stock trading: monthly return
- Thread starter Nemsy
- Start date
Ever taken a chunk of margin from your account and bought a new car or thrown a wild party with it? If it's really yours that should be cool, right?
The point still stands. If you lose borrowed money, the hit comes from the collateral of your initial capital. Margin lets you take bigger swings with the stake you started with, thats it.
What little you tell is still quite interesting.
The adapting and consistent changing intrigues me because it's the opposite of the way I've tried to go. From the beginning I've strived to build a methodology that is consistent through all moods thick and thin and does not require tweaking or interpretation. Doesn't that burn you out not to have a bedrock/core methodology that lasts?
I'm also surprised at the 2 or 3 to 1 r:r's and the lower than 40% hit rates, those are standard type numbers for position traders but very rare for short termers in my estimation. Care to share your typical holding time?
The how much risk per trade is definitely a personal thing, if I were ballsy I would put more on the table, but I have a strangely passionate distaste for double digit drawdowns, no matter how rare or infrequent.
Dark, Sorry for the late reply I took off to the beach yesterday afternoon 
For me Dark staying fluid has been key... The only constant in my trading is me... My external methods change like the wind... My core over the years has been my money and risk management, my understanding of market dynamics, and my mind set... As for actual set-ups that I pull out of my arsenal they change with the markets...
[/QUOTE] [/B]I'm also surprised at the 2 or 3 to 1 r:r's and the lower than 40% hit rates, those are standard type numbers for position traders but very rare for short termers in my estimation. Care to share your typical holding time? [/B][/QUOTE]
For me I was never too interested in the probabilities BUT the odds... I would opt for the lumpy short-term curve but bigger increase in the macro frame anyday, as long of course that I could control the drawdowns... As for holding time, I was basicly doing 90% multi-session trading for most of my career, last summer is when I started concentrating more on intraday plays... After that it was a mix between the two and now it is pure intraday on the NQ...
[/QUOTE] [/B]The how much risk per trade is definitely a personal thing, if I were ballsy I would put more on the table, but I have a strangely passionate distaste for double digit drawdowns, no matter how rare or infrequent. [/B][/QUOTE]
I am with you on this one... I was always focused more on staying in this beautiful game than making 1,000% a year... Over the years though I have been able to keep the +10% DD's to a bear minimum...And is it a lack of balls or wisdom that keeps you from putting too much on the tabel?
PEACE and good trading,
Commisso
For me Dark staying fluid has been key... The only constant in my trading is me... My external methods change like the wind... My core over the years has been my money and risk management, my understanding of market dynamics, and my mind set... As for actual set-ups that I pull out of my arsenal they change with the markets...
[/QUOTE] [/B]I'm also surprised at the 2 or 3 to 1 r:r's and the lower than 40% hit rates, those are standard type numbers for position traders but very rare for short termers in my estimation. Care to share your typical holding time? [/B][/QUOTE]
For me I was never too interested in the probabilities BUT the odds... I would opt for the lumpy short-term curve but bigger increase in the macro frame anyday, as long of course that I could control the drawdowns... As for holding time, I was basicly doing 90% multi-session trading for most of my career, last summer is when I started concentrating more on intraday plays... After that it was a mix between the two and now it is pure intraday on the NQ...
[/QUOTE] [/B]The how much risk per trade is definitely a personal thing, if I were ballsy I would put more on the table, but I have a strangely passionate distaste for double digit drawdowns, no matter how rare or infrequent. [/B][/QUOTE]
I am with you on this one... I was always focused more on staying in this beautiful game than making 1,000% a year... Over the years though I have been able to keep the +10% DD's to a bear minimum...And is it a lack of balls or wisdom that keeps you from putting too much on the tabel?
PEACE and good trading,
Commisso
Allow me.
There are two points being discussed on this thread regarding margin.
Return on Invested Capital (ROIC) is how much you make in a period on the money that you invested. Therefore margin is not counted.
Profit. This is how much you make from your operations including borrowings.
If you start a business on Jan 1st and invest 10k and your bank lends you 10x you have 100k total capital. Say you make 10% per month (ignore compounding) for 10 months and wind up your business.
