I'm amazed at your run... totally blown away. Now if you were me, you'd take all of the money off the table and put it into high yielding rental properties, and take the relatively passive income and start a new nestegg with it. Within 2 months, you'll have 10 grand to repeat this whole process with. ( I think you could easily generate $5k net/month off 600k of cash in some socal foreclosure real estate if you focused). With some leverage and the right credit situation, you could probably turn that $5k/month into $8k/month net...
Taking 320K to 3.5million by Year End 2009
- Thread starter neke
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Quote from neke:
Weekly Update for week 42/50 ended 10/31/2009
Ugly week, down 59K (9.3%). Gave back most of last week's gains. The market is begging for direction, and hit me with a wave of bigger moves than anticipated, catching me on the wrong side.
Three successive days of 20+ pts uni-directional moves in the S&P500. Down Wed, Up Thurs, Down Fri. Was hit really hard on Wed and Thur, and sat down to reflect on Friday.
Wed, what started as an automated trade in GRMN turned into a discretionary averaging down disaster as the stock failed to bounce back. Finally capitulated @ 12:51, selling 20220 at the market when I could bear it no more. The stock was then trading at 31.08; Got filled at prices between 30.85 and 30.94. That was the low of the day: somebody knew the last combattant had fallen!
Thursday, loaded up on FSLR puts sometime after the open after their bad earnings. Wrong timing of entry(waited too long) and exit, as the market roared to close the day up more than 2%. Gave up 45K.
Cut down on my automated size to minuscule level after Wed: the strategies do not like big uninterrupted moves.
Code:Opening Balance: 634,991 Net loss for the week -58,994 ------------------------------------------------ Net Balance: 575,997 Number of Trades 34 Number of Profitable Trades 17 Since Inception of Thread 01/10/2009 - 10/31/2009 Opening Balance: 320,064 Net gain (Less Margin Interest) 255,933 (Up 80%) ------------------------------------------------ Net Balance 575,997 Number of Trades 1132 Number of Profitable Trades 716 Top/Bottom Discretionary Trades for the week TICKER ENTRY DATE/TIME EXIT DATE/TIME QTY PURCHASE AMT SOLD AMT GAIN/LOSS TYPE BIDU 2009-10-26-17-50-48 2009-10-27-09-31-55 827 296604 319677 23044 SHORT QZNWX 2009-10-26-10-02-30 2009-10-26-11-35-53 30000 203570 216000 12021 AMZN PUT ------------------------------------------ PVTB 2009-10-26-12-06-47 2009-10-26-15-35-07 22470 291311 270491 -20862 LONG GRMN 2009-10-28-11-11-50 2009-10-28-12-51-27 20220 660963 625419 -35616 LONG QHBWE 2009-10-29-09-51-32 2009-10-29-11-16-10 40000 272000 228000 -44547 FSLR PUT
Well, you're not the only that was down 10% this week. That' not bad considering the market was down 6.5%, and you're obviously more aggresive than passive indexing. You've still beat the indexes by more than 50,000 basis points this year, moreso if you go back on your performance further assuming you have reported accurately.
I was down close to that much percentage wise, but I'm expecting a rebound to start on Monday. I wouldn't worry about it, unless you lose $200k next week, which is tomorrow.
I started on page 128 with questions as to why you lost so much. Well, I think it was a bad week for everybody, and the idiocy of thinking you could have seen the move coming doesn't require any response. Off 1% from the high turned into 2%, and when it was 3% there was no fucking way you could have seen the next 3.5%.
I wouldn't let it get you down. Just don't do it next week. Maybe ease off on the position sizes for a little bit while volatility normalizes, which it does sound like that's what you're doing.
Still with the averaging down, though. You might take it as a challenge to go the remainder of the year without averaging down and see how that does. You really only got 4-5 weeks of non-holiday trading left. You know all your trades, and I just get a little snippet of your highlights, so I really think if you went back and examined the added percentage value from averaging down I believe you would find it's hurt you more than helped you.
That bullshit about investing in illiquid assets is what bankrupts more people in this country than anything. The biggest hit for celebrities is always what to do with 20 million dollar mortgage with no income. Even if you got 2 mill in the bank it will still bankrupt you, and that's even with a quarter million dollar a year income, which would be hard to come by if you're washed up. Neke doesn't have enough money to do that. His liquidity and trading does him more good than a piece of a money pit.
Actually he gave good advice, assume he is suggesting purchase with all cash and no mortgage. Because that is what I have done. Now I trade mostly to piss around and pass the time.
The majority of Neke' profit has all been in a handful of days I can count on one hand. The vast majority of the time he treads water, loses, or is fighting back.
Therefore, given his winning days are with extreme leverage and on, oh maybe 4 days out of all the trading days, statistically he may very well go back and test his opening numbers.
Never underestimate the value of free cashflow. Free cashflow thrown towards a compounding vehicle, is how real multi-generational wealth is created.
The majority of Neke' profit has all been in a handful of days I can count on one hand. The vast majority of the time he treads water, loses, or is fighting back.
Therefore, given his winning days are with extreme leverage and on, oh maybe 4 days out of all the trading days, statistically he may very well go back and test his opening numbers.
Never underestimate the value of free cashflow. Free cashflow thrown towards a compounding vehicle, is how real multi-generational wealth is created.
Neke:
I think I see your point, and I am impressed by your clear thinking. What you are saying at the core of your post is that your own positive performance is proof that you have an edge with a high probability, because otherwise , and because you use leverage, you would have already blown out or at least have a negative performance by now.
So you prove by contradiction that you must have an edge (which is what people in probability would call almost-certain as the prob of the existence of an edge tends towards one. It should, the more you play and stay positive).
