How to easily make 1000 % per Year !

BSD

BSD

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It most definitely does not require rocket science, it does not take some elusive quant algorithm you need to invest lots of PhD work hours and millions into hardware on first, no, all it takes is a simple, robust system that is compoundable.

It doesn't even need a high win rate NOR a high Risk : Reward ratio.

What is perfectly sufficient to achieve the stated objective is by trading a system that - on average, as always - wins "only" 50% of the time...

offers a Risk : Reward of 1 : 2...

a system that is based on very conservative and extremely feasible assumptions in other words...

a system that gives you say 2 trades / day...

which in reality is again extremely conservative just for the sake of this argument (in reality one should be able to get lots more signals with a system that has such parameters than my example of only two)...

a system that has you risking no more than 1% of your account per trade, which again is extremely risk averse...

You now have a system with which on average you have one losing trade per day, which loses you one percent of your equity, and one winning trade, which wins you two percent of your equity, and that leaves you with a net profit of 1% for your trading day.

Make on average 1% per day, and, just to err on the conservative side again, we will not compound that, but downplay the possible results, and end the month up 20%.

Now lets enter the power of compounding, which is the short term traders by far greatest weapon in their arsenal.

Compounding 20% gains per month for a full year, translates into overall gains for your book at year's end of a mind boggling, staggering 1000% !!!

Keep that up for a few years and you are well set to achieve absolutely whatever objectives you may have for yourself, trade a system that you can compound, and there are absolutely no limits - outside of yourself and your own potential inner fears and limitations - at all to keep you from achieving whatever you may wish for.

Of course one needs to keep in mind that with growth of your assets your returns will diminish over time.

Making 1000% / year is extremely feasible with say 50K, but somewhat less so if you've managed to compound up to 100 mill, let alone if you're up to trading with 1 billion.

The very best of the hedge funds with assets of around there can therefore be very satisfied already with an average annual compound rate of return of around 30% p.a

But even there the odd superperformance is still feasible, as Taleb proved with his one billion dollar hedge fund that returned 110% last year.

Or just have a look at TraderDaily and their top earning traders list of 2008, eg top dog John Paulson, who is running 9 daughter funds of cumulatively around 29 billion - one of his funds started out at 130 million in 2007, and he turned that into 3.2 Billion within ONE single year - earning himself a total of 3 billion cash in the process.

THAT is ALL trading is about, NET PROFITS that are COMPOUNDABLE.

You do not need the Holy Grail.

You do not need to be able to predict what markets do next.

All you need is to tweak the only aspects of trading we have influence over, when we enter, and when we exit, in a way that offers us a positive expectancy.

All you need is a simple, robust and above all Compoundable System with a Winning Percentage of no more than 50%, a Risk : Reward of no more than 1 : 2, Trade Opportunities of a lonely 2 trades per day, and Position Sizing that has you risking no more than a paltry 1% that any self-respecting, gunslinging gambler would probably laugh his head off at, in order to achieve whatever you want, and be it the sky !

=================================================================================

EDIT for further clarification:

PS, we are talking ON AVERAGE here...

that means some days you may have 5 losses in a row, the next day you get 3 winners in a row, followed by another loss the day after, and then followed yet again by another 4 winners the day after that, etc etc...

OF COURSE one does not have exactly 2 trades / day, one a winner, one a loser, that is just what you on AVERAGE end up at with a system that is right only 50% of the time, and only has a risk/reward of 1:2.
 
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Good words my man.

Sorry to be seemingly so negative here but this is text book stuff. Similar to saying that competing in 100m sprint in an olympic arena is all about determination, diet and ultimately speed.

Although true, (and we can all pick many stories through time of people that have succeeded) we forget about the constant struggle every day that a trader has, full time or not and the countless people that fail on a regualr basis.

Now although all this is true (in part of both events) the missing ingredient is what?

I know the ingredients in my cake but still fail to achieve any where near 1,000% per year compounded for the simple reason that I have come to the conclusion that it is only achievable by skill mixed with a high dose of luck, a word I dont favour in my job.

I personally only believe that one in a million will achieve the above posted results of 1,000% per year compounded,(as per people fail to win ratio) therefor, I dont believe it is for me. All I ever ask is that if more and more top athletes were competing on a bigger scale then those that fail, I would of course change my mind.

