# Realistic Rate of Return?



## beachlife

Hi Guys
I wonder if any active derivatives traders are willing to share their average rate of return to give me something to aim for.  I know those with an investment mindset are happy to just out perform the index. I am more interested in actively trading for cash flow as opposed to investing for long term growth.

For me out performing the index is not enough to live on.  I see examples of traders that have turned $10k into $110k in 12 months.  Daryl Guppy's newletter sample portfolio averages around 90%pa.

I currently trade CFD's long and short on asx top 200, commodities, spi, aud/usd on a daily time frame, not intra day.  If all of my stops were hit today my return on capital would be 18% since Jan.  If I took my open profits today it would be 40%.  Trade durations are 10 to 20 days, win loss ratio is 58% wins.  But it's early days yet.

What are those that trade for a living consistently making?  I need a realistic target.

Thanks.


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## tech/a

beachlife said:


> Hi Guys
> I wonder if any active derivatives traders are willing to share their average rate of return to give me something to aim for.  I know those with an investment mindset are happy to just out perform the index. I am more interested in actively trading for cash flow as opposed to investing for long term growth.
> 
> For me out performing the index is not enough to live on.  I see examples of traders that have turned $10k into $110k in 12 months.  Daryl Guppy's newletter sample portfolio averages around 90%pa.
> 
> I currently trade CFD's long and short on asx top 200, commodities, spi, aud/usd on a daily time frame, not intra day.  If all of my stops were hit today my return on capital would be 18% since Jan.  If I took my open profits today it would be 40%.  Trade durations are 10 to 20 days, win loss ratio is 58% wins.  But it's early days yet.
> 
> What are those that trade for a living consistently making?  I need a realistic target.
> 
> Thanks.





How do you want to live?
500% on $20K
100% on $100K
20% on $500K

More to the equation than % wins


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## Trembling Hand

beachlife said:


> What are those that trade for a living consistently making?  I need a realistic target.
> 
> Thanks.




Lot easier to stay in the game if you have the right amount of capital. Aiming for X return is a fools game.


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## beachlife

% return that is consistantly possible will determine how much capital is required.  It's the best measure as its scalable.  100% on $20k can be scaled to 100% on $200k, provided that initial risk is also determined by %, which mine is at 4%.

I would like to earn $150k pa.

I expect that good traders are making somewhere between 100% and 500% pa and good investors somewhere between 10% and 15% pa, but my expectations may be way off, hence the question.


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## Trembling Hand

beachlife said:


> % return that is consistantly




I've been trading for 12 years. Nearly 9 full time. The one thing my records shows is that consistently the rate of return is erratic. Aiming for X amount will lead to a blow up. If you _need _150k and you reckon you can make 30% start with 1 mil should see you _survive_.

The implication being that I doubt you can be profitable year in year out after the drag of Tax, Trading cost, living expense draw downs etc etc.


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## tech/a

Trembling Hand said:


> I've been trading for 12 years. Nearly 9 full time. The one thing my records shows is that consistently the rate of return is erratic. Aiming for X amount will lead to a blow up. If you _need _150k and *you reckon you can make 30% start with 1 mil should see you survive.*
> 
> The implication being that I doubt you can be profitable year in year out after the drag of *Tax, Trading cost, living expense draw downs* etc etc.




That's all you need know.


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## Gringotts Bank

beachlife said:


> % return that is consistantly possible will determine how much capital is required.  It's the best measure as its scalable.  100% on $20k can be scaled to 100% on $200k, provided that initial risk is also determined by %, which mine is at 4%.
> 
> I would like to earn $150k pa.
> 
> I expect that good traders are making somewhere between 100% and 500% pa and good investors somewhere between 10% and 15% pa, but my expectations may be way off, hence the question.




I have heard the best of the best are consistently at ~80%+pa.  I don't know what percentage of the trading population are at that level, but I suspect it's quite small.

What "realistic" means _for you_ is whatever you achieved last year.  If it was 5%, then _realistically_, that's what you'll get next year and the year after that, unless something changes quite dramatically.


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## tech/a

Gringotts Bank said:


> I have heard the best of the best are consistently at ~80%+pa.  I don't know what percentage of the trading population are at that level, but I suspect it's quite small.
> 
> *What 'realistic' means for you is whatever you achieved last year.  If it was 5%, then realistically, that's what you'll get next year and the year after, unless something changes quite dramatically.*




Nah!


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## Trembling Hand

Gringotts Bank said:


> something changes quite dramatically.




That is the definition of the market though. So you can be assured that nothing is repeatable as it was last year.


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## beachlife

Not aim for exactly but in the ball park.  For example if I am returning around 40% pa but others are averaging around 90% then I need to revisit my trading plan, but if 40% is the norm then I can just sit back and trade it.

I know of a trader that turned $10k in to $110k in 2010, that's extreme at 1100% and I doubt its consistant.  Larry Williams claims $10k to $1m in 1987, an extreme year, but he claims he did it.  

Daryl Guppy claims around 90% pa, without any compounding of profits and he has been above 90% return every year since 2004.  It would be more if he compounded his profits.  Is that closer to the norm or is he just that much better than everyone else. http://www.guppytraders.com/gup15.shtml

Somewhere there is a sensible ball park figure to measure my systems performance against.


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## Gringotts Bank

Trembling Hand said:


> That is the definition of the market though. So you can be assured that nothing is repeatable as it was last year.




Allowing for that....his ability to read those changes would need to improve quite dramatically, if last year he made 5% and this year he wanted 100%.  Something would need to change in his ability.

I know fund managers have a saying "past performance is no indicator of future performance", but capability is a highly reliable in its repeatability.  One year Fund X makes 20%, but all it did was track the index.  Next year the very same fund makes -20%, but all it did was track the index.  The capability of the Fund is still zero, only the market changed.

At school, when the test results came out, there were rarely any surprises.  The smart kid always got above 90%.  The repeatability of this was extremely high.  Everyone else's score was also highly repeatable.  Only if a kid made some huge change in his approach, effort, or understanding, would this be reflected in his score.


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## Trembling Hand

beachlife said:


> Somewhere there is a sensible ball park figure to measure my systems performance against.




Yeah thats un-leveraged return from month to month, year to year. To make sure your "system" isn't broken. Anything else is a function of leverage and luck that your approach fits the current market.

Once you actually have experiences and you can answer your own question you will know that its the least of your on going concerns. 

How many months have you been running for.


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## skc

beachlife said:


> What are those that trade for a living consistently making?  I need a realistic target.




This really is "how long is a piece of string" type question. While you can get a numerical answer, it means absolutely nothing to you. 

If you want to become a full time trader, have a look at this thread as well. 
https://www.aussiestockforums.com/forums/showthread.php?t=26543

As a guide: 

1. If you have a second income (e.g. partner or other passive income) that is sufficient for living expenses, then something like 3-4x your target income is a good start.

2. If you don't have a second income, you should have minimum of 3 years living expense put aside, in addition to your trading capital (which is 3-4x your target income).

3. If you only have $10k and have no hope of saving the $450k required... work hard on trading a small account, master a few instruments and take your stats to a prop shop and get funded there.



beachlife said:


> I see examples of traders that have turned $10k into $110k in 12 months.  Daryl Guppy's newletter sample portfolio averages around 90%pa.




If you speak to enough traders you will find someone who turned $10k to $110k in 12 months. What you don't know is if they are consistent, a leveraged nut, or just plan lucky. You will also come across plenty of traders who blow up $10k in 3 months. 

BTW is the Guppy portfolio verified independently, and are they real trades?



beachlife said:


> I expect that good traders are making somewhere between 100% and 500% pa and good investors somewhere between 10% and 15% pa, but my expectations may be way off, hence the question.




I think you will be very disappointed if you are aiming for 100-500% pa.  



beachlife said:


> I currently trade CFD's long and short on asx top 200, commodities, spi, aud/usd on a daily time frame, not intra day.  If all of my stops were hit today my return on capital would be 18% since Jan.  If I took my open profits today it would be 40%.  Trade durations are 10 to 20 days, win loss ratio is 58% wins.  But it's early days yet.




Without knowing too much about your trading... I think your stops are too wide if you have 40% open profit vs 18% if all stops are hit. I doubt too many full time traders would have 22% portfolio heat at any one time.


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## beachlife

That's a good point, his results are on shares, without leverage, but usually with a 2% risk rule.  They are documented in real time in his newsletters, examples published here http://www.guppytraders.com/gup198.shtml

I have been using my current rules since Jan.


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## beachlife

skc said:


> This really is "how long is a piece of string" type question.




No it's not, I asked others if they would share their results, not speculate on my abilities, so far no one willing to share.


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## Trembling Hand

Gringotts Bank said:


> At school, when the test results came out, there were rarely any surprises.  The smart kid always got above 90%.  The repeatability of this was extremely high.  Everyone else's score was also highly repeatable.  Only if a kid made some huge change in his approach, effort, or understanding, would this be reflected in his score.




We are not at school GB thats exactly the same same year in year out. Was talking to the CEO of a place that has 80 discretionary traders of the highest calibre. Serious dudes - serious money.

His thoughts were that out of the 20 years he has been doing it he has only seen a couple that are consistent over a long period (1 of them trades 25 mil per clip and has never had a down month  F me ) He stated that to do what they do, back good traders, you have to let them have some sort of drawdown from  year to year or else you would have NO traders..............


Of course in interwebland we are all profitable all the time.....


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## Trembling Hand

beachlife said:


> No it's not, I asked others if they would share their results, not speculate on my abilities, so far no one willing to share.




Last month my turn over was about 800 mil and I made 2 grand after cost....... 

Howz that for a return.


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## McLovin

Trembling Hand said:


> Last month my turn over was about 800 mil and I made 2 grand after cost.......
> 
> Howz that for a return.


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## Trembling Hand

LOL McLovin.... Exactly!


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## beachlife

Trembling Hand said:


> Last month my turn over was about 800 mil and I made 2 grand after cost.......
> 
> Howz that for a return.




LOL, if your turnover was derived from a $20k capital base then better than most fund managers.


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## skyQuake

Trembling Hand said:


> LOL McLovin.... Exactly!




In the end everyone becomes a liquidity rebate trader!


