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(can) small accounts make a living ?!

  • #141
  • Mar 4, 2009 7:43am Mar 4, 2009 7:43am
hello Foredog and thanks for the info, thats why i posted.without actually showing my results they run like 54 wins and 3 losses with about 5 less than 10 pips, 2 more than 80 and the rest 15-35 thats trading gbp/usd and trading eur/usd its around 46 wins and 11 losses with ranges 5- 45 common and a couple of huge movers.i might just be feeling greedy but you are right i might get a losing run in the future so i dont know what strategy to use hence the post.
SEE LINE,TRADE LINE..PRICE HAS TO GO SOMEWHERE,,, PRICE WILL GO SOMEWHERE.
  • #142
  • Mar 4, 2009 7:46am Mar 4, 2009 7:46am
Quoting birdt
Who cares about strike rate? It's your success% X R:R that matters.
That's the only holy grail there is in trading.
Playing the Lottery give you a pretty decent R:R but how about the success rate? This just shows that R:R alone is useless just as pure successrate.

As for trading for a living.
When you plan your cost of living and your income to compensate that you often have
to include that with trading income you pay less taxes (atleast where I come from).
So to get the same standard of living you can do this with less trading.
Earning 4000 USD and giving 42% of that to the government. You could live the same way
with earing 3093 USD when you have a 25% flat tax on capital gains.
  • #143
  • Mar 4, 2009 8:22am Mar 4, 2009 8:22am
Quoting birdt
Who cares about strike rate? It's your success% X R:R that matters. If you're not using stops or using a low R:R then you'll find out the hard way and have even less bankroll to play with. Having a high stike rate with low R:R will mean your account will grow real slowly 90% of the time, but when you hit that loser or losing streak your account is going to get punished. You need to turn that shit upside down, not lose 90% of the time, but manage your risk so you take a few small losses here and there, get stopped out at break even or take a small win most of the time. When you hit the occasional bullseye and get a runner then you see your account benefit. The psychology of that might be hard to stomach, but your job as a trader is not protect your emotions and feed your ego but to manage and minimise risk whilst exposing yourself to the possibility that you get 'lucky' and hit a home run. Think of an trending market - it only moves dramatically in the direction of the trend a small fraction of the time. I put it to you that your account balance should look somewhat similar.
Very good post!
Anyone who has tried such an approach including me knows how realy,realy,realy difficult it is from the psychological poin of view to trade like this but i also belive this IS the way to go! You hit the nail right on the head. The key is,you need to get that bulls eye fast or else you will lose confidence. God forbid you miss an opurtunity that turns out to be a big winner. You realy need to overcome those difficulties in your head.
  • #144
  • Mar 4, 2009 8:26am Mar 4, 2009 8:26am
Quoting H. Rearden
Yes, Maheswara - got it on my shelve...did not get 'round reading it yet.

H. Rearden
oh lol , no wonder its H.Rearden instead of H.Roark
To Live is the rarest thing in the world , Most people exist , that is all
  • #145
  • Mar 4, 2009 8:46am Mar 4, 2009 8:46am
Quoting Tjpld
Earning 4000 USD and giving 42% of that to the government. You could live the same way
with earing 3093 USD when you have a 25% flat tax on capital gains.
Ah yep... the good ol' "Abgeltungssteuer". Greetings from München!
  • #146
  • Mar 4, 2009 9:18am Mar 4, 2009 9:18am
A very good post, Birdt -

I might throw in that there is the category of trader - and I know some of them personally - who have the ability to make an exceptional living by collecting money on a 1 to 2 pip basis and do several hundred trades/day - having on average 2 losers which wipe out 10 maybe 15 of the winners at once. Still if you do the math, they come out on top every day.

As you said: it is about what type of stomach (or mindset) the individual brings to the table.

But for the purpose of this discussion, I'd like to look at the less extreme end of the spectrum either way. On the other end of course, are the people who can commit 50% risk on a trade that may last 6 month and yields on avg. over 200%...not many people can deal with the inbetween fluctuations of such an account either.

It is a very fine line while in a trade to distinct between what could be a good exit or a premature one. Actively managing your trades is one of the hardest parts in this business....we all know the devil on the left and the angel on the right, arguing about taking the money and run or pushing for more (while in profit) and (while losing) to cut or to hang in with conviction that it will turn.

This will lead ultimately to aspects of the thread which should determine the amount you will need to bring to the table, because it is a main factor in giving the trader a degree of 'peace of mind' to approach trading in a more relaxed way. Trading in a tense state of mind because you fear a loss only fuels that fear. Being able to trade with the firm knowledge that some losses are inevitable makes a huge difference.

More later - coffee time.

H. Rearden
  • #147
  • Mar 4, 2009 10:50am Mar 4, 2009 10:50am
Ok, back for the last post of today.

I will take a better look at compunding at a later stage, I have decided, since it is more a part of money-management rather that our primary question.

Now, one other important ingredient of running trading as a business is the question of how much time you CAN and WANT to spend trading during a day/week/month. This is not a trick-question, it is simply to establish for yourself whether it actually makes sense to consider it as a venture.

