Portfolio Management | Forex Factory

Options

Go to
Permalinks
Print Thread

Similar Threads

BASKET TRADE Management: Using multiple trade management EA's on basket trades 11 replies

Alternative Trade Management/Money Management Methods 3 replies

Money Management / Risk Management 24 replies

Successful Trade Management / Risk Management 0 replies

Portfolio management 3 replies

Attachments: Portfolio Management
Exit Attachments

Portfolio Management

  • #1
  • First Post: May 31, 2006 9:08am May 31, 2006 9:08am
I started this research because some folks out there claim that they grow their margin up to 50% per month. I tried to answer two questions:

 

  1. What would be the best method to withdraw money from your forex account (or rather your margin)?
  2. What will happen to your margin and how much profit you make after two years?

I assumed that you make a constant percentage profit per month (which is not possible in reality) and also the starting margin is US$10,000.

To answer the first questions I tried different approaches such as withdraw half of the profit every month, or every 3 months, and so on. I eventually came of with an enhanced approach that says withdraw a quarter of your profit at the end of each month and then half of the remainder of the profit at the year end.

Let me give you an example. Suppose you make $1000 of profit every month. So based on this method your monthly withdrawal would be $250. At the end of the year you've made $12000 of profit but you've already withdrawn $3000 so the remainder of your profit would be $9000 (i.e. $12000-$3000). Now you are eligible to withdraw half of this which would be $4500. So your total profit is $12000. You withdraw a total of $7500 and you add $4500 to your margin.

Thus if you use the above protfolio management and if you start with $10000 and have a constant monthly profit. Your margin, profit, and average monthly profit will look like the following image for 5,10,15,20, and 50% growth per month.

http://www.geocities.com/cad_tips/po...management.jpg

Now lets get back to those two questions.

 

  1. I can't say which method is the best portfolio management but I found this approach very useful (much better than quarterly-half approach). I'll hopefully publish the results of my research in the near future to show how I came up with this idea. Note that, this approach is useful if you constantly make money and if you use it you are using it at your own discretion. I'm not responsible for whatever might happen to your portfolio.
  2. The tables show you that if you constantly have a 50% monthly growth after two years your $10,000 margin increases to over $9,300,000 and you have made an average profit of over $400,000 per month (a total of over $9,600,000). I don't know how realistic it could be but I prefer not to believe those who claim they make such profit constantly. This means that theoritcally you can become a mulit-billionaire in less than 5 years and just by trading Forex.

What are your thoughts?

  • #2
  • May 31, 2006 9:56am May 31, 2006 9:56am
The growth rates are impossible to achieve. Check out the different rankings of various CTAs and instruments here.

http://www.barclaygrp.com/
  • #3
  • May 31, 2006 11:11am May 31, 2006 11:11am
Quoting jadedmikey
The growth rates are impossible to achieve. Check out the different rankings of various CTAs and instruments here.

http://www.barclaygrp.com/
I agree with you to a great extent. Just keep in mind that managed accounts are usually not leveraged or leveraged by 2. For a speculator that manages his/her own account the situation can be much better (no commission and high leveraged). However, I beleive that %50 growth is far beyond reality.
  • #4
  • May 31, 2006 11:18am May 31, 2006 11:18am
Quoting aparsai
I beleive that %50 growth is far beyond reality.
Why?
Capital Preservation is key to long term wealth accumulation
  • #5
  • May 31, 2006 1:02pm May 31, 2006 1:02pm
I guess because he couldn't do it and he doesn't know anyone who did it. Neither do I .
Anyhow, I would take 50% for at least 6 months (the average)

Quoting MuddBuddha
Why?
-soso
-soso
  • #6
  • May 31, 2006 2:02pm May 31, 2006 2:02pm
Quoting MuddBuddha
Why?
I think I explained that clearly in my first post. However, let me ellaborate on that. Let's assume that there are two scenarios in place. In both scenarios you have a monthly growth of 50%. The first one assumes that you do not need your margin and let it grow without withdrawal. The second one assumes that you withdraw 50% of your profit every month. Here are the results.

http://www.geocities.com/cad_tips/50-percent-growth.jpg

As you see if you begin on January 2007 with $10,000.00 in your account in scenario 1 you'll have over a billion dollars in your account by the end of May 2009 (after 2 years and 5 months) and in scenario 2 you'll be a billionaire by the end of Aril 2011 (after 4 years and 4 months). Look at the figures at the end of year 5. They look tempting don't they. I've attached a pdf file to show more details. Unfortunately you can't upload a spreadsheet.