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## tech/a

skyQuake said:


> In the end everyone becomes a liquidity rebate trader!




Most of these 50% + returns ar quoted against capital at risk.
Not total capital 
You may have 1 mill but at any Time risk 50k and return 50k
All I know are gross not nett as already pointed out.


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## beachlife

tech/a said:


> Most of these 50% + returns ar quoted against capital at risk.
> Not total capital
> You may have 1 mill but at any Time risk 50k and return 50k
> All I know are gross not nett as already pointed out.




Exactly.  I'm not interested in the type of calculations that the gurus do like return on margin to make their testimonials look better, eg Hi Guru, thanks for making me a supertrader, I just made 300% on my first trade..blah blah

Back to Daryl, his results are quoted on total starting capital, $100k capital, $90k profit.

I am only interesed in return on total capital.


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## skc

beachlife said:


> No it's not, I asked others if they would share their results, not speculate on my abilities, so far no one willing to share.




You are saying you want to use it to help set your target.

Let's say *20* people responded and the average over the last 5 years were 7.8%, 33%, 1.2%, 19% and 55%.

How do you plan to make use of this information to help set your target?


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## burglar

skc said:


> You are saying you want to use it to help set your target.
> 
> Let's say *20* people responded and the average over the last 5 years were 7.8%, 33%, 1.2%, 19% and 55%.
> 
> How do you plan to make use of this information to help set your target?




I would average the averages! :


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## beachlife

skc said:


> You are saying you want to use it to help set your target.
> 
> Let's say *20* people responded and the average over the last 5 years were 7.8%, 33%, 1.2%, 19% and 55%.
> 
> How do you plan to make use of this information to help set your target?




That's like asking an olympic swimmer who's time they're trying to beat.  

I would aim to match the best, which so far seems to be Daryl Guppys 90%.


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## CanOz

beachlife said:


> Hi Guys
> I wonder if any active derivatives traders are willing to share their average rate of return to give me something to aim for.  I know those with an investment mindset are happy to just out perform the index. I am more interested in actively trading for cash flow as opposed to investing for long term growth.
> 
> For me out performing the index is not enough to live on.  I see examples of traders that have turned $10k into $110k in 12 months.  Daryl Guppy's newletter sample portfolio averages around 90%pa.
> 
> I currently trade CFD's long and short on asx top 200, commodities, spi, aud/usd on a daily time frame, not intra day.  If all of my stops were hit today my return on capital would be 18% since Jan.  If I took my open profits today it would be 40%.  Trade durations are 10 to 20 days, win loss ratio is 58% wins.  But it's early days yet.
> 
> What are those that trade for a living consistently making?  I need a realistic target.
> 
> Thanks.




0% or negative would be my bet for 99% of all home based* intra-day directional derivative* traders.


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## Trembling Hand

beachlife said:


> I would aim to match the best, which so far seems to be Daryl Guppys 90%.




It would be far easier to see where you are going with 5 months of trading stats and an equity curve rather than taking a a system that is vastly different than yours. Are you using leverage? It seems that Guppys isn't and has a very high win rate and not that active.

I think you said you are/were an engineer. I'm surprised you cannot see the huge fault you a designing into your system.


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## beachlife

beachlife said:


> I currently trade CFD's long and short on asx top 200, commodities, spi, aud/usd on a* daily time frame, not intra day*.  *If all of my stops were hit today my return on capital would be 18% since Jan.  If I took my open profits today it would be 40%*.  Trade durations are 10 to 20 days, win loss ratio is 58% wins.  But it's early days yet.




To answer the last 2 posts it probably best to quote the original post above.  But as of Fri, if I include my open posiitons at Fridays close my return on capital over the last 5 months is 43%.  If they all go bad on Monday it will be 18%.  Not annualised, not on margin, no maths tricks, just straight % return on starting capital.

Yes I am an engineer, pretty good at maths too. No I cant see a fault with aiming for a performance target and then monitoring it.  My system has risk management, position sizing, an entry trigger, a trailing stop, trades long and short over a variety of instruments, and I monitor its performance in percentage terms of risk vs reward and return on capital.  Leverage is irrelevant, it merely allows me to position size in expensive shares without needing to worrry about having enough cash.  It is not used as a performance measure and is not used for position sizing.  If I want to risk $1000 on a cba trade I dont care what the margin or leverage is, as long as I have enough in my account to get the trade on.  My capital is increasing, I have more wins than losses, and my wins are consistantly bigger than my losses.  My system works, I am just trying get a feel for if it can be improved.




(I used to take profits at 2x risk, which is why so many are capped at 2, now I let them run a bit longer).


What huge fault do you see?


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## tech/a

I can see a number of areas
You ave identified 1 ---- a serious problem.
You have seen seen 1 as irrelevant --- although you are using leverage correctly in a portfolio situation.
And I see 3 areas you could improve on.
Frequency
Not moving initial stop
Pyramiding

Just off the top of my head.


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## Trembling Hand

beachlife said:


> My system works, I am just trying get a feel for if it can be improved.




AND that can be done with the numbers of YOUR system not someone else's. But really I'll leave you to it.


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## Gringotts Bank

beachlife said:


> That's like asking an olympic swimmer who's time they're trying to beat.
> 
> I would aim to match the best, which so far seems to be Daryl Guppys 90%.




I know a systems futures trader (fully automated) who has made over 100%pa for 5 years running, with miniscule drawdowns.  

Also, have a look at the "Market Wizards" series of books.  They highlight stats from America's best traders and fund managers over the long term.  Great reading.   

http://www.amazon.com/Market-Wizard...qid=1369452989&sr=1-1&keywords=market+wizards


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## peter2

Your current trading system can only get what it is designed to get. If you have done any backtesting then you would know what those values are. If you have been fully invested 100% of the time then you should be near your system limits. It seems that you may not know what your system is capable of achieving. You could review your performance to identify if there are any aspects that you can improve to boost the results. 

You could consider how your results compare to the MAE and MFE of the moves (swings) you traded. You may like to calculate an efficiency factor for your trading. 

My general observation is that most traders do not get anywhere near what their systems are capable of. The human is the weakest point in most trading systems.


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## beachlife

peter2 said:


> Your current trading system can only get what it is designed to get. If you have done any backtesting then you would know what those values are. If you have been fully invested 100% of the time then you should be near your system limits.




I am never more than 10% of total capital at risk and my back testing suggests my system should produce 100%pa, more if I compound the profits.  My results since Jan suggest I am on track, but am I sure there are many out there doing much better.  How much better is all I am trying to find out.


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## Julia

beachlife said:


> I am never more than 10% of total capital at risk and my back testing suggests my system should produce 100%pa, more if I compound the profits.  My results since Jan suggest I am on track, but am I sure there are many out there doing much better.  How much better is all I am trying to find out.




Why does it matter what anyone else is doing?   Don't you rather work out what you need to make in order to fund your lifestyle/retirement plans/whatever and then make your own plan to achieve that?

If you have a substantial amount of capital available, then obviously you need to be less demanding on the % return and thus have more choices about what you do.


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## Gringotts Bank

beachlife said:


> I am never more than 10% of total capital at risk and my back testing suggests my system should produce 100%pa, more if I compound the profits.  My results since Jan suggest I am on track, but am I sure there are many out there doing much better.  How much better is all I am trying to find out.




Something is not adding up here and I am very suspicious.

On another thread you said your system consists of "just a moving average and a trailing stop. Once I reach a set profit I stop".

And yet here you say that the backtests suggest 100%pa return.  I've never *ever* heard of such a thing.  It sounds way off.  I have run hundreds of thousands of backtests in my time.  It's not even remotely possible.  100% might be possible for a very proficient programmer, but not with moving averages and trailing stops.  Any system developer will back me up on this.


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## Gringotts Bank

Well....

I guess that puts a close to this thread.  It was all made up.


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## beachlife

Gringotts Bank said:


> Something is not adding up here and I am very suspicious.
> 
> On another thread you said your system consists of "just a moving average and a trailing stop. Once I reach a set profit I stop"..





I never said they were the same system.  What I am testing for intra day has nothing to do with my end of day system referred to here.


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## beachlife

Gringotts Bank said:


> Well....
> 
> It was all made up.




LOL.  This from someone who says he trades by pretending he is George Soros.  You are telling someone over there that is trying to learn and share his experiences to pretend he is a wall street legend.  What rate if return does that generate for you?  Did you short the aud/usd the other week like George did?  I did because my system told me to, not because of any self affirmation nonsense.


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## Gringotts Bank

beachlife said:


> LOL.  This from someone who says he trades by pretending he is George Soros.  You are telling someone over there that is trying to learn and share his experiences to pretend he is a wall street legend.  What rate if return does that generate for you?  Did you short the aud/usd the other week like George did?  I did because my system told me to, not because of any self affirmation nonsense.




It's not nonsense.  Adding new and positive mental filters has had more impact on my bottom line than anything I've ever done in trading.  It has allowed me to spot patterns in charts that I would never have seen before - high probability entries mainly.  Some of these I have had coded for me, because they are quite complex.  Amibroker finds the patterns, and on top of that I apply a discretionary filter to try to fine tune it.  A person with a successful mindset will see a chart totally differently to someone with a loser mindset.  The Method Acting approach is something I thought of.  Hypnosis is a more reliable and robust approach to altering one's mindset.


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## Kalaika

Gringott's Bank - I applaud what you've tried to do with your trading.
Natural selection (for want of a better word) quickly weeds out the less than stellar psyche's from the market reasonably effectively. The majority of highly successful traders have gotten where they are through developing systems (approaches) which are *right for them*, and then in executing these systems, they have not wavered - they they do not doubt, second guess or change (which is often a recipe for disaster). What i see in your aproach is a genuine attempt to strengthen your own mental edge, and good on your for doing this. It's one of the most fundamental areas of investment in corporate leaders (my past life), so why not traders?

beachlife: I'm with Julia - if you've *genuinely *developed a system which models 100% annual return through thorough backtesting, then for goodness' sake, set aside part of your equity, and trade the bloody thing without question, to see how it performs in real time.

Seeking a benchmark from public comment in ASF is an academic exercise at best, and by the looks of many responses, might be calling the legitimacy of your OP into question, and/or drawing some criticism around the ego-factor. Most of the best traders in the world have systems generating long term CAGR of 30-50%, so why on earth wouldn't you look at this as a rudimentary comparison?

