Realistically, How much Money can I Expect to Make?

This is a discussion on Realistically, How much Money can I Expect to Make? within the New to Trade2Win forums, part of the Reception category; Originally Posted by NVP what idiot goes 75% of pot on each bet ? .....kelly criterion ? spare me N ...

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Old Nov 14, 2017, 7:39pm   #113
 
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Originally Posted by NVP View Post
what idiot goes 75% of pot on each bet ? .....kelly criterion ?

spare me
N
Don't have time to watch the video, but a very smart man Ed Thorp said half Kelly should be the goal for the retail trader...
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Before you trade even single penny on the stock market, please spend the time and educate yourself by back testing different trading strategies and ideas - go to eBay and search for "historical stock market data", you can buy 20 years of data for less than $100 - that's all you need to start.
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Old Nov 15, 2017, 11:38pm   #114
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Originally Posted by NVP View Post

when the market performs in line with the systems parameters then money will be made (assuming the system is designed to maximise returns in these conditions)


thats why its swings and roundabouts and for many many traders its tough to beat certain targets consistently ......... in certain (limited) market conditions the returns will be ultra sweet ...and then in poor conditions you will get killed


N
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Old Nov 16, 2017, 12:30am   #115
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Originally Posted by Lee Shepherd View Post
Hi Jason101,

I hear, get and understand your point entirely. If you'd have been in this business as long as me then you would also have heard your words above many times over with various degrees of defence and denial from the lips that said it.
I recon you are right there.


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Originally Posted by Lee Shepherd View Post
The one about 'lessening risk if it were other peoples money', is in fact the opposite to how traders (other peoples money) and funds work.

Hedge funds etc cash in on wins (and management charges) so wish to make their clients as much money as possible so they can collect their 10-20% 'incentive fee'. As a retail trader, you take 100%, therefore you can actually afford to greatly reduce your risks.

However, this should have no bearing on how you trade, not one bit. As I mentioned above in my post, the markets do not care about who owns the money on the table, neither should you. If you can show a return the way you trade, why would you change that for friends and family and ultimately give them less a return whilst also taking far less yourself?

Think about what you are saying: You would trade 'more sensibly, less risk, more carefully', if it were someone else's money. This obviously makes sense to you but it doesn't to me.
I am sure this is my fault, what I was getting at is that a fund that stated a probable draw down of 50% would not be viable, there would be no investors willing to take part.

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Originally Posted by Lee Shepherd View Post
Surely your money is worth as much to you as someone else's money is worth to you, in actual fact, your money should be worth more, after all, its your blood, sweat and tears that have gone in to getting the money to trade with in the first place. Your friends and family would legally understand the risks taken and accept (not necessarily like), but accept the fact you lost them their money. You on the other hand would have to live with the fact that you have traded at high risk and blown your account (maybe several times over which is the norm), lost your confidence and money and have to start again.Lee
These are all very interesting points.

I do feel I would care more about losing someone else's money than mine. I am not sure if that is a good or bad trait in trading?

It is a tight rope walk between blowing up completely, blowing up after setting aside some winnings (for a recovery account) and lastly turning a moderate account into a pretty decent size.

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Originally Posted by Lee Shepherd View Post
The bottom line is this: If you find a way to trade, trade the way you found - do not change for anyone.Lee
I have found my way, it is just very unconventional. It would be hard to trade in other ways for me. When I feel I can pretty easily take 100's % out of the markets in a few weeks or months, it is very hard to get my head around making a conscious effort to earn less, even though I know it would reduce my risk, which is greater than most profitable traders.