Now, suppose theoretically you can make such money. How can you find a broker, a bank, or even an OTC market that can handle your fortune and accept all of your trades.

BTW, how many billionaires do you know that are trading Forex only? Why all these "guys" who call themselves "super-duper-professional" Fx players do try to sell you a course for less than five grands? Why do they waste their time to become a broker, sell e-books, write books, and so on instead of sitting and trading for billions of dollars?

I'm not saying you can't make good money through forex and I don't deny that other than making money you may approach people to present yourself, socialize with them or just have a good time. There are many good books, presentations, training courses, and so on in the market, but believe me, if you could make over a billion dollars in less than 5 years you wouldn't even bother to read this text.

No offence. I'm just trying to be realistic and reasonable.

Good luck to everyone
Attached File(s)
File Type: pdf is-50percent-possible.pdf   73 KB | 942 downloads
  • #7
  • May 31, 2006 2:24pm May 31, 2006 2:24pm
I see your explanation and understand the spreadsheet.

My question was to the qouted comment:

"
I BELIEVE that %50 growth is far beyond reality.
"

I'm asking WHY you believe this. Is it merely the numbers? Or the fact that you don't know anyone who has achieved it personally?

I imagine the SMALL percentage of people who sell systems or become brokers, or whatever, represent a very small portion of the trading population and an even smaller portion of the millionaire traders.

So, I'll take your disbelief as a personal challenge. Whatever I believe, I can achieve...or so I've been told.

Convincing myself of what I CANNOT do seems to be counter productive and not worth the discussion.

No offense....but that's the way I see it.
Capital Preservation is key to long term wealth accumulation
  • #8
  • May 31, 2006 2:24pm May 31, 2006 2:24pm
Quoting soso_beton
I guess because he couldn't do it and he doesn't know anyone who did it. Neither do I .
Anyhow, I would take 50% for at least 6 months (the average)
-soso
I wish I could do it
  • #9
  • May 31, 2006 2:36pm May 31, 2006 2:36pm
Quoting MuddBuddha
I see your explanation and understand the spreadsheet.

My question was to the qouted comment:

"
I BELIEVE that %50 growth is far beyond reality.
"

I'm asking WHY you believe this. Is it merely the numbers? Or the fact that you don't know anyone who has achieved it personally?

I imagine the SMALL percentage of people who sell systems or become brokers, or whatever, represent a very small portion of the trading population and an even smaller portion of the millionaire traders.

So, I'll take your disbelief as a personal challenge. Whatever I believe, I can achieve...or so I've been told.

Convincing myself of what I CANNOT do seems to be counter productive and not worth the discussion.

No offense....but that's the way I see it.
If you have an acre of land and 2 corn seeds which produce 50% [what the heck, let's say 100%] additional seeds/season, your "Additional Corn Seeds" WILL reach a maximum. Maybe not for a while, but, it will happen no matter what you believe.

With All due respect Mudd, if you CAN beat the above scenario, World Hunger will be history.
No offense....but that's the way I see it.
  • #10
  • May 31, 2006 2:37pm May 31, 2006 2:37pm
Quoting MuddBuddha
I see your explanation and understand the spreadsheet.

My question was to the qouted comment:

....
....
Convincing myself of what I CANNOT do seems to be counter productive and not worth the discussion.

No offense....but that's the way I see it.
Mudd,

I accept that there are some people who've made a fortune by trading Forex. I believe that with correct strategy, money management, and psychology of trade you can be a very successful trader. What I do not beleive in is to dream of impossibles. My conclusions is based on my personal results, the people who are around me, the websites and portals that I visit, and those numbers up there.

