EricP, Lescor, Patrickq, Dustin and gang..
- Thread starter ChkitOut
- Start date
I think a lot of analogies here are focused on the outlier type of success.
When we look at NFL guys or some prominent business figures we have to remind ourselves that while they are obvious examples of success, they are very atypical of the sort of success that many strive for.
In order to be Bill Gates all stars have to align just right: his intelligence, drive, work ethic, family background, exposure to technology at early age, access to capital, timing, luck, etc. All of this has to be just right.
But Bill Gates type of achievement isn't what an average trader is going for. Meaning, most of the above doesn't have to be just right in order to figure out a way to squeeze an annual 100K out of the market. And, I would speculate that many here who can make 100K year in, year out would call themselves successful.
So, if that number is any determinant then I don't see how luck, being at the right place at the right time, etc. trump having the guts to apply oneself with consistency. Basically, just working intelligently and very hard for a sustained period.
We aren't talking Goldman Sachs kind of money here. 100K is equivalent to an expected daily profit of $400. While I know E(400) is not easy by any stretch, I don't see why it isn't achievable, even if one is relatively unlucky and hasn't met that benevolent mentor with a killer edge.
In other words, in order to take some money out of the market one doesn't have to be a truly awesome trader. It's not a binary function where you either make a ton or you lose your account. There are lots of guys in the middle. Think pro poker players that you never see in WSOP. Many of them do just fine.
If you aren't reaching for the stars, what's luck got to do with it?
/Wulfrede
When we look at NFL guys or some prominent business figures we have to remind ourselves that while they are obvious examples of success, they are very atypical of the sort of success that many strive for.
In order to be Bill Gates all stars have to align just right: his intelligence, drive, work ethic, family background, exposure to technology at early age, access to capital, timing, luck, etc. All of this has to be just right.
But Bill Gates type of achievement isn't what an average trader is going for. Meaning, most of the above doesn't have to be just right in order to figure out a way to squeeze an annual 100K out of the market. And, I would speculate that many here who can make 100K year in, year out would call themselves successful.
So, if that number is any determinant then I don't see how luck, being at the right place at the right time, etc. trump having the guts to apply oneself with consistency. Basically, just working intelligently and very hard for a sustained period.
We aren't talking Goldman Sachs kind of money here. 100K is equivalent to an expected daily profit of $400. While I know E(400) is not easy by any stretch, I don't see why it isn't achievable, even if one is relatively unlucky and hasn't met that benevolent mentor with a killer edge.
In other words, in order to take some money out of the market one doesn't have to be a truly awesome trader. It's not a binary function where you either make a ton or you lose your account. There are lots of guys in the middle. Think pro poker players that you never see in WSOP. Many of them do just fine.
If you aren't reaching for the stars, what's luck got to do with it?
/Wulfrede
A very pragmatic view.
As to the role of luck, it's a nice excuse as in 'I just didn't have the luck'. Easier to blame external factors than to look within oneself.
I dare say successful traders don't blame luck, the market, HFT, whatever, for a losing day. It always makes more sense to ask what one could have done differently to avoid that bad day. HFT and chop? Just don't trade. Great day? What can one do to make it happen more often, what was done well, etc.
Professional sports teams have a rigorous process of constant self-examination, that is the only way to get to the top and stay there. The individual trader can certainly benefit from that approach.
I definitely agree that luck plays a big role in all of this. Right place, right time, etc....
But now, one question i do have is, is it safe to say, if someone can make 100k a year consistently, then shouldn't that person be able to make 500 a year as well. Then its just a matter of adding size then. I guess while typing this now, i realize that fear might come into play at the point where size is being added. Not trying to take the thread off track.
But now, one question i do have is, is it safe to say, if someone can make 100k a year consistently, then shouldn't that person be able to make 500 a year as well. Then its just a matter of adding size then. I guess while typing this now, i realize that fear might come into play at the point where size is being added. Not trying to take the thread off track.
No it has nothing to do with fear or greed. Computers have niether and last I checked 80% plus of all volume is non human driven
It is because many effective strategies are capacity constrained. This prevents ramping up size--- in fact, the greatest edges have the greatest capacity constraints--- it's how the market survives.
surf
An excellent comment. It made me realize something I forgot to say.
