# Making $2000 per month from $20,000???



## seals139 (12 April 2006)

How realistic is that with a good broker?
seals139


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## wayneL (12 April 2006)

seals139 said:
			
		

> How realistic is that with a good broker?
> seals139




Possible, but not much to do with the broker. It's the trader who matters.

But as an exersize, with $20k you could trade futures, but for money management reasons you shouldn't trade more than 1 or 2 contracts.

If you traded eminis (or you could trade SPI) and you averaged 2 pts per day profit per contract, that would be your $2000 per month...and that's USD.... per contract.

Sounds simple, and it is. But it ain't easy and most blow up an account or two before getting it right.... if your psychology survives. Tenacity is needed.

Cheers


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## wayneL (12 April 2006)

PS

I am definately NOT recommending this course of action, just showing what's possible.


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## happytrader (12 April 2006)

seals139 said:
			
		

> How realistic is that with a good broker?
> seals139




Hi Seals 139

Just wondering what your idea of a good broker is?

Cheers
Happytrader


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## nizar (12 April 2006)

wayneL said:
			
		

> Possible, but not much to do with the broker. It's the trader who matters.




These threads are typical when we are in a bull-market, as we are in currently...

Tend to agree with Wayne, those returns are possible, but depends how pro u are....

I'v personally made $1G+ per week for the last few weeks playing with less than that... but sustainability is the hard part... markets can turn on you at any time...


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## tech/a (12 April 2006)

120% a year.

Reckon a broker who can do that would have his house/s mortgaged to the hilt at 7% and the proceeds margined at around 2xs or be trading CFD's at 10x living on his own island.

My first thought was---how many months?
2nd thought was---do people honestly believe that there are people out there that can consistently turn $20k into $42K a year working for a wage of $70K a year?
3rd thought.
Find one of these people pay them $70K and give them $200k,tell them to look after the house and take out their wages,give them the sat phone number and see you in 12 mths.


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## professor_frink (12 April 2006)

I've done it before trading options but it's the exception, not the rule.
I did it in january and march this year so far  , but these aren't exactly average conditions, so I'm not expecting to do it every month!


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## Broadside (12 April 2006)

unsustainable long term - possible short term by taking big risks, it is risk/reward always has been...10% per month means big big risk and it may happen for a month or two before the risk bites you and you get wiped out. 

$2000 a month from $100,000 is getting more realistic I reckon.


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## bullmarket (12 April 2006)

totally agree with you Broadside   



			
				Broadside said:
			
		

> unsustainable long term - possible short term by taking big risks, it is risk/reward always has been...10% per month means big big risk and it may happen for a month or two before the risk bites you and you get wiped out.
> 
> $2000 a month from $100,000 is getting more realistic I reckon.




with risk/reward - I always say to others:

higher risk = *potential* higher reward

and not necessarily actual higher reward.

seals139:  my view is that if making huge profits from trading was easy then everybody would be sitting at home punching in buy/sell orders all day. Sure, a minority of traders probably do but remember that *anecdotal evidence suggests that less than 10% of traders are profitable, at least to any significant extent, in the long run.*

hope this helps..

bullmarket


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## tech/a (12 April 2006)

> it is risk/reward always has been...10% per month means big big risk and it may happen for a month or two before the risk bites you and you get wiped out.




Just interested in how you are equating 10% return / mth as a 10% risk / month?



> with risk/reward - I always say to others:
> 
> higher risk = potential higher reward
> 
> and not necessarily actual higher reward.




How have you equated risk in the request?
Where is there evidence that the poster intends to take on high risk?

How on earth do you equate higher risk to "potentially" higher reward?


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## professor_frink (12 April 2006)

tech/a said:
			
		

> Just interested in how you are equating 10% return / mth as a 10% risk / month?
> 
> 
> 
> ...





Good point tech. my maximum risk for last month was 5% of my account( and it would have taken a pretty large correction for that to happen) and my account moved up by well over 10%.


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## Broadside (12 April 2006)

my point is to chase a return of that size massive risks must be taken....the higher the potential return the higher the risk that must be taken, seems pretty straightforward to me


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## bullmarket (12 April 2006)

I didn't say he/she intended to take on higher risk 

I simply posted what I say to others when it comes up in conversation 

If you don't agree with or accept the risk/reward thing then that is fine by me.  

How I determine the risk/reward for my investments is a personal thing and I assume the various ways of determining risk and reward should have been covered in the RISK thread.

cheers  

bullmarket


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## Broadside (12 April 2006)

tech/a I never equated 10% return a month as 10% risk not sure what makes you think I have.....to chase a return of this size I said big big risks would need to be taken...where are you coming from?


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## professor_frink (12 April 2006)

think tech was refering to bullmarket. High return doesn't always equate with a super high risk- sometimes yes but alot of times you can get good returns with a quite acceptable level of risk.


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## tech/a (12 April 2006)

Broadside said:
			
		

> tech/a I never equated 10% return a month as 10% risk not sure what makes you think I have.....to chase a return of this size I said big big risks would need to be taken...where are you coming from?




Why do you think that?
You can certainly trade small initial capital without taking big big as you put it risk or Unacceptable risk.

I do agree that using a larger capital base makes a $2000 a month return easier from the point of view of required return on investment.

But smaller capital bases need not equate to the necessity of taking on a higher risk to achieve a return.
You'd only be able to trade one or two stocks at a time (Max--one is preferable) and youd need to be right on top of any adverse move below initial purchase price.
Youd need very cheap brokerage.
But it can be done. Hell even I have done it this month all be it with $30k and so far $7000.My max risk is 1-2% and I get it wrong often.

So where am I coming from?
Why do you think big big risks need to be taken to gain a 10%+ return / mth on initial capital.
Just interested in why you and Bullmarket think that?


