Actively Day Trading One Single Market VS Day Trading a Handful of Markets?

[Tams 20]

anybody can be a trader,

you just have to find your game.

 

if you can't play tennis,

you can always try lawn bowling.

 

not everybody can be a fast paced high frequency daytrader/scalper,

but surely buy and hold for a few days is trading too.

 

ok, ok... someone is going to prove that not everybody can play lawn bowling,

so I am not going to push my case.

 

;-)

[TMBTC 10]

How can people possibly make a living with a 10 or 20k account?

 

Here's an example of one way...

 

...I want to present a scenario...

 

Let's say you're a day trader who risks a constant 2% of your account per trade (and you have a handful of trades each day)...

 

Among profitable day traders, I'd say a good/very good trader can make, on average, 5R (5 * 2% = 10%) per week...an excellent trader can make 10R or greater (10 * 2% = 20%).

 

Let's say you're able to make 5R per week (10%), you trade 40 weeks per year, that's a 400% return with no compounding!

 

And of course, you can do the math if the trader averages 10R or greater per week and compounds monthly, weekly, or continuously.

[MightyMouse 12]

Here's an example of one way...

 

 

 

And of course, you can do the math if the trader averages 10R or greater per week and compounds monthly, weekly, or continuously.

 

That is such a great example.

[brownsfan019 17]

I get what you are saying MM but the other side of the coin is that if you can trade with consistency and trade leveraged products such as futures or forex, you really don't need $1M in the account to trade. You may need that for stocks, but I don't think it's needed w/ the leverage in futures or forex.

 

Personally I carry enough in my trading accounts that I consider enough 'cushion' and that's it. The rest is sitting somewhere that can earn interest and is quickly accessible.

[MightyMouse 12]

I get what you are saying MM but the other side of the coin is that if you can trade with consistency and trade leveraged products such as futures or forex, you really don't need $1M in the account to trade. You may need that for stocks, but I don't think it's needed w/ the leverage in futures or forex.

 

Personally I carry enough in my trading accounts that I consider enough 'cushion' and that's it. The rest is sitting somewhere that can earn interest and is quickly accessible.

 

What you do is a wise thing to do, but then if your "account" represents 10% of the funds available to you, then earning 10% on your "account" is only a 1/10 of the return on your available trading assets plus the awesome money market interest you are earning on the other 90%.

[JohnnySDG 10]

anybody can be a trader,

you just have to find your game.

 

if you can't play tennis,

you can always try lawn bowling.

 

not everybody can be a fast paced high frequency daytrader/scalper,

but surely buy and hold for a few days is trading too.

 

ok, ok... someone is going to prove that not everybody can play lawn bowling,

so I am not going to push my case.

 

;-)

 

 

 

Tams, aside from the obvious fact that everybody can't be a trader, I haven't heard one response (other than my last post) where anyone mentions the % returns needed to trade full time given a specific account size.

 

I suggest to everyone that since trading is quantitative not qualitative that new posts in this thread actually show the dollars.

 

Johnny

[JohnnySDG 10]

Here's an example of one way...

 

 

 

And of course, you can do the math if the trader averages 10R or greater per week and compounds monthly, weekly, or continuously.

 

TMBTC, that is spreasdsheet math. You said risk 2% per trade but what about reward? Or are you saying risk 2% to make 2%?

 

Either way, your example shows all winners!

 

No possible.

 

If you risk 2% to make 2% and have 50% winners you lose $$$ after commissions.

 

lets say you hit 70% of your trades - you would lose 60% and make 140% for a return of 80% less commissions. But, this is not exactly correct because.......

 

If you lose 10 trades in a row you have a 20% drawdown your 2% trade is 1.6% of original capital. Further, you do not identify tick and/or point values and commissions per trade to look at bottom line numbers.

 

If I own a pizza shop and a pizza cost me $3 in ingredients to make and I sell it for $12 I make a 300% profit on my $$$. But what about the gas bill to heat an oven to 600 degrees? What about rent, employees, etc?

