How To Make Big Money

jiggly

jiggly

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Hi everyone, it has been a long time since i started a thread and I thought I would start a discussion in something which i am thinking about at the moment, and that is how to make big money trading.

I should expect that we all got into this business because we want to make BIG money, i got into it because the possibility to make a lot of money in a hurry, well 3 years later and I haven't recouped the total cost of my investment, both financially and through the time i have devoted.

I have read plenty of books and frequent the forums and I know that many of you have done the same, but its all the risk 1-2% on a trade stuff, look for trades with a risk reward of greater than 1:1 etc.

well I got into this because I want to make big money like livermore, martyn schwartz etc. these guys accumulated vast sums of money, and althought they followed very sound principles to risk and money management I can't help but wonder that, relatively speaking they must have been hitting it heavy.

we are all aware that building wealth takes time but having your account fluctuate a few percent here and there given the losing runs it may have is in effect slow gaining, this is just from my experiences and opinions.

other than betting everything in one go, does anyone have any practical ideas as to the types of strategies we can employ to make a lot of money in a hurry. but then again if they were good you wouldn't tell me and you would be doing it already ;)

regards to all for your thoughts
 
Reward a = Risk b X Capital c X Time d

To get Reward 100a, you would need at least 100b, 100c or 100d (or 10 X any 2, or 4-5 X all 3).

Since you're excluding increasing c and d, that means you must be prepared to input 100 b, that is, take much bigger risks.

Unfortunately, Reward a can also have a negative value and the easiest way to prove this is by taking bigger risks.

It seems like a trap, it probably is, I don't think there is a dependable way to make a lot of money fast from trading other than by taking a once in a lifetime risk.
 
jiggly said:
Hi everyone, it has been a long time since i started a thread and I thought I would start a discussion in something which i am thinking about at the moment, and that is how to make big money trading.

I should expect that we all got into this business because we want to make BIG money, i got into it because the possibility to make a lot of money in a hurry, well 3 years later and I haven't recouped the total cost of my investment, both financially and through the time i have devoted.

I have read plenty of books and frequent the forums and I know that many of you have done the same, but its all the risk 1-2% on a trade stuff, look for trades with a risk reward of greater than 1:1 etc.

well I got into this because I want to make big money like livermore, martyn schwartz etc. these guys accumulated vast sums of money, and althought they followed very sound principles to risk and money management I can't help but wonder that, relatively speaking they must have been hitting it heavy.

we are all aware that building wealth takes time but having your account fluctuate a few percent here and there given the losing runs it may have is in effect slow gaining, this is just from my experiences and opinions.

other than betting everything in one go, does anyone have any practical ideas as to the types of strategies we can employ to make a lot of money in a hurry. but then again if they were good you wouldn't tell me and you would be doing it already ;)

regards to all for your thoughts
Click to expand...

yes, why does anybody try and make small money trading when we all want to make big money trading.

The secret is to buy when the short term moving average crosses above the long term moving average. Exit when it falls below it. Open a spreadbetting account and lump on with 20X margin. Then place an order for your mansion and sports car.

UTB

PS- please don't share this secret.;)
 
Have you read Confessions of a Window Cleaner... er... I mean Reminiscences of a Stock Operator. Yes, he was "hitting it heavy". He also went completely bankrupt twice in his life because he hit it heavy.

For every Jesse Livermore success, I bet there are 19 Jesse Livermore failures (that's 95% failure, right?) who went bankrupt and never came back to the market (and probably lost their wife and got a job in McDonalds at the same time). That is why we have to practice good money management.
 
Compound Interest.....its not the number of pips, its the value of each pip. If you had made 1% per day, and traded 250 days a year(we all need hols), starting with £1000, it would now be 1.7 million.
 
Okay. Lets take J. Livermore as an example.

Probably. (Got the probably bit from the beer ads). The greatest trader that ever lived.

