What kind of approach can make you INSANELY rich?
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That's what billionaires do pre-market. You should see what they do in the real markets! Insane negative tick stop-losses, multiple trades in alternate universes and leveraging their in-laws for a double-plus good whammy in the morning. And we haven't touched base on breakfast yet!
That made me laugh
Let me offer you a look from a different angle:
If you day trade for a living you are unable to take advantage of the magic of compounding and will likely not be very rich in the long run.
Compounding is what can make you very rich if you are able to generate yearly gain of 20%-25% which most day traders on ET claimed were easily obtainable. Compounding also protects you from the occasional draw down which is inevitable whether you are trading or investing (even Buffett had negative years).
...If someone could generate 20% the shorter the timeframe, and compound that, the better. -- Why just 'settle' for that return in a year's window or range
Your argument, or sentence, makes no sense...why are you only able to Compound a year's return -- but not say, for example, a day's return...
Alot of people associate day trading, or a day's return, with a very small miniscule % compared to the overall year's.
If you treat it like stock investing, then yes.
But if you treat it like an aggressive trader here for the purpose of real returns, then now you're getting somewhere.
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Completely wrong.
Daytrade the ES with the following hypothetical information:
- Starting capital: $5,000
- Margin: $1,250
- Commission: $5 per RT
- Net profit per day: 2 points
- Maximum position: 250 contracts
Even with making just 1 point net a day your account will be at $1,885,145.
Tell me: how long do you have to compound your $5,000 "in the long run" to achieve this? You can make an estimation in years (months and day are not relevant). If you use your "in the long run" strategy and make 100% net return a year (which is not realistic at all), you will need 10 years to get to the $5,100,895. But in the meantime the daytrader will have reached 10 times more as he generates each year $5,000,000.
So I agree with @Chuck Krug:Make 2 ES points a day with 1000 contracts.
Even with 250 contracts you make a decent living. There is even no need to take 1,000 contracts.
If people speak about compounding they should do the real calculation. Most even have no idea about the power of compounding.
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@ironchef is 110% correct.
Because, as the FACTS prove to us time after time, 99.9% of traders are big fat loosers. Only a tiny percentage of people can actually consistently trade profitably. Sooner of later the majority of traders become big fat loosers because they fall to the usual traps of over-trading and over-leverage and end up back where they started (or worse !). Why do you think so many shops are predominantly B-Book shops ? Its because they know that the vast majority of people on their platform are big fat loosers and so they don't need to hedge on the real markets and are just happy to let the risk come out in the wash as the loosers kill off their accounts through their own incompetence.
Your hypothetical example merely serves to exemplify this very FACT. You say start with $5,000 and "After 1 year your account will be at $5,100,895.". I say that is a prime example of high-risk over-trading and over-leverage.
Meanwhile the investors ("in the long run" people) are able to look at the bigger picture, effectively trading longer timeframes by taking lower-risk positions. Investors also benefit from total return, able to gain from both capital growth and income (which is where the compounding happens). In contrast, the big fat looser day traders are pretty much entierly reliant on capital growth alone.
The FACT is that time and time again, the markets prove that "slow and steady wins the race".
The trouble is that we live in a world of instant gratification, and most people are just too damn lazy to do the right thing and look at the bigger picture.
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Buffet said :
rule n°1 : no loss
rule n°2 : get back to rule n°1
From a compounding point of view, what he says is common sense.
Now, Buffet is no really doing day trading so to speak.
FACT is that the majority of all people are even not able to be profitable in LT trading. But that does not change the FACT that you can make good money in the hypothetical example I gave. And beat LT traders. I also believe more than 0.01% are consistent winners, this 99.9% is a myth that goes around but nobody ever proved it.
OP asked : “What kind of approach can make you INSANELY rich?” I answered that question. There was never a reference to “all people should be able to do that”. Succes is always for a small minority, the majority always ends up as losers. If the majority defines if something is possible or not, then there would be no billionaires and no world record breaking sportsmen, there would even never have been any inventions.
Again, this has to do with the stupidity of people and over estimating their fantastic abilities as trader. Over trading and over leveraging also has to do with the stupidity of people and over estimating their fantastic abilities as trader. I wrote in past on ET already that this will NEVER happen with the capital management system explained in the link below. In fact it is impossible to EVER go broke if you are able the work in the way I explained.
https://www.elitetrader.com/et/thre...ng-is-50-50-always.304513/page-6#post-4362499
A professional needs more information than this to come to a valid conclusion. You know nothing about the risk reward ratio, Sharp ratio, drawdown… Your statement is without any proof or you must be a clairvoyant like Madame Soleil. The hypothetical model has a drawdown between 17 and 22%. That’s much less than the drawdowns Buffett experienced in past. He had a few DD that were much bigger and would have wiped him out if he would have been a hedgefund.
Your posting is correct for over 90% of the people, but completely wrong for the remaining ones.