If I am allowed a friendly comment, I would say that "You are not as dumb, as the gyration in your equity may make you look". You have a very sharp mind. You understand deeply the probs.
Now back to your question about probability, which I will adjust a bit. In the game you offered, the arithmetic return for a large number of trials/coin is zero. So the probability of the arithmetic return to be higher than 10K is 50%. Now the answer to your question.
In the case the game should tend towards the geometric average, which is always less than the arithmetic average.
Therefore the probability that the balance will greater than 10k is LESS than 50%, because the arithmetic mean is always higher than the geometric and the former is already at 50% prob.
The more leverage one uses, the more one should be able to detect whether there is an edge or not.
Since you have used leverage, and your balance is positive in its return, I declare you have with an edge with a high probability (almost certain, but practically certain), even if I am not sure now what it is, although I think I have an idea why you have an edge.
Thanks my friend. All of you please give a hand to Neke. We just proved that he has an edge. The case is closed.
Sorry to post again (this will be the last topic of the thread I will butt my head into, promise), but I don't see how using high leverage to produce gains reinforces the idea that one has an edge. A negative edge can temporarily show extraordinary performance with extreme leverage; in fact, that's usually the only way they can. Considering neke had a pretty deep drawdown from peak only a few months ago, I don't think you can compare his trading to 10,000 coin flips just yet. Additionally, even a postive edge, using high leverage, can quickly deteriorate into catastrophe if conditions change (LTCM).
But the whole question of edge is moot. All markets change over time, what is important for longevity is understanding where and how your gains are achieved, understanding that can give you the ability to even anticipate when and under what conditions your returns will deteriorate. Leverage is not an edge; on the contrary, it just makes the slope even more slippery on the way down if that is indeed the case.
I tried to make a point for the sake of giving precaution, but now I really don't feel there's anyone listening. Good luck whenever you decide to go full-time with this.
But the whole question of edge is moot. All markets change over time, what is important for longevity is understanding where and how your gains are achieved, understanding that can give you the ability to even anticipate when and under what conditions your returns will deteriorate. Leverage is not an edge; on the contrary, it just makes the slope even more slippery on the way down if that is indeed the case.
I tried to make a point for the sake of giving precaution, but now I really don't feel there's anyone listening. Good luck whenever you decide to go full-time with this.
Illiquid:
I would be good if you could stay and post more. Your posts provide value. I wanted to comment, but thought to step aside until Neke had a chance to read it.
Neke:
It would be useful if you could signal whether it is ok with you if there would be a debate. Maybe some comments on Illiquid's points would also be appreciated by the thread readers.
I would be good if you could stay and post more. Your posts provide value. I wanted to comment, but thought to step aside until Neke had a chance to read it.
Neke:
It would be useful if you could signal whether it is ok with you if there would be a debate. Maybe some comments on Illiquid's points would also be appreciated by the thread readers.
Weekly Update for week 43/50 ended 11/07/2009
Another bad week. Down 24K(4%). Really bad trading decisions all around. Glad the week has ended to think of fixing what is broken.
Biggest loss was shorting BDK on its rally after the announcement of the offer. Not enough due diligence made before deciding to short. The stock kept climbing, and I averaged in recklessly and took on too much size, and without the requisite spacing ( 5000 @ 58 after hrs, 5000 @ 58.22, 5000 @ 58.50, 5000 @ 58.66. Covered 1200 @ 59.55, 18800 @ 60.00). Cost me 33K. Then on Fri was taken to the cleaners on HANS. Trades made without conviction and whipsawed endlessly. Shorted 10000 @34.20, covered 34.80 losing 6K, then went long 20000 shares, sold at 18K loss. Came back later for another try at long: lost 8k. Made a little back on AMZN call.
Another bad week. Down 24K(4%). Really bad trading decisions all around. Glad the week has ended to think of fixing what is broken.
Biggest loss was shorting BDK on its rally after the announcement of the offer. Not enough due diligence made before deciding to short. The stock kept climbing, and I averaged in recklessly and took on too much size, and without the requisite spacing ( 5000 @ 58 after hrs, 5000 @ 58.22, 5000 @ 58.50, 5000 @ 58.66. Covered 1200 @ 59.55, 18800 @ 60.00). Cost me 33K. Then on Fri was taken to the cleaners on HANS. Trades made without conviction and whipsawed endlessly. Shorted 10000 @34.20, covered 34.80 losing 6K, then went long 20000 shares, sold at 18K loss. Came back later for another try at long: lost 8k. Made a little back on AMZN call.
Code:
Opening Balance: 575,997
Net loss for the week -24,055
------------------------------------------------
Net Balance: 551,942
Number of Trades 30
Number of Profitable Trades 20
Since Inception of Thread 01/10/2009 - 11/07/2009
Opening Balance: 320,064
Net gain (Less Margin Interest) 231,878 (Up 72.4%)
------------------------------------------------
Net Balance 551,942
Number of Trades 1162
Number of Profitable Trades 736
Top/Bottom Discretionary Trades for the week
TICKER ENTRY DATE/TIME EXIT DATE/TIME QTY PURCHASE AMT SOLD AMT GAIN/LOSS TYPE
WFMI 2009-11-05-09-30-08 2009-11-05-11-54-52 20000 561484 580178 18644 SHORT
QZNKX 2009-11-06-10-31-22 2009-11-06-15-50-15 30000 128485 139500 10608 AMZN CALL
-------------------------------------------------------------------------------------
HANS 2009-11-06-10-10-56 2009-11-06-10-19-59 20000 678614 670124 -8528 LONG
HANS 2009-11-06-09-45-48 2009-11-06-10-06-36 20000 695638 678003 -17667 LONG
BDK 2009-11-02-17-51-34 2009-11-03-11-07-03 20000 1199460 1166677 -32869 PRECONS- Status