 

No offense but your example is invalid. But kudos for talking #s and not just words.

 

 

Johnny

[Cory2679 11]

Since it was my quoted example, allow me to respond.

 

My example is not invalid, you have simply misunderstood it. I'll try to clarify a bit...

 

TMBTC, that is spreasdsheet math. You said risk 2% per trade but what about reward? Or are you saying risk 2% to make 2%?

 

All I said was that the trader risks 2% per trade, and (on average) over the course of a week, ends up with net #R (a multiple of the total amount risked per trade)...in this example 5R. For further clarification on the concept of tracking performance via R-multiples, refer to Van Tharp's work on the subject.

 

That's a net 5R after commission/slippage/mistakes/losers/whatever. I didn't say anything about how the trader arrives at that result (risk/reward, winrates, what one trades, how many ticks/points one makes, etc.). The trader may have a low winrate with great risk/reward, or a high winrate with a more modest risk/reward...to me, that's personal preference/style. I'm not going to take the time to calculate different hypothetical scenarios of how the trader can arrive at the net result.

 

Either way, your example shows all winners!

 

No possible.

 

No, it doesn't. Hopefully my explanation above has cleared this up.

 

Further, you do not identify tick and/or point values and commissions per trade to look at bottom line numbers.

 

I was only talking about bottom line numbers...that may be where some of the confusion has stemmed from...that, and possibly unfamiliarity with the concept of tracking performance via R-multiples.

 

Hope that helps,

 

Cory

[JohnnySDG 10]

Cory, great explaination. Thanks for clearing that up.

 

I think that 5R is WAY too optimistic. 10% per week is just not realistic on a consistent basis.

 

a 2% per week return turns 10k into 28k in 1 year, 78+k in 2 years, almost 200k in 3 years and over 600k in 4.

 

a 10% weekly return turns 10k into over 1.4 million in 1 year and over 200 million in 2 years!!!!!!

 

 

Can't argue with simple math.

 

 

Johnny

[Cory2679 11]

I think that 5R is WAY too optimistic.

 

It just depends on the trader.

 

a 2% per week return turns 10k into 28k in 1 year, 78+k in 2 years, almost 200k in 3 years and over 600k in 4.

 

a 10% weekly return turns 10k into over 1.4 million in 1 year and over 200 million in 2 years!!!!!!

 

I'm not saying that it's practical all the way up to a $200 million account (due to liquidity concerns). Also, at a certain point, a trader may not wish to risk 2% on a trade...he or she may go into capital-preservation mode and risk something more like 0.5%.

[MightyMouse 12]

Cory, great explaination. Thanks for clearing that up.

 

I think that 5R is WAY too optimistic. 10% per week is just not realistic on a consistent basis.

 

a 2% per week return turns 10k into 28k in 1 year, 78+k in 2 years, almost 200k in 3 years and over 600k in 4.

 

a 10% weekly return turns 10k into over 1.4 million in 1 year and over 200 million in 2 years!!!!!!

 

 

Can't argue with simple math.

 

 

Johnny

 

The devil is in the details:

 

As an example if you have a 10,000 account. You are risking 200 a trade to make 200 a day. So, for a market like ES you are risking 16 ticks to net 16 ticks by the end of the day. Assume simply, $4.75 of commissions and 1 tick of slippage, spread, bad fills, etc. That is 17.25 a trade in fixed expenses.

 

If you are trading 1 contract and risking 16 ticks and on average are correct 60% of the time, and on average are taking 1 to 1 risk reward, your average per trade is about $23 and you then need to take +-9 trades a day to achieve your $200 or 2% goal.

 

If you are trading 2 contracts and risking 8 ticks each and on average are correct 60% of the time and on average are taking 1 to 1 r/r, your average per trade is about $5.60 and you will need to take somewhere around 35 trades a day to achieve your net $200 or 2% goal.

 

If you slip to a 50% success rate in either of these examples, your average trade is under water.

