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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?

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  #301 (permalink)
 Surly 
denver, colorado
 
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bluemele View Post

Calling someone a bag used to flush fluids from an orifice is seemingly offensive.

I agree but couldn't resist - that's why I edited my post - but not so quickly that my original language didn't slip through the digital cracks...

Seek freedom and become captive of your desires. Seek discipline and find your liberty. - Frank Herbert
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  #302 (permalink)
 jonc 
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Breconeer View Post

Having found I could make a living without being sat at the desk day in day out, I trade actively for 4 months each year (the darker colder months, Nov/Dec/Jan/Feb) and only occasionally during the other 8 months when life takes priority. I trade small/medium UK stocks only - previously via conventional buy/sell through online broker accounts, but in recent years mostly via online spreadbetting the same stocks instead.

You must be earning huge profits every time you trade if you can trade just 4 months in a year and make a living.

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  #303 (permalink)
 RM99 
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jonc View Post
You must be earning huge profits every time you trade if you can trade just 4 months in a year and make a living.

That's really not that uncommon with guys who trade equities.

"Sell in May and go away" really is a rule that a lot of guys follow.

The Summer months are useless for options traders and earnings traders.

The Fall and the Winter are the prime time to trade, with earnings, the holidays, etc.

I once met a guy who would literally day trade (equity options) until he made $70k-$80k and then he would take the rest of the year off. Sometimes that took him 3 weeks, sometimes 2 months.

My friends said he was a total basket case during those periods though....

"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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  #304 (permalink)
 RM99 
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Just to give you some perspective.....

moves of 10-100x your money aren't really all that uncommon with options traders.

If you take a $10k account and double it 4 times, you now have $160k....which again, seems kinda obscene, but with options trading, it's not all that out of the question.

Guys who trade options truly have a niche though, it's a combination of technicals and fundamentals....share float, earnings reports, etc.

"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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  #305 (permalink)
 gg80108 
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Surly View Post
I have thought a lot about whether to give my answer to this question. I am going to do it but please realize that I don't want to be critical and that I am giving my answer to offer one opinion on why there weren't more successful traders forthcoming with the information loriley was so gracious to post. I only suggest this because I know there are many profitable traders on this forum who have very likely decided not to post, possibly for the reason I suggest below.

The reason as I see it (and I've thought this for quite some time while reading this interesting thread) is that the folks who are asking for hard proof and also complaining that such proof has not been offered up have come across as very aggressive and "whiney". I'm being honest here - if I had a friend who offered up the sour grapes about "prove it to me, prove it to me" like has been done in this thread (and other places on this great forum) I wouldn't be inclined to help them in the least. Frankly I would be (am) repulsed by it. It is clear that many have suffered on this long hard road of trading and it is also clear that there have been genuine attempts to help those suffering and genuine sympathy all on this thread. I'm just voicing my opinion about why the proof has not been forthcoming as bluemele has asked no less than 5 times in the few short sentences I quoted above.

If this post is too rude for this forum, please let me know and I'll delete it in an instant as I have infinite respect for this forum and all its participants and don't want to cause a problem.

surly

Some things u have to have blind faith other things there is no whine just facts,, lets see ur statements, show me the money,,, lol
Lets see we only need 99.999% more posts to show that there is a collection of traders here that can beat the odds......

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  #306 (permalink)
 jstnbrg 
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monpere View Post
Yes, it's great that the poster is making money... but how exactly does that help you? Will looking at those statements help you win your next 5 trades?

If you're not profitable and you're not sure making money consistently is even possible, having someone demonstrate that it is possible means you're not chasing a mythical pot of gold at the end of the rainbow. You're not trying to invent a perpetual motion machine. Maybe you are aspiring to the PGA tour and you won't get there, but it's not impossible to get there, people do it every year. You may be wasting your time because you don't have what it takes, but at least you're not wasting your time trying to do the undoable.

Of course, it's possible that @ loriley is the monkey on the typewriter who is randomly pounding out Shakespeare's works. But I don't think so. One losing day in six weeks sounds pretty nonrandom.

"You don't need a weatherman to know which way the wind blows..."
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  #307 (permalink)
 jonc 
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RM99 View Post
Just to give you some perspective.....

moves of 10-100x your money aren't really all that uncommon with options traders.

If you take a $10k account and double it 4 times, you now have $160k....which again, seems kinda obscene, but with options trading, it's not all that out of the question.

Guys who trade options truly have a niche though, it's a combination of technicals and fundamentals....share float, earnings reports, etc.

I had been hearing about people earning good money in options. My experience with options is limited.

Is the intraday movement in options comparable to futures?

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  #308 (permalink)
 RM99 
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jonc View Post
I had been hearing about people earning good money in options. My experience with options is limited.

Is the intraday movement in options comparable to futures?

Whole different ballgame.

Options mainly involves buying "time" in which you have a window to exit your option or let it expire. The price of the option is based upon the length of time you buy and the volitility that the equity has shown. They use a back period to calculate volitility (which is why new IPOs don't have options available immediately). You can also play "leap" options which are year long.

The math gets pretty complex...and there are varying strategies....

For instance, I tried to convince my buddy to butterfly the Visa/Mastercard ruling earlier this Summer.

When you know that an equity is going to most likely move considerably, but you don't know which way it will move...then you can butterfly or hedge by buying both the put and the call.

This gives you a window in which to sell/buy back, and once the ruling comes out, you take some pain on the loser, exit it and ride the winner.

Options traders do most of their heavy lifting around news and earning events...because that's when they get the most movement in the equity price.

It's a whole other art in itself...options trading, but the leverages and the amount of money you can make is substantial. But like I said....it takes years (if not decades) to be saavy enough to do it correctly.

As far as I can tell, most successful medium to small equity traders make most of their money on options (rather than straight buying/selling).

"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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  #309 (permalink)
 Lornz 
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jonc View Post
I had been hearing about people earning good money in options. My experience with options is limited.

Is the intraday movement in options comparable to futures?

Options reveal another dimension... It is definitely something worth looking in to, but expect to spend a substantial amount of time learning about them. It is not necessarily options or futures....

Other aspects of trading would be spreads and basket trading. I hardly see any mention of them on this site, but I would recommend looking in to such subjects...

Pure directional bets are the hardest thing to do, and is a losing game for most...

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  #310 (permalink)
 forrestang 
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jonc View Post
I had been hearing about people earning good money in options. My experience with options is limited.

Is the intraday movement in options comparable to futures?

Options were the first things I traded a while back. I started mainly with credit spreads and Iron condors. I did ok with that. It's a dual position that limits downside risk, but also limits upside based on the way it's structured.

I also did some buying of options outright. This was the most PITA as you had to be correct on direction AND you had to be right on that direction in a certain amount of time. Most of the time I was wrong, but when I was right it would pay nicely.

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  #311 (permalink)
 zer0 
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This is comment is old, but the issues are timeless.

Fixation with undercapitalization is one of the most pervasive and disabling myths about trading, specifically when referring to futures markets. $5,000 is easily enough funding to not only trade with successfully, but to build wealth from, for an advanced trader. Yes, easily. The point is really this: You can pi$$ away $100,000 just as readily as $5,000; perhaps easier. You must know what you are doing. It won't matter at all what your account size is, if you don't sufficiently know what it is that you are doing.

Regarding the 2%/month comment... If you are referring to CTAs swinging billion dollar bats, sure, but what we are concerned with here, are individual traders with comparatively small accounts. Let's call such traders micro traders. Micro traders, by virtue of their account size, are afforded nimbleness, and also cannot, at any serious level, affect the market in which they trade. The micro trader is not bound by liquidity concerns in the same way CTAs are, and a micro trader's gains are not softened by their impact on their market.

The takeaways are these:

1) You need an account that is just a few times larger than the margin requirement for your market. The exact amount is dictated by your trading style, obviously.

2) You need to be aware of your market offers in ticks. Hint: It's much greater than the ATR or ADR values. For example, the NQ, of which requires only $500 in intraday margin (sometimes less), offered approximately 4,200 ticks of potential profit yesterday, Friday, August 5th, 2011. How much money is that? It's roughly $21,000 per contract. Of course nobody expects to take all or even most of that potential, but then, if astute, one should discern quickly that they don't need to.

3) Micro traders need to set a course to take a percentage of that offer, which incidentally, if modest, will still net them substantially more than the 2%/month figure. Revisiting NQ from yesterday, taking just 1% of the ticks offered, or ~ 42 ticks, would net a micro trader ~ $840 before costs. Such a return would equate to a ~ 68% return on margin. That's one trading day. Of course, most micro traders do not calculate their returns on required margin, so let's calibrate to accommodate. Assuming the micro trader allots 4x the necessary margin intraday, the ROI is still an impressive ~ 17%, before costs. Sounds crazy? It isn't. I won't assert specifically what is possible, since it might stir the nest, but a micro trader can take much more than 1% of their market's intraday offer, all without disproportionally high risk.

4) Drawdowns are not necessary. Of course there will be losses and washes intraday, but with a logical methodology, interday, and certainly interweek losses, are unnecessary. If you are experiencing them, your method isn't, or you simply are not good enough.

This leads me back to my emerging futures.io (formerly BMT) theme: Forget the conventional wisdom. Think for yourselves. Save the time.



webart View Post
The figures come from brokers, actually the figures for those that make money for more than a year are 98%/2% according to a CBOT lecture I was listening too ... and they should know.

Yes, how it works, is the professional traders, get there money from the newbies, and there is a constant supply of newbies into the market convinced by the marketing of the educators (who also feed on the newbies) that they will be able to make a living using their $5000 account. The market works by offering Hope, but not delivering what was Hoped for, that is what keeps the market moving.

The problem with making a living out of it, is the amount of capital you really need to have to handle draw downs and to give yourself the leverage you need and that's assuming you know what your doing (which takes years). When your under capitalized you have scared money, so you run tight stops and make poor decisions.

If you can make 2% per month consistantly, then you are up there with the best traders.

And no, I don't make 100K per year from trading !

There are much easier ways to make money than from trading.


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  #312 (permalink)
 er2wizard 
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zer0 View Post
This is comment is old, but the issues are timeless.

Fixation with undercapitalization is one of the most pervasive and disabling myths about trading, specifically when referring to futures markets. $5,000 is easily enough funding to not only trade with successfully, but to build wealth from, for an advanced trader. Yes, easily. The point is really this: You can pi$$ away $100,000 just as readily as $5,000; perhaps easier. You must know what you are doing. It won't matter at all what your account size is, if you don't sufficiently know what it is that you are doing.

Regarding the 2%/month comment... If you are referring to CTAs swinging billion dollar bats, sure, but what we are concerned with here, are individual traders with comparatively small accounts. Let's call such traders micro traders. Micro traders, by virtue of their account size, are afforded nimbleness, and also cannot, at any serious level, affect the market in which they trade. The micro trader is not bound by liquidity concerns in the same way CTAs are, and a micro trader's gains are not softened by their impact on their market.

The takeaways are these:

1) You need an account that is just a few times larger than the margin requirement for your market. The exact amount is dictated by your trading style, obviously.

2) You need to be aware of your market's offer in ticks. Hint: It's much greater than the ATR or ADR values. For example, the NQ, of which requires only $500 in intraday margin (sometimes less), offered approximately 4,200 ticks of potential profit yesterday, Friday, August 5th, 2011. How much money that is? It's roughly $21,000 per contract. Of course nobody expects to take all or even most of that potential, but then, if astute, one should discern quickly that they don't need to.

3) Micro traders need to set a course to take a percentage of that offer, which incidentally, if modest, will still net them substantially more than the 2%/month figure. Revisiting NQ from yesterday, taking just 1% of the ticks offered, or ~ 42 ticks, would net a micro trader ~ $840 before costs. Such a return would equate to a ~ 68% return on margin. That's one trading day. Of course, most micro traders do not calculate their returns on required margin, so let's calibrate to accommodate. Assuming the trader allots 4x the necessary margin intraday, the ROI is still an impressive ~ 17%, before costs. Sounds crazy? It isn't. I won't assert specifically what is possible, since it might stir the nest, but a micro trader can take much more than 1% of their market's intraday offer, all without disproportionally high risk.

4) Drawdowns are not necessary. Of course there will be losses and washes intraday, but with a logical methodology, interday, and certainly interweek losses, are unnecessary. If you are experiencing them, your method isn't, or you simply are not good enough.

This leads me back to my emerging futures.io (formerly BMT) theme: Forget the conventional wisdom. Think for yourselves. Save the time.

Bravo!!!!!! Finally.....someone who gets it......

“The more I am around people, the more I love my dogs.” ~Author Unknown
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  #313 (permalink)
 Surly 
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zer0 View Post
Fixation with undercapitalization is one of the most pervasive and disabling myths about trading, specifically when referring to futures markets. $5,000 is easily enough funding to not only trade with successfully, but to build wealth from, for an advanced trader.

I would even argue that being undercapitalized should be seen as an advantage as a beginning trader. Consider the following:

- if you have a large account you risk a far greater sum during the learning curve.

- a small account shows you very quickly the negative effects the lack of emotional self-control can have on your trading; and how real money on the line can quickly scuttle your emotional self-control.

- a small account (should) forces you to spend a far longer time in SIM before risking capital - a process I feel undervalued in the trading community. I would give any new trader the advice to spend at least 6 months and more like a year trading in SIM until (as you say) they forget how to lose money.

- not being able to afford education will force one to rely on oneself to develop an understanding of the markets and an approach to trading.

...to name a few.

Seek freedom and become captive of your desires. Seek discipline and find your liberty. - Frank Herbert
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  #314 (permalink)
Breconeer
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skyfly View Post
The Truth is that not one person on this futures.io (formerly BMT) is willing to produce anything that proves they have made it. However they are all willing to make indicators, and write their journals, and "join the elite" team. And those same people will defend themselves by saying " I do not have to prove anything to you"! Well, ok, I guess ya don't. But then dont say you make your living from trading, that's pretty generic. I mean come on, your making your living from trading, and your hanging around here? That doesn't even sound right, Come on....!!!

The truth is that all the people who sell programs, and systems and on and on, have figured it out. Big Mike himself has figured it out. They have figured out how to make money from trading, TEACH IT, write about it, talk about it, make indicators for it, write journals for it, do everything under the sun except actually make money from it. The Bible says their is "Nothing new under the sun" and thats true here too.


Why is it that we see this same question? "Can a trader make it " Why is that? It's because no one is making it, and everyone is experiencing the exact same thing. You know why you do not find a person willing to prove it, because would you, if you had it! No..no you wouldnt, and their is no man or woman that is making a living trading sitting at their computer on a Sunday night or whatever night for that matter, scrolling through futures.io (formerly BMT) website.