Last edited by Jason101; Nov 16, 2017 at 12:52am.
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Old Nov 28, 2017, 6:10pm   #116
 
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I like it when people ask about profit before they've even started trading. Why don't they ask about what else could they read or learn to become a successful trader?
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Old Dec 6, 2017, 12:31pm   #117
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Profitable trading comes when you:
Don't lose money in a week
Don't lose money in a Month
Don't lose money in a year
To say you won't lose money in a day is a bit of wishful thinking. Lok for the profitable months in preference, remembering a profitable month is when you do not lose money.
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Old Dec 6, 2017, 7:44pm   #118
 
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Originally Posted by Tytus_Barnowl View Post
Profitable trading comes when you:
Don't lose money in a week
Don't lose money in a Month
Don't lose money in a year
To say you won't lose money in a day is a bit of wishful thinking. Lok for the profitable months in preference, remembering a profitable month is when you do not lose money.
Unfortunately, you'll lose money on all of those time intervals, no matter how good you are... the trick is have more winning than losing years...
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My number 1 trading rule: EDUCATE YOURSELF!

Before you trade even single penny on the stock market, please spend the time and educate yourself by back testing different trading strategies and ideas - go to eBay and search for "historical stock market data", you can buy 20 years of data for less than $100 - that's all you need to start.
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Old Feb 9, 2018, 6:46am   #119
 
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How Much good amount of money we can gain as a traders?

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Originally Posted by T2W Bot View Post
LONG ANSWER

Don’t focus on the money
This question is high on the FAQ list and in the minds of many aspiring traders as, not unreasonably, it’s what attracts many of us to trading in the first place. However, as many commentators have noted, financial gain is merely a by-product enjoyed by good traders, it’s rarely their prime motivation for doing it. Certainly, if you start your trading career based on a need to make £1,000s per month or per annum, you’re at an instant disadvantage. To focus on the money while trading will distract you and, almost inevitably, lead to costly mistakes. You’ll be too caught up in how much money you’re making or losing to trade in the calm and disciplined way that is required in order to enjoy success in the long term.

Aspire to trade well – and the money will follow
Sales people who only focus on the commissions rarely make good sales people. It’s only when they focus on the wants and needs of their prospects and how best to serve them that the sales start to roll in. And so it is with traders: they have to focus on becoming the best practitioners of their art that they can be – not the money they might make. That said, this FAQ will outline some of the key factors that will determine how much – or how little – you can expect to make.

A tale of two photographers
If you turn on a camera and give it to a monkey, sooner or later, it will take a photo. Maybe lots of photos. Given what passes for art these days, someone will probably argue that the monkey is a good photographer! Obviously, monkeys know nothing about photography and any ‘good’ pictures they take are the result of luck and not skill. If you could understand monkey talk, how would you answer a monkey photographer who asks: “realistically, how much money can I expect to make doing this?” And if a 1st class honours degree graduate of photography from the Royal College of Art asks their course director the same question, what do you think the answer might be? The two answers range from - probably nothing in the case of the monkey - to, potentially, millions in the case of the RCA graduate.

. . . What’s this got to do with trading?
Well, the monkey won’t lose any money, beyond the cost of the camera. Unfortunately, the same cannot be said for traders. Why? Because, if you don’t understand the markets, the risks involved or how to trade well, you’re very likely to end up as a net loser rather than as a net gainer. Without a doubt, there are a lot of trading ‘monkeys’ out there who, inevitably, help to maintain the alleged failure rate of around 90%. So, in answer the question, at one extreme you could lose all of your capital, your house and your partner and be declared bankrupt. At the other extreme, you could be eye wateringly wealthy. To try and narrow the range down, this FAQ will assume that you are closer to the RCA graduate in the analogy above, rather than the monkey; i.e. you know the markets, the risks involved (and how to manage them) and how to trade. You have a written trading plan that you have back tested and forward tested until you’re blue in the face! The spectrum is still ludicrously wide and needs to be narrowed down further. To help us to do this, two key factors need to be considered when determining the size of potential gains or losses. They are the market(s) that you trade and the size of your account.