Peace out.


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## beachlife

Gringotts Bank said:


> It's not nonsense.




Yes it is.   You do not have to imagine you are someone you arent, or be hypnotised, to have a positive mindset, and the words system and discretionary dont belong together.  Still no rate of return given.




Kalaika said:


> ... then for goodness' sake, set aside part of your equity, and trade the bloody thing without question, to see how it performs in real time.




As I said before I have been trading it since Jan, yes with real money.



Kalaika said:


> Seeking a benchmark from public comment in ASF is an academic exercise at best, and by the looks of many responses, might be *calling the legitimacy of your OP into question*, and/or drawing some criticism around the ego-factor. Most of the best traders in the world have systems generating long term CAGR of 30-50%, so why on earth wouldn't you look at this as a rudimentary comparison?




No hidden agenda, nothing to sell, no commissions to make, no ego needs.  I was just curious to see if anyone was doing as well as Daryl Guppy's sample newsletter portfolio.  Clearly no one here is even close to this level, and because they arent they dont believe anyone else can be either, or they are at that level and enjoy posting cryptic meaningless garbage to satisfy their egos.

Such a simple question, 'please share your results' has been a huge waste of time.  I wont bother posting my results in Dec, no one will believe them no matter what they are.


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## skc

beachlife said:


> Such a simple question, 'please share your results' has been a huge waste of time.  I wont bother posting my results in Dec, no one will believe them no matter what they are.




Yes it has been a waste of time and it has been explained to you. If your system shows 100% p.a. based on a certain risk per trade (I think you said 4%). That's your return. So super_trader_girl_22 (I made her up) can return 250% while I can return only 5% (and we average 122.5%) has no bearing to you. 

The danger of looking for the high mark is that you don't really want to chase that by dialing up the risk per trade and hence your risk of ruin.

Let me share with you some practical advice. 

You've started trading since Jan. By Dec you should know better what sort of trade frequency (i.e. number of traders over 12 month) and drawdown you can expect in your system.

Look at what you want as an income... say $150k p.a. So you need $150k capital at current level of risk and 100% return. Or if you have $300k captial, dial down the risk to 2-2.5% per trade and get your $150k income that way. Or if you really wanted $150+, then use $250k (or whatever). You see how straight away you can make your return really any number you choose. 

So at the end of the year you tell everyone your return is X%. What meaning has it got for anyone learning to trade or setting a target for themselves? 

FWIW, my rate of return is infinite as I trade other people's money...


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## Gringotts Bank

beachlife said:


> Yes it is.   You do not have to imagine you are someone you arent, or be hypnotised, to have a positive mindset, and the words system and discretionary dont belong together.  Still no rate of return given.




No you don't have to do any of those things_ if they are already in place_.  If they are in place, good for you.  If they are not, you definitely need to do something to make a change, and I am offering some possibilities for action.  Having all the knowledge is a small fraction of the puzzle.  Canoz's situation demonstrates this clearly.  He knows more than many ASF members about how markets work, and yet he is failing miserably. He has applied what TH has recommended diligently, but to no avail.  So what have you offered that will help him?   

No rate of return given.  So what?  I've never pretended to be a superman trader on any thread including this one.  I'm not making as much as you - does that help you feel better?  How much I make should be of no concern to anyone.  What should be of concern is how much *change* has occurred as a result of applying the correct mindset.  The amount of change is far more significant than any technical factor, any position sizing factor, any trade management or R:R factor I have ever applied. Before this, I had studied and studied and studied (like Canoz) and all it did was reduce my drawdowns, albeit significantly.

*Kalaika*, thanks for your post!


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## beachlife

skc said:


> So at the end of the year you tell everyone your return is X%. What meaning has it got for anyone learning to trade or setting a target for themselves?




If it is a good result it just might stop them from being discouraged by idiots that post nonesense like

"If you need 150k and you reckon you can make 30% start with 1 mil should see you survive."


It might help them set a realistic target to aim for, and it might stop them from paying thousands of dollars to 'mentors' that barely beat the index.


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## skc

beachlife said:


> If it is a good result it just might stop them from being discouraged by idiots that post nonesense like
> 
> "If you need 150k and you reckon you can make 30% start with 1 mil should see you survive."
> 
> It might help them set a realistic target to aim for, and it might stop them from paying thousands of dollars to 'mentors' that barely beat the index.




I will leave you to it. After trading for a few more years, come back to this thread and see if anything you can reflect on or gain a new understanding. May be you will indeed prove the above to be BS (or not applicable to you), or you will look at that and think "Someone told me but I didn't want to listen".

Good luck.


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## CanOz

Beach, there aren't too many trading equities here that would post thier results. Certainly the Prop guys aren't going to, they'd get the boot. Tech had just posted the real results of his and Pavs system. You have guppys results...go to collective2 and grab some more more there....they're for systems but it doesn't matter...

This all together should give you an idea of what is achievable at the upper end.

CanOz


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## beachlife

Gringotts Bank said:


> ....  So what have you offered that will help him?




I suggested he focus on one market, widen his time frame, and avoid lunch time.  I didnt give any detailed advice because I am not a successful intra day trader.

All the positive attitude in the world is pointless and irrelevant if the maths of the system dont work.  To succeed  you need a mathematically sound system, first and foremost.  Once you have that you need the dicipline to implement it.  That's it.  You dont need to wake up every day and look in the mirror and say good morning super trader.



Gringotts Bank said:


> ....  How much I make should be of no concern to anyone.




It should be, and it is for me.  If you are happy with your performance then that is fantastic.  I would never criticise that.  But if you arent the sort of trader that he wants to be then he shouldnt listen to you.  He should only listen to people that are at the level he wants to be at.  I dont take notice of anything anyone says if they arent making around 100% pa, because I know its possible and if someone doesnt know how to do it then their advice is not worth listening to, no different to ignoring a running coach if you want to be a swimmer.  I also wont belittle someone if they are only making 10%, but I would help them where I could if they asked for it.  And if someone says my posts are made up, like you did, then I will call them out.


----------



## Gringotts Bank

beachlife said:


> I suggested he focus on one market, widen his time frame, and avoid lunch time.  I didnt give any detailed advice because I am not a successful intra day trader.
> 
> All the positive attitude in the world is pointless and irrelevant if the maths of the system dont work.  To succeed  you need a mathematically sound system, first and foremost.  Once you have that you need the dicipline to implement it.  That's it.  You dont need to wake up every day and look in the mirror and say good morning super trader.
> 
> 
> 
> It should be, and it is for me.  If you are happy with your performance then that is fantastic.  I would never criticise that.  But if you arent the sort of trader that he wants to be then he shouldnt listen to you.  He should only listen to people that are at the level he wants to be at.  I dont take notice of anything anyone says if they arent making around 100% pa, because I know its possible and if someone doesnt know how to do it then their advice is not worth listening to, no different to ignoring a running coach if you want to be a swimmer.  I also wont belittle someone if they are only making 10%, but I would help them where I could if they asked for it.  And if someone says my posts are made up, like you did, then I will call them out.




You don't need any maths at all in discretionary trading  (which is what Canoz was trying to do).

I've given this example many times before.  Tiger Woods could no more teach you how to hit a golf ball than fly.  However Woods' coach (who is nowhere near as good), could take you a long way.  So you'd rather go to Tiger.  I'd rather go to Tiger's coach.  The top guys in any field are very rarely good at teaching or even understanding how it is they became so good.  You're wasting your time going up that road.


----------



## beachlife

skc said:


> "Someone told me but I didn't want to listen".




There has been nothing constructive said.  Take this example

_I can see a number of areas
 You ave identified 1 ---- a serious problem._ *Why would I ask if I had identified it?*
_You have seen seen 1 as irrelevant --- although you are using leverage correctly in a portfolio situation._ *This makes no sense at all.* _And I see 3 areas you could improve on.
 Frequency _  - *what, too many, or too few*
_Not moving initial stop_ - *I never said where my initial stop is, when, by how much *
_Pyramiding_ - *when, by how much*

There is nothing in that post, or any others that will make more sense in 6 months.


----------



## beachlife

Gringotts Bank said:


> You don't need any maths at all in discretionary trading  (which is what Canoz was trying to do).





Then he has been gambling, he needs a system.




Gringotts Bank said:


> I've given this example many times before.  Tiger Woods could no more teach you how to hit a golf ball than fly.  However Woods' coach (who is nowhere near as good), could take you a long way.  So you'd rather go to Tiger.  I'd rather go to Tiger's coach.  The top guys in any field are very rarely good at teaching or even understanding how it is they became so good.  You're wasting your time going up that road.




No no no.  Tiger Woods' coach has proven himself as a coach, he has proven results so of course I would listen to him, but I wouldnt listen to the guy at the local club that wont show me his score card.


----------



## FlyingFox

Hi beachlife,

Interested to know how far back you have backtested?


----------



## Gringotts Bank

beachlife said:


> Then he has been gambling, he needs a system.
> 
> 
> 
> 
> No no no.  Tiger Woods' coach has proven himself as a coach, he has proven results so of course I would listen to him, but I wouldnt listen to the guy at the local club that wont show me his score card.




Proven coach (Sean Foley), but he can't win a major.  In fact his Wikipedia page doesn't mention even one title he has won.

I'm offering advice but can't make 100%.  Is my advice useless?  I guess you're saying I need to coach someone to 100% before you'd listen.  I'll need someone to coach first.  Canoz won't listen to me!!  One day someone might.  If not, I'll just continue to work on myself.


----------



## CanOz

Gringotts Bank said:


> ....... Canoz won't listen to me!!  One day someone might.  If not, I'll just continue to work on myself.




Hey now...I told you I use a trading coach, so it is possible that you idea could be discussed one day

My reasons were more numerous than only what I posted...

CanOz


----------



## Gringotts Bank

CanOz said:


> Hey now...I told you I use a trading coach, so it is possible that you idea could be discussed one day
> 
> My reasons were more numerous than only what I posted...
> 
> CanOz




Great. I'd really enjoy that challenge.


