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Realistic Account Growth?

  • #41
  • Jan 17, 2010 4:22pm Jan 17, 2010 4:22pm
What is realistic? Profiting in the markets is highly unrealistic for most people.

What does it matter what is realistic for someone else? Is it a warm blanket to wrap yourself in to keep you warm while studying the markets so that one day you know you will have a big prize waiting for you at the end of all that hard work?

Or is it to know that your profits are under par? But again that shouldn't matter because this knowledge will neither help you nor hurt you.

Do you think the best traders and richest people in the world ask these questions?

No they don't care what is deemed realistic.. they only care about the now and taking as much and making as much as they possibly can... Let someone else worry about what is realistic.
  • #42
  • Edited 5:38pm Jan 17, 2010 5:27pm | Edited 5:38pm
Quoting moneymaker2
Judging from your avatar (and your replies), it is easy to see that you have a negative view of high leverage. And if low leverage works best for you, that is great!! I mean no disrespect, but to say that scalping with high leverage makes you "not a trader" is a comment you woud expect from someone new to currency trading that has either had a very bad experience over-leveraging or is simply regurgitating something they've read, not from an experienced trader such as yourself.
I do not have a negative view of high leverage but I do have a negative view of of unrealistic risk adjusted growth... you say im against scalping no im not with high leverage makes me a bit scared for that gambler.. but a scalper is not a trader he is a gambler... plain and simple... if you want to be a gambler by all means go for it... just know what you are before you do it.. and put the numbers in your favor.. as i disagree with 90% of books and there are almost 0 books on money management.. what i say comes from years in the market.. I dont mind the attack really as I expected it on a forum with the most amount of trades floating from 1 hour to 5min..


Quote
Everyone who has traded any length of time knows there are multitudes of ways to trade currency. Countless strategies and money management techniques and chart reading with no indicators and chart reading with indicators and different timeframes, etc., etc.. It is good to warn less experienced people of the downfalls of a certain subject, such as over leveraging, but to say you are only a trader if you trade low leverage is simply misleading.
there a countless strategies sure but there is also countless failed traders.. all with these ways of trading that dont work.but say they do... you think you have an edge but you dont if you think bars forming at random on a 15M chart give you a better edge. then i dunno what to say.. as the only thing probably giving you an edge is the elastic movement in the market. No its not misleading to say that low leverage traders are the only traders as thats the truth.. people watch 15M 1H charts because they are impatient to wait for a good more efficient trade on the higher time frames. They dont save add to there accounts as they go and build a foundation they think that they can start with 100 bucks and end at 10k in a year but thats not the case... sure U can make the gamble and max out every trade and if your lucky you may do it but your better off going to vegas... and your not gonna understand good trading later.. but youll think its the right way after gambling yourself up.


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I trade short timeframes and I trade 400:1 leverage. If I could trade 1000:1, I would do it in a heartbeat!! High leverage is not a bad thing in and of itself (you actually get a margin call sooner with 100:1 than 400:1). It has nothing to do with getting into a trade or getting out of a trade. It has nothing to do with making a trade a good one or a bad one. It has nothing to do with making a trade profitable or a loss. What it does do is allow more purchase power. At 400:1, I can open a trade with 12 lots for the same "cost" as 3 lots at 100:1....
once again you think im against leverage im not I like 400:1 as well tho I wont actually trade it I like where the margin is in lower leverage trades.
it actually does have to do with the trade being bad or good or profitableover a long term.. if you use to much leverage and draw to far down you have a much higher risk of ruin... and also even with a winning strat just a bit to much leverage will actually kill your edge... this is provable ill attach a spreadsheet. The upside can and often is killed by the downside...
Quote
That being said, since I trade short time frames and am at my computer when the trades are open, I have more control over entry and exit. I personally would not use 400:1 on trades I open and walk away from. Not that it is bad, but because it takes me out of my comfort zone. I know there are people that are very successful trading off the daily chart, but since I do not, I can only tell people what I have found that works and doesn't work with the methods I trade. It certainly would not be fair to say that my short term method is the only way to...
actually its not there are alot (the majority) of strategies that plain simple do not work period... why because they are posted by people who 1 cant back up their findings 2 dont even know why that system would even work.. 3. no MM thought into it. seriously ask a ema crossover "trader" why there system works they will stare at you blankly probably and if you get a smart one he may bullshit a reason but odds are they wont be able to tell you.. my 2 pips worth is that 96% of the people in the systems section are not profitable.. and have no reason to post and have no fundamental idea of why that system should work they simply craft bullshit and sucker other people into trying it ... and people seem to back it up then apply serious leverage to it.. and blow their account faster than vanilla ice's bank account after he was sued.