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## Broadside (12 April 2006)

because it is a tried and true rule of thumb to chase higher potential returns you need to take higher risks....I wouldn't advocate to a newbie taking punts on one or two stocks at a time even with tight stop losses you can get caught out...each to their own the risk/reward equation holds for me


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## professor_frink (12 April 2006)

Broadside said:
			
		

> because it is a tried and true rule of thumb to chase higher potential returns you need to take higher risks....I wouldn't advocate to a newbie taking punts on one or two stocks at a time even with tight stop losses you can get caught out...each to their own the risk/reward equation holds for me




broadside I'd be more inclined to say that the rule of thumb you are refering to is mainly used by financial planners, and is often followed by the phrase- don't take high risks doing it by yourself, give your money to me and I will manage it for you.


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## bullmarket (12 April 2006)

Hi tech/a 

re your :



> Why do you think big big risks need to be taken to gain a 10%+ return / mth on initial capital.
> Just interested in why you and Bullmarket think that?




_If you look back and read more closely what I actually posted _ you will see that I referred to *higher* risk and not *big * risk  because big/small/low or whatever are all relative terms and what might be a small risk for one might be a big risk for another....it's as simple as that. 

I would have thought that all this should have been covered in the RISK thread and so I'm not going to re-hash what might have been said in there.   

see you in the soup 

bullmarket


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## Broadside (12 April 2006)

I wouldn't agree but that's fine....let's get back to the original question from what I assume is a newbie investor?  is it realistic to achieve this return? no it isn't, even a "good" broker won't always have good tips


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## tech/a (12 April 2006)

Broadside said:
			
		

> because it is a tried and true rule of thumb to chase higher potential returns you need to take higher risks....




It is??



> I wouldn't advocate to a newbie taking punts on one or two stocks at a time even with tight stop losses you can get caught out...each to their own the risk/reward equation holds for me




I dont advocate punting either to anyone newbies included.
But with all due respect I think you should be having a look at your understanding of risk reward.
IE that you currently believe higher risk equates to a potentially higher reward.

Higher return comes about at exit not entry.
Greatest risk is at entry and this is where initial capital is at risk.
Once price moves away from the purchase price (positively) risk to initial capital deminishes.
You need to be right immediately and the only time you should be sitting in a trade which still has upside potential while in a corrective phase is when you have open profit---not at initial purchase.


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## tech/a (12 April 2006)

bullmarket said:
			
		

> I didn't say he/she intended to take on higher risk
> 
> I simply posted what I say to others when it comes up in conversation
> 
> ...



From what I see you dont determine your Reward to Risk.
What you do is quantify it in your own mind by evaluating it with your own criteria.
Its nothing more than a feel good rating system for stock selection.
A far far cry from Reward to Risk analysis.

But hey if you think you have it by the horns so be it.

There arent various ways of determination---only one.
Perhaps I could recommend some good reading.


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## professor_frink (12 April 2006)

Broadside said:
			
		

> I wouldn't agree but that's fine....let's get back to the original question from what I assume is a newbie investor?  is it realistic to achieve this return? no it isn't, even a "good" broker won't always have good tips



no worries broadside, no point in arguing about it. Don't think there is such a thing as a good 'tip', so I'm going to have to say no- no broker is going to help you make 10% a month- but you can sometimes do it yourself when the conditions are right.


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## professor_frink (12 April 2006)

tech/a said:
			
		

> There arent various ways of determination---only one.
> Perhaps I could recommend some good reading.



What books would you recommend? Always looking for more info


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## bullmarket (12 April 2006)

no problem tech/a 

as you say, you can only go by what you have seen which is very limited and by no means everything I do   

cheers

bullmarket


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## Broadside (12 April 2006)

tech/a sure....you enter a stock at very low transaction cost, tight stop loss, your downside is limited assuming it doesn't gap down so you limit your risk, or you have a guaranteed stop loss in place but of course you pay more for that.....in a rapidly rising market or if you select the right stock SOMETIMES you may get a 10% return + per month, I would not say it is typical or realistic in an average market which I believe was the intention of the original post...is it realistic? was the question. 

You can pick the right stock but sometimes for months it does nothing, trades sideways, if you only had one or two stocks as you suggest do you sell them at cost or a small profit chasing the next one in order to achieve your 10% target?  I would say transaction costs would blow you out of the water unless you target the right stock month after month after month. 

If you want to use derivatives, options, cfds you can amplify your returns but even you would concede using these derivatives is higher RISK would you not?  and certainly higher transaction costs.

I understand how risk / reward works with all due respect, if you choose not to agree with that premise that is fine with me.


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## tech/a (12 April 2006)

professor_frink said:
			
		

> What books would you recommend? Always looking for more info





Understanding Risk
Peter Lally

The Trading game.
Ryan Jones.

2 must have's.


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## professor_frink (12 April 2006)

tech/a said:
			
		

> Understanding Risk
> Peter Lally
> 
> The Trading game.
> ...




Thank you sir, most appreciated.


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## professor_frink (12 April 2006)

Broadside said:
			
		

> If you want to use derivatives, options, cfds you can amplify your returns but even you would concede using these derivatives is higher RISK would you not?  and certainly higher transaction costs.
> 
> I understand how risk / reward works with all due respect, if you choose not to agree with that premise that is fine with me.




Put simply, if you trade derivatives, you just need have a very good idea of where your risk lies and at what point you would be in serious trouble. Wont comment on cfd's as I've never traded them, and probably never will, but with options there are many strategies that can be implemented to lower your risk during a trade- sometimes eliminate it completely.


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## happytrader (12 April 2006)

professor_frink said:
			
		

> Put simply, if you trade derivatives, you just need have a very good idea of where your risk lies and at what point you would be in serious trouble. Wont comment on cfd's as I've never traded them, and probably never will, but with options there are many strategies that can be implemented to lower your risk during a trade- sometimes eliminate it completely.




Hi Professor Frink

Totally agree with your post. 

Cheers
Happytrader


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## wayneL (12 April 2006)

Broadside said:
			
		

> my point is to chase a return of that size massive risks must be taken....the higher the potential return the higher the risk that must be taken, seems pretty straightforward to me




That's not actually true all the time. If position trading, that is certainly true.