If you are reasonable, doesn't mean that it will stop you from growth. If I didn't beleive in Forex I wouldn't have wasted my time on it. I beleive in it but don't think that in long term you can constantly grow your portfolio 50% per month. That's all.

BTW, you are a great member of this forum I don't want to lose you because of this discussion. I started my research to see what would be the best way to handle my portfolio but it seems the way I presented it was not right. I didn't really mean to just focus on that "impossible" part.
  • #11
  • May 31, 2006 3:16pm May 31, 2006 3:16pm
I'm not interested in what IS or IS NOT plausible; merely why you convinced yourself that 50% was not achievable. I don't care for the numbers or the logic; just curious why. Was it the logic and numbers combined? Or have you already "programmed" yourself for less than 50%?

Your comment to SOSO was a little peak into the answer.

I gained 123% last month. This month I should come in at just about 100%.

Before the onset of June, I'd like to know why I shouldn't expect at the very minimum, 50%.

it would be a curious thought experiment to see how much my trading would be affected by the mere expectation that 50% is not achievable on a regular basis.

I have no intention of convincing myself otherwise, but I'd be interested to know how others think. Do you already have pre-concieved notions in your head as to what is and what is not attainable? Or do you limit yourself merely to your own abilites and strive to improve those with each trade?

I think you've stumbled across an interesting trade physchology question.
Capital Preservation is key to long term wealth accumulation
  • #12
  • May 31, 2006 3:36pm May 31, 2006 3:36pm
Mudd, TEACH ME!

Quoting MuddBuddha
I'm not interested in what IS or IS NOT plausible; merely why you convinced yourself that 50% was not achievable. I don't care for the numbers or the logic; just curious why. Was it the logic and numbers combined? Or have you already "programmed" yourself for less than 50%?

Your comment to SOSO was a little peak into the answer.

I gained 123% last month. This month I should come in at just about 100%.

Before the onset of June, I'd like to know why I shouldn't expect at the very minimum, 50%.

it would be a curious thought experiment to see how much my trading would be affected by the mere expectation that 50% is not achievable on a regular basis.

I have no intention of convincing myself otherwise, but I'd be interested to know how others think. Do you already have pre-concieved notions in your head as to what is and what is not attainable? Or do you limit yourself merely to your own abilites and strive to improve those with each trade?

I think you've stumbled across an interesting trade physchology question.
  • #13
  • May 31, 2006 3:39pm May 31, 2006 3:39pm
Hi Aparsai, I have a question about your analysis. Why would you want to continue to grow at that rate? If it were me I definitely have a goal I want to reach and then I would slow down. Is there some reason to continue exponentially? Maybe I am not understanding your concept...

Thanks Scott


Quoting aparsai
Mudd,

I accept that there are some people who've made a fortune by trading Forex. I believe that with correct strategy, money management, and psychology of trade you can be a very successful trader. What I do not beleive in is to dream of impossibles. My conclusions is based on my personal results, the people who are around me, the websites and portals that I visit, and those numbers up there.

If you are reasonable, doesn't mean that it will stop you from growth. If I didn't beleive in Forex I wouldn't have wasted my time on it. I beleive in it but don't think that in long term you can constantly grow your portfolio 50% per month. That's all.

BTW, you are a great member of this forum I don't want to lose you because of this discussion. I started my research to see what would be the best way to handle my portfolio but it seems the way I presented it was not right. I didn't really mean to just focus on that "impossible" part.
  • #14
  • May 31, 2006 4:32pm May 31, 2006 4:32pm
Quoting smjones
Hi Aparsai, I have a question about your analysis. Why would you want to continue to grow at that rate? If it were me I definitely have a goal I want to reach and then I would slow down. Is there some reason to continue exponentially? Maybe I am not understanding your concept...

Thanks Scott
If it is to grow exponentially why not go for it. My argument is that it's not possible to go into that direction for a long time. To somehow prove that it's not possible I brought it to the paper. Sometimes when you want to prove that something is wrong you can go ahead step by step and show it is not possible to achieve. My analysis is based on that.