you got 2 options in trading

one continue to give your money to the market and be nothing but liquidity
or step away from the norm .. try patience slow calculated well thought out trading and limit your losses and squeeze out as much gains as you can get...

anyways the Yale Econ teacher trades their schools account and has averaged 22% YOY he has such a high risk adjusted growth that it blows my mind... and he trades less than 1:1 for safety I do much better annually but have a much worse risk adjusted growth..
  • #43
  • Jan 17, 2010 8:47pm Jan 17, 2010 8:47pm
Originally Posted by moneymaker2 http://cdn.forexfactory.com/images/buttons/viewpost.gif
Judging from your avatar (and your replies), it is easy to see that you have a negative view of high leverage. And if low leverage works best for you, that is great!! I mean no disrespect, but to say that scalping with high leverage makes you "not a trader" is a comment you would expect from someone new to currency trading that has either had a very bad experience over-leveraging or is simply regurgitating something they've read, not from an experienced trader such as yourself.

Quoting domino
I do not have a negative view of high leverage but I do have a negative view of of unrealistic risk adjusted growth... you say im against scalping no im not with high leverage makes me a bit scared for that gambler.. but a scalper is not a trader he is a gambler... plain and simple.......

I certainly understand your apprehension of scalping (or short term trading), because not everyone can do it and be successful at it, and you should not be ashamed of that whatsoever!

As far as the "name", well, the IRS, the SBA and the SEC considers me a trader rather than a gambler, so I am going to go with them. But honestly, I have no nevermind what people chose to call it, because it has nothing to do with the money going into my account.

It just disappoints me when I see currency people (sorta scared to say 'trader' now...) proclaim that "This is the way to do it and if you do it different than what I say then you are a stupid, oxygen-depleting maggot that doesn't deserve to live.", because eventually it narrows everything down to a few specific ways, and that just limits new people's views of how to make money. While I agree about unrealistic growth, people have to determine what is realistic to them, not what is realistic to someone else. Some people would be very happy making $300/month. If I would have thought I wouldn't make $300/day, I would have never gotten in to currency but just stuck with daytrading options. So 'realistic' is an individual thing, not something to be mandated by an experienced trader. Because it doesn't take long on this forum to realize that an experienced trader is not necessarily a successful one!
  • #44
  • Jan 17, 2010 9:59pm Jan 17, 2010 9:59pm
Quoting moneymaker2
Originally Posted by moneymaker2 http://cdn.forexfactory.com/images/buttons/viewpost.gif

I certainly understand your apprehension of scalping (or short term trading), because not everyone can do it and be successful at it, and you should not be ashamed of that whatsoever!
my apprehension? if there was efficiency in scalping I would do it.. but there isnt.

Quote
As far as the "name", well, the IRS, the SBA and the SEC considers me a trader rather than a gambler, so I am going to go with them. But honestly, I have no nevermind what people chose to call it, because it has nothing to do with the money going into my account.
there is a big difference between names.. thats why i state the difference.

Quote
It just disappoints me when I see currency people (sorta scared to say 'trader' now...) proclaim that "This is the way to do it and if you do it different than what I say then you are a stupid, oxygen-depleting maggot
that doesn't deserve to live.",


well good thing i didnt say that .. im pretty sure my arguement is with the leverage and profits... im not saying scalping is wrong just know what you are.. its that simple not bad not good.. using the high leverage is what im against... I simply say if you trade lower timeframes your a gambler.. nothing bad... Ill even explain it more what is your fundamental reasons for your "trades" as a scalper? what reinforces your direction? if your trading 15M your probably all TA.. or PA whatever you wanna label it.. so you get a trigger ... you know the odds.. and you make a wager on the odds you got.. if you do it right you make money in the long run but not right away you grind the odds... this is gambling lol why is that not gambling?... can you make money gambling ... sure... but your not a trader your a gambler.. know who you are.. I know a guy who is really good at betting on horse races .. over the long term he makes money... but he doesnt call himself a horse race betting technician... he is a gambler he knows hes a gambler and he acts like a gambler... I dont think i said there is one way to make money but i did say huge leverage will kill your account... am i talking down to scalpers ... no .. but they are gamblers.. easy enough .. show me a scalper who has a base in fundamentals and looks to psychology and TA after his fundamentals and ill call him a trader unfortunately i dont know any... and as for the leverage if your gonna be a gambler act like one.. low leverage will lower your risk of ruin high leverage will increase your risk of ruin.