But if daytrading futures it's not true at all. I trade one contract per $15,000k of capital dedicated to daytrading. 

My risk per contract is around $150 Maximum with NO chance of overnight gaps. Risk per trade = 1% MAXIMUM.

Tech,

$1000 per week with 20k is actually ~250% return  

A "good" broker doesn't mess with $20,000 accounts and I have a mate who isn't even good (although he is a brilliant relationship builder) who earns several hundred thousand per year.

Cheers


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## tech/a (12 April 2006)

Its pretty evident that most here have a flawed veiw of reward to risk and its use.

Many believe that by evaluation of a stock or an individual trade,by whatever method,technical or fundamental or even feel good thats all I can bear,that this quantification allocates risk.

In some quantifiable situations eg a 10% risk of traded capital from initial purchase price there is a clear allocation to that trade.
If its a fundamental look at ratio's and they indicate a strong balance sheet then this is a percieved risk NOT an allocated risk and not even close to being quantifiable. There is uncertainty.

On the reward side looking at a chart and determining a possible high value or fundamentally allocating a market value on a stock doesnt quantify reward either.

To base a trade on Risk as many seem to using similar to the above and estimation of potential reward  again as seen in the above,is not even close to correct use of Risk Reward analysis and its correct implementation.

Might make the user feel good but has little practical use.



> $1000 per week with 20k is actually ~250% return




Was refering to the $2000/mth not Nizars post


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## It's Snake Pliskin (12 April 2006)

tech/a said:
			
		

> Understanding Risk
> Peter Lally
> 
> The Trading game.
> ...




Tech,

I think you mean Mike Lally, Mastering Risk.


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## It's Snake Pliskin (12 April 2006)

> I would have thought that all this should have been covered in the RISK thread and so I'm not going to re-hash what might have been said in there.




It's relevant Bullmarket. It's not your position to tell us where to post and what to post.

Enjoy your day.


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## tech/a (12 April 2006)

Snake Pliskin said:
			
		

> Tech,
> 
> I think you mean Mike Lally, Mastering Risk.




Thanks Snake.

absolutely correct.


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## wayneL (12 April 2006)

tech/a said:
			
		

> Was refering to the $2000/mth not Nizars post




Yes, my bad, got my figures muddled


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## bullmarket (12 April 2006)

Hi wayne

maybe I am wrong but I am getting the impresion that some people are taking the views expressed in here on risk/reward too literally.

Sure, those who are experienced and so hopefully know what they are doing and understand the concept of risk can reduce the risk of loss and the amount of loss by various strategies discussed elsewhere.........that goes without saying 

But there are many out there who for whatever reason purely punt on pub/cabby/chatroom/hairdresser/cleaner or whatever tips   and imo it is in these type of scenarios where someone has effectively thrown a dart at a newspaper listing of ASX companies that the concept of higher risk = only potential higher reward is more relevant.....ie....as in some spec miner making a huge discovery etc etc 

Another way of thinking of it is in the case where a punter walks into a casino and puts $100 on red.  He has just under 50% chance of winning, allowing for the zero and if he wins he only wins $100 or 1:1.

But if he puts that $100 on say number 5 then he is taking a much bigger risk because he has only a 1 in 37 chance of winning (including the zero) but his *potential reward* is much higher if 5 comes up as he gets paid 35:1

I think what you and others are getting at in your posts when you talk about reducing the risk in trades is similar to the way the roulette punter can reduce his risk of loss and/or amount of loss by effectively hedging his bet on #5 by placing bets on other possible outcomes on the table as well.

I hope this clarifies earlier posts 

cheers

bullmarket


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## It's Snake Pliskin (12 April 2006)

bullmarket said:
			
		

> Hi wayne
> 
> maybe I am wrong but I am getting the impresion that some people are taking the views expressed in here on risk/reward too literally.
> 
> ...





More like poker, not roulette.

Poker is the only gambling that may have a positive expectency.


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## professor_frink (12 April 2006)

tech/a said:
			
		

> Thanks Snake.
> 
> absolutely correct.




no wonder I could only find info on the other one.


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## tech/a (12 April 2006)

Bullmarket.

Your post clearly illustrates my point.
You have the same veiw as most I have seen discuss this topic.
While people feel they have a handle on reward to risk and the ratio's derived and its implementation---clearly they dont.


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## Milk Man (12 April 2006)

How about with forex?

Use 3% of portfolio as risk per trade, positive carry, 60%+ winners, avg win larger than average loss...... how about now? 

Is this higher risk than unleveraged stocks? Per trade, no; over a portfolio, depends how many positions (more leverage). Throw in high liquidity, almost no gaps, no brokerage (spreads- but hey....); how high risk is this? 

My numbers are saying this is entirely possible, statistical significance wouldnt constitute a proper 'clinical trial' if you will, but are enough to satisfy me. But on the advice of a broker of all people: HELL NO !!! These people are vampires people, VAMPIIIIRRRREEEEESSSS !!!!!!


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## Broadside (12 April 2006)

tech/a Bullmarket may well have a very successful strategy that is perfect for him/her.  Maybe you do too.  I know I am very happy with how I manage my risk and choose my stocks.  You can split hairs or surmise we don't understand risk but I would maintain in answer to the original question it is not realistic to expect a 10% return per month from a stake of $20k.  Don't forget the question while you question the last 100 years of finance theory.


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## tech/a (12 April 2006)

Broadside.

That may well be the case.
There are possibly some here who would like to actually understand reward to risk and its use in trading.
It actually takes some effort but effort that is worth while.
Both you and bullmarket are happy with your interpretation.

Why go on about it.

Well there are many here who may take your interpretation as correct.

Perhaps I'm wrong but wouldnt it be benificial to know the correct use and formulation of Reward to Risk?


If no ones interested then I'll shut up.

To further make my point broadside,whats the Reward to Risk ratio of your method/s and how have you determined them?

(Let me guess---It varies on each trade it depends on a number of factors)
 So over the last 100 trades what has it been?

Anyway your not interested so I'm wasting time and key strokes.


