Questions from a non-trader

Instead of talking about ROI, compounding, and all the rest about "growing" money....think about the money as simply the tool that allows you to trade.

We have traders who make $5K per week, with only $25K in their accounts....is that 20% per week ...heck no!! It is "labor" and "sweat" money earned....the money is just there to allow you to trade.

Is your time worth nothing?? Your "stagnant" money certainly is. Money managers are simply trying to make their investor's "dormant" money grow...traders are trying to make a good living at their profession.

Just a different way to look at the profession.
 
Originally posted by Don Bright
Instead of talking about ROI, compounding, and all the rest about "growing" money....think about the money as simply the tool that allows you to trade.

We have traders who make $5K per week, with only $25K in their accounts....is that 20% per week ...heck no!! It is "labor" and "sweat" money earned....the money is just there to allow you to trade.

Is your time worth nothing?? Your "stagnant" money certainly is. Money managers are simply trying to make their investor's "dormant" money grow...traders are trying to make a good living at their profession.

Just a different way to look at the profession.
More...

Don,

Sure. I understand your comment. Small businesses are concerned with positive cash flow rather than compounded annual returns. As one famous trader once said,"You can't eat compounded annual returns!" hehe. That's why they think in dollar terms not return basis.

But your statement about your traders making $5K/wk on $25K BELIES the fact that he's probably very leveraged. I mean Bright in a sense gives that trader up to $1M in his acct on deposit of $25K whether he uses the entire $1M is something else. But I'm sure he uses more than the mere $25K base to generate a $5K/week return! I mean think about it! $25K is just 500 shares for a $50 stock or 1000 shares on a $25 stock.

But I agree with your pt. abotu cash flow positive vs returns in trading vs investing.

trader99
 
Originally posted by Don Bright
Instead of talking about ROI, compounding, and all the rest about "growing" money....think about the money as simply the tool that allows you to trade.

We have traders who make $5K per week, with only $25K in their accounts....is that 20% per week ...heck no!! It is "labor" and "sweat" money earned....the money is just there to allow you to trade.

Is your time worth nothing?? Your "stagnant" money certainly is. Money managers are simply trying to make their investor's "dormant" money grow...traders are trying to make a good living at their profession.

Just a different way to look at the profession.
More...

I agree.
 
Well, we could get into a whole discussion of how to measure performance, ROI, and what REALISTIC money can really be made by mere mortals.

The original post was from a guy asking what to expect from a 50k stake, and to suggest 10%-20% a month is a bit like telling the guy that buys a lottery ticket he's looking at a 10 million dollar payday.

He MAY be, buy don't hold your breath.
 
hmm...

if richard dennis had believed that the way to go was trading like his fellow brethren in the pits where he started out as a local and scalping a salary out of the markets (most locals, like everywhere else in the markets, never make it) he would never have turned his original usd 400 into the eventual usd 200 million that he went on to amass...

the same goes for the ex local paul tudor jones, and many others more...

if marty schwartz had learned the skills necessary to compounding his equity he wouldn't have failed with his fund, and that had after all been his biggest dream, playing with the top dogs in the industry and earning what they earn, that is...

the big money in this business stems most unequivocally from learning how to compound...

and yes, you will face large drawdowns, maybe even bust up a number of times...

dennis, soros, robertson, kovner, bacon et al, all the biggest traders ever have tales to tell of volatile returns...

but in the end, they are still so far ahead financially of what they could ever have hoped to achieve using other supposedly safer methods...

compounding really is the 8th world wonder.

if you are one of the very select few who can earn their semi-monthly wages from the markets, why not, but one shouldn't imply that there are very many being able to consistently achieve that, and maybe just 1% who can actually make a living from that equivalent to a decent 9 - 5 deal.

but one shouldn't ignore other available avenues, and most emphatically not if you want to earn big money.

cheers
 
Originally posted by trader99


Don,

Sure. I understand your comment. Small businesses are concerned with positive cash flow rather than compounded annual returns. As one famous trader once said,"You can't eat compounded annual returns!" hehe. That's why they think in dollar terms not return basis.

But your statement about your traders making $5K/wk on $25K BELIES the fact that he's probably very leveraged. I mean Bright in a sense gives that trader up to $1M in his acct on deposit of $25K whether he uses the entire $1M is something else. But I'm sure he uses more than the mere $25K base to generate a $5K/week return! I mean think about it! $25K is just 500 shares for a $50 stock or 1000 shares on a $25 stock.

But I agree with your pt. abotu cash flow positive vs returns in trading vs investing.

trader99
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That is exactly the point I am trying to make. If a car dealer has $100K, and gets "flooring" from GM, then he makes money based on the $10Mil worth of cars, not his $100K. The same thing works in trading....if you "use" capital rather than "abuse" it, you have a great opportunity.

The whole business works much better when traders treat their trading as a business/profession....I think we see "eye to eye" on this one.
 
of course the bottom line is that all you're talking about, don, is leverage...

sthg every futures or fx trader has access to who goes to a broker and opens an account...

i believe i've read somewhere that your traders have to put up usd 25K...

and with those they then have access to leverage ...

once, however, the usd 25K have been decimated that's it and out the door...

therefore, everything comes down to the original equity of 25k and positions that are sized in accordance with the equity at risk.
 
Originally posted by vvv
of course the bottom line is that all you're talking about, don, is leverage...

sthg every futures or fx trader has access to who goes to a broker and opens an account...

i believe i've read somewhere that your traders have to put up usd 25K...

and with those they then have access to leverage ...

once, however, the usd 25K have been decimated that's it and out the door...

therefore, everything comes down to the original equity of 25k and positions that are sized in accordance with t

he equity at risk.
More...
That's why I say "use" not "abuse" of capital. It takes about $3 Million to place my opening only orders every day, yet I am not "risking" the money, simply "using" it.

And why would the $25K be "decimated"? Since it belongs to the traders, we hope that they are not taken excessive risk, and are focusing on the things that work in the market.

Let's plan on making money, step by step, not going crazy from the get go.

BTW, we have carried (and are carrying) people who have gone deficit for a period of time (as long as they are "trying" and not "gambling" with our money).
 
Originally posted by Don Bright

That's why I say "use" not "abuse" of capital. It takes about $3 Million to place my opening only orders every day, yet I am not "risking" the money, simply "using" it.

And why would the $25K be "decimated"? Since it belongs to the traders, we hope that they are not taken excessive risk, and are focusing on the things that work in the market.

Let's plan on making money, step by step, not going crazy from the get go.

BTW, we have carried (and are carrying) people who have gone deficit for a period of time (as long as they are "trying" and not "gambling" with our money).
More...

let me put it like this...

the words use or abuse don't really matter, one can call it whatever one wants...

when you have 100k and that allows you to buy 3 million worth in the fx or whatever markets, the latter figure is still totally irrelevant...

the only relevant figure is what is happening with your 100k after you've put on your 3 million position...

ie, is the 100k becoming more or less...

leverage and margin, in other words.

cheers
 
Not to belabor this point, but I want to be specific about this. When "using' $3mil by placing orders (of which maybe only $250K will be filled) is what I mean by "use."

Abuse is when a trader is excessively risky, naked positions, excess long/short, etc.

I think it's just semantics with us....

Good Luck!!

Don
 
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