Quote from FuturesTrader71:
It depends on what they mean. If they are pulling the original amount out every month, then it is absolutely possible. But compounding at 100% may not be a likely scenario; although anything is possible.
Since ES is doing very little at the moment (and I'm bored), let us explore the matter a bit further. Let me present a gross exaggeration first to make a point, and then a
relatively more "plausible" scenario.
First the outrageous scenario. Consider a chess board, which has 64 squares. Imagine that you place a single
penny on the first square (the corner of your choice). If you then subsequently double the amount of the preceding square, by the time you reach the 64th square you will have theoretically achieved more wealth than all the wealth of this world. In
dollar terms, the last square will have a value of $1.84467 x 10^17. I believe this is in the quadrillions (which come after trillions). If each square were to represent one month, then the theoretical wealth will have been achieved in just over 5 years.
Of course, this example is patently absurd. Therefore, let us pare it down to more "reasonable" levels based on your assertion that it is "absolutely possible" to consistently make 100% monthly returns. You are not comfortable with the idea of monthly compounding, presumably for the reasons I mentioned in my prior post (liquidity, etc.). Therefore, let us consider the possibility that he does reinvest all his winnings and seeks to expand the markets he trades in to overcome liquidity issues. He can do so by expanding to international markets and by hiring other traders to trade his method. Even so, the growing size of his account will likely degrade his method and his strategy will no longer be able to achieve 100% monthly returns because he is reinvesting (compounding). Therefore, let us assume that he is only able to achieve a quarter of his earlier performance, a "mere" 25% monthly return when reinvested. This would mean that if he were to start with only $10,000, he would have net profits before overheads of almost $16 Billion after only 64 months. Not bad if you can get it. Just as a matter of interest, if he could "only" achieve a monthly return of 20% (which is reinvested), he would have profits before overheads of over $1.1 Billion. A 30% reinvested return would yield profits before overhead of over $196 Billion. You choose.
So, my question to you is this: where are all these traders who are able to make 100% monthly returns and why are they not reinvesting, regardless of the degradation of their methods? Presumably, if they only applied themselves they could displace the Soros, PTJs, Cohens, and all the other legends of the trading world in a matter of a few years. Even
those guys never even dreamed of consistent 100% monthly returns and look where they are.
Therefore, I will continue to abide by the conclusions of my 2 earlier posts: BS.
