Does anyone here actually make money trading?

[Profitaker]

100% of 100k per year doesn't need to involve a high risk of ruin (I must start a thread on this). Frequency of trading is one key to this statement. A high win ratio is a good supporting factor.

It depends. If you’ve got to make £ 100k / year to pay the mortgage / school fee’s / mooring charges / wife’s handbags etc, etc, then what happens is that following a period of drawdawn risk will need to be increased in order to recover, when actually risk should actually be reduced.

Recovery % = Loss % / ( 1- Loss % )

A 20% loss of capital requires a recovery of [ 0.20 / 1 – 0.20] = 25%
A 30% loss of capital requires a recovery of [ 0.30 / 1 – 0.30] = 42.9% and so on

I contend that targeting 100% annual return carries an extremely high risk of ruin (near certainty depending on the time frame), which is totally different from actually having achieved 100% return whilst striving for a much lower target.

If you can take 4 trades per day on average then you have to earn 0.1k per trade.
If you trade a system with 66% wins and 1.5x the loss per win then you have to risk about 0.12k per trade to earn 0.1k per trade.

So each trade is risking not 1% of capital but 0.12% of capital.

Such a “system”, if it were scaleable, would be absolutely priceless. I don’t believe it exists. Anyway, not wishing to split hairs, but it’s actually £ 153.846 risk per trade
(153.846 x 4 x 0.66 x 1.5) + (153.846 x 4 x 0.34 x -1) = £ 400.

Also, with such a massive edge, you should be trading it till the cows come home, not just 4 trades a day. For example, it you ran 50 trades per day then your max risk per trade would drop to just £ 12.30 per trade(!) in order to make £ 400 / day.

 

[firewalker99]

I contend that targeting 100% annual return carries an extremely high risk of ruin (near certainty depending on the time frame), which is totally different from actually having achieved 100% return whilst striving for a much lower target.

As nine, I completely disagree with this statement, but will not engage in deep discussion as this is not the thread to do so.

Such a “system”, if it were scaleable, would be absolutely priceless. I don’t believe it exists.

I have seen (people trade) systems with a combined higher win% ànd r:r ratio. There's nothing unbelievable about it, except perhaps the fact that most of us don't manage to find something with such an edge. But that's more of a "I couldn't do it, so I don't believe it can be done" comment... sorry to attack the mods

Also, with such a massive edge, you should be trading it till the cows come home, not just 4 trades a day. For example, it you ran 50 trades per day then your max risk per trade would drop to just £ 12.30 per trade(!) in order to make £ 400 / day.

The edge exists not because of the number of trades one takes per day, but because the number of winning trades in the long run. Taking more trades a day most likely will decrease the win% and thus the profits.

 

[nine]

Absolutely Firewalker - good to see that someone gets it.
Patience is not just its own reward.

Cheers

 

[Citizen2007]

Such a “system”, if it were scaleable, would be absolutely priceless. I don’t believe it exists. Anyway, not wishing to split hairs, but it’s actually £ 153.846 risk per trade
(153.846 x 4 x 0.66 x 1.5) + (153.846 x 4 x 0.34 x -1) = £ 400.

A system that gives a win percentage of 66% is what i would assume the norm is for a high percentage of traders, which is why there are not as many extremely wealthy traders as one would expect. Its a % return that allows one to make steady progress. But to really hit the big league you have to have an edge that will tip the balance soemwhere. I know a particular trader who will get one trade wrong in maybe thirty or so trades.



Also, with such a massive edge, you should be trading it till the cows come home, not just 4 trades a day. For example, it you ran 50 trades per day then your max risk per trade would drop to just £ 12.30 per trade(!) in order to make £ 400 / day.

That depends on the system, some may not permit 50 trades per day. Some may only give you maybe three or four signals a week, but because of the win/loss ratio is higher, you can really lump it on.

 

[FXSCALPER2]

Hey profittaker,

Targeting 100% return runs an 'extremely high' risk of ruin? Extremely high? How is that? If a trader who risks 2% per trade and has 100k, trades with a 40 pip average stop, s/he will have to make 2000 pips per year to make 100% return. That is about 166 pips per month without compounding! If the trader adjusts for previous gains and losses, their risk of ruin is extremely low. You can see this for yourself by doing an excel or monte carlo simulation.

 

[Profitaker]

As nine, I completely disagree with this statement, but will not engage in deep discussion as this is not the thread to do so.

Oh I don’t know, the thread titled is “Does anyone here actually make money trading?” so nobody could call “off topic” should you decide to engage in deep discussion in that respect.

