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Setting realistic expectations

  • #1
  • First Post: Jul 18, 2012 5:17pm Jul 18, 2012 5:17pm
This is for the noobys - those with unrealistic expectations of what trading can bring. First of all you have to become succesful, and that means having a consistent strategy/system that delivers more than you lose. This is a big ask and most don't make it. Having achieved this what can you expect as a return? Well Elder in his books reckons that 20% a year makes you a super star. 30% is very rare. So your $1000 might be $1300 by the end of the year if you are very very good. I don't doubt that some are doing better than this - but they are even more rare. If you could make just 1% a day on your account you would own all the wealth of the planet within a decade (assuming compounding). So beware of the 10 pips a day brigade - it just doesn't happen like that. Beware of the claims of 90% win rates - they are almost certainly lies.
Personally I'm happy with around 70% win rate and a few per cent a month on a consistent basis - some months more, others less.
I wrote this cos coming to a forum such as this it is easy to believe that hundreds of traders are turning 1K into a million is six months - it could possibly happen by luck, but the next six months may see it all lost.
Setting a realistic expectation will stop you beating yourself up and make you take more notice of strategies that you might otherwise have rejected.
Good luck with your trading - and even better build a realistic strategy.
Irregular
  • #2
  • Jul 18, 2012 9:29pm Jul 18, 2012 9:29pm
Thanks for the advise and tips, it will be helpful for newbies..
  • #3
  • Jul 20, 2012 1:09pm Jul 20, 2012 1:09pm
It isn't necessarily the win rate that stops the 80-90% guys from owning the world it is the mind games that occur when you get past your comfort zone with the position sizes.

Risking the weekly shop money every trade is worlds away from risking the price of a new prestige car.

You know it.
  • #4
  • Jul 20, 2012 1:27pm Jul 20, 2012 1:27pm
Quoting jag1966
It isn't necessarily the win rate that stops the 80-90% guys from owning the world it is the mind games that occur when you get past your comfort zone with the position sizes.

Risking the weekly shop money every trade is worlds away from risking the price of a new prestige car.

You know it.
You've obviously been there. Thats why I need mechanical systems - call it a psychological weakness, but they are the boss unless I see them misbehaving. It's also why I need anywhere between 10 and 20 trades on at a time - it would be very unfortunate with a 70% win rate to have all trades in negative territory at the same time, and so I focus on the winners knowing there is a good chance the losers will come back.
Another reason trading is different to a business is that losses stare you in the face all the time. In a business you might simply not see the fact that the fifty grand a year employee you just hired is a waste of space. Trading is ultimately brutal - only confidence in your methods can bring comfort.
Irregular
  • #5
  • Jul 20, 2012 1:35pm Jul 20, 2012 1:35pm
Quoting bigblue
You've obviously been there. Thats why I need mechanical systems - call it a psychological weakness, but they are the boss unless I see them misbehaving. It's also why I need anywhere between 10 and 20 trades on at a time - it would be very unfortunate with a 70% win rate to have all trades in negative territory at the same time, and so I focus on the winners knowing there is a good chance the losers will come back.
Another reason trading is different to a business is that losses stare you in the face all the time. In a business you might simply...
20 trades at a time would drive me insane, I HAVE to be out of trades within minutes, however I am not a scalper and I don't sit watching charts all day.

Like you it has taken me years to devise a working system for myself and like you I had to have absolute confidence in my system.

All the best
  • #6
  • Jul 20, 2012 1:49pm Jul 20, 2012 1:49pm
Quoting bigblue
It's also why I need anywhere between 10 and 20 trades on at a time -
Increasing your risk and just "hoping for the best" ?

Quoting bigblue
Another reason trading is different to a business is that losses stare you in the face all the time.
Silly statement. Do you NOT think that a business owner's loss, should they occur, would "stare them in the face ?

Quoting bigblue
Trading is ultimately brutal - only confidence in your methods can bring comfort.
True... but anything (financial endeavor) can be ultimately brutal and in reality, confidence in something doesn't guarantee success.

Outside of finance, I'm sure Hitler was confident and comfortable for a time.

"The proof is in the pudding". Make adjustments. Be aware.
Stay on top of things that might effect your profession/business/career.

Happy trading
When the Joker is in the deck.. fear not and play it well
  • #7
  • Jul 20, 2012 1:51pm Jul 20, 2012 1:51pm
Quoting jag1966
20 trades at a time would drive me insane, I HAVE to be out of trades within minutes, however I am not a scalper and I don't sit watching charts all day.

Like you it has taken me years to devise a working system for myself and like you I had to have absolute confidence in my system.

