Getting Started What can I make in my first year trading?

We get questions like this one quite often. We find that most aspiring traders don't have a clue as to what to expect from the market. Yet here they are, putting up their money. Most are going to learn the hard way. We have no idea in the world what you can expect to make in your first year of trading, or any other year, for that matter. What we can tell you is that without proper guidance and help, you are probably going to have some very bitter experiences. Why? Because your anticipations are almost completely wrong.

Futures traders, especially beginning traders, often open an account with unrealistic expectations of trading performance. These expectations could be formed by the sales literature for a trading program that emphasizes its profitability, by reports of success stories by top traders or by some brokers within the industry. In all cases, you are rarely made aware of the many other times when performances were considerably worse. In other words, you are a victim of selection bias.

Most advertisers of courses, systems, books, etc., will mislead you into thinking that you just can't lose if you buy what they are selling. We are talking here about hype, major hype - as much as the authorities will allow them to get away with.

Selection bias is a term well known within the social sciences and occurs whenever some undesired screening factor leads to a misrepresentation of a population sample. For example, traders seldom express their losing trades with as much enthusiasm as their winning trades. Consequently, a random selection of letters or phone calls received by a company that sells a trading program often will overstate the proportion of traders who are doing well. Sometimes the cause of the selection bias is not obvious. For instance, let's say that a trader who purchases a very expensive price and charting package is more profitable than another trader without it. The merits of the package seem obvious. Maybe not. It could be that the individual who can afford to purchase the package is better capitalized than the other trader and this is the reason for the better performance.

Starting off your futures and options trading experience with unrealistic expectations inevitably will lead to frustration and disappointment. It's better to face reality now. It will make life as a trader easier down the road. Here are just a few facts to dispel those unrealistic expectations.

1. More traders lose money than make money. The figures are fuzzy, but it is 80% to 90% (maybe more) who end up losers and leave.
   
2. Within the industry, only a small percentage of retail traders are profitable on a consistent basis. Moreover, if you are just starting out, you should expect to incur some loss strictly due to error on your part as you climb up the learning curve. Increased trading knowledge and experience combined with trading strategies that have superior risk/return characteristics can help put the odds of success in your favor. So, it is important to study the markets and educate yourself before trading or, alternatively, you can rely on the support of your broker professional. Another option you may also want to consider is paper trading. It's a viable option because it's a lot cheaper to make a mistake in a fictitious account than a real one.
   
3. You will have losing trades. In fact, most of your trades will be losing trades. It is impossible to predict price movements every time. Even when the technical and fundamental factors are in agreement, the market often moves in an unexpected way. This can even happen several times in a row. For this reason, it is always important to make sure that loss is limited on every trade and that you have sufficient trading capital to withstand several losing trades without being taken out of the game.
   
4. Don't expect to become financially independent. It's unrealistic to expect a small-sized account, especially one under $5,000, to generate consistent income to replace regular employment. While this may be possible for a very low percentage of traders, it does often require high-risk trading. High-risk trading means that if you are one of the many who lost money, then you probably lost your money very quickly and you may end up owing even more money to the clearing firm. High-risk trading should be avoided, especially by the beginner. Rather, concentrate on low-risk, low-frequency trading and devote appropriate effort to increasing your knowledge and understanding of futures trading.

Keep in mind that, as a beginner the emphasis should be on learning and proceeding slowly. By that, I mean practicing in a paper trading account and confining your trades to those that have low risk. The expectations of huge profit that many beginners start out with may be realized, but only after you invest the requisite time and energy and only after a slow and realistic start.

 

[Roberto]

Roberto, You know as well as I do that "There's none so blind as those who will not see".

Acknowledged and understood, Bob. But WHY is it always this area where people don't want to see?!

These can't _all_ be people who've done a bit of spread-betting and lost their money through over-trading, excessive position-sizing, trading without an edge and all the reasons traders normally lose?! In fact earlier "discussions" on these points have taught me that some of the protagonists actually have precisely NO experience of spread-betting anyway.

It's only "another trading vehicle" after all - it just happens to be the best-regulated and least taxable one. So where does all the prejudice and misunderstanding come from???!

And why does nobody else want to correct some of this misinformation? Every time I post anything on this subject I get a flurry of supportive PM's from the "silent majority" who clearly know better ... but why do they want to be so silent?!

 

[Glenn]

I'm not taking a particular side here, just stating facts; i.e. summarising what the Chairman said.

However if you think that "Logic, experience and statements on these boards and in many other places from SB company staff all disprove it." then I wish you well. Those items don't disprove anything, they just deny it.

