# Trading/Daytrading for a living



## tech/a

> I am very confident I could make a damn site more money by doing a couple of day trades every day than working for a living, but until I have proven this (maybe by taking a months leave to try)




Hmm a conundrum and a contradiction in terms.
This in itself is an interesting topic.

Who thinks they could make a living trading?
How much would you need to start your trading business?
How much do you think you would need to make/year/month? (Dont forget you'll be taxed on Profit).
Why would you want to trade for a living? Is it necessary?
Are people under misconceptions (generally) when wishing to trade for a living?

Other than capitalisation what would be the main requirements in a business plan for trading?
Perhaps those that do can outline their business plan?

Sorry its off topic but perhaps could be a topic of its own if there was interest.


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## bullmarket

*Re: What is a typical trading day like for u guys?*

I agree with you tech/a - you've gone off topic 

The points you raised have already been discussed in other threads in this and other forums , so rather than reinvent the wheel in this thread maybe it would be better if you or anyone else interested in continuing the theme to maybe have a look at or continue the *"My investment plan" thread or other similar threads in the Trading Strategies/Systems or other forums * 

cheers

bullmarket


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## tech/a

*Re: What is a typical trading day like for u guys?*

Oh God!


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## wayneL

*Re: Trading / Daytrading for a living*

This has been split off from another thread (So opening posts may seem strange  )

Cheers


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## Bobby

*Re: What is a typical trading day like for u guys?*



			
				tech/a said:
			
		

> Oh God!



 AHahaha !  

Gee thats got to me.

Bob.


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## wayneL

*Re: Trading / Daytrading for a living*



> I am very confident I could make a damn site more money by doing a couple of day trades every day than working for a living, but until I have proven this (maybe by taking a months leave to try)
> 
> 
> 
> 
> 
> Hmm a conundrum and a contradiction in terms.
> This in itself is an interesting topic.
> 
> Who thinks they could make a living trading?
> How much would you need to start your trading business?
> How much do you think you would need to make/year/month? (Dont forget you'll be taxed on Profit).
> Why would you want to trade for a living? Is it necessary?
> Are people under misconceptions (generally) when wishing to trade for a living?
> 
> Other than capitalisation what would be the main requirements in a business plan for trading?
> Perhaps those that do can outline their business plan?
> 
> Sorry its off topic but perhaps could be a topic of its own if there was interest.
Click to expand...



The actual numbers are really no different to normal trading. What may differ is the time frame for trades (eg daytrading)...depending on capitalisation, personality, cash reserves etc 

From my point of view as one who is trading for a living already, it is "technically" the easiest business (or job) I've ever been involved in, and the reasons have been gone over a number of times. Providing the numbers have been worked out properly, this is not a hard business folks.

What can be EXTREMELY challenging and debilitating is the psychological aspects, which may cause people to deviate from their plan, make mistakes etc.

I liken it to "cold calling". Cold calling is dead easy, phone up people you don't know, spout your spiel, and either get told to F off or you get an appointment.

What could be more easy? But it's hard psychologically. I personally find it emotionally impossible to do. Other folks sit there all day and do it without a problem...the good ones make good money.

Same as trading for a living... and particularly daytrading. A lot of folks are just not emotionally equipped for it. Thats not a criticism, it's just personality traits. I find it emotionally easier trading and daytrading for a living than more conventional businesses, which I don't particularly enjoy.

But I know folks that love their conventional business and would never dream of tossing it in for trading... and have had many discussions with Tech/a and others on this topic. It all comes down to the individual.

To conclude, what porper says is pretty close. It's not hard to do, but you have to prove...to yourself.... whether it's possible or not.


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## Porper

*Re: Trading / Daytrading for a living*



			
				wayneL said:
			
		

> The actual numbers are really no different to normal trading. To conclude, what porper says is pretty close. It's not hard to do, but you have to prove...to yourself.... whether it's possible or not.




That is exactly my point.As Wayne says trading for a living really is no different to trading part time, obviously the numbers change.As Nick radge states in his book Adaptive Analysis, if you have a positive expectancy, just trade more to make more money.

Now I am not advocating that we all go and tell our employers to bugger off and start day trading, that would be too easy, and tech has asked very valid questions about having a business plan, capitalisation etc and these would need to be discussed and put into place. The main concern for me would be to know with absolute confidence that I could make a living from this, and that is where I don't agree with Tech that you need a mechanical proven system that has been tested and back tested again.If you have proven over a period of time to be very profitable (years) and have the numbers in the right places (win/loss ratio etc) then to me that is as good as you can get in an ever changing marketplace.

I am open to being corrected as I am fairly new to all this, but this is how I see it now.

Probably stir a hornets nest with my very simplistic view, but why make non complicated issue complicated.


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## Porper

*Re: What is a typical trading day like for u guys?*



			
				tech/a said:
			
		

> Hmm a conundrum and a contradiction in terms.
> This in itself is an interesting topic.
> 
> Who thinks they could make a living trading?
> How much would you need to start your trading business?
> How much do you think you would need to make/year/month? (Dont forget you'll be taxed on Profit).
> Why would you want to trade for a living? Is it necessary?
> Are people under misconceptions (generally) when wishing to trade for a living?
> 
> Other than capitalisation what would be the main requirements in a business plan for trading?
> Perhaps those that do can outline their business plan?
> 
> Sorry its off topic but perhaps could be a topic of its own if there was interest.





Good questions which I will try to answer honestly.


*Who thinks they could make a living trading?*


I am convinced I can make a living trading, even though I have loads still to learn, based on previous results and my trading plan.

*How much would you need to start your trading business?*


How long is a piece of string.With CFD's I think around $50,000 would be enough.

*How much do you think you would need to make/year/month? (Dont forget you'll be taxed on Profit).*


I think you would need to make enough at least to match your present lifestyle requirements or problems would certainly surface (especially Mrs Porper) 

*Why would you want to trade for a living? Is it necessary?*


I suppose because people enjoy it, I certainly do, I also realise that it could after time get boring, you won't know this until you try.I think what you are getting at Tech is why would you need to trade everyday when you can make the same money investing.In my case I feel I can't make as much medium term, in fact I do both and short term trading (momentum trading) gives me greater rewards.

*Are people under misconceptions (generally) when wishing to trade for a living?*


I am certain people are under great misconceptions when thinking about trading for a living.It is up to us as individuals to make sure we are ready and able to be among the very small percentage that get it right.


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## sam76

*Re: Trading / Daytrading for a living*

Taken from todays "Age".

Why playing the average game pays


After 25 years as a stockbroker, I have sussed it. I have tried everything - traded warrants, traded crap, traded options, traded momentum, traded off charts, traded futures, having played the portfolio game, listened to everyone, listened to tips, believed fools, ignored geniuses, sweated at night, hidden losses from the wife, read everything and even having made some money, finally, I have sussed it.

There are four ways to make "easy" money, just four. But they are cast iron. Guaranteed to work. Here they are.

· Be born rich.

· Marry rich.

· Win the Lotto.

· Lie and cheat.

Failing this list of "easy" money makers, most of us will have to resort to the second list. Ways to "make" money (as opposed to "easy" money).

· Build a business.

· Build a career.

After this lot comes another list. How to "look after" your money. Finally:

· The stockmarket

As many of us can testify, if you try to beat the averages in the stockmarket you put your money and often your future in the hands of Lady Luck. Even the most hard working and sophisticated of investors will admit as much. Predicting the future is a difficult thing. It is not the place to make your "life's money".

Instead the stockmarket will, reasonably reliably, "look after" your money. The average return over the past 50 years is around 12 per cent a year. At that rate you'll double your money every six years and triple it every 10. Great stuff.

But try to "make" your life's money in the stockmarket, try to beat the 12 per cent average, try to transform yourself the way Warren Buffett did, and you are likely to be disappointed. Most of you will not become mega rich by playing the stockmarket. Yes some will, and some do, but the odds are that you won't. The ones that do are in a tiny minority. They are not the norm. The stockmarket is good for looking after your money, but when it comes to "making money" there are better investments of your time and energy.

I am a big fan of the Rich Dad, Poor Dad philosophy. If you've never read the book, get it today and read it over Easter. By page 30 you'll get the idea. The most exploitable resource in the world is people and their willingness to work for a certain (rather than variable) sum.

I remember being a stockbroker in the 1980s. As an institutional salesman we used to argue with the huge broking firm we were employed by about whether we should get paid 10 per cent of what we brought in, or 20 per cent (institutional sales). We claimed 20 per cent, the standard brush salesman's take. The broking house argued that because their franchise was so strong they could replace us with a monkey and 10 per cent was enough.

Let's be generous and take 20 per cent. As employees earning 20 per cent we could take home a lot. In fact some dealers were earning the firm multiple millions of pounds a year. This was the '80s remember. Stockbrokers had a very nice decade. But let's think about this.

If the employee was taking home 20 per cent then the broking house was taking home 80 per cent. In investment terms, the broking house was making a 400 per cent return on their investment in the employee. When the average annual return on the stockmarket is 12 per cent, you have to ask, who cares about the stockmarket, what's the better investment?

The best investment is in you, your business, your employees or your career. Get on with that.

Trying to squeeze more than the average out of the stockmarket is no career. The stockmarket is a tool, not a life, unless of course you are fortunate enough to work in it.

Marcus Padley is a stockbroker and the author of the daily stockmarket newsletter Marcus Today.


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## tech/a

*Re: Trading / Daytrading for a living*



> The stockmarket is a tool, not a life,




Amen.

You make money from trends and if your nimble with the right tools,---Outliers,---the constant search for and the consistent implementation of your profitable business---plan--- to compliment your lifestyle and make best use of your $$s for your future is the challenge for every trader.
When you get really good at it you can then grow not only your money but other peoples (banks lenders etc).

Thats when you get serious.
We do it with house 20% down then 80% or more on loan.
So why not the stock market?


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## dingo37

*Re: What is a typical trading day like for u guys?*

hi techa,

i may be new to this site but i have been trading for the last seven years,
so as a part time trader we had lost a small fortune in the beginning,[$57,000]

but we clawed our way back, and we are holding our own very nicely now.

at the moment we are trading with around 30 to 50 thousand dollars,
and at the end of every three months or so we bring the profits home,
then we leave at least 30/50 thou behind to trade with,

having said all of that,

i will say that the 30/50 is not enough to go full time trading with,
because we still owe just under a $100,000 on our house,

so in order for us/me to go full time trading we will need at least $150,000 in our trading account,
to cover all of our $$$$$ needs at home.

or at least have the house paid out.

so going full time trading fol's is something that we all need to think about very carefully.

at this point in time my income from working is paying for the house,
and i am trying to see if my trading can hold all of our other needs together for at least 12 to 18 month's before i will chuck in my job.

well anyway that is the way we are trying to do it anyway.

good luck to all,

and trade wisely folks   




			
				tech/a said:
			
		

> Hmm a conundrum and a contradiction in terms.
> This in itself is an interesting topic.
> 
> Who thinks they could make a living trading?
> How much would you need to start your trading business?
> How much do you think you would need to make/year/month? (Dont forget you'll be taxed on Profit).
> Why would you want to trade for a living? Is it necessary?
> Are people under misconceptions (generally) when wishing to trade for a living?
> 
> Other than capitalisation what would be the main requirements in a business plan for trading?
> Perhaps those that do can outline their business plan?
> 
> Sorry its off topic but perhaps could be a topic of its own if there was interest.


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## Julia

*Re: What is a typical trading day like for u guys?*



			
				tech/a said:
			
		

> Oh God!




Ditto Bobby's comments.
I'm still falling about laughing!

Julia


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## crackaton

*Re: Trading / Daytrading for a living*

I love my work and I love trading and I do both at the same time!! It is great!!


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## dennisll

*Re: Trading / Daytrading for a living*

*Who thinks they could make a living trading?*
Generally I think the idea (fantasy, I think is a better word) that one could make a living trading is one that is sold to the masses.  Very smart people with books/trading systems/brokerage services know that there is a huge pool of people who are unhappy with their present economic situation and as such a large potential customer base.  That said, with enough capital and realistic expectations it is possible to trade for a living.

*
How much would you need to start your trading business?  How much do you think you would need to make/year/month? (Dont forget you'll be taxed on Profit).*
One must look at the long term returns of the market he wishes to trade, then make an intelligent decision based on his personal skill and track record.  Say the market I wish to trade has averaged a 10% return over the long term.  Based on my skill, I think that a worst case scenario is a 5% return, average return is 8%, and best case return is a 16% return.  From this you can then determine how much you need in starting capital based on how much you need, before tax, to make in profits per year.  For example (everything before tax):

1. I need $4,000/month or $48,000/year to replace my current job salary
2. Based on my worst, average and best case scenarios, I would need (48k/%return):
Worst = $960K
Average = $600K
Best = $300K

Obviously if my starting capital does not even get to 300K, then realistically I am not ready to start trading for a living.  However if it did fall somewhere between the best and worst case figures, I must then decide if I can survive during the years when I perform at worst case level.  For example

Say I have $500K capital.  If I perform at worst case, then my return for the year is $25K.  I have to ask myself if I can realistically survive with only $25K to sustain me for that year.  

Important to note that the worst case scenario is still a positive return!  I won't even go to what a worst case scenario with a negative return looks like.

*Why would you want to trade for a living?*
An extremely important question which I think one must answer before even starting to put together a business plan.  Do you want to trade for a living because you are unhappy at your job?  Do you think you are underpaid at your present employment situation and think you can do much better trading?  Do you believe that by trading you will have more control over your time and more free time for other things?  Is trading something you truly believe is right for you?  "Know Yourself" has always been one of the most oft-repeated phrases when it comes to trading and for good reason.  As in any decision in life, if the decision to trade for a living is not made after a thorough analysis of the facts and your personal circumstances, it would be very difficult to succeed.

*Are people under misconceptions (generally) when wishing to trade for a living?*
A resounding yes.  The industry promotes trading as "the last frontier".  "Live and work anywhere in the world!  Control your own hours!"  Some even go as far as showing fantastic returns and needing only a few minutes per day to do it.  What can we expect Mr Joe average, who has never traded before, to think then?  Perhaps he has started imagining what life would be like living next to the beach, powering up his laptop while having a beer, to check how much money he has made.  Ok maybe that is a bit extreme.  Perhaps a more realistic fantasy is one where he doesn't have to work the same number of hours as in his current job, and yet make more money.  This after reading a few books and attending a few seminars.

Please let me clarify that I do think that trading for a living is very possible, and that there are people who already have achieved this.  I answer these questions from the perspective of a person who has recently been introduced to the market, who has seen the fantastic returns, and who has started going through some literature on the basics of trading (or perhaps even joined this forum) and may have started trading a little bit to test the waters.  My answers are not meant to be discouraging, but rather as a reality check against the blue-sky propaganda usually produced by the industry.  Note also that I assume that whatever starting capital allocated for trading remains the same, ie during good years no additional capital is added to the starting capital and during bad years no funds are withdrawn to supplement the shortfall for living expenses.


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## Strw23

*Re: Trading / Daytrading for a living*

dennisll, Good post. I generaly agree with most of the things you have written but surely if you wanted you could attain your goals with less starting capital. I have noticed from some of the threads around the forum that alot of people seem to be afraid of the big bad word *LEVERAGE*. I wouldnt say it is risk free (but what is) but with the right trading plan and risk management it is nothing to be afraid of. As someone has already said we do it with our homes, why not with the stock market? I can buy a house on no deposit if I have the equity in another property, thats more than 100:1 leverage but people dont seem to have a problem with it because its a house. Have a plan, use guarenteed stops if you have to, but dont be afraid of leverage, it is just another tool to help attain your goals faster.