----------



## beachlife

CanOz said:


> Beach, there aren't too many trading equities here that would post thier results. Certainly the Prop guys aren't going to, they'd get the boot. Tech had just posted the real results of his and Pavs system. You have guppys results...go to collective2 and grab some more more there....they're for systems but it doesn't matter...
> 
> This all together should give you an idea of what is achievable at the upper end.
> 
> CanOz




Thanks Can, I had never heard of collective2.

Check this out using their forex trends which claims 212%, on what I thought.  From their graph you can get the following account balances

7 jan 2010 $564632
6 jan 2011 $613254
5 jan 2012 $735745
3 jan 2013 $800603

So for 2010 to 2011 open bal =$564632, profit is 613254-564632=48622.  annual return is 48622/564632*100 = 8.6%

2011 to 2012 open bal = 613254, profit is 735745-613254=122491.  annual return is 122491/734745*100 = 16.6%

2012 to 2013 open bal = 735745, profit is 800603-735745 = 64858. annual return is 64858/735745*100 = 8.8%

I just love year 10 maths.


----------



## beachlife

FlyingFox said:


> Hi beachlife,
> 
> Interested to know how far back you have backtested?




2 years


----------



## beachlife

Gringotts Bank said:


> I guess you're saying I need to coach someone to 100% before you'd listen.




yes, 100% per annum


----------



## Trembling Hand

beachlife said:


> If it is a good result it just might stop them from being discouraged by idiots that post nonesense like
> 
> "If you need 150k and you reckon you can make 30% start with 1 mil should see you survive."
> 
> 
> It might help them set a realistic target to aim for, and it might stop them from paying thousands of dollars to 'mentors' that barely beat the index.




Thats not rubbish at all. Thats based on something that you have not got. 12 years of full time experience trading many different approaches and many different markets. You will find that just as your system is proven with consistent results and you dial up the capital you will be hit with all sorts of drags - Tax - drawdown - market change - unexpected time away from markets - low motivation - fear - system out of synic - repayments on your new Porsche etc etc. All of these and more will make what you return over one period foolish to think your equity curve will keep going in a straight line to infinity.

But its clear. You asked a simple question but will not listen to experienced answers. Who is being silly here?

As for my return I've made in 12 years everything from 800% to -10% per year. What can been seen from that


----------



## tech/a

Trembling Hand said:


> Thats not rubbish at all. Thats based on something that you have not got. 12 years of full time experience trading many different approaches and many different markets. You will find that just as your system is proven with consistent results and you dial up the capital you will be hit with all sorts of drags - Tax - drawdown - market change - unexpected time away from markets - low motivation - fear - system out of synic - repayments on your new Porsche etc etc. All of these and more will make what you return over one period foolish to think your equity curve will keep going in a straight line to infinity.
> 
> But its clear. You asked a simple question but will not listen to experienced answers. Who is being silly here?
> 
> As for my return I've made in 12 years everything from 800% to -10% per year. What can been seen from that




Your dosing up a hard pill to swallow.
My feeling is your being rejected due to a low capital base.
He wants a $150K income with a low starting capital base--hence the need to 
find something well above average and closed ears on the facts.

Its should be a business.
How many businesses return 100% or more on investment
in a year year after year with a starting capital or 100-200K?

Unfortunately---money does make money.
The single most common killer of business is under capitalization.


----------



## craft

beachlife said:


> yes, 100% per annum




That's not even close to realistic.

10K starting capital and no leverage and you would still be the richest person in the world in 20 Years.

Trying to force a return on the market is **** about face anyway. You can't control the market - you can only position your self to benefit when the market is generous and survive when it's not.  

You can work on your process and skills but you can't dictate how much or when you will be compensated for your efforts. A compoundable  return on unleveraged capital over an investing career of 20%p.a would be legendary ( ie Buffets long term return is only 20%) - realistic - shoot a little lower.

You might have good years and knock the socks of 20% in any given year - but long term the market eats dreamers that don't have the humility to understand the nature of their relationship with the market and the skills and aptitude to deal with the lean periods.


----------



## craft

tech/a said:


> Its should be a business.
> How many businesses return 100% or more on investment
> in a year year after year with a starting capital or 100-200K?




The even bigger question is how many of these businesses (if any exist) can take the earnings and re-invest it and still make the same returns on the expanded capital base.

If you’re not thinking about the scalability (ie compounding your earnings) then you’re aiming at an endless journey on the treadmill even with a 100% return. Earn it – Spend it all – you might as well just have  a job.


----------



## 5oclock

craft said:


> The even bigger question is how many of these businesses (if any exist) can take the earnings and re-invest it and still make the same returns on the expanded capital base.
> 
> If you’re not thinking about the scalability (ie compounding your earnings) then you’re aiming at an endless journey on the treadmill even with a 100% return. Earn it – Spend it all – you might as well just have  a job.




Very good point!!!!! +1


----------



## Gringotts Bank

This is interesting about Guppy's performance figures.  From Amazon reviews:

Although Guppy uses a number of ideas in his trading, his core trend trading techniques involve the use of trend lines, the Count Back Line, Guppy Multiple Moving Averages and a basic 10ema/30ema crossover system. I've tested all these systems thoroughly using TradeSim, in various combinations on thousands of stocks over 20 years of data. They're hopeless. Even in a roaring bull market they perform only adequately. You'd need a whole lot of discretion to get them to perform as well as he claims they work in his newsletter.

I was a subscriber to his newsletter for two years. Some cheating (or some egregious errors at the very least) boosted the performance figures in his newsletter. Back then I was a novice trader, and I found his exit techniques very confusing. I counted at least 8 different exit methods - the worst one being just a gut feeling that he'd made enough profit. It took me a long time to realize that this was all symptomatic of his sloppy approach, not just my inability to understand him. His understanding and use of statistics is especially poor.

I think this once again reinforces the idea that one needs much more than technique, method, position sizing, risk management and trade management.  Intuitively knowing when to sell - it looks like Guppy can do this.  My explanation for this ability is that he has the perfect mindset for trading, but you may have your own.  You don't get to be that successful using techniques that simply do not backtest profitably. But can he teach others?  I'd say no, absolutely not.  Can you profit by using his newsletter?  Probably.  I can't tell how realistic his 90% average return is.  Has anyone researched this?


----------



## 5oclock

GB its a big call saying none of Guppys techneques work even in a bull market!!!!!! Ever heard of Darvas?? ONE of Guppys methods is  Darvas and we all know that that worked---and before you think this is a personal go at you it isnt, just wondering at a big call and if you tested all his methods---also i have in no way any barrow to push for Guppy.


----------



## craft

Gringotts Bank said:


> Has anyone researched this?




 How can you? the supporting data is not available.

The burden of proof lays on the claim. Until the claim is proved beyond a reasonable doubt - Its bull**** to a prudent person I would think.

10K put in at the start of the claimed performance record would now be worth 304 Million.  Where are all the customers yachts'?


----------



## Gringotts Bank

5oclock said:


> GB its a big call saying none of Guppys techneques work even in a bull market!!!!!! Ever heard of Darvas?? ONE of Guppys methods is  Darvas and we all know that that worked---and before you think this is a personal go at you it isnt, just wondering at a big call and if you tested all his methods---also i have in no way any barrow to push for Guppy.




The reviewer said they perform only adequately in a strong bull market, (meaning you'd be getting a positive return but probably with some big drawdowns on an ugly equity curve).  This guy's review indicates that Guppy does not trade the way he indicates in his books, because if he did, he wouldn't achieve 90% ave. returns over so many years.  It indicates that Guppy exits a trade whenever he damn well feels like it's the right time.  Guppy himself obviously has an intuitive ability to read markets and be very profitable. This is the same with all top traders.  

I tested his multiple moving average many years ago, (but used a Jurik low lag MA to try to improve things).  Got nuthin.  I tried it with all manner of stops - time, profit/loss, trailing.  If one of his strategies is useless, probably all of them are.  But my point, again, _Guppy himself_ knows when to sell and it's different every time according to this reviewer.  HE makes money, and perhaps his subscribers do, but you can bet those who try to implement strategies outlined in his books do not.


----------



## Trembling Hand

craft said:


> How can you? the supporting data is not available.
> 
> The burden of proof lays on the claim. Until the claim is proved beyond a reasonable doubt - Its bull**** to a prudent person I would think.
> 
> 10K put in at the start of the claimed performance record would now be worth 304 Million.  Where are all the customers yachts'?





I'm not disputing you post but no one compounds like that. Especially in the ASX small caps. I don't think even the worst of nuttiest claim that an approach is scalable out to infinity. Guppy does say that these results are based on an account reset at 100g each year.


----------



## tech/a

Actually agree with a lot of GB's comments.
From a T/A perspective its very average.


----------



## beachlife

This getting silly now.  I never said anything about compounding to $300m and buying super yahcts.

Guppy has a newsletter with a sample portfolio.   It has a $100k capital base.  He doesnt compound.  Each year for many years he has generated around $100k in profits in this sample portfolio, mathematically a 100% pa return (even in 2008).  A 'job' I could live with and happily pay tax on.  His results are documented in real time in his newsletters.  Yes I too find his books difficult to read, and his exact system is hard to figure out, but I am happy to accept that his newsletter are genuine.

This opened my mind to the possibility that it is possible to consistantly generate a nice wage from a base well below $1m, and I have set out to give it a go, but havent quit my day job just yet.  If you dont know how to do it dont say it cant be done, open your mind to the possibility that you just dont know how to do it.

I'm sure GB will agree with this, they say if you want to be successfull surround yourself with like minded POSITIVE people.  No one like that here, just closed minds, suspicion and endless negativity.

Adios.


----------



## tech/a

beachlife said:


> This getting silly now.  I never said anything about compounding to $300m and buying super yahcts.
> 
> Guppy has a newsletter with a sample portfolio.   It has a $100k capital base.  He doesnt compound.  Each year for many years he has generated around $100k in profits in this sample portfolio, mathematically a 100% pa return (even in 2008).  A 'job' I could live with and happily pay tax on.  His results are documented in real time in his newsletters.  Yes I too find his books difficult to read, and his exact system is hard to figure out, but I am happy to accept that his newsletter are genuine.
> 
> This opened my mind to the possibility that it is possible to consistantly generate a nice wage from a base well below $1m, and I have set out to give it a go, but havent quit my day job just yet.  If you dont know how to do it dont say it cant be done, open your mind to the possibility that you just dont know how to do it.
> 
> I'm sure GB will agree with this, they say if you want to be successfull surround yourself with like minded POSITIVE people.  No one like that here, just closed minds, suspicion and endless negativity.
> 
> Adios.





