Does anyone here actually make money trading?

[dbphoenix]

Some reality (at last) from db !!! Thank god, and I couldn't agree with you more sir.

Try going back a few pages Mr.Phoenix, because another one claims a 66% win at 1.5 times the loss. Good for them, I say. Perhaps us peasants will be invited to their Gin palaces in due course ?

I don't want to get into anything. Just providing a little cold water for any beginners who might be reading this thread.

Db

 

[firewalker99]

If you have a consistent win rate of 50% at 2 x times the loss, then there is no catch.

Those numbers were hypothetical, not applicable on myself. Nothing more than an illustration that you don't need 90% win systems or winners 5 times as big as losers. It helps though

I must congratulate you as you have well and truly made it ! But the other 99.99% of the trader population here (me included) may wish to consider prudent risk management whilst they strive for such a system as yours.

Thank you, but the way I trade I manage >50% win ratio. My system used to be around 55% but then I filtered out a lot of trades and nowadays I take much less trades but chances are much higher they will be profitable.

 

[nine]

Some reality (at last) from db !!! Thank god, and I couldn't agree with you more sir.

Try going back a few pages Mr.Phoenix, because another one claims a 66% win at 1.5 times the loss. Good for them, I say. Perhaps us peasants will be invited to their Gin palaces in due course ?

Profitaker,

I don't know why you've become so negative on this subject.

Not only negative ... wrong. And for a moderator its quite a concern that you choose to use condescending phrasing like "another one" and "perhaps us peasants will be invited to their Gin palaces in due course." That doesn't seem to me to be behavior that we would expect from moderators; does it seem so to you?

Why don't you go back a few pages and reread my post. It doesn't claim any numbers but uses them to illustrate that a 100% pa return absolutely does not (as you claimed a few posts before) imply that a trader "would entail taking on massive risk and eventually (but surely) will result in wipe-out".

The post illustrated that a modest win rate and a modest win/loss with relatively few trades per day could provide 100% pa at a low risk per trade. You calculated said risk as 0.154% of capital per trade. Not 2% or 5% but 0.154% .... surely not a path to sure wipe out?

The key to this achievement (and it really is simple) is found in Firewalker's earlier post:

Trading is about patience. Patience to wait for the best, highest probability trade.

something dbphoenix also used to emphasize rather nicely a while back.

 

[Profitaker]

I don't know why you've become so negative on this subject.

I haven’t. On the contrary I find it an interesting debate, which by nature entails disagreeing. Nothing negative about that.

Not only negative ... wrong.

Yes, I am wrong in your opinion, and you in mine, hence a healthy debate.

And for a moderator its quite a concern that you choose to use condescending phrasing like "another one" and "perhaps us peasants will be invited to their Gin palaces in due course." That doesn't seem to me to be behavior that we would expect from moderators; does it seem so to you?

Let me try to allay your concerns. As a moderator I am still entitled to an opinion. Not only that, but I am also entitled to post / discuss / argue / debate within the site rules, just like you are. I was going to pick out selected words and phrases which I found condescending from some of your some posts, but thought that would serve no purpose.

Why don't you go back a few pages and reread my post. It doesn't claim any numbers but uses them to illustrate that a 100% pa return absolutely does not (as you claimed a few posts before) imply that a trader "would entail taking on massive risk and eventually (but surely) will result in wipe-out".

Ok, done that.

But what is the point in plucking numbers out of thin air if it’s not achievable in reality ?

The post illustrated that a modest win rate and a modest win/loss with relatively few trades per day could provide 100% pa at a low risk per trade. You calculated said risk as 0.154% of capital per trade. Not 2% or 5% but 0.154% .... surely not a path to sure wipe out?

Surely not. But I disagree that the win rate/ win-loss is “modest”. It’s not, it’s fantastic, dare I say fantasy ? As a reminder, your illustration used a win rate of:-

66% win @ 1.5 times the loss
and Firewalker used
50% win @ 2 x times the loss

Neither of which (IMHO) is achievable with any degree of consistency. So where does that leave the argument of achieving 100% annual return without risking wipe-out ?

Agree patience is indeed a virtue.