Quote
because eventually it narrows everything down to a few specific ways, and that just limits new people's views of how to make money. While I agree about unrealistic growth, people have to determine what is realistic to them, not what is realistic to someone else. Some people would be very happy making $300/month. If I would have thought I wouldn't make $300/day, I would have never gotten in to currency but just stuck with daytrading options. So 'realistic' is an individual thing, not something to be mandated by an experienced trader. Because...
you can make whatever you want daily but have the right account size for it... and control your risk and leverage... be a trader and have a reason why to be in your trade other than TA... or be a gambler and try to control the odds and your risk ... if you are a trader act like a trader.. if you are a gambler act like a gambler... a gambler who acts like a trader will fail and a trader who acts like a gambler will well i dunno.. havent tried that one. But if you wanna make 300$ a day adjust your account to be within the correct risk adjusted growth... Im not telling people thats its bad to be different as its great to be different your probably not gonna make money being like everyone else... I just caution huge results.. and large leverage and look at it like why would you put yourself in that situation the truth is being a trader has way different MM than being a gambler... if you actually read what i posted youd read where i said if you wanna gamble then gamble nothing wrong with that.. but use moderate leverage at the most and base it on your actual performance and risk adjusted growth... if you drawdown 2.5% to make 4% great leverage it up but know that if you leverage up you could see 12% returns at a 7.5% drawdown... risk adjusted growth... understand your RISK of RUIN... High leverage will insure that your risk of ruin is exceptionally high.. control your risk act like a gambler know your odds and run with it fine... im not saying anyone shouldnt do it... just act like what you are...
  • #45
  • Jan 17, 2010 10:34pm Jan 17, 2010 10:34pm
I started with a 5k account last Feb. and finished the year at 28k, for a profit of 23K. I have cashed out and am starting over with 5k this year to see if I can do it again. I have been trading since 2002 and this was my first profitable year (no B.S.ing myself). But I am going for maximum capital appreciation.... not trying to trade for a living. I cannot trade forex for a living...that is to say trade profitably week in week out, month in month out, and year in year out over a long time horizon of 10+ years. I have given up on that pipe dream. I am trying for maximun captial gain within a smaller time frame (10,000 trades) and hoping to get out at that point. Can I be profitable 2 years in a row? Unknown.... we shall see!
  • #46
  • Jan 17, 2010 11:29pm Jan 17, 2010 11:29pm
Quoting domino
... just act like what you are...
.....
  • #47
  • Jan 17, 2010 11:35pm Jan 17, 2010 11:35pm
Quoting moneymaker2
.....
lol now whats wrong with that...
  • #48
  • Jan 19, 2010 9:09pm Jan 19, 2010 9:09pm
Back on topic...if you know the approximate win rate of your system and your average winner and loser, you can use the Kelly Criterion to calculate the maximum percent of your account to risk per trade in order to maximize your gains in the long run.

There are no doubt caveats when using Kelly to trade live; however, this approximation should give you enough into to tell whether something is realistic or not...
Hindsight is 20/20
  • #49
  • Edited 1:33am Jan 20, 2010 1:13am | Edited 1:33am
Quoting Hedginghog
Not surprisingly we have seen from the responses (albeit a small sample) that 50% per month consistently, is unlikely to be achievable for most traders, but profits of 5-15% per month are being consistently achieved by those profitable traders who took the time to offer their examples. Of course this says nothing for the large proportion of users of this website who are not profitabile, and unlikely to ever be profitable, in their trading endeavours.
If one took the average of the sample being posted here, one would gain the impression that the majority of 'traders' (using the term in the loosest possible sense) win, when in fact the opposite is true.

I stand by what I said: that just because Mr X is making - or claims, on a forum, that he's making - 10% per month, this has no real bearing on what I will ultimately make. Everything else being equal, the statistics suggest that I will end up among the 95% (a whopping 19 out of every 20 people) that lose.
  • #50
  • Edited 11:32am Jan 20, 2010 1:15am | Edited 11:32am
Quoting cosgrove
Back on topic...if you know the approximate win rate of your system and your average winner and loser, you can use the Kelly Criterion to calculate the maximum percent of your account to risk per trade in order to maximize your gains in the long run.