All the best
People are so different. I actually have no interest in trading as such at all - my passion is for the systems. So I trade daily bars and a single trade might last three months - or 2 days depending when the exit signal is generated. 20 trades make me feel that something is happening, and so most days I enter or exit a trade. But I just run a daily update at the end of the day. The mechanics of trading probably takes me no more than fifteen minutes a day - so the day is free, or I can work on systems. I'd get so stressed if I had to watch a trade - good job I don't.
Irregular
  • #8
  • Jul 20, 2012 1:59pm Jul 20, 2012 1:59pm
Quoting bigblue
People are so different. I actually have no interest in trading as such at all - my passion is for the systems. So I trade daily bars and a single trade might last three months - or 2 days depending when the exit signal is generated. 20 trades make me feel that something is happening, and so most days I enter or exit a trade. But I just run a daily update at the end of the day. The mechanics of trading probably takes me no more than fifteen minutes a day - so the day is free, or I can work on systems. I'd get so stressed if I had to watch a trade...
As you say we are all different. I too hate watching trades and I definitely cannot stand being in trades longer than 20 or 30 minutes.

Take the trade, fixed stop and target, it is generally over in the time it takes to have a shower, rinse and repeat the next day.
  • #9
  • Jul 20, 2012 1:59pm Jul 20, 2012 1:59pm
Quoting bigblue
People are so different. I actually have no interest in trading as such at all -

End of story

Time to move along
When the Joker is in the deck.. fear not and play it well
  • #10
  • Jul 20, 2012 2:02pm Jul 20, 2012 2:02pm
Quoting Slim Buffett
End of story

Time to move along
I tended to agree with Blue, I am not interested in trading either, all I am interested in is making money using priceaction.

People ask me what euro is doing or gold etc, I have no idea at all I just trade the patterns that make me money, on any instrument, they all work the same.
  • #11
  • Jul 20, 2012 2:11pm Jul 20, 2012 2:11pm
No your strategy will - depending on if it can scale in or not - have a max return because of liquidity. Compounding will make your account grow faster than any position trader/invester can ever achieve but there is a limit for every strategy.

For single position scalpers this can be easily calculated by pips * max on the spot liquidity of your exchange / broker.

For scale in strategies it gets more difficult.


Also if you are comfortable with a certain slippage to get more fill etc. or once your positions get really big you will have several other factors going after you. Things will go smooth for the first 10-20mil sizes but after that you will get additional worries than just your entry/exit.



Quoting bigblue
This is for the noobys - those with unrealistic expectations of what trading can bring. First of all you have to become succesful, and that means having a consistent strategy/system that delivers more than you lose. This is a big ask and most don't make it. Having achieved this what can you expect as a return? Well Elder in his books reckons that 20% a year makes you a super star. 30% is very rare. So your $1000 might be $1300 by the end of the year if you are very very good. I don't doubt that some are doing better than this - but they are even...
  • #12
  • Jul 20, 2012 2:15pm Jul 20, 2012 2:15pm
Quoting jag1966
I tended to agree with Blue, I am not interested in trading either, all I am interested in is making money
I totally understand what you're saying. If I were an automotive engineer I really wouldn't be interested in selling cars.

I would want to design them so that I could make money.

Some have no real passion for what they do.

I suppose neither is a guarantee of success.

But I'll take "liking what I do" anytime
When the Joker is in the deck.. fear not and play it well
  • #13
  • Jul 20, 2012 2:58pm Jul 20, 2012 2:58pm
Quoting unknown4x
No your strategy will - depending on if it can scale in or not - have a max return because of liquidity.
Hypothetically (for me at least) there are many instruments - if you happen to have a widely appicable method - and so you could (with some help) trade many (maybe thousands) of instruments. And why stop there - having amassed billions you could go on the acquisition trail - buying undervalued companies etc.
I do not know whether people exist who make 1% a day on a consistent basis. I certainly do not - and I can see there will be limiting factors. Even so I think it helps to accept that modest (20% a year) gains are very very respectable. This industry is like a dream machine and no one speaks openly about what is realistic - but just perpetuate the dreams. People who have dreams are asleep - sleeping people are easily fleeced.
Irregular
  • #14
  • Jul 20, 2012 3:16pm Jul 20, 2012 3:16pm
Quoting bigblue
This is for the noobys - those with unrealistic expectations of what trading can bring. First of all you have to become succesful, and that means having a consistent strategy/system that delivers more than you lose. This is a big ask and most don't make it. Having achieved this what can you expect as a return? Well Elder in his books reckons that 20% a year makes you a super star. 30% is very rare. So your $1000 might be $1300 by the end of the year if you are very very good. I don't doubt that some are doing better than this - but they are even...
Yes, doing the math, it would seem with 1% a day you could own the planet, but is that the only reason you can't make 1% a day? Because one day you may own the planet and that's just unreasonable.

With 20% a year, it would take longer but you still could own the planet some day, by that logic this must be unreasonable too.
  • #15
  • Jul 20, 2012 3:21pm Jul 20, 2012 3:21pm
Quoting bigblue
. This industry is like a dream machine and no one speaks openly about what is realistic - but just perpetuate the dreams. People who have dreams are asleep - sleeping people are easily fleeced.
This seems prophetic and yet a bit contradictory. "This industry is like a dream machine"

but yet "People who have dreams are asleep" That's true in the literal sense but if you don't dream of (aspire to) something, how can you achieve it.