 

[damianoakley]

Hi All,

I've read this thread with interest.

I'm not going to take anyone's side, but I will highlight something from my own trading experience, which will maybe help this debate on a 100% return being risky.

I have traded full-time for 6 years and am happy to make an annual profit of around 50% in a year. I risk 1% of my capital on every trade. My best ever trading year showed a 108% profit. During that year, I experienced a 19% drawdown.

So, maybe you CAN achieve 100% profit within a year without taking an unacceptable risk....


Thanks

Damian

 

[Profitaker]

Hi Damian

Thanks for contributing, and yes it's certainly possible, and more. Don't think anybody said otherwise, certainly not me. But the risk of wipe-out kicks in when you have to make 100% return on your capital because we're talking about a living and paying bills that need to be paid.

There is a big difference between shooting for (say as you do) a 50% return and ending up with 108% return, and shooting for 100% return which will most likely end up a 50% return, possibly a negative one at that.

 

[damianoakley]

Hi Profittaker,

I think what you're suggesting is that most amateur traders would set a target of 100% as a target that they would LIKE to achieve, as opposed to setting a target that is realistic to whatever strategy they are employing.

In this case, then I could see how an amateur might start to take on more risk than is safe in order to meet his target, therefore the "risk of ruin" would indeed be quite high.

I think the difference comes when it is a professional trader who is setting himself that 100% target based on careful analysis of what is possible with the strategy that he is employing.

Hope all that makes sense....


Thanks

Damian

 

[nine]

Profittaker,

My issue was your attitude and tone - much better suited to ET than T2W. Plus the fact that you were wrong in your slight ... I never claimed, as you stated "another one claims a 66% win at 1.5 times the loss."

After that prior post I left you alone despite your picking holes in a valid argument ... which is that risking less than 1% per trade, in fact less than 0.2% per trade is not "a path to sure wipe out?"

Why pick numbers out of mid air ... just a reasonably conservative set of round numbers. I didn't want to use higher and less achievable numbers because that would invite skepticism ... better to stay low.

A 66% win rate with 1.5x win/loss inclusive of slippage and commission is not difficult to do in discretionary day trading. And if you trade just 3 largely independent markets as I do its not hard to find 4 trades per day (I find around 3 per market that meet my criteria).


Are you really telling me that with 3 independent markets (I trade STW, SPI and EUR.JPY) and 5.5 trading hours per day you couldn't find 20 trades that have a 66% chance of returning 1.5x the risk each week? If you think that you could then would you consider a 0.15% risk on your capital excessive ? Thats 100% pa.

Ok if you could only find 2 such trades a day (or 10 per week over 3 markets) then how about risking 0.3% of your capital. Do you consider a 0.3% risk per trade to be on the sure and slippery slope to ruin. I don't.

 

[Citizen2007]

PT I think I am beginning to see which angle you may be coming from.

Although the return is achievable, the fault lies not in the system but within us. If you had a system that had a win ratio of 66% at1.5 or even 2, there is no doubt that your will achieve a 100% return.

The actual problem with failing to achieve this lies somewhere else.


To trade a system with a 66% ratio requires huge discipline. I think unless it is an automated system it would be extremely difficult to maintain over a long period time for an analyst.

Lets look at this from the psychological perspective. You will take three trades, one will be a loser, which one , you don’t know or else you would not take it. If you knew, you would do something different.

How long before you begin to question or doubt the next trade, even though it may be the winning one. Unless you are gambling this will not persist for too long.


Most traders here spend most of their day analysing charts, working out whats best and whats not, I assume most traders on this board fit into this category. So how long before you begin to question that losing trade and change your system. As analysts we will not be able to continue in that state of mind for long.


If it was simple to accept a 66% wining system then i assume most traders would be profitable at the end of the year.

Why is this difficult?

It is human nature to evolve in everything that we do. Once your mind has done all that it can at one level, it will automatically be looking for the next level. This is an automatic process one will find difficult to control without some kind of discipline or personal plan in place.

This being the case, once you have developed the 66% system you will be looking to improve upon it.

The system itself can achieve the results, i think it is the human factor here that will detract you.

