people are trading for a living?????

[dottom]

It was originally a billiard ball puzzle... and you also had to determine if the odd ball (penny) was heavier or lighter.

At every weighing one of three things theoretically can happen: the pans can balance, the left pan can go down or the left pan can go up.

It will be necessary to refer to a given ball as definitely normal (N), potentially “heavy” (H) or potentially “light” (L). Often our identification of a ball in this way will be as part of a group (= “This group contains a heavy/light ball”), and will depend on what we learn from a previous weighing. At the start, all balls have a status of unknown (U).

To show at each weighing what is being placed in each pan, we represent the situation as per the following examples:

UUUU ——— UUUU
(This means four balls in each pan, all of unknown status)

H ——— H
(This means two balls, one per pan, each from a group temporarily identified as “heavy”)

UUU ——— NNN
(This means three balls of unknown status weighed in the left pan against three balls whose status is known definitely to be normal)

It is important also to be able to imagine several separate areas on the bench where the balance is standing. One is obviously for keeping balls that have already been eliminated as normal; another is for balls that as a group are being thought of as potentially heavy; likewise there is an area for potentially light balls.

FIRST WEIGHING UUUU ——— UUUU

Pans balance All these U’s are now known to be N’s; the odd ball is one of the remaining unweighed four (call them UUUU from now on). Proceed to Second Weighing: Case 1

Left pan down One of the four balls in the left pan is heavy (call them HHHH from now on) or one of the four balls in the right pan is light (call them LLLL from now on). Proceed to Second Weighing — Case 2

Left pan up One of the four balls in the left pan is light (call them LLLL from now on) or one of the four balls in the right pan is heavy (call them HHHH from now on). Proceed to Second Weighing — Case 2

SECOND WEIGHING

Case 1 UUU ——— NNN
Pans balance All these U’s are now known to be N’s; the odd ball is the remaining unweighed U, but we don’t yet know if it’s heavier or lighter than normal. Proceed to Third Weighing — Case 1

Left pan down One of these U’s is heavier than normal, but we don’t yet know which one (call them HHH from now on). Proceed to Third Weighing — Case 2

Left pan up One of these U’s is lighter than normal, but we don’t yet know which one (call them LLL from now on). Proceed to Third Weighing — Case 3

Case 2 HHL ——— HLN
Pans balance All these H’s and L’s are now known to be N’s; the odd ball is one of the remaining unweighed H or two L’s. Proceed to Third Weighing — Case 4

Left pan down The odd ball is one of the left two H’s or the right L. Proceed to Third Weighing — Case 5

Left pan up The odd ball is either the right H or the left L. Proceed to Third Weighing — Case 6

THIRD WEIGHING
Case 1 U ——— N
Pans balance Not possible
Left pan down The odd ball is this U, and it’s heavier
Left pan up The odd ball is this U, and it’s lighter

Case 2 H ——— H
Pans balance The odd ball is the remaining unweighed H (heavier)
Left pan down The odd ball is the left H (heavier)
Left pan up The odd ball is the right H (heavier)

Case 3 L ——— L
Pans balance The odd ball is the remaining unweighed L (lighter)
Left pan down The odd ball is the right L (lighter)
Left pan up The odd ball is the left L (lighter)

Case 4 L ——— L
Pans balance The odd ball is the remaining unweighed H (heavier)
Left pan down The odd ball is the right L (lighter)
Left pan up The odd ball is the left L (lighter)

Case 5 H ——— H
Pans balance The odd ball is the remaining unweighed L (lighter)
Left pan down The odd ball is the left H (heavier)
Left pan up The odd ball is the right H (heavier)

Case 6 H ——— N
Pans balance The odd ball is the remaining unweighed L (lighter)
Left pan down The odd ball is this H (heavier)
Left pan up Not possible

 

[Mr Subliminal]

Excellent dottom. I also now see how there are 2 variations, as per rs7. My solution has Second Weighing, Case 2 HHL --- HHL (as opposed to your HHL --- HLN) with the corresponding ensuing logic.

