Newbie on a hot streak - can it last? 300% last month

Hi T2W,

I just started getting into trading about a month ago. I started off with a relatively small amount as I don't know too much about it; but it seems simple enough as I have some gambling experience and know about risk and reward. The risks i've taken in the last month haven't been big and i've never used more than 5% of my account on a trade.

My decision on when to buy or sell is nothing complex at all and so far it's been working out; so i'm happy on that aspect. I'm just wondering after seeing 300% profit last whether this is "normal" or perhaps i'm just a lucky guy and it can't last.

Well let us know how you are doing in a few months time with a decent amount of money
good luck!

Firstly, (please dont be offended if this doesn't apply): if you are trying to gather interest for some product or service, I wouldn't bother as the mods will delete it quicker than you can say:

"If you buy this then I can GUARANTEE you will be able to retire in less than 2 years. Spend 10 minutes a day trading using my simple system and make 300% A MONTH!!!!!"

If you are not peddling a commercial product, then my reply would be:

Well done on an excellent month. Was the account size very small? This would, in a way, help to explain the massive returns.

300% is not sustainable, but profitable trading IS sustainable. Your risk per trade (at 5%) is actually quite high and will likely need to come down at some point. Keep with what you are doing, record all of your trades so you can analyse % winners and risk reward ratios. And wait a little longer; after 3 or 4 months your results will become more significant (statistically).

I add that i'm not trying to sell anything. I started off with £1000 and I don't always risk 5% - I said i've never used more than 5%.

Thanks

Mr E said:

I don't know too much about it

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Mr E said:

i've never used more than 5% of my account on a trade.

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Based on those two bits of your post I'd say that you're:

Mr E said:

just a lucky guy and it can't last.

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Many people would consider 5% of your account a large amount to risk on a single trade even if the person risking it knew a lot about what they were doing. I'd invest some time (not money) in trying to get an idea of how well you'd perform over a longer period by doing a bit of historical testing. You need to make sure you're honest with yourself when doing it.

I'd also suggest reading and learning as much as you can about trading and get a decent trading plan in place before risking any more cash. Take your 300% profit, put it to one side and continue trading when you know more and have a proper plan.

but it seems simple enough as I have some gambling experience and know about risk and reward

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That comment gave the impression you're a little naive with regards to trading - That's not meant as a criticism; I was incredibly naive when I first got interested in it and arguably still am.

Mind you I could be completely off the mark and you've already done all the above, have taken to trading like a duck to water and are just looking for some reassurance because you find your performance so far a little too good to be true.

Either way I wish you the best with your trading.

:edit: I realise you're not risking 5% every trade but it's important to be consistent - Taking a risk of 5% of your account isn't (by most judgements) sensible whether you do it once or a hundred times. Of course there are exceptions but if you don't really know much about trading you wont know what they are or why they are - I certainly don't know.

Mr E said:

Hi T2W,

I just started getting into trading about a month ago. I started off with a relatively small amount as I don't know too much about it; but it seems simple enough as I have some gambling experience and know about risk and reward. The risks i've taken in the last month haven't been big and i've never used more than 5% of my account on a trade.

My decision on when to buy or sell is nothing complex at all and so far it's been working out; so i'm happy on that aspect. I'm just wondering after seeing 300% profit last whether this is "normal" or perhaps i'm just a lucky guy and it can't last.

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IMHO: Talking % in terms of risk and account growth can be very misleading. A newbie with £100 in their spread-betting account can make a lucky trade with a wide stop and say they doubled their account on a trade with an 80% risk!

Keeping risk at 1%/ trade is a guideline (albeit a good one) but for a newbie it is difficult because most don't have a large starting capital. I think it's better to look at the points/pips risked Vs the result. I know many here will disagree, but the size of your stop is not a function of capital, market gyrations, the last pinbar, inside bar outside bar, double bottom, flags, wedges, hedges, whips, whammies etc..etc...Stops are a function of proficiency. If you think you are lucky then you are! You are not proficient.

Sometimes not being bogged down by too much information is not such a bad thing information overload can mess things up.
Let me tell a little story to illustrate my point.
In 1992 when the recession was at its peak NEXT plc was on its knees the shares were trading at 5 pence.
I decided in all my youthly wisdom at the time to start trading shares
I walked into the bank(no internet then)and asked the clerk to buy me 5000 pounds worth of NEXT shares, After trying to disuade me from my mission she proceeded to tell me I was a idiot and would soon be parted from my money.
We all know what happened to NEXT.
Now if you are wondering what happened to my 100,000 next shares?
read on




As time went by I started learning more about p/e ratios and gearing and roce,etc.
came to the conclusion the clerk was correct I was a blithering Idiot and sold of my shares luckily for at 8pa share thanked God I had got off with a little profit and swore I would never make a decision like that again.lol

sometimes you might just be a lucky person!!!
information overload and rules might just hinder that.I don't know if you will manage 300% but if your luck plays out at just 5% you are on to a good thing
Good Luck!!

However I am not advocating anyone trade based on luck

I think the moral of this discussion thus far is that you should try to learn a little more, trade with a plan and make sure you don't get yourself too bogged with information overload.

That's what I've taken from it anyway.

Not put forward so much as counter argument but more to illustrate the point about information overload,
On any given day the number of analysts being positive about a currency /stock probably equals the negative ones.
Then it can be argued that an element of luck plays a major part on analysts you agree with.

I don't think it's luck - i'm just wondering if perhaps i'm performing above expectation.