Can any trader really be content , long term, with a system that only allows 66% ? I dont think he will persist for too long. He will always be looking to improve. It is this constant quest for improvement that will cause him to fail.

 

[BSD]

I think we're all agreed on the number one rule governing what we do that's equally valid in all other entrepreneurial or business endeavours where you're managing risk exposure, namely that risk and reward are two sides of one coin.

If you want big returns you'd better be prepared for a volatile ride and maybe even the odd blowup or two.

Richard Branson didn't get to where he is without taking on monumental risks, that's simply the nature of the beast, and one needs to be fully aware of not only exactly what one wants, but also what the price is one needs to pay to get there.

It's all about defining one's utility function, about clarifying personal objectives vs acceptable pain threshold on the journey.

That said, and what with the numbers we're talking about here, I'm really surprised that nobody with any floor or arcade experience has piped up so far...

Shouldn't think they're a bunch charaterized through great shyness usually ;-)

I remembered one thing I read awhile back tho, and thats that TWI is or was one of them, and he's also somebody who gives off the impression that he knows what he's talking about:

QUOTE=twalker;74501]

I currently work in an Arcade and will try to answer your questions.

Many people think if you make 20-30% a year that you are doing brilliantly well. Many here will make 50-100% per month. It is not a methodology you could apply to large amounts of capital such as fund trading but for individuals accounts it cannot be bettered. I know as I traded professionally for many years before I went out on my own.

Saying that, it is not easy, nobody gives money away. We all work long hours and it takes most people around 6 months to get to the point where they are competent.[/QUOTE]

Marty Schwartz of Market Wizards fame averaged out at 33% / month in the nine audited 4 month long trading contests that he entered with a stake of US$ 400 000 each time, and in the tenth contest he got out at breakeven.

There is a world of difference between what you can achieve on a compounding vs a non-compounding basis due to eventual liquidity issues that you'll encounter.

Averaging out at the returns of Schwartz or floor / arcade traders you clear out your account every year or even every month.

Some guys who have great talent, lady luck behind them, and balls of steel go on to become the huge success stories that created real wealth we read about like Dan Zanger, or even the monumental, in todays money Billion dollar fortune of a Jesse Livermore, obviously with the caveat that such a journey will see its share of blowups included in the equation.

 

[Profitaker]

A 66% win rate with 1.5x win/loss inclusive of slippage and commission is not difficult to do in discretionary day trading.

I think that is the crux of your argument, and mine, and perhaps on that note we can agree to disagree....

 

[black bear]

After a cold shower ~ FW post ok IMO

Okay I understand, but at first you said you didn't believe it could be done.
Anyway, talking risk into consideration, how about this very real-life example:

Hypothetically speaking:
- I need $2000 in margin to trade 1 car DOW.
- The average daily range of the DOW is 200 points.
- 1 point DOW equals 5$
- I don't want to risk more than 1% on every single trade, pretty conservative.
- my system gives me one signal a day.

Now this is how I apply it:
- I use stops of 20 points (100$)
- For every 10k I trade 1 lot, so my risk is limited to 1% on each trade.
- I have a win ratio of 50%, not that high right?
- My winners are on average twice as big as my losers.
- I take one trade a day.

Over a period of a month this makes:
- 20 trades: 10winners/10losers
- 20 trades: 400 points profit/200 points loss = 200points net profit (excl. commissions)
- My net profit = 200 x 5$ = 1000 USD.

That's 1000 USD on my 10k capital. 10% in one month. Not bad right?
Compounded over a year this will amount to $31384. So I would've made more than 200% profit in my first year?

So tell me, where's the catch?
-> I'm not taking any risks on my account, chances that I'm hitting a losing streak where I run into 7 or more losing trades are <1%. And even if I lose 10 times in-a-row I still have only lost 10% of my whole account. My risk of ruin is negligible.
-> I'm only having a 50% win ratio, not anything to brag about
-> My risk:reward isn't spectacular neither

And still I manage to triple my account in over a year?

