I saw the thread on what $1000 compounded can turn into with just 1% gains every day. Has anyone used this form of money management and is it even possible.
when you say compounded over what period you mean - quarterly, semi-annually…daily…
if you gain 1% daily over 22 working days gives you more or less 22% monthly (which in my experience with that amount of capital I gain with auto-trading forex on zulutrade).
I was referring to annually. I saw how $1000 can then into six or seven figures in three or four years. No withdrawals, and 1% daily gains.
From what little i know at the moment, it’s more or less impossible to find any trader than can last for 3 or 4 years without a single day of a losing trade…
1% ROI could be possible a day, and im sure there are traders who make that and then some, but it all depends on your risk per trade… But again, you won’t find someone who can do it consistently without some drawdowns… Its part of the business…
Sanj
Indeed, I’d echo that. I am consistently profitable, but I do have losing trades so that means that I do have losing days. I also don’t scalp, so am not a particularly high-frequency trader, so there are days when I don’t place any trades at all. But over the course of a month I am profitable, over 10% a month, sometimes a lot more.
I would strongly urge you not to get hung up on a daily return; as long as the month is profitable (or even the quarter - the market does occasionally give particularly tough months) then the overall money will come.
ST
here here !!! very well stated!! scalping is a bad thing to do, unless you are very very good to do so. monthly returns is a better management. but I really doubt in forex trading you can reach this figure you are asking (get 1 mil from 1000 bucks investment ) sounds quite difficult unless you manage to follow some good signals and constantly change the risk and lots attributed.check zulutrade there are some good systems there - some are scalpers, others day-traders - full range as to make a good combined portfolio 
Thank you! Although you threw me by adding a little to my quote at the end… I know nothing about leverage!
ST
Thanks. I’ve read the threads on the possibility and wanted to know if anyone is actually doing it. I’m new to this and was trying to get some ideas for short/ medium/ and long term goals. Trying to understand what is a reasonable expectation. I appreciate the help.
Successful trading is like a business and there is a reason why business reports come out in a quarter and not daily!
Good point
Yep, there is a reason; two reasons even, but none is performance-related:
- Preparing a complete and comprehensive business report takes a considerable amount of time and effort.
- Therefore, it costs a considerable amount of money; daily or weekly reports (effected by a company’s CO Dept.) are prepared intra-company only.
Being a fellow SAP Consultant you know what I’m talking about, and why this is so.
Reporting is tedious business.
O.
Yep. My point was however it makes no sense to come up with and read daily reports even if it is easy. A day is nothing in any business. Even a quarter is not much. If you or I would look to buy a business or to buy shares of a stock, would we look at just one business report or many of those in a row?
The more the better, of course (or the longer, in this case), since business reports are, in effect, just statistics.
And those become more accurate with increasing amounts of input data.
O.
Yep. It’s a little like with charts. If you have a weekly chart it says more than a minute chart about the market. 
Anyone who really wants to understand the arguments about quarterly reports etc should check out Naseem Talebs remarkable book “Fooled By Randomness”.
In the book he argues that time scale is important in judging performance, and he uses a simple Monte Carlo simulation to illustrate this. The following passage is taken pretty much word for word from the book.
"Lets take the example of a happily retired dentist, living in a pleasant sunny town. We know a priori that he is an excellent investor, and that he will be expected to earn a return of 15% on excess of treasury bills, with a 10% error rate per annum.
That means that out of 100 sample paths (from the simulation), we expect 68 of them to fall within a band of plus and minus 10% around the 15% excess returns i,e. between 5% and 25% (this is based on the fact that in a simple binomial distribution 68% of all observations fall within +/- 1 standard deviation of the mean)
It also means that 95 sample paths (from the simulation) would fall between -5% and 35%
The dentist builds for himself a nice trading desk in his attic, aiming to spend every business day there watching the market, whilst sipping decaffeinated cappuccino. He as an adventurous temperament so he finds this activity more attractive than drilling the teeth of reluctant little old park avenue ladies.
