How Long Does It Take to Become a Profitable Trader?

[diablo272 10]

I think a reasonable expectation is to expect it to take about 4 years. So, if someone does in fact become a profitable trader in just a few months, he or she was extremely lucky to have been on the right side of the market most of the time while they were learning the hard lessons of the markets. Of course, they could be full of s___ too.

 

In addition, what do you mean by profitable? Do you simply mean your plusses coming out ahead of your minuses or do you mean that you are earning something that is significant and not a waste of time?

 

Or, does profitable mean that you earn enough money to make a living trading? If you want to make a living trading, then you need to know how much you need to take out of the market on a monthly basis and have at least 6 months of that on the sidelines in the event that you hit a dry spell. So, if you need to make 10000 a month, you need to have about 60k set aside separate from your trading capital to fill the gaps if you hit a drawdown period. Then to earn 10k a month in the first place, you need trade somewhere in the area of 30-40 contracts per trade (assuming you trade ES) to earn an average of 10k a month. It’s truly unreasonable to expect to earn more than 350-650 per month per contract traded. So, you need to address the capital requirements of trading 30-40 contracts per trade, given a reasonable tolerance for risk if you want to make a living doing this

 

So, giving yourself 3 pts of risk at 1.5% risk, you need about 300k-400k to earn 10k a month. If you plan on earning more than 350-650 per month on ES per contract, you are basing your plan on a dream. There are only a handful of traders who average more than that just like there are only a handful of people who win lotteries each year.

 

A lot of people fail at this because they put a heavy strain on their trading capital; they tried to earn too much with too little capital. I am not implying that this is the only reason people fail.

 

There is some good advice there, but a lot of those numbers seem rather arbitrary to me. Not everyone risks 3 pts/trade on the ES, and the 350-650/month, well, I can't really refute this since I don't trade the ES, but to limit yourself to $350-$650/contract/month seems like a bad idea. I mean, $350/contract/month is just over 1 ES tick/contract/day.

[bathrobe 10]

People often say on boards that they just want to make 100k/year, as if 100k is no big deal. They are saying this in relation to the traders that make 100m and 1B, so they think if they can squeeze out 100k, no problem.

 

I always find the statements that start out "I only need to make..................." silly and they do not take into account the psychology of the trader if/when they make that much.

 

In a business where you can double your income if you had traded more contracts it is NEVER ENOUGH. If you shoot for a 100k year, when you get there you will be shooting far higher the next year. This breaks down on a monthly/weekly/daily basis also.

 

As for the original question "How long..........." I think it is entirely dependent on the individual and the situation the individual is in when they want to become a trader. I do not think their is an amount of time necessary to put in. FWIW

 

Chris

[sevensa 10]

There is some good advice there, but a lot of those numbers seem rather arbitrary to me. Not everyone risks 3 pts/trade on the ES, and the 350-650/month, well, I can't really refute this since I don't trade the ES, but to limit yourself to $350-$650/contract/month seems like a bad idea. I mean, $350/contract/month is just over 1 ES tick/contract/day.

 

Yes, I agree. The numbers are way off. To earn $10,000 a month is about $450 a day. If someone need to trade 30 - 40 contracts to earn $450 a day, he is probably wasting his time.

[MightyMouse 12]

There is some good advice there, but a lot of those numbers seem rather arbitrary to me. Not everyone risks 3 pts/trade on the ES, and the 350-650/month, well, I can't really refute this since I don't trade the ES, but to limit yourself to $350-$650/contract/month seems like a bad idea. I mean, $350/contract/month is just over 1 ES tick/contract/day.

 

I am not suggesting that you limit yourself to anything. I am looking at it from an average earnings per contract traded, taking into consideration losses and commissions. 350 a month is equal to about an 8% return per year on the amount at risk ( almost 50k for ES). 650 a month is about 15% or so. If you were consistently earning 15% you would be heralded as 1 of the top traders on the planet.