Original question.

Yes I agree with you.


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## bullmarket (12 April 2006)

no problem tech/a 

as I said before I'm not going to re-hash what was probably said in the RISK thread 

All I can do is post my views and what works for me and supporting arguments/examples and if they provide food for thought for someone then all well and good - if they don't, then so be it as it is of no consequence to me at all at the end of the day 

We'll just have to agree to disagree. 

cheers

bullmarket


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## Broadside (12 April 2006)

tech/a I do not have a quantative approach to reward and risk but I think it is a useful rule of thumb (not hard and fast, markets can be inefficient and opportunities can exist) that if one seeks a higher return there is a higher risk entailed in doing so.  Now opportunities present themselves from time to time where high returns can exist with little or no risk, and they are gratefully taken.  In efficient markets they rarely last long.  I will read the books you have suggested I am always hoping to learn more.  Cheers.


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## Plan B (12 April 2006)

tech/a said:
			
		

> Perhaps I'm wrong but wouldnt it be benificial to know the correct use and formulation of Reward to Risk?
> 
> If no ones interested then I'll shut up.




Please go on.....yes really....


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## Milk Man (12 April 2006)

Plan B said:
			
		

> Please go on.....yes really....




A good source of info for newb's is 'adaptive analysis' by Nick Radge (about the first 50 pages). Most of what tech or anyone else could tell you is contained therein. I'll give you an example of risk anyway.

You have decided to buy stock XYZ for $1 (for whatever reason) and have decided to place a stop-loss order at 95c (also whatever reason; support level etc) . Your risk is therefore 5c per share. Now say you think that the price will rise to $1.20 (again whyever; resistance etc) the potential reward is 20c. The reward is therefore 4 times the risk, and such the reward/risk ratio is 4:1.

Reward/risk can be used across a portfolio as well. Tech knows more than me about this. The most useful part of risk analysis is fixed fractional position sizing, I feel. Will post more on it if you want (when I get time).


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## tech/a (12 April 2006)

Actually I was thinking of using Plan "B" and low and behold!!


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## twojacks28 (12 April 2006)

it has barely anything to do with the broker. the broker is there to buy and sell shares for you. also they cannot be experts in every company on the asx. thats why they will only follow a few stocks which they are advised on by there researchers and by what they know about the company. back to the question it is up to you and what you decide to invest in. stock selection is the key. 

twojacks28


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## bullmarket (12 April 2006)

Hi Plan B

I agree with Milkman's example 

It is one way of determining a reward/risk ratio.  I posted a similar example in the RISK thread and I'll requote an extract to reinforce MIlkman's example.



> ..............but one simple example of measuring risk I can give (in keeping with KISS) is calculating the potential reward to risk ratio as part of whatever other criteria you might have that have to be met before a buy signal is generated.
> 
> eg...say on a chart the current shareprice is 106c and the nearest historical support is at 100c and the nearest historical resistance is at 110c.
> 
> ...




The above and Milkman's are both valid examples although they are simple but a good starting point imo and you can then go on and complicate the determination of risk and reward as much as you like by including other factors (fundamental and/or technical).  I posted a website in the RISK thread which contains much more detailed info on how to determine risk if interested.

hope this helps

bullmarket


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## tech/a (12 April 2006)

Ok Here is the problem.
All of the examples given by Milkman and Bullmarket are missing a very important part of Reward Ratio analysis.

*They have no idea what the REWARD to RISK ratio is for their method of trading.*

There is a vast difference in calculating as Possible R/R ratio and having a known.
I'll guarantee that Nick Radge knows the Risk Reward ratio of his Elliot method of trading, calculated over many many trades.

(A) To simply have an individual "potential R/R " calculated by setting a stop and a possible target is meaningless.

Lets take 100 trades where you do (A) Your stop will be hit X times.
Your Target will be hit Y times. Z number of trades will never reach the stop nor the Target. 
So what then is your Reward to risk Ratio?
Is it the "Potential R/R " you calculate every trade?
Is it possible that you have enough losses in a row that you no longer have enough capital to trade?
Are you trading a method which actually has a positive R/R?
Could you have individually "potential positive Risk reward ratios" and still trade nett loss?
Is it possible that it takes so long for your target to be hit that you trade far more losses than Winners even with an individual positive expectancy?
Is it possible that the number of losses V number of wins renders your individual expectancy meaning less?

Positive expectancy isnt about individual trades!!

*Its about the METHOD you trade!!*

If you dont know the expectancy of your method of trading over a large number of trades, no amount of individual allocation of POSSIBLE Return to Risk will give you a positive expectancy trading methodology.

*You're Deluding yourself and GAMBLING.*

Long term traders can and do stumble on profitable methods by pure length of time holding in a bull market. Short term traders invariably dont.
The risk for those longterm traders who stumble on a profitable method is that.
(1) They wont know when its failing - she will be right it always corrects!
(2) They have no idea of efficiency.
(3) Their return can be spasmodic and their equity curve can be anything but smooth.
(4) They invariably make profit way less than that indicated by their "Calculations" and cant work out why particularly if they sell at a target.

For short term traders.
Well simply many fail and never work out how on earth they did when every trade they took had a positive expectancy.

Semantics Broadside?/Bullmarket?

Newbies/Traders deserve to know the correct use of R/R not one which has been misunderstood, and the pitfalls of misuse.
Most will ignore it as not important, but some will revisit and adjust/understand and perhaps begin to trade profitably consistantly,where consistent profit over long periods eluded them.
*This is for those traders.*


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## Bobby (12 April 2006)

tech/a said:
			
		

> Ok Here is the problem.
> All of the examples given by Milkman and Bullmarket are missing a very important part of Reward Ratio analysis.
> 
> *They have no idea what the REWARD to RISK ratio is for their method of trading.*
> ...




HeY Tech,

This is a Great post ! Needs to be locked in somehow.
You hit it with this, well done.

Regards Bob.


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## Joe Blow (12 April 2006)

I have removed a few off topic posts from this thread.