Thats the truth.


As mentioned in my intro earlier, I am now into Year 14 of trading for a living. Why do I hang around in forums? I don't. I pop in and skim briskly through a handful of posts every week or two, if and when I feel like doing so.

Because despite having 'made it' I am still always learning a new point or two from others, and never too smug to do so. And because personal case histories in forums of this type were a very significant factor in providing me with self belief in my own early years. If I can return the favour by pointing out that success is achievable, I am happy to do so. I have nothing to sell or promote.

If a few people scoff at what I write or dismiss it as fantasy, so be it. I am not discouraged. It's water off a duck's back.

In forums such as this, people normally write under the guise of a username - so fantasising is perfectly possible. But over the years I have met with several forum traders who I now count as friends out there in the real world.We know each other well enough to exchange details of how we trade. So yes, Skyfly, we do exist - but you are of course perfectly entitled to disbelieve if you want - and I take no offence at you doing so.

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  #315 (permalink)
 monpere 
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Breconeer View Post
As mentioned in my intro earlier, I am now into Year 14 of trading for a living. Why do I hang around in forums? I don't. I pop in and skim briskly through a handful of posts every week or two, if and when I feel like doing so.

Because despite having 'made it' I am still always learning a new point or two from others, and never too smug to do so. And because personal case histories in forums of this type were a very significant factor in providing me with self belief in my own early years. If I can return the favour by pointing out that success is achievable, I am happy to do so. I have nothing to sell or promote.

If a few people scoff at what I write or dismiss it as fantasy, so be it. I am not discouraged. It's water off a duck's back.

In forums such as this, people normally write under the guise of a username - so fantasising is perfectly possible. But over the years I have met with several forum traders who I now count as friends out there in the real world.We know each other well enough to exchange details of how we trade. So yes, Skyfly, we do exist - but you are of course perfectly entitled to disbelieve if you want - and I take no offence at you doing so.

How would you describe you style of trading? As a veteran in this business, it's good to know what approaches can stand the test of time.

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  #316 (permalink)
Breconeer
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monpere View Post
How would you describe you style of trading? As a veteran in this business, it's good to know what approaches can stand the test of time.

I guess I would describe my style as opportunistic. "Get in, grab it, get out; don't still be there when the roof falls in."

Being OUT of the market, in cash, is the safest place to be - so I don't hang onto a non-performing position with fingers crossed waiting and hoping for a position to come good.

I sift quickly through company charts, looking for any that show a convincing and ongoing uptrend or downtrend, and I use spreadbets to take a position in them, in the direction they are going. I find ongoing downward patterns far more reliable than upward ones, so most of my best gains come from downbets.

I don't try capturing the entire upward or downward run, nor do I try getting in before a run starts. I am happy to capture the middle third of an established run. If momentum slows and the price chart begins to get twitchy, I get out and go find something else.

I maintain a watchlist for what appear to be the best upward contenders and another for downward ones. Some of them are best traded when the market as a whole is moving strongly the same way - such as now for downbets. I have around thirty bets in place this week, of which about 27 are downbets. In another week or month that mix might reverse or I might temporarily hold no positions at all with my portfolio 100% in cash ready for future opportunities, or because I want a few days/weeks holiday. I hold most positions for weeks, some for months, none for a year, some for a few days or less than a day, some for a few hours, and occasionally for just a few minutes. The most positions I hold at a time is 30-35, more often it's around a dozen, sometimes just 2 or 3, sometimes none.

At 7am each day (in my Nov-Dec-Jan-Feb period) and on occasional mornings the rest of the year, I skim through the business news headlines, looking for whatever might impact the stock price of a particular company or sector, and I might aggressively trade something in the first hour of that trading day and then log off for the day. I get more satisfaction from closing and banking the gain (or quickly banking the smallest possible loss on those i get wrong) and walking away, than from constantly watching screens or constantly fretting over what my positions are doing. The positions I leave open when I'm not watching are ones in which my stake has been calculated to tolerate a worst-case scenario; and because I use spreadbets I can utilise the facilty known as a trailing stoploss - in which my designated safety net travels with the stock price when moving in my favour, but stays put and shuts out that position if/when the price turns against me. I appreciate that some countries do not allow spreadbets on stocks and indices, but here in the UK they are quite widely used in preference to actually buying stock.

I don't employ fancy indicators or sophisticated software - I merely climb aboard what's moving and jump off when it isn't going my way. I don't study company accounts attempting to calculate value - I just play the price movement and keep in touch with related news that might affect it.

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  #317 (permalink)
 tderrick 
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Breconeer View Post
I guess I would describe my style as opportunistic. "Get in, grab it, get out; don't still be there when the roof falls in."


I appreciate that some countries do not allow spreadbets on stocks and indices, but here in the UK they are quite widely used in preference to actually buying stock.

I don't employ fancy indicators or sophisticated software - I merely climb aboard what's moving and jump off when it isn't going my way. I don't study company accounts attempting to calculate value - I just play the price movement and keep in touch with related news that might affect it.


I would assume that the US Does NOT allow Spread Bets with stocks. Is this correct?


AJ
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  #318 (permalink)
Breconeer
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tderrick View Post
I would assume that the US Does NOT allow Spread Bets with stocks. Is this correct?

As I understand it, Uncle Sam regards gambling on stockmarkets as the work of the devil, and US citizens are not trusted to go there. Spreadbetting is classed as gambling. Conventional trading of stocks is not classed as gambling - despite the fact that it involves studying form, reaching a judgment on likely performance, and backing that judgment with money - which to me seems much the same.

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  #319 (permalink)
 mmtrader4 
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zer0 View Post
This is comment is old, but the issues are timeless.

Fixation with undercapitalization is one of the most pervasive and disabling myths about trading, specifically when referring to futures markets. $5,000 is easily enough funding to not only trade with successfully, but to build wealth from, for an advanced trader. Yes, easily. The point is really this: You can pi$$ away $100,000 just as readily as $5,000; perhaps easier. You must know what you are doing. It won't matter at all what your account size is, if you don't sufficiently know what it is that you are doing.

Regarding the 2%/month comment... If you are referring to CTAs swinging billion dollar bats, sure, but what we are concerned with here, are individual traders with comparatively small accounts. Let's call such traders micro traders. Micro traders, by virtue of their account size, are afforded nimbleness, and also cannot, at any serious level, affect the market in which they trade. The micro trader is not bound by liquidity concerns in the same way CTAs are, and a micro trader's gains are not softened by their impact on their market.

The takeaways are these:

1) You need an account that is just a few times larger than the margin requirement for your market. The exact amount is dictated by your trading style, obviously.

2) You need to be aware of your market offers in ticks. Hint: It's much greater than the ATR or ADR values. For example, the NQ, of which requires only $500 in intraday margin (sometimes less), offered approximately 4,200 ticks of potential profit yesterday, Friday, August 5th, 2011. How much money is that? It's roughly $21,000 per contract. Of course nobody expects to take all or even most of that potential, but then, if astute, one should discern quickly that they don't need to.

3) Micro traders need to set a course to take a percentage of that offer, which incidentally, if modest, will still net them substantially more than the 2%/month figure. Revisiting NQ from yesterday, taking just 1% of the ticks offered, or ~ 42 ticks, would net a micro trader ~ $840 before costs. Such a return would equate to a ~ 68% return on margin. That's one trading day. Of course, most micro traders do not calculate their returns on required margin, so let's calibrate to accommodate. Assuming the micro trader allots 4x the necessary margin intraday, the ROI is still an impressive ~ 17%, before costs. Sounds crazy? It isn't. I won't assert specifically what is possible, since it might stir the nest, but a micro trader can take much more than 1% of their market's intraday offer, all without disproportionally high risk.

4) Drawdowns are not necessary. Of course there will be losses and washes intraday, but with a logical methodology, interday, and certainly interweek losses, are unnecessary. If you are experiencing them, your method isn't, or you simply are not good enough.

This leads me back to my emerging futures.io (formerly BMT) theme: Forget the conventional wisdom. Think for yourselves. Save the time.


thank you, Thank You, THANK YOU!! Finally, a trader who tells it like is.

I would place a special emphasis on number 4: "Drawdowns are not necessary . . . If you are experiencing them, your method isn't, or you simply are not good enough."

It took me +3 years to realize who I was as a trader and to find the method right for me and become consistently profitable - with a small account!
I've met and spoken with many both successful and failed or near failed traders. It drives me absolutely crazy when many failed traders blame everything and everybody but the person in the mirror. NOTE - don't take the aforementioned comment personally, if you do then perhaps you should look in the mirror.
The problem in this business, yes it is a business people, is there is some underlying belief you put $2500 in a futures account having never traded before and you become a millionaire overnight. This, I believe, is propagated by the less than ethical vendors selling wares in classes and indicators who convey this is an easy business. Does it happen yes, but rarely. It takes time. For me +3 years for me because I refused to quit. I was helping a trader who had a small account and when he wasn't making $30K a month after three months of trading he got out of the trading business. All too common. 'Nuff said.

Thanks again zer0

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  #320 (permalink)
 mmtrader4 
Chicago, IL
 
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You sound like an angry, frustrated person.


skyfly View Post
The Truth is that not one person on this futures.io (formerly BMT) is willing to produce anything that proves they have made it. However they are all willing to make indicators, and write their journals, and "join the elite" team. And those same people will defend themselves by saying " I do not have to prove anything to you"! Well, ok, I guess ya don't. But then dont say you make your living from trading, that's pretty generic. I mean come on, your making your living from trading, and your hanging around here? That doesn't even sound right, Come on....!!!

The truth is that all the people who sell programs, and systems and on and on, have figured it out. Big Mike himself has figured it out. They have figured out how to make money from trading, TEACH IT, write about it, talk about it, make indicators for it, write journals for it, do everything under the sun except actually make money from it. The Bible says their is "Nothing new under the sun" and thats true here too.


Why is it that we see this same question? "Can a trader make it " Why is that? It's because no one is making it, and everyone is experiencing the exact same thing. You know why you do not find a person willing to prove it, because would you, if you had it! No..no you wouldnt, and their is no man or woman that is making a living trading sitting at their computer on a Sunday night or whatever night for that matter, scrolling through futures.io (formerly BMT) website.

Thats the truth.

Perhaps you need to go to Elite Trader forums and wallow in your frustration with them. ET is nothing more than an attack forum. I sure don't hang around forums. Let's see I've had about 25 posts since mid 2010 you've had over 100. So who hangs around forums? I intermittently come to futures.io (formerly BMT) to look for subjects and or advice that may interest me at the time. This thread I am a part of so when I get notice from futures.io (formerly BMT) that new posts are awaiting I MAY go look, sometimes not. The fact is sky, there are many successful retail traders but don't boast about it. I need not prove anything to you. If I worked at a "real" job (as if trading isn't) and made $100K would I need to prove it to you? Would you even ask? Temper your pessimism, find a method that works for you and go be successful. I'm sure you can be if you truly work at it.

Note posted at 10:40 CST SUNDAY 8/7/11 ---- I don't go to forums during trading hours

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  #321 (permalink)
 RM99 
Austin, TX
 
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zer0 View Post
This is comment is old, but the issues are timeless.

Fixation with undercapitalization is one of the most pervasive and disabling myths about trading, specifically when referring to futures markets. $5,000 is easily enough funding to not only trade with successfully, but to build wealth from, for an advanced trader. Yes, easily. The point is really this: You can pi$$ away $100,000 just as readily as $5,000; perhaps easier. You must know what you are doing. It won't matter at all what your account size is, if you don't sufficiently know what it is that you are doing.

Regarding the 2%/month comment... If you are referring to CTAs swinging billion dollar bats, sure, but what we are concerned with here, are individual traders with comparatively small accounts. Let's call such traders micro traders. Micro traders, by virtue of their account size, are afforded nimbleness, and also cannot, at any serious level, affect the market in which they trade. The micro trader is not bound by liquidity concerns in the same way CTAs are, and a micro trader's gains are not softened by their impact on their market.

The takeaways are these:

1) You need an account that is just a few times larger than the margin requirement for your market. The exact amount is dictated by your trading style, obviously.

2) You need to be aware of your market offers in ticks. Hint: It's much greater than the ATR or ADR values. For example, the NQ, of which requires only $500 in intraday margin (sometimes less), offered approximately 4,200 ticks of potential profit yesterday, Friday, August 5th, 2011. How much money is that? It's roughly $21,000 per contract. Of course nobody expects to take all or even most of that potential, but then, if astute, one should discern quickly that they don't need to.

3) Micro traders need to set a course to take a percentage of that offer, which incidentally, if modest, will still net them substantially more than the 2%/month figure. Revisiting NQ from yesterday, taking just 1% of the ticks offered, or ~ 42 ticks, would net a micro trader ~ $840 before costs. Such a return would equate to a ~ 68% return on margin. That's one trading day. Of course, most micro traders do not calculate their returns on required margin, so let's calibrate to accommodate. Assuming the micro trader allots 4x the necessary margin intraday, the ROI is still an impressive ~ 17%, before costs. Sounds crazy? It isn't. I won't assert specifically what is possible, since it might stir the nest, but a micro trader can take much more than 1% of their market's intraday offer, all without disproportionally high risk.

4) Drawdowns are not necessary. Of course there will be losses and washes intraday, but with a logical methodology, interday, and certainly interweek losses, are unnecessary. If you are experiencing them, your method isn't, or you simply are not good enough.

This leads me back to my emerging futures.io (formerly BMT) theme: Forget the conventional wisdom. Think for yourselves. Save the time.

Sorry, I disagree.

Undercapitalization is an extremely common theme among failing traders and for the same reasons you outlined in your post. "You need an account that is just a few times larger than the margin requirement for your market."

And therein lies the problem. How many traders are trying to trade on instruments like CL or ES with an account less than $10k? Brokers almost encourage it. I know before the CL reserve increase, late last year, I had a broker that would allow up to 4 contracts (intraday) with a $5k on CL. Why do they do this? Commissions. Even though the exchange reserve for CL is now $6250, a broker can offer a reduced margin for intraday (as long as the trader isn't holding over).

Why do traders do this? Leverage, volitility, etc.

Being overleveraged or undercapitalized simply hastens the inevitable. If you're profitable, then you'll simply grow more quickly. But if you're losing, it simply quickens the process. Thus, traders who are underapitalized are not afforded any appreciable long term (or even short) term risk tolerance. If they make one massive mistake, or even a short series of small mistakes, the loss takes them below their marginal requirements and bam....they're out.

Higher capitalization also means that a trader is afforded more options when it comes to "making a living."

