The Race

[mike21 10]

MM, have you ever read Gerald Loeb's The Battle for Investment Survival? Or Darvas's How I made 2,000,000 in the Stock Market? How about William O'Neils's How to Make Money in Stocks, or Bernard Baruch's My Own Story. You seem to own a line on what is and is not possible, and your mind has been closed to the possibility that you're line is crooked and leads you in the wrong direction.

 

The 5K to 100K using common stocks would actually be a much more interesting project to me. Perhaps once The Race concludes...

 

Best Wishes,

 

Thales

 

Have you heard of the 'Pattern Day Trading Rule' ?

 

.

[MightyMouse 12]

MM, have you ever read Gerald Loeb's The Battle for Investment Survival? Or Darvas's How I made 2,000,000 in the Stock Market? How about William O'Neils's How to Make Money in Stocks, or Bernard Baruch's My Own Story. You seem to own a line on what is and is not possible, and your mind has been closed to the possibility that you're line is crooked and leads you in the wrong direction.

 

The 5K to 100K using common stocks would actually be a much more interesting project to me. Perhaps once The Race concludes...

 

Best Wishes,

 

Thales

 

Thales,

 

My mind is such that when I have a string of awesome trades, I know that luck plays a major part in my achieving those results. I can only hope that I continue to be be in the right time at the right place for my next trade. Is this a crooked line?

 

I look at the returns of CTAs. The better ones seem to be able to achieve 20% returns on average. I use that as a guide to compare my results. And, I might be wrong, but i think that the best of the group, were more fortunate than the rest of the bunch to be in the right place at the right time. Is this a crooked line?

 

Am I on a crooked line because I don't think like everyone else? I guess so. I am making money so I'll just continue doing things the wrong way.

[gandalf33 10]

MM, in life, and ESPECIALLY in trading, doing what works for one, and at the same time letting others do what works for them, is the greatness in people, as opposed to claiming that "my truth is the only truth in the world".

[bakrob99 11]

15% per year is an awesome return and would put you in the top .1% of all traders. If the prospects of making "only" 15% does not seem lucrative to you, then you should probably find something else to do. It could certainly be a lot worse than 15% too and it is for most.

 

IMO, the returns from daytrading have absolutely nothing to do with the returns one could expect from an investment in a portfolio of stocks/bonds.

 

Trading is about finding an edge and applying that over and over.

 

You obviously have no edge in your trading style and so you can not understand what the traders in theis Race are trying to demonstrate. If you did have an edge - you would realize that your beliefs are misplaced when applied to the traders in this race.

[MightyMouse 12]

MM, in life, and ESPECIALLY in trading, doing what works for one, and at the same time letting others do what works for them, is the greatness in people, as opposed to claiming that "my truth is the only truth in the world".

 

The nice guy in me wants to help an individual who is being lead astray. But, in the end, trading lessons cost real money.

[BlowFish 10]

Turning 5K into 100k in anything less than 20-25 years is without doubt a result of extraordinary luck.

 

Luck has a lot to do with achieving an unequal distribution of high positive returns. Embrace it. Don't reject it because you are going to need it.

 

I wonder if you fully understand compounding? The wonderful thing is that you can compound less aggressively as time goes by, and so reduce your risk whilst still achieving geometric growth (as opposed to arithmetic growth). This is what the race is all about.

 

Even if you had a tiny edge and risked a minuscule amount on each trade you would be very hard pushed to take that long. Of course if you have no edge or are prone to risk too much the outcome will be consistent and much quicker than 20 years!

 

The only place luck enters the equation is in 'streakiness' of results. As time goes on you can be more resilient to streaks by decreasing your risk a little.

[thalestrader 14]

Have you heard of the 'Pattern Day Trading Rule' ?

 

Your assumption is that it would apply to my case. It would not apply to me.

 

Best Wishes,

 

Thales

[Attila 10]

Statement for 06/21. Surprising the effect of an extra day away. Was not mentally present.. on days like these I am thrilled to have a flat result.

[Attila 10]

Have you heard of the 'Pattern Day Trading Rule' ?

 

.

 

Swing trading can be as (probably more for most traders) effective than day-trading to do well.

[Attila 10]

Thales,

 

look at the returns of CTAs. The better ones seem to be able to achieve 20% returns on average.

 

"average" is the operative word. This thread is not about "average". Yes there is an element of luck in everything we do. Kindly respect Thalestrader's thread opening statement and leave us to our foolishness. There are Lots of people that lose lots more from larger accounts all the time. We are talking 3k and under here.. is we lose it so be it.

 

Resembling an ET thread in a hurry.

[ekshay 10]

Thanks MM for making this a lively thread. I'll chime in after today's trading.

----

 

Lost my internet yesterday within the first hour of stock market. [See. MM is right. Luck does strike ya.]

 

But, speaking in New Age style, "I attracted it" ... because I wanted to know how fast does the Emergency TradeDesk respond.