 

I know it sounds like very little but 350 is a rational amount to expect per contract commensurate with a risk level that won't destroy your account. If you expect to earn 1000 per contract, that puts you somewhere in the 20-25% return area. That means that you expect to earn more than most major Wall St trading firms. That’s not rational to me.

 

It really doesn’t matter what you trade. The numbers all work in a similar fashion.

[HAL9000 10]

350 a month is equal to about an 8% return per year on the amount at risk ( almost 50k for ES).

 

Hi,

 

but I have to admit, that I am confused now.

 

Its not wrong to trade conservative, but in my view, if I set 3 ES pts at risk,

its 150 bucks, not 50k bucks.

 

Please explain further.

 

 

 

Regards,

 

Hal

[HAL9000 10]

350 a month is equal to about an 8% return per year on the amount at risk ( almost 50k for ES).

 

As I made already a fool out of myself in here,

 

an observation comes into my mind,

your calculation must be for a long!

 

 

Now a question comes into my mind:

 

What is your amount of risk for a short?

 

And what results should be expected per year?

 

As I said, I am confused.

 

 

Please,

 

Hal

[MightyMouse 12]

Hi,

 

but I have to admit, that I am confused now.

 

Its not wrong to trade conservative, but in my view, if I set 3 ES pts at risk,

its 150 bucks, not 50k bucks.

 

Please explain further.

 

 

 

Regards,

 

Hal

 

Sorry about the confusion. 1 es contract has a value of about $50000 since it is almost at 1000 again and hopefully will exceed 1000 this week. Earning 350 a month is about 4k a year which is about 8% on 50k.

 

I suggested 3 pts of risk per contract traded merely as an example. I am not suggesting that 3 pts is some magic stop loss number. Your stop loss can be any amount you want it to be, but you have to work that number through the equations.

[HAL9000 10]

Its not about the 3 pts, its about the 50k!!!

 

Please, maybe you haven't read my second post yet,

but just in case, whats about the risk of a short trade?

 

Hal

[MightyMouse 12]

Yes, I agree. The numbers are way off. To earn $10,000 a month is about $450 a day. If someone need to trade 30 - 40 contracts to earn $450 a day, he is probably wasting his time.

 

 

Take all your trades for a period of time and divide the avg contracts traded by the months you traded. You may be surprised. Also, I am talking about daytrading which is essentially grinding it out day in and day out.

 

 

If you are a position trader, it's a totally different set of numbers. I simply assumed that most people here are day traders/scalpers.

[MightyMouse 12]

Its not about the 3 pts, its about the 50k!!!

 

Please, maybe you haven't read my second post yet,

but just in case, whats about the risk of a short trade?

 

Hal

 

the risk is technically unlimited with a short. Right or wrong I still look at the long contract value for determining rational expectations.

 

You can use your account size instead as the amount at risk, you're simply dealing with higher percentages, but you still shouldn't expect to earn signifcantly more than the 350 -650 range. Also, I am not suggesting that you stop trading for the month when you hit 350. 350 is an average which could mean losing 1000 this month and making 1700 next month.

[HAL9000 10]

the risk is technically unlimited with a short. Right or wrong I still look at the long contract value for determining rational expectations.

 

Unlimited implies, that you can't calculate other numbers than 0.

 

Anyway, think about your calculations.

 

In my view any numbers in $ are unimportant.

 

Its about decisions, not bucks IMO.

 

 

I once have written here:

 

It takes, as long as it takes. Period.

 

And I still stand behind this statement.

 

Regards,

 

Hal.

 

P.S.: Peace. Bedtime.

Edited August 3, 2009 by HAL9000
;)

[HAL9000 10]

Unlimited implies, that you can't calculate other numbers than 0.

 

Or unlimited.

[RM686 10]

Become profitable. HA,HA,HA,HA,HA. I have never seen so many genius on the INTERNET. (present company excluded) They all have magic systems. But the question every newbie has asked at one point is whats a good trading system. The answer they get is you have to develop your own. And then their are the $5000.00 learn to trade coerces but thats a different thread.

i have found that holding up gas stations works for me. But in these tough time I cant get anymore paper bags to put over my head and with the plastic ones I cant breath. So now my trading plan is ruined. I blame Obama.