He subscribes to a web based service that supplies him with continuous prices, now to be obtained for a fraction of that he pays for his coffee. He puts his inventory of securities in his spreadsheet and can thus monitor the value of his speculative portfolio.
A 15% return, with a 10% volatility (or uncertainty) per annum translates into a 93% probability of making money in any given year. But at a narrow time scale this translates into a mere 50.02% probability of making money over any given second.
Over very small time increments, the the observation will reveal close to nothing. Yet the dentists heart will not tell him that. Being emotional, he feels a pang with every loss as it shows in red on his screen. He feels some pleasure when the performance is positive, but not in equivalent amount as the pain experienced when the performance is negative [Talab covers this point in considerably more detail later in the book]
At the end of every day, the dentist will be emotionally drained. A minute by minute examination of his performance means that each day (assuming 8 hours per day) he will have 241 pleasurable minutes, against 239 un-pleasurable ones, and this amounts to 60,688 and 60,271 respectively per year.
The table below shows the probability of making a profit over a given period of time:
Period Probability
1 Year 93%
1Quater 77%
1 Month 67%
1 Day 54%
1 Hour 51.3%
1 Minute 50.17%
1 Second 50.02%
Consider the situation where the dentist examines his portfolio only upon receiving his monthly account from the brokerage house. As 67% of his months will be positive, he only incurs four pangs of pain per annum and eight uplifting experiences. This is the same dentist following the same strategy. Now consider the dentist looking at his performance only every year. Over the next 20 years that he is expected to live, he will experience 19 pleasant surprises, for every unpleasant one.
The scaling property of randomness is generally misunderstood even by professionals. I have seen PhD’s argue over a performance observed in a narrow time-scale (meaningless by any standard)
- Over a short time increment one observes the variability of the portfolio , not the returns, In other words, one sees the variance, little else. I always remind myself that what one observes is at best a combination of variance, and returns, not just returns
2)Our emotions are not designed to understand the point. The dentist did better when he dealt with monthly statements rather than more frequent ones. Perhaps it would be even better for him if he limited himself to yearly statements
- when I see an investor monitoring his portfolio with live prices on his cellular telephone or his palm pilot, I smile and smile.
Finally I reckon that I am not immune to such an emotional defect, but I deal with it by having no access to information, except on rare circumstances. Again I prefer to read poetry. If an event is important enough it will find its way to my ears."
The key point he’s trying to make is that the distribution in returns is random, and measuring returns over a period as short as a day is meaningless. The idea of earning a consistant 1% a day is an unrealistic expectation that you need to deal with, daily gains and losses are just varience, and not something to get fixated on.
Quite interesting insights by Mr Taleb; maybe his book is worth the while.
lol, although maybe a retired dentist isn’t the best example for somebody who has turned to trading at an advanced age … doctors are known to be notoriously inept at managing money.
I think a good frequency to monitor account performance is the interval in which one withdraws from one’s account: if you plan to withdraw once a month, because you cover your monthly expenses with your trading profits, set yourself a monthly goal, e.g. 10% or 15%; if you withdraw at the end of every quarter, use this interval to determine your goals, and so on.
Cheers,
O.
Yeah, its a bit of a recurring joke that runs through the book
The figures are probably not particularly realistic for day traders, but its an interesting intellectual exercise to work backwards from a realistic annual return and drawdown figure, and to see how those translate into the sort of varience you’d see on a typical day by day basis.
The answer is probably a million mile from what people expect
Yeah … 12% monthly gain (which sounds pretty nice) translates to approx. 0.5% per day (if you compound at least for the month) … which doesn’t sound very impressive.
This is where Excel comes in really handy, to realize what the figures actually mean … and to stare in amazement at the sheer power of compounding.
O.
as a day trader or long-term trader ?! i guess get 1% daily average in short term without good investment can’t be rational, but in the long-term is.
1% per day is good.