So one poster here has told you he has returned -10% to +800%
I've a method which has been published which turned $30K into $360K in 5 years but was leveraged 2:1

You've also been told home truths.
What more do you want?

Perhaps you should contact Guppy?


----------



## craft

Trembling Hand said:


> I'm not disputing you post but no one compounds like that. Especially in the ASX small caps. I don't think even the worst of nuttiest claim that an approach is scalable out to infinity. Guppy does say that these results are based on an account reset at 100g each year.




I didn’t know Guppy stated he reset the base each year – didn’t see that on the page linked too with the performance figures.

Resting the account each year drops the Compound Annual Return to about 18%.

To me compound annual return (on all available funds) is the only sensible measure.  Seems I don’t naturally make the assumption that others like to state their results differently.  (Guess my way of figuring wouldn't sell many newsletters)


----------



## McLovin

If you're not interested in compounding, then why not do something like opening a lawn mowing service. You'll probably earn more on your capital.


----------



## VSntchr

McLovin said:


> If you're not interested in compounding, then why not do something like opening a lawn mowing service. You'll probably earn more on your capital.




Jim would probably have something to say about the ability to compound returns in the lawn mowing area!


----------



## Trembling Hand

craft said:


> (Guess my way of figuring wouldn't sell many newsletters)




yep that I do agree on.



McLovin said:


> If you're not interested in compounding, then why not do something like opening a lawn mowing service. You'll probably earn more on your capital.




My point about compounding in part goes like this,

year 1 = $100,000 * 100% = $200,000 less 30% tax (-$30,000), less cost (data, accountant etc, $2000), Less living expenses ($30,000)

Year 2 = $138,000 * 100% = $276,000 less 50% tax (-$69,000) less cost (data, accountant etc, $2000), Less living expenses ($50,000)

Year 3 = $155,000 etc etc

Although in fairy land you are getting 100% return on your account in the real world there is huge drag on your account. Throw in a drawdown year and your $100,000 starting capital isn't enough to survive by a factor of 10 although you are making mostly 100%!!


----------



## craft

Trembling Hand said:


> My point about compounding in part goes like this,
> 
> year 1 = $100,000 * 100% = $200,000 less 30% tax (-$30,000), less cost (data, accountant etc, $2000), Less living expenses ($30,000)
> 
> Year 2 = $138,000 * 100% = $276,000 less 50% tax (-$69,000) less cost (data, accountant etc, $2000), Less living expenses ($50,000)
> 
> Year 3 = $155,000 etc etc
> 
> Although in fairy land you are getting 100% return on your account in the real world there is huge drag on your account. Throw in a drawdown year and your $100,000 starting capital isn't enough to survive by a factor of 10 although you are making mostly 100%!!




This is exactly why only using Compound Annual Rates makes any sense.

Starting capital base, ending capital base, non trading related withdrawals, capital additions, duration. The compound annual rate is the measure that balances it all out and allows sensible comparison.


----------



## McLovin

craft said:


> This is exactly why only using Compound Annual Rates makes any sense.
> 
> Starting capital base, ending capital base, non trading related withdrawals, capital additions, duration. The compound annual rate is the measure that balances it all out and allows sensible comparison.




I'd really love fund managers have to produce some sort of "after tax" return for a hypothetical tax payer. I think it would really be illuminating about how the constant churning employed by some managers degrades return.


----------



## beachlife

craft said:


> This is exactly why only using Compound Annual Rates makes any sense.




I cant leave this unanswered in case a newbe stumbles across it later.

For a super fund yes, to hide years like 2008 in the longer term averages, for a business no.  

In business you measure your gross profit and then your net profit after expenses, and you compare both to last year, and as a return on your capital invested in the business, and you do it in straight % terms.  Then the business pays it tax.  Compounding is never included in business performance measures, neither is tax.  After tax you then decide to retain profits as additional capital or pay a dividend, or a combination of both.

My OP was simply trying to get a measure of gross income potential before expenses, as a % of capital, for trading as a business.


----------



## Trembling Hand

beachlife said:


> My OP was simply trying to get a measure of gross income potential before expenses, as a % of capital, for trading as a business.




How long is your string?????

10K?
100k?
1 mil?
20 mil?


----------



## skyQuake

beachlife said:


> My OP was simply trying to get a measure of gross income potential before expenses, as a % of capital, for trading as a business.




lots of factors...
- As TH said, depends on how much capital you throw at it. In general higher amount of capital = harder to generate returns.
- Experience 
- Whether you're retail or insto 
- What the general market does 
- How much work you put into it

As a guess, new traders make market returns - 5%. This figure is considerably worse in sideways/bear mkts.
Variance is high due to skill/luck/type of mkt


----------



## peter2

My advice for the newbs. 
Don't worry about other peoples stated ROI's. Most of them are misleading either intentionally or unintentionally. Anyone mentioning a % return without also mentioning the max draw down (% risked) to get that reward is intentionally misleading their audience. 

If you feel the need to compare your return against others, recognise this need as a typical newbie trait and that you haven't traded enough or traded through different market conditions. 

Your only concern should be whether your trading plans are capable of fulfilling your risk/reward goals. If they are, then do it, if not, improve them.


----------



## beachlife

Trembling Hand said:


> How long is your string?????
> 
> 10K?
> 100k?
> 1 mil?
> 20 mil?




When position sizing is % based it is all scalable until you reach liquidity problems, so it makes no difference.

$5000, 4% risk is $200, 100% gross return is $5000

Double it

$10,000 4% risk is $400, 100% gross return is $10,000

multiply by 50

$500,000 4% risk is $20,000, 100% gross return is $500,000 (assuming you can get your trades filled)

That's why I asked for % not $$, once proven small it can to scaled to whatever I want - within the limits of liquidity.


----------



## Trembling Hand

beachlife said:


> When position sizing is % based it is all scalable until you reach liquidity problems, so it makes no difference.
> 
> $5000, 4% risk is $200, 100% gross return is $5000
> 
> Double it
> 
> $10,000 4% risk is $400, 100% gross return is $10,000
> 
> multiply by 50
> 
> $500,000 4% risk is $20,000, 100% gross return is $500,000 (assuming you can get your trades filled)
> 
> That's why I asked for % not $$, once proven small it can to scaled to whatever I want - within the limits of liquidity.




In a lot of instruments it doesn't take much to reach liquidity limits where you cannot just hit the buy or sell button, especially in the ASX. If you are using CFDs you will find very very quickly that you cannot trade with anything worth while.

Thats why its so hard to answer you question. There are some here trading a few thousand up to a few million or more. But really if you knew your system and your markets it seems hard to believe that you aren't the best one to answer your own question!


----------



## beachlife

Trembling Hand said:


> In a lot of instruments it doesn't take much to reach liquidity limits where you cannot just hit the buy or sell button, especially in the ASX. If you are using CFDs you will find very very quickly that you cannot trade with anything worth while.:




That is why I am starting small with cfd's over currency and commodities so I can switch to the futures contracts when cfd liquidity becomes a problem.




Trembling Hand said:


> Thats why its so hard to answer you question.:




What's so hard.  Either of these would have spared a lot of time for everyone.
1. my usual rate of return is somewhere between x & y.  Good luck.
2. none of your business, I hope you fail.  (seems to be the general preference)




Trembling Hand said:


> it seems hard to believe that you aren't the best one to answer your own question!




I know what my system should make.  If I knew what returns others were generating I wouldnt have asked.


----------



## Trembling Hand

beachlife said:


> What's so hard.  Either of these would have spared a lot of time for everyone.
> 1. my usual rate of return is somewhere between x & y.  Good luck.




You are quite thick aren't you? My usual rate of return swings massively. I'm pretty sure most profitable traders are the same.

There is no NORMAL YEAR... FFS!


----------



## beachlife

Trembling Hand said:


> You are quite thick aren't you? My usual rate of return swings massively. I'm pretty sure most profitable traders are the same.
> 
> There is no NORMAL YEAR... FFS! :




_Insults are the arguments employed by those who are in the wrong._
Jean Jacques Rousseau


----------



## boofis

beachlife said:


> _Insults are the arguments employed by those who are in the wrong._
> Jean Jacques Rousseau




Alright, you win, everyones been wrong this whole time. None of us actually trade, or have traded for longer than you, it's actually really easy to make 1000% every year on a $500 account. Let us know how you go mate!


----------



## skc

Trembling Hand said:


> You are quite thick aren't you? My usual rate of return swings massively. I'm pretty sure most profitable traders are the same.
> 
> There is no NORMAL YEAR... FFS!




Stop loss, my friend.


----------



## Trembling Hand

skc said:


> Stop loss, my friend.




LOL. 

My after market hobbie,


----------



## burglar

Trembling Hand said:


> LOL.




Let me guess ... it feels sooo good when yah stop!!


----------



## beachlife

boofis said:


> Alright, you win, everyones been wrong this whole time. None of us actually trade, or have traded for longer than you, it's actually really easy to make 1000% every year on a $500 account. Let us know how you go mate!





Sure mate,

End of day system, 8th Jan to 30th June

76% with 100% profits reinvested back into capital base.

(would be 71% if 100% profits withdrawn, ie fixed 4% risk per trade).

Win / loss 61%


New intra day FX system based on similar entry signals averaged around $200/day on live $5k test account in June, even  with undiciplined 1st week. (I dont believe in testing on sim).  Last 2 weeks around $300/day.  No compounding yet, 4-8 trades per day.  Now optimised and coded into MT4.  Still just $5k for another month of testing MT4.


----------



## TheUnknown

trading forex is a disaster


----------



## zac

TheUnknown said:


> trading forex is a disaster




I think theres a saying that goes along the lines of "Forex is the quickest way to the poor house"

Personally I think the disaster isn't Forex so much its in anything where you don't understand it well enough. The amount of leverage used in Forex catches people off guard. Ive heard some rather sad stories.
However ive heard some real good stories too.
I've known of people who on Forex on just one trade (yes one) have set their whole life up.

