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(can) small accounts make a living ?!

  • #261
  • Mar 7, 2009 9:16pm Mar 7, 2009 9:16pm
Quoting kermut
Do thread "owners" or starters have special privileges? Are there unwritten rules about what one can and cannot post in a thread? As the new kid on the block, I know I need to read more than post for a while and ask questions before taking a false step.

I believe it is by design to make the author of the system look smart to the rest. The more rules the better. The more indicators the better. In most cases, the threads with the most views have complex rules.


It was the above posts by you that made me post what I did, but upon...
Apology not necessary but thanks anyway.
TRO
  • #262
  • Edited 10:33pm Mar 7, 2009 10:05pm | Edited 10:33pm
[quote=mikkom;2587094]uh.. no. Because every trade risk should be calculated based on the current sum therefore every trade will risk exactly the same percentage and cannot wipe you out. In other words every losign trade will decrease the amount of dollars to be risked.

Reardon's method does not calculate each trade based on the current sum. He was very specific about that. If your balance increases throughout the week, your trade risk is still only 2% of the original stake (10k x 2%).
My point is this: After one year, if the trading method was valid and truly had an edge, Reardon would now be trading risk free, as he would have already taken his original stake off the table in monthly installments. If he and someone else who was not taking money off were both trading identical methods and they both blew their accounts one or two years from now, Reardon would be in better shape. He would have already taken back his original risk plus some. He wouldn't enjoy the benefits of compounding, but he wouldn't risk a total negative experience either. I'm aware, as you said, that if you only trade a fixed fraction of current account balance, in theory, you cannot blow your account. But in reality you can trade yourself into a situation where you'd be trading for pennies, or fractions of pennies trying to recoup your 10k. Which, for practical purpose, has the same financial impact as blowing your account
It's all a matter of goals and risk appetite. The ideal situation is to trade two accounts (or more) with at least one managed for income and one other managed for compounding and account building. No reason to not do both.

It would be total insanity to base your trade risk to amximum amount of dollars you have had at some time.

I agree. Who said anything about doing that?

(and yes you are correct that I was not talking about method as described here - I just wanted to say in numbers what 10% every month would mean if you really could do that)

That's why my first sentence stated your math was correct but doesn't apply to this method. I only responded to your post because, fundamentally, I'm in agreement with what you are saying though it didn't sound that way.. I agree it would be difficult to steadily get the consistent results required to build a little bit into millions. Hence the idea that if you are winning now, it's a good idea to take at least a little of it back. If your method falls apart, you will still have some reward. My own plan calls for taking a little off at each new high water mark. That's why I easily see the point of Reardon's plan.
  • #263
  • Mar 7, 2009 10:12pm Mar 7, 2009 10:12pm
H.Rearden,

I am looking further at your trading method as I would like to practice applying it for myself. I especially like its simple concept which I think is important for robustness over the long term, something I have been attempting in my own methods.

I feel I have a good grasp of the entry but I am endevouring to work out how you are managing the trade.

Looking at the detailed account statement you posted, most of the profit taking is smaller than the losses and the exit is made quite quickly. It appears that the strategy is to enter, move stop to BE quickly then exit if the BO is stalling, you are trying to exit at the peak of the first surge from the BO if it is stalling otherwise if the BO has not stalled you let it run a bit further, but you are not holding for more than a 1:1 RR based on initial stop. Additionally, if price immediately goes against your position you do not exit prior to the initial stop being taken out.


Is the above generally how you apply the method? or is there any other key details to the trade management? (or am I completely wrong with my initial assumptions?).

I am Very grateful for your time and effort in helping out aspiring traders.

Cam
  • #264
  • Mar 7, 2009 11:45pm Mar 7, 2009 11:45pm
i had a very curious question to ask ALL OF YOU WHO HAVE POSTED... I see you all keep talking about making 10% a month, 2% a day profit like this.. it came to my mind striaght away.. WOW you guyz can can make profit everyday then why does it matter if small account can trade for a living.. let's say using the 10% a month which is the lowest profit i found out so far in this thread.. if the system is so good, y not juz borrow 1 million from bank paying them int of 30% a year... at the end of 1 year, Ur account would be 3 million.. pay back 300k interest plus 1 million borrowed u still left with 1.7million.. isnt that good.