You made a profit of 100%, but your ROIC was 1000%.
This is why inventory and accounts receivable (AR) are so important in a business because they consume cash and degrade the ROIC. This is why Dell, eg, has such a good business model because they are cash positive (get their money in before they pay it out) so that although their profit margins are low their ROIC is relativley high.
In theory, if you have a profitable method of trading you want all the leverage you can get because the only thing that holds you back from stellar ROIC is your access to trading cash.
Hope that helps.
Cheers
Yes, success is possible daytrading in this market! you too can make 300% a month ! Just give me your life savings as collateral and we'll get started churning, er, trading your account !
Totally agree, which is why I prefaced it with 'in theory'. A lot of profitable businesses fail because of cash flow issues rather than lack of long term profitability. If you are over geared (margined) then you have no wriggle room. That is what will sink you.
Cheers
PS. I know, I've done it.
Working with a large firm.....over 1000 traders....I can tell you that in equities trading, the very best traders averaged about 11 cents per trade when the market was trending.(Sure, there was a period we were doing better than 50 + cents, but that was an abberation. Just buy Amazon and Yahoo and the rest every day).
Now at that time, stock prices were substantially higher. Today those traders are closer to 2+ cents per trade. The actual dollar amounts are really irrelevant. If a trader has 100k to trade, or 10mm, they are going to use only what they feel is justified. So the return on those numbers can't be very accurately stated. NO ONE uses all their buying power all the time. In todays market, they are all happy (IMHO) to achieve 1% per month relative to their total allowable buying power. Of course 2 cents on an $8 stock is about equivalent to the previously mentioned 11 cents when the same stock was at $40. Now the question becomes.....how much does it COST to make the transaction? Well about 2 cents is probably a good guess. So net profit? Zero sounds about right. So how do we make money? Guess what....the good traders saved for this rainy day. Summers especially have been bad times to trade anyway.
Having said this, I emphasize that this is EQUITY trading only. Is there opportunity in basket trading? Futures? Index tracking stocks? Option strategies? I certainly hope so. And I believe so, which is why I intend to go that route. If I am wrong, I will have to wait out the market. And yes, there is an argument to be made that we are once again in a "trending market"....(trending down). But as I speak, the dow is down 200 points (10am eastern). Is there anyone who doubts we can close positive today? Down 500? Rough market!
By the way...these results are for daytraders only....including overnighting limited to single night holds
Now at that time, stock prices were substantially higher. Today those traders are closer to 2+ cents per trade. The actual dollar amounts are really irrelevant. If a trader has 100k to trade, or 10mm, they are going to use only what they feel is justified. So the return on those numbers can't be very accurately stated. NO ONE uses all their buying power all the time. In todays market, they are all happy (IMHO) to achieve 1% per month relative to their total allowable buying power. Of course 2 cents on an $8 stock is about equivalent to the previously mentioned 11 cents when the same stock was at $40. Now the question becomes.....how much does it COST to make the transaction? Well about 2 cents is probably a good guess. So net profit? Zero sounds about right. So how do we make money? Guess what....the good traders saved for this rainy day. Summers especially have been bad times to trade anyway.
Having said this, I emphasize that this is EQUITY trading only. Is there opportunity in basket trading? Futures? Index tracking stocks? Option strategies? I certainly hope so. And I believe so, which is why I intend to go that route. If I am wrong, I will have to wait out the market. And yes, there is an argument to be made that we are once again in a "trending market"....(trending down). But as I speak, the dow is down 200 points (10am eastern). Is there anyone who doubts we can close positive today? Down 500? Rough market!
By the way...these results are for daytraders only....including overnighting limited to single night holds
well said rs7
though i will add that not all intraday traders go for pennies and not all intraday traders are hurting right now.
some take more of a patient sniper approach, only take a handful of trades on any given day, have holding times measured in hours rather than seconds or minutes, and are rolling along just fine
though i will add that not all intraday traders go for pennies and not all intraday traders are hurting right now.
some take more of a patient sniper approach, only take a handful of trades on any given day, have holding times measured in hours rather than seconds or minutes, and are rolling along just fine