Who went bankrupt twice. (That is the one thing that I cannot get my head around). (How can anyone who is a millionaire go bankrupt doing the thing that made him a fortune)?

Surely when you get down to your last few thou you must think... Well, fcku me I think I dropped a bo****k here about market direction. Knew I should have gone long!

Anyway, I digress.

He made a fortune by first proving that he called the market right, by easing out a 'line', and then plunged in with everything. That is how he made his money, and, I guess that tells me why he blew out twice.
With that much invested, trying to off load it without moving the market too much is very difficult. This is when a 30 point move on the dow was considered a major move.

But the fact is he knew he was 'right' with the market after first testing it.
Whether the same type of feat could be accomplished today given the different market conditions is arguable.
I know there are traders today that take home a few bob, but what was his net worth in todays money?

I know he cut his teeth on shares but he made his money from swinging comods.

Also one of his 'famous' quotes about it's the sitting and waiting that makes the money. Or something like that is generally perceived differently to what he meant.
He didn't mean buying and holding a stock etc. He meant waiting and holding in cash for the right moment to present itself. Reading the 'tape' etc, and when the odds were most in favour, then testing and 'plunging' in.

So those are the first conditions that have to be met as you make you way to an 'overnight' fortune. Lol!

Oh by the way, I think I have a little known book about livermore on my computer that goes deeper than 'confessions of...' and shows a bit more to the man. Although I came by the copy 'gratis' from the 'net' I do not want to post the thing on here so if anyone would like a copy please pm me. (I think I still have it) :cry:
 
Forget about trying to make money. Instead concentrate on not losing money, you will notice an improvement in your results just by shifting you attention away from trying to make winning trades and toward avoiding losing ones.

When you do find the right trade that has the lowest risk of losing you will know about it, for whatever reason, the messages just all sync and re-enforce your views on the market, that is when you load up heavy and make real money. But don't expect to find these trades often, I perhaps get these 2-3 times a week if that, at all other times I am just focusing entirely on playing great dee-fence!
 
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I understand what you are all saying, I do not class myself as a newbie, I have been at this for 3 years, with the type of results which others would question if it was all worth it. I am nudging positive in terms of my PnL, but not to satisfaction, i am talking about gaining say 3% on a trade then the next three would be losers taking me out of 4.5%, then I may make a couple of good trades then back to slightly better than when i started. and so on

My results fair about as good as an ISA account in a month than what it would take the ISA to perform over the year., (not taking into account the tax.)

I realise that all we need to do is remain consistent in the positive and increase size, and compound ( i have done all the spreadsheets and calculations) but the reality of the results dont resemble the theory in my case unfortunately. or we can take on more risk, either by reducing our stop loss levels in effect trading more but having a higher probability of having the stop hit,

I have been thinking about splitting my account into a number of trades, say I have £10,000, I would make 20 trades risking £500 a trade, with the tightest stop possible given the market conditions, but the only thing stopping me is the fear of loss doing something like this, as yes I have also read all the books and material and seriously understand where this can lead.

thanks for all your responses.
 
si1503 said:
Forget about trying to make money. Instead concentrate on not losing money, you will notice an improvement in your results just by shifting you attention away from trying to make winning trades and toward avoiding losing ones.

When you do find the right trade that has the lowest risk of losing you will know about it, for whatever reason, the messages just all sync and re-enforce your views on the market, that is when you load up heavy and make real money. But don't expect to find these trades often, I perhaps get these 2-3 times a week if that, at all other times I am just focusing entirely on playing great dee-fence!
Click to expand...

this is something I will consider a little more carefully, a good offence is also a good defence.

maybe I should get them the other way around and I could see an improvement. then again If I could find where I can improve on both then this would be better for overall performance.

thanks for your views.
 
Options - do you know if livermore had any risk criteria, because i read, i think it was in reminiscence that when he new he had the 'aces' when he was dead right he would bet everything.

on the other hand, one of his trading rules was to never lose money. I have read this book a few times and its excellent.