Now.. come to think of it.. do you all trading methods guranteed profit everyday??? if Yes, den i dont think you all will be in this thread.

I'm sure this thread is meant for people like me and some newbies or people that trade but keep lose to learn something which can gif consistent profit..

I'm sorry if i sound offended to any1 but i'm just stating the fact... I've been trading for 3years and i still not be able to make profit out of forex.. i'm still in RED....

I'm sure quite a few people here that is either reading or posting face same problem as me.. if not we wont be lurking here and see some eye catching thread n jump in to take a peep to see wats good for us...

and if these thread had too many post, it is really tiring to go thru from 1st post to read up to near 20pages... especially for newcomer that gets to join FF...

last but not least, i hope this thread would be beneficial at the end of the day to all of us...
  • #265
  • Mar 8, 2009 12:09am Mar 8, 2009 12:09am
Holypendant;
I'm sorry if i sound offended to any1 but i'm just stating the fact... I've been trading for 3years and i still not be able to make profit out of forex.. i'm still in RED....

Holypendant:

When you enter, does price usually turn against you? If that happens more times than not, then instead of entering at your entry price, enter at your stop loss price. May sound stupid but since what you are doing is not working, what do you have to lose? One other trick is to only go long if price is above the open and only go short if price is below the open. That's from DIBS. Good luck.
TRO
  • #266
  • Mar 8, 2009 12:11am Mar 8, 2009 12:11am
Quoting Holypendant
[...]
I'm sorry if i sound offended to any1 but i'm just stating the fact... I've been trading for 3years and i still not be able to make profit out of forex.. i'm still in RED....

[...]
I guess i speak for all when I say no offense taken.

I don't have anything related with H. Rearden too, although I subscribe every position he took on the approach to trading, this is valid either for 100$ or 10000000$ accounts.

By reading your post, what came to my mind was that PROBABLY (and after reading the quoted phrase) you still lack either good Money management or a good and solid risk/reward average system, assuming you already have the mindset.
After all, there is no difference (or it shouldn't be) between a $1000 account and 1000000 one. It's all about discipline and planning, the difficult part usually is to stay in the boundaries and not getting to greedy or fearfull.

My advise, should it be worth anything to you, is that you need to revise one of your key components to trading, Mindset, System(aka plan) or Money Management.

Hope i helped somehow,
Sps
Traders are smartasses
  • #267
  • Mar 8, 2009 4:03am Mar 8, 2009 4:03am
Quoting billflet

It would be total insanity to base your trade risk to amximum amount of dollars you have had at some time.

I agree. Who said anything about doing that?
That's what I thought you meant by the following:

Quoting billflet
On the other hand, if you keep compounding, your dollar amount risked will increase with every winning trade. After 8 or 9 months of successful compounding you could quickly blow your account due to a series of losing trades, resulting in a total loss.
because if you use usual risk%, the risk of blowing up your account does not increase when the account grows.

I have nothing against not compounding or taking out money once in a while (good idea) but if someone can archieve 10% per month, there is no rational reason for not compounding - (and this is not directed at you billflet) if emotions get in the way, just automate entries to use r% instead of entering manually - 10% from compounded account can feed you for a year while 10% from initial account saldo can feed you for month (or even shorter period).
  • #268
  • Mar 8, 2009 4:07am Mar 8, 2009 4:07am
Hi Pendant,Good question,your amazing.I dont think my bank would lend me £1000000 but just incase they had last week i would now be retired lol. Happy trading
SEE LINE,TRADE LINE..PRICE HAS TO GO SOMEWHERE,,, PRICE WILL GO SOMEWHERE.
  • #269
  • Mar 8, 2009 5:26am Mar 8, 2009 5:26am
In my view, small accounts cant make a living in the beginning, but a gradual income can be developed if discipline is falled, it will take much of a time, but the latter it shall turn in to living income.
Main discpline, shouldnt be greedy, should have stop - orders, should be very strict in money management principles....
  • #270
  • Mar 8, 2009 5:35am Mar 8, 2009 5:35am
H. Rearden

I would like to thank you for sharing your experience in this thread! Your answer to the question in place seems very believable to me, mainly because it coincides with my own conclusions based on what I have drawn so far from different sources, plus a little of my own experience.

