How to easily make 1000 % per Year !

[Mikeyfx]

hi, agree with alot thats been said here. but would like to add that while what your saying is true and system not at fault and if it was all run by cpu then no problen but unfortunately humans dont think like pc's, they are irrational and the markets are moved by humans, there lies the problem.
discipline and trading like a machine is the key, not to change when things dont go your way and of course to be that disciplined you have to have complete faith in your style/system of trading.
most people i believe cant do this and even ones that can have to work hard at it, as the so said 95/5% average would seem to suggest.

 

[BSD]

hi, agree with alot thats been said here. but would like to add that while what your saying is true and system not at fault and if it was all run by cpu then no problen but unfortunately humans dont think like pc's, they are irrational and the markets are moved by humans, there lies the problem.
discipline and trading like a machine is the key, not to change when things dont go your way and of course to be that disciplined you have to have complete faith in your style/system of trading.
most people i believe cant do this and even ones that can have to work hard at it, as the so said 95/5% average would seem to suggest.

True.

Identifying the problem is one thing, solving it is another matter entirely.
Tim.

One possible solution might be:

Look for good entries that make sense, be it pullbacks, breakouts, in direction of the overall trend, WHATEVER, and, within the context of THIS example system, let it either WIN, or LOSE, ie no trailing, no pulling stops up to breakeven.

Trailing stops or getting out prematurely at the fisrt sign of weakness with such a small reward vs the risk, and targeting such a small part of ATR, will mean far too many wins that don't fit the requirements of this particular expectancy constellation, same with pulling stops up to breakeven too quickly, a system like this needs some breathing room imo.

Of course, if you have eg a trending system that NEEDS far higher risk / rewards to work, that wouldn't be an option, you'd need to pull your stop up to breakeven, then trail, etc.

 

[Mikeyfx]

Its to do with confidence, if i have a system that i know works and has returned at least 1:2 over past x amount of weeks/months/years and i have a day where i have 5 straight losses! do i then start to lose confidence? if i know it works then i shouldnt but then we again come back to discipline.

 

[BSD]

Its to do with confidence, if i have a system that i know works and has returned at least 1:2 over past x amount of weeks/months/years and i have a day where i have 5 straight losses! do i then start to lose confidence? if i know it works then i shouldnt but then we again come back to discipline.

And you WILL have days with a system like this where you have 5 or more straight losses !!!

I have always found that in trading one of the most helpful things is to be totally emotionally detached from the individual trade - risking no more than 1% / trade definitely helps as well - and to instead make like a casino or insurance firm: view things in terms of your longer term edge and from the greater scheme of things, NOT caring about individual losses or even losing streaks, accepting them instead as no more than the cost of doing business that they are.

Casinos may lose money straight for days on end, insurance firms can and do get hit by outlier events wiping out an entire years or more profits at one go...

But they don't care do they.

Because overall they are the ones raking in the net profits.

 

[Adamus]

Such a simple system is really just an illusion until it has been proven with real money in real markets.

Say I'm a system trader, I know all about curve-fitting and so on and I code a system which back-testing shows makes a decent sort of profit and win:loss ratio after commissions and slippage: how do I have confidence that it's going to carry on working in the real world?

If I chose the best performing algorithm for my back-testing period, the chances are that in the real world, the system is going to tank straight away - it's just another subtle manifestation of curve-fitting.

To illustrate my point a little better, the best performing algorithm in back-testing will also have rotten performance in the months immediately preceeding the back-testing period too.

So basically what I'm saying is that this 'simple robust system' is not something that you just find lying around waiting to be used to make yourself a zillionaire - the 'simple robust system' is in fact the very 'Holy Grail' that you eschew.

 

[BSD]

I agree.

Skewing your expectancy favourably - by influencing the only things you can, basically, entries, exits, trading opportunities and position size - in combination with a simple system attuned with how markets move, and aligned to capture very realistic and modest parts of available daily ranges, is INDEED ONE possible Holy Grail for the sort of system described here.

AND it is VERY realistic as well.

After all, I am NOT talking about some phantasy system with an average hit rate of 95%, or an average Risk : Reward ratio of 1: 15 or whatever...

I am talking about a SIMPLE system with a MODEST winning percentage of NO MORE than 50% which is just about as good as a coin toss...

and an EQUALLY MODEST Risk : Reward of NO MORE than 1 : 2...

targeting NO MORE than 10% of the daily range.

ABSOUTELY NOTHING outrageous, outlandish, or unrealistic out of some curve fit vendors pipe dream here T ALL.