Not to say that they were probably stupid and over committed on that one trade. Even reading the forums, so many people went short the Japan Yen.


----------



## Smurf1976

beachlife said:


> That's why I asked for % not $$, once proven small it can to scaled to whatever I want - within the limits of liquidity.



Mathematically maybe, but human psychology often becomes a limiting factor once the actual $ amounts become significant.

You risk $1000 - no problem, you won't lose much sleep over that.

You risk $1,000,000 - that's a lot of money for most people and fear can very easily take over.

It's the same with everything. If I put a steel beam on the ground then any able bodied person can walk along it quite easily without falling off. Now suspend the same steel beam between two high rise buildings and attempt to walk along it. Nothing has changed with the task, you just put one foot in front of the other and walk, but the consequences of failure have gone from nothing to total loss and most will be terrified at the thought of taking such a huge risk. Psychology takes over.


----------



## freebird54

Covered calls work on 3% a month
Other option plays higher return, less capital required  but higher risk
I have been in stocks for 40 years, options for 15 years

I have just started on Bonds and index trading so learning all over again.



beachlife said:


> Hi Guys
> I wonder if any active derivatives traders are willing to share their average rate of return to give me something to aim for.  I know those with an investment mindset are happy to just out perform the index. I am more interested in actively trading for cash flow as opposed to investing for long term growth.
> 
> For me out performing the index is not enough to live on.  I see examples of traders that have turned $10k into $110k in 12 months.  Daryl Guppy's newletter sample portfolio averages around 90%pa.
> 
> I currently trade CFD's long and short on asx top 200, commodities, spi, aud/usd on a daily time frame, not intra day.  If all of my stops were hit today my return on capital would be 18% since Jan.  If I took my open profits today it would be 40%.  Trade durations are 10 to 20 days, win loss ratio is 58% wins.  But it's early days yet.
> 
> What are those that trade for a living consistently making?  I need a realistic target.
> 
> Thanks.


----------



## freebird54

Covered calls work on 3% a month
Other option plays higher return, less capital required but higher risk
I have been in stocks for 40 years, options for 15 years

I have just started on Bonds and index trading so learning all over again.



beachlife said:


> Hi Guys
> I wonder if any active derivatives traders are willing to share their average rate of return to give me something to aim for.  I know those with an investment mindset are happy to just out perform the index. I am more interested in actively trading for cash flow as opposed to investing for long term growth.
> 
> For me out performing the index is not enough to live on.  I see examples of traders that have turned $10k into $110k in 12 months.  Daryl Guppy's newletter sample portfolio averages around 90%pa.
> 
> I currently trade CFD's long and short on asx top 200, commodities, spi, aud/usd on a daily time frame, not intra day.  If all of my stops were hit today my return on capital would be 18% since Jan.  If I took my open profits today it would be 40%.  Trade durations are 10 to 20 days, win loss ratio is 58% wins.  But it's early days yet.
> 
> What are those that trade for a living consistently making?  I need a realistic target.
> 
> Thanks.


----------



## Value Collector

beachlife said:


> .
> 
> What are those that trade for a living consistently making?  I need a realistic target.
> 
> Thanks.





I think for the sake of conservative forward planning, you should consider yourself ready to be a full time investor / trader when you have large enough working capital base that you could live the way you like from based on it earning 8% for you.

They way I personally prefer is to do the following.

1, Own your own home debt free. (no rent or mortgage payment will allow you to sleep soundly)

2, Have 3 years living expenses in a high interest bank account. ( Having this gives you a great buffer against down turns)

3, Then have your working capital deployed in a way that suits your knowledge and talent, the returns will be lumpy, so when you have years with solid returns top up your 3 years expenses bank account.


----------



## beachlife

Thanks but I would expect a lot better than 8% pa for a derivatives trader. 

I have found the answer I was looking for here

http://www.worldcupchampionships.com/live-stats-3

and here

http://www.guppytraders.com/gup15.shtml


----------



## Value Collector

beachlife said:


> Thanks but I would expect a lot better than 8% pa for a derivatives trader.
> 
> I have found the answer I was looking for here
> 
> http://www.worldcupchampionships.com/live-stats-3
> 
> and here
> 
> http://www.guppytraders.com/gup15.shtml




As I 8% is a figure I chose for conservative planning. You are free to earn higher rates if you can, But remember not every year will be a killer year.If you don't have a decent buffer of saved monthly expenses, and and you only have a small capital base because you planned on earning 30% a year every year, you will quickly eat through you capital, and be in the embarrassing position of having to tell friends and family you failed and have to rejoin the work force.

If you can earn those large returns, then it shouldn't take you long to get to that large capital base through compounding, where you could live of 8% with a 3 year buffer set aside and a paid for house.


----------



## Value Collector

beachlife said:


> Thanks but I would expect a lot better than 8% pa for a derivatives trader.
> 
> ]




Another thing to keep in mind is that those high returns are coming at the expense of other peoples losses, and If you are new to the game, then you have a great chance of becoming the guy that helps fund those high returns for the experts,


----------



## beachlife

Value Collector said:


> be in the embarrassing position of having to tell friends and family you failed and have to rejoin the work force.




Nothing embarrasing about that at all.  I retired from work at age 35, the GFC meant I had to go back to work until now, no one laughed, well no one that matters to me.  To me it's more laughable to go to work every day hoping that one day you would have paid off your home and saved enough to retire.  

Im the process of finalising my last contract and will quit the work force again.  My only source of income will be the markets.  If I have to go back to work next year, I dont care, at least I would have had another year off, unlike any one that will laugh.

By the way I was able to retire at that age because I ignored everyone that said it couldnt be done and just went and did it anyway.

As they say, if you dont aim high you are guaranteed to never hit that target, but if you aim high, you just might hit the bullseye.


----------



## Value Collector

beachlife said:


> - the GFC meant I had to go back to work until now,
> 
> -By the way I was able to retire at that age because I ignored everyone that said it couldnt be done and just went and did it anyway.
> 
> As they say, if you dont aim high you are guaranteed to never hit that target, but if you aim high, you just might hit the bullseye.




- With the strategy I laid out the fact you would have had 3 years buffer meant you would have survived the gfc down turn and given you the time to really profit from it.

- I am not discouraging you, I am a full time investor myself, and am in my early 30's. I was just suggesting a strategy that should stop you being one of those guys that gets wiped out and has to start again if you have a bad year (or two).


----------



## Trembling Hand

Value Collector said:


> - With the strategy I laid out the fact you would have had 3 years buffer meant you would have survived the gfc down turn and given you the time to really profit from it.
> 
> - I am not discouraging you, I am a full time investor myself, and am in my early 30's. I was just suggesting a strategy that should stop you being one of those guys that gets wiped out and has to start again if you have a bad year (or two).




VC as a short term trader the gfc was heaven. If you have a higher trade frequency draw-down periods are normally limited to weeks and/or a month or two rather than years. 

I do know where you are coming from because I know few who have stuck in the trading game through market phase changes. And I agree 100% the best chance of long term survival is not needing this month to be positive to enable you to pay the rent. Funnily enough of the derivative traders I have know, which is quite a few, just about 100% that are still in the game as strong as they where 10-7 years ago are trading prop.


----------



## beachlife

Value Collector said:


> - With the strategy I laid out the fact you would have had 3 years buffer meant you would have survived the gfc down turn and given you the time to really profit from it.
> 
> - I am not discouraging you, I am a full time investor myself, and am in my early 30's. I was just suggesting a strategy that should stop you being one of those guys that gets wiped out and has to start again if you have a bad year (or two).




Investor is the key word, the thread was asking for returns of traders, who as TH says, would have shorted the GFC for good returns (very rare that I agree with him).  At that time my focus was property so I missed one of the biggest opportunities in recent history, but suspect another is just around the corner.

Being in your 30's with your own home paid off, with 3 years wages in a high interest bank account (where are they?), and on top of that enough capital invested in the market to live off an 8% return then I tip my hat you.  That's an awesome position to be in.

I was once very close to being in the same position, but not any more and the strategy you suggest requires so much savings that it's beyond the reach of most people.


----------



## Value Collector

Trembling Hand said:


> VC as a short term trader the gfc was heaven.




It was heaven for me too, The GFC is what allowed me to build the holdings I have now.


----------



## Value Collector

beachlife said:


> -Investor is the key word, the thread was asking for returns of traders, who as TH says, would have shorted the GFC for good returns (very rare that I agree with him).
> 
> -  At that time my focus was property so I missed one of the biggest opportunities in recent history, but suspect another is just around the corner.
> 
> -Being in your 30's with your own home paid off, with 3 years wages in a high interest bank account (where are they?), and on top of that enough capital invested in the market to live off an 8% return then I tip my hat you.  That's an awesome position to be in.
> 
> -I was once very close to being in the same position, but not any more and the strategy you suggest requires so much savings that it's beyond the reach of most people.




- similar principles apply, just because you label yourself a trader does not mean you will outperform investors, And just because you are an investor doesn't mean you will have low returns, I suggest 8% as a conservative figure, for safety.

- If you were retired, living off property how did the gfc force you back to work.

- High interest bank accounts don't have the high interest they used to have, but I was talking about the likes of ING etc, I personally hold my "wage saving" and other savings in a mortgage interest offset account I have attached to some property investment loans I have.

- Not really, The way I look at it, If you are able to earn the high trading returns your looking for, you should be able to compound you existing capital position to get to my position in a number of years, If you can't compound to get to my position in 10years or less, then your not earning the high returns that would justify trying to live of a small capital base in the first place.

for example if your going to earn 50%, it will turn $100,000 into $2,500,000 in 8 years, So you could keep the $100,000 capital base and live off $50,000 a year, or you could keep working and compound it to set yourself up in a really rock solid position.


----------



## Value Collector

A close friend of mine was trading for about 2.5years on a capital base of $150,000 in the run up to the GFC, his operation blew up and he and his wife were forced back to work, This is the main reason I kept hard at it for longer than I probably had to, to make sure I was set up properly. 

