You mean you made $1,000 on your $5,000 investment in 10 weeks? Well, then, any fool can clearly see that you're well on your way to making $5 billion. Only a moron would question your method or destiny at this late stage of the game. Go with God. And tell Him I said hi.
Hmm.. let's say you put $5k in a stock and in a year you lose half. The next one you lose half again. The next one doubles. The next one doubles. Yaaaaa in 4 years you went no where. Since you will never pick 25 in a row, this strategy will pretty much go nowhere...
Compounding is straight forward. The assumption is that you are fully deployed. In other words, if the sum of capital your using is 5K, this is your reference point for gains. So week 1 when you invest, you deploy the full 5K. When you close out the position for your gain (~2%), you reinvest the full 5.1K into the next trade as opposed to the 5K you initially assumed. This is compounding... 5K start, 5.1K end of week1 5.2k start, 5.202K end of week2 5.202K start, 5.306K end of week3 +6.1% gain as opposed to uncompounded 5K start, 5.1K end of week1 5K start, 5.1K end of week2 5K start, 5.1K end of week3 +6.0% gain The difference in the growth becomes more drastic the furthur you walk forward in time. There is alot of NOISE in ET (actually, the majority is noise). Much of it is ignorable...
It's worth 5K for me to find out how far this can go. See you in the Forbes 400. (now I'm dreaming) Thunderdog, you're not questioning, you're attacking. You're not adding to what you're tearing down. You only want to tear down. Sorry the markets disappoint you. I'll be on my way with my "delusions"
When you present yourself as a moron, you will be treated as one. It's really quite equitable. P.S. Compounding during the course of the year would not really work for your wondrous method because you only do one trade a year and hold on to it for that duration. At best, it may apply to any dividends you generate during the course of the year, but the effect will be relatively inconsequential in relation to your proposed scenario. There. I "added."
makosqu, I posted this thread in hopes of attracting like-minded traders (or academics) such as yourself. Taking the risk (what isn't these days) I'd probably attract more flies than honeybees. Nothing I wasn't prepared for. Besides, I'm itchin' for a fight. Getting back to your premise, 1% weekly compounded sounds good but you're forgetting trading costs. Each trade is independent of one another so each time you open a new position, you're taking on a new risk. It's a lot easier to find one good company, then many so so ones. Of course, if we get hit with a decade long recession, this could blow up in my face. I'd like to forget my position for the 12 months but the impulse to track it is too tempting.
I defer to your obvious intellectual superiority, Thunderdog. You sure put me in my place. Make any money in the markets lately? You conveniently fail to mention your positions or lack thereof