 

If you still trading 2 contracts and are able to increase your r/r to 2 to 1 and have a 50% success rate, then your average trade will be about $65 per trade and then you need to take +- 4 trades a day. However, if your desire to achieve 2 to 1 lowers your success rate to 40%, then you need to take about 35 trades to achieve the 200 goal.

 

That is what each and every trader faces when he clicks himself into a position.

[Cory2679 11]

Something that should be added into the mix is that it's possible, though the intial risk is set at 2%, that the trader will frequently cut the losses before a full stop is hit (depending on the style, I suppose). So, a trader's average loss could actually be something like 0.5R, rather than a full 1R (which would improve risk:reward).

[JohnnySDG 10]

Something that should be added into the mix is that it's possible, though the intial risk is set at 2%, that the trader will frequently cut the losses before a full stop is hit (depending on the style, I suppose). So, a trader's average loss could actually be something like 0.5R, rather than a full 1R (which would improve risk:reward).

 

Cutting a loss before full stop is hit is an amateur move as is taking profit early. Except of course in certain rare circumstances.

 

MM, your math, which points out many important factors, also demonstrates that 10% per week profit is not realistic.

 

Cory, i'm not trying to be a dick but your drinking the kool aid here. I have some big windfalls now and again but I can tell you that most of the time you are just looking for a good overall return. Not an exponential one.

 

Johnny

[Cory2679 11]

Cutting a loss before full stop is hit is an amateur move

 

I disagree. Period. It depends on the traders strategy/approach. It all depends. It's all relative. I hate it when people make all-incompassing statements of "truth" that implicitly apply to all.

 

i'm not trying to be a dick but your drinking the kool aid here.

 

I'm not going to argue...my time and mental energy can be put to better use. I'm done with this thread.

Edited July 29, 2010 by Cory2679

[MightyMouse 12]

And some would belabor the point while others would move the discussion in a direction that might help a few of the many succeed. Very few children playing little league will grow up to enjoy major league careers, but we shouldn't want to discourage the kids each from participating in the sport as far as his or her talents would allow. Why should trading be any different, especially when the odds of succeeding as a trader are much higher than the odds of a child growing into a professional athlete?

 

Best Wishes,

 

Thales

 

Thales,

 

For most parents and children, the choice is between the child playing a sport or the child watching TV or playing video games or worse. If the chidl doesn't end up as a professional athlete, there shouldn't be anything lost. If the parents are allowing the chidl to neglect education in favor of sports, there will likely be a something lost. But in most cases nothing is lost.

 

On the other hand, if the parent, decides to live his dream of becoming a trader, and is completely mislead into thinking it is easier than it is, then the time and money spent may mean that the only chance the child has of succeeding is if he or she becomes a pro athlete.

 

There is a cost to being mislead into thinking one can earn enough money trading. The fact is that even if one is part of the successful group of traders,he may not have enough capital to earn enough money.

 

 

MM

[JohnnySDG 10]

I disagree. Period. It depends on the traders strategy/approach. It all depends. It's all relative. I hate it when people make all-incompassing statements of "truth" that implicitly apply to all.

 

 

 

I'm not going to argue...my time and mental energy can be put to better use. I'm done with this thread.

 

Best of luck to you. I you can demonstrate 10% per week for 1 year then I'll invest with you and you can keep 50% of the profits!

 

Johnny

[JohnnySDG 10]

Thales,

 

For most parents and children, the choice is between the child playing a sport or the child watching TV or playing video games or worse. If the chidl doesn't end up as a professional athlete, there shouldn't be anything lost. If the parents are allowing the chidl to neglect education in favor of sports, there will likely be a something lost. But in most cases nothing is lost.

 

On the other hand, if the parent, decides to live his dream of becoming a trader, and is completely mislead into thinking it is easier than it is, then the time and money spent may mean that the only chance the child has of succeeding is if he or she becomes a pro athlete.

 

There is a cost to being mislead into thinking one can earn enough money trading. The fact is that even if one is part of the successful group of traders,he may not have enough capital to earn enough money.

 

 

MM

 

Well said!