Hi FW

Catch, 10 in a row think you can have a run a little worse at even money if my memory correct and perhaps if really un lucky experience 2 such events quite close together but not that often I would lose any sleep over it

If you bank a bit for a rainy day I think your on pretty safe ground FW

I have copied it myself to remind me you only need a simple plan, mines simple and comforting to no others out there are to

Great post IMO

Andy AKA

That's a big if. Real life, unfortunately, is not quite so simple.

Db

I don't want to get into anything. Just providing a little cold water for any beginners who might be reading this thread.

Db

Profitaker,

I don't know why you've become so negative on this subject.

Not only negative ... wrong. And for a moderator its quite a concern that you choose to use condescending phrasing like "another one" and "perhaps us peasants will be invited to their Gin palaces in due course." That doesn't seem to me to be behavior that we would expect from moderators; does it seem so to you?

Why don't you go back a few pages and reread my post. It doesn't claim any numbers but uses them to illustrate that a 100% pa return absolutely does not (as you claimed a few posts before) imply that a trader "would entail taking on massive risk and eventually (but surely) will result in wipe-out".

The post illustrated that a modest win rate and a modest win/loss with relatively few trades per day could provide 100% pa at a low risk per trade. You calculated said risk as 0.154% of capital per trade. Not 2% or 5% but 0.154% .... surely not a path to sure wipe out?

The key to this achievement (and it really is simple) is found in Firewalker's earlier post:



something dbphoenix also used to emphasize rather nicely a while back.

Hi All

I must be a real simple, because I don"t get it

AT ALL

I was a bit last night and a little confused, big guns out and all.

I take any post I make serious and am aware that less or complete novices are reading them, and I think from FW"s many posts on other threads he does to.

FW posted a "Hypothetically speaking:" template thats all, I have re-read it and very with what he was trying to impart or say

I approach each trade with something very similer to what FW posted in mind, in fact I thought FW had been inside my computor and stole it Its an ideal thats all, if you substitute your own methods results etc its a nice ready made blueprint for making calculations off if your not very good at that kind of thing. It shows you what you should be considering.

I have no back testing skills (not interested) whats so ever and have demo traded only once which I concede did really help me. (emotional trading issues) I have made every error to date you can make and don"t care at all, in fact looking back the demo trading was only effective because I had made those errors.

That was my choice at the beginning, I prefer doing to play play, if you want to learn anything you have got to IMO make mistakes, some learn from mistakes some don"t other more able individuals seem to manage to avoid all the pitfalls and learn lessons very easy.

They are perfect

Accounts for me = I look every week and take out extra, if no extra I check my trades to see if I followed method to the letter or have strayed. I tighten up is the only way I can describe it, I am less inclined to attempt to run profits, I am watchng my cash flow I guess, I am aware how my account stands so will grab whats on the table at price dislocation from EMA"s and look to re-enter if market offers me another good entry after I have banked. If not = still I banked and I was happy to at the time given the condition of my bank and recent trading conditions I had experienced. Much the same way a small garage owner (myself 20yrs ago) might take a poor job on to cover overheads after experiencing a few poor weeks trade.

Pride comes before a fall, and there is a lot to learn from doing a poor paying job

for example ~ garage trade bad, a rubbish job arrives or is offered

option 1.

We dont do them kind of jobs here mate , moan moan no work etc

or

option 2.

Hello

Your quiet, take the job on and make a small profit or maybe just cover costs but you would be amazed at where it can lead and what new skills you can learn that will come in useful later on. Many times I have done that only to find out later I was working on the 2nd or 3rd car in the family and picked up the rest of the familys work and friends of the familys work as well. happy days again and a larger customer base.

Win rate

Without going over every trade like some do looking for this and that, checking everything which I am sure works for them very well indeed

That approach is not for me thank you very much, win rate is what it is, mines usually pretty good, +50% - +75% / it drops below that for sure but I am aware it as and tighten up, see tighten up explanation, I confess it still leaves me a little confused, but I am not going to fix it if it is not broken.

I take profit when I think I should, its so individual to every trade, maybe because I have a lot to learn I don"t no and when I do I will let you no, I am just not inclined to stay in a trade when my method says or shouts at me MOVE OVER

Probably due to personal weakness associated with liking to win and taking profits to early etc I am working on that area at the moment.