There are no doubt caveats when using Kelly to trade live; however, this approximation should give you enough into to tell whether something is realistic or not...
As you point out, the Kelly is about maximizing return. In complete contrast, a trader's topmost priority should be managing risk.
  • #51
  • Jan 20, 2010 2:17am Jan 20, 2010 2:17am
I am not a gambler but I have been in a casino about 6 times in my life and each time I have seperated some affordable portion of my cash as "gambling money". To me this is the only way to gamble. I have been lucky. One night, the night Mike Tyson first won the world title, I won over £300.00 on roulette with about £50.00 initial stake. I have also been lucky in the knowledge that this is probably not repeatable, especially in roulette, and that is why I am not a gambler.

It is gradually dawning on me that a good trader can do this sort of thing with, say, last week's profit if there is a good set up, without endangering the main account. Not only that but, unlike roulette, a good trader can usually see if a trade is going wrong and get out early.

I call this ramping up. Potentially disappointing but not catastrophic. Potentially very exciting if you know what you're doing.
Gone to a better place
  • #52
  • Jan 20, 2010 5:09am Jan 20, 2010 5:09am
I'm likely the only person in the world who's up on Gambling Machine ie the type you find in a pub / chip shop, back when I was 15 I put 30p in to is as bored, won £1 and never gambled again so I can be that 1 person.

There is different types of Gambling, Casino's, Machines, horses you can't win the odds are against you as simple as ( unless you cheat ), the only way the odds are against you trading is the spread, but being able to pick when to trade more than makes up for this.


Trading isn't a Gamble, although to be fair the way most of you trade based on utter rubbish is a gamble!!
Nothing to it, but to do it!!! Stick to the plan FOOL!!!!
  • #53
  • Jan 20, 2010 6:42pm Jan 20, 2010 6:42pm
Quoting hanover
As you point out, the Kelly is about maximizing return. In complete contrast, a trader's topmost priority should be managing risk.
SPOT ON!!

So the really important question is not "how much can or should I make," but "what are the potentially losses in my current methodology and how can I manage risk in order to reduce those potential losses to a level that I am comfortable with and that will make my trading a sustainable profession?"... the achievement of this objective then usually also leads to understanding the "how much can I make" question, because the full capability of your method is understood... starting with risk.

Form me is was a simple shift in thinking - with quite potent implications.
  • #54
  • Jan 20, 2010 7:00pm Jan 20, 2010 7:00pm
Quoting Hedginghog
SPOT ON!!

So the really important question is not "how much can or should I make," but "what are the potentially losses in my current methodology and how can I manage risk in order to reduce those potential losses to a level that I am comfortable with and that will make my trading a sustainable profession?"... the achievement of this objective then usually also leads to understanding the "how much can I make" question, because the full capability of your method is understood... starting with risk.

Form me is was a simple shift in thinking...

But..... everyones negative and looks at the worst case scenario, what if I lose 10times in a row if I'm taking big risks I'll get burned, nobody ever thinks what if I profit 10 times in a row which is hopefully more likely as well thats what your aiming to do.

Look on the positive side from time to time, stop trading really small with your 10K account, going hmm made 75cents today that was nice, lifes to short for that, take some damn chances. *


* Only after you've perfected a damn cool safe method!!
Nothing to it, but to do it!!! Stick to the plan FOOL!!!!
  • #55
  • Jan 21, 2010 7:51am Jan 21, 2010 7:51am
Quoting Hedginghog
So the really important question is not "how much can or should I make," but "what are the potentially losses in my current methodology and how can I manage risk in order to reduce those potential losses to a level that I am comfortable with and that will make my trading a sustainable profession?"... the achievement of this objective then usually also leads to understanding the "how much can I make" question, because the full capability of your method is understood... starting with risk.
In my attempt to be brief, I left this out. I would hope a trader using Kelly would include a "worst case" scenario in his research.
Hindsight is 20/20
  • #56
  • Jan 21, 2010 8:03am Jan 21, 2010 8:03am
Quoting Turveyd
But..... everyones negative and looks at the worst case scenario, what if I lose 10times in a row if I'm taking big risks I'll get burned, nobody ever thinks what if I profit 10 times in a row which is hopefully more likely as well thats what your aiming to do.

Look on the positive side from time to time, stop trading really small with your 10K account, going hmm made 75cents today that was nice, lifes to short for that, take some damn chances. *


* Only after you've perfected a damn cool safe method!!
Because the Kelly formula requires knowledge of your approximate win and loss rate (say, p and q respectively) percentages, I would hope most traders would say "What are my chances of losing X trades in a row? q^X. What about winning Y trades in a row? p^Y"

Then he would look over his trade history to see if those results make sense: "How many times did I lose X trades in a row? Does that match with my expectations?"

