How not to make 100% ! who needs to?

[leonarda]

Ok, continuing the current theme...

Take the following 2 scenarios, which camp would you prefer to be in?

A) Trading for a living
- using lots of leverage
- hopefully making 100% per year
- drawdowns up to 60%
- withdraw funds when needed to live on

B) Have a decent day job, trade a few hours a week
- use modest leverage
- hopefully making 25% per year
- drawdowns up to 15%
- compound funds with a aim of building up a nice pension pot over 10+ years

Which camp do you prefer? Plan A definitely looks rather stressful compared to B, but the rewards of A might be worth it, but are the risks worth it too?

I hope to aim for plan B myself.

 

[FX Bandit]

Modest regular returns with low drawdowns from high probability set-ups are certainly more likely suited to the temperament of the average would-be speculator.

Such an approach would also allow for the mistakes that most traders make.

However, each to his own. No approach is right, just more or less suited to the individual concerned.

 

[shadowninja]

The 100%/25% is irrelevant. I really don't understand why people cannot see that you can risk just 1% and make 500% a year. Can you guess why it's possible, realistic and safe?

 

[meanreversion]

Er, tell us ?

 

[leonarda]

Can you guess why it's possible, realistic and safe?

err yes, please tell?

 

[meanreversion]

Leonarda, plan A can be modified, if you have sufficient starting capital. My aim is to make 20-30% a year, with potential for a similar magnitude of drawdown.

If your starting capital is not large (e.g. <£20k) then plan B is definitely the one to go for. But as I recall, you're doing significantly better than that this year?

 

[Vorbis]

It's very subjective.

The only reason I trade at all is for the freedom of not needing the dayjob, so option B is a non-starter for me.

 

[wallstreetwarrior87]

In response to the theme in general, there is so much confined thinking, nothing outside the box.

Why are there only 2 options, there are hundreds of possibilities to make returns far greater than whats quoted?

But to achieve this one has to move away from stereotypical nonsense that is regurgitated all over the place.

I saw a comment somewhere( maybe here?) it was great:

Dont swing at sh*t.

Make that the traders premise, and build from there.

No matter what anyone says, a high strike rate is vital as a daytrader. Yet this hardly gets a mention.

 

[leonarda]

It's very subjective.

The only reason I trade at all is for the freedom of not needing the dayjob, so option B is a non-starter for me.

yep agree, I wasn't saying there's a right answer...

 

[leonarda]

In response to the theme in general, there is so much confined thinking, nothing outside the box.

Why are there only 2 options, there are hundreds of possibilities to make returns far greater than whats quoted?

But to achieve this one has to move away from stereotypical nonsense that is regurgitated all over the place.

I saw a comment somewhere( maybe here?) it was great:

Dont swing at sh*t.

Make that the traders premise, and build from there.

No matter what anyone says, a high strike rate is vital as a daytrader. Yet this hardly gets a mention.

yes I know... lots of options possible obviously. I was just trying to describe 2 opposite ends of the spectrum and see where people put themselves and why?

 

[leonarda]

Leonarda, plan A can be modified, if you have sufficient starting capital. My aim is to make 20-30% a year, with potential for a similar magnitude of drawdown.

If your starting capital is not large (e.g. <£20k) then plan B is definitely the one to go for. But as I recall, you're doing significantly better than that this year?

I was trying to describe 2 options at each end of the spectrum, so variations on each are obvious likely.

I am doing well this year, but it's my first year, i'm using slightly more leverage than I would like and I might have been a bit lucky so far. My target is similar to yours. If all goes to plan I will start next year by adding some more cash to my account and lower my leverage targetting about 30-50% with hopefully a max drawdown of about 20%.

 

[wallstreetwarrior87]

yes I know... lots of options possible obviously. I was just trying to describe 2 opposite ends of the spectrum and see where people put themselves and why?

I can see why its interesting, but everyone is different.

All I try to do in any response is to nudge a little in the direction of independence.:idea:

Seek approval from no-one, as it is you that decides your destiny (without sounding too whacky, but you get what im saying)

 

[robster970]

If you're using trading to validate yourself and your self-worth then you will eventually remove yourself from the trading gene pool. Questions about %age returns usually indicate this. There is no right answer to this and frankly it's down to people's (a) risk taking and (b) capital base. There will be a broad spectrum from the ultra-conservative to the ultra-aggressive.

One thing that jumps out though - the conservative end are usually very well capitalised. Ask yourself how they got there. Was it doing 100% returns per annum or was it long term compounding with lower risk?

 

[leonarda]

I can see why its interesting, but everyone is different.

All I try to do in any response is to nudge a little in the direction of independence.:idea:

Seek approval from no-one, as it is you that decides your destiny (without sounding too whacky, but you get what im saying)

yep makes sense, and it's these independent ideas that feed my knowledge and make me break new ground... so thanks!

 

[leonarda]

One thing that jumps out though - the conservative end are usually very well capitalised. Ask yourself how they got there. Was it doing 100% returns per annum or was it long term compounding with lower risk?

yep, that was the question I was trying to indirectly ask...!?

 

[shadowninja]

Er, tell us ?

err yes, please tell?

Tell you what, let's assume I'm correct. Now, you tell me why.

 

[meanreversion]

yep, that was the question I was trying to indirectly ask...!?

I'm 38 this year, does that help?

 

[meanreversion]

One thing that jumps out though - the conservative end are usually very well capitalised. Ask yourself how they got there. Was it doing 100% returns per annum or was it long term compounding with lower risk?

Most "legendary" traders started off very aggressively, so that's not necessarily a barrier to long term success.

Read "The Big Short" by Michael Lewis.. it mentions a small hedge fund called Cornwall Capital, who went all out on a series of trades and completely cleaned up. It can be done.

 

[Splitlink]

I'm 38 this year, does that help?

I'm 78, so your 38 would help me a lot.

 

[meanreversion]

I'm 78, so your 38 would help me a lot.

Er, you are not 78.