Play the ball, not the man please gentlemen. I know I've said it before and I'll probably say it again but it is the only way we can keep things civilised here.

Carry on.


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## bullmarket (12 April 2006)

Hi tech/a



			
				tech/a said:
			
		

> Ok Here is the problem.
> All of the examples given by Milkman and Bullmarket are missing a very important part of Reward Ratio analysis.
> 
> *They have no idea what the REWARD to RISK ratio is for their method of trading.*




The assumption you make in the above extract is not correct - in my case at least. 

*I have a formula I use to quantify my risk/reward for my investments and so I know exactly what it is.*

I will not disclose the formula I use in a public forum like this because I don't want anybody to use it blindly without them understanding fully what I do and how I do things.

Also, if you look at my signature below you will see that I am not a trader.  That signature has been there from post 1 

I won't be around tomorrow so I'll see you in the soup next week if you would like to discuss further.

cheers

bullmarket


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## tech/a (12 April 2006)

> I have a formula I use to quantify my risk/reward for my investments and so I know exactly what it is.




*Good for you.*
For everyone else the calculation of Reward to Risk is no mystery.
There is no special exclusive formula that makes one method better than another,it is simply the same for everyone,there are not multiple ways to calculate it.There is no confusion and every trader blind or otherwise can calculate it.

Implementation and understanding take a little longer---infinitely for some it seems.


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## Broadside (12 April 2006)

tech/a using adaptive analysis or whatever your method is can the original poster achieve a 10% return per month?


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## bullmarket (12 April 2006)

no problem tech/a 

re your:



> There is no special exclusive formula that makes one method better than another,it is simply the same for everyone




If you look back through my posts you will see that I never suggested that what I do is any better than what anyone else does - and your comment above is basically saying that what I do is the same as what you do   so I don't see what you were on about earlier 

take care and try to relax over Easter 

bullmarket


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## Smurf1976 (12 April 2006)

The original question is a bit like asking if someone with a good suit, nice shoes and a BMW can earn $250,000 a year from their job.

A few CEO's and the like earn that sort of money whilst dressing smartly for work and driving a nice car. But there's a cause and effect question here since it's knowing the right things, knowing the right people and having the right luck which has lead to the high paying job. Simply buying an expensive suit and a BMW won't get you a $250K income.

Likewise simply opening an account with a particular broker won't turn you into a trader earning 120% per year. Aqcuire the right skills and with some luck (just happening to own a junior exploration company that makes a big discovery will help...) you MIGHT make that sort of money trading. But it's unlikely and has nothing to do with the broker in the context of a $20K account and most will not succeed. Likewise most people aren't high paid CEO's.

So realistically I would say "no" to the original question. You might do it with some form of leveraged trading (eg forex) but in that case you're still not making 120% on your 20K. You're making 40% on 60K leveraged etc.


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## bullmarket (12 April 2006)

Hi smurf1976

I generally agree with you - but I think Eddie's on a little more than $250k a year 

cheers

bullmarket


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## Broadside (12 April 2006)

bullmarket where can I find the thread on risk please?  thanks in advance


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## wayneL (12 April 2006)

Smurf1976 said:
			
		

> The original question is a bit like asking if someone with a good suit, nice shoes and a BMW can earn $250,000 a year from their job.
> 
> A few CEO's and the like earn that sort of money whilst dressing smartly for work and driving a nice car. But there's a cause and effect question here since it's knowing the right things, knowing the right people and having the right luck which has lead to the high paying job. Simply buying an expensive suit and a BMW won't get you a $250K income.
> 
> ...





Well put, Smurf. 

Particularly the last paragraph. The only proviso being that ones risk control must be very tight so as drawdown doesn't blow one out of the game. Hence my thoughts on daytrading.

Folks do achieve it. Get on Mirc and you see it as people call trades live. (and the ones that don't  )

Cheers


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## Joe Blow (12 April 2006)

Broadside said:
			
		

> bullmarket where can I find the thread on risk please?  thanks in advance




Broadside,

You can find the 'Risk' thread here: https://www.aussiestockforums.com/forums/showthread.php?t=2982


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## Broadside (12 April 2006)

thanks Joe  Blow, appreciated


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## tech/a (13 April 2006)

Broadside said:
			
		

> tech/a using adaptive analysis or whatever your method is can the original poster achieve a 10% return per month?




In some months yes consistently very difficult with such a small capital base.


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## Milk Man (13 April 2006)

tech/a said:
			
		

> Ok Here is the problem.
> All of the examples given by Milkman and Bullmarket are missing a very important part of Reward Ratio analysis.
> 
> *They have no idea what the REWARD to RISK ratio is for their method of trading.*




I hope youre not making assumptions about what I do or do not understand tech. I gave an example of the usage of risk reward. Im green but not that green : .




> Positive expectancy isnt about individual trades!!
> 
> *Its about the METHOD you trade!!*
> 
> ...




True; risk reward analysis of individual trades wont make you profitable (certainly not by themselves). I wasnt suggesting this but it is important to point out I guess.


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## TheAnalyst (13 April 2006)

I can do that and better in all markets.


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## professor_frink (13 April 2006)

Tech, bullmarket- you two should just get in the ring and get it over with. If you both don't mind me saying, just ignore each other- it's obvious you don't get along, and it makes the thread hard to read when you have to sift through pages of arguing to find the information! I for one would like to pick your brain a little on this subject tech(if that's alright with you of course!) and I'm sure I'm not alone. Bullmarket- if you don't agree with tech, maybe you should stop posting in this particular thread- you know whatever you say is going to annoy tech so please don't let this thread get as long winded and hard to read as the RISK thread- it had alot of potential.
Ok then, there is my whinge over with for the morning- now onto the good stuff-




			
				tech/a said:
			
		

> Ok Here is the problem.
> All of the examples given by Milkman and Bullmarket are missing a very important part of Reward Ratio analysis.
> 
> *They have no idea what the REWARD to RISK ratio is for their method of trading.*
> ...