As for trading full time, I know several people who do it. What they did was after making consistant returns for a few years in all kinds of markets they quit their jobs to trade full time. One person always keeps a minimum of 1 years wages in a seperate bank account should he have a bad year. Another lives of the money she made last year so if she has a bad year she will just return to work until her capital is built back up.

Scott


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## professor_frink

*Re: Trading / Daytrading for a living*

hi dennisll, you make some good points in your post, but I think that your being a bit too negative about it- what kind of trader(full or part time) thinks that 10% is going to put food on the table?
You will find that most people who do trade as their primary income would find that to be fairly silly. 10% isn't much better than fixed interest, and shouldn't be used as any sort of benchmark. If someone was relying on 10% a month to pay themselves then they may run into problems sometimes.
I definately agree with what your saying about it being promoted as an easy way to make a living by the industry, but then again, anyone who listens to that when there is obviously a vested interest in the issue is pretty silly to start with.


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## nizar

*Re: Trading / Daytrading for a living*



			
				dennisll said:
			
		

> *Who thinks they could make a living trading?*
> Generally I think the idea (fantasy, I think is a better word) that one could make a living trading is one that is sold to the masses.  Very smart people with books/trading systems/brokerage services know that there is a huge pool of people who are unhappy with their present economic situation and as such a large potential customer base.  That said, with enough capital and realistic expectations it is possible to trade for a living.
> 
> *
> How much would you need to start your trading business?  How much do you think you would need to make/year/month? (Dont forget you'll be taxed on Profit).*
> One must look at the long term returns of the market he wishes to trade, then make an intelligent decision based on his personal skill and track record.  Say the market I wish to trade has averaged a 10% return over the long term.  Based on my skill, I think that a worst case scenario is a 5% return, average return is 8%, and best case return is a 16% return.  From this you can then determine how much you need in starting capital based on how much you need, before tax, to make in profits per year.  For example (everything before tax):
> 
> 1. I need $4,000/month or $48,000/year to replace my current job salary
> 2. Based on my worst, average and best case scenarios, I would need (48k/%return):
> Worst = $960K
> Average = $600K
> Best = $300K
> 
> Obviously if my starting capital does not even get to 300K, then realistically I am not ready to start trading for a living.  However if it did fall somewhere between the best and worst case figures, I must then decide if I can survive during the years when I perform at worst case level.  For example
> 
> Say I have $500K capital.  If I perform at worst case, then my return for the year is $25K.  I have to ask myself if I can realistically survive with only $25K to sustain me for that year.
> 
> Important to note that the worst case scenario is still a positive return!  I won't even go to what a worst case scenario with a negative return looks like.
> 
> *Why would you want to trade for a living?*
> An extremely important question which I think one must answer before even starting to put together a business plan.  Do you want to trade for a living because you are unhappy at your job?  Do you think you are underpaid at your present employment situation and think you can do much better trading?  Do you believe that by trading you will have more control over your time and more free time for other things?  Is trading something you truly believe is right for you?  "Know Yourself" has always been one of the most oft-repeated phrases when it comes to trading and for good reason.  As in any decision in life, if the decision to trade for a living is not made after a thorough analysis of the facts and your personal circumstances, it would be very difficult to succeed.
> 
> *Are people under misconceptions (generally) when wishing to trade for a living?*
> A resounding yes.  The industry promotes trading as "the last frontier".  "Live and work anywhere in the world!  Control your own hours!"  Some even go as far as showing fantastic returns and needing only a few minutes per day to do it.  What can we expect Mr Joe average, who has never traded before, to think then?  Perhaps he has started imagining what life would be like living next to the beach, powering up his laptop while having a beer, to check how much money he has made.  Ok maybe that is a bit extreme.  Perhaps a more realistic fantasy is one where he doesn't have to work the same number of hours as in his current job, and yet make more money.  This after reading a few books and attending a few seminars.
> 
> Please let me clarify that I do think that trading for a living is very possible, and that there are people who already have achieved this.  I answer these questions from the perspective of a person who has recently been introduced to the market, who has seen the fantastic returns, and who has started going through some literature on the basics of trading (or perhaps even joined this forum) and may have started trading a little bit to test the waters.  My answers are not meant to be discouraging, but rather as a reality check against the blue-sky propaganda usually produced by the industry.  Note also that I assume that whatever starting capital allocated for trading remains the same, ie during good years no additional capital is added to the starting capital and during bad years no funds are withdrawn to supplement the shortfall for living expenses.




Nice post, excellent in fact...

But dont forget, as Scott mentioned, people that trade for a living are ALREADY pro before they quit their jobs, of course a negative year will hurt but with careful stock selection and stringent risk management which comes after several years of experience, it shouldnt be a disaster


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## bullmarket

*Re: Trading / Daytrading for a living*

yes :iagree: as well - nice post dennisII

in addition I think everyone starting out should have tattood on the back of their hands, so that they can see it when punching in buy/sell orders, that anecdotal evidence says that less than 10% of traders make a decent profit in the long run   - not to be discouraged from setting themselves up to trade but to remind them of the time and effort it takes to be consistantly successful in the long run  

bullmarket


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## dennisll

*Re: Trading / Daytrading for a living*

Thank you for your kind responses.  

Strw23, I agree that Leverage is a fantastic tool for wealth accumulation and can be used in conjunction with a trading strategy.  Perhaps a new thread showing how Leverage can be used with risk controls would be beneficial?

Professor frink, I did not mean to sound negative so I apoligize if that was the tone of my post.  10% return may appear to be small, but if the average return of the market one has chosen is 10%, I think it is logical to expect that an average trader's return will be around that figure as well, plus or minus some percentage points depending on his skill level.  Top traders may be looking at say 2x or 3x that amount.  I did say that I was looking from a new trader's point of view which is why I chose to be conservative.

From another perspective, I would consider 5% as a risk-free return (throw all my money in a high yielding online savings account).  A 10% return would be double that and would be much more attractive.  

Nizar, if a pro decides to trade for a living I have no worries at all since he is a pro and would know exactly what to do in different circumstances.  It is the beginner or amateur trader that I thought of when I wrote my post, especially since it is usually these people who do fantasize about trading for a living.  

Bullmarket, was it 10% of traders?  I thought it was less actually.  Hopefully as we learn more through this forum we can nudge that up to 11% 

I remember reading old issues of Shares magazine where they followed the progress of a contest winner who tried trading for a living for a year (or was it six months?).  A great real-world example and something I would recommend everyone who wishes to eventually trade for a living read.


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## professor_frink

*Re: Trading / Daytrading for a living*



			
				dennisll said:
			
		

> Thank you for your kind responses.
> 
> Strw23, I agree that Leverage is a fantastic tool for wealth accumulation and can be used in conjunction with a trading strategy.  Perhaps a new thread showing how Leverage can be used with risk controls would be beneficial?
> 
> Professor frink, I did not mean to sound negative so I apoligize if that was the tone of my post.  10% return may appear to be small, but if the average return of the market one has chosen is 10%, I think it is logical to expect that an average trader's return will be around that figure as well, plus or minus some percentage points depending on his skill level.  Top traders may be looking at say 2x or 3x that amount.  I did say that I was looking from a new trader's point of view which is why I chose to be conservative.




hey dennis, no apology needed! I should have changed the word negative for conservative, so I'll do that in this post. You'll probably find that more full time traders are trading other instruments- futures,options, etc, that make returns above the 10% you mentioned look very low- look at what wayne gets up to- he mentions in another thread the sort of returns you can achieve daytrading futures.
From a beginners position your goal of 10% is getting more realistic, but they are the last people who should be considering full time trading, and I would have a guess that most people who start trading realise this quite quickly(god I hope I'm right about that part)


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## whenbob

*Re: Trading / Daytrading for a living*

Hi all, This is my first time on the forum. I also am a fan of rich dad poor dad and am a fan of the philosophy. I am about to start trading in shares and trying to learn as much as I can. I have been using Incredible charts for practice over a couple of months now and will be in the asx stockmarket game in June. I must admit that i have had misconceptions about how much can be made in the market and appreciate what all of you have had to say on the subject of making a living from trading. I have selected a few stocks with consistant patterns over a number of years which I will start with and see how I go. Any advice offered for someone just starting out would be appriciated.


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## happytrader

*Re: Trading / Daytrading for a living*

Hi whenbob

Checking out stocks with consistent chart patterns is an excellent start. Hopefully you've checked out what time of the day to enter and exit by looking at hourly charts. After all you want the pattern to hold its shape so you've got the best chance of follow through. Theres often a lot of movement over the day.

Most importantly you need to rehearse your actions for when you eventually get hit with a 'code blue'  You want your primary response to be the correct one so it sets the scene and burns a memory into your brain should you recognise threats to future positions. Just like your immune system the first exposure to a new infection can be prolonged and painful but once the brain and the body establishes a memory future exposures bring about a rapid protective response. Ever wondered why some people have short fuses? Works the same way.

Cheers and best wishes
Happytrader


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## whenbob

*Re: Trading / Daytrading for a living*

Hi Happy Trader, Thanks for your reply, I have taken on board what you have to say. Thanks for your reply and advice.
regards whenbob.


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## Ageo

*Re: Trading / Daytrading for a living*

Can i ask for those people who make profits, do any of you actually compound (re-invest) your profits? or do you just spend it and start over again?


I think alot of people dont realise the power of delayed gratification, because even taking small profits whilst compounding over years will take your position into a whole different area.


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## tech/a

*Re: Trading / Daytrading for a living*

Absolutely.
Terribly powerful and a "secret" to genuine wealth creation.

*Its not the analysis that makes the profit its how its used.*


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## beachbum

*Re: Trading / Daytrading for a living*

When money is made the temptation is to reward yourself. Pressure also comes from spouse's etc. Avoid the temptation and you will have that profit working for you also. When you have a decent capital base it is then time to start allowing yourself some rewards. It's just a hard slog to begin with and that's that.

Cheers


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## Ageo

*Re: Trading / Daytrading for a living*

The funny thing is that there could be 2 different traders which


Person 1* Trades and earns 100% p/a (example) but spends his earnings.


Person 2* Trades and earns 20% p/a but compounds his earnings.


5 yrs later the person that spends is still forced to make the same returns if not more which means they are still in the same position and there bank account isnt progressing.

The person who compounded his profits can now even achieve 50% less Return on Risk trades from his original 20% p/a but because he has such as large capital base he will still out earn Person 1 by far.

And if you continue this patter you will see that Person 1 will always be a sucker and have to trade another day, where is Person 2 will have so much capital that he can invest into areas which will give him a passive income and he will never have to work ever again if he doesnt choose to.


I dont think the problem lies in how well you can profit but how well you can keep your money once you have it and still have it work for you.

P.S But if you do make high % profits and you compound it imagine how fast your account will grow.


----------



## tech/a

*Re: Trading / Daytrading for a living*

Responsible and calculated use of leverage can increase the power of compounding even further.

I know of an example where $30K is now $310K in 3.5yrs even after last weeks belting.

http://lightning.he.net/cgi-bin/suid/~reefcap/ultimatebb.cgi?ubb=get_topic;f=74;t=000029


----------



## Ageo

*Re: Trading / Daytrading for a living*



			
				tech/a said:
			
		

> Responsible and calculated use of leverage can increase the power of compounding even further.
> 
> I know of an example where $30K is now $310K in 3.5yrs even after last weeks belting.




Imagine if those returns were the same for the next 3.5yrs it would amount to over $3.1 million, and again another 3.5 would amount to $31 million

So in 10.5 yrs based on those results you could have a bank of around $31 million? 

hehe i would prefer to earn 10% p/a on $31 million then 100%p/a on $31,000.


----------



## bullmarket

*Re: Trading / Daytrading for a living*

Hi Ageo

My understanding of what you are generally saying is that for a given income requirement then obviously the larger your investment capital, the lower the required yield you need to generate that required income.  Currently I need a tad over 5% yield from our income portfolio to meet my and mrs bullmarket's annual living expenses.

Being retired and an investor whose #1 priority nowadays is income :iagree: 100% with you 

cheers

bullmarket


----------



## chemist

*Re: Trading / Daytrading for a living*



			
				Ageo said:
			
		

> The funny thing is that there could be 2 different traders which
> 
> 
> Person 1* Trades and earns 100% p/a (example) but spends his earnings.
> 
> 
> Person 2* Trades and earns 20% p/a but compounds his earnings.




If he's trading for a living, what is he living on? 

cheers,
Chemist


----------



## tech/a

*Re: Trading / Daytrading for a living*

Depends on his capital base.

$500K traded on Margin, or even $250K on margin would be able to do it easy and still compound with a 20% return on total funds.


----------



## Ageo

*Re: Trading / Daytrading for a living*



			
				tech/a said:
			
		

> Depends on his capital base.
> 
> $500K traded on Margin, or even $250K on margin would be able to do it easy and still compound with a 20% return on total funds.





You hit the nail on the head, all im trying to point out is that of course you need to live but people tend to increase there "living standards" as there income increases which in my opinion is the worst thing you can do since you will never progress onto financial independence.


And since alot of people here are part time traders (still have another source of income) its wise to compound as much as possible to benefit down the track.


----------



## tech/a

*Re: Trading / Daytrading for a living*

Yes and when they take a living expense drawdown there is of course 50% tax on trade profit if held less than 12 mths.

When you think about it a business which costs a$200K would generally supply a reasonable wage.
One that cost 1 or 2 mill would then be expected to generate much more return for investment for the owner.


----------



## nizar

*Re: Trading / Daytrading for a living*



			
				Ageo said:
			
		

> You hit the nail on the head, all im trying to point out is that of course you need to live *but people tend to increase there "living standards" as there income increases which in my opinion is the worst thing you can do since you will never progress onto financial independence.*




of course people would much rather have lived a good life than to die with 100million dollars to their name but not have enjoyed a cent of it

*plan 4 tomorrow but enjoy the moment just in case u dont get 2mrw... everything in moderation*


----------



## Ageo

*Re: Trading / Daytrading for a living*

Nizar im not saying not to enjoy yourself but wouldnt you prefer to sacrifice a few things in a 5 - 10yr time frame and then play for the rest of your life?


I always remember a saying 

"Play now and Pay Later"

          or

"Pay now and Play Later"


For me i prefer the latter, (but im 23) and i know once i start to play i can do so everyday for the rest of my life if i choose to.

P.S it doesnt mean i dont have a good time, i enjoy life everyday but even if my income increases i still behave the way i was at the start. It just means i dont go blow money on fancy cars (been there) and other liabilities (bad debt). But hey thats my goal to be in a position to never have to work ever again but it might not be someone else's goal.

Adrian


----------



## pharaoh

*Re: Trading / Daytrading for a living*

I like what you are covering here, re compounding profits. 
Why would anyone do anything but reinvest these profits?

The fun is all in seeing your capital base grow. 

I have a question to raise. 

I am working on a small capital base, and am trying to grow it so I don't have to borrow, and take a marginal loan. 

I took $1000 12 weeks ago, put in an extra $800, and my portfolio is now worth $5,400 in this period. 

My goal was to turn this into $10,000 in the first 6 months of trading, so i'm halfway there. 

I didn't expect to reach it, but surprisingly got halfway there quite quickly, until this bugger of a market consolidation the past week. 