All my life, I was aiming for a higher probability of success and never the biggest success. That is my temperment. That necessarily means taking less return under certain circumstances. (Think of a bell curve - one person gets the top return and lots get an average return) When my account was much smaller, I tried to hit big outliers. Now that it is large, I aim for lower return and higher consistency and probability of success.
My methodology has been adjusted. That is the power of trading - one can choose the risk and reward you want subject to the probabilities that the market offers and one's own psychology and talent at any given time.
There is a huge myth out there that trading is infinitely scalable. It certainly is true a bit at smaller sizes, but not at larger sizes in my view. That is not how the game works because timing and luck is unpredictable. Only skill is predictable and only after a long series of trades. Most scale too soon, only to find out that they are not that talented, only that lucky!
FWIW
The greatest edges have the largest capacity restraints......from MS.......and, Dustin
saying " take goog and aapl off your screen" is a good reminder to where the juice in equities is. The type of sub $10 thin stocks where you should limit your size to 5-10k.
Chkitout , get a good commish structure, and test/look for opportunity here since you
have the trading experience to swim with these scumbag pink slips and shenanigans down here. Put 20 of those on your screen and $200 per play win/lose can be very frequent.
IB for retail Joe like me discourages this with their fees. My 2 cents but in different ways
I have heard same thing twice on this thread.
saying " take goog and aapl off your screen" is a good reminder to where the juice in equities is. The type of sub $10 thin stocks where you should limit your size to 5-10k.
Chkitout , get a good commish structure, and test/look for opportunity here since you
have the trading experience to swim with these scumbag pink slips and shenanigans down here. Put 20 of those on your screen and $200 per play win/lose can be very frequent.
IB for retail Joe like me discourages this with their fees. My 2 cents but in different ways
I have heard same thing twice on this thread.
Quote from vinc:
that's a funny oneand how are you going to achieve it? with miserable edge and 1mln account? or perhaps with a super edge and a 3000$ acc. ?
though small time, still a dreamer
So, you mean this can't be done?
How about this: a $40K account yieldng a BP of $400K (you can get more but you won't need it). Trading an average of 30-60K shares a day. A reasonable cost structure (~30 mils per round trip)
Now, with even a 1:1 r/r and 55/45 win/loss, E = $10 per trade assuming the r/r is at $100. Achieving some version of this is obviously where the hard work comes in. If your argument is that this particular piece can't be done, then you're bucking the entire buy side industry. That's a tough battle.
To make/lose $100 with sufficient frequency one can trade in 200 - 500 share lots. Size is according to the underlying's vol. Call an average volatile stock at $100/share. So your (500 lot) position uses up $50,000 on average.
If you hold 2-4 positions at a time, you need $200,000 in BP. Double it for variance and you're maxed at $400,000. Max will be very rare.
Now, ~80 round trips throughout the 6.5 hr period isn't unreasonable, given a good basket and a level of automation. (Let's say, 30-40 stocks, each signaling 2-3 trades a day. In my experience, it won't work out that way, but the approximation works; you'll have 2 stocks giving you 20 trades, 3 stocks that you trade once but stay in all day long and make E(20c/share), and the rest will chop)
The overall yield can be somewhere around $800 if the assumed expectation is inclusive of all trading strategies. Naturally, since this is only an expected value, given a typical SD, the number and its sign can vary a bit. With more vol, more than a bit, but with a increasingly lopsided log curve.
Depending on your lot size your commissions will range from $96 to $240 for that day. Add NASD/SEC fees and average out exchange fees (depends on your strat, but it's not a terrible assumption). You'll still end up way above $400.
You can do better still if you can fix your cost structure. Also, if you don't mind some vol in your equity, employing less active strategies will drastically reduce that cost. There are ways to tweak this. There is, after all, a reason why traders tend to lengthen their t/f after a few successful years.
So, a few things really need to come together and this is what a lot of folks don't realize; getting these few things right is incredibly hard (hence my beaten to death work ethic argument).
Reading a few books, staring at charts and clicking all day long in hopes of making a consistent $400 is probably nearly impossible and yet that's what many people think trading is all about.
But to answer your question, this is how I would achieve it.
/Wulfrede