All the technology we have today is the culmination of "dreams" for example.

So could you please make up your mind.
When the Joker is in the deck.. fear not and play it well
  • #16
  • Jul 20, 2012 3:31pm Jul 20, 2012 3:31pm
Quoting Slim Buffett
This seems prophetic and yet a bit contradictory. "This industry is like a dream machine"

but yet "People who have dreams are asleep" That's true in the literal sense but if you don't dream of (aspire to) something, how can you achieve it.

All the technology we have today is the culmination of "dreams" for example.

So could you please make up your mind.
OK I'm making up my mind - people who dream are asleep - and technology (being an ex physicist) definitiely does not come from dreaming - it just comes from research - the end result of which is unknown at the time. I think there is a difference between an ambition and a dream - but semantics could rule forever here.
Irregular
  • #17
  • Jul 20, 2012 4:00pm Jul 20, 2012 4:00pm
Quoting bigblue
OK I'm making up my mind - people who dream are asleep - and technology (being an ex physicist) definitiely does not come from dreaming - it just comes from research - the end result of which is unknown at the time. I think there is a difference between an ambition and a dream - but semantics could rule forever here.
you can only research something if you have an expectation / hypothesis (or a dream).
  • #18
  • Jul 20, 2012 4:08pm Jul 20, 2012 4:08pm
Quoting bigblue
OK I'm making up my mind - people who dream are asleep - and technology (being an ex physicist) definitiely does not come from dreaming -
Then perhaps you're so smart that you confuse dreaming with aspiration. I don't care if you're an ex - physicist (key word; ex) or have a Phd in Phd's

Do you really think that progress comes without "dreaming". Did Orville and Wilbur Wright not "dream" ? People "dreamed" of being the first to walk on the moon. etc..... etc

btw, you're so smart that you spelled this word wrong "definitiely"



Quoting bigblue
it just comes from research - the end result of which is unknown at the time.
So you could spend 45 years in research before you have a real answer?
I don't want to wait until I die for your research to find "the answer"

Could it be that you're searching for the elusive Holy Grail ?
When the Joker is in the deck.. fear not and play it well
  • #19
  • Edited 4:41pm Jul 20, 2012 4:21pm | Edited 4:41pm
Quoting bigblue
Hypothetically (for me at least) there are many instruments - if you happen to have a widely appicable method - and so you could (with some help) trade many (maybe thousands) of instruments. And why stop there - having amassed billions you could go on the acquisition trail - buying undervalued companies etc.
I do not know whether people exist who make 1% a day on a consistent basis. I certainly do not - and I can see there will be limiting factors. Even so I think it helps to accept that modest (20% a year) gains are very very respectable. This...


No you can't trade thousands of instruments simply like that. Every instrument has its own quirks. You are unlikely to master all. Only few people have the abilities to trade more than a few. And you will not simply amass billions with this. E.g. a normal 40 pip a day strategy with a 1:1 or 1:2 R/R will put you in the 7 digit league within a year from any amount you start with but it will be capped at around half a mil or mil a month.


There are far more people making more than 1% a day than you think. Of course not your average 100 pip SL guy telling you to trade weekly here since there is simply not enough movement for this to generate those returns with r/r. It all comes down to narrowing your risk as small as possible. Follow gatorinla to see what i mean. But as i said you will hit a hard stop with such simple strategies at one point because of liquidity. And icap etc will not be the solution as if you scale up even more you will get to know different problems of frontrunning, cornering in etc but you will probably never reach that level.


And no as long as liquidity is not your constraining factor 20% a year is not what i would consider even a halfway decent trader. Don't let people fool you with banks/funds don't make more too - its unprofessional to make more. Bullshit, they just have the problems i told you about. They cannot leverage / compound that way except for HFTs which 100% live of compounding.
  • #20
  • Jul 20, 2012 4:37pm Jul 20, 2012 4:37pm
Quoting bigblue
Hypothetically (for me at least) there are many instruments - if you happen to have a widely appicable method - and so you could (with some help) trade many (maybe thousands) of instruments.
And now it becomes obvious that he likes to "dream"
"Hypothetically". "trade many (maybe thousands) of instruments."


Quoting bigblue
And why stop there - having amassed billions you could go on the acquisition trail - buying undervalued companies etc.
I do not know whether people exist who make 1% a day on a consistent basis.
We could go on the acquisition trail but he doesn't know if anyone is making any money? A physicist should now these things? It's only science, right?


Quoting bigblue
This industry is like a dream machine and no one speaks openly about what is realistic - but just perpetuate the dreams.
Perhaps he's like a dream without the machine.
When the Joker is in the deck.. fear not and play it well
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