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Hi Everyone. Help me set rational expectations?
Started:November 3rd, 2014 (06:30 AM) by Total Novice Views / Replies:330 / 3
Last Reply:November 8th, 2014 (01:56 PM) Attachments:0

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Hi Everyone. Help me set rational expectations?

Old November 3rd, 2014, 06:30 AM   #1 (permalink)
Elite Member
Savannah, GA
Futures Experience: Beginner
Platform: Still Researching
Favorite Futures: Stocks
Posts: 6 since Oct 2014
Thanks: 15 given, 0 received

Hi Everyone. Help me set rational expectations?

I'm a somewhat experienced investor, but am new to trading. I'm generally one to look at annual reports, calculate cash flows, project them into the future (pessimistically), discount that back to the present to come up with a "fair" price for a stock, then try to buy it at a 50% discount. You know - I'm a generic value guy.

That's been working well, but I've been seeing enhanced returns by deciding where the market is wrong and exploiting that. My most recent example:
  • I bought ESI (ITT Tech) because it was just sooooo cheap. The market hates it, the Obama administration hates it, but it's still generating profits so the discount to "fair" value was 90% or so. There are some looming problems, but competent management can fix those.
  • Despite the cheap price, I saw the stock price drop ~ 40% a few weeks later. So I bought more, and bought some ITM calls dated for next year.
  • It dropped more, and I bought more (and more options.)
  • The short squeeze happened, and I offloaded my calls for 600%, 700%, and 800% gains as I scaled out.
Now my long position is showing as underwater as far as unrealized gains, but I'm pretty far ahead overall.

Anyway, my interest in market inefficiency has led me to trading, and I think I might be able to figure this out. But I thought getting my head on straight would help me be rational in the days to come.

So, some questions:
  • What percentage of traders are profitable? 5%?
  • What percentage of traders on futures.io (formerly BMT) are profitable?
  • What's a reasonable expectation as far as profitability goes? If I've got $500,000 in my discretionary investing account, and $30,000 of that is cash waiting to be invested for the long term, what sort of income can a profitable trader expect to earn? I ask because trading = short term gains, and part of my calculation here is "is it a good allocation of time to trade versus doubling down on my regular investing strategy? Is 30% per year pre-tax a reasonable average return on investing equity (depending on skill and choice of instrument?) 60% 10%?
  • What edge does someone who watches the market and trades discretionary have over automated investing? As someone who meditates and has learned to trust that inner voice I have a great deal of respect for intuition, but it would seem that a really insightful guy could build a system that was automated and very profitable (like screening lots of instruments for a few setups that are low likelihood, high probability, and highly profitable. Of course, quant shops might have ID'd all of these already..."
Thanks for your time. Just trying to make rational decisions here and it's hard to find advice and information that really feels trustworthy.

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Old November 3rd, 2014, 06:30 AM   #2 (permalink)
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Old November 8th, 2014, 10:44 AM   #3 (permalink)
Elite Member
desert CA
Futures Experience: Intermediate
Platform: NT7, TOS
Broker/Data: AMP/wCQG, TDA
Favorite Futures: CL,YM
Posts: 1,994 since Jul 2011
Thanks: 2,171 given, 1,498 received

Wow, you already have your own system of investing that profitably with traditional fundamentals analysis? We should be asking you questions on your trading success, but congrats. Are your questions pertaining more to daytrading? My guess to some of your questions: most of us are daytrading at futures.io (formerly BMT), maybe 1% , imho, are consistently successful or have reached there. The retail trading discussed here is usually at much smaller accounts than what you posted but the next step above forex discussion sites and their small microlots trading. A large majority of the membership lurk and never post. There are claims of all kinds of % gains, but losing %'s(and losses as well as gains) are rarely posted nor most anything ever proved.

Last edited by Cloudy; November 8th, 2014 at 10:50 AM.
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Old November 8th, 2014, 01:56 PM   #4 (permalink)
Market Wizard
Futures Experience: Intermediate
Platform: Investor/RT
Broker/Data: IB / DTN
Favorite Futures: Futures
Posts: 3,518 since Feb 2012
Thanks: 3,045 given, 6,077 received

Congrats on your nose for special stocks.
It is very hard to have "expectations" in the financial markets - especially not rational ones.
You gave ONE example of a good outcome of buying stocks, re-buying stocks and selling
parts of them with a nice gain.
Now the big question comes in:
WHAT is CONSISTENCY - and over which time?
Earning more than a normal salary OVER TIME is for sure some consistency that lets you
"not getting out" of this business.
The term "over time" (aka consistency) here means 3 years plus...
Think about it before you drop your normal job.

Good trades

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