If you go to a bank and ask for a business loan for any business and they find that you won't be allocating enough time to the endeavour, they will most likely not give it a second look. I know that trading can be different in terms of that you can do one trade a month and still make money - but that would not be a reliable enough frequency for anyone to consider this a business which needs to produce regular profits to live of.

So when considering to run trading as a proper business (especially with smaller amounts of capital involved), you have to be clear about the fact that it is a full-time career. You cannot become excellent at it if you haven't got the time to invest. Professionals cannot turn up for whatever they do on a part time basis, expecting the same learning/success curve as the person who throws all efforts into it.

If trading is the thing for you, make sure you are prepared for the transition.
Know the in's and out's of the business - there is a lot more to it then most forum readers assume. On the positive side, it has become a lot easier in terms of access to data, general info, trading with leverage, spreads - overall costs.

Feel free to fire away with more questions and comments and I will try to answer or reply as time allows.

H. Rearden
  • #148
  • Mar 4, 2009 11:01am Mar 4, 2009 11:01am
Quoting billytt
hello Foredog and thanks for the info, thats why i posted.without actually showing my results they run like 54 wins and 3 losses with about 5 less than 10 pips, 2 more than 80 and the rest 15-35 thats trading gbp/usd and trading eur/usd its around 46 wins and 11 losses with ranges 5- 45 common and a couple of huge movers.i might just be feeling greedy but you are right i might get a losing run in the future so i dont know what strategy to use hence the post.
hi billytt

an interesting thing to do IF it's possible would be to pull up a chart and find the crappiest most ordinary tightest sideways range bound recent period and try and back test your system through that period and see how that does. also go back in time to a period when the daily range for each bar may not have been as big as they are now and pick a sideways period through then and test. this way you are "proving" your system in a way in the worst lind of market conditions.

judging by your comment that you have had a couple of huge movers it sounds like you want the trades to run if possible.

hope this helps

z
  • #149
  • Mar 4, 2009 11:14am Mar 4, 2009 11:14am
Quoting H. Rearden
So when considering to run trading as a proper business (especially with smaller amounts of capital involved), you have to be clear about the fact that it is a full-time career. You cannot become excellent at it if you haven't got the time to invest.
Are you basically implying that it is very hard to get a full time income trading end-of-day data, i.e. daily charts? I believe trading daily charts requires no more than 1-2 hour a day at best. Of course daily charts suggest bigger capital because of larger stoplosses. Did you mean that it just can't be done with small deposit and small deposit requires trading smaller moves, i.e. fulltime intraday trading? I'm confused...
  • #150
  • Mar 4, 2009 12:33pm Mar 4, 2009 12:33pm
Quoting radiantchild
Are you basically implying that it is very hard to get a full time income trading end-of-day data, i.e. daily charts? I believe trading daily charts requires no more than 1-2 hour a day at best. Of course daily charts suggest bigger capital because of larger stoplosses. Did you mean that it just can't be done with small deposit and small deposit requires trading smaller moves, i.e. fulltime intraday trading? I'm confused...
Hi Radiant,

From my own experience, I would consider it very difficult to trade off 20 candles or bars per month. There are simply not enough opportunities to capitalize from without risking too much each time. You got the stop-loss scenario correctly identified.

H. Rearden
  • #151
  • Mar 4, 2009 12:35pm Mar 4, 2009 12:35pm
Hi Zorroz,it isnt a system i use but an observation normally using the hour time frame or sometimes the daily and i am in and out as fast as possible some times within minutes or the odd time an hour or two and yes i am a day trader. i made 16000 about 18 months ago from £500, i have back tested highs and lows for 10 years back and it is all good, i am going along with this thread about making an income as i think you can but you do need a bank roll to do it.I just need a better strategy just incase i hit a loser or 2 or 3 lol,i have been contacted by a forex factory viewer and he has suggested a good strategy which hopefully i will use,
SEE LINE,TRADE LINE..PRICE HAS TO GO SOMEWHERE,,, PRICE WILL GO SOMEWHERE.
  • #152
  • Mar 4, 2009 12:45pm Mar 4, 2009 12:45pm
Quoting H. Rearden
There are simply not enough opportunities to capitalize from without risking too much each time.
I was slowly coming to similar conclusion in my trading, thanks for sharing your experience. Could you please also share your thoughts on trading exact times of day, I mean the beginning of European session and NY session. I kinda like the idea of looking at my trading screen for no more than a couple of hours a day, is that really possible?

Thanks!
  • #153
  • Mar 4, 2009 1:11pm Mar 4, 2009 1:11pm
Radiant,

Although it would not be my direct advice (since my beliefs about the markets are different), I would say that there are some very good break-out strategies around that work on the basis of the UK-London open (between 6am GMT and 9am GMT). The US open is more difficult because it coincides with economic data releases and the market is more influenced (in the majors at least) by the accumulation of liquidity from europe.

Bear in mind that because these are very specific strategies, the occurrence and participation levels are higher - but so are the risk levels. The reason being that many people have identified those patterns and as a result they tend to have a lot more 'fake-outs' than they used to.