I'm happy with this so far, but I am worried about tax. 
Anyone in/been in a similar situation?
i.e. with the growing from a small base, what did you do about tax etc...

I want to grow this, compound the returns, and achieve financial freedom. Nothing extravagent, just a small 4 brm house in rose bay, cruiser, convertible merc, etc....

Cheers


----------



## Football Star

*Re: Trading / Daytrading for a living*

I conduct at least 4 trades per day and have considered day trading full time. I have done very well since Nov last year....but only takes one error and ................. the game can be over. I currently hold a big parcel of shares in lvl and if they don't come out of suspension all my profits since Nov are gone and more !


----------



## 123enen

*Re: Trading / Daytrading for a living*

Pharaoh,
Perhaps you should not consider a margin loan to be a negative but instead consider it to be a positive.

Assume that you had a margin loan offering 50% loan on the stocks in your portfolio. Your $1800 to invest would increase to $3600 to invest.
The $3600 profit you have made would be $7200 profit. ( less 3 months interest)

Margin loans can be a good thing, especially in boom times.


----------



## Porper

*Re: Trading / Daytrading for a living*



			
				123enen said:
			
		

> Margin loans can be a good thing, especially in boom times.




I agree margin loans and cfd's are good when used correctly, but as I found out last week, a small correction in the market equates to a big loss from your capital base.

If your margin to equity ratio is not too high (how much you borrow as a percentage of your account) then we all live to fight another day.

I wonder how many people have been margin called last week, or maybe sweating it out at the moment, hoping it will all come right.

Some people are forced into using loans or cfd's to make a reasonable profit but it has it's risks as we found out last week.


----------



## tech/a

*Re: Trading / Daytrading for a living*

Porper.

Some wise words there.

*PEOPLE AREN'T TAUGHT HOW TO TRADE WITH LEVERAGE*

Two things I would like to offer up.

If people get margin calls particularly regularly then how they trade is clearly not profitable.

I've said many times before that most traders have no idea if their longterm trading methodolgy (Even if its for short term trading ) is profitable.
Without *KNOWING * this Trading Margin and in particular CFD's is tantimount to driving blind folded.

*THIS is HOW it WORKS.*

Setting margin in my veiw should be relative to initial drawdown---If you have no idea what that is likely to be and trade margin OR CFD's youve----- just stepped in front of a bus BLINDFOLDED

Lets say your average drawdown is 8% (which my longerterm systems are.)
Leveraged at 10x then you would have 80% of your equity lost is this occured,not only that but youd have only 20% equity to fight your way into profit,something that testing would not have or been able to consider---simply it wouldnt happen and youd face ruin.

Next is maximum string of Losses and risk.
Again mine is 1% risk and 12 the longest string.
Taking CFD's at 10x my risk becomes 10% and 12 straight then Im ruined.
Without this knowledge I could be trading a highly profitable method (Which it is) and going broke!! simply because I am not in the position to manage my business because I dont have *CRITICAL INFORMATION.*

For me margin is perfct and so could be CFD's at 3x leverage.
3x gives me max 24% on initial drawdown and 36% on maximum consecutive losses.
Ive NEVER been margin called in the 3 methods and the 3.5 yrs Ive traded them on margin.

Lastly once accumulated profits come into play Margin calls become just a figure of speech.
Compounding of profit and accumulated open profit lead rise to compounding opportunities which *WHEN USED CORRECTLY* turn average traders into
very profitable businessmen!

On margin loans if called no need topanick and sell the House,boat,car,or kids---simply sell some of your holdings to bring the account into line.
IE $5000 of shares.

*LEVERAGE---wouldnt trade longterm without it!!*


----------



## Ageo

*Re: Trading / Daytrading for a living*

Yep basically the key to using any leverage in my opinion is to cut your losses small (so you can lose many times if you need to and still be in the game) and let your wins ride (so 1 win can offset your loss plus make you a profit). I expect to lose more than i actually win but the only difference for me is that when i win it exceeds the losses which actually moves into profits. Van Tharp mentiones this a few times in his book "Trade you way into Financial Freedom". If the market moves against you and your position is in trouble then i think you will always find trouble down the track. I would prefer to cut the loss at a minimum and then try and find a wave to jump on (wether it be long or short).

Adrian


----------



## MichaelD

*Re: Trading / Daytrading for a living*



			
				tech/a said:
			
		

> Lets say your average drawdown is 8% (which my longerterm systems are.)
> Leveraged at 10x then you would have 80% of your equity lost is this occured,not only that but youd have only 20% equity to fight your way into profit,something that testing would not have or been able to consider---simply it wouldnt happen and youd face ruin.



tech/a,

I agree with 99% of what you have said, but suggest that the above is not correct. 

The reason I believe it is not correct is that if you lose 80% of your trading equity whilst trading on margin, you should still be position sizing on the total equity size, not on the amount in the margin account.

eg
Initial Capital $10,000
Maximum Drawdown of system is 8%
Trading on 10% margin, you are controlling $100,000 worth of equity initially.

If you hit maximum system drawdown, your margin account balance will be $2,000, but you should be position sizing on $92,000, which is hardly fatal *so long as your psychology can accept the $10,000 to $2,000 drawdown in the margin account*.

I do, however, completely concur with your assertion that at 1% position size with maximum run of losses >9 you would blow up the account. Indeed, all the long term systems I have seen have a maximum string of losses of 10-12 - perhaps this is why CFD providers offer margin at 10% - for anyone leveraging at the maximum possible according to the CFD provider their risk of ruin would surely be close to 1.

Michael D
ps very happy to be proven wrong on this (since this is where the money is made on the markets)


----------



## pharaoh

*Re: Trading / Daytrading for a living*

Hey all

Ok, I think ur right, margin loans or cfd's are not such a bad idea perhaps - my thinking was all like my grandfather's principle - never get into debt. 

On the few posts above, I am v interested in what you guys are saying, but yu are losing me in the tech. 

Sorry, I have had no experience with cfd's, or leveraging etc...
I do know fcd's mean you can get exposure to say 100k of shares for 10% cap outlay for example, and I know more about margin loans - borrow money, invest in shares, interest only payments, tax deductible.

Can you give me lamens terms, in what you are saying?

i.e. if you only had a cap base of $5400, would you consider cfd or margin loan?

At this pace, it will take me forever to get to my $300,000 target in 18 months (ambitious or what)

1. Margin loans - seem a great idea, think the minimim is $20k - pay interest only which is almost all tax deductible I believe??
But, if there's a market correction, can be a bad thing....

*** I see a margin loan could be a very powerful tool to take out and invest on the turnaround of a correction - get great stocks like BHP, OXR etc at a discount. We know they will go up...

2. CFD's - seem like a great way to expose urself to a greater amount - but risky? With only $5,400 cap base, it could eat into my $ if the stocks I choose go backwards not forwards?

Thanks guys, sorry for the d-asse questions, but this would really help to clear things up
Cheers


----------



## Porper

*Re: Trading / Daytrading for a living*



			
				tech/a said:
			
		

> *LEVERAGE---wouldnt trade longterm without it!!*




Very interesting , your last line that is.

I think the psychological aspect of trading cfd's or shares on margin has a huge influence on profit here.

I do the opposite to you here Tech.I split my total funds between a standard account and cfd's.Two thirds to the standard.I use the standard account as medium term (a few months normally) as there is no interest to pay.Seems logical to me.I trade short term with my cfd's as to minimise interest charges.

My medium term portfolio is doing great, I have a system in place and have been profitable since I started.I don't trade a mechanical system, so to me, this is the nearest I have to a positive expectancy using my system.Tech I think will disagree with this.

Now to trading with leverage.I don't have a system in place and lost a small amount last year and very slightly up this year (2 wins and 7 losses).I have stopped trading this account until I can figure out where I am going wrong.

I am disclosing this information to hopefully stop others taking the plunge with leverage thinking that because you are profitable you will automatically be profitable with leverage. You won't !!  

 Also it can get quite scary when you see a spell like last week wipe out a very healthy profit.

Anybody know a good shrink


----------



## MichaelD

*Re: Trading / Daytrading for a living*



			
				pharaoh said:
			
		

> i.e. if you only had a cap base of $5400, would you consider cfd or margin loan?



Leverage is a fantastic way to get to the poorhouse quickly if you do not fully understand the risks involved. By fullly understand, this means you are trading a plan with a positive expectancy and you know its maximum drawdown. If you don't know these parameters of your system, then success will only be by blind luck, not skill.

The problem with leverage is that newer traders see it as a quick way to multiply profits, but that is not how the stockmarket works. The recent falls on the market will be hurting many, accustomed as they are to perpetually rising prices. To systems traders, it's just another day in the execution of their plan.

In a bull market, it is easy to get lucky and attribute this to skill, but to truly make money in the stockmarket you must first learn not to lose it.

A sobering read on what CFDs can do to a trading account of your size is here;
http://traderandy.blogspot.com/


----------



## tech/a

*Re: Trading / Daytrading for a living*

True but you have lost 80% of the 100K which leaves you with 20K to get it back or a 500% return.

If you have just lost 80% of your capital then a 500% return is highly unlikely.




> if you only had a cap base of $5400, would you consider cfd or margin loan?




Pharaoh

If your total capital base is $5400 I'd say neither.
*Please Please * understand that with a base like this a 10% move against you and youve lost the lot!!

If thats all youve got and its taken you years of paper rounds or hard savings to get then it can and will be all gone in a day if you dont understand how to position size safely when trading leveraged instruments.

Dont think that "Andy" guy trades his 10x leverage figures dont add up.
He'd have been dead last week.


----------



## crackaton

*Re: Trading / Daytrading for a living*



			
				Ageo said:
			
		

> Can i ask for those people who make profits, do any of you actually compound (re-invest) your profits? or do you just spend it and start over again?
> 
> 
> I think alot of people dont realise the power of delayed gratification, because even taking small profits whilst compounding over years will take your position into a whole different area.




Depends. With short trades, as in 1-3 days, I recoup what I invested and leave the rest in shares. For example earlier this year I bought $50k worth of EXt at .04. I sold out enough shares, can't remember the acutal figure, at .11. I got my $50K back and still have a truck load of EXT. This way Mr Taxman is happy and I am happy.


----------



## pharaoh

*Re: Trading / Daytrading for a living*

That $5400 I have made from $1800 over 12 weeks. 
So, I don't want to lose it as I have done so well in such a short time. 

As you said though, it is easy to make money in a bull market

I guess I am trying to figure out if cfd's or margin loans are a good ption now, or not. 

I think cfd's will be too risky for me, as you said, I could lose all the hard earned/invested profit of the last 12 weeks in one or two bad ones.

I am not to sure - I am swaying more towards a margin loan, to take out when the market turns back up.

i.e. buying quality stocks at a bargain - when the market starts going back up again, and investors return, I have picked up these stocks at a discount and my margin loan has helped me to capitalise properly, increase my exposure and my interest payments are tax deductible.


----------



## tech/a

*Re: Trading / Daytrading for a living*

Sorry Michael.
My reply is totally incorrect gotta fly will continue later.

Pologies.Durrrr.


----------



## Ageo

*Re: Trading / Daytrading for a living*



			
				MichaelD said:
			
		

> In a bull market, it is easy to get lucky and attribute this to skill, but to truly make money in the stockmarket you must first learn not to lose it.




Perhaps i miss-understood this, are you saying that you should try and develop a system that makes you win more than you lose? (win more i mean the trades that you place win vs loss trades).

If you say yes to that then please share your system hehe because i know that losing is easier than winning in the sharemarket so instead of trying to outsmart it i will embrace it and develop a system that allows me to lose at least 5 times more than i win, but when i win it obviously out weighs the loss and leads to a profit.

Now whether the system is trading shares (1 x leverage) or CFD's (90+ x leverage) the same principal applies, if you position size yourself well and know how much you can lose with x amount of trades then i believe you have a much stable system instead of always trying to pick winners (might aswell goto the TAB).


----------



## pharaoh

*Re: Trading / Daytrading for a living*

Ageo, on my situation, making $1800 into $5400, what would you do now. 
Margin loan, cfd's or try to keep picking winners (as i've been lucky with so far - eng, imp)

cheers


----------



## bullmarket

*Re: Trading / Daytrading for a living*

Hi Ageo



			
				Ageo said:
			
		

> Perhaps i miss-understood this, are you saying that you should try and develop a system that makes you win more than you lose? (win more i mean the trades that you place win vs loss trades).
> 
> If you say yes to that then please share your system hehe because i know that losing is easier than winning in the sharemarket so instead of trying to outsmart it i will embrace it and develop a system that allows me to lose at least 5 times more than i win, but when i win it obviously out weighs the loss and leads to a profit..................................




I can see what you are getting at and so obviously to develop a system that still keeps you in profit overall with an average 1 winning trade in 6 trades then it is even more important to have part of your trading plan that says....'keep your losses small' because otherwise that 1 winner will have to be a real 'doozy'   just to break even on the 5 losses.

I have friends who over the years average about 2 winning trades out of 3 (so they tell me anyway ).  What they did is paper trade a trading plan until they consistantly returned 66% winning trades. I'm sure they had other criteria that had to be met as well.  But what they found was that most of their trades resulted in either small losses or small wins, thus cancelling each other out and every so often they would enter a trade that did really well and it is these 1 in 3 trades that generate the vast majority of their profits.

I am not a 'trader' but I would think that most, if not all traders, would aim for at least a 50% win:loss ratio.

Anyway, just   food for thought

cheers

bullmarket


----------



## Porper

*Re: Trading / Daytrading for a living*



			
				bullmarket said:
			
		

> I am not a 'trader' but I would think that most, if not all traders, would aim for at least a 50% win:loss ratio.
> 
> Anyway, just   food for thought
> 
> cheers
> 
> bullmarket




I think a very important point is not to worry about your win percentage.If I could achieve a 50% win rate and keep my win/loss ratio as it is I would not be going to work everyday.

Maybe I am misunderstanding your point Bullmarket, but the win percentage is not the win/loss ratio.You can win 80% of the time and still be a marginal winner or loser.The win/loss ratio is measured by dividing your average winning amount by your average losing amount.This together with your win percentage gives you your expectancy.

If we spent all our time trying to avoid losing we would be in a mental home.
All that matters is how much you lose when you lose and how much you win when you win.

Should be easy really.That's what I keep telling myself anyway.


----------



## MichaelD

*Re: Trading / Daytrading for a living*



			
				Ageo said:
			
		

> Perhaps i miss-understood this, are you saying that you should try and develop a system that makes you win more than you lose? (win more i mean the trades that you place win vs loss trades).



You need a system with a positive expectancy. i.e. In the long term, you will come out ahead regardless of market conditions.

Most long term trend following systems have a win loss ratio of around 45%, so the majority of your trades are nett losers. The losers, however, are all small. The winners are also mostly small, but you eventually end up with occasional outsized winners which is where you make your money.

You cannot know in advance which of your trades will be the outsized winner (and I am constantly surprised by which ones do end up taking a run vs the "sure fire winners" which fail). It's not glamourous - it's treading water most of the time, but when the big winners come, they are really big.

Aiming to increase the win % usually results in the system making less money at the end of the day, since the great majority of entry "wisdom" is in fact provably unprofitable.

Michael D

ps Mods - not wanting to be pushy as a newbie poster, but perhaps this thread could be split since it's turning into a rather interesting leverage/system discussion.


----------



## bullmarket

*Re: Trading / Daytrading for a living*

Hi porper

The win:loss ratio I mentioned earlier is (number of trades resulting in a profit) divided by (the number of trades resulting in a loss).