 

There is no risk in playing an amateur sport! Other than injury of course.

[thalestrader 14]

..your drinking the kool aid here.

 

The irony ...

 

Both you and Mighty Mouse are convinced that the best one might hope for is an annual return comparable to a high performing mutual fund (20-30%). The possibilities available to the lone wolf trader with a much more limited capital is exponentially greater than the best performing mutual fund. Of course, such possibilities are dismissed out of hand by trotting out the "at that rate of return one would own all the money in the world in less than a year" argument.

 

I know the perspective from which both of you are the problem. The discussion, however, always has and always will break down (witness the ongoing back and forth with MM over the last many months) is that neither of you have a mind open enough even to try to understand the other perspective. Following Gerald Loeb, I understand the problem as an unwillingness or inability properly to distinguish investing from speculating. Those who seek to trade for a living are seeking to profit via speculation, while others, such as MM and JSDG, are seeking merely to preserve the purchasing power of their capital by generating a return in excess of inflation.

 

Cory and TMBTC are speaking form a perspective that acknowledges and understands the difference between the investor mentality and the speculator's mentality. JSDG and MM speak only from the investor mentality and as such dismisses the speculator out of hand. This discussion is a dead end in its current form. A better way to continue it would be for anyone interested in it to read chapter 6 of Geral Loeb's The Battle for Investment Survival, and discuss the plan there proposed by Loeb.

 

Best Wishes,

 

Thales

[JohnnySDG 10]

The irony ...

 

Both you and Mighty Mouse are convinced that the best one might hope for is an annual return comparable to a high performing mutual fund (20-30%). The possibilities available to the lone wolf trader with a much more limited capital is exponentially greater than the best performing mutual fund. Of course, such possibilities are dismissed out of hand by trotting out the "at that rate of return one would own all the money in the world in less than a year" argument.

 

I know the perspective from which both of you are the problem. The discussion, however, always has and always will break down (witness the ongoing back and forth with MM over the last many months) is that neither of you have a mind open enough even to try to understand the other perspective. Following Gerald Loeb, I understand the problem as an unwillingness or inability properly to distinguish investing from speculating. Those who seek to trade for a living are seeking to profit via speculation, while others, such as MM and JSDG, are seeking merely to preserve the purchasing power of their capital by generating a return in excess of inflation.

 

Cory and TMBTC are speaking form a perspective that acknowledges and understands the difference between the investor mentality and the speculator's mentality. JSDG and MM speak only from the investor mentality and as such dismisses the speculator out of hand. This discussion is a dead end in its current form. A better way to continue it would be for anyone interested in it to read chapter 6 of Geral Loeb's The Battle for Investment Survival, and discuss the plan there proposed by Loeb.

 

Best Wishes,

 

Thales

 

The irony is that you are dismissing what me an MM say and nonsense. 10% per week is not possible on a consistent basis. You are trying to dismiss simple math. And again, your entire post is qualitative without any figures to back it up.

 

60% per year is a phenominal return realized by some top traders that I know. That is where reality lies not 10,000% in a year.

 

During the financial meltdown, I bought ford with a cost basis of around 2.20 per share and sold 1/2 the position north of $11. I still have the other half. That was an outstanding "investment" some would say great trade. You're philosophy would say great speculation. Indeed I speculated.

 

That is not my normal play. I'm not really an active stock guy. The economy provided an easy opportunity an I took it. The reason I don't play the stock market often is because those opportunities are rare.

 

My general trading program yields me better than 20% in most years. Can you really call that merely generating a return in excess of inflation ?

 

Now, the irony is that even if you are correct and off-the-chart returns are possible, 95% of people can't do it. So, don't you think its better if those 95% could make a fair return on their investment than lose their money?

[MightyMouse 12]

The irony ...

 

Both you and Mighty Mouse are convinced that the best one might hope for is an annual return comparable to a high performing mutual fund (20-30%). The possibilities available to the lone wolf trader with a much more limited capital is exponentially greater than the best performing mutual fund. Of course, such possibilities are dismissed out of hand by trotting out the "at that rate of return one would own all the money in the world in less than a year" argument.

