Average earnings

Hmm.. simple searches on this site and on the web will throw up polls, threads etc etc. Hell it even works if you misspell average like I just did.

As for zero sum game - well, there are features of zero sum games all over the markets, but on the whole it's not a zero sum game. That shouldn't be confused with - many decent day traders who have reached a level of competence will think they're doing alright only have a few losses take them back to break even.

If you want some examples of non-zero sum game - commission makers, people who have an edge in predicting what hedgers will do in the futures market, market wizards, traders on this site who have been making a consistent profit for years.

The answer has always been pretty much the same - yes you can make a profit, it could be, say, 1-15% of your fund per month, but the chances are greater that you will make a loss.

I'd also say there's a danger in telling people what to aim for. If someone says that over their trading career they've made 5% on average per month, that ignores the fact that their first 6 months may have been -25 -1 +2 -7 +1 +2

What's the point in aiming for 5% per month as a newbie when the only thing you should be learning is how to not lose big. Aiming for the decent income is going to increase the chances of losing big.
 
It's a negative sum game for everyone who trades the market Xeno; some people can overcome the house edge consistently, most can't.
 
If you want it explained:

A market can go up, down, or stay still. Our hero pays $0.50 per round turn, in a made-up market with a tick value of $10. Let's assume for simplicity that he's a scalper who trades with a 1-tick profit target and a 1-tick loss. In any given trade he stands to make $9.50 BUT he stands to lose $10.50. Assuming he had a 50% success rate, our trader has an expected loss of $0.50 per trade - over 100 trades, he will be $50 down even though he is even in terms of his trading. Anyone who enters a trade has a negative expectancy on that trade in the theoretical 'random walk' sense, and thus we are in a negative sum game; how then, can there be traders out there who go three years without a down day?

In order to be a profitable trader, we must implement a strategy whereby our success rate is greater than 50%, or we edit our risk/reward parameters. Consider the fact that the average retail trader might pay £4-5 on a tick value of £10, and you begin to see why this is a difficult business to do well in - our 'breakeven' trader is in reality losing money at a pretty heavy rate.

SL
 
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I meant to add that you can calculate that in the first example, our trader would need to have a success rate of 53% in order to be profitable. In the second example, that number becomes 76%. In other words, if you are spreadbetting the FTSE, don't scalp it...
 
I meant to add that you can calculate that in the first example, our trader would need to have a success rate of 53% in order to be profitable. In the second example, that number becomes 76%. In other words, if you are spreadbetting the FTSE, don't scalp it...

Who the hell would scalp without DMA and tiny spreads/commissions anyway
 
Who the hell would scalp without DMA and tiny spreads/commissions anyway
'kin loads would, as they don't understand the very concepts that SL has explained so eloquently.
Even tried it myself before I knew better!
100 quid in a spread betting account - what more do ya need, eh?!
:eek:
Tim.
 
On average people bet 2% of their pot per bet and if you can average winnings of 2% of your pot per day you are doing OK imho

That's only really +1 point per day on average, which doesn't sound much but if your compound interest calcs are right then it looks a lot better.

( plus a bit to cover commissions/spreads )
 
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