The trader with a $10k account has to make some serious returns in order to make a living, especially after all the burden, commissions and fees. (platform fees, data fees, internet connection, brokerage commissions, software, training and educational expenses, etc, etc, etc.).

An easy example would be something as simple as a straight equities trade or an options trade. The commission burden decreases the larger the order size....you can actually get so small that you're spending a great deal of effort just to overcome your burdens.

Similarly, the trader with a $1M account, can easily chase 1% a month and live more comfortably than most Kings throughout world history. He doesn't have to lean into every trade, doesn't have to make unnecessary or stupid risk...doesn't need to "chase" trades or feel like he's pressured into trading.

FURTHERMORE, the trader with a large account, has the mental and physical safety net of falling back on his capital if he gets stalled. He doesn't have to worry about the mortgage, or the car payment, etc, if his trading doesn't turn out to be going the way he'd hoped, he always has a large equity pool that he can draw from to survive.

Undercapitalization is probably THE SINGLE MOST COMMON reason that many traders take extraordinary risks (in many facets of their trading), take on too much leverage and are put in a position where they feel like they HAVE to trade in order to earn money.

Like I said, it's also the reason that many people end up "blowing up" their account before they have a chance to sit and reflect on what they're doing wrong.

This can be true for someone with a large account, but at least the larger account has the "option" of trading some of the more popular instruments (that feature all the nice movement and volitility we love) at a much lower leverage position.

I think your statements are coming from the perspective of "I had a small account and made it work" rather than informing people of the commonality of typical mistakes that failing investors make.

Just because JJ Berea is a world champion basketball player, doesn't mean that it's solid advice to tell high school kids who are 5'8" that they have a legit shot at playing in the NBA. And more appripo, it doesn't mean that someone telling a 5'8" kid the cards are stacked against him is bad advice or inaccurate.

If you're trying to trade CL with a $10k account (and you're a full time trader trying to make a living) then I'm sorry, your going to have to take some considerable risks that other traders don't have to bear.

Your comments about drawdown are puzzling to me. Am I to understand that you're trying to tell me you don't ever experience drawdown? If so, we need to talk. I'm willing to pay. If you're that good, sign me up. Because I don't proclaim to be all knowing when it comes to trading, but I've yet to see anyone who didn't suffer some amount of drawdown in their trading. (FYI, saying you never have drawdown means you never lose, which to me, seems a bit nonsensical).

"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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  #322 (permalink)
 monpere 
Bala, PA, USA
 
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RM99 View Post
Sorry, I disagree.

Undercapitalization is an extremely common theme among failing traders and for the same reasons you outlined in your post. "You need an account that is just a few times larger than the margin requirement for your market."

And therein lies the problem. How many traders are trying to trade on instruments like CL or ES with an account less than $10k? Brokers almost encourage it. I know before the CL reserve increase, late last year, I had a broker that would allow up to 4 contracts (intraday) with a $5k on CL. Why do they do this? Commissions. Even though the exchange reserve for CL is now $6250, a broker can offer a reduced margin for intraday (as long as the trader isn't holding over).

Why do traders do this? Leverage, volitility, etc.

Being overleveraged or undercapitalized simply hastens the inevitable. If you're profitable, then you'll simply grow more quickly. But if you're losing, it simply quickens the process. Thus, traders who are underapitalized are not afforded any appreciable long term (or even short) term risk tolerance. If they make one massive mistake, or even a short series of small mistakes, the loss takes them below their marginal requirements and bam....they're out.

Higher capitalization also means that a trader is afforded more options when it comes to "making a living."

The trader with a $10k account has to make some serious returns in order to make a living, especially after all the burden, commissions and fees. (platform fees, data fees, internet connection, brokerage commissions, software, training and educational expenses, etc, etc, etc.).

An easy example would be something as simple as a straight equities trade or an options trade. The commission burden decreases the larger the order size....you can actually get so small that you're spending a great deal of effort just to overcome your burdens.

Similarly, the trader with a $1M account, can easily chase 1% a month and live more comfortably than most Kings throughout world history. He doesn't have to lean into every trade, doesn't have to make unnecessary or stupid risk...doesn't need to "chase" trades or feel like he's pressured into trading.

FURTHERMORE, the trader with a large account, has the mental and physical safety net of falling back on his capital if he gets stalled. He doesn't have to worry about the mortgage, or the car payment, etc, if his trading doesn't turn out to be going the way he'd hoped, he always has a large equity pool that he can draw from to survive.

Undercapitalization is probably THE SINGLE MOST COMMON reason that many traders take extraordinary risks (in many facets of their trading), take on too much leverage and are put in a position where they feel like they HAVE to trade in order to earn money.

Like I said, it's also the reason that many people end up "blowing up" their account before they have a chance to sit and reflect on what they're doing wrong.

This can be true for someone with a large account, but at least the larger account has the "option" of trading some of the more popular instruments (that feature all the nice movement and volitility we love) at a much lower leverage position.

I think your statements are coming from the perspective of "I had a small account and made it work" rather than informing people of the commonality of typical mistakes that failing investors make.

Just because JJ Berea is a world champion basketball player, doesn't mean that it's solid advice to tell high school kids who are 5'8" that they have a legit shot at playing in the NBA. And more appripo, it doesn't mean that someone telling a 5'8" kid the cards are stacked against him is bad advice or inaccurate.

If you're trying to trade CL with a $10k account (and you're a full time trader trying to make a living) then I'm sorry, your going to have to take some considerable risks that other traders don't have to bear.

Your comments about drawdown are puzzling to me. Am I to understand that you're trying to tell me you don't ever experience drawdown? If so, we need to talk. I'm willing to pay. If you're that good, sign me up. Because I don't proclaim to be all knowing when it comes to trading, but I've yet to see anyone who didn't suffer some amount of drawdown in their trading. (FYI, saying you never have drawdown means you never lose, which to me, seems a bit nonsensical).

I think undercapitalizaiton is the most common problem for most failed traders, but not for the sake of undercapitaliztion itself, but rather because they do not yet have a profitable method, nor do they understand about their 'risk of ruin' stats. So, they go in head long and reach the risk of ruin point very quickly within their small account. In other words, they are undercapitalized because they don't know what they are doing. But give that same small amount of capital to a seasoned trader with the right method, they can grow that account without blowing it.

As a new trader, a large account only puts your risk of ruin point further away, thereby giving you the luxury of time and a monetary buffer while you learn to trade, but you will loose just as much money. The answer is not in getting a larger account, the answer is to develop a proven profitable method first, before putting your small account capital behind it.

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 RM99 
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Furthermore, let's expand on this whole idea of "making it" and "primary source of income."

In order for you to make trading your primary source of income, let's begin by laying out some assumptions.

Let's assume that you can "survive" off $1500/month, which is pretty paultry I know, but I'll use a low number just to show you for the sake of argument and no one can accuse me of biasing the discussion.

If you have a $15k account. That means, that you must "net" at least 10% a month after all your trading burdens and commissions (data feed, commissions, platform fee, etc).

So even the trader with a $15k account that's making 10% monthly is simply treading water. He's not building his account at all, he's taking all the profit he makes and using it to live. If he has a bad month, guess what...he has to dip into his capital.

The guy with a $100k account can afford to yield 2% a month, pay his bills and even have some left over to compound and grow his account.

The larger account can afford to be much more selective, pick his spots better, choose optimal or preferntial entries that maximize his odds of winning. If he misses 2 weeks during a "flat" period...hey, no big deal, he can trade 2 weeks out of that month and still not have to dip into his capital.

Now you start to have an understanding of how difficult it is to become a full time trader on a small account. The odds are INSANELY stacked against you. And even if somehow, you're able to be an awesome trader and average a crazy return, you have to be able to overcome your living expenses and grow/compound your account in order to get anywhere.

Why on EARTH do you think that Hedge fund managers won't touch people with small accounts? Because there's nothing gained from it. The manager has to take such extreme risks in order to yield any appreciable profit, that it's not worth it.

To truly "make it" as a full time trader and as your "primary" source of income, there's a direct relationship to the size of your starting capital and the likelihood of your success.

Again, can a large account holder take the same risks and blow out their account? Sure. But at least they're afforded the option of using less leverage, being more selective, being more patient, pushing pause if necessary and re-evaluating, etc.

This isn't to say it's not "possible." Is it possible to show up to an NFL training camp as an unsigned, undrafted rookie and make the team? Sure. Is it likely.....no. It does happen.

So the essence here is that if you don't have a large account, your back is against the wall. You're going to have to be that 5% type guy that's ultra patient, learns quickly.....adapts quickly, doesn't get emotional, doesn't make mistakes, doesn't chase trades when he should wait for the proper setup....etc. Not an easy or common thing to do.....and when you combine the fact that you have to do it CONSISTENTLY (which is always the primary discreminator in financial performance) and in the long term......well, now you know why so many people fail and go back to working a day job.

Being a "professional" trader or having it be your primary source of income has a lot of perks. You're your own boss, you can pretty much make your own schedule, you don't have to worry about employees or employers or customers or other business partners. You don't have to fight traffic every day. You can work from home (or wherever you choose). You can move/live wherever you choose). You have an nearly unlimited earnings potential, etc.etc.

But it does have some drawbacks. Good luck on establishing a line of credit with anyone. Until you have over 3 years of consistent income, most creditors will not give you "credit" (no pun intended) as having any income. That means it's difficult to finance a car loan or a mortgage (which might be a good thing....).

But the worst drawback is that you're putting your livelihood on the line everyday. Your risking the very thing that's enabling you to work and make these potentially extraordinary income levels.

"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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  #324 (permalink)
 RM99 
Austin, TX
 
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monpere View Post
I think undercapitalizaiton is the most common problem for most failed traders, but not for the sake of undercapitaliztion itself, but rather because they do not yet have a profitable method, nor do they understand about their 'risk of ruin' stats. So, they go in head long and reach the risk of ruin point very quickly within their small account. In other words, they are undercapitalized because they don't know what they are doing. But give that same small amount of capital to a seasoned trader with the right method, they can grow that account without blowing it.

As a new trader, a large account only puts your risk of ruin point further away, thereby giving you the luxury of time and a monetary buffer while you learn to trade, but you will loose just as much money. The answer is not in getting a larger account, the answer is to develop a proven profitable method first, before putting your small account capital behind it.

Well, yeah. That goes without saying. I never said being undercapitalized was the reason for their failure, I simply said it was a commonality.

If you do root cause analsys, you find that the behavior stems (in many if not most cases) from being undercapitalized.

"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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  #325 (permalink)
 RM99 
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monpere View Post
I think undercapitalizaiton is the most common problem for most failed traders, but not for the sake of undercapitaliztion itself, but rather because they do not yet have a profitable method, nor do they understand about their 'risk of ruin' stats. So, they go in head long and reach the risk of ruin point very quickly within their small account. In other words, they are undercapitalized because they don't know what they are doing. But give that same small amount of capital to a seasoned trader with the right method, they can grow that account without blowing it.

As a new trader, a large account only puts your risk of ruin point further away, thereby giving you the luxury of time and a monetary buffer while you learn to trade, but you will loose just as much money. The answer is not in getting a larger account, the answer is to develop a proven profitable method first, before putting your small account capital behind it.

Like I said, I only partially agree with that.

Even the most seasoned trader, if I handed him $10k and said "hey, I wanna make enough to live off and I have to have $2k/month to live on from here to eternity, so get cracking." Most seasoned pro's would say "no way." Or they'd say, that's fine, but you'll have to wait until I grow the account up to a stage where your $2k monthly withdrawl isn't totally stifling the account.

Your capital has a direct effect on the risks you can take, the risks you choose to take and the risks you're forced to take in order to yield some level of return.

"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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 bluemele 
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RM99 View Post
Like I said, I only partially agree with that.

Even the most seasoned trader, if I handed him $10k and said "hey, I wanna make enough to live off and I have to have $2k/month to live on from here to eternity, so get cracking." Most seasoned pro's would say "no way." Or they'd say, that's fine, but you'll have to wait until I grow the account up to a stage where your $2k monthly withdrawl isn't totally stifling the account.

Your capital has a direct effect on the risks you can take, the risks you choose to take and the risks you're forced to take in order to yield some level of return.

I think you are all right. I think you are all in agreement except you are not considering or putting as much weight on some assumptions. All traders are not the same, too many variables to measure.

The key assumption is that all persons with a 5K account can do it, but FIRST the big issue is to become profitable and consistent. So, the #1 problem that I see is traders going live and not earning their stripes and hence like @monpere was saying they can lose it, but if they do earn their stripes then of course they can mold that into more.

Something that bothers me about my original trading mentor and coach was that he didn't want to set limitations on how someone would be successful. The first question most people will ask is, "How long will this take for me to be profitable daily?".

If you are a vendor, you probably won't be closing many sales if you say, "Well, that depends upon you, look into the mirror and come back to tell me..." OR "Some do it in 30 days, some in 3-6 months, others in 3-6 years and others never!"

If someone had told me or I would have read more threads like this, then I would probably have saved significant $'s. Of course, there is the possibility of my EGO taking over and saying, "Well, I am too smart, and too successful in everything I do, so it will probably take me a week!"

This isn't popular with many, but if someone starts from a 0 background of trading, they should paper trade in my opinion for at minimum 2 years.

But, if that was the case it would probably remove a great many from the business. I have only read of one person who after a few months (I think about 8) was consistently profitable. Every single other person has YEARS of experience and nothing wrong with building a huge portfolio of paper money in my opinion. That is what my kids will be doing.

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  #327 (permalink)
 monpere 
Bala, PA, USA
 
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RM99 View Post
Furthermore, let's expand on this whole idea of "making it" and "primary source of income."

In order for you to make trading your primary source of income, let's begin by laying out some assumptions.

Let's assume that you can "survive" off $1500/month, which is pretty paultry I know, but I'll use a low number just to show you for the sake of argument and no one can accuse me of biasing the discussion.

If you have a $15k account. That means, that you must "net" at least 10% a month after all your trading burdens and commissions (data feed, commissions, platform fee, etc).

So even the trader with a $15k account that's making 10% monthly is simply treading water. He's not building his account at all, he's taking all the profit he makes and using it to live. If he has a bad month, guess what...he has to dip into his capital.

The guy with a $100k account can afford to yield 2% a month, pay his bills and even have some left over to compound and grow his account.

The larger account can afford to be much more selective, pick his spots better, choose optimal or preferntial entries that maximize his odds of winning. If he misses 2 weeks during a "flat" period...hey, no big deal, he can trade 2 weeks out of that month and still not have to dip into his capital.

Now you start to have an understanding of how difficult it is to become a full time trader on a small account. The odds are INSANELY stacked against you. And even if somehow, you're able to be an awesome trader and average a crazy return, you have to be able to overcome your living expenses and grow/compound your account in order to get anywhere.

