From rags to riches, 700$ to 100k in 2013

Quote from guy990opl:

The op wants to go from $700 to 100k in one year. Rest assured that there is no trading decision making process that will give you that result. Just because he trades options instead of picking horses at the track does not make him any smarter, any more sophisticated or any different than the typical gambler.

Regardess of the money one has 9 out of 10 traders lose money, good traders have an edge. If you don't have an edge you are a gambler.
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All attempts to profit from an uncertain outcome by putting capital at risk is gambling.

All trading in the financial markets is an attempt to profit from an uncertain outcome by putting capital at risk.

All trading is gambling.

Edges are everywhere - there are professional bettors who bet on nothing but horse races who have edges far greater than most of the would-be professional bettors laying wagers on the financial markets day after day will ever enjoy.

I suspect that most traders fail because they refuse to accept that they are engaged in gambling. This causes most to under appreciate how much risk is involved, they do not acknowledge the roles of chance and luck, they disregard or misunderstand odds and probabilities, and they underestimate both how small most available edges are and, ironically, they overestimate how large an edge they need.

Because of this, they look for certainty, they seek the 80% or 90% win rate. They average losers rather than pyramid winners. They treat all opportunities equally, and thus do not rein risk in when odds, though favorable, are relatively low nor do they press their bet when odds are not only favorable, but relatively high.

A long list of failures, misunderstandings, and miscalculations that lead inevitably to perpetual negative equity growth.

And all because they cannot accept self-identifying as "gamblers."
 
Quote from guy990opl:

The op wants to go from $700 to 100k in one year. Rest assured that there is no trading decision making process that will give you that result. Just because he trades options instead of picking horses at the track does not make him any smarter, any more sophisticated or any different than the typical gambler.

Regardess of the money one has 9 out of 10 traders lose money, good traders have an edge. If you don't have an edge you are a gambler.
More...
In terms of comparing gambling and investing,.... the issue for both is the issue of TIME.
For example, if a gambler at the roulet table bets on red or black, he has just under a 50/50 chance of winning.
Those are pretty reasonable odds. MUCH betting than betting the dogs and horses.
HOWEVER, if the gambler continues playing that very close to 50/50 bet, hour after hour, day after day.... he will eventually be wiped out.
It is a 100% certainty.
TIME, due to the odds, has killed him.

In the case of the option investor making very "low probability" trades for a higher potential gain,.... that can also work for a period of time.
But eventually, TIME works to his disadvantage as well.
As too many low probability trades will eventually wipe him out too.
You can throw darts for a long time. Perhaps even years.
But eventually the odds of low probability have to work against you, if you remain in the game.

Bottom line,... it's one thing to make the occasional bet at the roulett table.
And it's one thing to make the occasional "low probability" trade in the market.
It's common to win those type occasional bets.
But once you've changed over from "occasional", to that of "consistency" betting...... just a matter of TIME.
 
Quote from Put_Master:

For example, if a gambler at the roulet table bets on red or black, he has just under a 50/50 chance of winning.
Those are pretty reasonable odds. MUCH betting than betting the dogs and horses.
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There is never any positive edge in favor of the player in roulette. There are numerous successful professional horse players, on the other hand, who do, over the long run, have an edge over the track, in spite of the huge rake they must overcome on every bet.

One can gain an edge betting out of the money options. The edge is a function of both the probability of winning and the payoff on a winning bet.

For example, suppose you had a strategy that required purchasing calls four strikes OTM one week prior to earnings announcements. Let us also suppose that you lose 90% of these bets. In 90% of all cases, you lose your entire premium plus transaction costs. However, suppose that on the 10% that win, the pay-off is $9.10 for every dollar in premium and transactions costs paid. You would have an edge, albeit a very small one (0.11%). So long as you had a bankroll sufficient to absorb the losses, and you sized your bets appropriately, you would, over the long run and at an excruciatingly slow pace, make money.

Of course, what the OP here needs is a strategy where the probability of winning and the expected payoff from winning is sufficient to produce an edge that will allow his bankroll to grow much more quickly than my above example.

What would suffice? Well, assuming that the strategy offered frequent enough set-ups to accomplish his goal in a year, then he could accomplish his goal with a strategy that won 60% of the time and paid off $1.10 for every $1.00 bet, including transaction costs. He could expect his bankroll to grow, over the long run, at a rate of just over 3% per bet.

