It took me awhile to figure out your analogy was about Soccer and not American Football LOL, now it makes a little more sense. I have no problem with sports analogies even if they are a bit of a stretch of the topic at hand, I frequently use them myself.
Back to the point I was making, Nobody is good enough to consistently make 1% per trading day, that is a very unrealistic expectation, and something newbies don’t need to be reading as most of them come into forex with already unreal expectations. I know it was true for myself and only after I got real about my trading abilities did I start turning profits
How would you answer “FXKeys” founder Chris Pottorff, then, who has been trading for 23+ years and claims to have made over 1.5% per trading day, turing $1,000 into $100,000 in 14 months with the help of a few friends, all of them professional traders? (Google the words “A Great Money Management Strategy We Have Been Following For Years” and you will find his story easily.)
Great discussion, the key word in my statement is " consistently" there are many examples of extraordinary returns but it is often because they caught a one time event, I just watch the Movie The Big Short, those guys made a killing shorting the housing market, but it was a one time trade and not one that can be repeated. Look at fame trader Jesses Livermore, he made a lot of money really fast, then lost it all. We talked about hedge funs, they can make a lot of money fast but many of them go bust each year because they take very risky trades. And think about it, if you had a system to turn 1k into 100K why would you only be trading 1K?
The question is, how much time is need to qualify as “consistently”? I think 14 months qualifies.
The reason one might trade only $1,000 and not $100,000 is that one doesn’t [I]have[/I] more than $1,000.
According to Chris Pottorff, one should increase a small amount of money - money one can afford to lose - to a sizeable amount, withdraw most of the profits from it after a reasonable amount of time (every year or two, say), and put those profits in some safer sort of investment like real estate, starting again in forex with a small amount of money. Here’s his money-management advice in his own words:
[QUOTE]
Before, we thought a professional and full time trader had to have a big account like $500,000 (or a million dollar) account at least, and make a 1-5% profit per month ($5,000 to $25,000) to cover the expenses and have a good or probably luxury [standard of] living as a professional trader and investor. However, after having a $1000 account and turning it into $100,000 in 14 months, many of those professional and full time traders who were used to have big accounts, changed their minds and withdrew most of the money they had in their trading accounts and left only a small portion of it. They invested the money they withdrew in some other markets like real estate and traded the small portion of the money that was left in the trading account, to grow it to a reasonable amount of money and withdraw it again.
That was a great money management strategy. The money that was invested in real estate was not at risk anymore. [In forex], Even if you risk only 1-2% of your capital in each position, still your whole trading capital is at risk [because]:
There are some occasions that the stop loss or target orders can not be triggered specially when the position is big.
Or, sometimes you take a huge position by mistake (I know a Japanese trader who did this and lost a lot and then … himself. It was called the “fat finger” mistake after this event, because he was used to have big fat fingers and people said because of the fat fingers he had he pressed two buttons with one finger at the same time and so he took a 10 times greater position).
Sometimes the broker or the bank goes bankrupt and you lose the money.
Sometimes…
So it was a good idea not to put all the eggs in one basket, and invest in some other safer markets like real estate.
The money that was invested in real estate not only was not at risk anymore, but it made a great profit after few years.
The money that was left in the trading account was used to be turned into a reasonable wealth that could be withdrawn without any problems.
One of us who used to have a million dollar trading account, withdrew the money and left only $10,000 in the account. For him, who was used to having a million dollar account and make a reasonable profit every month for several years, $10,000 meant nothing. Trading with a $10,000 account had no risk for him at all. [I]He turns his $10,000 account into a million every 2-3 years[/I], while his other investments are also in profit without any risk. So he makes a reasonable amount of money through trading while there is no risk for him at all, and he is making money through his other safe and secure investments too. He has raised his trading capital to a million dollar [I]a few times so far[/I]. This is what many of our other team members are doing, but just with different amounts of money and account sizes. [I]This is what I have been doing for several years too[/I]. [Italics added by me - Absolutely]
[END QUOTE]
(As I said, Google the words “A Great Money Management Strategy We Have Been Following For Years” and you will find his whole story easily.)
You can become consistent from day one, that is consistent at loosing money and never generating long term growth.
As for being able to make long term gains time and time again, it really depends on how much time you can dedicate to learning, how well you adapt to change and learn from potential mistakes, and also how your logical and perhaps inquisitive mind operates! These are perhaps just a few points of many, and unfortunately they cant be quantified - so it’s impossible to give a answer which can be measured.
From my experiences, it took me four years to become consistently profitable to the current day. However, and as a real life example, I have traded an account which was tied to a certain trading method which was profitable for over three years (with a total number of trades in that period of over 800), in the fourth year it had FOUR losing consecutive periods and basically had to be shut down. Before these losing periods with a three year success rate it would be hard for any user of this system to not admit that they were a constantly profitable trader!
So the market changes, but the theories and practical elements stay the same, always. Therefore being consistently profitable/successful in this game is not about learning how to trade within a set of given boundaries, rather your success is based on how you can react to change. It’s changing conditions that kill black and white traders who learn to much theory and not enough practical experience.
Doesn’t the above example show only that a particular STRATEGY isn’t necessarily consistent? It surely doesn’t prove that a TRADER cannot be consistently profitable, does it?
Nor does it necessarily demonstrate anything about ALL strategies, but only about that ONE strategy which failed in the fourth year. And, at best, SOME others.