Why on EARTH do you think that Hedge fund managers won't touch people with small accounts? Because there's nothing gained from it. The manager has to take such extreme risks in order to yield any appreciable profit, that it's not worth it.

To truly "make it" as a full time trader and as your "primary" source of income, there's a direct relationship to the size of your starting capital and the likelihood of your success.

Again, can a large account holder take the same risks and blow out their account? Sure. But at least they're afforded the option of using less leverage, being more selective, being more patient, pushing pause if necessary and re-evaluating, etc.

This isn't to say it's not "possible." Is it possible to show up to an NFL training camp as an unsigned, undrafted rookie and make the team? Sure. Is it likely.....no. It does happen.

So the essence here is that if you don't have a large account, your back is against the wall. You're going to have to be that 5% type guy that's ultra patient, learns quickly.....adapts quickly, doesn't get emotional, doesn't make mistakes, doesn't chase trades when he should wait for the proper setup....etc. Not an easy or common thing to do.....and when you combine the fact that you have to do it CONSISTENTLY (which is always the primary discreminator in financial performance) and in the long term......well, now you know why so many people fail and go back to working a day job.

Being a "professional" trader or having it be your primary source of income has a lot of perks. You're your own boss, you can pretty much make your own schedule, you don't have to worry about employees or employers or customers or other business partners. You don't have to fight traffic every day. You can work from home (or wherever you choose). You can move/live wherever you choose). You have an nearly unlimited earnings potential, etc.etc.

But it does have some drawbacks. Good luck on establishing a line of credit with anyone. Until you have over 3 years of consistent income, most creditors will not give you "credit" (no pun intended) as having any income. That means it's difficult to finance a car loan or a mortgage (which might be a good thing....).

But the worst drawback is that you're putting your livelihood on the line everyday. Your risking the very thing that's enabling you to work and make these potentially extraordinary income levels.


The moral of the story is: Risk Capital...."Don't be trading your rent money."

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  #328 (permalink)
 zer0 
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RM99,

Please find my embedded response in blue:

Sorry, I disagree.

Undercapitalization is an extremely common theme among failing traders and for the same reasons you outlined in your post. "You need an account that is just a few times larger than the margin requirement for your market."

The problem is most that attempt trading, have no idea what they are doing. If one is a net loser then no amount of money will save them.

And therein lies the problem. How many traders are trying to trade on instruments like CL or ES with an account less than $10k? Brokers almost encourage it. I know before the CL reserve increase, late last year, I had a broker that would allow up to 4 contracts (intraday) with a $5k on CL. Why do they do this? Commissions. Even though the exchange reserve for CL is now $6250, a broker can offer a reduced margin for intraday (as long as the trader isn't holding over).

Why do traders do this? Leverage, volitility, etc.


Unaccomplished traders attempt trading overzealously because they have no idea what the sh$t they are doing. Everyone wants to blame everyone else (see your paragraph above), when the problem lies within the trader’s inexperience. Leveraged or not, if one has no idea as to what they are doing, they have little to no chance at survival.

Being overleveraged or undercapitalized simply hastens the inevitable. If you're profitable, then you'll simply grow more quickly. But if you're losing, it simply quickens the process. Thus, traders who are underapitalized are not afforded any appreciable long term (or even short) term risk tolerance. If they make one massive mistake, or even a short series of small mistakes, the loss takes them below their marginal requirements and bam....they're out.

Your sentence, which I’ve highlighted in red for clarity, precisely illustrates my point. If one does not know sufficiently what they are doing, it won’t matter what their account size is. Losses are inevitable to those that are not properly prepared. Undercapitalization is not the root cause. It is true that many failed traders over-leverage themselves, but luckily, correlation does not imply causation.

Higher capitalization also means that a trader is afforded more options when it comes to "making a living."

Of course, but then, if one’s methodology is good enough, they don’t need other options.

The trader with a $10k account has to make some serious returns in order to make a living, especially after all the burden, commissions and fees. (platform fees, data fees, internet connection, brokerage commissions, software, training and educational expenses, etc, etc, etc.).

$10,000 is more than enough for many to “make a living” from. However, trading, to me, is not about “making a living”, it’s about wealth accumulation. If an interested party is looking to “making a living”, I would suggest the corporate ladder instead of the price ladder.

An easy example would be something as simple as a straight equities trade or an options trade. The commission burden decreases the larger the order size....you can actually get so small that you're spending a great deal of effort just to overcome your burdens.

There are costs to surmount for any trader. So what? No trader with retail commissions should be “scalping”, but that is another matter entirely.

Similarly, the trader with a $1M account, can easily chase 1% a month and live more comfortably than most Kings throughout world history. He doesn't have to lean into every trade, doesn't have to make unnecessary or stupid risk...doesn't need to "chase" trades or feel like he's pressured into trading.

Nor does a professional futures trader, with a comparatively small account, need to take “unnecessary or stupid risk”. But then, winning futures traders would not bother actively trading equities. Why should they?

FURTHERMORE, the trader with a large account, has the mental and physical safety net of falling back on his capital if he gets stalled. He doesn't have to worry about the mortgage, or the car payment, etc, if his trading doesn't turn out to be going the way he'd hoped, he always has a large equity pool that he can draw from to survive.

What you are talking about here is whether or not someone can afford to trade. This is beyond the scope of our exchange.

Undercapitalization is probably THE SINGLE MOST COMMON reason that many traders take extraordinary risks (in many facets of their trading), take on too much leverage and are put in a position where they feel like they HAVE to trade in order to earn money.

Traders take unnecessary risks because they don’t know better, or worse, can’t control themselves. If they can’t determine an appropriate allocation of risk capital, they do not know what they are doing, and have no business trading. This is not an undercapitalization problem. It’s an ignorance problem.

Like I said, it's also the reason that many people end up "blowing up" their account before they have a chance to sit and reflect on what they're doing wrong.

One can blow up 100K just as fast as 5K, and the prior will hurt a whole lot more. One needs to know sufficiently what they are doing in either case.

This can be true for someone with a large account, but at least the larger account has the "option" of trading some of the more popular instruments (that feature all the nice movement and volitility we love) at a much lower leverage position.

ES, NQ, YM, TF, and similar instruments are not popular? All of these products are easily accessible to a $5,000 account. More importantly, a good trader can rather easily "make a living" off of an account of that size. However, I would never advise the ES for intraday trading purposes. Ask Fat Tails for a reason why.

I think your statements are coming from the perspective of "I had a small account and made it work" rather than informing people of the commonality of typical mistakes that failing investors make.

No, my statements come from simple arithmetic.

Just because JJ Berea is a world champion basketball player, doesn't mean that it's solid advice to tell high school kids who are 5'8" that they have a legit shot at playing in the NBA. And more appripo, it doesn't mean that someone telling a 5'8" kid the cards are stacked against him is bad advice or inaccurate.

This is hardly an appropriate analog. Trading does not require exceptional physical abilities and can be taught, to presumably anyone. How do I know this? My methodology can be described as a set of rules that anyone could follow.

If you're trying to trade CL with a $10k account (and you're a full time trader trying to make a living) then I'm sorry, your going to have to take some considerable risks that other traders don't have to bear.

Wrong. One can easily trade one CL contract with a 10K account, on an intraday basis. That is, at the risk of sounding like a broken record, if one sufficiently knows what they are doing. Again, you are imposing your perceived limits on others. I will however, grant you this: I would personally never trade CL interday with a 10K account, but then, I would never trade CL interday on any size account.

Your comments about drawdown are puzzling to me. Am I to understand that you're trying to tell me you don't ever experience drawdown? If so, we need to talk. I'm willing to pay. If you're that good, sign me up. Because I don't proclaim to be all knowing when it comes to trading, but I've yet to see anyone who didn't suffer some amount of drawdown in their trading. (FYI, saying you never have drawdown means you never lose, which to me, seems a bit nonsensical).

In my original post I said that intraday losses and washes will occur. However, I also implied that interday drawdowns should be rare, and interweek drawdowns should be rarer still. In fact, interweek drawdowns should be virtually nonexistent. The drawdown paradigm is a self-fulfilling prophetic way of thinking about markets. It is not a requirement. One can, and many do, make net gains on a daily basis with only rare exception. The aim should be nothing less.

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  #329 (permalink)
 RM99 
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zer0 View Post
RM99,

Please find my embedded response in blue:

Sorry, I disagree.

Undercapitalization is an extremely common theme among failing traders and for the same reasons you outlined in your post. "You need an account that is just a few times larger than the margin requirement for your market."

The problem is most that attempt trading, have no idea what they are doing. If one is a net loser then no amount of money will save them.

And therein lies the problem. How many traders are trying to trade on instruments like CL or ES with an account less than $10k? Brokers almost encourage it. I know before the CL reserve increase, late last year, I had a broker that would allow up to 4 contracts (intraday) with a $5k on CL. Why do they do this? Commissions. Even though the exchange reserve for CL is now $6250, a broker can offer a reduced margin for intraday (as long as the trader isn't holding over).

Why do traders do this? Leverage, volitility, etc.


Unaccomplished traders attempt trading overzealously because they have no idea what the sh$t they are doing. Everyone wants to blame everyone else (see your paragraph above), when the problem lies within the trader’s inexperience. Leveraged or not, if one has no idea as to what they are doing, they have little to no chance at survival.

Being overleveraged or undercapitalized simply hastens the inevitable. If you're profitable, then you'll simply grow more quickly. But if you're losing, it simply quickens the process. Thus, traders who are underapitalized are not afforded any appreciable long term (or even short) term risk tolerance. If they make one massive mistake, or even a short series of small mistakes, the loss takes them below their marginal requirements and bam....they're out.

Your sentence, which I’ve highlighted in red for clarity, precisely illustrates my point. If one does not know sufficiently what they are doing, it won’t matter what their account size is. Losses are inevitable to those that are not properly prepared. Undercapitalization is not the root cause. It is true that many failed traders over-leverage themselves, but luckily, correlation does not imply causation.

Higher capitalization also means that a trader is afforded more options when it comes to "making a living."

Of course, but then, if one’s methodology is good enough, they don’t need other options.

The trader with a $10k account has to make some serious returns in order to make a living, especially after all the burden, commissions and fees. (platform fees, data fees, internet connection, brokerage commissions, software, training and educational expenses, etc, etc, etc.).

$10,000 is more than enough for many to “make a living” from. However, trading, to me, is not about “making a living”, it’s about wealth accumulation. If an interested party is looking to “making a living”, I would suggest the corporate ladder instead of the price ladder.

An easy example would be something as simple as a straight equities trade or an options trade. The commission burden decreases the larger the order size....you can actually get so small that you're spending a great deal of effort just to overcome your burdens.

There are costs to surmount for any trader. So what? No trader with retail commissions should be “scalping”, but that is another matter entirely.

Similarly, the trader with a $1M account, can easily chase 1% a month and live more comfortably than most Kings throughout world history. He doesn't have to lean into every trade, doesn't have to make unnecessary or stupid risk...doesn't need to "chase" trades or feel like he's pressured into trading.

Nor does a professional futures trader, with a comparatively small account, need to take “unnecessary or stupid risk”. But then, winning futures traders would not bother actively trading equities. Why should they?

FURTHERMORE, the trader with a large account, has the mental and physical safety net of falling back on his capital if he gets stalled. He doesn't have to worry about the mortgage, or the car payment, etc, if his trading doesn't turn out to be going the way he'd hoped, he always has a large equity pool that he can draw from to survive.

What you are talking about here is whether or not someone can afford to trade. This is beyond the scope of our exchange.

Undercapitalization is probably THE SINGLE MOST COMMON reason that many traders take extraordinary risks (in many facets of their trading), take on too much leverage and are put in a position where they feel like they HAVE to trade in order to earn money.

Traders take unnecessary risks because they don’t know better, or worse, can’t control themselves. If they can’t determine an appropriate allocation of risk capital, they do not know what they are doing, and have no business trading. This is not an undercapitalization problem. It’s an ignorance problem.

Like I said, it's also the reason that many people end up "blowing up" their account before they have a chance to sit and reflect on what they're doing wrong.

One can blow up 100K just as fast as 5K, and the prior will hurt a whole lot more. One needs to know sufficiently what they are doing in either case.

This can be true for someone with a large account, but at least the larger account has the "option" of trading some of the more popular instruments (that feature all the nice movement and volitility we love) at a much lower leverage position.

ES, NQ, YM, TF, and similar instruments are not popular? All of these products are easily accessible to a $5,000 account. More importantly, a good trader can rather easily "make a living" off of an account of that size. However, I would never advise the ES for intraday trading purposes. Ask Fat Tails for a reason why.

I think your statements are coming from the perspective of "I had a small account and made it work" rather than informing people of the commonality of typical mistakes that failing investors make.

No, my statements come from simple arithmetic.

Just because JJ Berea is a world champion basketball player, doesn't mean that it's solid advice to tell high school kids who are 5'8" that they have a legit shot at playing in the NBA. And more appripo, it doesn't mean that someone telling a 5'8" kid the cards are stacked against him is bad advice or inaccurate.

This is hardly an appropriate analog. Trading does not require exceptional physical abilities and can be taught, to presumably anyone. How do I know this? My methodology can be described as a set of rules that anyone could follow.

If you're trying to trade CL with a $10k account (and you're a full time trader trying to make a living) then I'm sorry, your going to have to take some considerable risks that other traders don't have to bear.

Wrong. One can easily trade one CL contract with a 10K account, on an intraday basis. That is, at the risk of sounding like a broken record, if one sufficiently knows what they are doing. Again, you are imposing your perceived limits on others. I will however, grant you this: I would personally never trade CL interday with a 10K account, but then, I would never trade CL interday on any size account.

Your comments about drawdown are puzzling to me. Am I to understand that you're trying to tell me you don't ever experience drawdown? If so, we need to talk. I'm willing to pay. If you're that good, sign me up. Because I don't proclaim to be all knowing when it comes to trading, but I've yet to see anyone who didn't suffer some amount of drawdown in their trading. (FYI, saying you never have drawdown means you never lose, which to me, seems a bit nonsensical).

In my original post I said that intraday losses and washes will occur. However, I also implied that interday drawdowns should be rare, and interweek drawdowns should be rarer still. In fact, interweek drawdowns should be virtually nonexistent. The drawdown paradigm is a self-fulfilling prophetic way of thinking about markets. It is not a requirement. One can, and many do, make net gains on a daily basis with only rare exception. The aim should be nothing less.

Firstly, I agree with most of what your saying, but your conclusions are wrong. Again, the proof is in the reality and the facts.