What do you mean by efficiency? I've got no idea about that one.



			
				tech/a said:
			
		

> For short term traders.
> Well simply many fail and never work out how on earth they did when every trade they took had a positive expectancy.




As a shorter term trader would love to hear your views on this area. Because I'm not a purely mechanical trader, I know that any testing I do based on the systematic part of my trading is not going to give me a 100% accurate idea of risk/reward, but I know that it's pretty close(based on 5 years of trading live), so how would I use my risk reward ratio to improve my trading?


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## tech/a (13 April 2006)

tech/a said:
			
		

> In some months yes consistently very difficult with such a small capital base.




Having said that 3.5 yrs ago we started trading a method using Margin.
Its initial capital is $30,000.

If interested it can be followed here.http://lightning.he.net/cgi-bin/suid/~reefcap/ultimatebb.cgi?ubb=get_topic&f=74&t=000027

The last 3 mths return on starting capital is.

Jan  $15,000 or 50%
Feb -$4000 or -26.6%
Mar  $38,000 or 126%
Over the last year From March 2005 equity high of  $240,000 to Last week
$326,000 thats $86,000 on $30,000 initial capital or 286% increase.

So it can be done infact well and truely,even with a longterm method.
Sure leverage and compounding do their thing but thats all part of sound investing principles.

Unlike here say here is proof it can be done.
Much more difficult infact probably impossible trading in a discretionary manner.


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## tech/a (13 April 2006)

professor_frink said:
			
		

> What do you mean by efficiency? I've got no idea about that one.




Best return for $ invested.





> As a shorter term trader would love to hear your views on this area. Because I'm not a purely mechanical trader, I know that any testing I do based on the systematic part of my trading is not going to give me a 100% accurate idea of risk/reward, but I know that it's pretty close(based on 5 years of trading live), so how would I use my risk reward ratio to improve my trading?




If you have hand recorded trades of 5 yrs you have a massive amount of very useful information.You can find out a great deal from this info.
The key here is you have results how they were/are derived is of no importance,but you can certainly see how your trading is going and you can benchmark it against other methods like T/T and Steves---even though they are weekly and you can do the same against itself so you can see if it is within its blue print. You have a very valuable asset in those results.

Have you any tabulation.

IE
Number of winners
Number of losers.
Average win
Average loss---blah blah.??


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## professor_frink (13 April 2006)

tech/a said:
			
		

> Best return for $ invested.




thanks- I'll look into the that one.



			
				tech/a said:
			
		

> If you have hand recorded trades of 5 yrs you have a massive amount of very useful information.You can find out a great deal from this info.
> The key here is you have results how they were/are derived is of no importance,but you can certainly see how your trading is going and you can benchmark it against other methods like T/T and Steves---even though they are weekly and you can do the same against itself so you can see if it is within its blue print. You have a very valuable asset in those results.
> 
> Have you any tabulation.
> ...




it's around somewhere- very messy office  
straight off the top of my head its about
48% winners
av. win a bit over twice my average loss- that one is improving- not quite sure if it's because of the prevailing market conditions or because I'm becoming a better trader- only time will tell on that one.
Most consecutive losers-9(ouch!) Never like talking about that one!!
With that information, exactly how would I go about improving my trading?
Up until this point, my amateurish understanding of risk, was simply keeping my stops at a point where I was consistantly moving forward, whilst trying to keep my losing trades to no more than 3% of my total capital.


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## tech/a (13 April 2006)

There is quite a lot of information you can gleen from the results.

You need to collate them so that you can analyse results.
One of the reasons I trade mechanically is that I can test Ideas of many different methods over many 1000s of trades without having to wait years for the results to come in.
By then being able to tweek entry exis (particularly) and stops as well as parcel sizes and leverage all done with a few key strokes,and have the results in minutes not years.

All you'll be able to do with your results is see where your at now.All results that you have reported seem fine to me.
9 straight losses is no problem if whilst this is occuring you have open trades
cranking profit.

You have a long and exciting journey ahead and are well in front of the pack,having results you can tabulate.

To improve youll need first to have all your actual results and "Numbers" then you'll nned to be able to test with software your method and variants.

Its worth the time effort and $$$s
Amibroker is the cheapest and there is great help around (not from me I'm afraid I use Metastock and tradesim which is dearer and possibly not as flexible).


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## professor_frink (13 April 2006)

thanks tech appreciate it. Bought Amibroker about 6 months ago- still trying to get my head around the programming language properly.
Personally It's helped me alot in my trading- Once I figured out how to code the systematic part of my trading and run it through all the data I have, it gave me a good base to work off, as well as a minimum standard to set. It's what's got me interested in learning more about the nuts and bolts of risk management, and all the math that goes with it.
As it currently stands, I could be profitable trading the systematic part alone, something that I didn't know for sure this time last year. Next step is to learn the programming language a bit more to see how much further I can code the system. It will probably have some element of discretion in it(which I know you will probably cringe at!) but it works fine for me, which is the most important thing I suppose.
Going to order 1 of the books you mentioned yesterday, so look out- you may have some more questions fired at you in a few weeks!
Thanks for your time mate


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## Julia (13 April 2006)

tech/a said:
			
		

> Having said that 3.5 yrs ago we started trading a method using Margin.
> Its initial capital is $30,000.
> 
> If interested it can be followed here.http://lightning.he.net/cgi-bin/suid/~reefcap/ultimatebb.cgi?ubb=get_topic&f=74&t=000027
> ...




Is it possible to extract from the above result what you could have achieved using the same stocks/trades but without the leverage?

Julia


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## Julia (13 April 2006)

Smurf1976 said:
			
		

> The original question is a bit like asking if someone with a good suit, nice shoes and a BMW can earn $250,000 a year from their job.
> 
> A few CEO's and the like earn that sort of money whilst dressing smartly for work and driving a nice car. But there's a cause and effect question here since it's knowing the right things, knowing the right people and having the right luck which has lead to the high paying job. Simply buying an expensive suit and a BMW won't get you a $250K income.
> 
> ...