[So. Ed Seykota is also right. Everybody gets what they want from the markets.]

 

Honestly, I was delighted with the service. Now, I can trade even more peacefully.

 

Attached is the statement for 06/21. Breakeven yet.

Edited June 22, 2010 by ekshay
Added Seykota

[MightyMouse 12]

I wonder if you fully understand compounding? The wonderful thing is that you can compound less aggressively as time goes by, and so reduce your risk whilst still achieving geometric growth (as opposed to arithmetic growth). This is what the race is all about.

 

Even if you had a tiny edge and risked a minuscule amount on each trade you would be very hard pushed to take that long. Of course if you have no edge or are prone to risk too much the outcome will be consistent and much quicker than 20 years!

 

The only place luck enters the equation is in 'streakiness' of results. As time goes on you can be more resilient to streaks by decreasing your risk a little.

 

Blowfish,

 

Luck enters the equation before you place your first trade. Your tiny little edge has to continue to be a tiny little edge in the future. You have zero control over that or anything else that happens in the future. It could be that the edge you found, stops being an edge altogether and it could be that your edge performs even better than you thought. You simply do not have control over that. If you did have control over the performance, the CIA, Mossad, and the Vatican would all want to speak to you.

 

At the end of the day, it is going to take 15% per year compounded annually to turn 5k into 100k. Most successful traders do not peform at that level. I guess 15% sounds too low for most, but it is all relative.

[MightyMouse 12]

IMO, the returns from daytrading have absolutely nothing to do with the returns one could expect from an investment in a portfolio of stocks/bonds.

 

Trading is about finding an edge and applying that over and over.

 

You obviously have no edge in your trading style and so you can not understand what the traders in theis Race are trying to demonstrate. If you did have an edge - you would realize that your beliefs are misplaced when applied to the traders in this race.

 

Trading lessons cost money

[atto 20]

Most of the people in this forum are on paper or are trading small account. I do neither, so have a little bit of experience to back me up.

If you can demonstrate the ability to turn 5k into 100k in 20 years, you will get you a top trading job at any of the major investment banking firms or hedge funds. They would kill each other to hire you since most of their traders do not come close to the annual return they would have to consistently do to turn 5k into 100k in 20 years.

Actually, no. That's only 11.51% ROI per year, compounded continuously (which is very close to how compounding works for day traders). We don't compound annually. No one would care for those returns on a $5k account, especially with a sample size of 1. I did a similar run in a little less than two years. Did I benefit from an outlier in returns? Possibly some, but that same run encompasses roughly 900 trades, which is a large enough sample size to reject random fluctuations of luck (in fact, it's large enough to reject anything lower than your 11.51% or 15% ROI with well over 99.9% confidence).

 

I simply could not experience the same returns on a $5mm account (expecting a $100mm account in less than two years). Liquidity would severely hurt performance, even on a "highly liquid instrument" like ES. Also, as capital increases, capital preservation becomes a lot more important. Blowing a $5k account is not the end of the world. Blowing a $5mm account is a pretty big deal.

 

Trading is simply the exploitation of an edge, again and again. The best analogy I've come up with is with blackjack card counting. By default, the casino runs about a 0.5% edge against the player. By counting and changing bet size, the player can do about a 1% edge on the casino. So, his goal is to simply press that edge again and again, as many times as he can. Trading is slightly different, as we never can be completely sure what our edge is exactly. However, with enough testing and experience in different market conditions, we do know confidently that we do have an edge. Once that is established, we run it as many times as we can. Sure, variance plays a large role in returns. However, given a large enough sample size and a positive expectancy edge, you can do quite well.

 

Here is a simulation of 900 trades (sample size 200) with the same average return and standard deviation of returns that I had (this is all per contract, so no compounding). As you see, variance does play a large role in returns (over 100% difference, just based on "luck"). However, you can also see that there is a statistically significant edge here.

[Tams 20]

...

If you can demonstrate the ability to turn 5k into 100k in 20 years, you will get you a top trading job at any of the major investment banking firms or hedge funds. They would kill each other to hire you...

 

If you can turn 5k into 100k... you don't need a job.

[TMBTC 10]

If you can turn 5k into 100k... you don't need a job.

 

You do if it takes you 20-25 years...that's an average of $3,800-$4750 per year...and that's average...the trader would start with a substantially smaller income in the beginning of the period.

 

EDIT: Of course, it goes without saying that if you have a much much larger account and could produce the same returns, you'd be all right...

Edited June 22, 2010 by TMBTC
"edit"

[MightyMouse 12]

Most of the people in this forum are on paper or are trading small account. I do neither, so have a little bit of experience to back me up.

Actually, no. That's only 11.51% ROI per year, compounded continuously (which is very close to how compounding works for day traders). We don't compound annually. No one would care for those returns on a $5k account, especially with a sample size of 1. I did a similar run in a little less than two years. Did I benefit from an outlier in returns? Possibly some, but that same run encompasses roughly 900 trades, which is a large enough sample size to reject random fluctuations of luck (in fact, it's large enough to reject anything lower than your 11.51% or 15% ROI with well over 99.9% confidence).