I hope this clarifiers what I was saying 

cheers

bullmarket 

ps....I will be away this coming week so we can discuss further if you like the week after..


----------



## StockyBailx

*Re: Trading / Daytrading for a living*

The only differance with all that, as far as Im concerned. Is that with day trading you may be looking for something of a 40% price ratio and climbing. to co-inside with you analyse fundermendals, things such as momentum, volosity and volume must be of record highs. Your assets should be more then substantial to enable and exspect a reasonable return.
Penny stocks are the best example of this method, enabling the time of day to deside a selling piont or weather to hold?

Stocky.....


----------



## chemist

*Re: Trading / Daytrading for a living*



			
				Ageo said:
			
		

> Yep basically the key to using any leverage in my opinion is to cut your losses small (so you can lose many times if you need to and still be in the game) and let your wins ride (so 1 win can offset your loss plus make you a profit). I expect to lose more than i actually win but the only difference for me is that when i win it exceeds the losses which actually moves into profits....




If you've lost more than you've won, then you've lost.

"cut your losses small and let your wins ride" -- a worthless cliche. How do you know you were cutting a loss and not a win until after the event? how do you know your win is riding not about to crash, until after the event?

You should attend to reality, not cliches.

cheers,
Chemist


----------



## nizar

*Re: Trading / Daytrading for a living*



			
				chemist said:
			
		

> If you've lost more than you've won, then you've lost.
> 
> "cut your losses small and let your wins ride" -- a worthless cliche. How do you know you were cutting a loss and not a win until after the event? how do you know your win is riding not about to crash, until after the event?
> 
> You should attend to reality, not cliches.
> 
> cheers,
> Chemist




Chemist those words were actually said by Peter Lynch in his book One up on Wall St

And i think it goes without saying that hes more pro than EVEN YOU

He said that most people make the mistake of locking in profits quickly, ull never get ur 10-baggers that way (he got PLENTY in his time), and that they hold on to losers hoping for a recovery. You should be cutting the weeds and let the flowers grow - not the other way around


----------



## Ageo

*Re: Trading / Daytrading for a living*



			
				chemist said:
			
		

> If you've lost more than you've won, then you've lost.
> 
> "cut your losses small and let your wins ride" -- a worthless cliche. How do you know you were cutting a loss and not a win until after the event? how do you know your win is riding not about to crash, until after the event?
> 
> You should attend to reality, not cliches.
> 
> cheers,
> Chemist





Chemist i have only been a member of this Forum for about 1 week now and i must say you are full of wise comments.

All im going to ask you is this, since your not contributing to any threads at all but just adding criticism to them are you at all a Millionaire? Are you in a position to be giving such advice? 

You sound like my mechanic giving advice on what stocks to buy.

If you're not then im sorry but you're not in a position i want to be in. There are people here that are actually trying to increase there knowledge, not learn how to become a Mr "know all" but is dead broke and thinks they can give worthless advice to anybody.


As for Pharaoh mate im not in a position to give such advice but what i would recommend is find someone that is in the position you want to be in and ask them for some advice (perhaps even use them as a Mentor). Each person has to develop their own system that suits "them" not others.

Anywayz im off for a drink, cigar and some poker enjoy!


----------



## Porper

*Re: Trading / Daytrading for a living*



			
				chemist said:
			
		

> If you've lost more than you've won, then you've lost.
> 
> "cut your losses small and let your wins ride" -- a worthless cliche. How do you know you were cutting a loss and not a win until after the event? how do you know your win is riding not about to crash, until after the event?
> 
> You should attend to reality, not cliches.
> 
> cheers,
> Chemist




Ok, let's turn this around then.You say how do you know you were cutting a loss and not a win.If the stock is going down and you don't take a loss how do you know it won't keep going down ?

Your next comment you say how do you know your win is not going to crash.You don't but if it's rising why not let it ride ?

I don't think it is reality to have a fantastic win percentage and make great profits unless you are the worlds best trader.

Also, losing more often than winning does not make you a loser as you state.The worlds great traders often lose more often than they win.Difference is their average win is a lot higher than their average loss.

All this "must win" attitude will kill you mentally and will not allow you to be profitable.In my opinion of course.


----------



## professor_frink

*Re: Trading / Daytrading for a living*



			
				chemist said:
			
		

> If you've lost more than you've won, then you've lost.
> 
> "cut your losses small and let your wins ride" -- a worthless cliche. How do you know you were cutting a loss and not a win until after the event? how do you know your win is riding not about to crash, until after the event?
> 
> You should attend to reality, not cliches.
> 
> cheers,
> Chemist




hey chemist, have a look at tech/a's system. It wins less than 40% of the time and is very profitable.


----------



## nizar

*Re: Trading / Daytrading for a living*

Exactly

Well said Porper

Remember that maximum loss is 100%... maximum win can be much higher than that...


----------



## Ageo

*Re: Trading / Daytrading for a living*

 and i thought i was the only 1 seeing things hehe.

Good to see most people have the mentality that losing more than winning can actually be good (just as long as your wins outweigh the losses). Its also fantastic with your psychology because if you think that by getting ahead you need to win all the time, then what happens when you lose 1, or 2, 3, 5.......

You start to panic, your brain reacts different - and then thats when you start to become emotional and dont stick to your plan or stay disciplined.

Eventually you wont be able to hack it and you will either lose all of your capital or back out and that my friend is called Gambling, not Investing.

Teaching your brain that losing more trades than winning will allow you to go onto great wealth, i mean wether its 1, 10, 100, 1000 or even 10000 contracts and above your brain knows that its part of the process to lose but that 1 win will put you into profit. And the reason why alot of people that hope for more wins than losses dont outlay large capital is simply because there gambling and not investing. This is where leverage can be used at great advantage if used carefully (like a loaded gun  )


Adrian


----------



## wayneL

*Re: Trading / Daytrading for a living*



			
				chemist said:
			
		

> "cut your losses small and let your wins ride" -- a worthless cliche. How do you know you were cutting a loss and not a win until after the event? how do you know your win is riding not about to crash, until after the event?
> 
> Chemist




Chemist,

cliche'? Nope!

Truism? Yep! for the technical trader it is.

The expectancy equation confirms this.

Expectancy = (( 1 + risk/reward ratio) x win/loss ratio) - 1

Cheers


----------



## Ageo

*Re: Trading / Daytrading for a living*

Wayne could you break down your win expectancy?

sorry mate i didnt excel too good in maths 

cheers


----------



## professor_frink

*Re: Trading / Daytrading for a living*

he's done an article on it before. check these two threads out.

https://www.aussiestockforums.com/forums/showthread.php?t=2398&highlight=expectancy


https://www.aussiestockforums.com/forums/showpost.php?p=4858&postcount=25


----------



## Ageo

*Re: Trading / Daytrading for a living*

Thanks Frink
Ill check it out


----------



## chemist

*Re: Trading / Daytrading for a living*



			
				wayneL said:
			
		

> Chemist,
> 
> cliche'? Nope!
> 
> Truism? Yep! for the technical trader it is.
> 
> The expectancy equation confirms this.
> 
> Expectancy = (( 1 + risk/reward ratio) x win/loss ratio) - 1
> 
> Cheers




Your equation means nothing to me because you have not defined the terms.

That is by the by because no arithmetic recasting of the profit-loss calculation alters the facts I raised. No "staking plan" turns a negative expectation system into a positive expectation system. Trading rules that initiate transactions for reasons unrelated to future market direction (e.g. stop loss) decrease your expectation because every transaction costs you money.

I'd be happy to see references to published research which shows otherwise.

cheers,
Chemist


----------



## chemist

*Re: Trading / Daytrading for a living*



			
				Porper said:
			
		

> Ok, let's turn this around then.You say how do you know you were cutting a loss and not a win.If the stock is going down and you don't take a loss how do you know it won't keep going down ?




On the basis of the price action you described, you don't have any way to know. You're exiting because your exposure is making you worried. A stop-loss is trading in ignorance out of fear.

Does the fact that you're losing money on a trade make the market more likely to move against you? If you need to beat a retreat so quickly, perhaps your position size is too large relative to your capital.



			
				Porper said:
			
		

> Your next comment you say how do you know your win is not going to crash.You don't but if it's rising why not let it ride ?




Its "rising" is something it did in the past. You can't ride the past. Choosing not to exit is just another gamble on what it is going to do based on the assumption that whatever just happened is going to happen again. It does at least have the merit of not costing commission.



			
				Porper said:
			
		

> I don't think it is reality to have a fantastic win percentage and make great profits unless you are the worlds best trader.




That would be impossible. If you have a 53% win percentage and equal profits and losses, you are a great trader already.



			
				Porper said:
			
		

> Also, losing more often than winning does not make you a loser as you state.The worlds great traders often lose more often than they win.Difference is their average win is a lot higher than their average loss.
> 
> All this "must win" attitude will kill you mentally and will not allow you to be profitable.In my opinion of course.




What the text I replied to was _I expect to lose more than i actually win _ which to me implies losing more money than winning money, which implies losing overall. If the author intended to refer to numbers he should have put the word "often" in there.

Of course you can lose more often than you win and still win overall, but it is unlikely. Every stop-loss that hits is a tax on your trading (commission + bid/ask spread, at least). If your system gets stopped out a lot, then you have extra work to do to achieve profitability.

cheers,
Chemist


----------



## wayneL

*Re: Trading / Daytrading for a living*



			
				chemist said:
			
		

> Your equation means nothing to me because you have not defined the terms.
> 
> That is by the by because no arithmetic recasting of the profit-loss calculation alters the facts I raised. No "staking plan" turns a negative expectation system into a positive expectation system. Trading rules that initiate transactions for reasons unrelated to future market direction (e.g. stop loss) decrease your expectation because every transaction costs you money.
> 
> I'd be happy to see references to published research which shows otherwise.
> 
> cheers,
> Chemist




I agree no staking plan will overcome negative expectancy. But you seem to be confused between expectancy and money management. Expectancy has nothing whatever to do with staking plans. That is a separate issue. The expectancy equation is about creating positive expectancy. You should perhaps do some reading in this area... with an open mind of course.

Also, you might like to enlighten us with "the world according to chemist" instead of carping negativity from the sidelines.

How would you suggest folks trade profitably?


----------



## professor_frink

*Re: Trading / Daytrading for a living*

I'd like to know the answer to that as well. I use stop losses, I let my profits run for as long as I can, and I have positive expectancy in my trading. If these are all rubbish, what do you suggest I do?


----------



## Ageo

*Re: Trading / Daytrading for a living*



			
				wayneL said:
			
		

> Also, you might like to enlighten us with "the world according to chemist" instead of carping negativity from the sidelines.
> 
> How would you suggest folks trade
> profitably?





Been waiting for this all week   

Apparently any idea we have is no good, yet i havent seen any good ideas come from him.

Like i said he would make a great financial advisor


----------



## chemist

*Re: Trading / Daytrading for a living*



			
				wayneL said:
			
		

> I agree no staking plan will overcome negative expectancy. But you seem to be confused between expectancy and money management. Expectancy has nothing whatever to do with staking plans. That is a separate issue. The expectancy equation is about creating positive expectancy. You should perhaps do some reading in this area... with an open mind of course.
> 
> Also, you might like to enlighten us with "the world according to chemist" instead of carping negativity from the sidelines.
> 
> How would you suggest folks trade profitably?




I'm sorry if my posts have been too direct for some forum participants. So far I have not held back in saying what I think I have good reason to believe when I post. Perhaps I shall modify that approach.

I will tell you about my background. I am a computer programmer with a degree in mathematics. I have been trading sports wagering markets since late 2003. In that time I have made roughly $xxx,xxx from a starting capital about 1% of that. I am looking to expand my operations into the financial markets. With that in mind I have been researching futures, CFD's, etc, partly through books and journal papers, but also by observation. When I think I have good reason to believe I have a profitable trading method I will trade. I am not there yet.

I joined this forum to see what trading ideas were floating around. Like in gambling forums I find many people who seem to be under the illusion that trading (gambling) is the easy path to riches. It is not. If you failed at all other useful endeavours, don't turn to trading. Try driving a taxi instead.

There is no secret to success at professional gambling, unless hard work, clear headedness, and a commitment to doing what works is a secret. I think trading is similar. 

Stop-losses are like staking plans. They are not the same. Like a staking plan, a stop loss adds an element to your system which is unrelated to market direction or your expectation. As with staking plans, many gamblers, uh traders, think that adopting some arbitrary policy towards terminating their positions will make their losing system profitable. It almost certainly will not.

If your trading method has value then it has a component that is telling you something non-trivial about the market. This is your edge over the market. The stop-loss rule tells you to ignore your edge and get out of the market. Therefore a  stop-loss can only reduce your expectation, per dollar position size, because it reduces the amount of time you are trading your edge over the market and increases the number of fear trades (and commission and bid-ask spreads you have to cover).

It might be optimal to include a stop-loss because doing so may allow you to better exploit your edge by trading larger positions, compensating for the extra transactions. You can discover the maths yourself. However, stop-losses are not some magic that turns a losing system into a winning one. If you have no edge, you lose.

There are other important aspects such as minimizing costs. I was surprised to read that some of the (would be) traders here are unconcerned about costs because they are sure their trades will be so profitable as to render costs irrelevant. If your average profit before costs is 1% and your costs are 0.5%, you are happy; if your costs are 1% then you are not.

cheers,
Chemist


----------



## tech/a

*Re: Trading / Daytrading for a living*

Chemist.
I look forward to discussing your perception of profitable trading and how to be profitable soon.
I would tonight but need to see a Chemist to get rid of this headache.
I'll just go to bed.

I dont have a degree in maths but Son has he is finishing his Doctorate in photonics at Adelaide Uni.

Wish I had the knowledge Kris has and the experience I have amassed.
Once he has finished his doctorate we intend getting together,should be rewarding.

Thanks for your post----many pieces to discuss.

Hopefully tommorow will be a new and pain free day.


----------



## professor_frink

*Re: Trading / Daytrading for a living*

that's a better post chemist!
I see where you are coming from in regards to stop losses, but I disagree, especially when it comes to technical analysis. When a trader enters a trade based on a chart pattern or indicator, it won't work all the time. Nothing does.
For example, if you're basing your trading around buying areas of support, and that support fails to hold, then you sell,as the reason for entering the trade is no longer valid. You take a small loss and move on to the next one .Or if you base your buy signal around a moving average crossover, and after it happens, the stock turns down and the averages cross back, you sell. Nothing can be done to stop this type of thing happening whilst trading.

This is completely different to setting a random stop loss point to attempt to preserve capital whilst waiting for the big win to come along. 

Onto the next question- what is wrong with positive expectancy?

edit: What are the names of some gambling forums I could look at? I think it would be an interesting read


----------



## Lachlan6

*Re: Trading / Daytrading for a living*

Stop losses, stop losses, stop losses! Definently the most important thing when trading, especially cfd's. i think it is important to only take small losses cause the one compounded win  will cancel out these losses. soo important to trade smart when trading cfds. especially with the current market.


----------



## It's Snake Pliskin

*Re: Trading / Daytrading for a living*



> As with staking plans, many gamblers, uh traders, think that adopting some arbitrary policy towards terminating their positions will make their losing system profitable. It almost certainly will not.
> 
> If your trading method has value then it has a component that is telling you something non-trivial about the market. This is your edge over the market. The stop-loss rule tells you to ignore your edge and get out of the market. Therefore a stop-loss can only reduce your expectation, per dollar position size, because it reduces the amount of time you are trading your edge over the market and increases the number of fear trades (and commission and bid-ask spreads you have to cover).