I am not saying it was easy, but me and my partner did,


----------



## beachlife

Value Collector said:


> - similar principles apply, just because you label yourself a trader does not mean you will outperform investors, And just because you are an investor doesn't mean you will have low returns, I suggest 8% as a conservative figure, for safety.
> 
> - If you were retired, living off property how did the gfc force you back to work.
> 
> - High interest bank accounts don't have the high interest they used to have, but I was talking about the likes of ING etc, I personally hold my "wage saving" and other savings in a mortgage interest offset account I have attached to some property investment loans I have.
> 
> - Not really, The way I look at it, If you are able to earn the high trading returns your looking for, you should be able to compound you existing capital position to get to my position in a number of years, If you can't compound to get to my position in 10years or less, then your not earning the high returns that would justify trying to live of a small capital base in the first place.
> 
> for example if your going to earn 50%, it will turn $100,000 into $2,500,000 in 8 years, So you could keep the $100,000 capital base and live off $50,000 a year, or you could keep working and compound it to set yourself up in a really rock solid position.





I had negative geared rentals, a poorly timed purchase of new family home all being cash flowed by a renovation strategy.  The market died, my reno projects couldnt sell, cash flow stopped, interest rates went up every month, all investments had to be sold for less than what they were valued at pre GFC, tax on cap gains then had to be paid and it's all gone.  10 years of investing gone in 12 months, along with about $1.2m in 'paper' equity.  Managed to save the family home, but that's all.  With the market dead, and banks not lending, reno's for cash flow were no longer possible, so I had to go back to work for cash flow.  I still dont exactly know how so much equity just evaporated, but it did (based on bank valuations not agent opinions).

Yes my stragegy will compound nicely from a low base, but not at the rate you suggest due to tax and living exp deductions, but 8% pa on $100k wont even cover food.  To earn say a wage of $100k from an 8% return you need $1.2m, which by your recommendation needs to be saved from after tax income - impossible for most. 

I only know one person in your position at your age, he was a real estate agent that built a business and sold out before the GFC.  I dont know any wage slaves that come close to being able to quit their jobs and invest for a living on the terms that you recommend.

- - - Updated - - -



Value Collector said:


> A close friend of mine was trading for about 2.5years on a capital base of $150,000 in the run up to the GFC, his operation blew up and he and his wife were forced back to work, This is the main reason I kept hard at it for longer than I probably had to, to make sure I was set up properly.
> 
> I am not saying it was easy, but me and my partner did,




If they blew up during the GFC then they were buy and hold investors, not traders.


----------



## Value Collector

beachlife said:


> -Yes my stragegy will compound nicely from a low base, but not at the rate you suggest due to tax and living exp deductions, but 8% pa on $100k wont even cover food.  To earn say a wage of $100k from an 8% return you need $1.2m, which by your recommendation needs to be saved from after tax income - impossible for most.
> 
> - I dont know any wage slaves that come close to being able to quit their jobs and invest for a living on the terms that you recommend.
> 
> -If they blew up during the GFC then they were buy and hold investors, not traders.




- Well tax is a reality whether you are compounding it or spending it. But I think your missing the point, I am not saying save $1.2M from wages. I am saying compound your starting capital while you are still working earning money somewhere else, If you get high returns it shouldn't take you that long, if you can't get the high returns you had no chance with the small capital base.

- you made a mistake being under capitalised in your property business, I am just warning against repeating that same low capital mistake and also as I said planning on 8% just gives you a margin of safety, you don't want to plan on driving a 20 tonne truck every day over a bridge designed to carry 20 tonnes, you want to build a bridge that can carry 40 tonnes. 

- Firstly I think wage slave is a bit of a derogatory term I start out by saving money from my wages at a young age, But end up owning a business in sales that did very well, I lived off a fraction of what I was earning and compounded the savings, selling the business funded my 3 years wage account.

- If you think only buy and hold investors were hurt your crazy, In fact buy and hold investors that actually held right through probably did very well ( my mum didn't sell a single share between 1996 and now and her portfolio is well above pre gfc levels the gfc actually helped her dividend reinvestment plan buy more shares). From memory may mate was trading stocks and he was also using options, he was not a long term buy and hold guy. 

As I said - Planning on 8% is just a safety thing, I am not actually saying aim for 8%, aim for whatever you can get, but if your setup to be good at 8% you'll sleep happy,


----------



## Ves

Value Collector said:


> As I said - Planning on 8% is just a safety thing, I am not actually saying aim for 8%, aim for whatever you can get, but if your setup to be good at 8% you'll sleep happy,



I agree with the sentiment that you've made in this thread.  

If your emphasis is on savings rate  (ie saving a high proportion of your income - 50%+) then an 8%pa return compounded will add up really quickly.   If you do the maths,  and save 50% of your income from age 21 to age 35-40-45,  then some form of semi-retirement does not seem completely impossible as long as someone can achieve satisfactory returns  (not even super normal),  say 8-10%, which the market generally does over the long-term in a lot of cases.  You will not live a life of luxury, or be able to spend in amounts above the average person,  but quality of life will still be reasonable, especially if you embrace freedom.  It requires some sacrifices earlier in your adult life  (and in a lot of cases you will need to delay having children and if you do want children you need higher returns to support a higher cost base),  but as with everything in life there are trade-offs.  It is possible,  but only if you want it.

My emphasis is on risk-adjusted returns.   Gaining that 8-10-12% pa with the least risk possible.   Generally that requires me buying stable companies at a discount to their intrinsic value using a high discount rate.   Lots of other things I avoid,  but don't really want to bore anyone with that in this thread as I realise this is mainly for traders not investors.


----------



## beachlife

No this what you said and I am just trying to figure out how Mr & Mrs average wage earner could ever achieve it.



Value Collector said:


> consider yourself ready to be a full time investor / trader when you have* large enough working capital base that you could live the way you like from based on it earning 8% for you*.
> 
> They way I personally prefer is to do the following.
> 
> 1, Own your own home debt free.
> 
> 2, Have 3 years living expenses in a high interest bank account.
> .




So I read that as saying that anyone that wants a $100k income needs to wait until they have paid off thier home loan, saved $300k into a bank acc and have somehow built a working capital base of $1.2m, which of course would be all after tax.

My problems werent from being under capitalised, I had plenty of equity and was never called by the bank, my problem was a cash flow problem because the real estate market stopped and banks stopped lending.  These problems will never occur in trading.


----------



## Value Collector

beachlife said:


> No this what you said .




Please don't chop of the first half of my sentence when quoting me, I began the sentence with,

 "I think for the sake of *conservative* forward planning"

So, I was saying, be conservative or in other words "safe".


----------



## Value Collector

beachlife said:


> - figure out how Mr & Mrs average wage earner could ever achieve it.
> 
> 
> 
> -So I read that as saying that anyone that wants a $100k income needs to wait until they have paid off thier home loan, saved $300k into a bank acc and have somehow built a working capital base of $1.2m, which of course would be all after tax.
> 
> -My problems werent from being under capitalised, I had plenty of equity and was never called by the bank, my problem was a cash flow problem because the real estate market stopped and banks stopped lending.  These problems will never occur in trading.




- Spending less than they earn and put the savings (10 - 15% of earnings) into balanced investments over their working life, if you do this for thirty years you should be able to retire, mr and mrs aveverage shouldn't have a problem retiring at 55 if they did that.

- If you have paid off your home, you probably don't need $100K to live off. And if you are paying rent or a mortgage and still want $100K spending money your going to need a larger capital base anyway.

- You were under capitalised, other wise you wouldn't have been be negatively geared, relying on loans. Basically if your property investments are generating negative cashflow, your under capitalized.


----------



## Trembling Hand

beachlife said:


> If they blew up during the GFC then they were buy and hold investors, not traders.




You couldn't be further from the truth. I'm replying to this with some reluctance but certantly good intentions....here goes anyway...

Many very good traders got taken out during the GFC and then post GFC once volatility dried up. Very good traders. Basically all the locals on the SPI who had been there since electronic settlement started for example have, if they are smart/lucky, moved onto something else while others *blew to bits. *Really good traders, 100-300 lot locals (thats position size worth up to 40 mil per clip). Responsible for 100s of millions of dollars of turnover per day just in 1 instrument alone. You have not gone through a market change as yet and if you are at all as smart as you keep telling us you would drop such blind notions as to how hard it is to last long term in this game as a trader.

Believe me markets change just as you gain confidence and step up size. Been there done that -seen it 4 or 5 times. You will not be trading the same way as you trade now in 3-4 year if are lucky to recognise it and honest enough to change, that is if you are trading at all.


----------



## payday

Trembling Hand said:


> You couldn't be further from the truth. I'm replying to this with some reluctance but certantly good intentions....here goes anyway...
> 
> Many very good traders got taken out during the GFC and then post GFC once volatility dried up. Very good traders. Basically all the locals on the SPI who had been there since electronic settlement started for example have, if they are smart/lucky, moved onto something else while others *blew to bits. *Really good traders, 100-300 lot locals (thats position size worth up to 40 mil per clip). Responsible for 100s of millions of dollars of turnover per day just in 1 instrument alone. You have not gone through a market change as yet and if you are at all as smart as you keep telling us you would drop such blind notions as to how hard it is to last long term in this game as a trader.
> 
> Believe me markets change just as you gain confidence and step up size. Been there done that -seen it 4 or 5 times. You will not be trading the same way as you trade now in 3-4 year if are lucky to recognise it and honest enough to change, that is if you are trading at all.




TH - can I ask  why those traders blew up during the GFC if you know? Did they argue with the market and keep buying the dips or was it the extremely volatile nature of the markets during that period that just played havoc with their stops etc? Just seeing if there is a lesson in there for me to learn and observe. Thanks


----------



## beachlife

Value Collector said:


> - Spending less than they earn and put the savings (10 - 15% of earnings) into balanced investments over their working life, if *you do this for thirty years you should be able to retire*, mr and mrs aveverage shouldn't have a problem retiring at 55 if they did that.




You have missed the whole point.  The thread title isnt how to save enough to retire on at age 55.

The point of the thread was to find out what returns derivatives traders that trade for a living are making, that is, those that have replaced their day job income with trading income.  

The thread has nothing to do with long term retirement planning for wage earners.