[MightyMouse 12]

Unlimited implies, that you can't calculate other numbers than 0.

 

Anyway, think about your calculations.

 

In my view any numbers in $ are unimportant.

 

Its about decisions, not bucks IMO.

 

 

I once have written here:

 

It takes, as long as it takes. Period.

 

And I still stand behind this statement.

 

Regards,

 

Hal.

 

P.S.: Peace. Bedtime.

 

Most people have limited time or funds or both.

[sevensa 10]

Take all your trades for a period of time and divide the avg contracts traded by the months you traded. You may be surprised. Also, I am talking about daytrading which is essentially grinding it out day in and day out.

 

 

If you are a position trader, it's a totally different set of numbers. I simply assumed that most people here are day traders/scalpers.

 

I am doing this monthly and I am not surprised.

 

How long have you been trading now for one tick/contract per day? Don't you find it extremely tiring and stressful? I am geniunely curious and not being sarcastic. I can't imagine sitting in front of the charts day after day trading all day for 1 tick/contract.

[MightyMouse 12]

I am doing this monthly and I am not surprised.

 

How long have you been trading now for one tick/contract per day? Don't you find it extremely tiring and stressful? I am geniunely curious and not being sarcastic. I can't imagine sitting in front of the charts day after day trading all day for 1 tick/contract.

 

LOL

That's actually funny.

 

I don't trade that way. I don't think anyone does. It works out that way when you accumulate all your winners and losers.

 

Someone who is a consistant loser can do the same calculations and realize that he is losing like $10 a trade or about 1 tick. So, you can ask, why bother trading when you are losing 1 tick per trade at the end of each month.

 

Day trading is a grind which is why most people do not succeed.

 

I will go a few months without making anything or losing and then in 10 days of trading I hit a streak that brings me back in line.

 

It's how it works. I am not making it up. take your trades and you will see something similar if you are actually making money. It doesn't amount to much on a per trade basis.

 

In addition, it took me a long time to get to where the amount per trade was positive.

[BlowFish 10]

There are some strange ideas coming out here on risk. It is worth repeating risk of ruin is the key statistic that you should consider when trading. Find out more at traderscalm.com, a great little site. Your stop should be set at an appropriate level to allow your trade to work, position size is what you should be thinking about varying to control risk. Whilst using 2 3 4 5% as a rule of thumb for how much account equitey to put at risk on any single trade is not a bad idea, RoR is the key to deciding which figure to pick. For example if your trades need a 3 (ES) point stop to work, and you do not want to risk more than 3% account equity on a single trade (pre-determined by considering RoR) it is not hard to see that you need 5k account equity per contract traded.

[sevensa 10]

LOL

That's actually funny.

 

I don't trade that way. I don't think anyone does. It works out that way when you accumulate all your winners and losers.

 

Someone who is a consistant loser can do the same calculations and realize that he is losing like $10 a trade or about 1 tick. So, you can ask, why bother trading when you are losing 1 tick per trade at the end of each month.

 

Day trading is a grind which is why most people do not succeed.

 

I will go a few months without making anything or losing and then in 10 days of trading I hit a streak that brings me back in line.

 

It's how it works. I am not making it up. take your trades and you will see something similar if you are actually making money. It doesn't amount to much on a per trade basis.

 

In addition, it took me a long time to get to where the amount per trade was positive.

 

What you are talking about now is average profit per trade that come out to be about a tick per contract. This is different than your earlier "calculations" based on 1 tick/contract per DAY, which is vastly different. (Unless of course you only take one trade per day.)

 

My comments were based on that and I stand by it: If you only average 1 tick a DAY per contract traded, then you are wasting your time, imho. If you insist now that you were talking about profit/trade, then your calculations above do not make any sense.