I have one final question for you if you don't mind: what's your thought on backtesting? Does it help to become a better trader, or is it just a waste of time cause history and realtime charts are completely different thing?

Since it's impossible for me to change careers yet, I have to devote most of my day time to my job and cannot really watch 5M/15M charts (it's working hours during both London and beginning of NY session for me). I was trading 4H/Daily for a while, but I find these timeframes don't really suit me -- partly because of wide stops, partly because I can't focus on anything while my position is in the market and spend a lot of time checking it again and again. So my problem is that while I can't make money trading, I also can't find the time to learn how to trade, i.e. watch the market and manage my trades. What would be your advice on backtesting versus live trading during asian session (I assume most active pairs are NZD, AUD, Yen)?

Thanks again and I wish you all the best!
  • #271
  • Mar 8, 2009 6:54am Mar 8, 2009 6:54am
Quoting radiantchild
...partly because of wide stops...
If you belive wide stops are bad and mean higher risk you still have to learn alot. You should read my rant about stops. http://www.forexfactory.com/showthre...19#post2452519

If you are working full time higher timeframes is the only way to go.
I was thinking the same way some years ago. M5-M15 thats where the quick money is. Once you explore the benefits of a daily chart you will never go back.
  • #272
  • Mar 8, 2009 8:00am Mar 8, 2009 8:00am
...precisely, I am now hooked on 4 hr time frames. My current strategy is to place a trade on a 4 hr pivot. While that is in a positive, place a scalp on 5 min time frame.
  • #273
  • Edited 11:14am Mar 8, 2009 9:14am | Edited 11:14am
hi H. Rearden,

thanks for sharing.

were you invited by a member of this forum who was your pupil?

sorry, i am very curious and there are two points in what you says that makes me wonder that.


best regards.
  • #274
  • Mar 8, 2009 9:59am Mar 8, 2009 9:59am
Quoting Tjpld
If you belive wide stops are bad and mean higher risk you still have to learn alot. You should read my rant about stops. http://www.forexfactory.com/showthre...19#post2452519
Well, actually I'm aware of how to adjust position sizes based on risk, but thanks for the link anyway. Maybe I should really switch my broker and move money to one that allows fractional positions -- I trade micro account of about $300, even for a say 75 pip stoploss I need positions smaller than minimum lot allowed (0,01 in my case).

As for other aspects of trading longer-term charts -- well, maybe you're right and I'm just looking for quick money, I kinda like the idea of getting in and out with a profit in about 30 minutes or so...

Anyway, thanks for advice, I think I'll create one more account and give daily/4h one more try...
  • #275
  • Mar 8, 2009 10:19am Mar 8, 2009 10:19am
Quoting mikkom



because if you use usual risk%, the risk of blowing up your account does not increase when the account grows.

I have nothing against not compounding or taking out money once in a while (good idea) but if someone can archieve 10% per month, there is no rational reason for not compounding - (and this is not directed at you billflet) if emotions get in the way, just automate entries to use r% instead of entering manually - 10% from compounded account can feed you for a year while 10% from...
I worded that poorly. What I meant was the compounder is risking more dollars per trade than the non-compounder who has been consistently removing money from his account. I didn't mean to imply that the compounder had a greater chance of failure because of his greater account size. Just that all his profits along with his original stake are at risk where the non-compounder has seen some reward for his efforts.
I agree with position that turning a small amount into millions is unlikely. That is why I'm all for removing some while trading is going well. Most, if not all, systems will break down over time or at least go into a serious drawdown. I agree that no matter how well your trading is going today, there are no guarantees for tomorrow. Anything could happen, including your broker going belly up.

Even if someone is convinced that their method will last forever without a serious drawdown, there is still a rational reason for removing cash. The whole point of the thread is about making a living from a small account. That would require removing cash on a regular schedule.
  • #276
  • Mar 8, 2009 3:36pm Mar 8, 2009 3:36pm
Quoting H. Rearden
Hi all,

Last post.

