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Primary source of income: how many have made it?
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Primary source of income: how many have made it?

  #351 (permalink)
Urban Samurai
Chicago IL
 
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@bluemele

I say that because at the moment, I trade through one of my live accounts, and I am profitable. Profitable enough to pay my bills. Right now, although profitable, my equity swings can be pretty volatile. This is due mainly to my level of consistency, which isn't where I want it to be yet. This is the reason I haven't sized up, also why I am still miles away from 'making it.' But it's just a matter of time.

I trade this account off to the side, on my laptop with nothing running but 1 chart and a DOM.

Along side that, on my main PC, I have running a myriad of charts that I trade on SIM of various strategies and ideas I either have read about, or changes to my primary means of trading that I am testing out to achieve a better rate of consistency.

So basically, I am just not comfortable with where I am to even consider saying, "I've made it."

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  #352 (permalink)
Fortitudo et Honor
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jstnbrg View Post
I'm jumping in and I haven't read the recent posts in this thread, so it's possible this has already been said or is not really relevant. I'm replying specifically to the post I quoted, not to the rest of this thread. You can have a winning methodology but be ignorant to the capital requirements of that methodology, or not be sufficiently acquainted with how the market you are trading can change its character. I knew a prop trader who made $600,000 his first year trading the yield curve in an extremely nonvolatile market and then lost $1,000,000 on a single trade in one day when the market changed. I know a guy who used to trade in the bond pit who had at least a mid 8 figure career (!) but who lost it all in the late '90s when the Treasury stopped issuing 30 year bonds. Was he ignorant? Obviously, yes and no. He knew well how to make money in one environment but didn't adapt (or just quit, why not with tens of millions of dollars?) when things changed.

How on Earth do you lose $1M in one trade with ANY form of risk management in place?

I get your point, that consistency is relative and just because you've made it, doesn't mean your out of the woods....but even so....

I know a guy who made $1M before he was 21. He dropped out of college and went to work for a large broker. Had all his licenses, etc.

He made $260k in one day. Similar to your story, he lost it ALL in a couple of days when he got stupid and margin calls came knocking.

He trades for a living now, but his success was largely due to the current market conditions at the time. His failure had more to do with risk management and money management. He was young and thought that his success was normal and that it would never end....why should he be cautious......

I've met and observed a couple of traders who trade with no stops. Even on equities (which they trade) I would still have a doomsday stop in place. Flash crashes, black swans, and even the events we cannot conceive of happening (before the flash crash, who knew it was possible?).

The lesson learned is that even if you have a stop that's way beyond your manual exits, you have to operate with some form of a safety net in place.

"A dumb man never learns. A smart man learns from his own failure and success. But a wise man learns from the failure and success of others."
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  #353 (permalink)
Logician
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Hi.

There is steadfast assumption that markets change their dymanic in such ways that require all methodologies to adapt. This is not the case. Certainly there are strategies that work some of the time but there are others that capture the very essence of what markets are. This means such methodologies must work, if the markets they aim to exploit, exist. This is market character vs 'edges' I'm talking about. 'Edges' are not necessary, and if not careful, you can fall off them as this reckless anecdote illustrates.


jstnbrg View Post
I'm jumping in and I haven't read the recent posts in this thread, so it's possible this has already been said or is not really relevant. I'm replying specifically to the post I quoted, not to the rest of this thread. You can have a winning methodology but be ignorant to the capital requirements of that methodology, or not be sufficiently acquainted with how the market you are trading can change its character. I knew a prop trader who made $600,000 his first year trading the yield curve in an extremely nonvolatile market and then lost $1,000,000 on a single trade in one day when the market changed. I know a guy who used to trade in the bond pit who had at least a mid 8 figure career (!) but who lost it all in the late '90s when the Treasury stopped issuing 30 year bonds. Was he ignorant? Obviously, yes and no. He knew well how to make money in one environment but didn't adapt (or just quit, why not with tens of millions of dollars?) when things changed.



Last edited by zer0; August 16th, 2011 at 09:11 PM. Reason: spelling errors
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  #354 (permalink)
Fortitudo et Honor
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zer0 View Post
Hi.

There is steadfast assumption that markets change their dymanic in such ways that require all methodologies to adapt. This is no the case. Certainly there are strategies that work some of the time but there are others that capture the very essence of what markets are. This means such methodologies must work, if the markets thay aim to exploit, exist. This is market character vs 'edges' I'm talking about. 'Edges' are not necessary, and if not careful, you can fall off them as this reckless anecdote illustrates.

Absolutely.

When trading strategy edge is based in market structure fundamentals (like price action and volume) and entry criteria is crafted in such a way as to only enter when the conditions are present, the resulting performance is largely based on how often that fundamental criteria is met.

Oil would have been a fairly terrible instrument to trade in the 1980's after the bottom fell out of domestic oil and it basically remained in the same price range for a decade.

There's always an appropriate instrument/market somewhere.

Similarly, I've found that strategies/techniques and approaches that are "timeless" are also fairly corresponding on any instrument/market with necessary volume and volitility.