H. Rearden
  • #154
  • Mar 4, 2009 1:47pm Mar 4, 2009 1:47pm
A small account (<2000) is difficult to make anything from that will be called a "living"

Unless you gamble it, which i dont recommend since this small account was hard to come by (thats why it's small in the first place right?)

So, small account, for me, is just for learning purposes. Once u learn then u can add to that account (some savings) and grow the account.

and remember, compounding works both ways. You can compound winnings and losses.

And last but not least, Pay yourself first. Take some out of the account into a saving account or buy something with it. Money by itself cant be eaten.
100% of traders are losers. Just that some win more than they lose!
  • #155
  • Mar 4, 2009 2:00pm Mar 4, 2009 2:00pm
Quoting Mr demark
A small account (<2000) is difficult to make anything from that will be called a "living"
Would you say it is possible to "make a living" with an account of about $8K-$10K? By that "living" I mean at least $1,5K/month -- quite good amount where I come from. Of course I know everybody's way is different, but I've found that one of my problems with trading education is inability to come up with some realistic expectations. There are so many trading educators that say the same old thing -- "you have to have realistic expectations", but I don't see they really give at least a vague picture of what those expectations could be.

Again, as in any business, no-one can give any guaranteed numbers, that's natural -- but I'd really love to hear from people who trade fulltime about their experience and their picture of "realistic expectations"...
  • #156
  • Mar 4, 2009 2:18pm Mar 4, 2009 2:18pm
Quoting radiantchild
Would you say it is possible to "make a living" with an account of about $8K-$10K? By that "living" I mean at least $1,5K/month -- quite good amount where I come from. Of course I know everybody's way is different, but I've found that one of my problems with trading education is inability to come up with some realistic expectations. There are so many trading educators that say the same old thing -- "you have to have realistic expectations", but I don't see they really give at least a vague picture of what those expectations could be.

Again,...
Radiant,

To give you (and every other reader of this thread) realistic expectations of how you can make a living (month by month) is the game plan of this exercise. As I mentioned earlier, I am running this experiment with my son's demo based on an amount I believe to be sufficient for success. I have not revealed the actual figure (which I will do in good time). The reason for this is not to string you along but to keep your attention on matters you need to know before - beause you won't get many chances if the money you have in readiness for trading isn't used in the best possible way.

H. Rearden
  • #157
  • Mar 4, 2009 2:25pm Mar 4, 2009 2:25pm
Quoting H. Rearden
To give you (and every other reader of this thread) realistic expectations of how you can make a living (month by month) is the game plan of this exercise.
Perfect, I'm all ears And I bet a lot of aspiring traders reading this great thread are as well...
  • #158
  • Mar 4, 2009 2:29pm Mar 4, 2009 2:29pm
Glad to hear it, Radiant and others.

Time for me to retire for the day now.
Back tomorrow with more for you to chew on.



H. Rearden
  • #159
  • Mar 4, 2009 3:56pm Mar 4, 2009 3:56pm
Quoting H. Rearden
Radiant,

Although it would not be my direct advice (since my beliefs about the markets are different), I would say that there are some very good break-out strategies around that work on the basis of the UK-London open (between 6am GMT and 9am GMT). The US open is more difficult because it coincides with economic data releases and the market is more influenced (in the majors at least) by the accumulation of liquidity from europe.

Bear in mind that because these are very specific strategies, the occurrence and participation levels are higher -...
I would imagine that we will get to your market beliefs as we go on...I wonder what your thoughts are on targets. My feelings are not to approach trading with an amount of money per month, but in pips (ok, thats a fine line, just have to convert pips to $). At this point I want to learn how to make 400-800 pips per month (and break that down to weekly and daily targets). Once I can do that consistantly (that is the key of course) then I can worry about account size. From what I have seen, 100-200 pips per week shouldn't be out of line to shoot for, your thoughts? And if you agree, can you talk about if you were to do that, how your market beliefs (as far as time to trade the market) would help reach that goal?

Thank you...
  • #160
  • Mar 4, 2009 5:04pm Mar 4, 2009 5:04pm
Quoting Narrew
I would imagine that we will get to...
i never actually understood why people tend to calculate their profits in pips. You can have positive pips gain at the end of the week and still be down on your balance. all pips are equal only if you take exactly the same position size on every trade. most strategies demand you though to adjust your position size to the stop loss you need depending on different setups, market conditions, volatility and so on. The only really comparable way of calculating profits of different traders/systems/setups/trades per weeks/days/months is the percentage of risk and revenue. not the amount of pips

edit: for example this week i'm about 800 pips in 'profit' but still some 2% of my account got wiped out . how is that possible you'll ask me? i played a gbpjpy pin bar which got me almost 1000 pips profit, but i took it with a very small position size due to a huge stop loss i used. Than i had some losing trades on various other setups losing 50 pips here 40 there and so on with bigger size of position. as a result i'm down for the week in dollars but up for the week in pips. should i be happy i met all the pip goals? obviously not
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