Just a thought to keep you in the game

I always took and still do take my profits if I became unsure of myself in a trade, that does not happen as often as it used to so I get to run my profits a little more each time, and learn a little more

IF YOUR NOT IN IT, YOU CAN"T WIN IT

Banks,

Keep them small to start if you like me have to trade real money, if your method does not work in a demo account it will not work at the market. The smaller the bank the lower your exposure but you must have a bank and you must learn to manage it. Excess funds must be removed so you get used to starting from scratch again and again and again.

The last year I pulled back from a 50% drawdown and since then doubled that bank. Since pulling back from total wipe out I have had no trouble trading at all, I remove excess funds from the bank as I did when I ran a small business, if I experience a poor run of results, my trading seems to have got to a standard where poor = breaking even = small wins = small loss"s.

Risk = small start up bank 5% max per trade. Today I trade a larger bank and it is not so replaceable so max risk per trade = 1%

Just like the small business I used to run, you tread water for a month then all Crimbo"s in one day

Nine pointed out FW previous post regarding hard work SPOT ON IMO

Good luck with your trading everyone, I am off to manage sorry F..ck up this winning position my methods got me into again

Andy AKA

 

[nine]

Does anyone here actually make money

Yes. OK PT. I think we should agree to disagree.

Before I leave it alone completely it might be worth while telling how I achieve it. The principles may be of use to someone new or seeking to improve. As I said in the first post I get about 3 trades per day per market. So how do you achieve a high win rate ... and perhaps why would you want to?

Why: Citizen2007 correctly identified that the problem to trading strategies really well lies in ourselves more than the strategies. I've been trading full time for over 5 years and before that traded long term trend strategies with perhaps 5 trades per contract per year win rates of 40% to 50% and win/loss ratios over 2. The bad thing about a low win rate is that you have a much greater frequency of long strings of losers making them harder to take. The bad thing about very few trades is that its a long time between new equity highs. So, I like high frequency high win rate strategies because they are the easiest to trade: its easier to be profitable most days much easier than profitable most years!

How: Sacrifice. Don't get hung up on getting lots of points from moves. Don't worry about getting few relatively few points from the day. Be fussy. Be patient. Take only the easiest points available.

So I took a strategy 2 years ago that returned X trades per day and I tried to figure out how to identify the best trades ... which for me is the situations where you have a high win rate (70% to 80% when executed well) with a good return (anything over 1.5x allowing for NORMAL slippage and commissions).

The process of getting the "best" trades cut out 2/3 of my trades.
I also get less than 30% of the average days range out of the contracts with 3 trades (ignoring the much greater true ranges). On great days the markets leave me way behind.

But what I ended up with suited me and I find it easy to trade. People who know me point out that in the last 3 years I haven't changed my system although its not quite true. My charts look exactly the same ... but ... Its basically the exactly the same strategy but its been refined by discarding the less probable trades and forgoing the opportunity for really big winners. Its also had to change a little as my markets changed.

A couple of really important points that may not be obvious are that you have to get really expert in why your strategy works, how, and when and you also have to get familiar with your chosen markets and the minor variations needed for their different characters.

I do try to add something new to it every couple of months but unless they test out as really improving it they don't make the grade. They add interest for a bit but they have to pass the back and forward testing to make it. In fact there is one change from my charts 2 years ago - I had an indicator on my short term tuning chart and it has gone now.

So there it is FWIW. Enough from me. Good trading

 

[black bear]

bits and pieces

Yes. OK PT. I think we should agree to disagree.

Before I leave it alone completely it might be worth while telling how I achieve it. The principles may be of use to someone new or seeking to improve. As I said in the first post I get about 3 trades per day per market. So how do you achieve a high win rate ... and perhaps why would you want to?

Why: Citizen2007 correctly identified that the problem to trading strategies really well lies in ourselves more than the strategies. I've been trading full time for over 5 years and before that traded long term trend strategies with perhaps 5 trades per contract per year win rates of 40% to 50% and win/loss ratios over 2. The bad thing about a low win rate is that you have a much greater frequency of long strings of losers making them harder to take. The bad thing about very few trades is that its a long time between new equity highs. So, I like high frequency high win rate strategies because they are the easiest to trade: its easier to be profitable most days much easier than profitable most years!