Now let's revise it to a more realistic situation. If you realize that you can have a 50% growth when your margin is less than a specific amount then you may decide to limit your margin within that specific limit. I didn't mean that you can't grow your margin by 50%. I meant that you can't do that constantly if you keep a significant portion of the margin for trading. So there should be a point to stop.

I hope I made my point. Sorry guys, English is my second language.
  • #15
  • May 31, 2006 4:37pm May 31, 2006 4:37pm
Quoting MuddBuddha
I'm not interested in what IS or IS NOT plausible; merely why you convinced yourself that 50% was not achievable. I don't care for the numbers or the logic; just curious why. Was it the logic and numbers combined? Or have you already "programmed" yourself for less than 50%?

Your comment to SOSO was a little peak into the answer.

I gained 123% last month. This month I should come in at just about 100%.

Before the onset of June, I'd like to know why I shouldn't expect at the very minimum, 50%.

...
...
I think you've stumbled across an interesting trade physchology question.
I don't say it's not possible to see the growth you are talking about. What I try to say is that if your margin was $10,000,000 could you see the same growth and in a month make another $10,000,000. Beleive it or not you have to slow than at some point. You reach a point that you may get a call from your broker that sorry we can't handle this. And it's not just the broker, there are many other fundamentals that stop you from growing so fast like psychlogical effect and even liquidity of the market when you are dealing with huge amounts of money and many others that I'm not aware of.

I hope I made it more clear. I'm getting anxious that why I started this thread in first place. I think it goes nowhere. Let's see maybe you guys help me to have a better understanding of trading. I'm new to this field and I might be wrong about many things.
  • #16
  • May 31, 2006 4:52pm May 31, 2006 4:52pm
Quoting Bemac
If you have an acre of land and 2 corn seeds which produce 50% [what the heck, let's say 100%] additional seeds/season, your "Additional Corn Seeds" WILL reach a maximum. Maybe not for a while, but, it will happen no matter what you believe.

With All due respect Mudd, if you CAN beat the above scenario, World Hunger will be history.
No offense....but that's the way I see it.
Bemac,

You just reminded me of an old story. It says that when the king of India asked the inventor of chess what he wants as the reward he said please place a seed of wheat on the first square of the chess board and double-up the number of seeds in consecutive squares (i.e. 1 seed in square 1, 2 seeds in square 2, 4 seeds in square 3 and so on). The king was very happy that he asked for such a cheap reward. What he was not aware of was that he had to place 9,223,372,036,854,775,808 seeds (i.e. 2 raised to the power of 63) in the last square which is litterally more than all the wheat seeds in the world (or is it?).

I don't know what is the end of the story or whether it's real or not but it teaches us something...Doesn't it?

BTW, the total seeds in the story would be 18,446,744,073,709,551,615.
  • #17
  • May 31, 2006 5:35pm May 31, 2006 5:35pm
50% is extremely realistic to achieve. I'm not trying to give anyone false hope, but in any given month - yes you can achieve 50% or more.

Just look at what Buddha posted.

However, Can you sustain 50% a month over 1 or 2 years??? like the stats on aparsai's post. The short answer is - No.

I'm not being negative to any belief you can make 50% consistently. By all means, i think it is achieveable. But when you start looking at years ... this is the tricky bit.

Most people who make 50% are on high leverage 100:1 + - It's pretty tough to try to make that figure on 20:1.

Its not a matter of psychology - but a matter of mechanics and sound management.

As their accounts grow in size, the ability to service such an account will diminish - the ability to control such an account (because of the numerous brokers you will need to subscribe with) will diminish.

I believe - over a very long period of time, were talking 5 years or more. It is very achievable to achieve the 10% a month figure.

I'm currently on 25% a month - I know, as my account grows, I'll need to move my leverage down, and take a lower return on my account.

But hey - when you've got a couple of mill in your account.....whos complaining?