So, I come to the conclusion that although it is true, the real point comes back to that most must fail for a handful of people to win, the same as for a handful of people to be rich the majority must be poor (or poorer), this is of course true in all walks of life throughout the money filled lands we live in. As in trading, money doesn't come from nowhere and is certainly only ever invented/created by the banks of the world, so, it must come from the other players, hence the well spoke about but controversial saying '95% of people fail' (ref trading).


Pipe dream: yes.
Reality: unfortunately not for most.
Chance against winning the lottery: probably better but then the lottery doesn't try and take your money back from you every trade you take.


Negative or reality?.....I'll let you decide....But if you decide negative...come back and tell me so when you've got past it being a pipe dream.


Lee Shepherd. (Regular full time trader for over 4 years indices, 10 years equities)
 
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Makes it look easy for anyone to become a billionaire.

Great idea, brilliant for selling systems especially. :)
Wonder why reality can't match up to the above returns? Must be going wrong somewhere...


BSD said:
It most definitely does not require rocket science, it does not take some elusive quant algorithm you need to invest lots of PhD work hours and millions into hardware on first, no, all it takes is a simple, robust system that is compoundable.

It doesn't even need a high win rate NOR a high Risk : Reward ratio.

What is perfectly sufficient to achieve the stated objective is by trading a system that - on average, as always - wins "only" 50% of the time...

offers a Risk : Reward of 1 : 2...

a system that is based on very conservative and extremely feasible assumptions in other words...

a system that gives you say 2 trades / day...

which in reality is again extremely conservative just for the sake of this argument (in reality one should be able to get lots more signals with a system that has such parameters than my example of only two)...

a system that has you risking no more than 1% of your account per trade, which again is extremely risk averse...

You now have a system with which on average you have one losing trade per day, which loses you one percent of your equity, and one winning trade, which wins you two percent of your equity, and that leaves you with a net profit of 1% for your trading day.

Make on average 1% per day, and, just to err on the conservative side again, we will not compound that, but downplay the possible results, and end the month up 20%.

Now lets enter the power of compounding, which is the short term traders by far greatest weapon in their arsenal.

Compounding 20% gains per month for a full year, translates into overall gains for your book at year's end of a mind boggling, staggering 1000% !!!

Keep that up for a few years and you are well set to achieve absolutely whatever objectives you may have for yourself, trade a system that you can compound, and there are absolutely no limits - outside of yourself and your own potential inner fears and limitations - at all to keep you from achieving whatever you may wish for.

Of course one needs to keep in mind that with growth of your assets your returns will diminish over time.

Making 1000% / year is extremely feasible with say 50K, but somewhat less so if you've managed to compound up to 100 mill, let alone if you're up to trading with 1 billion.

The very best of the hedge funds with assets of around there can therefore be very satisfied already with an average annual compound rate of return of around 30% p.a

But even there the odd superperformance is still feasible, as Taleb proved with his one billion dollar hedge fund that returned 110% last year.

Or just have a look at TraderDaily and their top earning traders list of 2008, eg top dog John Paulson, who is running 9 daughter funds of cumulatively around 29 billion - one of his funds started out at 130 million in 2007, and he turned that into 3.2 Billion within ONE single year - earning himself a total of 3 billion cash in the process.

THAT is ALL trading is about, NET PROFITS that are COMPOUNDABLE.

You do not need the Holy Grail.

You do not need to be able to predict what markets do next.

All you need is to tweak the only aspects of trading we have influence over, when we enter, and when we exit, in a way that offers us a positive expectancy.

All you need is a simple, robust and above all Compoundable System with a Winning Percentage of no more than 50%, a Risk : Reward of no more than 1 : 2, Trade Opportunities of a lonely 2 trades per day, and Position Sizing that has you risking no more than a paltry 1% that any self-respecting, gunslinging gambler would probably laugh his head off at, in order to achieve whatever you want, and be it the sky !
Click to expand...
 
I hear you Lee and Girl, and know exactly what you're saying.

And no doubt you're right.

But on the other hand, if you go look at any number of prop firms or talk with exchange members, there are many traders there that make way beyond 20% / month, there are people there regularly making up to 50% / month...

Many there of course have styles that are not compoundable, but that kind of trading is still good for several million / year.

Then again you have those that make great monthly returns AND with styles that are compoundable, and they make it all the way to the top.

I mean, to be honest, the system from above IS feasible, IS doable, does NOT take anything most of us here do not have...

Nothing spectacular or beyond the scope of most good traders there at all.