This is REALLY just about as feasible as it gets.

It is just as realistic to assume a trend following system that has an even lower hit rate of say 33%, BUT an average risk : reward of 1 : 3, which would also come out very profitable, and allow for great compounding.

This is all realistic stuff.

And also, go visit prop firms or talk with exchange members, 20 - 50% / month - in many cases not compoundable but in others it is up to a degree - is absolutely NOT unheard of there AT ALL.

 

[BSD]

If somebody honestly thought that 50% winners and 1 : 2 risk : rewards reakky pose a great difficulty and are not feasible and actually quite unheard, I'd honestly like to hear what they are doing or consider realistic instead...

30% winners, and with risk of 1%, but rewards of 0.5% !?!

or striving for 90% winners, but with risks of 1%, rewards of 0.1% ?!?

The focus of this study is the habitual speculator in commodity futures markets. Responses to a 73-question survey were collected directly from retail commodity brokers with offices in Alabama. Each questionnaire recorded information on an individual commodity client who had traded for an extended period of time.

The typical trader studied is a married, white male, age 52. This trader does not consider preservation of his commodity capital to be a very high trading priority. As a result, he rarely uses stop loss orders. He wins more frequently than he loses (over 51% of the time) but is an overall net loser in dollar terms. In spite of recurring trading losses, he has never made any substantial change in his basic trading style.
Wiley InterScience :: Session Cookies

I mean a trading style like that WOULD explain why some 95 of market participants are net losers, but that is about all that explains.

 

[brutusdog]

If somebody honestly thought that 50% winners and 1 : 2 risk : rewards reakky pose a great difficulty and are not feasible and actually quite unheard, I'd honestly like to hear what they are doing or consider realistic instead...

30% winners, and with risk of 1%, but rewards of 0.5% !?!

or striving for 90% winners, but with risks of 1%, rewards of 0.1% ?!?

The focus of this study is the habitual speculator in commodity futures markets. Responses to a 73-question survey were collected directly from retail commodity brokers with offices in Alabama. Each questionnaire recorded information on an individual commodity client who had traded for an extended period of time.

The typical trader studied is a married, white male, age 52. This trader does not consider preservation of his commodity capital to be a very high trading priority. As a result, he rarely uses stop loss orders. He wins more frequently than he loses (over 51% of the time) but is an overall net loser in dollar terms. In spite of recurring trading losses, he has never made any substantial change in his basic trading style.
Wiley InterScience :: Session Cookies

I mean a trading style like that WOULD explain why some 95 of market participants are net losers, but that is about all that explains.

losing traders are always looking to get out of a winning trade, whilst winners are looking to add to it.

losing traders are always looking to hold onto a loser so it can come good where as winners cant get out of it fast enough.

this is the perennial problem of getting the r:r right, it might be good r:r on paper and the system but achiving it is different.

when in a trade a trader should stay in it until the profit target is achived or until the trader has a signal to trade in the opposit direction.

good thread bsd

cheers

bd.

 

[foredog]

An example of Markus' point, not the same 2:1 etc but the same idea

Infiniteyield Forex

A (very) experienced trader taking a simple system and trying to compound it over a period of years to a large sum.

If his system does work, think about it.....

put $500 in 10yrs time $150k, start with another $500 every year and think where you'd be, a lot better off than letting the man from the Pru run your pension!

 

[BSD]

Infiniteyield Forex

Thanks for the link Mr. Dog

Will be sure to read that !

 

[davngab]

Nice thread BSD.
I have back tested a strategy trading the es mini over a 7month period. Very simple method to follow, over the last 7 months has a R:R of average about 1:2.
Have been paper trading it for the past month and am doing really well. So far for the month of october I have placed 15 trades and had 4 stop outs. I dont enter with a set profit target so the R:R on each trade can vary. I will get out with one of 3 different possibilities.... My signal gives me an entry going the opposite direction, The "stair stepping" in the current trend reverses or on my DOM I see a bid/ask in the opposite direction of 1000 contracts plus.... This month im up about 80points on the ES... I'll have to see if I can keep it up when I feel im ready to go live...

But definately agree 100% with what your saying... Good R:R and your strike won't have to be great. I guess it comes down to the individual to make sure they can step up to each individual trade and trade it mechanically...

 

[pulimath]

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.

Dear friend
Your theory is good But cannot to be applied in real life

Better suggest some practical solutions for stock trading if u can


with regards

Pulimath

 

[emeklica]

Hii my friends. I am from TURKEY.and best wishes to my friends.