Maybe you could elaborate on the opposite side of the equation that you didn't mention.

If you don't cut losses, do you cut winners? Or would that be inverted?


----------



## tech/a

*Re: Trading / Daytrading for a living*

Chemist.

It is not possible to calculate R/R without enough data to give a meaningful result.
As you say simply setting a stop with a percieved target price in itself has absolutley no meaning with regard to Positive expectancy---*although many delude themselves into thinking that setting a tight stop and targetting a sale price of 5x stop is a positive expectancy trading methodology*

Expectancy can and is calculated from a set of trades over a period of time given inputs and variables,when traded return results that can then be formulated into expectancy and a whole host of other results.


----------



## chemist

*Re: Trading / Daytrading for a living*



			
				professor_frink said:
			
		

> that's a better post chemist!
> I see where you are coming from in regards to stop losses, but I disagree, especially when it comes to technical analysis. When a trader enters a trade based on a chart pattern or indicator, it won't work all the time. Nothing does.
> For example, if you're basing your trading around buying areas of support, and that support fails to hold, then you sell,as the reason for entering the trade is no longer valid. You take a small loss and move on to the next one .Or if you base your buy signal around a moving average crossover, and after it happens, the stock turns down and the averages cross back, you sell. Nothing can be done to stop this type of thing happening whilst trading.




I agree. Yesterday your indicator said sell. What does it say today? If it now says buy (or hold), then closing or reversing your position is not being stopped out, it's a (rational) change of mind. OTOH if still says sell why close the position just because yesterday's trade has so far failed to show a profit? if we're trading our indicator we trust it. One random wrong day shouldn't change our minds.




			
				professor_frink said:
			
		

> This is completely different to setting a random stop loss point to attempt to preserve capital whilst waiting for the big win to come along.




Sure. Some people think that fiddling around with stops and targets can make them profitable. If a no-brainer strategy like "set your stops tight and wait for the big one" really was profitable, wouldn't any number of billion dollar hedge funds have arbed the inefficiency away by now?



			
				professor_frink said:
			
		

> Onto the next question- what is wrong with positive expectancy?




I don't get this bit. I like positive expectation.



			
				professor_frink said:
			
		

> edit: What are the names of some gambling forums I could look at? I think it would be an interesting read




http://www.bettingforum.co.uk is the best for golf. Unfortunately gold membership is invitational only.

Others that aren't complete rubbish:

http://www.arbforum.co.uk
http://forum.therx.com/index.php
http://www.punterslounge.com/forum
http://mb.winneronline.com/index.html

cheers,
Chemist


----------



## professor_frink

*Re: Trading / Daytrading for a living*



			
				chemist said:
			
		

> I agree. Yesterday your indicator said sell. What does it say today? If it now says buy (or hold), then closing or reversing your position is not being stopped out, it's a (rational) change of mind. OTOH if still says sell why close the position just because yesterday's trade has so far failed to show a profit? if we're trading our indicator we trust it. One random wrong day shouldn't change our minds.




The problem with that chemist, is I know any indicator I use is not trustworthy, most won't even get it right 50% of the time, but they will catch the big move when it comes. They will also catch the tops of smaller moves. That's why appropriately placed stop losses and position sizing(staking plans) are essential. You need to stay in the game long enough for your methods expectancy to play out.

Sorry I must have misunderstood you in regards to expectancy. When wayne posted the expectancy equation up before, you said the equation meant nothing. Looking back on that post now, after the recent posts you've made I can see why you said that and I agree. No position sizing method can turn negative expectancy into a positive one, but a poor position sizing method combined with not following stop loss signals generated by the system can turn positive expectancy into a failure.

Thanks for the links. I'll check em out today


----------



## tech/a

*Re: Trading / Daytrading for a living*



			
				tech/a said:
			
		

> Chemist.
> 
> It is not possible to calculate R/R without enough data to give a meaningful result.
> As you say simply setting a stop with a percieved target price in itself has absolutley no meaning with regard to Positive expectancy---*although many delude themselves into thinking that setting a tight stop and targetting a sale price of 5x stop is a positive expectancy trading methodology*
> 
> Expectancy can and is calculated from a set of trades over a period of time given inputs and variables,when traded return results that can then be formulated into expectancy and a whole host of other results.





Prof are you falling into this trap?

How do you determine Positive expectancy in your trading?
More to the point how do you KNOW your trading is with a positive expectancy.

Waynes equation without tested numbers means nothing its simply a formula,with them then the calculation can be performed and a final figure determined.


----------



## professor_frink

*Re: Trading / Daytrading for a living*



			
				tech/a said:
			
		

> Prof are you falling into this trap?
> 
> How do you determine Positive expectancy in your trading?
> More to the point how do you KNOW your trading is with a positive expectancy.
> 
> Waynes equation without tested numbers means nothing its simply a formula,with them then the calculation can be performed and a final figure determined.




God I hope not!

Expectancy in my trading is based on previous trades, so technically you'd be right.I don't know for sure that my future trades will still have it. But that's discretionary trading for you isn't it! I think(well at least I hope!) I've done enough trading and have enough results on the board(5+ years worth) to establish that I am trading with positive expectancy.


----------



## Ageo

*Re: Trading / Daytrading for a living*



			
				tech/a said:
			
		

> Prof are you falling into this trap?
> 
> How do you determine Positive expectancy in your trading?
> More to the point how do you KNOW your trading is with a positive expectancy.
> 
> Waynes equation without tested numbers means nothing its simply a formula,with them then the calculation can be performed and a final figure determined.





So basically your saying you wont know your expectancy until you start trading? (i agree) But you have to have some sort of guide to have you on the right track. Perhaps trading very small amounts at 1st so you can see what your expectancy is and if it looks good increase the volume over time.


----------



## professor_frink

*Re: Trading / Daytrading for a living*



			
				Ageo said:
			
		

> So basically your saying you wont know your expectancy until you start trading? (i agree) But you have to have some sort of guide to have you on the right track. Perhaps trading very small amounts at 1st so you can see what your expectancy is and if it looks good increase the volume over time.




If you use a mechanical system that's been tested, like tech's system, then you can establish it before you start. with discretionary trading there's no real way of knowing until you start trading.


----------



## tech/a

*Re: Trading / Daytrading for a living*



> with discretionary trading there's no real way of knowing until you start trading.




Here in lies the single most important problem facing discretionary traders.

Even with best intentions and hypothesis,you wont have a picture for months if not years---and if its not positve or positive enough then back to the drawing board.

This is why being able to test Ideas and being able to refine them is terribly important.

In the end not only positive expectancy will be known but a vast array of information which should be used as a blueprint for all future trading.


----------



## tech/a

*Re: Trading / Daytrading for a living*

Have loaded in for more AIM at 12.5c

This is not recommended for home viewers.
I'm punting on a support area and averaging down.


----------



## Bobby

*Re: Trading / Daytrading for a living*



			
				tech/a said:
			
		

> Have loaded in for more AIM at 12.5c
> 
> This is not recommended for home viewers.
> I'm punting on a support area and averaging down.




Interesting to see you averaging down   isn't this a no no ?

Also your buy at 12.5 was above support of 12c , but they are 13c now so what was your thinking at the time ?
Was it the depth strength 12c  .

Bob.


----------



## tech/a

*Re: Trading / Daytrading for a living*

Bobby.

Yes it is a no,no.
I got caught with the gap down so changed the play.
what I'm doing is risky (if I get filled,still 3rd in the que at 12.5)
My intention is to mitigate loss. I may well add to it!!

I certainly dont recommend averaging down,this is a situation which fortunately I find myself in rarely as I take the loss.

Will see how it pans out.Now 13.5,will not chase the buy.


----------



## Sean K

*Re: Trading / Daytrading for a living*

Do you guys using Moving Averages to determine entry and exit strategy?

If so, which indicators do you use? 

MACD (buy when there's a bullish divergence moving up through signal line for eg?)

Simple MAs (buy when 20 or 50 day MA crosses 200 day MA for eg?)

Any other rules you work off, or you using other systems?


----------



## Bobby

*Re: Trading / Daytrading for a living*



			
				tech/a said:
			
		

> Bobby.
> 
> Yes it is a no,no.
> I got caught with the gap down so changed the play.
> what I'm doing is risky (if I get filled,still 3rd in the que at 12.5)
> My intention is to mitigate loss. I may well add to it!!
> 
> I certainly dont recommend averaging down,this is a situation which fortunately I find myself in rarely as I take the loss.
> 
> Will see how it pans out.Now 13.5,will not chase the buy.




Thanks for being so candid !
Good to know your not going to chase it !

Bob.


----------



## tech/a

*Re: Trading / Daytrading for a living*



			
				kennas said:
			
		

> Do you guys using Moving Averages to determine entry and exit strategy?
> 
> If so, which indicators do you use?
> 
> MACD (buy when there's a bullish divergence moving up through signal line for eg?)
> 
> Simple MAs (buy when 20 or 50 day MA crosses 200 day MA for eg?)
> 
> Any other rules you work off, or you using other systems?





No I generally trade Breakouts. Or volume spikes when trading in a discretionary manner.

My longterm trading methodology is here if you are interested 

http://lightning.he.net/cgi-bin/suid/~reefcap/ultimatebb.cgi?ubb=forum;f=74


----------



## Bobby

*Re: Trading / Daytrading for a living*



			
				kennas said:
			
		

> Do you guys using Moving Averages to determine entry and exit strategy?
> 
> If so, which indicators do you use?
> 
> MACD (buy when there's a bullish divergence moving up through signal line for eg?)
> 
> Simple MAs (buy when 20 or 50 day MA crosses 200 day MA for eg?)
> 
> Any other rules you work off, or you using other systems?




Hullo Kennas,

I don't use the common indicators much any more, because when to many use something it becomes less affective.
I do pay attention to depth & volume plus other stuff.

Bob.


----------



## professor_frink

*Re: Trading / Daytrading for a living*



			
				kennas said:
			
		

> Do you guys using Moving Averages to determine entry and exit strategy?
> 
> If so, which indicators do you use?
> 
> MACD (buy when there's a bullish divergence moving up through signal line for eg?)
> 
> Simple MAs (buy when 20 or 50 day MA crosses 200 day MA for eg?)
> 
> Any other rules you work off, or you using other systems?




most of my trades are based around the directional movement group of indicators.  Don't use the macd, mainly the RSI and mainly to look for divergence. recently changed from having a 20 period sma on the chart to a 5,15 and 30 ema to help gauge the trend( If you read "your trading edge" magazine you'll know what I'm talking about with the ema's. A woman that writes for them who also uses the DM group, is always raving about them so I gave them a go for awhile, found it really helpful, so they are on there all the time now). Depending on how a trend develops will determine which one I pay most attention to. And it makes the chart look real  pretty


----------



## chemist

*Re: Trading / Daytrading for a living*



			
				tech/a said:
			
		

> Prof are you falling into this trap?
> 
> How do you determine Positive expectancy in your trading?
> More to the point how do you KNOW your trading is with a positive expectancy.




t/a

I don't KNOW anything so I use statistics. I never trade without backtesting. Once your profits are out past 10 sigma you can pretty much forget about the possibility that it is all down to luck.

cheers,
Chemist


----------



## tech/a

*Re: Trading / Daytrading for a living*

Chemist.

My post you have referred to was infact meant for Professor fink.

Prof for short


----------



## chemist

*Re: Trading / Daytrading for a living*



			
				tech/a said:
			
		

> Chemist.
> 
> It is not possible to calculate R/R without enough data to give a meaningful result.
> As you say simply setting a stop with a percieved target price in itself has absolutley no meaning with regard to Positive expectancy---*although many delude themselves into thinking that setting a tight stop and targetting a sale price of 5x stop is a positive expectancy trading methodology*
> 
> Expectancy can and is calculated from a set of trades over a period of time given inputs and variables,when traded return results that can then be formulated into expectancy and a whole host of other results.




t/a,

I trust your health has improved. I don't disagree with anything you've said above. A positive expected profit (in excess of buy-and-hold) requires an edge over the market. Fiddling with your staking, stops, and targets moves you around on a risk-reward curve defined by the performance of your market direction picking. What most traders really want to do is move to a whole new (higher) curve because the one they're on now is a risk-loss curve.

cheers,
Chemist


----------



## tech/a

*Re: Trading / Daytrading for a living*

Chemist.

If you remove "Target" from any equation and replace it with an exit criteria,the remaining results and expectancy will be relative to that set of criteria.
"target" is the parameter which can limit profit,infact it can have the greatest detrimental effect as the old adage of letting profits run cannot occur beyond any set target.

Most are only interested in entry when it is exit which will govern return.


----------



## wayneL

*Re: Trading / Daytrading for a living*



			
				chemist said:
			
		

> t/a
> 
> I don't KNOW anything so I use statistics. I never trade without backtesting. Once your profits are out past 10 sigma you can pretty much forget about the possibility that it is all down to luck.
> 
> cheers,
> Chemist




10 sigmas? Thats a lot of sigmas chemist.

Question: 10 sigmas from what?


----------



## chemist

*Re: Trading / Daytrading for a living*



			
				nizar said:
			
		

> Chemist those words were actually said by Peter Lynch in his book One up on Wall St
> 
> And i think it goes without saying that hes more pro than EVEN YOU
> 
> He said that most people make the mistake of locking in profits quickly, ull never get ur 10-baggers that way (he got PLENTY in his time), and that they hold on to losers hoping for a recovery. You should be cutting the weeds and let the flowers grow - not the other way around




Not sure which words you are talking about and I have barely heard of Peter Lynch. I don't read "hero" investment fiction for the same reason I never paid anyone for gambling advice. If they're writing a book or doing "seminars" or selling a "system" then they are probably snakeoil salesmen and certainly not professional gamblers or traders. People who are genuinely making money gambling on a long term basis hold their cards pretty close to their chest. I never met one who wanted to tell me his system, and I've never told anyone mine. Whether it's gambling or trading, there's only so much stupid money in the market, so why give some of it away?

cheers,
Chemist


----------



## Ageo

*Re: Trading / Daytrading for a living*



			
				chemist said:
			
		

> Not sure which words you are talking about and I have barely heard of Peter Lynch. I don't read "hero" investment fiction for the same reason I never paid anyone for gambling advice. If they're writing a book or doing "seminars" or selling a "system" then they are probably snakeoil salesmen and certainly not professional gamblers or traders. People who are genuinely making money gambling on a long term basis hold their cards pretty close to their chest. I never met one who wanted to tell me his system, and I've never told anyone mine. Whether it's gambling or trading, there's only so much stupid money in the market, so why give some of it away?
> 
> cheers,
> Chemist





lol glad to see your full of help! So what your saying is then these forums are useless? i mean why would someone want to help others right? then what are you doing here?

Chemist just answer me one question mate, are you a multimillionaire and are you in a position to never go back to work if you dont want to?

Yes or No


----------



## nizar

*Re: Trading / Daytrading for a living*



			
				chemist said:
			
		

> Not sure which words you are talking about and I have barely heard of Peter Lynch. I don't read "hero" investment fiction for the same reason I never paid anyone for gambling advice.




Google him

Ran a fund for Fidelity from 1977 to 1990, 10k invested with him at the beginning would have yielded 280k at the end... 29% per year compounded and never a negative year.. yes he made money in 1987.... when he started with the fund it was 20mil, when he left it was well into the billions.. money flooding in...

