Is it really possible to make money in this trading lark?

[alpha_monkey]

For me, a trading approach stands a greater chance of success if it follows the KISS principles - Keep It Simple Stupid.

jtrader.

I think you're right.

Futures only go up, down or stay the same. The human element is the part that causes trouble. Because of this, systematic trading appeals to me. Would like to try to automate the spreader's tactics. Anyone investigated this?

 

[TWI]

Assuming you are talking about the spreader tactics that I employ then I have, it is a nightmare, particularly if you try to leg into all the spreads. If you sit on spread products themselves then it works but the contingencies are extensive and working through them is an "interesting" exercise. If they are not included then a scratch on every trade is likely. I did not realise what I actually did when things start to go against me until I tried to code it. I don't know I have been completely successful and I am a bit apprehensive to set the beast in motion as I fear it may eat my cash, or leg me out on something horrible or crash on me at a bad time. It is likely that I am a terrible coder and I do not well understand the API document so I have to be scared.
Good luck if you go down this path.

 

[nobrainer]

Lions69,

'If one were to take the argument further, Trader A in the example above would be able to exceed Trader B over a period of time by simply reinvesting his capital (even if Trader B did the same).''




Trader A may do better %age wise..sadly though he will always be poorer.As I said, on a micro level its pounds and pence that count , not % return....that is unless you manage a fund.

Futhermore,

''Nobrainer,

I enjoyed reading your post, it confirms my view that one of the reasons many people come unstuck is that they seek unrealistic returns. ''

Sadly the uninformed always equate expecting big returns as having to take on bigger risks.The reality is that you can increase the level of your trade size without changing your risk profile.....it's just a natural progression for those not hindered by worrying about %ages and are able to concentrate on making money.Perhaps you should try it.
Regards.

 

[Racer]

If your starting capital is very small then you have a very high percentage of costs to get over before you get in profit on a trade.(spread, dealing charges and stamp). e.g. a £2K trade compared to a £50K trade.
Okay stamp will be the same percentage wise but the dealing costs will be completely different and significant.
And if you trade on margin with £2K that sort of sum can easily get wiped out very fast, compared to trading with £50K

 

[LION63]

Nobrainer,

I am quite certain that you can do most calculations without difficulty so, I would suggest that you do a few based on the principle of compounding to check if I am right or wrong. Furthermore, most traders that raise the size of their transactions as they go along (based on success) actually lower the percentage risk that they take on. As such, it becomes a win win situation. The stakes are higher but the percentage risk is less.

For those that talk about returns, how do you define returns? Is it that I have £50,000 capital and I have made £10,000....I am a very good trader? Or is it that I make a return of 25%? I would rather be in the second camp and that type of trader is much better. It goes without saying that if there was a league table, the second would be higher than the first. If on the other hand I were to try and follow the argument that you only deal in pounds and pence, it could only be based on the fact that one has very substantial capital to start off. Sadly it is not the case for many traders and they need to make money in the markets in order to increase their capital. If they do not compound how are they going to make their trading financially viable?

 

[nobrainer]

Racer, if your funds are limited...why pay stamp duty?Look for vehicles such as cfd's where you pay no stamp and you can deal using just 5% margin with certain brokers eg.cmc.What I'm saying is that you cut your cloth accordingly and moreover you have to build your pot more slowly initially.

Lions69, we are approaching the Trader A and B from different angles .Firstly, I don't consider anyone who has a pot of 10k to be a 'trader'.He's a speculator at best, a 'wannabe' and most likely a punter with aspirations.Many of us were in that boat at one point or another, perhaps thru getting hammered by the tech boom or when we first started out as'beginners'. Comparing such people to full time 'traders' is just plain irrelevent.
If you are asking me what I consider to be a good rate of return for a full time 'bonafide trader'........my answer would be that a really good trader......... .If his pot size is only 50k, he ought to be making 75k as a bare minimum...........thereafter I agree, that as his pot grows he will find it harder to increase it %age by the same level.If his pot size is 250k, he ought to be aiming for 250k every year, whatever the market, bull or bear.That type of return puts him in the top 3% of traders of private traders imo having spoken extensively to the biggest uk direct access cfd providers.The US may be different.
Most of us are private individuals so I find the %age comparison irrelevent...perhaps wrongly.But I def know what is more relevent to me.

 

[frugi]

Nobrainer,

Firstly, I don't consider anyone who has a pot of 10k to be a 'trader'.He's a speculator at best, a 'wannabe' and most likely a punter with aspirations.

Why not? Let consistent returns, or lack thereof, be the judge of that

Unless we refer to huge amounts of capital, e.g £250k+, percentage return is surely the only meaningful measure of relative performance (although £ return is often the vital practical consideration)?

I thought all traders are speculators, although the latter usually implies a longer time frame. Perhaps the word has a negative connotation for some, like gambler?

 

[LION63]

Frugi,

Those who have always view the havenots as 'wannabes' and second class citizens. I would have thought that a trader with capital of less than £10,000 will evaluate his/her ability based on ROCE (percentage returns), to say that this is wrong or that the individual should not be in the markets is somewhat misguided.

I have a personal friend who only had £500 starting capital earlier this year, in a period of 6 months he made in excess of £2 million, is anyone out there saying that he should not be trading? I guess not, those that are not successful are busy labelling him a gambler but I would rather be a gambler with £2 million than a so called 'Professional' doomed to mediocrity.