Liquid Markets
Some markets are highly ‘liquid’, enabling traders to trade in ‘size’; others are not. A very liquid market is one that attracts a lot of participants, particularly commercial interest – e.g. banks – who have very deep pockets. This is important because it enables traders to buy an instrument at a specific price, certain in the knowledge that there will be someone willing to sell to them at that price. Conversely, there will be traders willing to buy from them as and when they want to sell. An example of a market that tends not to be very liquid - i.e. ‘illiquid’ - is the ‘penny stocks’ market, so called because the share price is less than $0.10. Often, these are small companies that are not listed on the major stock exchanges like the LSE or NYSE. In theory, with $1,000, a trader could buy 10,000 shares priced at $0.10. If the price doubles to $0.20 then, on paper, they’ve doubled their money. However, finding prospective buyers to sell to in order to turn the paper profit into hard cash might not be so easy. By contrast, in normal market conditions, buying and selling 10,000 shares of a stock like Microsoft will be straightforward, as so many people trade it every day. Broadly speaking, its perceived value and the amount it rises or falls, will have little impact on your ability to enter and exit trades at the prices you want. (For more on the pitfalls of trading penny shares, see 'Useful Links', below.)

ES, YM & size
When traders talk about trading ‘size’, they are referring to the number of futures contracts or number of shares traded. For example, let’s take the ES - the e-mini futures contract based on the S&P 500 equity index. The ES is a highly liquid instrument, enabling traders to trade large size, unlike its sibling contract the YM, based on the Dow Jones Industrial Average. According to official CME figures for June 2010, 61,258,075 ES contracts were traded, compared with just 3,688,697 YM contracts. So, all things being equal, if you’re an index futures trader and you want to trade size, you’ll opt for the ES in preference to the YM. Equities traders have to gauge the liquidity of the individual stock when determining how many shares to trade. The penny stocks example above illustrates that you don’t always need a large account in order to trade a lot of shares, but you do need liquidity.

Volatile markets
The bedfellow of liquidity is volatility. This refers to the amount an instrument moves within a specified time period, e.g. an hour, day or week. A common mistake made by novice day traders is to trade highly liquid stocks without taking into account of their volatility. This is ‘monkey’ trading and results in the demise of many wannabe day traders. If you propose to trade large size of very volatile instruments, you’ll need a very large account indeed, as you’ll need very wide stops. And trading size with wide stops is potentially very, very costly. Another rule of thumb is that the more liquid a stock is, combined with a relatively low share price, the less volatile it tends to be. Microsoft in the U.S. is a good example of this, as is Vodafone in the U.K. In order for traders to make a good profit from small price movements, they have to trade large size. This principle applies to all Forex traders. That’s why an intra-day move of one cent in the value of the U.S. dollar is regarded as huge!

Small account + large size + volatile instrument = monkey trading
Generally speaking, the ability to trade size tends not to be the main concern for most retail traders, because their accounts aren’t big enough for it to be an issue. However, what is an issue is the exact opposite; their accounts are too small. Trading volatile markets in too much size with a small account is a recipe for disaster. It’s another monkey error made by novice traders who focus on the potential gain, as opposed to the potential loss. For example, the ES can move 20 points in one day. If you’re trading say, fifteen contracts, that’s a profit or loss of $15,000! Great if it’s the former and a bummer if it’s the latter! Even if you’re happy to risk 5% of your equity on any one trade (not recommended by the way), you’ll need an account funded to the tune of $300,000, in order to comfortably take a hit this big and to stay within your 5% risk parameter. Many brokers advertise margins as low as $500, i.e. you only need $500 in your account per contract traded. So, in theory, you’d only need $7,500 in your account to trade fifteen ES contracts. Don’t be lured by this – it’s financial suicide. You’re far more likely to ‘blow up’ – i.e. lose all your money - than you are to end the day in profit. The index would only have to go against you by ten points and your entire account would be wiped out in a single trade. The issue of account size is expanded upon in another FAQ: How Much Money Does a Trader Need to Start Trading?