Since the M1 chart (as you can see) is my primary chart to trade off, you can also see that is provides 1 or 2 opportunities on most days to make money - how much we never know in advance. I trade only the majors plus eur/yen which behaves somewhat similar to cable. So, having 1 maybe 2 low-risk opportunities per pair, times 5 pairs, almost every day, I would need to call myself a complete imbecile if I couldn't bank 0,5% on avg. with the aforementioned MM structure.

There are two threads which I would like to recommend...
Thanks for your insights.
I noticed on the charts you posted that prior to the entry point you circled there were numerous signals on the 1m chart that were confirmed on the 5m and 15m charts that did not do so well. How do you manage these?
  • #277
  • Mar 9, 2009 2:52am Mar 9, 2009 2:52am
Quoting Tjpld

If you are working full time higher timeframes is the only way to go.
I was thinking the same way some years ago. M5-M15 thats where the quick money is. Once you explore the benefits of a daily chart you will never go back.
if you are looking for small % gains then this might be true

but trading longer term just makes the reality kick in rather later than sooner.
  • #278
  • Mar 9, 2009 2:52am Mar 9, 2009 2:52am
Good moring everyone,

It is good to see many positive responses. As promised, I will try to answer a final set of questions which have come in since my last post on Friday.

Please forgive me if I don't reply to each and everyone of you individually but rest assured that I have read all posts. I will simply try and stay as close to the topic as possible.

Coffee time first.

H. Rearden
  • #279
  • Mar 9, 2009 3:05am Mar 9, 2009 3:05am
Dear H. Rearden,

Are you opening a brokerage firm soon? Your posts do look like that (a little)..

Well, you have said 2 things: about the fixed % to live, to risk, to gain.. etc. It is a good start but I believe every trader will find out these numbers for him/her self. First of all, 90-95% of them just loose money anyhow.

BUT I do believe in compounding, if you can make 10% per month and live on that.. GREAT. Now double your deposit and withdraw 5% from now on, letting the other 5% compound.. everybody can do the math how quickly this will turn to $10 000 000 (which makes it rather doubtful).

Another thing I believe in is errors. Human errors, technical errors.. doesn't matter really because end result will be that you will loose money. In case of some consecutive errors you can blow out, loose all your trading capital. Therefore my advice would be to drink less coffee and use the saved money to build up a reserve.

Second thing you said was that for the smaller trader it is a lot easier to make profit trading short term than longer term like 4h or daily bars which is very true.

Best regards,
Piccolo

PS - about the coffee, please take no offense, I drink coffee a lot, too.
  • #280
  • Mar 9, 2009 3:38am Mar 9, 2009 3:38am
Ok,

Several posts in the thread were concerned with the 'edge' and the critique that if one has an edge, why bothering with a 'small' account - one could make 10% a month on a borrowed few million and never have to work again.

I found over the years - and in spite of the fact that I came across a number of people for whom a few million were only small change - that it is rather difficult to make them part with their mostly hard earned cash on basis of philantropic reasons.....one definitely needs a track-record (mostly with real money) to be considered.

Another point is the size of your trades/investment and whether is actually is your cash or not. Some readers made comments of the following nature: pressing the button with $5/pip or with $5000/pip is all the same as long as your risk reflects for example 2% of the total base capital. Let me tell you that is is not - at least not for most. To have the confidence levels which will let you put on a trade with a risk of 200.000 without an elevated heart rate on a daily basis as well as staying relaxed and detached comes with years of experience. There are of course exceptions, which are not the subject of the thread though.

Some readers have asked the question: what is the point in reading this thread if you have an edge that makes you 10% a month already?

I believe there are many new traders out there who have identified some sort of inefficiency in the market (edge by definition is a very small advantage in the traders favour), but have not found a way to properly quantify or utilize it in a consistently profiatble way.

For all who have (or might in future) come up with that question and have not done so, please read the thread in its entire length - its under 300 posts and a small time investment considering the amount of information it containes.

I mentioned in the beginning that I will not teach you a method/system/grail - the thread supported the existence of an edge - one that is also in line or with the aim of making a monthly living. Please consider the the fact that there are huge differences in, as well as how to apply the 'edge' - and I am not talking about Bono's guitar playing sidekick here.

More later.

H. Rearden
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