If your "system" only works on a particular instrument or on a particular time frame or with very specific settings and constantly needs updating...then the system isn't "robust."

Robust systems may not be equally as productive when varying the inputs (instrument, chart time frame, input settings, etc) but they should be at least profitable.

Obviously a robust and timeless approach will fair best on optimal parameters, but it should be positive and profitable with a wide range of inputs....

If you're system is only profitable with specific conditions, then you should at least be wary that it's a sign of more inherent risk, because if any of the inputs change enough, the systems becomes negative.

"A dumb man never learns. A smart man learns from his own failure and success. But a wise man learns from the failure and success of others."
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  #355 (permalink)
Membership Revoked
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forrestang View Post
@bluemele

I say that because at the moment, I trade through one of my live accounts, and I am profitable. Profitable enough to pay my bills. Right now, although profitable, my equity swings can be pretty volatile. This is due mainly to my level of consistency, which isn't where I want it to be yet. This is the reason I haven't sized up, also why I am still miles away from 'making it.' But it's just a matter of time.

I trade this account off to the side, on my laptop with nothing running but 1 chart and a DOM.

Along side that, on my main PC, I have running a myriad of charts that I trade on SIM of various strategies and ideas I either have read about, or changes to my primary means of trading that I am testing out to achieve a better rate of consistency.

So basically, I am just not comfortable with where I am to even consider saying, "I've made it."

Sounds good, forrestang!

You'll get "there"...

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  #356 (permalink)
Membership Revoked
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jstnbrg View Post
I'm jumping in and I haven't read the recent posts in this thread, so it's possible this has already been said or is not really relevant. I'm replying specifically to the post I quoted, not to the rest of this thread. You can have a winning methodology but be ignorant to the capital requirements of that methodology, or not be sufficiently acquainted with how the market you are trading can change its character. I knew a prop trader who made $600,000 his first year trading the yield curve in an extremely nonvolatile market and then lost $1,000,000 on a single trade in one day when the market changed. I know a guy who used to trade in the bond pit who had at least a mid 8 figure career (!) but who lost it all in the late '90s when the Treasury stopped issuing 30 year bonds. Was he ignorant? Obviously, yes and no. He knew well how to make money in one environment but didn't adapt (or just quit, why not with tens of millions of dollars?) when things changed.

It's always interesting to read your posts regarding the good (?) ol' days. However, I must confess that I am less than impressed with the risk management of some of these guys..

How is your screen trading coming along?

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  #357 (permalink)
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Guys do you thinking earning $100k a year in trading consistently is considered a successful trader?

I'm thinking if someone can earn $100k what would stop him from earning a million?

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  #358 (permalink)
Elite Member
Bala, PA, USA
 
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jonc View Post
Guys do you thinking earning $100k a year in trading consistently is considered a successful trader?

I'm thinking if someone can earn $100k what would stop him from earning a million?

Nothing I can think of, other then his psychological risk profile. To double, triple your income, you have to double, triple your risk, etc. Can he psychologically handle that. Other then that, I think maybe some physical market restrictions like account size, liquidity of his particular market, etc., although these would also depend on his style of trading.

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  #359 (permalink)
Elite Member
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jonc View Post
Guys do you thinking earning $100k a year in trading consistently is considered a successful trader?

I'm thinking if someone can earn $100k what would stop him from earning a million?

Yes, I think there is one major limitation but like monpere pointed out it depends... Horst who is someone I follow has recently switched to the ES. He would make between 3K and 12K per day trading CL, TF, 6E etc.. on most days, but realized that he couldn't ever make the HUGE money of 100K days trading these using his techniques.

He had a choice:

1. Change your style to go up a timeframe or two.

2. Keep your style and just trade a different instrument that has the liquidity.

However, what I knew beforehand but has been cemented into me is that a different instrument is as much of a challenge as going to a higher time frame if not more. Hard to trade 200 contracts overnight without having some additional 'stress' though... So I think he made the right choice of sticking to intra-day and just bumping contracts slowly but surely.

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  #360 (permalink)
Fortitudo et Honor
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Every strategy/system reaches a "saturation" point.

That is to say, every system reaches a point where adverse market effects and/or slippage begin to either make the strategy begin diminishing returns or at some point negative returns.

The saturation point is dependent upon liquidity of the instrument, the price action/volitility and movement.

A scapling strategy that nets a small rake each trade will "saturate" much more quickly than a strategy that seeks larger moves. These types of strategies must overcome saturation with more trades.

You can use limit orders to fix your slippage exposure, but eventually, those limit orders provide noticeable support/resistance to price movements.

Independent of your order, the market would have moved x increments over a given time period.

Dependent of your order, the market may move less (with limit orders).

There's a 3rd order effect of your order as well, (with respect to other traders altering their actions based upon your order).

Obviously, these issues (and saturation) generally become a factor after the system incorporates positions that are large enough to make a living....

The entire point, is that no system is "unlimited" in it's earning potential. Eventually it grows beyond the capabilities of the instrument/market to support them.

"A dumb man never learns. A smart man learns from his own failure and success. But a wise man learns from the failure and success of others."
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