I think he trades more like someone who would be playing poker, I play a good game, and I have made my intitial stake four times over on a couple of occasions, purely because there isn't a fixed risking structure when betting at a pot against other players than what you can have when placing a trade in the market as an individual, sometimes you are betting as much as 20% of your stake other times you are all in...... its knowing when you have the 'ace's' and you cant be beat, as livermore says,

but that time in reality is never in my opinion, there is no set odds to the market as there is with a eck of cards.

or is there?????
 
Never sustain a loss of more than 10% capital invested. Often he would be out well before this. The 10% rule he had is different to a r/r of 1 or 2% on the start of a trade.

Never average down. (Although I think he did this on one or two occasions).

Don't lose your stake.

Never meet a margin call.

Keep cash in reserve for when the right 'moment' appears.

He was worth over 200 million after the '29 crash. That is quite a few billion in todays money, and he started his career with pocket change!
There has never been anyone one who could match that feat yet. There may be fund managers who take home a good wage and have a very nice fund to play with but it is not 'their' money.

Mind you, I reckon our Trader Dante will be giving him a run for his money soon.

And he didn't use indicators! Just the tape.
Dan Zanger says he doesn't use indicators, he uses chart patterns. So maybe there are a few clues here on how people should be trading?
 
Why do aspiring traders use Livermore as an example? The man was clinically depressed much of his life and ended it by blowing his brains out. Sounds great doesn't it?

In the Squibb building at 745 Fifth Avenue, at the age of 63, Livermore entered the Sherry-Netherland Hotel on November 28, 1940, at 4:30 in the afternoon.

Sitting on a stool at the end of the cloakroom, he withdrew a .32-caliber Colt automatic pistol, placed the barrel of the gun behind his right ear and pulled the trigger, dying instantly.

The police revealed that there was a suicide note of eight small handwritten pages in Livermore's personal notebook. It was addressed to his wife.

“My dear Nina: Can’t help it. Things have been bad with me. I am tired of fighting. Can’t carry on any longer. This is the only way out. I am unworthy of your love. I am a failure. I am truly sorry, but this is the only way out for me. Love Laurie”.
 
He also had some bad luck and poor judgement.

Through unknown mechanisms, he yet again lost much of his trading capital, accumulated through 1929. Thus, on March 7, 1934, the bankrupt Livermore was automatically suspended as a member of the Chicago Board of Trade. It was never disclosed to anyone what happened to the great fortune he had made in the crash of 1929, but he had lost it all.

Who in their right mind would marry a women whos last four husbands had commited suicide?

On March 28, 1933, Livermore married the 38 year old Harriet Metz Noble in Geneva, Illinois; there was no honeymoon. It was Harriet's fifth marriage, and all four of her previous husbands had committed suicide.

Anybody still wanna be like Jesse Livermore???
 
rols said:
He also had some bad luck and poor judgement.

Through unknown mechanisms, he yet again lost much of his trading capital, accumulated through 1929.
Wouldn't we like to know how that happened eh?

Thus, on March 7, 1934, the bankrupt Livermore was automatically suspended as a member of the Chicago Board of Trade. It was never disclosed to anyone what happened to the great fortune he had made in the crash of 1929, but he had lost it all.

Who in their right mind would marry a women whos last four husbands had commited suicide?

On March 28, 1933, Livermore married the 38 year old Harriet Metz Noble in Geneva, Illinois; there was no honeymoon. It was Harriet's fifth marriage, and all four of her previous husbands had committed suicide.

You would have thought the police would have taken a closer look at that wouldn't you.
5 in a row. Beats working for a living.
Anybody still wanna be like Jesse Livermore???
Click to expand...


Yep, but without the wife and the gun!
 
Livermore knew how to lose and had no problem blowing out and wasn't in the game for the money - you have to see that from his point of view. As far as his clinical depression goes, that is an illness and is none of our concern.

