Why trade?

[CityTrader]

I agree to think of it in terms of capital employed i.e. in the above example the capital employed is £100 ( all be it only £10 is mine) but the RISK is on £100 - thus if you make £10 it's surely a 10% return not 100%

Colinrichie - the broker doesn't ask for the full £100 as they make more money by lending you capital at base plus 2 or 3 % than they do from executing your trade. I have heard of CFD commissions being offered as low as 8 BP ( 0.08%) ROUND TRIP to sub prime institutions ( 4 guys I know working from a local office as a limited company)

W

 

[options]

Does it really matter?
Who cares if people see it as 10% or 100% returned.
What matters is the final balance, be it end of trade, eod, eoy or end of life. Anything else is just saying 'look at me aren't I clever'

As an aside CT, why did you get into trading. I know you have said it's the only thing you know. But why? Safe job in the city perhaps or the lure of decent money?

 

[ColinRiche]

margin rates are based on the probability of the instrument crashing to zero

if you were to trade currencies at a gearing of 100-1 and you turned £1 into £2, contract size being £100 again

would you say that was a 100% profit or a 1% profit

it maybe a contract size of £100 but your risk would never be £100
unless it was iraqi denar of course

so it would be 100% profit

you need to know your risk reward levels

 

[CityTrader]

Options, why did I get into it? back when I was 19, it seemed an awful lot more exciting than going off to Central London Polytechnic to do a foundation course in Accountancy. never sure it would ever be considered a safe job. Still I did work in New York for 2 years, and the money was always pretty good. So, all in all, I guess I made the right decision..

 

[mma]

bank traders are rubbish , it's a proven point . would you like me to prove it ? ( rubbing my hands with anticipation)

huhuhuhuuhuhuh.

 

[options]

CT. Right choice I think, though accountancy can be exciting, just ask the chaps at Enron.

The safe jobs bit comes from my background in the East end of London. If you had a job in the city. People thought; bank; job for life. Didn't matter what you did.

2 years in New York? Nice experience, and one to cherish.
All "Sliding doors" as I see it.
My wife who works for a bank as a manager was offered a chance for a 6 month swop to NY a while back. She wasn't sure, too long etc and turned it down; a 21 year old lad who we both knew went out while they sorted out another manager to go.
He Hasn't been heard of since.
yeah, that's right. Two weeks before 9/11.
Sliding doors. Grace of God stuff.

When I was a young lad you either went into an office or did manual work, as a bloke, office work was not an option.

So. a lot of years wasted. But good life experience.


Come on then mma, expand on your slanderous accusation that bank traders are cr*p, and prove it. That statement infers that all bank traders...and that's an awful different lot, don't make the bank any money

 

[CityTrader]

bank traders are cr*p , it's a proven point . .

proven? where? by whom? are you the same guy who a few months ago got into the same conspiracy style theory then- that bank traders are only good at internal politics? I'm certainly not going to get into a pi**ing contest with you - and I'm feel no need to shout about my trading performance since becoming independent, BUT I really, really do want to see your "proof"

 

[stevet]

most people keen to trade, but from outside the "industry", tend to misinterpret the term trader as used within the "industry" - since it is a generic term used to cover a whole lot of stuff

and very very few "traders" in the industry are employed to take outright positions - most are performing some sort of arbitrage, hedging, or market making function, or are used to get multiple orders into the market effciently

hence when markets quieten down and these people get laid off -they dont trade for themselves - since they dont have that skill base, and more importantly, they have seen how markets operate and know enough to know that trading successfully as a private is real difficult, and pretty much guaranteed to seriously deplete your bank account

there is an irony that private traders, think trading is about taking outright positions, which most professionals in the industry, would never even attempt, let alone rely on as a source of income

as an individual, you really got to know what, how and when to trade, because there is no salary at the end of the month, so you need to get enough size on each and every day, and make money each and every day to give you a return to support your lifestyle - and the skill set is way different to what you would normally learn working for a large financial institution

 

[CityTrader]

Excellent post steveT - don't disagree with any of it. The only other point I would make, is that the markets are becoming more fragmented - with the likes of Kyte, First New York, Maddoff, etc, etc, more and more traders from The City, are now either working from home using the likes of GNI Touch or IG's L2 or cutting a profit sharing deal with a firm like Maddoff. It's a trend that must becoming increasingly worrying for Risk managers within the City.

 

[mma]

30 + market wizards , all independents only 1 from a bank .