Was the biggest fund in the world at its peak and hes very famous, im suprised u havent heard of him...

You should read his book, u mite learn sumthing... oh maybe not, since u already know everything


----------



## tech/a

*Re: Trading / Daytrading for a living*

why does it matter?

I dont find anything offensive posted by Chemist?

I can understand why pro gamblers would not disclose their methods.
Traders have a massive market with far more players and far more money involved,disclosing methods doesnt detract from ones performance or put them in a position where their disclosure causes them the loss of an edge.

If you were a pro poker player then things could be very different.


----------



## chemist

*Re: Trading / Daytrading for a living*



			
				dennisll said:
			
		

> Thank you for your kind responses.
> 
> Strw23, I agree that Leverage is a fantastic tool for wealth accumulation and can be used in conjunction with a trading strategy.  Perhaps a new thread showing how Leverage can be used with risk controls would be beneficial?
> 
> Professor frink, I did not mean to sound negative so I apoligize if that was the tone of my post.  10% return may appear to be small, but if the average return of the market one has chosen is 10%, I think it is logical to expect that an average trader's return will be around that figure as well, plus or minus some percentage points depending on his skill level.  Top traders may be looking at say 2x or 3x that amount.  I did say that I was looking from a new trader's point of view which is why I chose to be conservative.




Always be conservative in assessing the prospects of any trading venture. Over confidence kills far more cats than curiosity ever did.



			
				dennisll said:
			
		

> From another perspective, I would consider 5% as a risk-free return (throw all my money in a high yielding online savings account).  A 10% return would be double that and would be much more attractive.




That depends on how variable that 10% return is. You should test the Sharpe ratio.



			
				dennisll said:
			
		

> ...
> Bullmarket, was it 10% of traders?  I thought it was less actually.  Hopefully as we learn more through this forum we can nudge that up to 11%




According to Betfair, the dominant betting exchange, each year approximately 0.15% of their active user base makes a net profit in excess of £15,000. I expect traders have a much higher general aptitude, but sixty times?    

cheers,
Chemist


----------



## Bobby

*Re: Trading / Daytrading for a living*

Well Chemist I like a original thinker.

Your about to trade with your own ideas ? would you like to discuss your thoughts or debate more .

As you stated you have a maths degree,  Like to ask you about a theorem if thats ok ?

Bob.


----------



## wayneL

*Re: Trading / Daytrading for a living*



			
				wayneL said:
			
		

> 10 sigmas? Thats a lot of sigmas chemist.
> 
> Question: 10 sigmas from what?




Looking forward to your answer to this question.


----------



## chemist

*Re: Trading / Daytrading for a living*



			
				wayneL said:
			
		

> Looking forward to your answer to this question.




Odd, I posted an answer earlier today. My wireless link can be a little unreliable in the den.

In the systems evaluation context in which it was used, 10 sigmas from the expected returns of a random trader with the same number of transactions.

cheers,
Chemist


----------



## wayneL

*Re: Trading / Daytrading for a living*



			
				chemist said:
			
		

> Odd, I posted an answer earlier today. My wireless link can be a little unreliable in the den.
> 
> In the systems evaluation context in which it was used, 10 sigmas from the expected returns of a random trader with the same number of transactions.
> 
> cheers,
> Chemist




OK

Then it may be assumed that a random trader would achieve returns within 1 Sigma of the Broad based index, yes?

1 sigma on the XJO is approximately 10%, so you are looking for returns in excess of 100% per annum, to statistically verify positive expectancy? (Is how you are looking at it?)

A handsome goal, and certainly achievable whithin a certain account size, but a little over the top for verification purposes. 2 Sigmas (unleveraged), on a consistent basis (though not suggesting this should be the ultimate goal) should be ample to prove positive expectancy I would have thought.

Just my AUD$0.02 

Cheers


----------



## chemist

*Re: Trading / Daytrading for a living*



			
				wayneL said:
			
		

> OK
> 
> Then it may be assumed that a random trader would achieve returns within 1 Sigma of the Broad based index, yes?
> 
> 1 sigma on the XJO is approximately 10%, so you are looking for returns in excess of 100% per annum, to statistically verify positive expectancy? (Is how you are looking at it?)
> 
> A handsome goal, and certainly achievable whithin a certain account size, but a little over the top for verification purposes. 2 Sigmas (unleveraged), on a consistent basis (though not suggesting this should be the ultimate goal) should be ample to prove positive expectancy I would have thought.
> 
> Just my AUD$0.02
> 
> Cheers




Correction: I'm not looking for 10 sigma anything.

The correct calculation is to compute the statistics of the matching random trader. This can be done by montecarlo methods or just calculated. 

Let's imagine you traded XJO futures. If you did N trades in the year and were average absolute delta d, then its annual variance is something like d.V(XJO). The commission and bid-ask spread components don't change the variance, they just make expectation go negative. E = E(XJO) - N.c, where c is the average round trip transaction cost.

So if N=100 (daytrader), d=0.25 (average trade duration about half the day on half the days), c=0.002 (0.2% costs), then we're looking at expected under-performance of the XJO of 20% with a standard deviation of about 5%, so just matching the XJO for the year is a four sigma event. Even over only one year high sigmages are possible for methods with a high transaction rate.

cheers,
Chemist


----------



## wayneL

*Re: Trading / Daytrading for a living*



			
				chemist said:
			
		

> Correction: I'm not looking for 10 sigma anything.
> 
> The correct calculation is to compute the statistics of the matching random trader. This can be done by montecarlo methods or just calculated.
> 
> Let's imagine you traded XJO futures. If you did N trades in the year and were average absolute delta d, then its annual variance is something like d.V(XJO). The commission and bid-ask spread components don't change the variance, they just make expectation go negative. E = E(XJO) - N.c, where c is the average round trip transaction cost.
> 
> So if N=100 (daytrader), d=0.25 (average trade duration about half the day on half the days), c=0.002 (0.2% costs), then we're looking at expected under-performance of the XJO of 20% with a standard deviation of about 5%, so just matching the XJO for the year is a four sigma event. Even over only one year high sigmages are possible for methods with a high transaction rate.
> 
> cheers,
> Chemist




OK, 10 sigmas it is.


----------



## Bobby

*Re: Trading / Daytrading for a living*

Hey Chemist its time to prove You !

Show us the formula to work this out .

Three urns contain respectively 1 white, 3 red, & 2 black balls; 3 white, 1 red, & 1 black ball; 3 white, 3 red, & 3 red, & 3 black balls.
Two balls are chosen from a randomly selected urn.

If the two balls are a white and a red, what is the probability that they came from the second urn ?


Don't try to bull **** me  

Bob.


----------



## It's Snake Pliskin

*Re: Trading / Daytrading for a living*



			
				tech/a said:
			
		

> Bobby.
> 
> Yes it is a no,no.
> I got caught with the gap down so changed the play.
> what I'm doing is risky (if I get filled,still 3rd in the que at 12.5)
> My intention is to mitigate loss. I may well add to it!!
> 
> I certainly dont recommend averaging down,this is a situation which fortunately I find myself in rarely as I take the loss.
> 
> Will see how it pans out.Now 13.5,will not chase the buy.




Well, well, well. Tech averaging down. How discretionary is that!
How's the psychology?


----------



## Bobby

*Re: Trading / Daytrading for a living*



			
				Snake Pliskin said:
			
		

> Well, well, well. Tech averaging down. How discretionary is that!
> How's the psychology?



 Snake no need to rub it in, he had the guts to say its bad &  thats good for all the new traders who now know that its a crap play !

You do agree I hope ?   

Bob.


----------



## tech/a

*Re: Trading / Daytrading for a living*



			
				Snake Pliskin said:
			
		

> Well, well, well. Tech averaging down. How discretionary is that!
> How's the psychology?




Yeh Thought Id excelled.
Psychology,touch and go,sweaty palms,constant pacing,Cash Converters on Speed dial.

Hahaha
Theres a few K at risk here,no need to make funeral arrangements just yet.


----------



## wayneL

*Re: Trading / Daytrading for a living*



			
				tech/a said:
			
		

> Yeh Thought Id excelled.
> Psychology,touch and go,sweaty palms,constant pacing,Cash Converters on Speed dial.
> 
> Hahaha
> Theres a few K at risk here,no need to make funeral arrangements just yet.




hehehe


----------



## macca

*Re: Trading / Daytrading for a living*

Hi Tech,

Could be old age sneaking up on you here mate.

Mid life crisis, seeking excitement outside the usual behaviour pattern, sounds bad mate !!

We insiders know that you are just trying to get enough drinking silver to keep up with Steve in the UK


----------



## It's Snake Pliskin

*Re: Trading / Daytrading for a living*



			
				Bobby said:
			
		

> Snake no need to rub it in, he had the guts to say its bad &  thats good for all the new traders who now know that its a crap play !
> 
> You do agree I hope ?
> 
> Bob.




It sounds like a desperation play Bobby.


----------



## It's Snake Pliskin

*Re: Trading / Daytrading for a living*



			
				tech/a said:
			
		

> Yeh Thought Id excelled.
> Psychology,touch and go,sweaty palms,constant pacing,Cash Converters on Speed dial.
> 
> Hahaha
> Theres a few K at risk here,no need to make funeral arrangements just yet.




Maybe you could lead us through your thoughts when doing it Tech.


----------



## tech/a

*Re: Trading / Daytrading for a living*



			
				Snake Pliskin said:
			
		

> Maybe you could lead us through your thoughts when doing it Tech.



 Snake

Thought I was doing that.

Anyway.
Annoying that I didnt get filled as it would have averaged me at 17c.
Now 15c and only 4c off the pace.
Still holding and will let you know how I intend playing this as price developes.


----------



## chemist

*Re: Trading / Daytrading for a living*



			
				Snake Pliskin said:
			
		

> Maybe you could elaborate on the opposite side of the equation that you didn't mention.
> 
> If you don't cut losses, do you cut winners? Or would that be inverted?




Snake,

I don't think it helps to consider whether you are winning or losing. Your best estimate of what the market will do today is the same regardless, and that is what you should be paying attention to.

cheers,
Chemist


----------



## chemist

*Re: Trading / Daytrading for a living*



			
				professor_frink said:
			
		

> The problem with that chemist, is I know any indicator I use is not trustworthy, most won't even get it right 50% of the time, but they will catch the big move when it comes. They will also catch the tops of smaller moves. That's why appropriately placed stop losses and position sizing(staking plans) are essential. You need to stay in the game long enough for your methods expectancy to play out.



Frink,

It is possible to think about this more clearly. Suppose your method M picks some profitable moves, but sometimes gets it wrong. Suppose further that if the day after a trading signal the market has moved contrariwise by X%, then it is more profitable to close your position regardless what M says. Then why not replace M by M', the same method but with the rule concerning the movement since yesterday factored in? 

This produce the same behaviour in the case of a reversal, while making the method stronger overall. Under the "indicator plus stop-loss" system you were entering positions in circumstaces where, if you had entered the same position the day before, you'd be exiting it now!

cheers,
Chemist


----------



## chemist

*Re: Trading / Daytrading for a living*



			
				Bobby said:
			
		

> Hey Chemist its time to prove You !
> 
> Show us the formula to work this out .
> 
> Three urns contain respectively 1 white, 3 red, & 2 black balls; 3 white, 1 red, & 1 black ball; 3 white, 3 red, & 3 red, & 3 black balls.
> Two balls are chosen from a randomly selected urn.
> 
> If the two balls are a white and a red, what is the probability that they came from the second urn ?
> 
> 
> Don't try to bull **** me
> 
> Bob.




Bob,

You will be able to work this out if you apply Bayes' Theorem.

 

Chemist


----------



## Bobby

*Re: Trading / Daytrading for a living*



			
				chemist said:
			
		

> Bob,
> 
> You will be able to work this out if you apply Bayes' Theorem.
> 
> 
> 
> Chemist



 Hullo Chemist,

Well done !   

Thomas Bayes ( 1702 - 1761 )

Regards Bob.


----------



## wayneL

*Re: Trading / Daytrading for a living*



			
				Bobby said:
			
		

> Hullo Chemist,
> 
> Well done !
> 
> Thomas Bayes ( 1702 - 1761 )
> 
> Regards Bob.




Oh Gawd!

http://en.wikipedia.org/wiki/Bayes'_theorem

Black Scholes was enough to cause cranial fission for me. 

What does it all mean?


----------



## professor_frink

*Re: Trading / Daytrading for a living*



			
				wayneL said:
			
		

> Oh Gawd!
> 
> http://en.wikipedia.org/wiki/Bayes'_theorem
> 
> Black Scholes was enough to cause cranial fission for me.
> 
> What does it all mean?




It means people like me should just step aside for the rest of this thread


----------



## Bobby

*Re: Trading / Daytrading for a living*



			
				wayneL said:
			
		

> Oh Gawd!
> 
> http://en.wikipedia.org/wiki/Bayes'_theorem
> 
> Black Scholes was enough to cause cranial fission for me.
> 
> What does it all mean?




PROBABILITY: elements of the mathematical theory   

Have Fun
Bob.


----------



## wayneL

*Re: Trading / Daytrading for a living*



			
				professor_frink said:
			
		

> It means people like me should just step aside for the rest of this thread




LOL... Indeed!

Exit, stage left for me too.


----------



## tech/a

*Re: Trading / Daytrading for a living*



> This produce the same behaviour in the case of a reversal, while making the method stronger overall. Under the "indicator plus stop-loss" system you were entering positions in circumstaces where, if you had entered the same position the day before, you'd be exiting it now!




Chemist.
This will largely depend on timeframe and in particular width of stop/number of occurences relative to the method being traded.So in some cases yes.

With longer term methods there becomes a balance between width of stop and occurence.To tight and your stopped out to early.
To wide and your often stuck in a trade somewhere between stop and entry price.
Then there is the validity of your entry -- at what point do you determine that the reason for entry is no longer valid,this in my veiw should be at around the same point as any stop.This is also a topic I have never seen covered by Fundamental traders who buy on percieved "Value" if the market trades the share down 20-40% or more is the trade "Better" value or worse?

Technically an entry generally has no relevence to value other than current or near price action,which remains valid or becomes invalid at a predetermined level.

For systems traders this level acn be tested andf results recorded,and if traded the same as the tested inputs and variables (provided the testing is using a significant amount of data over a long enough period) should return within the Sigma's of the results shown from Montecarlo testing.

The 3 I use have even in times like those we have now.

Results then are traded on a method rather than singular trades.The results of each trade cannot be known however the results of multiple trades can be tested and results recorded to give a trading blueprint.

Always interested in ways of increasing trade results.


----------



## swingstar

*Re: Trading / Daytrading for a living*

I don't know any day traders personally, but I do know a number of traders who trade for a living and have been for a good few years. I myself have been for over 12 months. 

Worst case scenario, which I don't think will happen, is I get a job. I'm happy living this "fantasy" for now. 

To the "realists", sorry to burst your bubbles...


----------



## It's Snake Pliskin

*Re: Trading / Daytrading for a living*



			
				swingstar said:
			
		

> I don't know any day traders personally, but I do know a number of traders who trade for a living and have been for a good few years. I myself have been for over 12 months.
> 
> Worst case scenario, which I don't think will happen, is I get a job. I'm happy living this "fantasy" for now.
> 
> To the "realists", sorry to burst your bubbles...