Yet I still agree with you, most will NOT make it, but why exactly is that then if the problem does not lie with the system ?

IMO most will never make it because A: they couldn't trade such a simple system, just look at all the people here looking for holy grails instead of doing the perfectly obvious and perfectly simple and just getting on with it already...

and B, people have an inner barrier limiting themselves and their prospectives, many have no deep personal and inner desire to get rich in the first place, but have their comfort zone out which nobody and nothing could propel them, and that is OK as it is, others just think that getting rich is what they should strive for as society would value that in their opinions, but don't really have the commitment to see it through, yet others can't handle the pressure and they start messing up their heads when money starts coming in, they start seeing numbers instead of more neutral percentages, and they are not wired to handle that...

eg all of a sudden one percent of your equity equals a great outfit...

a great holiday...

a great watch...

a great sports car...

a great loft...

etc...

What happens then ?

They get scared, and do not trade their simple system any longer the way it should and indeed needs to be traded to work, ie they don't hold onto their winners long enough any more, they can't stand losing any more, and by doing that, they mess up the needed expectancy to make their otherwise perfectly good system work.

It's all in the head imo, because the system it definitely isn't.
 
So keeping this as simple as possible...

2 trades a day
1% equity risk
50 point stoploss
100 point target
Increase daily so 1% starts at ie $10, then becomes $15, then $20 etc
Requires 1 loss and 1 win to target (hypothetically)
Every day

Is that the crux of it?
 
BSD,

Not sure what to say mate.

I agree with what you're saying in it's entirety but yet still dont fully grasp why I personally couldn't make it, probably because I'm comfortable with what I earn but yet strive for more, maybe something inside me secretly is actually happy with what I have, I of course would disagree with myslef if that was that case and I dont wish to start an arguement with myself today. I had one a year ago and I didn't talk to myself for weeks, it was hell, I wouldn't even make myself a cup of tea without spitting in it.:LOL:
 
wasp said:
So keeping this as simple as possible...

2 trades a day
1% equity risk
50 point stoploss
100 point target
Increase daily so 1% starts at ie $10, then becomes $15, then $20 etc
Requires 1 loss and 1 win to target (hypothetically)
Every day

Is that the crux of it?
Click to expand...

Basically yes, although to keep things a tad more conservative in my example I was keeping it to a non-compounding 1% / day net result - on average - for a month at a time, ie ending the month up a non-compounded 20%, and then only compounding the months themselves, ie 20% month for 12 months then ends up at 1000%.

But that was just to keep it simple and reduce the potential earnings a bit more to keep the final number smaller.

Normally it should definitely be done the way you did, ie always risk 1% of whatever your equity is at the time, ie you're positioned smaller when you lose, and bigger when you win, but it's always one % of your equity .

Lee Shepherd said:
BSD,

Not sure what to say mate.

I agree with what you're saying in it's entirety but yet still dont fully grasp why I personally couldn't make it, probably because I'm comfortable with what I earn but yet strive for more, maybe something inside me secretly is actually happy with what I have, I of course would disagree with myslef if that was that case and I dont wish to start an arguement with myself today. I had one a year ago and I didn't talk to myself for weeks, it was hell, I wouldn't even make myself a cup of tea without spitting in it.:LOL:
Click to expand...

:)

Don't get me wrong, I am not saying this is the only way, all I was trying to show was that there is a way that is far simpler than most would assume, but that was just by showing how it CAN be done, not how it SHOULD be done.

What is far more important is doing what YOU REALLY want to do, I TOTALLY believe that anybody can achieve ANYTHING they want to, but there we have it, DOES EVERBODY WANT to get rich ?

Hell no, I probably know more people with zero interest in wealth than people WITH interest in that.

Wasn't it Ed Seykota who said everybody gets out of markets waht they want, well, imo that doesn't just apply to markets, that applies to LIFE.

If anybody is happy with good money they're making trading, and happy with their lives, THAT IS ALL that counts, not what you have in your account.

And not talking with oneself for weeks is definitely a TOO high price to pay for doing sthg one doesn't really want to :)
 
BSD said:
....What is far more important is doing what YOU REALLY want to do, I TOTALLY believe that anybody can achieve ANYTHING they want to....
Click to expand...

I WANT the Olsen twins in the shower next time I go upstairs but you DON'T always get what you want!!


As for the original topic, nice theory but....