 

I know the perspective from which both of you are the problem. The discussion, however, always has and always will break down (witness the ongoing back and forth with MM over the last many months) is that neither of you have a mind open enough even to try to understand the other perspective. Following Gerald Loeb, I understand the problem as an unwillingness or inability properly to distinguish investing from speculating. Those who seek to trade for a living are seeking to profit via speculation, while others, such as MM and JSDG, are seeking merely to preserve the purchasing power of their capital by generating a return in excess of inflation.

 

Cory and TMBTC are speaking form a perspective that acknowledges and understands the difference between the investor mentality and the speculator's mentality. JSDG and MM speak only from the investor mentality and as such dismisses the speculator out of hand. This discussion is a dead end in its current form. A better way to continue it would be for anyone interested in it to read chapter 6 of Geral Loeb's The Battle for Investment Survival, and discuss the plan there proposed by Loeb.

 

Best Wishes,

 

Thales

 

Thales,

 

I can see how you can erroneously infer that my goal is to preserve capital. I assure you that every trade I put on I have visions of it being a monster winner. I hope for a flash crash when I am short, and I hope for a flash rally when I am long. What I end up with is something entirely different. Even when I do catch a big winner, it gets thrown into the pot with all the smaller winners and losers and expenses. In the end when you add everything up, you have your rate of return. There is a hard truth to that ROR and for most it is negative. If you are going to apply some sort of rational money management, then it is going to require an extraordinary amount of of luck to achieve the type of results that everyone dreams of. If you are going to argue that you can walk on water and bend spoons with your mind, and conclude that your extraordinary rate of return is not a result of good fortune, then please do since I find it entertaining..

 

 

MM

[thalestrader 14]

The irony is that you are dismissing what me an MM say and nonsense...

 

There is no irony there, just as there is no possibility, based on your beliefs, of fruitful discussion. You will just keep saying "X is not possible," while I will keep saying, "Nothing is impossible, though some things are far more difficult, and thus less likely, than others."

 

The irony to which I referred was that you characterize Cory as a "kool-aid" drinker, while you yourself fail to see that you have drank some potent brew yourself.

 

Best Wishes,

 

Thales

[Kiwi 16]

Thales, do you realize that this board has been overrun by people like SDG and Urma. The funny thing is that there are a few real self-managed traders here but between the grandiose and the disaffected losers the board has become rather disappointing.

 

If you think of somewhere better let me know.

[JohnnySDG 10]

Thales, do you realize that this board has been overrun by people like SDG and Urma. The funny thing is that there are a few real self-managed traders here but between the grandiose and the disaffected losers the board has become rather disappointing.

 

If you think of somewhere better let me know.

 

It must be disapointing when someone points out verbal bullshit that is not backed up by real math. And, where not talking advanced calc or trig but basic +-x/.

 

95% are losers that is a hard fact. Many of those have ALL the tools but can't do it.

The one that do are not making the kind of returns you mention. It tantamount to the BS real estate systems on tv at 2 am.

 

I make money trading. Its what I do and have done for 20+ years so I know from experience not some jerkoff's book. I also know that the pipe dreams of trading ES and ER with stupid only- make-your-broker-money margins is a suckers play.

 

Keep searching for the grail!

 

Johnny

[thalestrader 14]

It must be disapointing ...

 

What is disappointing is that your vulgarity and your mean-spiritedness are now tolerated here at TL.

 

I'll respond no more to you, so go ahead have the last word.

 

Best Wishes,

 

Thales

[thalestrader 14]

If you think of somewhere better let me know.

 

Funny enough, I've been actively pondering a solution to that very situation myself. I've even considered going off to some obscure corner of the 'net and blogging. I assume the cranks would let me be, and if not, I could "moderate" their comments, as I cannot abide either meanness or vulgarity.

 

Likewise, Kiwi, is you find somewhere better, let me know as well.

 

Best Wishes,

 

Thales