In contrast to what you say in your article (see quote below) to what Morty's site says, I am a believer of survival... What I am giving you here is a framework around which to calculate your expectations Guy2 you also said this too: There are many assumptions in these figures. We have not discussed the possibility of having 20 losing trades in a row followed by 20 winning trades in a row. If you used a stop of 2 points per trade and the first 20 trades you placed were all losers then you will have lost 40 points which (based on trading 1 contract) is $2,200 (including commission of $5 per trade) and your account is down to $2,800. This is a devastating way to start but nonetheless is a possibility and a reality that you should plan for and not ignore. Making a spreadsheet Morty's way seems more defensive and the way I am accustomed to thinking about survival and expectations. It must be wonderful to have such an efficient and consistant edge that one could think in a proactive way.
I had a bit of fun with the 5,000 to 100,000 puzzle. Treating it as such - a puzzle. High leverage is a retail phenomenon. Professionals would think 100:1 over-leveraged eg in retail spot Forex (my specialization), 1,000 USD initial margin gives you 100,000 USD to play with. Or, put another way 100,000 to lose. I'd recommend always trading mini accounts. You cannot get away from 100:1 but you can have smaller equity-at-risk. Example: Assuming a 30 point stop, 1 mini lot trade and 10,000 USD equity. The maximum equity at risk is (30x1)/10,000 or 0.3%. If you leveraged the living breath out of it, you could trade 10,000/1,300 or 76 mini lots. Equity at risk is now (30x76)/10,000 or 23%. Trying explaining a 23% drawdown, on one trade, to someone who cares! Heaven forbid, you should have three losing trades in a row. Best wishes Morty www.mortysill.biz
Oh Morty (may I call you Morty?), what you could do with an Oanda account!!!! hint: 1 unit incremental bet sizing available there...
blew out three accounts, 1st one was $5K, other two were $20K and $18K before I stopped gambling, over leveraging, learnt some trade management skills, and made back my losses +$100K. Took me 7 years, as it took me realtively small amount of time to blow out 1st two accounts most of the time wasn't even trading. A smarter person could probably do it in 2-3. In case anyone is intereted apart from experience and watching the markets Elder's and Seprandeo's books were what made the difference for me. Also, I start every year out with $100K and whatever I make at the end of the year I take off thetable and have put in to RE. I have blown up a few times over the years (not for a while) since I started making money but my strategy over the years has served me well. Can't say that I haven't just been lucky though. If I didn't take all earnings off the tabe every profitable year I would probably be broke.
Mvic, Thanks for sharing. Your honesty and time will be appreciated by many who read this archive, and I hope you share more along the way...(Folks isn't it good to read wisdom from good honest traders, without the ego trip?) Happy Thanksgiving, Michael B.
Happy Thanksgiving to you too! Not sure I am deserving of your kind words as I still consider luck to have played a large part in any success that I have enjoyed trading. I can say this appropo this thread, even in my most profitable year of over 2 decades of trading I have NEVER done the % equivalent of $5K to $100K (what is that 2000%?)in one year. My very best year was a shade under 1300% and there have only been two others over 1000%, in over 20 years! Of course you also have to give consideration to the fact that I reset my account each year and trade relatively small size. Also, I should mention that there have also been a couple of years where I ended the year with a $0 balance (which would mean I have lost $150K as after I lose my starting $100K I refund my account with $50K after a month off). Very hard to face the fact that you actually lost money after a year of stress and hard work. Last thing that I will say before I sign off is that I have had a spouse through out that made a very good and reliable monthly income that more than covered all living expenses so i never was trading with money we needed to live on. In retrospect that too is probably one of the things that made a huge difference to my profitability.