I have seen (people trade) systems with a combined higher win% ànd r:r ratio. There's nothing unbelievable about it, except perhaps the fact that most of us don't manage to find something with such an edge. But that's more of a "I couldn't do it, so I don't believe it can be done" comment... sorry to attack the mods

Perhaps I should have mentioned the word “consistently”. I’ve never heard of (never mind witnessed) a consistent win rate of 66% at 1.5 times the loss value. Until such time as I do, such claims will remain (to my mind anyway) just as that – unsubstantiated claims.

The edge exists not because of the number of trades one takes per day, but because the number of winning trades in the long run. Taking more trades a day most likely will decrease the win% and thus the profits.

I’m afraid that is categorically wrong. The edge, perceived or otherwise, either exists or it doesn't. If it does exist you should squeeze it till the pips squeak. Come on guys !

Citizen – if you have an edge, you milk it. No "if’s" or "but’s", you milk it. I should quantify that by saying that the system should be scaleable, which it may not be.

Targeting 100% return runs an 'extremely high' risk of ruin? Extremely high? How is that?

Yes. Show me a fund that has made 100% p.a. consistently ? In fact, show me a fund that has made 100% year-to-date. If you can get anywhere close to that kind of performance there’s a hedge fund worth several billion just gaging for YOU to run it.

Have to say it doesn't suprise me that 90%+ of traders lose money.

 

[hanzam]

Trader turns £50000 to 1 million Sunday Times article

Profit from the falling markets
Bold investors have been using the stock market turmoil to make moneyJessica Bown
THOUSANDS of investors have been turning the slide in the stock market to their advantage by betting that markets and share prices will fall.

The FTSE 100 index of leading shares fell 0.5% last week to finish at 6,262 on Friday, wiping out most of this year’s gains for many investors.

But some canny traders have made big profits by spread-bet-ting or using contracts for difference (CFDs) to make money from plunging equities. Today anybody can invest in such products, which rise or fall in value inversely to the movement of the underlying investment, making it possible to profit in any conditions.

Simon Denham of Capital Spreads, a spread-betting firm, said: “The recent weakness in the markets held no fear for the legions of spread-betters who were able to ‘short’ the market. Market turmoil adds an element of risk – but also can lead to significant reward.”

Barclays Stockbrokers said it has been amazed by the number of people trading while the stock market has been so rocky. Paul Friel, associate director, said: “Last month was our busiest on record for both CFDs and spread betting as investors rushed to take advantage of movements in global markets, including commodity and currency markets.”

Investors should be under no illusions about the risks. Only one in five spread-betters makes money, according to research by City University’s Cass Business School. But for some the element of danger is worth it.

Douglas Cowpland, from Battle, East Sussex, is up thousands of pounds this year using CFDs. Cowpland, 80, opened a Barclays Stockbrokers CFD account with £50,000 about five years ago. Since then, he has increased the size of his investment pot to £1m and has even been able to buy two yachts in the Caribbean with his profits.

Cowpland, a hotelier, said: “My wife Julie tends to take care of the hotel business, while I spend my time trading CFDs over the internet. I have been up by as much as £100,000 in a day due to market volatility, but you can of course have bad days. I do think you need to be something of a risk taker to trade in this way.”

You also need to have the necessary time and dedication. Cowpland is close to his laptop at all times. He said: “It is fast moving, so you have to keep on top of it. Even when I am on holiday in the Caribbean on one of the yachts, I am always online.”

One of the attractions of spread bets and CFDs is that they allow you to profit from the market for a fraction of the cost of normal shares. Instead of paying full face value you put up a deposit, known as trading on margin. Most companies only ask for 10%-25% of the actual value, although this adds to the risk.

If the share price moves in your favour, you can make big money from a small stake, but you can also suffer big losses if the market moves against you. It is therefore possible to lose much more money than you put down in the first place.

One way to reduce risk is to pay a bit extra to apply a stop loss that will ensure the investment is sold when it goes above or below a certain price.

Of the two, many investors find CFDs easier to understand. When you trade CFDs you agree to receive the difference between the price when the contract is opened and the price when it is closed. If you think the value of the CFD will rise, you go “long”, or “short” if you think it will fall.

Say you thought shares in a company are about to drop and take out a CFD to go short of 1,000 shares at 100p. The contract value would be £1,000, but you would put down only about 20%. If you closed the contract at 95p, the difference in price would be 5p and you would make £50. But if it rose to 120p, you would lose £200.