"Magazines are full of articles about it. They write about it in the Financial Times, in Shares magazine and in loads of other places - articles by perfectly well informed people with all the right experience and connections, interviews with SB company staff, and so on and so forth."

Lol - Likewise if you believe everything you read in the press.

Like I say I have no axe to grind but I do get the impression that "the lady doth protest too much" in defense of the SB Co's.
As a customer, why should you care what other people think about SB co's; and to the extent that you get angry and hot under the collar ? Curious imho.

Glenn

 

[Col_Stiffler]

I for one have been pleased with the direction this thread has taken - thanks a lot guys!

As someone fairly new to SB trading, I had read a few of the "misinformed" comments on various threads regarding the industry, from time to time - enough to worry me about what I could really expect if I were ever to become successful enough to do it full-time.
As Roberto has suggested above, I did ask Simon at CS a direct question on this subject on another thread, and as usual he gave a direct and seemingly very honest reply. I was happy with that, but after reading the above posts by Roberto and "the Dr", I'm even happier now.

Thanks again for taking the time to explain the situation and for being bothered enough to argue it out. This is what the forums are for, I reckon.

 

[Roberto]

As a customer, why should you care what other people think about SB co's; and to the extent that you get angry and hot under the collar ?

You're not the first to ask me that, so it must be a fair question, I suppose.

I think the main reasons are:-

1. I just don't like seeing so much misinformation;

2. I don't like very opinionated and quite often rude people (NOT meaning you, of course!) with very little factual information being given the same "weight" as polite and well informed people;

3. It genuinely baffles me (as I've just mentioned in a couple of posts here) WHY people are so misinformed about something for which all the "corrective information" is widely available, and every time I wander into these one of these discussions I feel in some sense "determined to get to the bottom of it" but somehow I never do! The "fear of spread-betting" (if that's what it is!) is apparently comparatively widespread and I simply can't understand why, when it's so very well regulated and under-taxed too.

4. I find that "sitting out" the discussion completely, which I sometimes do (as you can see from the other thread that's currently running on this subject) doesn't actually satisfy me any better!

To be honest, it also surprises me a bit that apparently one can't correct obvious misinformation on a fairly public forum without being asked "what one's 'agenda' is"! I don't see that happening to anyone writing about any other subject. Do you?

 

[rossored]

i guess you must be some trade2win nark or something cos anytime someone questions you the post is removed.

I'm not quite sure what the point of this statement is?

Its quite simple to me. If people (that means anyone) report posts that are offensive, and we agree, then we remove them. Cut-and-dried. There's no agenda with Roberto or anyone else to my knowledge.

Please do not make posts like this - they are unneccersary and cause me and the other mods/admins grief when we really have better things to do than go around putting out silly little fires all the time.

 

[Roberto]

Glenn ... here you see, right on cue, the perfect examples of why I'm so baffled by the whole situation of this subject!

Correcting mistaken information, on this subject, _habitally_ produces comments as irrelevant and offensive as all of these:-

you have very little comprehension about what you are doing.

do you know how to make money?

you clearly dont even have the basic building blocks in place.

i guess you must be some trade2win nark or something

it just seems to be full of a couple of egos who know nothing.

self appointed knowitalls

Where does all this stuff come from?! And WHY?!

I rest my case.

 

[Roberto]

As Roberto has suggested above, I did ask Simon at CS a direct question on this subject on another thread, and as usual he gave a direct and seemingly very honest reply. I was happy with that, but after reading the above posts by Roberto and "the Dr", I'm even happier now. Thanks again for taking the time to explain the situation and for being bothered enough to argue it out. This is what the forums are for, I reckon.

Many thanks, Col. Good to know that people are helped by correcting misinformation, anyway. I suppose it ought to be what the forums are for, but sometimes you can't blame people for just not wanting to bother any more. It's a shame, but the opinionated and offensive minority always seem to end up driving other people away.

 

[Glenn]

You're not the first to ask me that, so it must be a fair question, I suppose.

I think the main reasons are:-

1. I just don't like seeing so much misinformation;

2. I don't like very opinionated and quite often rude people (NOT meaning you, of course!) with very little factual information being given the same "weight" as polite and well informed people;

3. It genuinely baffles me (as I've just mentioned in a couple of posts here) WHY people are so misinformed about something for which all the "corrective information" is widely available, and every time I wander into these one of these discussions I feel in some sense "determined to get to the bottom of it" but somehow I never do! The "fear of spread-betting" (if that's what it is!) is apparently comparatively widespread and I simply can't understand why, when it's so very well regulated and under-taxed too.