Surely in order to become a consistently profitable TRADER, all one needs to do is follow a FEW consistently-profitable strategies?
The Babypips school has this to say about trading strategies, which are called by them “trading systems”:
[QUOTE]
If you do a simple search in Google for “forex trading systems” you’ll find many many many people out there who claim to have the “Holy Grail” system that you can purchase for “only” a few thousand dollars.
These systems supposedly make thousands of pips a week and never lose. They will show you supposed “results” of their perfect systems and it will make your eyeballs turn into dollar signs as you sit there and say to yourself, “Wow I can make all this money if I just give this guy $3,000. Besides, if his system making thousands of pips a week, I’ll be able to make my money back in no time.”
Slowww down cowboy. There are some things you should know before you give them your credit card number and make that impulse buy.
[I]The truth is that many of these systems DO in fact work.[/I] [Emphasis added by me - Absolutely]. The problem is that forex traders lack the discipline to follow the rules that go along with the system.
The second truth (Is there such thing as a second truth?) is that instead of paying thousands of dollars on a system, you can actually spend your time developing your own mechanical trading system for free, and use that money you were going to spend as capital for your forex trading account.
The third truth is that creating mechanical trading systems isn’t that difficult. What is difficult is following the rules that you set when you do develop your system.
[END QUOTE]
But if many of these systems DO in fact work, why not simply take a few of them, and apply them consistently and with discipline?
It may be true that forex traders lack discipline, but then the fault is with their [I]lack of discipline[/I], isn’t it? And who can ever be successful in ANY endeavour without discipline? Can one be a good lawyer or doctor - or even a good car mechanic - without discipline?
So: surely assuming that every trader - or even every newbie trader - lacks discipline is akin to assuming that every lawyer or doctor - or every law student or med student - lacks discipline, isn’t it? And can’t we easily see how stupid such an assumption would be?
Why would anyone want [I]your[/I] money, and share the profits with you, when they can - if they are consistently making 0.5% to 1% per trading day - make their [I]own[/I] money grow a thousand-fold in a matter of a few years, and [I]not[/I] share the profits with anyone?
Indeed. Well said. If you are consistently winning with $10 you can be consistently winning with $10 thousand; if you are consistently losing with $10, then even if you have $10 million you will eventually lose all of it!
Mr. Absolutely,
There are many advantages to trading with someone else’s money. For starters, someone would want my money simply because they don’t have it ! Also trading with someone else money will always have strings attached that if positioned right are favorable to both the persons money and the trader. For example, each trade can be reviewed and ensure that there is forced discipline with the trader. This forced discipline is good for the trader to ensure that each and every trade is properly thought out. As well as the obvious advantage that the traders losses are not his own but the other persons money. All in all, traders only can make money or get fired, while the lenders can either make or lose money.
MoneyNVRSleeps,
Consistent means to me that each and every trade has at least a stop loss as to ascertain a risk amount per trade. With trailing stops you would not need a profit target however with regular stops then a profit target is needed as well. All trades have to be categorized by setup and then I would have to go through your trading records to verify this. For example, I only have 2 setups, so its easy for me. As for consistency with respect to time, more than half of the weeks should be profitable and almost all months should be profitable.
I have always wanted to start a Proprietary trading firm. If i could find the traders with uncorrelated returns I would start one with my broker.
Good stuff man, and good luck. Im not there yet, But pretty dang close.
My goal is to make $333,000,000,001.00
I do have a process now, finally. My scalping is Renko with 10 pip hard stops, 20% margin per trade, I do scale in if I need to, and ALL trades are followed by a Tight trail of 1.5 pips.
My other strat is naked charts pure price action, again, with hard stops of 10 pips, and TP whenever I think I have to. Trying to get away from scalping, but still can have that, " never know whats going to happen:" in the back of the mind, like everyone does, I guess. 50% margin,
I doubt that anybody who has enough resources to trade - a computer, an internet account, a credit card to deposit money with a broker, etc - can’t come up with $1,000. If they have proven themselves in a demo account to be consistently make 0.5% to 1% per trading day, they can turn this $1,000 into a million within a few years.
And I for one would not like to trade with someone else’s money if there are strings attached.
In addition, I would not like the burden of knowing that I have lost someone’s money. I’d feel obliged to reimburse them.
I started with $1300 in a trading account in 2004. Leverege was 400:1 and away I went. after 6 months of trading I had turned that $1300 into $276.00. Sound familiar to anyone? Most ego’s won’t allow them to admit that this is the basic scenario for most new traders. You MUST LEARN several things. First and foremost the realization that trading the forex market is volatile, unforgiving and is NOT A GET RICH QUICK PROCESS!!! You MUST develop/learn a trading style/strategy based on a proven set of criteria. You MUST also follow strict money management so not to overtrade your account. when initiating trades based on criteria you must exercise discipline and patience. one can become a successful trader using all of the aforementioned, but it is a learning process. Greed is another factor. once you have learned to experience some level of success in trading many traders want to “speed up” the process by trading too early or staying too long in a trade. you are going to miss movements…DON"T CHASE A TRADE. Be satisfied when a trade plan executes as you planned, and don’t worry if you missed some of the move. “patience equals profit” and remember you will never go broke by closing trades while in profit. sorry just a rant…Danny