You still have to be able to correctly make this points, regularly and consistently which, you need to have more than a calculator and a desire for.... I totally agree with your point but its not that easy to get 1 (bigger) win and 1 (smaller) loss on a consistent basis.

Hence the search and study and analysis of markets.

So in order to achieve this.... How do you ensure you get the results required?


NB: Not trying to start an argument here but this is only part of the equation isn't it? I have spreadsheets showing I should have an 8 figure return a year... Still only on 7!;)
 
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Phil Mibbutz said:
Those two are always hanging around my place, so I'll send them round if you want.
Click to expand...

Nice one cheers! I'll send them to Jtrader afterwards... :LOL:

In fact, maybe just straight to Jtraders... think he needs them more!!
 
BSD said:
Ah.

Just found this.

You create the expectancy and thereby desired results of your system yourself by skewing your risk / rewards - ie the way you react to what happens - in a way that is commensurate with how markets move.

Take a market with an Average True Range of 200 pips / day.

Trade in the direction of the trend, buying a pullback to the mean.

That allows you a relatively tight sl, as it'll become evident very quickly if it is a pullback, or if the trend has indeed changed.

Set a SL of 10 points if you will. Now, take a day where the usual to be expected ATR has not been done overnight, ie it is still likely to be ahead of you.

And then nobody can tell me that they can't get at least a profit of 10% of the daily ranges move, ie 20 out of 200 pips out of the market.

It ain''t the system, it's the doing - taking the losses with discipline, allowing the sytem to breathe, while letting your winners run up to their targets, all while compounding all the way, that is the problem.
Click to expand...

Ahhh, just like that!
 
ERR, sorry for the repost :)

wasp said:
So in order to achieve this.... How do you ensure you get the results required?
Click to expand...

Ah.

Just found this.

You create the expectancy and thereby desired results of your system yourself by skewing your risk / rewards - ie the way you react to what happens - in a way that is commensurate with how markets move.

Take a market with an Average True Range of 200 pips / day.

Trade in the direction of the trend, buying a pullback to the mean.

That allows you a relatively tight sl, as it'll become evident very quickly if it is a pullback, or if the trend has indeed changed.

Set a SL of 10 points if you will. Now, take a day where the usual to be expected ATR has not been done overnight, ie it is still likely to be ahead of you.

And then nobody can tell me that they can't get at least a profit of 10% of the daily ranges move, ie 20 out of 200 pips out of the market.

Of course, an even better way of doing it is setting close stops, AND THEN LETTING MARKETS RUN, offering the potential to making risk / rewards of 1:10, 1:20, or 1:30 in some cases, but while that will have lower hit rates, that is the by far most profitable way of trading, BUT comes at the price of having higher rates of losses, and of having to sit through many paper profits that disapear, some of which will come back, some won't, but overall you will get the BIG swings that way.

It ain''t the system, it's the doing - taking the losses with discipline, allowing the sytem to breathe, while letting your winners run up to their targets, all while compounding all the way, that is the problem.
 
wasp said:
Ahhh, just like that!
Click to expand...

Yes.

Look at Richard Dennis, does it get ANY simpler than the Turtle system ?

Buying when it goes up, selling when it goes down ?

Low hit rate in the 30%'s, BUT OUTSTANDING risk /rewards.

Was good enough for turning 400 bucks into several hundred million within a pretty short time span.

;-)

Deutsche Bank did some studies on overall net profitability of systems awhile back, and nothing comes even close to simple, basic, low hit rate, high risk / reward trend following strategies on a compounding basis.
 
PS, don't forget - as per the original system in the first post - we are talking ON AVERAGE here...

that means some days you may have 5 losses in a row, the next day you get 3 winners in a row, followed by another loss the day after, and then followed yet again by another 4 winners the day after that, etc etc...

OF COURSE one does not have exactly 2 trades / day, one a winner, one a loser, that is just what you on AVERAGE end up at with a system that is right only 50% of the time, and only has a risk/reward of 1:2.
 
nice idea, BSD, and in general, I would agree with you.
the issue seems to be why most dont achieve it.

I have this theory that salespeople would make better traders than people used to salaried positions.

Salespeople are used to the idea of making umpteenth presentations and getting knocked back, but know that, on average, one deal out of say, 5 or 6, is enough to earn them good commissions.
Salespeople are used to random incomes.