4. I find that "sitting out" the discussion completely, which I sometimes do (as you can see from the other thread that's currently running on this subject) doesn't actually satisfy me any better!

To be honest, it also surprises me a bit that apparently one can't correct obvious misinformation on a fairly public forum without being asked "what one's 'agenda' is"! I don't see that happening to anyone writing about any other subject. Do you?

The difficulty you face is twofold.
Firstly there will be people who have had bad experiences of Spreadbetting who will not agree with all you say; and the parallels with the bucket shops of Livermore's day are there to be drawn.
Secondly you have to accept that you are just another person posting here, no matter how verbose or assertive, and there is no more reason to believe you (or me) than anyone else, unless you provide incontravertible proof.

What you describe as" obvious misinformation" is just a statement you make, not a fact.

Glenn

 

[barjon]

No spread-bet firm needs to hedge _all_ the positions taken with them, because if they can balance their spread flexibly enough, they can try to engineer a situation in which half of the positions on a product hedge the other half, so that they carry no net exposure on that product.

On that particularl product, they then "make their living" from the spread, which is of course paid by winners and losers alike.

In practice, it will rarely if ever work out exactly like that, of course!

To the extent to which they _can't_ do that, they must then decide whether to hedge their "net position".

!

roberto

mmm, as you point out its not as easy as that. Unlike a normal bookmaker SB companies have limited ability to balance their book by adjusting their prices to attract/dissuade buyers or sellers. Thus, although they have the advantage of the spread over normal bookmakers it is not easy to engineer a balance so as to "make a living" from it.

When it comes to successful clients and hedging you might ponder on why horse racing bookmakers close the accounts of consistent winners when they could just lay off (and over-lay) their bets. It's a question of risk since, particularly in a fast moving market, it's no certainty that they could get the price they have given the punter. They can lessen that risk by limiting bet size, or offering restricted odds, or some combination but, ultimately, the no risk option is to close the account. And they do.

That said I have no beef with SB companies. Idon't use them all that much but it all works very smoothly and without disadvantage when I do.

good trading

jon

 

[Tuffty]

Roberto,
Excluding the costs of trading arguement I think some people will always have a problem with spreadbetting based on the business model they run. This is because the spread bet co may hold the other side of the bet. My guess is that these people may have a personality where they find it difficult to trust others. If one didtn't trust the spread better you wouldn't be able to place a bet with them as you would assume they'd mess you around. I may be wrong but it may help in understanding the response of some people to spreadbetting. If effect they're saying, look out don't trust anyone - if you give someone a tenner they'll run off with it. They are saying what they are saying with postive intentions from their perspectives.

 

[Col_Stiffler]

Perhaps the way forward here is for those, like me, who had their doubts for whatever reasons about SB companies and their practices, to take the issue up publicly (i.e. on these discussion boards) with someone like Simon from Capital Spreads - who appears to be happy to discuss anything with Trade2Win members.

Like most things, it's always going to come down to personal experiences and opinions, that's true, but for those with negative things to say about SB trading, why not actually take up your gripes directly, so that we all might benefit from the process? More constructive, surely?

 

[Roberto]

the parallels with the bucket shops of Livermore's day are there to be drawn.

It's the "retail Forex brokers" who have inherited that mantle, I think! The bucket shops of Livermore's were _unregulated_. Spread-betting is more tightly regulated than most forms of trading, thanks to the FSA, which actually inspects every trade made by every client. You can't get much better protection than that!

there is no more reason to believe you (or me) than anyone else, unless you provide incontravertible proof.

That's not fair, Glenn: _unlike_ other people posting here, I have actually quoted sources and provided references for verifying what I say!

 

[Roberto]

I think some people will always have a problem with spreadbetting based on the business model they run. This is because the spread bet co may hold the other side of the bet.

Yes, I take your point, Tuffty. This makes sense.

The irony is that in reality the broker is actually far more likely to hold the other side of the position in the case of, for instance, a retail forex brokerage (largely unregulated) than with an SB firm, where the other side of the position will actually far more often be held by another client or hedged. But some people think the opposite, I know, and it seems to be a criminal offence to say anything about it.

 

[Tuffty]

Roberto,
You said 'The FSA actually inspects every trade made by every client?

Want to take out a spread bet with me on that one? It's a binary and I'll quote you 70-72. (Closes at 100 if they do).

 

[Glenn]

"Spread-betting is more tightly regulated than most forms of trading"
Yes, makes you wonder why really doesn't it.
Lol.