While CFDs are available only on financial assets, spread bets allow you to gamble on almost anything. Cantor Spreadfair, a bookmaker, said some clients were betting up to £4m last week that house prices in greater London would fall 10% by December 2010.

When you spread bet, the bookmaker will quote you a spread for a share or the level of an index at a given date and you bet on how far you think it will move above or below the spread.

Last week Tradindex was quoting 6,306 to 6,313 for the FTSE 100 in January. If you think it will beat that, you can bet £10 a point above 6,313. If you think it will be lower, you can bet below 6,306. If the Footsie finishes at 6,300 and you have bet on it falling, you would make £60 (£10 times six). If you close the bet at 6,310 you would lose £40.

You avoid 0.5% stamp duty when you deal, and profits made from spread-betting are exempt from capital-gains tax. CFDs are liable for CGT.

 

[Profitaker]

Trader turns 1 million to £50000 Sunday Times article

Trader turns 1 million to £50000 Sunday Times article

Doesn't quite make such compelling reading, does it ?

But I'm sure that such occurrences are far more frequent than we care to acknowledge, and certainly much less documented than they ought to be.

Eyes wide open !

 

[FXSCALPER2]

Profittaker, I knew someone would say funds wouldn't make 100%. Just for a moment, ignore what we hear (truly, I am sure) about the returns of billion-dollar funds and look at the numbers.

What makes you think risking 2% of 100k runs an 'extreme risk of ruin'? I mean what in the calculations tells you that?

As to a billion dollar fund 'gagging' to let me run their funds, Can you imagine them letting me risk 20 mio per trade? Can you also imagine them letting me take any trade I like, scalping or otherwise? There is a definite edge in being a small trader which will disappear if you are managing billions.

If I was given 10k and I risked just 2%, I am certain I would double it in a year. But if I was given 1bio, the game changes completely.

There is a reason why big funds don't make 100%. It is not the amount of money you have that matters, it is the utility function of the money that you risk that matters. Paul Tudor Jones says ,rightly, his percentage return would be much bigger if he was trading his own funds rather than managing such a huge amount of money.

Good trading

 

[wanttotradewell]

I have only been...

trading for about 4 months now and only for the last 3 weeks have I not ended on a loss, and last week i actually ended up 25 points
I think as soon as I started to forget about making big money quickly and not trading in a panic (along with much better money management) I have managed to stop consistently loosing. Knowing that I can go from a consistant loss to a consistant break-even /small profit, I am sure that I can refine my methods to come up with a way to be more in profit. the only reason I have not been more in profit is that I have made a few mistakes that I knew afterwards were stupid, with time those sort of things will be tweaked out. You just need to learn from your mistakes, I learn something new every week, sometimes every day!

I think that all you need is a fairly basic trading plan which you should test with as minimum capital as possible (the company I use allows you to trade the 1st 8 weeks for 10p per point), then you can gradually refine the plan to make it break-even and even into profit without worrying about loosing too much money ( I was amazed that in my first few months, even trading 10p per point, I managed to loose over £100 lol). I considered several times whether it was actually possible for me to make money, especially since I could only devote a few hours a day to trading. I have read about 4 books so far and I am trying to find the time to get started on my next one and I constantly search the net for free information on trading, I think if you put the time in then you will get rewards.

I think the dreams of the toned girls oiling you up need to be put on hold a few years lol (I had similar dreams, then the non-farm payroll happened on my 2nd day of trading ever....having not heard of it before I lost quite a bit of money, at which point I decided to take up my trading companies offer of 10p per point lol ).I am now trading at 50p per point and I have no intention of increasing this until I have shown to myself I can consistantly make money. My aim for now is to not have to add amy more funds to my trading account ...if I can do that, especially for the next few months, then I will be extatic (having read most people have quit trading within 6 months)

 

[Profitaker]

What makes you think risking 2% of 100k runs an 'extreme risk of ruin'? I mean what in the calculations tells you that?

It doesn’t. I didn’t say that. I said targeting 100% annual return carries an extremely high risk of ruin (near certainty depending on the time frame). But, targeting 100% annual return is entirely different to risking 2% of capital per trade and ending up with 100% return after a year. There is a big difference between the two scenarios because of the way risk is handled following a drawdown (see post 81), and that is to say nothing of the psychology involved of having to make the 100% return in order to pay the mortgage / school fee’s etc, etc.

There is a definite edge in being a small trader which will disappear if you are managing billions.

Agreed. But if you have a “system” with a consistent win rate of 66% at 1.5 times the loss value you have some way to go before it disappears. I did qualify the £ billion fund analogy by saying the system should be scaleable.