Salaried people have the cushion of knowing that they only have to turn up at the office on time, and they will get paid, no matter what. They fail to distinguish between the 9-5 "being at work" and "being productive", and thus are affected more by spending a day working hard, only to come away with nothing, becasue they feel they are "entitled" to money just for being at the office.

thats my theory. hope thats not off-topic, as the numbers you give are reasonable (although I would say expect 40% win:loss,and you're still doing well)

You have mentioned my heroes Ed Seykota and also the Turtles, and their easy rules.

Why not construct a simple entry/exit system with defined stops, and see how it goes.
Within a few pages, you will get advice on adding that extra indicator to "improve" it, to the extent it stops working!! ;) :) (speaking from experience, each new indicator is to prevent a loss that happened in the past, only to find that it prevented a good trade entry in the future)
 
trendie said:
nice idea, BSD, and in general, I would agree with you.
the issue seems to be why most dont achieve it.

I have this theory that salespeople would make better traders than people used to salaried positions.

Salespeople are used to the idea of making umpteenth presentations and getting knocked back, but know that, on average, one deal out of say, 5 or 6, is enough to earn them good commissions.
Salespeople are used to random incomes.

Salaried people have the cushion of knowing that they only have to turn up at the office on time, and they will get paid, no matter what. They fail to distinguish between the 9-5 "being at work" and "being productive", and thus are affected more by spending a day working hard, only to come away with nothing, becasue they feel they are "entitled" to money just for being at the office.

thats my theory. hope thats not off-topic, as the numbers you give are reasonable (although I would say expect 40% win:loss,and you're still doing well)

You have mentioned my heroes Ed Seykota and also the Turtles, and their easy rules.

Why not construct a simple entry/exit system with defined stops, and see how it goes.
Within a few pages, you will get advice on adding that extra indicator to "improve" it, to the extent it stops working!! ;) :) (speaking from experience, each new indicator is to prevent a loss that happened in the past, only to find that it prevented a good trade entry in the future)
Click to expand...

I TOTALLY agree with ALL points in your post mate !!!
 
The concept put forward by Markus is refreshing in its simplicity and, on the face of it, almost appears easy to achieve - as I think UKtradergirl commented earlier. (Nice to a have some female input UKtradergirl - welcome!) So, for those of us who aren't quite managing to achieve these returns - where are we going wrong? It strikes me that trading is a bit like being a professional tennis player. Take Roger Federer; he's very good at everything: serving, volleying, half volleys, forehand, backhand, at the net or on the baseline - he's got it all. Now imagine a very slightly different Roger Federer, virtually identical to the first but for one key difference; the 'other' Roger Federer only gets 50% of his 1st serves in and they rarely top 100mph. In the context of the complete player, the difference isn't that great, yet the impact on his results will be exponentially huge. I doubt he'd even make the top 1,000 players list - let alone the top 10. How does this relate to trading? Well, I'm quite good at picking my entry, good at position size and stop placement - but I rarely hit the target. It's the 2:1 R:R in Markus' example that I struggle with, and by the time you've thrown in commissions - well, let's just say I'm some way short of the 1000% p/a objective! I think of myself as being a bit like the 'other' Roger Federer, so I know where I'm going wrong - which is a start. However, knowing precisely what to do to address the problem in order to achieve the 2:1 R:R is proving to be a bit of a bu88er! I suspect there will be many other traders besides me in the same boat, trying to address a similar problem. It only takes one area of weakness or one skill that trails behind the others to have a huge (i.e. negative) impact on our trading statistics. Identifying the problem is one thing, solving it is another matter entirely.
Tim.
 
BSD, when I first saw your post's title I assumed that someone was selling something and that it would be, as just about always, cr*p. But then I realised that you were the author and thus unlikely to be selling something cr*p - or anything at all. The reason I could never follow this simple system is that I am the epitomy of poor discipline - and will thus always be the poor relative to you, more able traders.
 
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Don't get me wrong guys and girls btw, I have excellent capabilities for ****ing things up myself and, no good, real reasons for those brain farts needed either, no doubt about that at all, I think that is just part of the process though, NOTHING in life goes up in a straight line from the bottom left hand corner up the the right hand side of things where we want to end up.

But what I really wanted to do with this EXAMPLE of ONE way of doing it is to show how, if OVERALL we can learn to LET GO - we can go much further and with far LESS effort than fighting tooth and nail for every single pip on the way, by ignoring wiggles, by just trading within the scope of daily movements, asking for just small parts of that at a time, and by creating a positive expactancy system that does not call for outrageous, phantasy elements to make it work.
 
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