Once you have your edge/system, here is how to ramp up the account: Say you risk 1% per trade (or whatever), using fix fractional position sizing. As the account grows (hopefully), you risk the greater of 1% per trade or 5% of made profits. Run the numbers. Basically, you start risking more per trade on % basis, but you have already built up the "houses" money. Example: Starting account $100k. Risk is $1000 per trade. You build that to $200k, now 1% risk is $2000 or 5% of $100,000 profits is $5000 per trade. So, you are now risking 2.5% per trade. Obviously your DD will go up and you may want to cap it, but it can build up nicely a with a positive expectency edge/system. Cheers!
Very practical suggestion. Thanks stok for sharing. I am making a note of it. Very useful if applied correctly!
Finding a market inefficiency and grinding out very consistent income week after week, month after month for a couple of years, whilst not blowing it all on booze, drugs, women, fast cars etc (i recommend blowing only 1/3 your net income on those vices).
Question - how do you compound on 50k, after taxes and subsistence level income? Unless you live in a shoebox in a tax haven or 3rd world country, 50k is 35k net. That's 3k a month. I don't know about you but it's kinda hard to live a decent life on 20k or less. So even if the guy makes 100% a year, he is going to compound at 20% maximum. And making 100% a year is pretty damn hard without huge risk or a rare trading edge. Even if you were that good, it's far better to get investor capital or a job at a fund and do it on 500k+, then you can make some real money, while drawing a salary that doesn't consign you to one rung above a burger flipper's salary. Also, how is being single better? If you are married or cohabit, then your rent is halved, and someone else brings in income at basic tax rates. Unless you are dumb enough to shack up with someone who leeches off you and doesn't pay their own way.
dude, you are on the wrong site!!!! this is ELITE TRADER... we use words like "edge" "20% return" "double money" and "rich" as matter-of-fact!!!! on this site, first you say you have an edge (absolute fact) and then build your argument on that... ok, let me try to add value now... first find a stock that is not followed by many firms....do your research (which is likely bad) and then start to take massive positions when the stock looks horrible (hopefully stocks from 10 to 20 dollars).....not under 10. then get about 3,000 shares...... this is what I did....and it worked after a few years. 20ish to 70ish and got out high 50's... if I can do it.....well, then 0.000000000001% of you can do it. haha
Good point. Consider that motivated people have done the following: i) put a man on the moon ii) made $50 billion dollars iii) won a world war iv) beaten a superpower with a rag tag 3rd world peasant army v) numerous amazing inventions vi) got billions of people to believe complete bullshit vii) fucked 1000+ hot women viii) various athletic achievements of legendary proportions ix) abolished slavery x) won equal rights for various oppressed minorities By contrast, making a few million in 5-10 years out of trading should not be as difficult, if equal effort is applied. There is just one problem - who says you get to choose your motivation levels? I'd be interested in your friend's insights on solving lack of motivation.
when I opened my account at ib, it was worth 28k. The first year I figured, if I worked 40/hrs a week I made $8.20/hr bout the only good thing was 60/40 split, no medicare ssi
Of course effort alone does not make one world class. But becoming financially independent does not require world class performance, it just requires top 20% - and most people can find SOME commercially viable field at which they have reasonable aptitude. Reasonable aptitude and huge effort, in the 1st world at least, will normally result in reasonable success. Garachen's point is not that everyone who tries their best will become the next Buffett or Soros, but that almost everyone does *not* do anywhere near their best effort. Thus they fall well short of their full potential. This is totally true. Surely there is a middle ground of say 80% effort, without requiring total life sacrifice and obsession, which should result in most people's goal of a fairly satisfying life with financial prosperity.
Yeah. Compounding 50k in efficient markets is incredibly difficult. if you can make 25% per annum with <20% drawdowns, that is world class hedge fund performance. Why pike on 50k when you can get a finance job, receive 100k+ risk free income while you prove yourself over 1-2 years, then trade 7 figure+ capital and scale quickly to big bucks, and make a fortune? Only pike on small accounts if you are i) in a full-time job ii) have a fat edge that doesn't require lots of capital to trade (e.g. daytrading inefficient markets where you can make 500+ per day with moderate risk) iii) are completely unemployable for some reason, live in a very cheap country, and don't mind big swings and a good chance of blowing up eventually.