When I told a couple of other traders that with say £50,000 capital I could make £1,500 a week (£75,000 a year) they laughed and reminded me of remarks headmasters used to make in reports - Continuously sets himself low targets which he fails to achieve.'

People like Nobrainer should realise that fingers are not equal and the roads to glory are very diverse.

 

[Trader333]

Are you saying that your friend traded their way from £500 to £2M ? or that they made it by some other means as this was not clear ?


Paul

 

[LION63]

He traded from £500 to £2 million.

 

[Trader333]

Well that is impressive but is a very rare occurence and in my view not possible for the vast majority of people. The reason being that the £2M has to be got from others losses and, as with most things, few are at he top of the tree.


Paul

 

[Trader333]

Actually I have another question, in your view was this performance good fortune or skill ? Do you think that this could be repeated again starting today with £500 ?


Paul

 

[LION63]

Absolute skill and a little bit of good fortune. He is very dedicated to his profession and spends about 18 to 20 hours a day trading. His research is second to none and he is one of those that believes that when there is doubt there is none. Once he has done his research and everything stacks up, he pulls the trigger.

 

[JumpOff]

Lion63, Are you free to tell us what instrument (s) he was trading during this run?

Also, to achieve this rate of growth, he must have been using tremendous leverage. Do you know what steps he took to manage his risk?

Thanks,
JO

 

[nobrainer]

Lions 63.......£ 500 to 2mill is incredible.......reminds me of the tech boom! Did it make of those who rode the likes of BLM from a few quid to £140, great traders? No, they happened to be very lucky and chose a great stock in a great bulll market.
You friend may be a great trader, whether he'll repeat that performance I'd doubt esp. since he started off with just 500 quid, suggests he is a newbie.....it would be interesting to know how he fares over the next few years.Naturally , he was concerned about £'s and pence rather than ROCE, don't you think?
As for you making 1500 per week from 50k capital..........that's quite good and personally I find that more impressive esp. if you have consistently achieved that over a long period.I think that's a very normal return for a good trader...I can think of at least 3 traders whom I speak to daily who have achieved that for the past 4 years.The only drawback is that its hard to grow exponentially from there if you need to live from that profit esp. after paying tax.

 

[LION63]

May I start by correcting one wrong assumption; at no time did I say that my capital is £50,000 and I make £1,500 per week in profits. Nobrainer, that was a reference to a few lines in your post, personally, I would view that as mediocrity itself. There are obviously those that would be very happy with such a return/profits but not me. Good luck to those who are making that and are content, as the saying goes, to each his own.

For those who asked genuine questions as opposed to being cynical or trying to make snide remarks I will say the following -

My friend has traded financial markets in various ways since the 1980s, he used to trade from a dedicated office in America and employed a clerk and a secretary. He made quite a lot of money in the markets and lost it all in real estate. He returned to this country about 8 years ago and monitored the markets whilst working out different systems and methods.

He came to the conclusion that for him (you can make your own choice) it comes down to risk/reward; ROCE/percentage return and compounding his capital as he went along. He trades forex, indices and shares and is not interested in anything else. As I said before, he works very long hours and trades the Far East markets; Europe and the US. He uses 100 point stops on all major currency crosses (does not bother with the others) and looks for a return of 25 points. His aim is to achieve a profit of 100 points per day in profits and then run every trade thereafter for maximum profit potential, he may also have multiple positions running at the same time. Under no circumstances will he go against the markets in any trade, he prefers to stand on the sidelines watching. As for the FTSE100, DAX or CAC he places a stop of 25 points looking for 10 points; with the Hang Seng and Nikkei it is a stop of 300 to get 100. With individual shares it is much more complex so I will not bother going into any details.

For those that think my friend will possibly go broke, do not hold your breathe, he has just paid £1.2m (cash) for a luxury house and bought another 3 properties for cash (buy to let). Poor people worry about tax, the rich and successful hire accountants. He has made his money in choppy markets and I believe that that is harder than in bull or bear markets.

I hope that this has given you an insight into how my friend has managed to turn a paltry amount into a huge profit doing it HIS WAY.

 

[ersatz99]

Is your friend called Harvey.

 

[eddiecomestotown]

ive noticed a few people on here saying trading is a zero sum game - or for every loser there is a winner. I cant agree with that.

If I buy a share at $100 and sell it at $110 then who is the looser on this transaction????

My profit or loss is completly down to a change in market sentiment. No one has lost money through me making $10.

Or am i missing something.

kazza, for me learning to trade has taken a while. I first started out with months of paper trading, testing different theories etc until I thought I had some chance. I started trading with small amounts and realised how little I knew and what impact it has when you put real money down. I then fed my experiences back into my theories and tried again, and again and again.

I wouldn't consider myself successfull yet but this has taught me a lot about how the market works and has made me a lot more realistic in my approach.

For me I am convinced I can do it, and thats why I am willing to devote so much time to it.

 

[Trader333]

Lion63,

Under no circumstances will he go against the markets in any trade, he prefers to stand on the sidelines watching

Can you clarify what is meant by this because it can be said that if his stop is hit then he has gone against the market or does his risk model say that up to his stop is not classed as being against the market ?

eddie,

For share trading your example is partially correct but it ultimately relies on an ever increasing population. For futures then it is a totally zero sum game, in fact it is even less than zero sum when you take out the transaction costs. By this I mean that if someone is up $100 then then somewhere someone or several people have to, (in accumulation), be down by the same amount.


Paul

 

[GotGold]

£500 - £200,000 in 6 months?
I would have to see proof to believe such a claim.
Step aside George Soros, here comes 'my mate'!