It may be a fantasy for some, and it may be a very good reality for others.

Certainly a bubble for others and big for a *select few*.


----------



## mit

*Re: Trading / Daytrading for a living*



			
				chemist said:
			
		

> Frink,
> 
> It is possible to think about this more clearly. Suppose your method M picks some profitable moves, but sometimes gets it wrong. Suppose further that if the day after a trading signal the market has moved contrariwise by X%, then it is more profitable to close your position regardless what M says. Then why not replace M by M', the same method but with the rule concerning the movement since yesterday factored in?
> 
> This produce the same behaviour in the case of a reversal, while making the method stronger overall. Under the "indicator plus stop-loss" system you were entering positions in circumstaces where, if you had entered the same position the day before, you'd be exiting it now!
> 
> cheers,
> Chemist




Reply to an old message I know, but isn't this true only for a random market? I was inhabiting a forex forum for awhile and some people were talking about largely the same things (Grid trading a variation on Martingaling). I tested this against 7 years of minute data and found it didn't work. M' would have a chance of failure greater than the amount saved by getting in at a lower price. Using probability is good for getting a feel for the markets but when you look at the actual data things aren't quite the same.

This is different from a staged entry where you buy above a support and might buy some more closer to the support level if it drops further.

MIT


----------



## stink

HI All,

Well finally got through this thread, although i think only the first couple of pages stayed on topic  

Anyway the main things i have picked up in reading this is "maximum Drawdown" i hope that the correct term.

How do you calculate this?

If i had 10k and was looking to use leverage "safely", how do i calculate the maximum drawdown? I understand the 2% rule etc when trading without leverage but i dont understand yet how to apply the same type of rules etc when trading margin.

Cheers Stink


----------



## tech/a

Ill make all clear on the other thread when I get more time.

Cheers


----------



## MichaelD

stink said:
			
		

> If i had 10k and was looking to use leverage "safely", how do i calculate the maximum drawdown? I understand the 2% rule etc when trading without leverage but i dont understand yet how to apply the same type of rules etc when trading margin.



If you know the maximum drawdown of your system without leverage, then simply multiply it by the proposed leverage. i.e. if your system's maximum drawdown without leverage is 10% then with 50% leverage it will be 20%.

WARNING: Learn to trade well without leverage first or leverage will very quickly destroy you. Think not of the increased profits, but instead focus on the increased drawdowns that leverage will bring. Your psychology needs to be prepared for this before you use leverage.


----------



## stink

MichaelD said:
			
		

> If you know the maximum drawdown of your system without leverage, then simply multiply it by the proposed leverage. i.e. if your system's maximum drawdown without leverage is 10% then with 50% leverage it will be 20%.
> 
> WARNING: Learn to trade well without leverage first or leverage will very quickly destroy you. Think not of the increased profits, but instead focus on the increased drawdowns that leverage will bring. Your psychology needs to be prepared for this before you use leverage.




So your basically saying that i just apply the same money management rules i would to a normal trade? So if i was only comfortable to lose $600 of my 10k before i would stop trading and slap myself around a bit, then with say 50% leverage i have 15k then my max loss i can take on this amount is $900??

With the leverage and cfd's is the leverage applied to my total account or each individual trade i.e i have 10k and want to open a position using 3k of my own money plus say another 3k of leverage making the position i have open 6k in total but i have to make sure that should this trade go against me i dont lose anymore than 900? or if i have two positions open say two parcels of 3k with 3k of leverage on each my stops etc have to be in place to ensure that i dont lose more than 900 should the trade go against me?? Arghhh no that cant be right cause that makes the position i have oen 12k,   i think i am gonna !


----------



## Fugazi

I find it easier to just forget about how much actual hard cash you are using. All that's happening is you are trading a bigger bunch of shares for less real money. Just look at the profit/loss. If you enter a trade on the understanding that if it goes to pieces you could lose $1000 before you are stopped out, what difference does it make whether the trade cost $10 or $10K to put on. The risk is the same.


----------



## swingstar

Fugazi said:
			
		

> I find it easier to just forget about how much actual hard cash you are using. All that's happening is you are trading a bigger bunch of shares for less real money. Just look at the profit/loss. If you enter a trade on the understanding that if it goes to pieces you could lose $1000 before you are stopped out, what difference does it make whether the trade cost $10 or $10K to put on. The risk is the same.




Exactly. The way I look at leverage is freeing up equity for more positions. Risk is the same no matter what. You'd be stupid to use leverage and not alter position size accordingly.


----------



## stink

Fugazi said:
			
		

> I find it easier to just forget about how much actual hard cash you are using. All that's happening is you are trading a bigger bunch of shares for less real money. Just look at the profit/loss. If you enter a trade on the understanding that if it goes to pieces you could lose $1000 before you are stopped out, what difference does it make whether the trade cost $10 or $10K to put on. The risk is the same.




Good point mate i suppose its the thought of trading with money that i dont really have, but like you say as long as i consider the potential loss and have stops set accordingly and more importantly have ability to cover the loss then it should be fine.


----------



## MichaelD

stink said:
			
		

> So your basically saying that i just apply the same money management rules i would to a normal trade? So if i was only comfortable to lose $600 of my 10k before i would stop trading and slap myself around a bit, then with say 50% leverage i have 15k then my max loss i can take on this amount is $900??



Yes, correct. In this situation you are trading 15K although you only have 10K but at the same risk level as you would have traded 10K - hence the increased drawdown from $600 to $900.


----------



## alwaysLearning

This thread is very intresting to a newbie like myself.

I'm very surprised at some of the comments but that just goes to show how ignorant I am about trading.

It sounds like a lot of you incline on going long and medium for most of your capital base. Doesn't sound like you guys go 'short' that much, otherwise you'd be busier during the day etc.


----------



## tech/a

alwaysLearning said:


> This thread is very intresting to a newbie like myself.
> 
> I'm very surprised at some of the comments but that just goes to show how ignorant I am about trading.
> 
> It sounds like a lot of you incline on going long and medium for most of your capital base. Doesn't sound like you guys go 'short' that much, otherwise you'd be busier during the day etc.




Not that much available to go short on in Aust.
The US is a different matter though.
I prefer to trade the physical rather than CFD's.
Using IB. Having been introduced to their Conditional orders platform and Brokerage that you only dream about ( $6.50 under 10K or .08% in Aust or $1 each way in the US) I'm in traders heaven.


----------



## julius

tech/a said:


> I prefer to trade the physical rather than CFD's.





Why's this tech ?


----------



## tech/a

I want to own it.
I want something tangible.
Just me I guess, I want an asset.


----------



## >Apocalypto<

Tech, Julius.

this not really aimed at u tech just a reply in a small sense to your above post.

what i have seen heard and learnt. it's a very hard gig to make a living only trading CFD's. I am sure some can do it but i bet that's a rare few.

Like TH has pointed out many a time u want to scalp day trade for a living u got to trade the futures with a big start up account. If u plan to scalp day trade FX then ECN is the only way to go. (not EFX) 

Transparency people! 

Tech, if u had the capital available could u make a living day trading fully paid shares?


----------



## tech/a

I trade fair sized parcels now on Margin.
So Yes.
But agree a return of say 1-2% a week
doesnt look much on a capital base of $20k.

I dont trade for a living---just for profit,so having funds work hard for me is prime.


----------



## ThingyMajiggy

So who here actually trades for a living, as in sole income is from trading? Doesn't matter about definitions or meanings or if you want to or not, just who here does successfully(profitable more often than not), as in doesn't need to go back to their job next week. On whatever instrument(stocks, options, CFDs, futs). 

Am interested to know how many, if any.


----------



## skc

ThingyMajiggy said:


> So who here actually trades for a living, as in sole income is from trading? Doesn't matter about definitions or meanings or if you want to or not, just who here does successfully(profitable more often than not), as in doesn't need to go back to their job next week. On whatever instrument(stocks, options, CFDs, futs).
> 
> Am interested to know how many, if any.




One here.

Others that I am aware of... MichaelD, SkyQ, WayneL(?), Pixel(?)

Propbably no more than 10.


----------



## ThingyMajiggy

skc said:


> One here.
> 
> Others that I am aware of... MichaelD, SkyQ, WayneL(?), Pixel(?)
> 
> Propbably no more than 10.




Yeah my thoughts too, what is your main driver? Pairs trading? 

I think SkyQ is prop? Wayne is options, not sure about MichaelD and pixel though, would be interesting to find out. 

Thanks for replying


----------



## captain black

ThingyMajiggy said:


> So who here actually trades for a living, as in sole income is from trading? Doesn't matter about definitions or meanings or if you want to or not, just who here does successfully(profitable more often than not), as in doesn't need to go back to their job next week. On whatever instrument(stocks, options, CFDs, futs).
> 
> Am interested to know how many, if any.




Another one here.

System trading shares and CFD's for over 10 years.
Discretionary trading index futures (Kospi and Dax mostly) for around 3-4 years.


----------



## ThingyMajiggy

captain black said:


> Another one here.
> 
> System trading shares and CFD's for over 10 years.
> Discretionary trading index futures (Kospi and Dax mostly) for around 3-4 years.




What's your opinion of it? If you don't mind me asking, are you guys doing alright from it? Or do you stress too much and think it's not worth it etc?


----------



## captain black

ThingyMajiggy said:


> What's your opinion of it? If you don't mind me asking, are you guys doing alright from it? Or do you stress too much and think it's not worth it etc?




I started with systems trading once I'd developed a couple of systems I trusted. Once you know you have a positive expectancy then it's just a matter of turning up, placing your trades and let the numbers do the work.

Day trading index futures can be stressful but I know I've got 10+ years of successful systems trading to fall back on if it all turns to crap. Thankfully it hasn't . I got caught with cash tied up in a CFD account when MF Global went under and most of my systems were in drawdown but thankfully was diversified enough not to go under. That night when the news came through about MF Global was probably the most stressful time (didn't eat for a few days). I don't find day to day trading overly stressful.

I work from home and wouldn't want to be doing anything else.


----------



## ThingyMajiggy

captain black said:


> I started with systems trading once I'd developed a couple of systems I trusted. *Once you know you have a positive expectancy* then it's just a matter of turning up, placing your trades and let the numbers do the work.
> 
> Day trading index futures can be stressful but I know I've got 10+ years of successful systems trading to fall back on if it all turns to crap. Thankfully it hasn't . I got caught with cash tied up in a CFD account when MF Global went under and most of my systems were in drawdown but thankfully was diversified enough not to go under. That night when the news came through about MF Global was probably the most stressful time (didn't eat for a few days). I don't find day to day trading overly stressful.
> 
> I work from home and wouldn't want to be doing anything else.




Bold part is the tricky bit I'm finding  Excellent to hear, well done and thanks for explaining! Must have been pretty hectic when the whole MF thing happened.


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## skc

ThingyMajiggy said:


> Yeah my thoughts too, what is your main driver? Pairs trading?
> 
> I think SkyQ is prop? Wayne is options, not sure about MichaelD and pixel though, would be interesting to find out.
> 
> Thanks for replying




Yes but trying to diversify. My profits are 75% pairs and 25% directional stuff... mostly day trading.

SkyQ is prop and so am I but we are not in the same shop.



captain black said:


> I got caught with cash tied up in a CFD account when MF Global went under and most of my systems were in drawdown but thankfully was diversified enough not to go under. That night when the news came through about MF Global was probably the most stressful time (didn't eat for a few days). I don't find day to day trading overly stressful.
> 
> I work from home and wouldn't want to be doing anything else.




Same story here. MFG going under was by far the most stressful situation I've ever been involved. And it's counterparty risk rather than market risk.

The only other stressors would mainly come from drawdown periods. That's why you need an adequate buffer for meeting your expenses. 

In terms of generating income, using leveraged instruments (like CFDs or futures) and doing day trading, the capital required can be quite small.


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## ThingyMajiggy

captain black said:


> I started with systems trading once I'd developed a couple of systems I trusted. Once you know you have a positive expectancy then it's just a matter of turning up, placing your trades and let the numbers do the work.
> 
> Day trading index futures can be stressful but I know I've got 10+ years of successful systems trading to fall back on if it all turns to crap. Thankfully it hasn't . I got caught with cash tied up in a CFD account when MF Global went under and most of my systems were in drawdown but thankfully was diversified enough not to go under. That night when the news came through about MF Global was probably the most stressful time (didn't eat for a few days). I don't find day to day trading overly stressful.
> 
> I work from home and wouldn't want to be doing anything else.




Also while you're here, what systems trading did you do? Stuff you developed yourself? In what platform? Been looking at a bit of systems stuff too. 



skc said:


> Yes but trying to diversify. My profits are 75% pairs and 25% directional stuff... mostly day trading.
> 
> SkyQ is prop and so am I but we are not in the same shop.
> 
> 
> 
> Same story here. MFG going under was by far the most stressful situation I've ever been involved. And it's counterparty risk rather than market risk.
> 
> The only other stressors would mainly come from drawdown periods. That's why you need an adequate buffer for meeting your expenses.
> 
> In terms of generating income, using leveraged instruments (like CFDs or futures) and doing day trading, the capital required can be quite small.




Very nice, so how did you get into pairs trading? Didn't realise it would be that big of a chunk of your main profits, you seem to do it well from what I've seen though, you ever thought about spreading futures? I imagine you would  pick it up pretty quick! 

Got a lot I could learn from you guys, hope to do something similar(trade for a living) down the track. Got plenty of time, but saving the funds.


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## captain black

ThingyMajiggy said:


> Bold part is the tricky bit I'm finding




It's all that matters. If you're not trading with a positive expectancy then you don't have a business, you have a gambling problem 



ThingyMajiggy said:


> Excellent to hear, well done and thanks for explaining! Must have been pretty hectic when the whole MF thing happened.




Yeah, it was pretty awful at the time. Thankfully we've gotten most of our money returned (95% for CFD accounts) and I learned a valuable lesson about counter party risk and also about a wonderful wife who looked at me the following morning and said "it's only money, you'll find a way to make it back".


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## captain black

ThingyMajiggy said:


> Also while you're here, what systems trading did you do? Stuff you developed yourself? In what platform? Been looking at a bit of systems stuff too.




All developed myself with Amibroker. Systems trading is a good place to start to gain confidence.


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## ThingyMajiggy

captain black said:


> It's all that matters. If you're not trading with a positive expectancy then you don't have a business, you have a gambling problem




Yeah it's how to KNOW you have it though, especially when we trade discretionary and the markets are ever-changing


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## captain black

ThingyMajiggy said:


> Yeah it's how to KNOW you have it though, especially when we trade discretionary and the markets are ever-changing




With systems trading using in-sample and out-of-sample data and walk forward testing.

With discretionary trading I used similar techniques to code up repeatable patterns and test them (similar to what Thomas Bulkowski has done). Once you have repeatable patterns coded up and tested it then comes down to sim trading and collecting metrics to see if you're able to reproduce your testing results. Market conditions change from minute to minute when you're day trading so you find out very quickly whether you're going to be profitable. Tech/a 's threads on trading index futures with VSA are useful to see how repeatable patterns can be traded consistently.


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## ThingyMajiggy

captain black said:


> With systems trading using in-sample and out-of-sample data and walk forward testing.
> 
> With discretionary trading I used similar techniques to code up repeatable patterns and test them (similar to what Thomas Bulkowski has done). Once you have repeatable patterns coded up and tested it then comes down to sim trading and collecting metrics to see if you're able to reproduce your testing results. Market conditions change from minute to minute when you're day trading so you find out very quickly whether you're going to be profitable. Tech/a 's threads on trading index futures with VSA are useful to see how repeatable patterns can be traded consistently.