Think percentages – not in $ amounts
The size of your account is critical in determining how much money you’ll make. Rather than thinking in pound or dollar amounts, it’s preferable to think in terms of percentages. On the face of it, a trader who makes $10,000 in one month is doing really well. Wow, $10k in one month! However, if they have a $1 million account, this only represents a 1% return. Suddenly it doesn’t sound quite so impressive. Whereas, a trader who makes the same amount with a $100k account has made a 10% return. That’s much more impressive. As a rule of thumb, and for reasons not covered here, it’s easier to make impressively big gains on very small accounts (say $1,000 or less) than it is on large accounts (say $250k or more). Equally, it is usually true to say that the bigger the return, the greater the level of risk incurred. So, be very wary of traders who claim to have doubled their account in a matter of days or weeks. Most of them are only able to do this by assuming massive levels of risk and exposing most - or all - of their account to catastrophic loss, such as the example above of the trader with a $7,500 account trading fifteen ES contracts.

Risk & Money Management
Central to your trading plan will be your risk and money management strategy. Risk management focuses on the steps required to minimise losses, while money management focuses on the steps required to maximise gains. Central to both these objectives are two simple ratios which, between them, enable traders to create a ‘positive expectancy’. They are:
The Success Ratio
Out of any given sample, what is the total number of winning trades, relative to the total number of losing trades? This is called the success ratio or win:loss ratio.
The Profit Ratio
This is the average £’s won on winning trades, relative to the average £’s lost on losing trades. This is called the profit ratio and is sometimes referred to as the ‘Sharpe Ratio’, although this is technically incorrect.

The important thing to note about the success ratio is that it is not necessary to have more than 50% winning trades to have a profitable trading strategy. Indeed, some of the biggest names in the industry utilise strategies that are profitable only 30% - 40% of the time. For more information on this and the two ratios, along with what positive expectancy means, please refer to the Essentials Of First Steps Sticky.

Putting it all together
For the sake of argument, let’s say that you’re a day trader and that your strategy as detailed in your trading plan indicates the following . . .
• A success ratio of 1 : 1 or 50%, i.e. half of your trades are winners and the other half are losers.
• A profit ratio of 1.5 : 1, i.e. the average profit on winning trades is one and a half times as large as the average loss on losing trades.
• Risk of 1% of your account equity on any one trade which, for the purposes of this example, will also be the size of the average loss. In other words, losing trades lose 1% of the account value and winning trades make 1.5% of the account value.
• You average 4 trades a day.
• Based on the above, i.e. two losing trades at 1% and two winning ones at 1.5%, you have a net daily profit of +1% of account equity. This equates to 5% per week, 20% per month and 240% per annum.

On a $5,000 account, this will produce profits of $50 per day, $250 per week and $1,000 per month. On a $25,000 account, it will produce profits of $250 per day, $1,250 per week and $5,000 per month. On a $100,000 account, profits of $1,000 per day, $5,000 per week and $20,000 per month. Please note that these stat’s are purely for illustrative purposes only. Your actual figures will, inevitably, be very different.

On the face of it, these stat’s sound as if they’re easy to achieve. On the contrary, they’re not. To make 1% per day, day in and day out, consistently over the long haul will require a huge amount of effort and commitment. It will be very difficult to achieve and harder still to maintain. Additionally, costs have not been taken into account. You’ll have to pay commissions, fees and charting subscriptions etc. – all of which mount up. In his book ‘Come into My Trading Room’, Dr. Alexander Elder suggests that a realistic goal for a newbie trader is to break even after expenses in the first year, equal the return you would get from a Building Society account in the second year, and to aim to double that return in the third year. Members of forums like this one are quick to point out that no one enters the trading arena to endure returns as dismal as these. Of course, they’re quite correct; the 20% returns per month - or better - outlined above is what we’re all here for. To be fair, some traders not only achieve returns like these, they actually do much better than this. It’s definitely possible, great wealth can be yours. Just don’t kid yourself for one minute that it’s going to be easy. Good luck!
You have really explained in a good way, but honestly, i have read 2 paragraphs which I found interesting but it would be very helpful if you can summarize in a short way.Seeking for the short summary
Thank you
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Old Feb 9, 2018, 9:59am   #120
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. . . but it would be very helpful if you can summarize in a short way.Seeking for the short summary
This post is entitled LONG ANSWER - hence it's long. You'll find the short summary you want in the post that precedes it entitled: SHORT ANSWER - it's just four little paragraphs long or, rather, short!
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