A person with a larger account is afforded options that a smaller account is not. Doesn't mean that a person with a larger account is automatically going to succeed. Doesn't mean that a person with a smaller account is doomed to fail.

It simply means that if you're trying to make a living as a trader, full time as your primary source of income, all the things I outlined still hold true. You're going to have to seek returns that a trader with a larger account does not.

Why do you think we have members on futures.io (formerly BMT) that come on here asking "Is it possible to develop a system on ES that nets 2 points a day?" Why do you think they chose that number (2 points?) Because they have a return in mind (rather than being profitable).

You're talking about what "should be" and I agree with everything you said. I'm talking about what "is."

If you fail, you cannot "blame" it on a small account. But again, a good majority of traders that get busted out, is because they start off with too much leverage and too little capital. This encourages them to take risks and positionsizes that a person with a larger account has the option of passing up.

Secondly, your logic surrounding drawdown is confusing.

Drawdown is drawdown, I don't care what time frame it's on. Just because you recover and end up positive on the day, doesn't mean that you experienced no drawdown.

If you have a single loss, guess what? That's drawdown. Granted, the less you lose, the less your drawdowns will be, but the fact remains there's no system, no trader in the world that wins 100% of the time.
If you wanted to be biased, you could change your time frame to suit your equity curve and claim no drawdowns on whatever timeframe you wanted.

As easily as you framed it around the close of the day, I could frame it around the hour. Losses are still drawdown, the fact that you recover by the end of the day is simply a mental anchor point for which you're grading yourself.

If a trader drawsdown 20% during the day (but recovers and ends up positive on the day) guess what? That's still drawdown. You still have to feature enough capital to weather that drawdown.

"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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  #330 (permalink)
 zer0 
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Firstly, I agree with most of what your saying, but your conclusions are wrong. Again, the proof is in the reality and the facts.

From my perspective, you have offered nothing compelling to support your arguments, whatever they actually are.

A person with a larger account is afforded options that a smaller account is not. Doesn't mean that a person with a larger account is automatically going to succeed. Doesn't mean that a person with a smaller account is doomed to fail.

A futures trader is offered a sh$t ton of points every day, and they do not need a large account to take advantage of that. There are no missed opportunities. Futures markets are where it’s at, and there is no futures market that is completely inaccessible to a micro trader with a small account. Sure, some markets like CL and FDAX are best left to more advanced participants. So what? In one eye and out the other, I guess.

It simply means that if you're trying to make a living as a trader, full time as your primary source of income, all the things I outlined still hold true. You're going to have to seek returns that a trader with a larger account does not.

When you have a solid methodology, there is no seeking. There is only trading. I don't wait for setups, I trade the day. As a futures trader, I would trade exactly the same way I am now with a much larger account, until either I hit a liquidity ceiling, or I start affecting my market in a way that changes my expectation.

Why do you think we have members on futures.io (formerly BMT) that come on here asking "Is it possible to develop a system on ES that nets 2 points a day?" Why do you think they chose that number (2 points?) Because they have a return in mind (rather than being profitable).

They ask because they don’t know better. I commented in the '2 points in ES' thread days or weeks ago. Traders should be after what is offered, not some silly fixed integer of points.

You're talking about what "should be" and I agree with everything you said. I'm talking about what "is."

You agree with everything I say, but yet you badger me? Honestly, I really don’t at all understand what you are trying to achieve in this conversation. You are apparently offering a solution looking for a problem. That, or you are just bent on being right and/or having the last word.

If you fail, you cannot "blame" it on a small account. But again, a good majority of traders that get busted out, is because they start off with too much leverage and too little capital. This encourages them to take risks and positionsizes that a person with a larger account has the option of passing up.

Traders get “busted out” because THEY DO NOT SUFFICIENTLY KNOW WHAT THEY ARE DOING. It is a function of ignorance, not money. Do I really need to state the obvious again?

Secondly, your logic surrounding drawdown is confusing.

I’m sorry this concept overwhelmed you.

Drawdown is drawdown, I don't care what time frame it's on. Just because you recover and end up positive on the day, doesn't mean that you experienced no drawdown.
If you have a single loss, guess what? That's drawdown. Granted, the less you lose, the less your drawdowns will be, but the fact remains there's no system, no trader in the world that wins 100% of the time.
If you wanted to be biased, you could change your time frame to suit your equity curve and claim no drawdowns on whatever timeframe you wanted.
As easily as you framed it around the close of the day, I could frame it around the hour. Losses are still drawdown, the fact that you recover by the end of the day is simply a mental anchor point for which you're grading yourself.
If a trader drawsdown 20% during the day (but recovers and ends up positive on the day) guess what? That's still drawdown. You still have to feature enough capital to weather that drawdown.

You just don’t get it. Unfortunately, I don’t have the time to educate you. I need to get some sleep for what would appear to be a big day tomorrow. I will do my best not to drawdown my account 20% intraday.

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  #331 (permalink)
 RM99 
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We're arguing apples and oranges.

I give up. You are correct. There's no correlation in account size and propensity to succeed as a full time trader. Anyone with a $500 account can make a full time living by trading that account.

"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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  #332 (permalink)
 monpere 
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I think most people with a $5k account are not full time traders. I don't think they just quit their job and expect to make a living trading with a $5k account. I believe the great majority of those people, and the great majority of traders on futures.io (formerly BMT) are not full time traders and have another primary source of income. I believe the goal is to grow $5k into an account that can allow them to quit their job. I also believe you can become an excellent trader with an account of $0, and if you do that you should be able to start with a $5k account and be making a full time living trading not too long after that... You 'should', but the reality is, the majority do not hang around long enough to reach the proper stage before putting that $5k out there.

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  #333 (permalink)
 RM99 
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monpere View Post
I think most people with a $5k account are not full time traders. I don't think they just quit their job and expect to make a living trading with a $5k account. I believe the great majority of those people, and the great majority of traders on futures.io (formerly BMT) are not full time traders and have another primary source of income. I believe the goal is to grow $5k into an account that can allow them to quit their job. I also believe you can become an excellent trader with an account of $0, and if you do that you should be able to start with a $5k account and be making a full time living trading not too long after that... You 'should', but the reality is, the majority do not hang around long enough to reach the proper stage before putting that $5k out there.

That's my point. The original title of this thread says "PRIMARY" source. Meaning how many traders are making money ONLY from trading.

I think there's a good deal of newbie retail investors out there that dabble with a small account and try to make it their primary source of income.

I think that a great many of them start off with wild expectations, which cause them to do things, take chances, lose patience, etc.

I'm not saying you can blame it on a small account, I'm not even saying having a large account would or would not have helped them, maybe they'd have blown through a large account too.

I'm simply saying that having a larger account, allows you to be satisified with a consistent and steady couple ticks/day strategy.

A couple ticks/day is not sufficient for a small account. So they seek larger gains and in the end, larger gains invariably means taking more risk and/or trading more often. You're either less selective or your chasing strategies that net more (but present more risk, more drawdown, etc).

The two largest commonalities among failing retail traders are A) lack of adequate starting capital and B) Failure to achieve a R/R ratio or a P/L ratio consistent with winning traders. If your strategy is able to achieve a P/L ratio of say 2:1 or better, chances are you're doing things right. NOT SAYING YOU CAN'T BE SUCCESSFUL OTHERWISE.

This board is getting ridiculous.

Someone comes out and makes a statement like "Playing the lottery is generally a sucker's bet and not a good investment" and then someone else comes running in claiming contrary, citing all the lottery winners as examples.

Most of what's said on the board are generalities and themes, not cold hard rules. There's always the exception to the rule in trading. But there's value in educating people as to the odds and probabilities as to what's successful and what is not.

If nothing else, it arms the trader with a greater sense that they should be wary if they're going to try to go against the grain and be the exception, rather than the norm.

If you're trying to trade a smallish account and make it your primary source of income (per the original thread subject) then my hat goes off to you, if you succeed, you're truly an outlier.

To all others, let that serve as wisdom, that if you decide to trade full time with a small account, you're going to have to be smarter than the next guy.

I don't know how else to frame the issue.

I agree with what zero is saying, that in the hands of the right trader, a small account can succeed. But that's the whole point "in the hands of the right/experienced" trader isn't always the case. It's rarely the case.

So MY point is that if you're starting out with a small account, don't add the additional pressure of trying to make your living off of it. Focus on winning and being profitable and grow your account to the point that you're comfortable enough to draw a living off it.

"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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  #334 (permalink)
 Xeno 
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RM99 View Post

I agree with what zero is saying, that in the hands of the right trader, a small account can succeed. But that's the whole point "in the hands of the right/experienced" trader isn't always the case. It's rarely the case.

So MY point is that if you're starting out with a small account, don't add the additional pressure of trying to make your living off of it. Focus on winning and being profitable and grow your account to the point that you're comfortable enough to draw a living off it.

I can see both sides. What I would say though, is that how many traders who have that 30k account really benefit from those increased options? It seems to me that the vast majority of them simply blow that too, and when they're down to 4k from 30k, they don't change anything, they just carry on until it's gone.

In that way, undercapitalisation is a good thing, since blowing your account seems to be such a major prerequisite for people to get serious about their trading ;-)

Sure, in reality people will have more options, less pressure and maybe make different choices with a larger account, but I guess zero is saying those factors pale into insignificance compared to whether people really know what they're doing. A 5k account holds little fear for the trader who has seriously walk-forward tested their system and found a max drawdown of 1100k

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  #335 (permalink)
 monpere 
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Xeno View Post
I can see both sides. What I would say though, is that how many traders who have that 30k account really benefit from those increased options? It seems to me that the vast majority of them simply blow that too, and when they're down to 4k from 30k, they don't change anything, they just carry on until it's gone.

In that way, undercapitalisation is a good thing, since blowing your account seems to be such a major prerequisite for people to get serious about their trading ;-)

Sure, in reality people will have more options, less pressure and maybe make different choices with a larger account, but I guess zero is saying those factors pale into insignificance compared to whether people really know what they're doing. A 5k account holds little fear for the trader who has seriously walk-forward tested their system and found a max drawdown of 1100k

This is a pointless discussion. Nobody in their right mind is going to try to make a living from any business with $5k investment, with no other primary source of income, when their monthly expenses is $2500+. If you are working full time it is a moot point. If you have $100k savings it is still a moot point. If your wife is supporting you, it's a moot point. If you you don't need that $5k to survive, it is a moot point. If you are in the latter, you have the luxury of blowing six $5k accounts and then become profitable on the 7th. So technically, yes you can do it, but can you do it from the 1st $5k account coming in as a newbie? Probably not.

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 Xeno 
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monpere View Post
This is a pointless discussion. Nobody in their right mind is going to try to make a living from any business with $5k investment, with no other primary source of income, when their monthly expenses is $2500+. If you are working full time it is a moot point. If you have $100k savings it is still a moot point. If your wife is supporting you, it's a moot point. If you you don't need that $5k to survive, it is a moot point. If you are in the latter, you have the luxury of blowing six $5k accounts and then become profitable on the 7th. So technically, yes you can do it, but can you do it from the 1st $5k account coming in as a newbie? Probably not.

I'm not sure anyone is saying you can make a living from the 5k straight off. Certainly not me.

And zerO originally said


Quoting 
$5,000 is easily enough funding to not only trade with successfully, but to build wealth from, for an advanced trader.

Build wealth. I think the point is this. Most people who want to make a living from trading, if they have a decent system and know its performance, could start with 5k and with other income support and compounding, could be making a living from trading without waiting years. A decent system could make an average of 3k pm with 1k max drawdown, trading 1 contract. 5k would happily cover margin and contingency. It really doesn't take long to get to 2 contracts and a reasonable monthly income.

But, the crux is, your system, and how well you do what you do.

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  #337 (permalink)
 zer0 
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I don't believe anyone said anything about trading with a $500 account.

Anyway, what an outstanding trading day. Amazing how much one can make with just 2 mini futures contracts. Anyone else catch any of this action today?


RM99 View Post
We're arguing apples and oranges.

I give up. You are correct. There's no correlation in account size and propensity to succeed as a full time trader. Anyone with a $500 account can make a full time living by trading that account.


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  #338 (permalink)
 zer0 
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Let's hug. I had too good a day to be angry. Did I say it was an outstanding day today? It was.


RM99 View Post
That's my point. The original title of this thread says "PRIMARY" source. Meaning how many traders are making money ONLY from trading.

I think there's a good deal of newbie retail investors out there that dabble with a small account and try to make it their primary source of income.

I think that a great many of them start off with wild expectations, which cause them to do things, take chances, lose patience, etc.

I'm not saying you can blame it on a small account, I'm not even saying having a large account would or would not have helped them, maybe they'd have blown through a large account too.

I'm simply saying that having a larger account, allows you to be satisified with a consistent and steady couple ticks/day strategy.

A couple ticks/day is not sufficient for a small account. So they seek larger gains and in the end, larger gains invariably means taking more risk and/or trading more often. You're either less selective or your chasing strategies that net more (but present more risk, more drawdown, etc).

The two largest commonalities among failing retail traders are A) lack of adequate starting capital and B) Failure to achieve a R/R ratio or a P/L ratio consistent with winning traders. If your strategy is able to achieve a P/L ratio of say 2:1 or better, chances are you're doing things right. NOT SAYING YOU CAN'T BE SUCCESSFUL OTHERWISE.

This board is getting ridiculous.

Someone comes out and makes a statement like "Playing the lottery is generally a sucker's bet and not a good investment" and then someone else comes running in claiming contrary, citing all the lottery winners as examples.

Most of what's said on the board are generalities and themes, not cold hard rules. There's always the exception to the rule in trading. But there's value in educating people as to the odds and probabilities as to what's successful and what is not.

If nothing else, it arms the trader with a greater sense that they should be wary if they're going to try to go against the grain and be the exception, rather than the norm.

If you're trying to trade a smallish account and make it your primary source of income (per the original thread subject) then my hat goes off to you, if you succeed, you're truly an outlier.

To all others, let that serve as wisdom, that if you decide to trade full time with a small account, you're going to have to be smarter than the next guy.

I don't know how else to frame the issue.

I agree with what zero is saying, that in the hands of the right trader, a small account can succeed. But that's the whole point "in the hands of the right/experienced" trader isn't always the case. It's rarely the case.

So MY point is that if you're starting out with a small account, don't add the additional pressure of trying to make your living off of it. Focus on winning and being profitable and grow your account to the point that you're comfortable enough to draw a living off it.


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 RM99 
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zer0 View Post
Let's hug. I had too good a day to be angry. Did I say it was an outstanding day today? It was.