LTCM ( ex merril ) , barings , yamaichi , peter young ( m.grenfell ) have all gone belly up .

hardly good PR for bank traders is it ?

as you well know this is a repeat conversation , you know which thread it is , why play games , look it up yourself.


*and very very few "traders" in the industry are employed to take outright positions - most are performing some sort of arbitrage, hedging, or market making function, or are used to get multiple orders into the market effciently*


correct , and that's why 99% of the best traders are private and non bank . also the banks deliberately use this term to confuse the public into thinking they actually trade for a living .

such is the incredible vanity of the (w?) banking community .

I have no respect for them . I take myself against any bank employed trader any day .

 

[ford]

Wow.. why trade? let's see..

First and foremost the thing that attracted me was the potential returns, theres no denying that.

The ability to work from home, infact, to work literally anywhere, with little in the way of overheads and me as the boss.

You can't come any closer to being in the 'perfect business'. Highly liquid, capable of being done from anywhere, talk about the amount of flexibility it gives you!

But now that I'm into it, I feel like I'm addicted to it. I find it stimulating and rewarding and find that there is always something to learn and something to explore.

I feel that as long as I'm always on the ball, and that the government doesnt somehow impede the ability to trade, that it is a pretty secure job that is effectively recession proof. Modern markets are always moving, they've been around for hundreds of years and it appears that human psychology is unlikely to change in the near future, meaning you will always be able to make money from the markets.

So there you go..

 

[grubs50]

I have always wanted to do it and now that i have started doing it, i find the challenge exciting, win or lose!!

 

[mma]

* Interesting that investors talk of % returns.It's really a false guide to success imo.For eg.its far easier to make 20k from a 10k stake than it is to make 200k from a 100k stake even though its the same % return. *

oh yeah right and you have made 20k from 10k ?
obviously it is easier than making 200k from 100k , but it is still a damn good ROI .

how many SB punters trade with even 10k risk cap ?? very few .

so all other discussion is rather irrelevant.

 

[Homeschoolma]

Keeping track of my %returns is important to me because, as I continually adjust my strategy, I compare my returns to see if my new method is better or worse over the course of the year. I can't tell with just a few trades, plus I depend on my profits for financing my homeschooling and supplementing our family income. I'd like to have some idea of how much I can expect to make each year.

 

[mully]

My rational for looking after my financies is quite simple. I watched my pension pot being destroyed by the "professionals" who happened to be colleagues. Having worked in the city for 23 years, I decided I could do no worse. So I am putting my thoughts into practise. I am not overly bullish about long only investing after 25 years of bullish equity markets and the thought of my pension pot being hostage to another 6 odd years, at least, to modest returns demanded action.

 

[CityTrader]

.But I do not keep track of my %age return- only my absolute return. The only benchmark is comparing my performance against my basic take home pay as an employee. I only think of my P&L as units of monthly take home i.e. " I'm up the (say) equivalent of 10 months take home"

 

[nobrainer]

mma.........., yes it is pretty easy to turn 10k into 20k by daytrading the right instruments and yes , it is far harder to turn 100k into 200k.On different trading accounts starting with 10k I've easily turned them into 20k within months.The problem with that is that the companies who have obliged me soon turn the screw to stop you from trading.
Having played this game for a while I now am pretty exclusively involved in direct access where I'm harming no one and past the point where turning 10k into 20k is enough to hit the targets I set myself.
As someone remarked, its absolute return what really counts not % return and that was the point I was trying to make.

 

[stevet]

nobrainer

"The problem with that is that the companies who have obliged me soon turn the screw to stop you from trading."

can't figure out what this means???

 

[mma]

* Well I certainly trade with significantly more than 10k *

how much more ? isn't it fact that on an ROI basis you would be doing poo poo , that is why you just look at * absolute returns * , which I would say only counts if you are trading at least 1/2 million quid capital . AR would not apply to all else.


stevet :


I second your motion.


what the hell is this guy doing anyway ?? from the looks of it , he's a broker more than a trader .

20k from 10k is still a very good ( not excellent ) ROI , and not to be scoffed at.

 

[CityTrader]

mma "how much more"???? to be perfectly honest, it's none of your ****ing business. I have stated I do not want to get into a ****ing contest with anyone, that's not what this board is about. (Obviously) we all trade as private individuals, there's no hedge fund style ranking of our returns, nor I suspect do any of us other than a small minority want that. If, however you want to start a "here's my figures " posting, I'll look forward to reading it.