Smurf:

Thanks for addressing the original question so appropriately.

Let's all remember  that it's almost impossible not to do well in the present market.  I haven't bought or sold anything for over three weeks and my portfolio has been up many thousands per day.  Then, of course, it can go down by the same amount when the market drops, just to add some reality.

Julia


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## Julia (13 April 2006)

wayneL said:
			
		

> Well put, Smurf.
> 
> Particularly the last paragraph. The only proviso being that ones risk control must be very tight so as drawdown doesn't blow one out of the game. Hence my thoughts on daytrading.
> 
> ...




Wayne:

What is Mirc?

Julia


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## tech/a (13 April 2006)

Julia said:
			
		

> Is it possible to extract from the above result what you could have achieved using the same stocks/trades but without the leverage?
> 
> Julia




Julia.

As an approximation / by 2.2

However to get to the position where these sorts of returns and growth on capital are possible you need to trade with that sort of leverage.

Use of leverage and compounding are 2 aspects of investment that should be investigated to maximie returns on any investment.
Most shy away from their use as they dont understand them and have heard horror stories.
Again implementation of Risk from knowledge of 
Maximum initial drawdown in particular will go a long way in sensible useage.

As an example Knowing the Maximum initial drawdown of a method you use can only be defined if you have a great deal of data like the "Prof" or you have testing software.Individual "risk" allocation does absolutely nothing in determining your overall longterm drawdown and string of losses.

When using leverage you must know this.

EXAMPLE

Lets say your initial drawdown is 15% which is acceptable in general terms.
If you were then to leverage using Margin at around 2.2x then your exposure is 33% which is bordering on rendering your method once depletion of initial capital by 33% close to 'under capitalised---you'll need a 66% increase in 33% less funds to return to break even!!!!


So perhaps the lure of CFD's is more to your liking at 10x leverage.
10x 15% = 150% chances are your generally accepted method will send you 
broke!!

Thats without looking at string of losses.(not as obvious as you may think)

*So what do you think?  Is individual allocation of unknown risk important or is the correct use of allocation better to know??*


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## StockyBailx (13 April 2006)

seals139 said:
			
		

> How realistic is that with a good broker?
> seals139



 
$20,000 I wish I had $20,000 to play with, because at present I could of turned that into a 75% profit and then sum this month and still climbing. Instead I will just have to settle for my $5,000 which I have turned into $17,500 since late febuary.   
I think it must be a bit hard to find a good honest broker to invest in and its best done by yourself, using the right share market software tools and equipment. To the best of your knowledge. Use your broker as a back up plan!

----STOCK'ie'BAILZ----  :goodnight 

_______Invest for profit not game!________


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## Julia (13 April 2006)

tech/a said:
			
		

> Having said that 3.5 yrs ago we started trading a method using Margin.
> Its initial capital is $30,000.
> 
> If interested it can be followed here.http://lightning.he.net/cgi-bin/suid/~reefcap/ultimatebb.cgi?ubb=get_topic&f=74&t=000027
> ...




Tech,  sorry, but I'm confused about the above.
If you are talking about "the last 3 months return" then how can it be on a base of $30,000 if you began with the $30,000 three and a half years ago?
Re "286% increase" -  that is over the 3.5 years, yes?

Julia


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## tech/a (13 April 2006)

Julia said:
			
		

> Tech,  sorry, but I'm confused about the above.
> If you are talking about "the last 3 months return" then how can it be on a base of $30,000 if you began with the $30,000 three and a half years ago?
> Re "286% increase" -  that is over the 3.5 years, yes?
> 
> Julia





Julia

3.5 yrs ago we started with $30k so even today thats the INITIAL capital.

Today the Capital has grown considerably so all of it is now working for us.
Over the last 3 mths capital has grown by $86,000 so based upon our INITIAL capital of $30,000 it has grown over the last 3 mths by 286%

This illustrates the power of compounding and leverage.
Had we started with $300,000 then growth would still be the same but the $ value more impressive.

So while $2000 a month seems a tall order now---invested well the above illustrates that very high returns are more than possible. think long term rather than now--which is what most do.


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## dennisll (17 April 2006)

"2k a month from 10k, how realistic is that from a good broker?"

Considering that the original question was posted on the beginner forum and that the poster requires the services of a good broker to do it, I think the simple answer is: Not realistic at all.  Had the original question been

"Is 2k a month from 10k possible?"

I would have to say, Yes it is possible.  Obviously it depends on who's doing the trading.

Cheers,

Dennis


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## wayneL (18 April 2006)

On the futures this evening.

Net $500AUD (or more) per 1 contract was available as a daytrade on any of the following:

Any Currency
Gold 
Any of the indexes

That's just one night. Doing that 4 nights per month on one contract and breaking even with the rest of the months trading delivers $2000 per month from a whole bunch less than $20,000 capital. (Though I suggest having close to this in cash reserve per contract)

Of course, I am at pains to point out that it is possible to lose as well.

But just to point out 2k from 20k is very possible.

NB As I do not call trades live, I make no representation as to whether I am personally achieving this or not. It's Just for for the sake of example. But those who followed my futures blog when I was running it would vouch for what I am saying here.

Cheers


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## Mikepaus (26 April 2006)

Mmm 120% profit in a year - I don't think so


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## tarnor (26 April 2006)

2k frem 20k per month can be easily done in this market.. many would be looking for more..


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## hypnotic (12 May 2006)

tarnor said:
			
		

> 2k frem 20k per month can be easily done in this market.. many would be looking for more..




I agree with many of those who agree it can be quiet easily done, IMO it is it is very possible in this market.

I only just started trading, picked a few good shares which went up average 15% in less than 3 weeks.

But it definitely wont last forever.

Nothing is easy, anyone can still lose money even in the bull market. 

Good luck and have fun trading   

Hypnotic


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## rcfoote (12 May 2006)

asx sharemarket game start with 50 thou and play with top 100 only leaders are averaging 2gs a week


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## crackaton (13 May 2006)

rcfoote@optusnet.com.au said:
			
		

> asx sharemarket game start with 50 thou and play with top 100 only leaders are averaging 2gs a week



No offense mate, but why are you using your email address as your name?