How: Sacrifice. Don't get hung up on getting lots of points from moves. Don't worry about getting few relatively few points from the day. Be fussy. Be patient. Take only the easiest points available.

So I took a strategy 2 years ago that returned X trades per day and I tried to figure out how to identify the best trades ... which for me is the situations where you have a high win rate (70% to 80% when executed well) with a good return (anything over 1.5x allowing for NORMAL slippage and commissions).

The process of getting the "best" trades cut out 2/3 of my trades.
I also get less than 30% of the average days range out of the contracts with 3 trades (ignoring the much greater true ranges). On great days the markets leave me way behind.

But what I ended up with suited me and I find it easy to trade. People who know me point out that in the last 3 years I haven't changed my system although its not quite true. My charts look exactly the same ... but ... Its basically the exactly the same strategy but its been refined by discarding the less probable trades and forgoing the opportunity for really big winners. Its also had to change a little as my markets changed.

A couple of really important points that may not be obvious are that you have to get really expert in why your strategy works, how, and when and you also have to get familiar with your chosen markets and the minor variations needed for their different characters.

I do try to add something new to it every couple of months but unless they test out as really improving it they don't make the grade. They add interest for a bit but they have to pass the back and forward testing to make it. In fact there is one change from my charts 2 years ago - I had an indicator on my short term tuning chart and it has gone now.

So there it is FWIW. Enough from me. Good trading

Hi Nine

will pm you later so you can tell me how best to exploit what I do but can not explain in writing very well.

you no me better than I no myself, would not have posted above if I new you were going to post this super post

just closed out trade for a bit of the move on the ftse +15pts, must sit down and work it all out in excel to keep everyone happy

Andy AKA

 

[black bear]

additional cut from post

just think this is worth a cut and paste, sorry to multi-post again

This bit if your not inclined to think this way is very hard

seeing what you have missed that perhaps could be yours if only

How: Sacrifice. Don't get hung up on getting lots of points from moves. Don't worry about getting few relatively few points from the day. Be fussy. Be patient. Take only the easiest points available.

So I took a strategy 2 years ago that returned X trades per day and I tried to figure out how to identify the best trades ... which for me is the situations where you have a high win rate (70% to 80% when executed well) with a good return (anything over 1.5x allowing for NORMAL slippage and commissions).

The process of getting the "best" trades cut out 2/3 of my trades.
I also get less than 30% of the average days range out of the contracts with 3 trades (ignoring the much greater true ranges). On great days the markets leave me way behind.

You do of course catch the odd good move, just because its in a rush to get there

Anyway thats my 10 bobs worth for another week, off to spend my 10 pts, the other 5 I banked for a rainy day :cheesy:

Andy AKA

 

[dbphoenix]

While PT may not win this year's Tact Award, I understand where he's coming from and I agree with him. One gets tired of all the hypotheticals and the backtested "results" and the extrapolations and the I read somewheres and the I know somebody whos and the pretend trading done to gain stature on a message board. Add to that the misplaced emphasis on expectancy ratios and the inevitable cry for cutting through all the bs and providing something practical and one can understand the sort of frustration exhibited by PT.

Those who are really and truly trading with real money and are not awash in a sea of denial and rationalization will understand. Or not.

Db

 

[FXSCALPER2]

While PT may not win this year's Tact Award, I understand where he's coming from and I agree with him. One gets tired of all the hypotheticals and the backtested "results" and the extrapolations and the I read somewheres and the I know somebody whos and the pretend trading done to gain stature on a message board. Add to that the misplaced emphasis on expectancy ratios and the inevitable cry for cutting through all the bs and providing something practical and one can understand the sort of frustration exhibited by PT.

Those who are really and truly trading with real money and are not awash in a sea of denial and rationalization will understand. Or not.

Db

I don't understand what profit taker is saying. I really don't. The gap between 'hypotheticals' and what happens in reality is psychological. The dispute here is basically between two types of reasoning. PT and you are inductive about whether 100% return is achievable. What you are saying, it seems to me, is that in real life it doesn't happen. But then, in real life trading sucess is very rare anyway, so you are clearly right about your assertion in one sense. We are talking about someone who actually makes money trading. Obviously a novice is highly likely to go broke trying trying for 100%, but a novice is highly likely to broke anyway.