No offense....but that's the way I see it.:
  • #18
  • May 31, 2006 5:40pm May 31, 2006 5:40pm
Newtons second law of motion says that if a body is moving with uniform velocity, it will continue to move till some force is applied on it to stop it.The natural forces like friction, air drag etc happen to be there to stop a uniform motion which is theoretically supposed to be continuous and unending.
Similarly trading has its own fricitions or drags which affect the theoretical exponential growth.
I can over speed car as much as I like when I am alone but I cannot (repeat cannot) overspeed much when my children are riding with me because psychology and love play a part.In the same way earned money after some extent of growth becomes more dearer than the original invested money.
The fear of losing money,brokers , and various causes slow down the exponential growth to linear growth.
The example of growing corn out of two seeds has same relevance.The frictional forces for growth of corn seeds are natural viruses who destroy crops,un-favourable weather, lack of resources after certain limit to water all those millions of acres of fields to grow corn.
In conclusion, I say growth of capital in forex is first exponential and then convets to linear and then comes diversification of assets to land,property,gold etc to save oneself from unwanted circumstances like Refco or various mishaps.
  • #19
  • May 31, 2006 5:43pm May 31, 2006 5:43pm
Quoting kolachi
Newtons second law of motion says that if a body is moving with uniform velocity, it will continue to move till some force is applied on it to stop it.The natural forces like friction, air drag etc happen to be there to stop a uniform motion which is theoretically supposed to be continuous and unending.
Similarly trading has its own fricitions or drags which affect the theoretical exponential growth.
I can over speed car as much as I like when I am alone but I cannot (repeat cannot) overspeed much when my children are riding with me because psychology and love play a part.In the same way earned money after some extent of growth becomes more dearer than the original invested money.
The fear of losing money,brokers , and various causes slow down the exponential growth to linear growth.
The example of growing corn out of two seeds has same relevance.The frictional forces for growth of corn seeds are natural viruses who destroy crops,un-favourable weather, lack of resources after certain limit to water all those millions of acres of fields to grow corn.
In conclusion, I say growth of capital in forex is first exponential and then convets to linear and then comes diversification of assets to land,property,gold etc to save oneself from unwanted circumstances like Refco or various mishaps.
A who in the what now?

No, I totally understand ... and your right, there is always going to be a greater condition to slow down the traders growth, as the account gets larger and larger.
  • #20
  • Edited 5:55pm May 31, 2006 5:49pm | Edited 5:55pm
Quoting Rusty_forexman
50% is extremely realistic to achieve. I'm not trying to give anyone false hope, but in any given month - yes you can achieve 50% or more.

Just look at what Buddha posted.

However, Can you sustain 50% a month over 1 or 2 years??? like the stats on aparsai's post. The short answer is - No.

I'm not being negative to any belief you can make 50% consistently. By all means, i think it is achieveable. But when you start looking at years ... this is the tricky bit.

Most people who make 50% are on high leverage 100:1 + - It's pretty tough to try to make that figure on 20:1.

Its not a matter of psychology - but a matter of mechanics and sound management.

As their accounts grow in size, the ability to service such an account will diminish - the ability to control such an account (because of the numerous brokers you will need to subscribe with) will diminish.

I believe - over a very long period of time, were talking 5 years or more. It is very achievable to achieve the 10% a month figure.

I'm currently on 25% a month - I know, as my account grows, I'll need to move my leverage down, and take a lower return on my account.

But hey - when you've got a couple of mill in your account.....whos complaining?

No offense....but that's the way I see it.:
FINALLY! Someone who understood why I asked why!!

Rusty, your post is well said. YES! 50% is attainble on a consistent basis, but over time the ability is decreased by other constraints. But that is really beside the point.

But let's face it aparsai, you knew the answer to your post long before posting. So the only reasonable purpose behind the post was to demostrate the you cannot expect 50%. I say you can. I say you have already defeated yourself if you let the math or the logic beat you down.

Who cares what is reasonable?! Who cares what makes mathmatical sense?!
Dare to defy the odds and you might just find out that you can!

If my favorite NFL team (the Packers, by the way) started the year by proclaiming, "If we can win at least 5 games, we'll be a pretty good team!". They wouldn't stay my favorite team for very long. Nor would anyone expect them to be successful. They had already defeated themselves long before the season began. I, as a fan, expect them to try their damndest to win regardless of their record, and regardless of the odds.

Out of all this, keep in mind that I merely asked "why?".
Capital Preservation is key to long term wealth accumulation
0 traders viewing now