Anyway, the point I was trying to make about Kelly is that you shouldn't believe the people crying "oh, never risk more than 1% per trade!!!" It is totally trader and system dependent. And actually, even with 1% some people may be over-betting.

As to how all of this ties to realistic account growth, I believe once you have done all of your research and concluded that you will not blow out your account, you can look back on your results (if they are statistically significant) of what would have happened if you had bet half or quarter Kelly and come up with a realistic return rate.

Please correct me if that last paragraph is wrong.

Also interesting for managing risk:

http://www.bjmath.com/bjmath/ror/donror1.htm

http://findarticles.com/p/articles/m.../ai_n32409572/
Hindsight is 20/20
  • #57
  • Jan 21, 2010 8:23am Jan 21, 2010 8:23am
Quoting cosgrove
Because the Kelly formula requires knowledge of your approximate win and loss rate (say, p and q respectively) percentages, I would hope most traders would say "What are my chances of losing X trades in a row? q^X. What about winning Y trades in a row? p^Y"

Then he would look over his trade history to see if those results make sense: "How many times did I lose X trades in a row? Does that match with my expectations?"

Anyway, the point I was trying to make about Kelly is that you shouldn't believe the people crying "oh, never risk more than...

Well said sir, well said!!

Everyone runs on the basis if they risk 1% they expect to make 1, doesn't anyone risk 1% and aim to make 3 - 5%, I risk 5% generally with the plan to make 15%.
Nothing to it, but to do it!!! Stick to the plan FOOL!!!!
  • #58
  • Edited 10:35am Jan 21, 2010 9:25am | Edited 10:35am
Thanks very much for all the informative and interesting contributions to my basic question.

Many replies here and elsewhere to this trading question draw on the well known statistic

"95% of all traders fail" (retail).

I have always wondered exactly what 'they' mean by that.

My viewpoint is that statistics is a subjective "science", I think it was Lord Courtney but I am probably wrong that said

"There are lies, There are God damn lies, Then there are Statistics" .....

What a great quote.


My Argument:
It could be argued that "95% of all Brick Layers fail".

Which could be seen as True, if one were to say that 95% of the people who pick up a trowel and build a wall in their back garden, which falls over, have 'failed' because they tried but failed to build a good wall and MORE IMPORTANTLY never picked up a trowel again.

Therefore it is TRUE that "95% of Brick Layers fail"

But 5% of people who picked up that trowel ... Love it... they may not build a good wall first time ... but they enjoy / are interested enough to put more EFFORT into LEARNING the skill.

I mean no disrespect at all to brick layers ... my father was a brick layer and an artist at his work.

My point .... maybe overly optimistic ... but still .... ANYONE can learn to lay brick well enough to be a competent brick layer.... ie build a sound wall.

Competency can be learnt. Competency at trading is a skill that can be learnt.

I believe that most competent instituional traders are exactly that ... competant... or else they would lose thier jobs ... but they are not ALL so excellent at trading that they are stars.

Within any task oriented environment ... there will be a few that excell, with the majority ranging from competant to good.

I am not an idiot. I can practice the skill untill I am competant, then build my wall.

Or to put it another way. Anyone can CHOOSE to be in that 5%.
  • #59
  • Jan 21, 2010 11:48am Jan 21, 2010 11:48am
Quoting Cdavid
Competency at trading is a skill that can be learnt........ Anyone can CHOOSE to be in that 5%.
Here is Dr Brett Steenbarger's view. Read his 'myth #2'. I'm not necessarily saying that he's right; it's just another perspective for you to consider.

In terms of the skill, experience, dedication and work ethic needed to become a consistently profitable trader, here are some other posts that IMO are worth reading:
http://www.forexfactory.com/showthre...57#post3170457
http://www.forexfactory.com/showthre...68#post2311668
http://www.forexfactory.com/showthre...799#post205799
  • #60
  • Jan 21, 2010 1:53pm Jan 21, 2010 1:53pm
I'd say there is no limit to how much you can make if you are nimble and professional. If you tell yourself that you can only make x% per month, then you will only make that percent per month.

My best month I made a few hundred percent return. Since I had made such an outstanding return, I called it a month and didn't accept any more trades. This led to me missing out on quite a few more percentage points for the month.

A general rule of thumb - 5-10% per month is a consistent living.
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