I'm not mad

I generally enjoy a debate and an exchange of differing viewpoints. That's what forums like these are all about. Yes, I had a good day. Today was a dream day in terms of market movement.

"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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 monpere 
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RM99 View Post
I'm not mad

I generally enjoy a debate and an exchange of differing viewpoints. That's what forums like these are all about. Yes, I had a good day. Today was a dream day in terms of market movement.

Yeah... too bad they happen once every 9 months. It was actually a dream week. I hope your strategies don't rely on these kind of days to be profitable

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 RM99 
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monpere View Post
Yeah... too bad they happen once every 9 months. It was actually a dream week. I hope your strategies don't rely on these kind of days to be profitable

Not to veer off topic, but any system or strategy that relies on outliers carries more risk. It's always best to plan for the worst and be pleasantly surprised when berry patches such as this week come along.

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 Lornz 
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monpere View Post
Yeah... too bad they happen once every 9 months. It was actually a dream week. I hope your strategies don't rely on these kind of days to be profitable

But what if you only trade every 9 months?

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  #343 (permalink)
 gg80108 
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"Traders get “busted out” because THEY DO NOT SUFFICIENTLY KNOW WHAT THEY ARE DOING. It is a function of ignorance, not money"
Ignorance seems to be one of those words that seems to take in everything but really contributes nothing in understanding..

Are all the rest of the competitors in an event, just ignorant because they did not win? Is Tiger Woods ignorant because he came in 38th, guess he did not know sufficiently what he was doing....

My question is ignorance of what?

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  #344 (permalink)
 zer0 
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I'm not certain this superfluous, even antagonizing post, contributes anything to understanding either. All I have taken away from it is that you seem to have a bitter disdain for the the word 'ignorance'. Anyway, I'll indulge you:

I believe the word 'ignorance' is quite clear in its chosen context here. Specifically, if a trader is unable to make net gains, or worse, is only capable of net losses day to day, week to week, et al., well, then they are ignorant as to how to trade profitably.



gg80108 View Post
"Traders get “busted out” because THEY DO NOT SUFFICIENTLY KNOW WHAT THEY ARE DOING. It is a function of ignorance, not money"
Ignorance seems to be one of those words that seems to take in everything but really contributes nothing in understanding..

Are all the rest of the competitors in an event, just ignorant because they did not win? Is Tiger Woods ignorant because he came in 38th, guess he did not know sufficiently what he was doing....

My question is ignorance of what?


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  #346 (permalink)
 bluemele 
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Xeno View Post
I'm not sure anyone is saying you can make a living from the 5k straight off. Certainly not me.

And zerO originally said



Build wealth. I think the point is this. Most people who want to make a living from trading, if they have a decent system and know its performance, could start with 5k and with other income support and compounding, could be making a living from trading without waiting years. A decent system could make an average of 3k pm with 1k max drawdown, trading 1 contract. 5k would happily cover margin and contingency. It really doesn't take long to get to 2 contracts and a reasonable monthly income.

But, the crux is, your system, and how well you do what you do.

Most systems need adaptation, and hence comes the experience. I have learned and created a lot of systems that are great for certain periods of time, but knowing when to change it up to me requires experiences.... unfortunately, I know of no substitute for experience than hours/time reviewing and/or tapping into another being for such information.

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  #347 (permalink)
 forrestang 
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I guess I get to say that trading is my primary source of income. I don't feel like I get to say, "I've made it" yet though.

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 bluemele 
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forrestang View Post
I guess I get to say that trading is my primary source of income. I don't feel like I get to say, "I've made it" yet though.

Why do you say that?

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 jstnbrg 
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zer0 View Post
I believe the word 'ignorance' is quite clear in its chosen context here. Specifically, if a trader is unable to make net gains, or worse, is only capable of net losses day to day, week to week, et al., well, then they are ignorant as to how to trade profitably.

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.

"You don't need a weatherman to know which way the wind blows..."
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 bluemele 
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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.

I love hearing these stories. You and Tiger Trader should invest into a thread where these stories really come through. Some may find them depressing or un-inspiring, but to me, they are lessons learned. I don't want to learn the same lesson someone just did!

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  #351 (permalink)
 forrestang 
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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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 RM99 
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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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 zer0 
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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.


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  #354 (permalink)
 RM99 
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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)
 Lornz 
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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)
 Lornz 
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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)
 jonc 
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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)
 monpere 
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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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 bluemele 
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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)
 RM99 
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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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 RM99 
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monpere View Post
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.

You're speaking in terms of "absolute" risk.

Relative risk I would think would not prohibit most traders in the long run.

This concept can be seen in anything from gambling to business.

When any individual/firm starts out, the numbers they manage seem large, but over time, as the entity grows/expands, those numbers that used to seem outrageous, now seem trivial.

A fledgling homebuilder might think he's swamped building 6 homes/year. His staff may be overwhelmed. Fast forward 3 years later, and now they're building 200 homes/year. Has his risk increased? From an absolute perspective, absolutely. From a relative perspective, hopefully the risk management is at least comparable. (i.e. they're building more homes, but they have a larger employee force, more capital on hand, equipment, offices, cash flow, etc).

The same is true for professional gamblers. A high roller like Phil Ivey may look at the entry fee for a $100k tournament as business as usual, but for a smaller/starting gambler, $100k may seem outrageous. When you're earning $3M+ a year, a $100k entry fee, is the same as a gambler earning $30k/year entering a $1k tournament.

Relative risk should be consistent when growing. It's the firms/traders/individuals that stretch their relative risk beyond their comfort/prudence that end up toppling.

Ideally, a trader could increase his position sizes incrementally, while simultaneously decreasing his relative risk exposure.

I wrote about this in earlier posts. A trader with a $1M account can enjoy a lower relative risk exposure and still make a living when compared to a trader with a $100k account.

"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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 jstnbrg 
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Lornz View Post
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?

It looks like I started an interesting discussion. The risk management of most of the survivors was just fine, that's why we were survivors. The example people are talking about, where this guy lost a ton of money on one trade, is a result of what I always considered to be the flawed way the trading "descendants" of Ray Cahnman traded.

They traded the yield curve. In my pit, the Five Year Note pit, this meant they traded either the 5/10 spread or the 5/30 spread. They would also trade the 5/10/30 butterfly (more on that later). The 2/5 spread was traded by guys standing in the Two Year Note pit.

Ray almost never took losses, he'd just wait for the market to come back. Sometimes that might take a year. He'd just roll the position into the next contract month, put it in "inventory", maybe "hedge" it with a related spread, maybe stick it in a separate account, and then wait and go on with his trading. At least, that's the way the stories go. I never discussed it with him, though he was a little bit of a mentor to me too. I was at heart a scalper, and his methodologies would not work for me.

Ray's yield curve guys were mean reversion traders, and they would "average" (the rest of us would call that "cannonballing"). So maybe they would sell a "unit" of the 5/10 spread a tick above where it settled or buy a unit a tick below settlements. They might do another unit 1/3 or 1/2 tick above the first unit, and continue "averaging up" for 4 or 5 entries. If they started to get uncomfortable they might buy some 10/30 spreads to hedge their position, establishing a butterfly trade.

Personally I don't know how so many of them survived, but they not only survived, they did very well. One reason was they were terrific at execution. Most of the time the curve didn't trend, and they'd only get 2 or three units on before they got a chance to take a profit on the whole trade. Also they were willing to trade for the smallest possible profit, a fraction of a tick, so they often made their money before the market got away from them. The problem was they were not well trained to handle trend days, so it was easy to blow up several weeks trading if the curve went in one direction and never looked back.

The story I was relating in the previous post involved a guy who had learned to trade the 5/10 and the 5/30 in a period where the yield curve was essentially always dead. If prices changed from the previous nights settlements they always came back, so the strategy was to add on with impunity until the curve reverted to the mean. When something happened that the market perceived would force the Fed to shift its stance, the curve absolutely exploded, and the trader in question kept seeing changes from settlement he had never encountered and was incapable of believing could last the day, and he just kept adding to his position. Remember, this guy had already made $600,000 his first year, so his ego was overdeveloped. (It took me over 5 years to make my first $600,000, and I had suffered plenty of adversity getting there, so I had little ego to get in the way. That came later).


Quoting 
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.

Absolutely great post! I had to think a little bit to understand what might be meant by "the very esence of what markets are" and I eventually came to understand it to mean rationing supply or demand through price, and a methodology that is able to detect imbalances in supply and demand as they are occurring or to detect such rationing taking place would be independent of the character of the market (volatile, mean reverting, trending, etc). Such a methodology would rely on the supply/demand imbalance being rectified to establish where a position was covered, rather than a set profit level. Concerning whether edges are necessary, they used to be helpful but certainly are not necessary. I took at least a little heat on almost everything I did once I was a large trader. And the curve traders usually weren't getting an edge, they were trading a probability, even if it was one they couldn't quantify. "The edge is the ledge" was an aphorism on the floor, even though it was what most of us aspired to get.

I'm not trading at all right now, I'm rehabbing my summer home. When I was last trading I was focusing on just a couple of setups, and I was a little below break-even in sim. It remains to be seen whether I still have the fire in my belly to do what it takes to make it on the screen, or whether I have the aptitude for this type of trading. I get so bored. I really need a methodology that lets me trade frequently.

"You don't need a weatherman to know which way the wind blows..."
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 Lornz 
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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?

Exactly!

If you're trading a liquid market, you either have an approach with positive expectancy or you've got nothing. If you do, you can just as easily make a million as you can $100K....

Unfortunately this doesn't change the fact that developing a valid approach is infinitely harder than most beginning traders assume...

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 Surly 
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Yes @Lornz, I've often heard experienced traders say that getting to consistently break even is quite a long way down the road to consistent profitability... And I would agree with that statement.

Seek freedom and become captive of your desires. Seek discipline and find your liberty. - Frank Herbert
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 bluemele 
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Lornz View Post
Exactly!

If you're trading a liquid market, you either have an approach with positive expectancy or you've got nothing. If you do, you can just as easily make a million as you can $100K....

Unfortunately this doesn't change the fact that developing a valid approach is infinitely harder than most beginning traders assume...

I hear the phrase 'positive expectancy' thrown around very very often. The challenge with a 'system' that creates positive expectancy is in a context of time. Over time, I have not seen an instrument trade the same way.

So when you create a system with positive expectancy, then how do you decided when the time is to adjust? Most traders figure that out when they go broke (hindsight).

Even if you have been trading for 10 years, the same system, it could all give up tomorrow for the next 10 years and then what?

I guess my point is, I think that is why discretionary trading without rigid rules is the best way to maintain true profitability over time. If PE systems were all you needed, there would be a lot more billionaires floating around....

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 zer0 
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There are some concepts so fundamental to markets that they really do not change. Of course, I will be called for BS on that statement, as I am not willing to share details. However, there are. Such things are so elemental they are existential to the markets you trade them on. There are other challenges to deal with of course: costs, liquidity, skilled execution, etc. All of which makes success a bit less than simple. I will insist, however, that the idea itself is very basic, and it does not change. It really cannot change for markets to be, well, markets.


bluemele View Post
I hear the phrase 'positive expectancy' thrown around very very often. The challenge with a 'system' that creates positive expectancy is in a context of time. Over time, I have not seen an instrument trade the same way.

So when you create a system with positive expectancy, then how do you decided when the time is to adjust? Most traders figure that out when they go broke (hindsight).

Even if you have been trading for 10 years, the same system, it could all give up tomorrow for the next 10 years and then what?

I guess my point is, I think that is why discretionary trading without rigid rules is the best way to maintain true profitability over time. If PE systems where all you needed, there would be a lot more billionaires floating around....


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  #367 (permalink)
 bluemele 
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zer0 View Post
There are some concepts so fundamental to markets that they really do not change. Of course, I will be called for BS on that statement, as I am not willing to share details. However, there are. Such things are so elemental they are existential to the markets you trade them on. There are other challenges to deal with of course: costs, liquidity, skilled execution, etc. All of which makes success a bit less than simple. I will insist, however, that the idea itself is very basic, and it does not change. It really cannot change for markets to be, well, markets.

I agree that certain fundamentals do exist, but 'certain' is an interesting word in an evolving marketplace. I do believe in the core foundations of existence and how those reverberate to trading.

But I see a LOT of people think that they have built the ultimate 'PE' system and then kaboooooooooooooooooom............

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 RM99 
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Although I agree with zero, I know some people will debate his point (about timeless approaches).

The more important factor about rules based vs. adjusting with market conditions is sticking to your plan (or even having a plan).

by having "rules" it protects you against catastrophic blowouts.

Simple money management and strategy performance metrics will ensure that you're able to stop and reassess before it's curtains.

If you've done enough to determine your expectancy and you know what your strategy "SHOULD" be doing, then you've probably done enough to determine what is in tolerance drawdown is for your system.

Thus if you're obeying your money management rules and only risking finite, pre-determined risk amounts, when the system draws down more than your tolerance limit, you stop and figure out what's going on.

Obviously, the implied step is correctly determining what the acceptible drawdown will be. There's tons of information and discussion on futures.io (formerly BMT) about tools like Monte Carlo and randomizing your results, so that you can get a tolerance interval of what your drawdown should look like.

Acceptible drawdown (like any scientific measurement) should come with a confidence interval.

That's to say, you know your drawdown is 3% at the 95th percentile. and it's 2% at the 70th percentile and 4% at the 99th percentile, etc.

You set a RULE that says if you break your tolerance limit with respect to drawdown, then you STOP and figure out what's ongoing.

Your rules might also include a number of consecutive losers. In your Monte Carlo analysis, you might determine that there's a 5% chance of enduring 10 consecutive losers. If you're truly obeying your rules, then you know that if you reach 10 in a row, the system is definitely drawing down OUTSIDE YOUR PREDETERMINED tolerance level.

This ensures that if you have a profitable mechanical/rules based system, you don't give back everything you've made.

The other implied concept is actually following the rules you set and sticking to your plan.

Tharp emphasizes that the key part of the plan is not how you'll enter the market, but what will you actually do once you're there. Similarly, developing a strategy/approach is important, but actually implementing it according to the rules you created is crucial. If you're not going to stick to rules, then any sort of performance metric or expectancy is either useless or greatly diminished.

I posted in another thread about expectancy and a trader's need to be "correct." Tharp talks about traders who spend way too much time in losing trades (hoping it will come back their way) so they can feel "correct" or validate their theory. The same applies to a system that may have turned negative. Once it goes beyond a planned downward move, it's time to stop and cut your losses and figure out if A) You simply did not accurately predetermine what that drawdown level was or B) something has fundamentally changed that now adversely affects your system to the point that it's no longer acceptible.