"the FSA, which actually inspects every trade made by every client."
I think you'll find that all they can inspect is the transaction log of the SB company, not the intention or experience of the client in attempting a transaction.
I worked in IT systems development for over 30 years and I know how easy it is to 'prove' something which is totally at odds with the customers experience.

"I have actually quoted sources and provided references for verifying what I say!"
Are you seriously suggesting that this means incontravertible proof ? Come on

I feel as if my comments here make it look like I am anti-SB co. This is not the case. I sit on the fence.
I am merely pointing out that your arguments are not at all strong because they are all based on hearsay and would not stand up in court.
Glenn

 

[Daniel]

Discussions of how spreadbetting companies operate always seems to get a bit heated.

As an earlier poster mentioned it would be great if we could get an article or two in the K Lab detailing what traders' personal experiences are with SB firms and whether and how people trade profitably with them. We'd then have some points of reference that 'newbies' could consider rather than the same arguments flaring up again and again. Wouldn't have to be too long and should avoid speculation about what the SB companies' motives/business models are (unless the author has first hand knowledge of this). Any volunteers? - (articles can be published under nicks if you prefer).

 

[Roberto]

"I have actually quoted sources and provided references for verifying what I say!" Are you seriously suggesting that this means incontravertible proof ? Come on

Well, I will respond to your question, Glenn, because some experience of discussing this subject at t2w has taught me that if I don't, I just get accused of "running away".

Strange situation, really: people feel free to question your motives, to insult you, to accuse you of all sorts of things, and if you choose not to answer them, then they have another go at you for "running away"!

They can say what they like, anyway. I have a living to make here, a mortgage to pay and a family to support, and arguing on an internet forum does not pay the bills, so this will be my last post in this thread.

So ... to answer your question: the answer is no: of course I'm not suggesting that this means incontrovertible proof. I never said that at all.

What I did say, and I'm still saying it now, is that among the people discussing on this thread, I am the only one who has at least quoted some sources and provided some references for people to be able to verify for _themselves_ what I've said. (And incidentally some people have done so and had the grace to acknowledge it.)

Given that that is so, it strikes me as a bit rich that people should also have a go at me, of all people, for not being able to prove what I'm saying. I'm the only one here who's offered any evidence at all, for God's sake! And I never said it was "incontrovertible proof". Those were your words, not mine.

 

[danfreek]

1lot, I have nothing against you, but your loss resulting from a post you made is your own responsability. If you are unable to manage your time efficiently then please don't blame others for it.

"i bet half of you dont even trade anyway - too busy pretending you do."

Comments like this have no place on a board that is intended for learning how to trade. this thread is called "what can I make in my first year trading?" That title doesn't call for random insults.

Once again, I have nothing against you, as far as I know you could run rings around me in your trading, and I do not pretend to be any better and I do not want to start an arguement. But please stop the blatant flaming.

 

[rossored]

To clarify:

Posts will not be removed if they contain so-called "inaccurate" information. We don't have time to do that.

Posts will be removed if they violate the Site Guidelines - advertising, name calling, etc. Believe it or not, It is actually possible to disagree with others without resorting to this sort of thing.

 

[Glenn]

Well, I will respond to your question, Glenn, because some experience of discussing this subject at t2w has taught me that if I don't, I just get accused of "running away".

Strange situation, really: people feel free to question your motives, to insult you, to accuse you of all sorts of things, and if you choose not to answer them, then they have another go at you for "running away"!

They can say what they like, anyway. I have a living to make here, a mortgage to pay and a family to support, and arguing on an internet forum does not pay the bills, so this will be my last post in this thread.

So ... to answer your question: the answer is no: of course I'm not suggesting that this means incontrovertible proof. I never said that at all.

What I did say, and I'm still saying it now, is that among the people discussing on this thread, I am the only one who has at least quoted some sources and provided some references for people to be able to verify for _themselves_ what I've said. (And incidentally some people have done so and had the grace to acknowledge it.)

Given that that is so, it strikes me as a bit rich that people should also have a go at me, of all people, for not being able to prove what I'm saying. I'm the only one here who's offered any evidence at all, for God's sake! And I never said it was "incontrovertible proof". Those were your words, not mine.

"I'm the only one here who's offered any evidence at all"

You have only offered hearsay, not evidence.
There is a big difference.
I'm not having a go at you, but it seems that you wish to persist in thinking that hearsay is proof, and that therefore it is true. And then you trust that others will take the same view.

"I am the only one who has at least quoted some sources and provided some references".
That does not prove anything except that perhaps you have been influenced by the sources you quote to the extent that you believe them.

I think you have stated your view and can leave it at that without being accused of running away.

No more from me on this - feel free to have the last word.
Glenn