What I find hard to understand is why a good trader would run a high risk of ruin just because he is targetting 100% return per year. Of course it depends on how one defines ruin. Ruin is usually equated with 'uncle point', a point at which one decides it is not viable to continue trading. So I may decide to abandon my goal when I lose 50%. With a system that wins 40% of the time with a 2:1 reward to risk, my risk of ruin is about 2 times going below 50% drawdown from some peak in the equity curve, using a simulation with 1000 iterations.

Now those are the numbers. The reason why most of us cannot do this comes down to psychology. But, it is a mathematical fact that you do not run a high risk of ruin if you risk 2% of your account and are a winning trader. I know that in real life it is nearly impossible to do because all sorts of things come into play. But I am just arguing that, in terms of the numbers, the risk of ruin had very little to do with aiming for 100% return. Rather it is something else. We can, of course, discuss that elsewhere because that is a separate topic. But it cannot be true going for 100% return, per se, will ruin a trader.

 

[DDI]

The reason why most of us cannot do this comes down to psychology. But, it is a mathematical fact that you do not run a high risk of ruin if you risk 2% of your account and are a winning trader. I know that in real life it is nearly impossible to do because all sorts of things come into play.

by the 2% risk you mean per trade? If so I think thats a heck of a lot. 10 bad trades and you are 20% down. I guess for longer term trading its ok but trading 10 to 30 min candles I dont risk more than 0.3% per trade.

 

[dbphoenix]

I don't understand what profit taker is saying. I really don't. The gap between 'hypotheticals' and what happens in reality is psychological. The dispute here is basically between two types of reasoning. PT and you are inductive about whether 100% return is achievable. What you are saying, it seems to me, is that in real life it doesn't happen. But then, in real life trading sucess is very rare anyway, so you are clearly right about your assertion in one sense. We are talking about someone who actually makes money trading. Obviously a novice is highly likely to go broke trying trying for 100%, but a novice is highly likely to broke anyway.

What I find hard to understand is why a good trader would run a high risk of ruin just because he is targetting 100% return per year. Of course it depends on how one defines ruin. Ruin is usually equated with 'uncle point', a point at which one decides it is not viable to continue trading. So I may decide to abandon my goal when I lose 50%. With a system that wins 40% of the time with a 2:1 reward to risk, my risk of ruin is about 2 times going below 50% drawdown from some peak in the equity curve, using a simulation with 1000 iterations.

Now those are the numbers. The reason why most of us cannot do this comes down to psychology. But, it is a mathematical fact that you do not run a high risk of ruin if you risk 2% of your account and are a winning trader. I know that in real life it is nearly impossible to do because all sorts of things come into play. But I am just arguing that, in terms of the numbers, the risk of ruin had very little to do with aiming for 100% return. Rather it is something else. We can, of course, discuss that elsewhere because that is a separate topic. But it cannot be true going for 100% return, per se, will ruin a trader.

You say that "those are the numbers". But they are hypothetical, simulated numbers. And "mathematical facts" have a nasty habit of biting one in the butt in the real world. There is also the question of whether "targeting" a 100% return is more or less professional than simply making oneself available for whatever the market is willing to provide.

And, no, the gap between what happens in simulation and what happens in the real world is not just psychological. If it were otherwise, then anyone with a halfway decent charting program could make a fortune with any one of his spectacularly successful computerized backtests.

Will going for a 100% return pa per se ruin a trader? Per se, maybe not. But doing so puts the cart before the horse, and that can lead to problems.

Db

 

[Citizen2007]

And, no, the gap between what happens in simulation and what happens in the real world is not just psychological. If it were otherwise, then anyone with a halfway decent charting program could make a fortune with any one of his spectacularly successful computerized backtests.

Db

Agree with you on that one DB. IMO the psychological aspect is only present when some aspect of technical understanding is not in place. It is this missing link that forces you to think and rethink and redevelop your system.