"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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 zer0 
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Oh yes, definitely. I think mostly when people use the term, they had found a pocket of time they thought proved their system to have PE (selection bias). We know what happens to them. In some cases the person did, in fact, have PE, but then, after some stretch of time, didn't any longer (a market dynamic shifted). This is what I personally call an 'edge'. It defies the common usage of the term, I know. I use and look for methodologies that employ what I call 'market character'. Specifically, that means that I aim to construct strategies from tactics/methods derived from existential market requirements. When one trades 'market character', a damaging fundamental shift cannot happen abruptly, or at all. A change large enough to render such a plan useless, requires the market to become something other than itself. Now, for the sake of being thorough, 'market character'-based methodologies, of course, have Kryptonite of their own. Luckily, its weaknesses can be spotted miles away using rudimentary statistics.


bluemele View Post
I agree that certain fundamentals do exist, but 'certain' is an interesting word in an evolving marketplace. I do believe in the core foundations of existence and how those reverberate to trading.

But I see a LOT of people think that they have built the ultimate 'PE' system and then kaboooooooooooooooooom............


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  #370 (permalink)
 monpere 
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bluemele View Post
I hear the phrase 'positive expectancy' thrown around very very often. The challenge with a 'system' that creates positive expectancy is in a context of time. Over time, I have not seen an instrument trade the same way.

So when you create a system with positive expectancy, then how do you decided when the time is to adjust? Most traders figure that out when they go broke (hindsight).

Even if you have been trading for 10 years, the same system, it could all give up tomorrow for the next 10 years and then what?

I guess my point is, I think that is why discretionary trading without rigid rules is the best way to maintain true profitability over time. If PE systems were all you needed, there would be a lot more billionaires floating around....

A rigid system is no different then a discretionary system, if the markets should change over time. The same way you would adjust your discretionary approach, is the same way you would adjust your 'rigid' system. Trading software providers do not spend thousands of hours programming backtesters and optimizers for nothing. Those tools are there for a reason. That reason is to allow you to 'optimize', in other words 'adjust' your rigid system as the markets change. I don't know one mechanical system trader who is not obsessed with optimizing, so much so that they over do it and start curve fitting. You really think a guy who spent 5000 hours coming up with a decent expectancy, is gonna spend 3 months without ever peeking at those numbers again? When the markets start to systematically change, a systems trader will probably notice before a discretionary trader does, and he will have the concrete numbers to prove it, without even scratching his head.

Furthermore, if you designed a rigid system that blows up your account while your not looking, then you had no business trading that approach in the first place. If your system is worth the paper it is written on, it should include rules that determine the favorable market conditions it was designed for. Case in point, my method generates on average 40-50 signals per day on the CL. The week before last with all the volatility, the method was brilliant, I chose the CL because of the volatility. But, the movement in the last week or so has been just horrible for it, so last week it was averaging around 10-15 signals per day rather then 50. That is the nature of a good rule set, it keeps you out of market conditions you have no business trading. So, if the markets change, then guess what, you don't blow up your account, you keep your money in your pocket, because you just won't get any trading signals.

I don't know where these ideas about the markets changing stem from. Ever since I can remember, double tops, double bottoms, divergence, pullbacks, breakouts, support/resistance etc. have not changed in the markets, have they?. Market fundamentals don't change, because the markets are people, human beings, emotions, greed and fear. When different life forms start trading the markets, then be ready for big market changes. Or, until the markets become primarily HFT vs HFT, or until the SEC decides they will move from decimalization back to fractional system, market fundamentals are not gonna change all that much. To me, the only effective aspect of the markets that changes is volatility. But, if your method is based on moon cycles, then I guess none of the above applies

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 Lornz 
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bluemele View Post
I hear the phrase 'positive expectancy' thrown around very very often. The challenge with a 'system' that creates positive expectancy is in a context of time. Over time, I have not seen an instrument trade the same way.

So when you create a system with positive expectancy, then how do you decided when the time is to adjust? Most traders figure that out when they go broke (hindsight).

Even if you have been trading for 10 years, the same system, it could all give up tomorrow for the next 10 years and then what?

I guess my point is, I think that is why discretionary trading without rigid rules is the best way to maintain true profitability over time. If PE systems were all you needed, there would be a lot more billionaires floating around....

Mind you, I said approach -- not system.

That would include discretionary trading, which, in essence, is just relying on one's ability to filter and process information as a "system"...

It is also a myth that systematic/automatic traders don't continually adjust and adapt to the changing dynamics of the market. In fact, many models are dynamic in themselves..

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  #372 (permalink)
 Lornz 
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zer0 View Post
There are some concepts so fundamental to markets that they really do not change. Of course, I will be called for BS on that statement, as I am not willing to share details. However, there are. Such things are so elemental they are existential to the markets you trade them on. There are other challenges to deal with of course: costs, liquidity, skilled execution, etc. All of which makes success a bit less than simple. I will insist, however, that the idea itself is very basic, and it does not change. It really cannot change for markets to be, well, markets.

Now am I certain we trade the same way...

It has always fascinated me how many fail to distance them enough to able to come to this realization. I think it's because it's too logical and simple, and most people don't seem to appreciate that...

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  #373 (permalink)
 gg80108 
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Lornz View Post
Mind you, I said approach -- not system.

That would include discretionary trading, which, in essence, is just relying on one's ability to filter and process information as a "system"...

It is also a myth that systematic/automatic traders don't continually adjust and adapt to the changing dynamics of the market. In fact, many models are dynamic in themselves..

Like the comment "one's ability to filter and process information as a "system" here lies the 5% who have the talent to make a go of trading,, while the rest keep using the system/models the "pros" use, not realizing its the ability to filter the tools information is the key to make profit..

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 bluemele 
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gg80108 View Post
Like the comment "one's ability to filter and process information as a "system" here lies the 5% who have the talent to make a go of trading,, while the rest keep using the system/models the "pros" use, not realizing its the ability to filter the tools information is the key to make profit..

Exactly.... The key point is one we all just made. Constant changes.

But, whether the context of time is 5 seconds, 5 minutes, 5 days, or 5 years, we are ever evolving our 'PE' systems. Like @monpere and others have mentioned as well, we are evolving even the most mechanical methods which in my opinion turns them into discretionary systems. I guess all a matter of context in time when referring to a definition to me.

I think when people who haven't traded very long and they read some of these posts it is over-simplified.

@Lornz, I didn't mean to challenge you but more to clarify or disagree without clarification.

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  #375 (permalink)
 zer0 
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I often suggest cleaning the slate and starting again with cold, hard logic. Few seem to notice, I imagine that even less try. The problem stems from the inherent, apparently innate need to find solutions for unclearly defined problems. Reduction --> Deduction --> Goal!!!!


Lornz View Post
Now am I certain we trade the same way...

It has always fascinated me how many fail to distance them enough to able to come to this realization. I think it's because it's too logical and simple, and most people don't seem to appreciate that...


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 Massive l 
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I’m at $1000 n I wan $1100, $1100, bid on $1100, I’m at $1000 would you go $1100, $1100

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Firehawkaz27
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Me personally i use quite a few trading methods i have plains for day trading swing trading and more longer term now do i make over 100k a year trading in this moment yes did i always make those numbers certainly not i started trading around 2005 also keep in mind im only 27 years of age so i started young my first year i lost my butt big time i all most gave up but i continued to learn and still learning to this day. Everyone's approach to trading is different and can be very hard to explain when asked the question how do you make money and how come you are successful? its not easy to answer because everyone thinks differently and approaches tasks differently. and that is what makes a market if everyone thought the same trading would near impossible to trade. In terms of how i live my life or did live it int he past when i first started i had a normal job like most society and changed my wants into needs meaning instead of blowing my money on drinking going out buying the latest fashions aside from bills all of my extra money went into trading accounts. and to this day i still live a simple life i have a one bedroom apt two used vehicles except now the only difference is alot of the profits i make are reinvested in my IRA account. so i guess all in all to ME trading is not just a trying to get rich sceme is a life style i really believe that.

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 PaperTrader 
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Firehawkaz27 View Post
Me personally i use quite a few trading methods i have plains for day trading swing trading and more longer term now do i make over 100k a year trading in this moment yes did i always make those numbers certainly not i started trading around 2005 also keep in mind im only 27 years of age so i started young my first year i lost my butt big time i all most gave up but i continued to learn and still learning to this day. Everyone's approach to trading is different and can be very hard to explain when asked the question how do you make money and how come you are successful? its not easy to answer because everyone thinks differently and approaches tasks differently. and that is what makes a market if everyone thought the same trading would near impossible to trade. In terms of how i live my life or did live it int he past when i first started i had a normal job like most society and changed my wants into needs meaning instead of blowing my money on drinking going out buying the latest fashions aside from bills all of my extra money went into trading accounts. and to this day i still live a simple life i have a one bedroom apt two used vehicles except now the only difference is alot of the profits i make are reinvested in my IRA account. so i guess all in all to ME trading is not just a trying to get rich sceme is a life style i really believe that.

Does your day job give u acess to the internet/market where u can study it?

Sent from my HTC Desire using Tapatalk

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  #379 (permalink)
 jstnbrg 
Chicago, Illinois
 
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Firehawkaz27 View Post
to this day i still live a simple life i have a one bedroom apt two used vehicles except now the only difference is alot of the profits i make are reinvested in my IRA account. so i guess all in all to ME trading is not just a trying to get rich sceme is a life style i really believe that.

Your approach is terrific, but you will probably encounter pitfalls along the way. Forewarned is forearmed. I'm 54 and I've spent my entire adult life in the commodity markets, all but the first six years as an independent trader at the CBOT. I've seen a lot of truly great traders blow up their fortunes outside of the pits, and I've made some of these mistakes myself. The biggest pitfalls:

1) Marriage. It's a wonderful institution, but it's important your spouse understand the variable nature of your income, and the necessity to maintain big reserves. Otherwise she may think if you make 100k you can spend most of that, and/or borrow against future income.

2) Complacency. You are confident in your abilities, and you (not you specifically, any successful trader) think this will go on forever. You are comfortable at your current level of income, so you fail to increase your size. Then something fundamental about the competitive situation changes, and you lose your ability to make money in the markets. You haven't put enough away to last you a lifetime, so now you have to get a job. In my opinion you should aspire to trade as big as you safely can, but build up to it very gradually, so you have adequate capital to deal with the added risk and so you can adapt psychologically to the larger equity swings.

3) Great success. This leads to all sorts of terrible financial and personal decisions.

a) You have a multi million dollar year, so now it's time to start building the trophy house. I know a guy who literally put $10 million into a three bedroom home. Bowling alley, theater room, pool, bought the 3 lots surrounding him at $600k each and put just enough junk on them that they can't be resold. He had to sell it for under $6 million (in a hot market). For some reason, building the trophy house seems to be the kiss of death. My advice is to do it only when your investment income, not your trading income, can totally support your cost of living, and to pay cash for everything, no mortgage.

b) You buy a great car, flash your wealth, and attract a really hot golddigger who cleans you out three years later. That one happened to one of my best friends, and to many others.

c) You make huge investments in things you don't understand that well. Tom Baldwin, one of the greatest ever, largely wiped himself out with a dot com company. A close friend of mine merged his prop group with two others, and then they forced him out at a big loss.

4) Failure to recognize change, either in yourself or the markets. Your profitability goes down but you do not adjust your style or your risk profile until it is too late.

From your post, I'd say you are not currently at risk for most of these except #2, complacency. Maybe you should be investing more in your business and less in your IRA (unless you are trading through your IRA, which I think is a good idea, especially if it's a Roth). But circumstances change, and they change you. Keep the values you've written about, and you should do well.

"You don't need a weatherman to know which way the wind blows..."
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  #380 (permalink)
 bluemele 
Honolulu, Hawaii
 
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IRA isn't bad, because you can just pay your 10% penalty if you need to dig in. If he continues down this path and it is 10 years of compounding without tax, that will far exceed the 10% penalty issue.

Good advice though and I have to find out, did you ever make it to Boulder??

@jstnbrg

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  #381 (permalink)
 liquidcci 
Austin, TX
 
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jstnbrg View Post
Your approach is terrific, but you will probably encounter pitfalls along the way. Forewarned is forearmed. I'm 54 and I've spent my entire adult life in the commodity markets, all but the first six years as an independent trader at the CBOT. I've seen a lot of truly great traders blow up their fortunes outside of the pits, and I've made some of these mistakes myself. The biggest pitfalls:

1) Marriage. It's a wonderful institution, but it's important your spouse understand the variable nature of your income, and the necessity to maintain big reserves. Otherwise she may think if you make 100k you can spend most of that, and/or borrow against future income.

2) Complacency. You are confident in your abilities, and you (not you specifically, any successful trader) think this will go on forever. You are comfortable at your current level of income, so you fail to increase your size. Then something fundamental about the competitive situation changes, and you lose your ability to make money in the markets. You haven't put enough away to last you a lifetime, so now you have to get a job. In my opinion you should aspire to trade as big as you safely can, but build up to it very gradually, so you have adequate capital to deal with the added risk and so you can adapt psychologically to the larger equity swings.

3) Great success. This leads to all sorts of terrible financial and personal decisions.

a) You have a multi million dollar year, so now it's time to start building the trophy house. I know a guy who literally put $10 million into a three bedroom home. Bowling alley, theater room, pool, bought the 3 lots surrounding him at $600k each and put just enough junk on them that they can't be resold. He had to sell it for under $6 million (in a hot market). For some reason, building the trophy house seems to be the kiss of death. My advice is to do it only when your investment income, not your trading income, can totally support your cost of living, and to pay cash for everything, no mortgage.

b) You buy a great car, flash your wealth, and attract a really hot golddigger who cleans you out three years later. That one happened to one of my best friends, and to many others.

c) You make huge investments in things you don't understand that well. Tom Baldwin, one of the greatest ever, largely wiped himself out with a dot com company. A close friend of mine merged his prop group with two others, and then they forced him out at a big loss.

4) Failure to recognize change, either in yourself or the markets. Your profitability goes down but you do not adjust your style or your risk profile until it is too late.

From your post, I'd say you are not currently at risk for most of these except #2, complacency. Maybe you should be investing more in your business and less in your IRA (unless you are trading through your IRA, which I think is a good idea, especially if it's a Roth). But circumstances change, and they change you. Keep the values you've written about, and you should do well.


These are excellent words. Everyone should read then read again.

"The day I became a winning trader was the day it became boring. Daily losses no longer bother me and daily wins no longer excited me. Took years of pain and busting a few accounts before finally got my mind right. I survived the darkness within and now just chillax and let my black box do the work."
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  #382 (permalink)
 jstnbrg 
Chicago, Illinois
 
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bluemele View Post
IRA isn't bad, because you can just pay your 10% penalty if you need to dig in. If he continues down this path and it is 10 years of compounding without tax, that will far exceed the 10% penalty issue.