----------



## beachlife

payday said:


> Just seeing if there is a lesson in there for me to learn and observe




I have blown up a few accounts in my time, the reasons were.
1. Risk per trade too large.
2. Stops too tight.
3. Trying to bottom pick (trade against under lying trend)
4. Trying to trade 1min to 15 min charts.  (that was really dumb, the whole point of stopping work is to get away from the computer, not remain glued to it for a living)
5. Removing futures stops in night market - that account was wiped out in one over night move.
6. Doing what I was taught at expensive seminars.
7. Trying to let winners run.
8. Trading options.
9. Trying to get in on a break out early.

What I do now.
The opposite of everyting above.

I am now in a position where I am happy to trade for a living without the safety net of any other form of income.


----------



## Trembling Hand

Non of those reason are why good traders blow up and get taken out of the game. They are the reasons why crap traders never make it to 1st base.


----------



## beachlife

Trembling Hand said:


> Non of those reason are why good traders blow up and get taken out of the game. They are the reasons why crap traders never make it to 1st base.




How can any trader that blows up be considered to have been good?


----------



## Valued

Were you writing options or something beachlife? You would have to be trying pretty hard to get wiped out on long calls or puts unless you used far too much risk per trade.

To be a professional trader for decades, I suppose you have to be able to trade more than just one instrument in one market. What if certain markets close due to disaster? You have to be able to trade multiple instruments in multiple markets.


----------



## Trembling Hand

beachlife said:


> How can any trader that blows up be considered to have been good?




LOL as per usual you try and pass on some info and you just hear what you want to. No wonder you walked into a property cluster F___. I'll leave you to it.


----------



## zac

beachlife said:


> How can any trader that blows up be considered to have been good?




If you read Market Wizards by Jack Schwager, most of the people were successful after blowing up.

Many a good trader learnt how to respect the market after blowing up.


----------



## skyQuake

Personally, I'd be wary of any trader that hasn't blown up a few times early on in the career.


----------



## RADO

Valued said:


> Were you writing options or something beachlife? You would have to be trying pretty hard to get wiped out on long calls or puts unless you used far too much risk per trade.
> 
> To be a professional trader for decades, I suppose you have to be able to trade more than just one instrument in one market. What if certain markets close due to disaster? You have to be able to trade multiple instruments in multiple markets.




This is a good answer to that earlier question. I know two people who were trading for a living, both were for about 5-10 years making pretty decent money. They both had entrepreneur mentality's as they both were former business owners. The main reason why they failed was because they were equity traders and could only make money on long positions. If you want to trade for a living you need to know how to trade more than just one instrument, I think the majority of people that trade for a living would either be futures or FX traders or a mixture of both. In regards to what a realistic rate of return is that depends on weather you trade part time or for a living.
If you trade for a living you will be drawing down on your funds at least monthly to pay for living/trading expenses not to mention Tax so you can't compound all of your returns. I know of some traders that can consistently get around 10-20% monthly trading Futures and FX but these guys would have to be in the top 1% these are people that trade for a living and have to draw down on there returns monthly to pay for living costs and tax etc. So you can't really compound that amount. They make what they can make and withdraw how ever much they want to withdraw but still live a pretty modest lifestyle.


----------



## beachlife

Valued said:


> Were you writing options or something beachlife? You would have to be trying pretty hard to get wiped out on long calls or puts unless you used far too much risk per trade..




No writing, just trading bought calls and bought puts as taught by a mob I wont name, but it was the late 90's and there was 3 of them all teaching the same thing, all claiming it was their own, one jumped on by asic, the other gone, the 3rd still spruking (not DK - stayed away from him).    I heard the market makers knew what was being taught.  Stops always got hit on the open of the next day if the US was quiet that night.  I lost count of how many times I was stopped out even when the underlying moved in the right direction - the power of the greeks.



Trembling Hand said:


> LOL as per usual you try and pass on some info and you just hear what you want to. No wonder you walked into a property cluster F___. I'll leave you to it.




Hardly a cluster F.  For 5 years it paid me a wage, allowed my wife to quit work too, bought us two 2 month around the world trips, and we came out the other end with a clean credit record, owning our own home, just no investments.  Times were so good I didnt even bother with trading.  I am not the only person on the planet that didnt see the GFC coming and if I had to choose between those 5 years and work I would do it again in a heart beat.

But back to you, crappy traders make the mistakes I made and then some quit (like I did back then), some go on to become good traders.  You havent answered how the ones that become good traders in your eyes then manage to blow up again.  

If not any of the things I did then what?

BTW how do you define a good trader?


----------



## Valued

I can see why people would lose money on options. I have seemed to have taken to options quite naturally so far. I wasn't aware of the greeks but just working it out myself I was already calculating the delta and theta. I reasoned that the option can only be worth as much as the intrinsic value and anything else must just be some value to compensate the writer of the option for being at risk. I then read about the greeks.

I think options are the bees knees for equities. For indices it's plainly inferior to futures in my opinion. For equities they seem amazing. The leverage can surpass any other instrument. I just took call options at 1:87 on Friday. Talk about leverage and the risk is absolute unlike a CFD which only offers 20:1 and you can lose more than your margin. The only issue is you have to get right not just the market direction but the market speed.


----------



## Value Collector

beachlife said:


> You have missed the whole point.  .




I thought you were asking the question because you wanted an idea of how much capital you would need, 

Basically all i was suggesting is use a conservative return for your calculations, that way you know you'll be ok.

But, i also suggested have a wage buffer of savings, because there will be years you may make 0% or even a loss, and if you are relying on hand to mouth monthly returns to eat as well as having a small capital base you are in trouble, because you may have to eat the small capital base if you have a bad year ( or two)

But i have no vested interest in your success or failure, i was just offering my opinion and what i thought was a rational way of setting yourself up.


----------



## Value Collector

Valued said:


> I think options are the bees knees for equities. For indices it's plainly inferior to futures in my opinion. For equities they seem amazing. The leverage can surpass any other instrument. I just took call options at 1:87 on Friday. Talk about leverage and the risk is absolute unlike a CFD which only offers 20:1 and you can lose more than your margin. The only issue is you have to get right not just the market direction but the market speed.




I use options in my investment operation also, I pretty much only write options though, i don't normally buy them.


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## craft

It’s not what return you can earn that will make you wealthy.  It’s what return you can continue to compound that counts. (or sizing up if using other people’s money).

Make 100% return un-compounded year in year out for 40 years and you will be a legend the likes of which has never been seen.  Yet you will still have made less than the nong who could only compound his pot at 10%.

If you’re not in a position to compound a decent percent of your return (or use other peoples money safely) then trading has no more imbedded wealth creation potential than any other job with the down side that earnings are more volatile and the discipline to keep at it will have to be internal. 

Compounding is king.

Size does matter.


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## Trembling Hand

beachlife said:


> But back to you, crappy traders make the mistakes I made and then some quit (like I did back then), some go on to become good traders.  You havent answered how the ones that become good traders in your eyes then manage to blow up again.
> 
> If not any of the things I did then what?
> 
> BTW how do you define a good trader?




Yeah I did. You haven't been through a market change. You are viewing the market in 1 dimension, you haven't seen how something can completely change characteristics. Your 'system' has been optimised, to some degree, to historical data. 

It will change and you will have a mighty hard time to relearn an approach because that is the nature of the game. You spend so long trying to get to a position where you know after the next 10-100-whatever trades you will be ahead then all of a sudden you will be forced to abandon that. MASSIVELY hard thing to do. It has nothing to do with the newbies mistakes 101.

Its about being left behind, markets change. They become too volatile for your positioning or signals or too locked up, which happened to the SPI traders. They were without doubt good traders. No way in the world you trade day in day out for 10-15 years swinging multiple millions per clip and and doing a few % of the instrument turnover without being a 'good' trader. I'm not talking retail wannbes on a CFD account. I'm talking about the actual people that ARE the market. What happened is a few arb bots post GFC just locked up the market when it was in the 4000s and would hardly budge all day. Basically over a year or two they emptied the locals account by out staying them and out boring them. 

Many had to go to different markets and completely different approaches. Some just fell to bits. Same thing is happening to medium term trend traders now in the ASX. Same thing will happen to US traders when that straight line market changes. Same thing will happen to the market I trade when the Seng either goes to 8000 or 50,000. What works now more than likely will not work in 4-5 years. Its always been that way.

Oh and a perfect example is the HFT crowd. A year ago everyone in the media and on forums were bitching about how its all so unfair that these guys are robbing the retail/sup funds with ease. Guess what is happening now? Most have gone broke the rest are on their knees.


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## Valued

TH would you say then that you either have to be very good at creating new systems to suit different market characteristics or be a very good discretionary trader who can see the changes in the market and react?

Perhaps it's like poker. In the year 2000 poker was easy. People used to walk in and just take money off the table easily or they played online and won bucket loads of cash. These days those some people are losers or break even players. They cannot keep up. The game has changed completely. It was only those who could create new styles of play that remain in the game. People had to adapt to the psychology of the other participants. Once they started to act differently, the game went upside down. Some were able to adapt their game based on feel and were successful. Others have used very complex game theory math and advanced software to create a system that works (although the dynamics of poker being a solvable zero sum game means the latter will eventually win).


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## tech/a

Being able to identify hat your market s either about to change or has changed is one.
Neural networks and it's derivatives will be the future.


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## Trembling Hand

Valued said:


> TH would you say then that you either have to be very good at creating new systems to suit different market characteristics or be a very good discretionary trader who can see the changes in the market and react?




Well you probably have to be one of the two. As for true system trading that is why they do out of sample testing and Monte Carlo testing to understand when their systems are 'broken'. 

With a disc traders yeah you have to be very honest with yourself and recognise that at some point you will have to literally abandon the golden goose and then go in search again. And its only after you are in a nasty draw down and the last thing you want to do is stop trading, re-test, reduce size and slowly build because that will be a very long time before you hit a high water mark again. Nasty nasty old game!


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## Valued

I do like Richard Farleigh's approach. He will trade/invest in any market. He said he was once bullish on bananas after noticing some price trend so he bought banana futures lol. Basically, to him something is trending or it is not. If it's trending he jumps on board and follows it no matter what it is. If a certain market isn't trending he just goes and looks somewhere else. Since he isn't limited to just stocks (and he doesn't even like stocks) he will look elsewhere. However, trading commodities and forex probably isn't for everyone.


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