Can you make consistent money in the markets ? Yes, definately. Is it easy ? No, not even close ! And anybody that tells me otherwise either hasn’t been trading long enough or is slightly economical with the truth.

It’s Monday, weekend rant over, heads down, and good trading to you Sir.

Wanttotradewell – Good on ya, and long may it continue !

 

[firewalker99]

Trader turns 1 million to £50000 Sunday Times article

Doesn't quite make such compelling reading, does it ?

But I'm sure that such occurrences are far more frequent than we care to acknowledge, and certainly much less documented than they ought to be.

Eyes wide open !

Looks to me like you misread that article.
The trader mentioned, turned $50000 into 1 million over a period of 5 years. That's an average of ~82% a year. Not bad, but nothing compared to what some people manage.

Not everybody wants to go public about it though. Some do... for example Larry Williams managed 10000%, his daughter 1000%. But as I said before, it's easier to turn 1000 into 1m than 1m in 1billion. It's a whole different game at that level. You might also want to read Stock Market Wizards if you truly believe "it can't be done".

 

[Profitaker]

You might also want to read Stock Market Wizards if you truly believe "it can't be done".

I didn't say it can't be done. On the contrary, I know it can be done, but not without the utmost respect for managing risk, and shooting for 100% return in a year is giving 2-fingers to risk management. That really is my only point here.

 

[firewalker99]

Oh I don’t know, the thread titled is “Does anyone here actually make money trading?” so nobody could call “off topic” should you decide to engage in deep discussion in that respect.

I wasn't going to reply at first, as this might fall on deaf's ears anyway and as I've heard it doesn't go well to go against a moderator lately. But... I'll stick my neck out.

Perhaps I should have mentioned the word “consistently”. I’ve never heard of (never mind witnessed) a consistent win rate of 66% at 1.5 times the loss value. Until such time as I do, such claims will remain (to my mind anyway) just as that – unsubstantiated claims.

I’m afraid that is categorically wrong. The edge, perceived or otherwise, either exists or it doesn't. If it does exist you should squeeze it till the pips squeak. Come on guys !

Citizen – if you have an edge, you milk it. No "if’s" or "but’s", you milk it. I should quantify that by saying that the system should be scaleable, which it may not be.

I honestly don't know where you heard this stuff. An edge consists of nothing more than a slightly higher probability of success. If somebody's edge exists because he wins 85% of his trades by taking one trade a day only (suppose with a risk:reward of 1,5 to 1), why would he want to take one trade per hour, if that will only make him lose more (a) money and (b) discipline/patience.

Trading is about patience. Patience to wait for the best, highest probability trade. Not scampering off into the distance taking 20 trades a day. Even one trade a week will do fine for anybody with a decent edge. After time, played with size, this person's account will grow very nicely. I don't know what you mean with "squeeze it till the pips squeak".

If your edge exists on a daily or hourly timeframe (I can think of no better example than trader_dante's excellent thread lately), why would you want to trade off 2 or 5 minutes if you can manage 2000% in several months?

As a final note, why do you think a system is or has to be scalable per definition? Because the markets are fractal in nature? Perhaps, but wrong logic, buying/selling 10 cars won't have much of an impact on the market. Trading 1000 cars in one execution on the other hand most likely will.

 

[Profitaker]

I wasn't going to reply at first, as this might fall on deaf's ears anyway and as I've heard it doesn't go well to go against a moderator lately. But... I'll stick my neck out.

Don’t know where you heard it from, but that’s a new one on me !

Thanks for the reply anyway, but you've missed my point, maybe because I didn't articulate it very well. Either way, I'll leave it there. Cheers.

 

[firewalker99]

A real life numeric example

I didn't say it can't be done. On the contrary, I know it can be done, but not without the utmost respect for managing risk, and shooting for 100% return in a year is giving 2-fingers to risk management. That really is my only point here.

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?

 

[black bear]

All New Boys take a copy and save to word

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

 

[Profitaker]

Okay I understand, but at first you said you didn't believe it could be done.

Confusion reigns (probably my fault). To clarify:-
I do not believe there is any consistent “system” with a 66% win rate at 1.5 x the loss
I do believe that a 100% annual return on capital is possible, but attempting this carries a significant risk of wipe-out. Shoot for the 100% return too often and wipe-out becomes a near certainty.

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?

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

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.

 

[dbphoenix]

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

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

Db

 

[Profitaker]

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

Db

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 ?