So you coded up things like candlestick patterns or more stuff like "if it gaps down then most times the gap will close" type stuff, overall market movement patterns? Yeah Tech's stuff is good, has helped many! 

Many other traders out there doing just trading for a living?


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## minwa

For retail traders who don't trade OPM, a lot of traders beleive trading to generate income to live off is the goal which is wrong. Building equity is the primary goal. Withdrawing profits to pay for expenses should only be a very small (if any) part of your total profits.

For example in first year of going full time you have 400k and make 100k a year, great. You take out 100k for expenses. Next year is the same, perfect. Then the third year comes and the market conditions shift or your personal condition (kids, family, illness etc) shifts and you end up making 50k loss. Now you still need to pay for expenses of 100k and a 50k loss. You end up with 250k. Next year you have to make 40% instead of the usual 25% just to pay for your expenses and you need to make 100% just to get back to previous equity and pay the expenses as well. Not gonna happen.

If you are not trading OPM or deriving some other sort of income from trading then your own trading (hopefully in multiple low correlated systems in different markets) must be big enough that taking out to pay for expenses is only a small portion.


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## Julia

ThingyMajiggy said:


> So who here actually trades for a living, as in sole income is from trading? Doesn't matter about definitions or meanings or if you want to or not, just who here does successfully(profitable more often than not), as in doesn't need to go back to their job next week. On whatever instrument(stocks, options, CFDs, futs).
> 
> Am interested to know how many, if any.



Are you differentiating between 'trading' and generating a living from one's capital?
ie what determines 'trading'?  The frequency?


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## ThingyMajiggy

Julia said:


> Are you differentiating between 'trading' and generating a living from one's capital?
> ie what determines 'trading'?  The frequency?




I mean trading for a living, I don't see how you could invest for a living as you wouldn't reap the rewards until you close the position so what do you do in the mean time? So frequency would be day-trading to maybe weekly trades if you could pull it off.

That being said there's no reason why you couldn't day/week trade and still have a bigger trade in play as well, if you have the capital. 

Minwa, it's 4am at the moment and I may not be thinking too straight but what is OPM?


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## captain black

ThingyMajiggy said:


> So you coded up things like candlestick patterns or more stuff like "if it gaps down then most times the gap will close" type stuff, overall market movement patterns?




"OPM" is "other people's money".

I've done much the same as Bulkowski has done, only using Amibroker and focussed more on quantitative analysis of VSA "patterns" for day trading index futures than traditional technical analysis. His site is:

http://thepatternsite.com/

Howard Bandy's books are worth a read if you're looking at trading system development.


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## Julia

ThingyMajiggy said:


> I mean trading for a living, I don't see how you could invest for a living as you wouldn't reap the rewards until you close the position so what do you do in the mean time?



You take a very limited view.   If you choose companies with good growth potential and equally good grossed up yield, sit with them as long as an uptrend continues, exit if it reverses, it's extremely possible for the combination of capital gain and yield to provide a very comfortable living.

I can think of at least three people here, probably four who do this, have no other significant source of income, and are adding considerably to their capital each year, after pulling out whatever they need to live on.


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## skc

ThingyMajiggy said:


> Very nice, so how did you get into pairs trading? Didn't realise it would be that big of a chunk of your main profits, you seem to do it well from what I've seen though, you ever thought about spreading futures? I imagine you would  pick it up pretty quick!




I got into pairs trading by reading this stock forum. It's a good market neutral strategy and works better in more volatile times. However, it is not ideal for a retail trader as you pay more commission (as each trade has 2 legs) and require more capital to hold the positions. With CFD you can day trade equities pretty "capital lite". But not with pairs.

I have never investigated spreading futures.... I literally don't get it.


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## ThingyMajiggy

Julia said:


> You take a very limited view.   If you choose companies with good growth potential and equally good grossed up yield, sit with them as long as an uptrend continues, exit if it reverses, it's extremely possible for the combination of capital gain and yield to provide a very comfortable living.
> 
> I can think of at least three people here, probably four who do this, have no other significant source of income, and are adding considerably to their capital each year, after pulling out whatever they need to live on.




Not limited, just didn't really understand how it was possible, with money needed to live day to day with the likes of food, fuel, bills so on and so forth, I assumed people who traded as their sole income would be exiting at EOD or end of week, to pay for living. 

I would think you'd need a rather large account to do what you're mentioning, but that's excellent if there are people that do it, would like to know more about how they achieve that


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## skyQuake

Hi Sam, I trade prop as SKC mentioned, with some PA punting on the side. 

I trade ADRs and Flow related events, with a little bit of misc arb when they pop up in the Aus mkts. Stress is fairly low as my trades are relatively systematic and timeframes a few hrs/days as opposed to a few seconds. Its the same trades day in day out. Index flow stuff can be a bit exciting though as it only happens every quarter.


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## Julia

ThingyMajiggy said:


> Not limited, just didn't really understand how it was possible, with money needed to live day to day with the likes of food, fuel, bills so on and so forth, I assumed people who traded as their sole income would be exiting at EOD or end of week, to pay for living.
> 
> I would think you'd need a rather large account to do what you're mentioning, but that's excellent if there are people that do it, would like to know more about how they achieve that



Will send PM, Sam.


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## ThingyMajiggy

skyQuake said:


> Hi Sam, I trade prop as SKC mentioned, with some PA punting on the side.
> 
> I trade ADRs and Flow related events, with a little bit of misc arb when they pop up in the Aus mkts. Stress is fairly low as my trades are relatively systematic and timeframes a few hrs/days as opposed to a few seconds. Its the same trades day in day out. Index flow stuff can be a bit exciting though as it only happens every quarter.




ADRs and Flow related events, with some misc arb? I've heard all these terms before but never really understood what's involved,  could you elaborate on what it actually involves, in a PM if you want(or here, not fussed)


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## ThingyMajiggy

Julia said:


> Will send PM, Sam.




Can't reply Julia, your inbox is too full says ASF. 



So less than 10 it is, that trade as a sole income, interesting stuff  Thanks all who replied


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## tech/a

Sam
If your trading the DAX you know what's possible on a few contracts and that means a smallish capital base---just the margin.
Share trading for a living is harder and more capital intensive.Day trading stocks is not really practical in AUS but if you had moderate capital--say 200k---could be done in more liquid larger markets like the US.

Some of us don't want to trade for a living and don't have to trade for a living---yet our returns from trading or investing would keep a sole trader comfortable in his surroundings.

For people like yourself it's important to know what's possible and have a goal to perhaps work toward.
But I think also important to know that someone's part time interest can also be someone's full time employment.
Your young----there will be many opportunities in life.
There maybe a few that trade full time but there is an important batch of us who could but wouldn't.
In my case would bore me to tears.---the work and the lack of social interaction---the negotiation developing and creation of business opportunity and maintaining it is a passion of which trading and investiing is only a portion of the big picture.

Good luck and if you need a hand you know where to find me.


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## nulla nulla

There is another thread on the same topic where people, that trade full time, have posted who may not have posted on this thread.

https://www.aussiestockforums.com/forums/showthread.php?t=17879&page=8&p=835650#post835650

I think you'll find that there are more than 10 forum members that live off the proceeds of their trading, whether through choice or necessity. There are probably more members that live off trading but choose to keep it to themselves.


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## Wysiwyg

Oh and fellas, remember the yard needs to be kept. That being lawn mowed, weeds pulled and rubbish removed. Then there is the laundry and the dishes and the floor cleaning. Remember the ironing and pick up the groceries. While you're out fuel up the car too.


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## Julia

ThingyMajiggy said:


> Can't reply Julia, your inbox is too full says ASF.



Sorry.  Cleared now.



nulla nulla said:


> I think you'll find that there are more than 10 forum members that live off the proceeds of their trading, whether through choice or necessity. There are probably more members that live off trading but choose to keep it to themselves.



+1.
Wysiwyg:  you don't have to sit at a screen all day to make a decent living.


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## captain black

Julia said:


> you don't have to sit at a screen all day to make a decent living.




+1
Like most things in life it's what you want to make of it or get out of it. For me it's always been about freedom, there's times I'm happy to sit at a screen and day trade, other times I'll just let my daily systems do their job and spend the day out in the kayak


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## AussieMatt

captain black said:


> For me it's always been about freedom,




Same for me. I value my freedom/independence most and trading suits it perfectly. In terms of stress, 
I do need to pay the bills but I actually find that less stressful than working my old corporate job because its something worthy instead of being stressed out over an issue with someone else's company


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## ThingyMajiggy

Thanks for the replies all, all points granted and agreed with  

My main goal in asking this was finding out if it's actually possible, I get that obviously it is, but it seems people have success for a period, not sustained. I just don't want to get confused between "Yes it's actually possible" and being suckered in because of the freedom it possibly can provide, and having tasted a little of the success before. i.e - a gambler mindset where realistically over the long run you'll probably blow up but in our heads we have the "yeah but what if....I'm one of the supposed 5%", you know like where is the line drawn, I don't want to waste years of my life chasing a goal that isn't possible. 

Don't get me wrong, I love trading and would love to be an ace at it, and am trying, but the question must be asked, hence why I thought I'd find out how many people have an income solely from trading(doesn't matter if it's day trading or swing/position etc.).

We see plenty of traders that have great periods of profitability, but is it sustained, can they keep it going for years, or just a good patch they happen to post about on a forum then they blow up. The odds aren't exactly in our favour 

I want nothing more than to be a sustained profitable trader, just don't want to be kidding myself and chase a mirage. So it's good to see/hear other's that are achieving what I want.


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## Wysiwyg

Julia said:


> Wysiwyg:  you don't have to sit at a screen all day to make a decent living.



Yes Julia. I have tried and failed more often than not to trade the shorter time frames. Lack discipline and concentration mainly. I need to be rigidly mechanical.  EOD trading is my go.


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## Julia

W, I didn't suggest shorter time frames.
If anything, I'd suggest substantially longer time frames, simply sticking with an uptrend until it reverses.
Probably too simple an approach to appeal to many here.


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## Greenscreen

Hi.

I've been having some success day trading. My problem is that when I look back at the day I have missed x number of companies that took off without me noticing.

Can anybody suggest a way of identifying day trading opportunities that come out of the blue ie breakouts on volume.

Often I look at news releases, but even that is hit and miss ie.  I'm looking at one company but another is moving.

Can anybody recommend any software to pick up the movers as close to breakout time as possible? - I've been trading 5 minute charts.

Thanks


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## tech/a

I used to attempt to trade Stock the way you are.
Sure had some success but as you say you have to find them and early.

I switched to Index Futures.
Presto I can trade long and short 
and can trade for a few hrs and be done.


https://www.aussiestockforums.com/forums/showthread.php?t=26509&page=218

This thread may have some interest for you.


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## Greenscreen

Thanks Tech/A I will take a look (know nothing about futures!)

I trade the secondary reaction with some VSA employed. Its very frustrating trying to identify the movers.


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## tech/a

Greenscreen said:


> Thanks Tech/A I will take a look (know nothing about futures!)
> 
> I trade the secondary reaction with some VSA employed. Its very frustrating trying to identify the movers.




This is what I did.
I limited stock selection to 10c to $5
I looked for setups rather than breakouts
I had a large watch list 
I traded on a daily basis but took trading signals
From a 15 min chart.
I was ruthless with trade management.
Moving to B/E as soon as practical
I was day to a few days in timeframe.

I also had a great 7c to 10c entry method I used
Might run it here one day as an exercise.

You can get YAHOO best performers and highest volume lists 30 min after open.
Some good ones do pop up but don't forget liquidity.


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## CanOz

Greenscreen said:


> Hi.
> 
> I've been having some success day trading. My problem is that when I look back at the day I have missed x number of companies that took off without me noticing.
> 
> Can anybody suggest a way of identifying day trading opportunities that come out of the blue ie breakouts on volume.
> 
> Often I look at news releases, but even that is hit and miss ie.  I'm looking at one company but another is moving.
> 
> Can anybody recommend any software to pick up the movers as close to breakout time as possible? - I've been trading 5 minute charts.
> 
> Thanks




SMB capital has a free podcast, tune in to see how the pros do equity trading intraday...


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## FXtrader2

tech/a said:


> I used to attempt to trade Stock the way you are.
> Sure had some success but as you say you have to find them and early.
> 
> I switched to Index Futures.
> Presto I can trade long and short
> and can trade for a few hrs and be done.
> 
> 
> https://www.aussiestockforums.com/forums/showthread.php?t=26509&page=218
> 
> This thread may have some interest for you.




Index funds... good trading choice, can't go wrong as will always go up if you hold on long enough. Direct shares? to hard to pick and no gurantee that a price will ever recover


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## FXtrader2

Greenscreen said:


> Hi.
> 
> I've been having some success day trading. My problem is that when I look back at the day I have missed x number of companies that took off without me noticing.
> 
> Can anybody suggest a way of identifying day trading opportunities that come out of the blue ie breakouts on volume.
> 
> Often I look at news releases, but even that is hit and miss ie.  I'm looking at one company but another is moving.
> 
> Can anybody recommend any software to pick up the movers as close to breakout time as possible? - I've been trading 5 minute charts.
> 
> Thanks




There are a lot of indicators that can be incorporated on the chart itself, there are also pattern identifiers that can examine a chart and indication that a brake-out pattern is forming. But I can say this... if it was that predictable and easy we would all be very rich! IMO Indicators are just a self fulfilling prophesy i.e. sometimes they appear to work but not because they predicted something but because enough people are reacting to the signal and trading on it. There is no substitute to trading on the fundamentals and using news to catch movements. Study the instrument you want to trade and stick to a handful of instruments that you know i.e know their fundamentals and how they react to news. You'll do much better by trading known instruments and mixing a bit of old fashioned gut feeling into the mix. Some day traders wholly rely on signals and will trade anything, even something they know nothing about, these are the ones that have a 30% success rate and eventually give up. You need an 80% success rate to make a living out of trading and 90% to become rich from it. So, forget trading on signals, chose 10 to 12 instruments, study them then trade them on fundamentals and on the news.


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## jiggy

Interesting thread

I am looking at trading too fulltime and am going to get in touch with a number of Prop houses. I am looking to trade equities but have heard that Propex was the most expensive in terms of what they charge their equities traders in terms of brokerage. Can anyone confirm this? The others all have a set standard minimum rate so I'm going to talk to the other to get a better details


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## lftrader

FXtrader2 said:


> So, forget trading on signals, chose 10 to 12 instruments, study them then trade them on fundamentals and on the news.




Interesting suggestion but how do you know that news is not discounted already.


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## FXtrader2

lftrader said:


> Interesting suggestion but how do you know that news is not discounted already.




If the instrument moves on the news then it's not discounted. The question to ask is whether the news is of a mature that temporarily moves the price or is it significant that the fundamental changes. If temporary then its probable that short term the price returns to its former trend so then you are probably on a winning trade.


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## SilverRanger

jiggy said:


> Interesting thread
> 
> I am looking at trading too fulltime and am going to get in touch with a number of Prop houses. I am looking to trade equities but have heard that Propex was the most expensive in terms of what they charge their equities traders in terms of brokerage. Can anyone confirm this? The others all have a set standard minimum rate so I'm going to talk to the other to get a better details




Just wondering, how did you go with the hunt? Are there many equity prop shops (other than propex) to begin with in Australia?


----------