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## Kipp (13 May 2006)

rcfoote@optusnet.com.au said:
			
		

> asx sharemarket game start with 50 thou and play with top 100 only leaders are averaging 2gs a week



Isn't it high school students in the asx game though?  I remember being forced into in grade 11- quite fun actually though we had no idea what the hell we were investing in (still made 20% in 6months...)

But point is, the ASX game probably isn't indicative of all traders/investors out there...


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## NettAssets (13 May 2006)

There are 2 ASX games.
An open one and a schools one.

Regards
John


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## ice (13 May 2006)

Why stop at $2000 a month?
My first ever trade returned 65% in 4 days. 
Extrapolate that, equals $13000 on $20000 outlay. Lets be conservative and say it takes 5 days. 
1 trade a week then. 
So $13000 x 52 weeks =....., but hang on we need holidays; say 4 weeks. Therefore $13,000 x 48 weeks = $624,000.
Hmmm, not bad. Not enough to live on but at least it's a start.  


ice


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## nizar (13 May 2006)

ice said:
			
		

> Why stop at $2000 a month?
> My first ever trade returned 65% in 4 days.
> Extrapolate that, equals $13000 on $20000 outlay. Lets be conservative and say it takes 5 days.
> 1 trade a week then.
> ...




U cant live off $624k a year?
Wow u must really have a good lifestyle - well done 2 ur success buddy


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## michael_selway (14 May 2006)

ice said:
			
		

> Why stop at $2000 a month?
> My first ever trade returned 65% in 4 days.
> Extrapolate that, equals $13000 on $20000 outlay. Lets be conservative and say it takes 5 days.
> 1 trade a week then.
> ...




Wow nice

what were some of yoru big losses if any?

thx

MS


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## tech/a (14 May 2006)

Ice has given an example.

Simply that his first trade made 65%.
He doesnt disclose his position size.
But shows what a 65% rise on $20K
would equate to in a year.

Some people dont read.


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## crackaton (14 May 2006)

ice said:
			
		

> Why stop at $2000 a month?
> My first ever trade returned 65% in 4 days.
> Extrapolate that, equals $13000 on $20000 outlay. Lets be conservative and say it takes 5 days.
> 1 trade a week then.
> ...



lol Impressive. So who are you trying to impress?


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## bullmarket (14 May 2006)

Good morning everyone 

It looks to me that some readers have been sucked in by ice   

I thought his post was said with tongue firmly planted in his/her cheek and was basically said in jest 

Anyway, happy Mother's Day to all the mum's out there. I hope you are all made to feel special today......and on every day   

cheers

bullmarket


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## rederob (14 May 2006)

crackaton said:
			
		

> lol Impressive. So who are you trying to impress?



probably his MUM.
yes, happy mum's day to all that fit the criterion, and anyone that does not should be helping them make it happy
....maybe that's where "happy" is today


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## chemist (18 May 2006)

tech/a said:
			
		

> 120% a year.
> 
> Reckon a broker who can do that would have his house/s mortgaged to the hilt at 7% and the proceeds margined at around 2xs or be trading CFD's at 10x living on his own island.
> 
> ...




There's no reason why the ability to turn $20k into $42k would preclude working in a $70k a year job. $32k a year isn't much to live on. 

I don't understand thought 3.

cheers,
chemist


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## mit (18 May 2006)

Average 2000 a month on 20000. I think it is extremely possible. Take more risk per trade but stay on the correct side of ROR. The problem is having the stomach for it when you get 50-60% drawdowns. Larry Williams has turned 10,000 into a million a number of times. He tried using this technique as a money manager and 10,000 invested went up to 2,100,000 then down to 700,000 where everybody bailed. The fund ended up at 1.1 million. (Larry Williams short term secrets to long term profits).

Make a constant 2000 a month on 20000. I think that this is a little harder but possible. It would take full time+ trading across a number of futures/forex/option markets ala Wayne.

MIT


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## tech/a (18 May 2006)

chemist said:
			
		

> There's no reason why the ability to turn $20k into $42k would preclude working in a $70k a year job. $32k a year isn't much to live on.
> 
> I don't understand thought 3.
> 
> ...




Find a Broker who can make you 120% a year,Give him a job and pay him the 70K,(An average broker would grab a $70K job)stick him in your house to house sit while you travel the world.
Your $200K will then be turned into another $240K less the $70K--should be able to live ok on that even travelling.


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## chemist (19 May 2006)

tech/a said:
			
		

> Find a Broker who can make you 120% a year,Give him a job and pay him the 70K,(An average broker would grab a $70K job)stick him in your house to house sit while you travel the world.
> Your $200K will then be turned into another $240K less the $70K--should be able to live ok on that even travelling.




Broker? No broker ever made anyone anything. Brokers don't know how to trade. The OP didn't say his broker was going to do this for him. 

Chemist


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## tech/a (19 May 2006)

seals139 said:
			
		

> How realistic is that with a good broker?
> seals139




Sorry my attempt at humor has been taken as a statement of factual possibility or in this case impossibility.

Was never meant to be a serious comment,just trying to lighten up.


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## Ageo (19 May 2006)

Excuse me for my ignorance but isnt that why there called brokers, because they are broker than you are usually? If they were that fantastic at investing why are they still working?

As for these returns, it depends on alot of factors. But if your trading plan allows you to lose say 18 trades out of 20 but your 2 trades make up the loss plus alot extra than i say its definately possible. I am all for people making others aware of risks but when you tell them no! its not possible that thats a load of **** simple because there are millionaires out there that "have done it" and are still "doing it". But i spose whatever you believe is exactly what you will do.



Remember leverage has risks like anything, but if you can minimize the loss (downside) and let the profits (upside run a tad) then i dont see what the problem is.


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## mlennox (19 May 2006)

piece of cake.

I've done it on a $1000 Account.


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