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Going pro vs staying non-pro
- Thread starter jay21
- Start date
Your math is too complicated: Here are the rough numbers.
Total invested in the first 6 years: 25k. Lost -20k. Left 5k in leaps.
Year 7th: gain +15k. Account total 20k
Year 8th: gain +14k. Account total 34k
Starting with 25K, you win 9K over the total 8 years.
1) Gross rate is 9/25=36%
2) Simple (Not compounded) annual rate is 36/8=4.5%
3) Compounded annual rate is 3.92% (Usually less than simple rate)
Now how much was you expense over the 8 years, commission and tax separately?
Just rough estimate for tax rate (=expense/ProfitBeforeExpense) calculation.
Most brokers provide annual report for the expense.
Please do not include internet bill, computer, your time etc.
I mean
1)If comm+tax is 9K over the 8 years, then TaxRate is 50%.
2)If it is 18K, then TR is 66%.
You sound more like an accountant than a trader..
You sound more like an accountant than a trader..
You do not have to answer. But traders should pay attention to the tax accumulated in lifetime.
I bet TR of most traders show bigger than 50%, and of course someone bigger than even 100%. The more you pay expense, the better you are as a patriot.
Furthermore, 2007 index 8 years ago and current index need to be considered.
If those two is almost same, you are really winner.
During the first 6 years, annual compounded PL is roughly -10% if you lost 80%.
During the first 7 years, annual componded PL is roughly 0%.
Suppose you win 20% at the 8 th year with original seed. Then during the 8 years, you total annually compounded PL is roughly 2.3% ( x=0.023 from (1+x)^8=1.2) but you spent time.
Probably you did not make min hourly wage (e.g. $10/hour in US) over the 8 years, as most traders do.
May I ask you the total expense(commission and tax) over the 8 years?
Thats completely irrelevant. Thats like having a trainee at a prop firm lose money for 9 months whilst hes still learning, and then on the 10th month maybe he makes up for 1 month of losses. And then you say, oh, ok then on average he is still losing a lot of money and that means he is going to continue losing money. But the fact is he is no longer the same trader he was when he started, he has gained a lot of skills. Maybe the next month he makes even more, and the month after etc etc because now hes consistently profitable.
In case one keep annual compounded 10% over 10 years, his seed 100K should be grown to
1.1^11 = 2.593742 = 260K.
With annual 20%, seed of 100K will be 1.2^10 = 6.191736 = 619K. Over 45 years like Buffet, 100K will be 1.2^45 = 3657.262 = 360000K.
Probably the compounded 20% is best in the last 400 years of capitalism history.
1.1^11 = 2.593742 = 260K.
With annual 20%, seed of 100K will be 1.2^10 = 6.191736 = 619K. Over 45 years like Buffet, 100K will be 1.2^45 = 3657.262 = 360000K.
Probably the compounded 20% is best in the last 400 years of capitalism history.
Your math is too complicated: Here are the rough numbers.
Total invested in the first 6 years: 25k. Lost -20k. Left 5k in leaps.
Year 7th: gain +15k. Account total 20k
Year 8th: gain +14k. Account total 34k
As countercountertrend points out, the question is whether or not you learned to trade. From the statistical point of view, the question is how many trading decisions you made in those last two years. If the profits are the result of a couple of lucky guesses you really haven't shown that you can trade profitably. And if the profits are the result of 10,000 30-second trades, you've shown that you've learned to trade quite well.
Before I went pro, I would want to show a significant profit over my most recent 100 trades or so. The reason for choosing that number is that I'm assuming that an "edge" amounts to roughly a 5% advantage over even odds. That is, a trader doubles the wager 52.5% of the time and loses it 47.5% of the time. To show a statistical advantage is 0.05, at one standard deviation, requires roughly 0.05 > sqrt(0.5x0.5/N) where N is the number of trades. Solving this gives N > 100. If you want two standard deviations, you need 400 trades. And if your edge is 2.5% instead of 5%, everything gets multiplied by 4. The math for this is given in the wikipedia article on binomial distribution's mean and variance here:
http://en.wikipedia.org/wiki/Binomial_distribution#Mean_and_variance
10,000 30-second trades,
most recent 100 trades or so.
you need 400 trades.
Instead of the # of execution, I bet the years of PL data. Someone trade 100 times in ONE day.
At least 5 years, and 10 years data is significant. And 45 years data is absolutely trustworthy, like Buffet's data, if his record is not lying.
http://www.berkshirehathaway.com/letters/2014ltr.pdf