 

[Atlantic]

Originally posted by AllenZ
Look at things from a standpoint of risk. If you risk an average of 1% of your account per trade then making a return of 10% a month is outstanding. This is a formula i use to determine a traders efficiency.

Basically: 10 X ave risk per trade taken = monthly return expected

Anything over this is a VERY good month. This also means if you want to make 40% of your account monthly you may have to risk 4% of your account per trade. What does this equate to?

If you trade the ES for example and you risk say 2 points per trade.( $100 ) Then with an account of 10K you should be able to make $1000 per month without ever exposing yourself to a risk of ruin. If that is not enough for you then dont look to make more without exposing yourself to more risk because you will most likely obtain the opposite effect.

The thing is the more risk you take the more you can make, but the high % chance you will blow out eventually.

Use this formula to come up with a reasonable amount to make based on your risk, after commission.

Anyone who thinks they can risk 1% per trade and still make huge monthly returns is pretty insane in my opinion.

Good Luck

AllenZ

so in other words - if a new trader (who wants to start really small and "conservative") only wants to risk 1 es point - he might be able to make $500 in a good month?

well - that's of course not much - but it's a start anyway - and the account would grow slow but steady (hopefully). nothing wrong with it imho.

if one can make this for one year consistently he should have learned a lot - and afterwards he might continue with a second contract or with a 2 pt. stop. what do you think, Allen?

 

[AllenZ]

This is pretty much my point. People have the idea that just because the eminis have a lot of leverage and require little capital to trade that somehow they can make huge returns on their capital investment.

This is an enormous suckers bet.

Sure there may be days when you are "on" where you can risk a little and make a lot but over time it just aint gonna happen and when you start thinking you can make $1500 a week trading 1 ES contract just cause the moves are there you are really setting yourself up for disaster. Make 10-20% a month consistently for even 6 months and you will see how difficult it is even with a volatile instrument like the futures.

-Take small risks 1-2% of risk per trade
-Aim for reasonable profits 10-15% per month
-Grow your account slowly and consistently
-Move up size as slowly as account and knowledge grows
-Look at a larger account as a way to reduce risk as opposed to optimize profit
-Become a trader

AllenZ

 

[Madison]

Originally posted by Publias

90% of humans make lousy traders also! Lawyers don't always fit in that category so we will say 89.8% to exclude them from the sample

Sturgeon's Law

"Ninety percent of everything is crap". Derived from a quote by science fiction author Theodore Sturgeon, who once said, "Sure, 90% of science fiction is crud. That's because 90% of everything is crud." Oddly, when Sturgeon's Law is cited, the final word is almost invariably changed to `crap'.

 

[sabena]

Allenz says" 10*average risk per trade is
good return per month"


You forget to say how many times that risk
is taken in that month.

Suppose two guys that trade the same system
with different timeframes, the first 1 trade
a day, the other 10 trades a day, each with
the same % at risk per trade.

Who will come out ahead, you think ?

 

[Atlantic]

btw - who invented that 1 : 10 formula?

 

[AllenZ]

I am speaking about active traders that look for multiple trades in a day. If you are not an active trader and take 1 trade a day or 3-5 per week you may actually look for a gain of 5-10% a month even with the 1% risk per trade. Now of course this is an average and nothing written in stone just an overall goal determined by risk taken. I dont care if you take it 3 times a day or 23 times. Because other things come into play, commissions, overtrading, ect ect ect.

This is just my own personal yardstick to measure trader performance.

Active Trader ( 3+ trades per day ) = 10 X risk per trade
Swing Trader ( 3+ trades per week = 5-7 X risk per trade

Anyone who performs better than this over 12 months or longer can consider themselves a VERY good trader. Again, just my thoughts on the subject.

I am not sure who invented this rule of risk per trade to determine efficiency, or monthly goals but it is part of a formula I learned from BO YODER. ( TA/Bo ) Who taught me a lot about risk and its effects on your trading. I may have expanded a very little on his concept by looking at it from a monthly standpoint but i dont any credit for the concept.

I just like it.

AllenZ