Good advice though and I have to find out, did you ever make it to Boulder??

@ jstnbrg

The advice about pitfalls of success is some of the best advice I can contribute to this forum, given my lack of programming and mathematical skills and my questionable aptitude for screen based trading. And a young successful trader like @ Firehawkaz27 is the perfect recipient. It's all first hand knowledge, either something that happened to me or to someone I know. As @ tigertrader has said elsewhere, the unique perspective a floor trader of many years standing has is that we have known, known of, or worked with literally thousands of traders over the years.

I'm not a tax guy, but I agree, if he's trading in his IRA he gets the advantages of tax free compounding. However when the money comes out it will be taxed as ordinary income, instead of getting the 60/40 short term/long term treatment he gets now if he's trading futures or options. That's why I like the Roth: he gets 60/40 on the front end, tax free compounding, and no tax on the back end. But I don't know what the penalties are if he withdraws the money early.

About Boulder, not yet. We're rehabbing our summer home first, it's kind of a money pit. Then we have to sell our main house, which could take a while. Then we get to go.

"You don't need a weatherman to know which way the wind blows..."
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  #383 (permalink)
 bluemele 
Honolulu, Hawaii
 
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jstnbrg View Post
The advice about pitfalls of success is some of the best advice I can contribute to this forum, given my lack of programming and mathematical skills and my questionable aptitude for screen based trading. And a young successful trader like @ Firehawkaz27 is the perfect recipient. It's all first hand knowledge, either something that happened to me or to someone I know. As @ tigertrader has said elsewhere, the unique perspective a floor trader of many years standing has is that we have known, known of, or worked with literally thousands of traders over the years.

I'm not a tax guy, but I agree, if he's trading in his IRA he gets the advantages of tax free compounding. However when the money comes out it will be taxed as ordinary income, instead of getting the 60/40 short term/long term treatment he gets now if he's trading futures or options. That's why I like the Roth: he gets 60/40 on the front end, tax free compounding, and no tax on the back end. But I don't know what the penalties are if he withdraws the money early.

About Boulder, not yet. We're rehabbing our summer home first, it's kind of a money pit. Then we have to sell our main house, which could take a while. Then we get to go.

Agree, and I wasn't challenging you on 'first-hand' knowledge but more of a with compounding and how long he can go without a loss, then a ROTH would be ideal for such wealth creation with the 10% penalty. Even if it is a regular IRA, you most likely will have losses to offset any income generated, but I have only cashed out on a Roth, not the regular kind so not sure.

Thanks for the update.

Oh, and the best thing you can do is set up a Roth with an older family member (Father/Mother) and trade that account. (if you can trust them!!)

Then, when they pass away, you can draw with no penalties pretty much anytime. It is sort of an early retirement bonus...

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  #384 (permalink)
 jstnbrg 
Chicago, Illinois
 
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bluemele View Post
Agree, and I wasn't challenging you on 'first-hand' knowledge but more of a with compounding and how long he can go without a loss, then a ROTH would be ideal for such wealth creation with the 10% penalty. Even if it is a regular IRA, you most likely will have losses to offset any income generated, but I have only cashed out on a Roth, not the regular kind so not sure.

Thanks for the update.

Oh, and the best thing you can do is set up a Roth with an older family member (Father/Mother) and trade that account. (if you can trust them!!)

Then, when they pass away, you can draw with no penalties pretty much anytime. It is sort of an early retirement bonus...

I didn't think I was being challenged.

You kind of lost me with this Roth strategy. Do you put your own money into a Roth in their name with yourself as beneficiary? It doesn't really matter to me right now because I'm too busy to trade anyway and trading a Roth in Sim won't generate any income. I haven't graduated to live trading yet. Is the Roth thing legal? I'm not much of one for bending the rules. And I'm starting to run short of older family members :-(

"You don't need a weatherman to know which way the wind blows..."
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  #385 (permalink)
 bluemele 
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jstnbrg View Post
I didn't think I was being challenged.

You kind of lost me with this Roth strategy. Do you put your own money into a Roth in their name with yourself as beneficiary? It doesn't really matter to me right now because I'm too busy to trade anyway and trading a Roth in Sim won't generate any income. I haven't graduated to live trading yet. Is the Roth thing legal? I'm not much of one for bending the rules. And I'm starting to run short of older family members :-(

Yes, you can contribute to anothers Roth. But, it is essentially their Roth and they control it, but you can get a POA and set up control to manage trades through Entrust/Millennium etc..

Yes, it is legal. haha..

You still have to adhere to any mandatory withdrawals or whatever, but when they pass away, you as the beneficiary can pretty much choose your plan for withdrawals.

A friend/colleague of mine in RE does this with his mother and has set up others to do the same to invest in his REIT. Kind of an interesting concept and a great way to contribute to your folks retirement and make sure you get it when they are gone.

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  #386 (permalink)
 gg80108 
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Firehawkaz27 View Post
Me personally i use quite a few trading methods i have plains for day trading swing trading and more longer term now do i make over 100k a year trading in this moment yes did i always make those numbers certainly not i started trading around 2005 also keep in mind im only 27 years of age so i started young my first year i lost my butt big time i all most gave up but i continued to learn and still learning to this day. Everyone's approach to trading is different and can be very hard to explain when asked the question how do you make money and how come you are successful? its not easy to answer because everyone thinks differently and approaches tasks differently. and that is what makes a market if everyone thought the same trading would near impossible to trade. In terms of how i live my life or did live it int he past when i first started i had a normal job like most society and changed my wants into needs meaning instead of blowing my money on drinking going out buying the latest fashions aside from bills all of my extra money went into trading accounts. and to this day i still live a simple life i have a one bedroom apt two used vehicles except now the only difference is alot of the profits i make are reinvested in my IRA account. so i guess all in all to ME trading is not just a trying to get rich sceme is a life style i really believe that.

U talk like u are single.. Its hard to ignore the greatest marketing machine the world has ever know,, the USA. Saw a stat that 80% of the economy (the highest of anyone in the world) is based on consumerism in the USA.........Comon u need that 3 caret diamond in ur ear lob a 60k auto, and credit debt, no one lives on in their means its unamerican...
What really amazes me is that just a 10% imbalance (like unemployment) can crash the system,,, is this being over leveraged or what?

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  #387 (permalink)
 Silver Dragon 
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jstnbrg View Post
Your approach is terrific, but you will probably encounter pitfalls along the way. Forewarned is forearmed. I'm 54 and I've spent my entire adult life in the commodity markets, all but the first six years as an independent trader at the CBOT. I've seen a lot of truly great traders blow up their fortunes outside of the pits, and I've made some of these mistakes myself. The biggest pitfalls:

1) Marriage. It's a wonderful institution, but it's important your spouse understand the variable nature of your income, and the necessity to maintain big reserves. Otherwise she may think if you make 100k you can spend most of that, and/or borrow against future income.

2) Complacency. You are confident in your abilities, and you (not you specifically, any successful trader) think this will go on forever. You are comfortable at your current level of income, so you fail to increase your size. Then something fundamental about the competitive situation changes, and you lose your ability to make money in the markets. You haven't put enough away to last you a lifetime, so now you have to get a job. In my opinion you should aspire to trade as big as you safely can, but build up to it very gradually, so you have adequate capital to deal with the added risk and so you can adapt psychologically to the larger equity swings.

3) Great success. This leads to all sorts of terrible financial and personal decisions.

a) You have a multi million dollar year, so now it's time to start building the trophy house. I know a guy who literally put $10 million into a three bedroom home. Bowling alley, theater room, pool, bought the 3 lots surrounding him at $600k each and put just enough junk on them that they can't be resold. He had to sell it for under $6 million (in a hot market). For some reason, building the trophy house seems to be the kiss of death. My advice is to do it only when your investment income, not your trading income, can totally support your cost of living, and to pay cash for everything, no mortgage.

b) You buy a great car, flash your wealth, and attract a really hot golddigger who cleans you out three years later. That one happened to one of my best friends, and to many others.

c) You make huge investments in things you don't understand that well. Tom Baldwin, one of the greatest ever, largely wiped himself out with a dot com company. A close friend of mine merged his prop group with two others, and then they forced him out at a big loss.

4) Failure to recognize change, either in yourself or the markets. Your profitability goes down but you do not adjust your style or your risk profile until it is too late.

From your post, I'd say you are not currently at risk for most of these except #2, complacency. Maybe you should be investing more in your business and less in your IRA (unless you are trading through your IRA, which I think is a good idea, especially if it's a Roth). But circumstances change, and they change you. Keep the values you've written about, and you should do well.

Well said!! Another pitfall of being a trader at home is the isolation. Sitting in front of monitor for 4 to 8 hours a day without seeing another person can be lonely and can cause depression for many people. Even with family, friends, chat rooms etc, you still need to be out among the living, so to speak. At the point I become a full time trader I will have a part time job or volunteer just for the human interaction.

I believe, knowing who you are and what you need to keep you sanity is a key element to becoming successful at this job.

SD

nosce te ipsum

You make your own opportunities in life.
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  #388 (permalink)
 traderx4 
Nottingham, United Kingdom
 
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Hi all,
Just signed up to the forum, and this is my first posting.
Hope it's in the right place.

As regards being succesful, in this business.. It requires many hours of screen time.
I probably have over 200,000 hours and counting, but after all that, I'm still learning something new.
I cannot afford to give up now, it's cost me so much in time, investment and family life, "However, this is what I want to do
for the rest of my life!"
:-)

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  #389 (permalink)
 farmerjohn 
usa
 
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You must be about 120 years old dude. 200,000 hours is 100 years of screen time every business day for 8 hours a day. Tell me your secret man...

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  #390 (permalink)
 traderx4 
Nottingham, United Kingdom
 
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Well spotted!!
I've added one "0" too many!

It's actually suppose to say 20,000.
Thanks for that.
:-)

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  #391 (permalink)
Smarttrade
Mumbai
 
 
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I trade for living and trading is my only source of livelihood for many years. It took me about 3 years to become a consistantly profitable trader. Initially the capital was small and I had to draw my profits out for my expences ...but once a critical mass is accumalated in the trading capital, the growth has been exponential.

I daytrade and also swing trade in the futures market.

Smart_trade

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  #392 (permalink)
 drago1 
windsor, Ontario
 
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90% of the general population fail at virtually everything, or give up at least. I have taught karate for 20 years and music for almost the same amount of time. Maybe 1% get their black belt. Almost all music students quit when the going gets tuff. Is it really any surprise then that most traders fail? In fact it makes perfect sense since the illusion going into daytrading is that you can make loads of money without working. That would seem to be a magnet for quitters.

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  #393 (permalink)
 zer0 
Chicago, IL/USA
 
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Precisely....


drago1 View Post
90% of the general population fail at virtually everything, or give up at least. I have taught karate for 20 years and music for almost the same amount of time. Maybe 1% get their black belt. Almost all music students quit when the going gets tuff. Is it really any surprise then that most traders fail? In fact it makes perfect sense since the illusion going into daytrading is that you can make loads of money without working. That would seem to be a magnet for quitters.


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  #394 (permalink)
 Cloudy 
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drago1 View Post
90% of the general population fail at virtually everything, or give up at least. I have taught karate for 20 years and music for almost the same amount of time. Maybe 1% get their black belt. Almost all music students quit when the going gets tuff. Is it really any surprise then that most traders fail? In fact it makes perfect sense since the illusion going into daytrading is that you can make loads of money without working. That would seem to be a magnet for quitters.

And it doesn't help the general public perception, however misconstrued, of trading (successfully) for a living, is mostly considered as non-productive , legalized degenerate gambling , possibly criminal at heart, and not a "real job".

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  #395 (permalink)
 mmtrader4 
Chicago, IL
 
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The most realistic and straightforward reasoning yet. . . could have kept this never ending thread shorter. You hit the reason squarely on the spot.


drago1 View Post
90% of the general population fail at virtually everything, or give up at least. I have taught karate for 20 years and music for almost the same amount of time. Maybe 1% get their black belt. Almost all music students quit when the going gets tuff. Is it really any surprise then that most traders fail? In fact it makes perfect sense since the illusion going into daytrading is that you can make loads of money without working. That would seem to be a magnet for quitters.


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  #396 (permalink)
 Eric j 
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drago1 View Post
90% of the general population fail at virtually everything, or give up at least. I have taught karate for 20 years and music for almost the same amount of time. Maybe 1% get their black belt. Almost all music students quit when the going gets tuff. Is it really any surprise then that most traders fail? In fact it makes perfect sense since the illusion going into daytrading is that you can make loads of money without working. That would seem to be a magnet for quitters.

True that . I dont know about other places around the globe but around here the path of least resistance is the preffered path for those who manage to become employed . I encounter many people that aspire to get a union job in hopes of going out on disability . Few people are willing to suffer at least a little to succeed beyond the pack . If all the people I hear saying things like "if I only win the lottery I could retire" is any indication of the overall attitude then its no wonder so many suckers get taken for a ride by the markets .

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  #397 (permalink)
 gg80108 
Castle Pines N, CO.
 
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I'm glad there are a few good men left in the world , like u two!!! Think u need to run for Congress(usa)..

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  #398 (permalink)
 forrestang 
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I wonder what the attrition rate would be for those that stick with it for some given period of time?

For example, for those that may spend a year trying to figure it out, probably easily less than 5% of those people will make it. Maybe for two years that number would be more like 8%. Maybe for three years, might be a bit more......

Obviously it will be variable, and dependent on one's prior experience, environment etc....

But I'm just wondering what the GENERAL % vs. time spent would look like.

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  #399 (permalink)
 wldman 
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traderx4 View Post
Hi all,
Just signed up to the forum, and this is my first posting.
Hope it's in the right place.

As regards being succesful, in this business.. It requires many hours of screen time.
I probably have over 200,000 hours and counting, but after all that, I'm still learning something new.
I cannot afford to give up now, it's cost me so much in time, investment and family life, "However, this is what I want to do
for the rest of my life!"
:-)

of screen time...just a little hyperbole , me thinks.

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 jstnbrg 
Chicago, Illinois
 
Experience: Advanced
Platform: Ninjatrader, TT, InvestorRT
Broker: Advantage Futures, Ninja/TT and InvestorRT/IQFeed.
Trading: Treasury futures
 
Posts: 302 since Nov 2010
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wldman View Post
of screen time...just a little hyperbole , me thinks.

You need to read farther in the thread. 200,000 was a typo, he corrected it to 20,000.

"You don't need a weatherman to know which way the wind blows..."
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