I risk between 3-5%/trade. If i'm on a loser I cut it quick, and if i'm on to a winner I'll let it run. It's simple, that's all you need to do and the price can only go one of two ways so if you can do this in the long run you can succeed.

Mr E said:

I don't think it's luck - i'm just wondering if perhaps i'm performing above expectation.

I risk between 3-5%/trade. If i'm on a loser I cut it quick, and if i'm on to a winner I'll let it run. It's simple, that's all you need to do and the price can only go one of two ways so if you can do this in the long run you can succeed.

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About 300% above expectation!!

These are good principles that you are adhering to. But you still need a system with some kind of edge on its entries and exits. How are you determining your entries and exits? If entries are random then I refuse to believe that any amount of cutting your losses quick and letting the profits run will result in these kinds of returns.

You want to briefly tell us how you are determining the entries for your trades?

If it's working for you and you're happy with your trading methods - stick with them.

The two things I'd urge you to consider though are that performance over one month isn't enough to base long term expectations on and that as your account grows you will eventually find a limit to how much money you can make in a given amount of time: If you manage to increase your account by 300% each month (Turn £1000 into £4000 then £4000 into £16000 etc) you'd have £16,777,216,000 after 12 months - if that happens I'll eat my hat.

Still, I think what's been said so far still stands: If you've not got a comprehensive trading plan that you are following one you should create one and stick to it. If you already have one, great, it looks like it might work out so long as you don't expect this kind of return (in percentage terms) to continue indefinitely.

I am not necessarily saying its all based on luck perhaps its something totally totally obscure like your mind rythym being in sinc with the market.
But if you don't do any analysis then you have to agree that there is an element of being lucky.

performing above expectation?
If fund manageres perform at 10% a month then they are performing above expectation!

I watch the market and what price does at certain places. If I think it's going up, I buy - and if I think it's going down i'll sell. There's nothing more complex to it than that. Even if this gives me an edge of 1% or even a zero edge i'll still be profitable using my strategy.

Doesn't seem like this thread can really get any further so I'll exit here, wish you all the best and say that I'm looking forward to your results over the next few months. Please keep us posted.

Mr E said:

I watch the market and what price does at certain places. If I think it's going up, I buy - and if I think it's going down i'll sell. There's nothing more complex to it than that. Even if this gives me an edge of 1% or even a zero edge i'll still be profitable using my strategy.

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Hi Mr E,
Welcome to T2W and congratulations on your success to date.
I agree with the main reason as to why your current profit level is unlikely to continue, namely, that 3-5% risk per trade is high and you'll want to reduce this as your account grows. Additionally, as the size of your positions increase, you're more likely to suffer from slippage. It's actually your last post (quoted) that's the most worrying in as much as your entry decisions sound somewhat vague and based largely on instinct. Is this correct, or am I reading too much into your comment?
Tim.

My prediction is Mr E will disappear quietly after a few weeks....

timsk said:

I agree with the main reason as to why your current profit level is unlikely to continue, namely, that 3-5% risk per trade is high and you'll want to reduce this as your account grows. Additionally, as the size of your positions increase, you're more likely to suffer from slippage. It's actually your last post (quoted) that's the most worrying in as much as your entry decisions sound somewhat vague and based largely on instinct. Is this correct, or am I reading too much into your comment?
Tim.

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I'll be sticking to 3-5% as it meets my goals. If I suffer from slippage and shenanigans then i'll just take my business elsewhere and find some place that can take my trades.

I believe that by watching the markets one can learn from the levels and develop almost an instinct whether to be in or stay out. If the price hovers at a certain point or is relatively stationary then I can use this to my advantage in a decision process. My entry is a little more complex to what I stated but not much more than that. I rely on odds, money management and running profits to achieve the results I have seen so far.

I'll be sticking around for a bit Hoggums until I decide to go back to some gambling for tax reasons.

Mr E said:

I'll be sticking to 3-5% as it meets my goals. If I suffer from slippage and shenanigans then i'll just take my business elsewhere and find some place that can take my trades.

I believe that by watching the markets one can learn from the levels and develop almost an instinct whether to be in or stay out. If the price hovers at a certain point or is relatively stationary then I can use this to my advantage in a decision process. My entry is a little more complex to what I stated but not much more than that. I rely on odds, money management and running profits to achieve the results I have seen so far.

I'll be sticking around for a bit Hoggums until I decide to go back to some gambling for tax reasons.

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Sound like your off to a flyer.... the same thing happened to me when I started out... THEN I LOST THE LOT...I blew more than 10K (thats when 10K was A LOT of money) then I decided that a random "feely" type approach whilst fitting my character (i.e a bit lazy) was not the way to go...

I am not saying that you will fail mate.. in fact I hope you make a million and retire within the year IT CAN BE DONE... but you would be in the tiny winners circle like those who accumulate on the dogs and win 60 grand with a 20p bet .. or lottery wins

A few people have already said about your trade sizing... I also think its too big a 1% risk should be maximum for starting out...

If your building up your account.. you need to protect it too... good luck

Mr E said:

I don't think it's luck - i'm just wondering if perhaps i'm performing above expectation.

I risk between 3-5%/trade. If i'm on a loser I cut it quick, and if i'm on to a winner I'll let it run. It's simple, that's all you need to do and the price can only go one of two ways so if you can do this in the long run you can succeed.

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MrE...you "think" too much. You are lucky and it won't last. You don't know what slippage is either