 

[timsk]

Dear friend
Your theory is good But cannot to be applied in real life
Better suggest some practical solutions for stock trading if u can.

Welcome to T2W Pulimath!
Two questions:
1. Why - in your view - can't the theory be applied in real life?
2. Can you suggest some practical suggestions of your own?
Cheers,
Tim.

 

[pulimath]

Welcome to T2W Pulimath!
Two questions:
1. Why - in your view - can't the theory be applied in real life?
2. Can you suggest some practical suggestions of your own?
Cheers,
Tim.

Dear Tim,

Thank u for the posting.

You have anticipated 2 trades per day.
Can we expect all our trades winning ones ?

We have to provide for losing trades also which will eat on the fains we have achieved.

Have you achieved 1000% gain for how many years in the past.

I could not achieve the same. If you have achieved it I appreciate your ability.

If so, I will call your trading system a perfect one. Please share it with the forum members.

With regards

Pulimath

 

[vergis92]

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.

Great theory but just a couple of points


20% a month gives, 1.2^12=8.9=790% not 1000%


the well known and talked about 2/1 reward/risk theory doesn't really compound in
practice, when pricing in profit+losses to be recovered you got to make more than
the average gain from time to time


I agree that you have to let the market give you clues instead than trying to beat it
in a perfect accurate forecast.... a loose approach with flexible mind is best
but that contradicts fix mechanical trading upon which you base your % return expectations,

finally successful traders, even stock index daytraders trade markets not money, they don't have
fixed stop loss , like a fixed $500 loss, rather they pay attention to different levels
and use different risk toleration each time..

 

[pseudo straddle]

Great theory but just a couple of points


20% a month gives, 1.2^12=8.9=790% not 1000%


..

Oh! Bugger! I was just going to post that! Perhaps I should change my ID to Pedantic Pete the Procrastinator!!

 

[forexincome]

I personally feel this could be very very difficult in the present trends. I perceive if there should be probablistic fixed growth in the market, the system can show definetely 85% results. Present unpredictable market ties our hands and legs.

 

[vergis92]

One thing is for sure, all winning traders say that profitability grows exponentially,
if it took one year to turn 20K into 40K then took less than six months to go from 40k to 80k
given same market conditions....

it must be that stress goes down as your account balance gets bigger and can withstand bigger
retracements, stop outs.. stress is a horrible thing

 

[BSD]

Dear Tim,

Thank u for the posting.

You have anticipated 2 trades per day.
Can we expect all our trades winning ones ?

LOL !

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)...

EDIT for further clarification:

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.

Great theory but just a couple of points


20% a month gives, 1.2^12=8.9=790% not 1000%

OMG, you don't say...

finally successful traders, even stock index daytraders trade markets not money, they don't have
fixed stop loss , like a fixed $500 loss, rather they pay attention to different levels
and use different risk toleration each time..

Where did I say anything else ?

I said we are only risking 1% per trade, NOT your example of a fixed sum.

First you look where your trade will be invalidated, distance from your entry to your stop loss then gets translated into a position size that equals 1% of your capital. NO mention ANYWHERE of a fixed sum.

Fixed fractional position sizing, you always risk 1% of your equity, ie you continuously get bigger as your account grows.

It is really pretty irrelevant how you skew your expectancy, fixed targets, trailing stops, or whatever, but if there is a trader here who has never in his life managed to come up with a system that ON AVERAGE ends up with 50% winners, and a Risk / Reward of 1 : 2, then I honestly suggest they have their heads examined while immediately ending their trading career, it ain't going nowhere anyway.

Reading stuff like the above really helps me understand why 95% of traders don't make it.

You could easily even come up with a mechanical system that ON AVERAGE has 50% winners and a risk / reward of 1 : 2.

And for the third time on this thread:

Anyone who calls themselves a trader, yet honestly believes that ON AVERAGE, - lol, did everybody finally grasp that now -, gains of 1% / day are NOT feasible, go get themselves another job, while everybody else can feel free to interview some exchange members or people trading at prop firms. Many there exceed the ON AVERAGE 20% / month as per my example, and have returns of up to 50% on a REGULAR basis there.

Of course the latter is in most cases not compoundable, but still good for several millions / year, and in the few cases where it is compoundable up to certain sums when returns will start diminishing, it is good for creating real fortunes.

Besides, what this thread and the specific example is REALLY on about is showing how simple and conservative expectancy systems are all that is needed for getting rich trading, that a perfectly feasible way to compound yourself to a positive fortune can be achieved with a win rate of around one third of your trades, and risk : rewards of 1 : 3.

ON AVERAGE again, of course.