Even a 50% win rate with a 1.1 to 1 payoff will get him there, though it would likely take a decade or more, as the growth rate of his bankroll would be a scant .11% per bet over the long run.

"Over the long run," or "Time" as you put it, is how a betting strategy plays out over numerour independent trials. The reason it applies both to gambling and investing is because investing is itself a form of gambling.
 
Quote from guy990opl:

The op wants to go from $700 to 100k in one year. Rest assured that there is no trading decision making process that will give you that result. Just because he trades options instead of picking horses at the track does not make him any smarter, any more sophisticated or any different than the typical gambler.

Regardess of the money one has 9 out of 10 traders lose money, good traders have an edge. If you don't have an edge you are a gambler.
More...

We do not know whether or not he has an edge. He claims to have been paper trading for two years, and doing quite well. Perhaps he has developed an edge? Yes, it is not real money, but then neither is back-testing.

If his intent was to trade stocks, I would say he does not have a clue. Options however have profit potential superior to stocks, without use of margin. From 30 days to expiry in, spreads routinely offer the chance to make 100% or more. I'm not saying that people typically realise such excellent returns, merely that they exist and one can at least go some way towards those returns.

In his first post he also indicated he intends to get a job to add to his capital. He probably won't be able to add huge amounts, but certainly he understands what would help. Also, he wants to add forex to his trading instruments, which gives pretty good leverage.

Can one turn $700 or $5,000 into 100K in one year? Theoretically yes, unlikely though it may be. I suspect the 100K was a big hairy audacious goal plucked out of thin air, but even if he makes it to 50K it would be something.

He will need some luck, but more than that he will need excellent decision making skills to avoid the pitfalls and press home the advantages as Cygnetnoir detailed in his post.
 
Trade Number Two in progress - short eur.jpy 119.765, current stop loss is now +10 pips in the money, original stop loss was -15 pips.

I have no idea where the stray trendline came from, please disregard.
 

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Quote from cygnetnoir:



All trading is gambling. [...]

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Like you said most "investors" don't think of themselves as gamblers, and at times they get lucky. On the other side you get professional traders. Some have been trading for over 20 years. Is it luck ?

In my modest opinion professional traders are not gamblers, if they were they could not last so long.


Quote from Put_Master:

In terms of comparing gambling and investing,.... the issue for both is the issue of TIME. [...]
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You are correct and time will separate the gambler from the real trader.


Quote from justrading:

We do not know whether or not he has an edge. [...]

From 30 days to expiry in, spreads routinely offer the chance to make 100% or more. [...]


Can one turn $700 or $5,000 into 100K in one year? Theoretically yes, unlikely though it may be. I suspect the 100K was a big hairy audacious goal plucked out of thin air, but even if he makes it to 50K it would be something.

He will need some luck, but more than that he will need excellent decision making skills to avoid the pitfalls and press home the advantages as Cygnetnoir detailed in his post.
More...


How can one has an edge to turn $700 in 100k ?

From 30 days to expiration he might make 100% or....lose 100%.

Can one turn $700 or $5000 into 100k in one year ? Yes with a LOT OF LUCK...my point was just that to physically going to Vegas is a better idea and it offers better chances. Not to mention that the Adult Convention is happening this very week :-)
 
Quote from guy990opl:

Like you said most "investors" don't think of themselves as gamblers, and at times they get lucky. On the other side you get professional traders. Some have been trading for over 20 years. Is it luck ?

In my modest opinion professional traders are not gamblers, if they were they could not last so long.
More...

Professional traders, professional gamblers - what is the difference? There are pro gamblers - blackjack players, poker players, sports bettors, pony and dog handicappers - some of whom have been gambling for far more than 20 years. Is it luck? No, it is edge.

What, in your opinion, distinguishes the trader from the gambler so as to set the trader apart as something other than a gambler? What qualitative difference is there between the pro trader who plays his or her edge in the futures market day after day that makes his activity different in kind from the pro card player who plays his or her edge in the casinos and card parlors day after day?

This is not a rhetorical question. And you will not be able to answer it without changing commonly accepted definitions or violating principles of logic.
 
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