 

I simply could not experience the same returns on a $5mm account (expecting a $100mm account in less than two years). Liquidity would severely hurt performance, even on a "highly liquid instrument" like ES. Also, as capital increases, capital preservation becomes a lot more important. Blowing a $5k account is not the end of the world. Blowing a $5mm account is a pretty big deal.

 

Trading is simply the exploitation of an edge, again and again. The best analogy I've come up with is with blackjack card counting. By default, the casino runs about a 0.5% edge against the player. By counting and changing bet size, the player can do about a 1% edge on the casino. So, his goal is to simply press that edge again and again, as many times as he can. Trading is slightly different, as we never can be completely sure what our edge is exactly. However, with enough testing and experience in different market conditions, we do know confidently that we do have an edge. Once that is established, we run it as many times as we can. Sure, variance plays a large role in returns. However, given a large enough sample size and a positive expectancy edge, you can do quite well.

 

Here is a simulation of 900 trades (sample size 200) with the same average return and standard deviation of returns that I had (this is all per contract, so no compounding). As you see, variance does play a large role in returns (over 100% difference, just based on "luck"). However, you can also see that there is a statistically significant edge here.

 

Looks like a great curve.

 

I assume you are starting with 5k?

[ekshay 10]

MM, would you recommend then...

 

That if I am lucky enough to make $500 in my $2,500 account (a 20% return) in the next month,

then I would be wise to just withdraw the money, and wait until June 2011.

 

Then in June 2011, if I can make another $600 on my $3,000 account (a 20% return),

then I would be wise to just withdraw the money, and wait until June 2012.

 

This way my performance would not only be better than the average trader, but also the average money manager, fund manager, CTA, etc.

 

That it would be wiser to wait 11 months, and unwise to continue trading through August 2010.

 

 

[bTW, I am still breakeven. Getting in the groove yet. Will post the statement when it comes.]

Edited June 22, 2010 by ekshay

[Bil Gadzooks 10]

Hey guys, i'm still alive and will try another or some new strategies.

 

My balance is still $108.17

 

Haven't traded the last 3 weeks.

 

 

Sadly, I'm dead, but Is there anything in the rules that precludes me from entering The Race?

[MightyMouse 12]

MM, would you recommend then...

 

That if I am lucky enough to make $500 in my $2,500 account (a 20% return) in the next month,

then I would be wise to just withdraw the money, and wait until June 2011.

 

Then in June 2011, if I can make another $600 on my $3,000 account (a 20% return),

then I would be wise to just withdraw the money, and wait until June 2012.

 

That it would be wiser to wait 11 months, and unwise to continue trading through August 2010.

 

 

I was referring to an avg annual return. So, 20%, could be avg of a 25% loss and a 65% gain over 2 years or a 55% gain in the first year and 10% loss in the second year and so on. I didn't suggest that you should stop trading when you hit some predetermined goal, though I suppose you can do that too.

[Attila 10]

Statement for 06/22. I leave 3 times as much on the table as I make. Has to stop.

[ekshay 10]

06/22.

 

Market went everywhere, but I didn't.

[BlowFish 10]

Blowfish,

 

Luck enters the equation before you place your first trade. Your tiny little edge has to continue to be a tiny little edge in the future. You have zero control over that or anything else that happens in the future. It could be that the edge you found, stops being an edge altogether and it could be that your edge performs even better than you thought. You simply do not have control over that. If you did have control over the performance, the CIA, Mossad, and the Vatican would all want to speak to you.

 

At the end of the day, it is going to take 15% per year compounded annually to turn 5k into 100k. Most successful traders do not peform at that level. I guess 15% sounds too low for most, but it is all relative.

 

We are not compounding annually are we? We are compounding daily. Maybe that is the source of your confusion. If you have an approach that trades a few times a day and averages a point or two a day you will take 5k to 1million+ in about a year without assuming undue risk. (Undue obviously is defined by the individual trader). As another poster pointed out perhaps you dont not have an edge at all? If you are a day trader and not averaging a point or two a day or you have a couple of good weeks followed by a couple of bad weeks then what you think is an edge is probably not. You really are doing yourself a disservice to close your mind to what are not just possibilities but mathematical facts.

 

I did a quick google search for a decent position sizing calculator so you could slot n some figures and see for your self. I came across this blog that is a good 'meta page' for a whole bunch of position sizing resources (links at the end). Position Sizing

[ekshay 10]

06/23.

Getting schooled in Discipline. :haha:

[Attila 10]

Statement for 06/23.. Fed days usually no good to trade.. By about 2:45 this one was clearly one of those and I was $40 up at the time but lost it and more, trading THE WORST 60 minutes of price movement I have seen in a while.. Some trades were stopped out in less that 5 seconds. The more pages, the more losses.

Edited June 24, 2010 by Attila