It's no secret how winning traders win and take the profits from everyone else. They have an edge and they exploit that edge day in and day out. It's a number game. If you buy a can of beans for 30 cents and sell it for 40 cents you make a 10 cent profit. Do that 10,000,000 times and you've made $1,000,000. Trading is the same. If you make (on average) $50 for each trade you place then you execute 20,000 trades and you've made $1,000,000. Simple isn't it? I've written an article called The Edge which explores how long it would take you to start with a $5,000 account and turn it into a $100,000 account trading the ES contract. I'm not sure if I've posted this in the right forum (should it be in Career Trader?) but I'm sure that a moderator will move it if appropriate. Comments and criticism welcome.
How long or how many or how often? I work for a guy who trades the euro, and has even adjusted his trading hours to take advantage of the price movement that has occurred of late in the 'middle' of the night. He averages around 10 3 contract trades a day, and has been gaining around 275 ticks on those trades, or $3400. Since these day trades can be done in a $5000 account, the answer to you question is under 30 days. Meaningless answer isn't it, but how many traders would lose their $5000 in 10-15 days, and what if your market loses its trading range? So I understand the arithmetic in your article, but it seems to assume many things in terms of being able to assign any profit goal and then automatically go achieve it, which is just not going to happen for the majority, is it?
Assigning any profit goal would not work. You need to sit down and calculate what your edge is and how many times a day/week that edge is available and plug in the numbers. The best place to get these figures are from your past trading records and if you've kept good records you'll have a strategy name with each trade that you did. If you don't have trading records then you need to take the results of your back tested system and purchased system and plug in those numbers.
Hi, The downside stops you doing this quickly. It is possible to leverage to the hilt (400:1) and make this profit in short order but....... take a few losing trades and you get taken out big time. I am an independent FX trader. I have a non-commercial website that deals with this issue (amongst other things). Go to www.mortysill.biz and follow the 'Money management' link. Because I know most retail FX traders think about how quickly they can double (usually) their money - I have set-up a challenge: follow 'Hall of Fame' link on the web site. Regards Morty mortysill.blogspot.com
The answer to your question is pretty simple: y = 3 / (ln g), where 'g' is how many times you can increase your capital per year For example, if you are extremely good and risk tolerant and get a very nice maket so that you could double your capital every year, then y = 3 / (ln 2) ~ 4.3 [years] - you need a little over four years to make $100,000 from $5,000. If you are 25, you could buy that Porsche (from your article) before you turn 30... but I would personally wait for another year to double the $100,000 and buy a nice Ferrari 430 The new Ferrari F430
yourself to the ES contract. There are other contracts to use and the best plan would be to use whatever is giving the best opportunity. Possibly start the day watching the ES, but be setup to see other contracts, NQ, ER2, bonds, Euro(I need to start watching this as Sundance shows), etc, to take advantage of which is moving.
I have an answer using a Forex example and compounding. For this to work, the initial trade must generate a profit approximately equal to the initial margin plus stop size. For the Euro, this would be 1,000 plus 300 = 1,300 initial margin. Therefore the first trade would be three standard lots (5,000/1,300). Taking 20 points per trade (which is very achievable) and two trades a day, the first day generates 1,200. 5,000 plus 1200 = 6,200. Which allows 4 standard lots the following trading day. Keep doing this and you get the following table: Day Start Lot size Finish 1 5000 3 1200 2 6200 4 1600 3 7800 6 2400 4 10200 7 2800 5 13000 10 4000 6 17000 13 5200 7 22200 17 6800 8 29000 22 8800 9 37800 29 11600 10 49400 38 15200 11 64600 49 19600 12 84200 64 25600 13 109800 84 33600 14 143400 110 44000 15 187400 144 57600 16 245000 188 75200 17 320200 246 98400 18 418600 322 128800 19 547400 421 168400 20 715800 550 220000 21 935800 719 287600 22 1223400 941 376400 23 1599800 1230 492000 24 2091800 1609 643600 25 2735400 2104 841600 26 3577000 2751 1100400 Sorry about the alignment, I think it's still readable. Forget 100,000! You could get to the big 1M in 26 trading days. What's your appetite for trading in 275 million dollars! Remember no losses in 26 straight trading days. Best wishes Morty
The rule here is to know how many consecutive trading losses you are likely to incur with your strategy. Then, you make sure the total loss from these consecutive losing trades does not exceed 10% of equity.