Most traders I know are on their knees praying when they are 3 ticks offside.
 
we use him as an example because he managed to make so much f*cking Mulaa that if we could just be a few million behind him, we would do extreamly well.

besides him blowing out several times and bouncing back several times also, I dont know about you, but if i could manage to do that AND know when to slow things down and stop, I would be onto a good thing.

wouldn't you agree.??

Options - so we are sasying in essence if he had £1000 he would make a trade and risk £100 of it (10%), either by slowly injecting this amount into the market or starting with this amount and then adding another £100 as he went along - i think he was using the profits on the position for additional margin as well was he not?

good luck to all
 
Jesse Livermore is one of my heros. The poor guy never had access to the basic trading knowledge we take for granted today, ie risk and money management techniques. He was figuring out the basic stuff as he went along the hard way. Nor did he have access to todays medicine and therapy to alleviate his depression.

In general you cant make big money without taking big risks (drawdowns).

If someone wants to make big money quickly I would recommend taking bigger risk (3% to 5% per trade) when you start out with a relatively small account. If you blow up your account you can always go back to your day job and recharge it. As you account grows you can start dropping the risk down towards sensible levels.

Returns in the 100% to 500% per year range are possible if you are prepared to take the big drawdowns. Thats much easier to do when you account is small and you have a job to fall back on. A great trading system also helps!
 
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Roughly about right as I understand it.

He would test his theory by putting into the market 10 or 20% of the capital he wanted to invest. If that went awry he would pull any amount left out of the trade.

When it went right, he would add to it at prime points. without flicking back through the book I couldn't say the percentages he used. (It does tell you in the book), but I don't think he ever invested more than 50% in one block in one purchase. Preferring incremental amounts until he was as maxed out as he intended. Getting out of the position(s) would have been the same way.

He also on occasion I believe, had to buy the market 'up' in order to off load for fear of adjusting the price too much. Not something the likes of us will have to worry about.

Also, although he 'plunged' in heavy when he knew he was right. I don't think he ever had his net worth invested in one trade. (I may be wrong on this though. Someone who has recently read the book will have a better memory than I.)

Interestingly, he never took his own advice of putting some of his profit away from the market. Might have been his saving grace had he done so. Especially after the first collapse.

Then again, wouldn't he have pulled the savings out and carried on as normal?
 
you see many aspiring trader has looked to livermore's trading style for clues as to how they should approach the markets, it is almost like a story and manuel for trading in one.

My system and I bet your own mimicks his somewhere along the lines, whether you realise this or not.

for instance, he traded on chart patterns (tape reading), his position would be confirmed by the increase or absence of volume, it should react as expected or he would be out. he traded in the direction of the broader market trend, he waited for his pivotal points to arise before starting his operations, he had some sort of risk and money management, which we are trying to uncover in more detail in this thread. (some might say it was no good, but his risk tolerence was far greater than yours and mine). he would let his profits run until the trend was on its last legs, he cut his losses short.

come to think of it now, I dont really add to my positions, I slowly reduce them as the market moves in my favour to reduce the overall risk and exposure at the beginning until the market confirms I am correct (playing defence), where as he does the opposite. I dont trade 10% at any one go, i dont explore my position by testing the market.

does anyone else trade similar to this?

this could be some of the areas, along with playing differently with our capital, where I and others could be preventing themselves from making bigger money.

so I have an account of lets say £1000.

we could wait for our opportune time for trading, then we could trade our initial 1-2% risk position as an exploratory trade, as the position moves in our favour and the trend is confirming itself, we could add another 2% and so on, until we reach a total position risking 10% (£100).

we are in business to trade, this is a business where you can start very small and turn it into a fortune if we go about managing that money correctly, if we have a method which leaves a lot of our capital sitting idle and unemployed for the majority of the time we could be fundementally preventing ourselves from realising our ambitions.

the best of luck to all
 
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