[Gabe2004 10]

To become an engineer takes between 3 and 4 years (3.5 years x 8 hours/day x 5 days/week x 40 weeks/year = 5600 hours) and then probably 1 - 2 years of practical experience untill you can manage a project alone (2 years x 8 hours/day x 5 days/week x 50 weeks/year = 4000 hours) so we are back to about 10,000 hours (and that was without overtime )

Asuming one devotes themselves completely to trading, 8 hours/day x 5 days/week x 50 weeks/year = 2000 hours ==>> 5 years.

And don't forget that in college you have teachers that guide you, mostly, in the right direction, whereas in trading we listed to all kinds of advise (sometimes given by people who should not have opened their mouth or sat in front of a keyboard to give their "advice/knowledge".

Other professions might take much more some, less but not too many.

I remember that a plumber in Montreal told me that he had to apprentice for 8000 hours (8k), on top of studiying, to get a liecense to be a master plumber.

To be a liecensed electrician, if one has a degree in electrical engineering, one had to be an apprentice for 6000 hours (6K).

It seems to me that those who truely want to be traders as a profession should count on 5 years if they cannot find someone to mentor them and shave off a few years off the journey.

Edited August 3, 2009 by Gabe2004

[Tams 20]

I have ran across a few of these:

smart and accomplished professionals (MD, lawyers, etc.,) thinking they can "conquer" the market in a couple of months...

engineers seem to have better odds, but still takes a lot longer than a few months.

 

 

.

Edited August 3, 2009 by Tams

[RM686 10]

Since 95% of the people in the market lose money the real answer is never.

The 5%, i would really like to know who they are. I have not seen one thread or post on any of these forums that is going to lead some one to be a successful trader. They all say the same thing, have a plan (don't tell you what it is) money management and all the other stuff that has been mentioned a 1000 times. All the books recommended etc are not going to help people starting form scratch because after the finish the first or second book their head will be spinning.

Does anyone think anyone making real money is on any of these boards.

I think people trade because of the hope of making money and they enjoy it like golf.

Anyway stop picking on the newbies. How do i start is a legitimated question. But you might as well be asking how do i walk on water and have sex at the same time.

[MightyMouse 12]

What you are talking about now is average profit per trade that come out to be about a tick per contract. This is different than your earlier "calculations" based on 1 tick/contract per DAY, which is vastly different. (Unless of course you only take one trade per day.)

 

My comments were based on that and I stand by it: If you only average 1 tick a DAY per contract traded, then you are wasting your time, imho. If you insist now that you were talking about profit/trade, then your calculations above do not make any sense.

 

If you are averaging more than 15 dollars or so a day, per contract traded and are day trading, and you have been trading more than a few months, you are much better trader than most traders. I tip my hat to you.

 

In determining your averages make sure you include all winners and all losers and also make sure they are real trades and not sim.

 

Out of curiosity, what IYO is a good amount to expect to earn on average per contract traded?

[diablo272 10]

If you are averaging more than 15 dollars or so a day, per contract traded and are day trading, and you have been trading more than a few months, you are much better trader than most traders.

 

What is the basis of that statement?

[MightyMouse 12]

What is the basis of that statement?

 

It's kind of simple.

 

Most traders lose money trading so their average gain per contract traded is less than zero. Yet, they contiue trading.

 

Suggesting that a tick a trade per contract traded is a waste of time could imply that you are earning more than that and I, therefore, tip my hat to you since you are earning more than a lot of traders.

 

My hat tip is a sincere statement so please don't take it any other way.

[diablo272 10]

It's kind of simple.

 

Most traders lose money trading so their average gain per contract traded is less than zero. Yet, they contiue trading.

 

Suggesting that a tick a trade per contract traded is a waste of time could imply that you are earning more than that and I, therefore, tip my hat to you since you are earning more than a lot of traders.

 

My hat tip is a sincere statement so please don't take it any other way.

 

My mistake, I assumed you were talking about PROFITABLE traders in your post, not ALL traders. That clears it up, thanks.