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How do professional traders think?

Discussion in 'Trading' started by Tropo, 26th Oct, 2016.

  1. Tropo

    Tropo Well-Known Member

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  2. Aaron Sice

    Aaron Sice Member

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    I think it's a bit simpler than that.

    I try to view my trades in percent instead of dollars.

    I also don't trade more or less than 20% of any available capital on any one trade.

    That way, I'm not exposed to too much risk but is substantial enough to avoid trading for trading system sake at a nil-profit exercise after comms, spreads, interest, etc.

    I mean, if you could make 10% on a trade, why only put $1000 on it if you have a portfolio balance of $100k? It's a waste of effort and resource.

    If you will put $1 on it, then you should put 20% on it.

    Wins are in percent. Losses are in percent. Capital allocated is percent.

    Divorce your mindset from dollars and all its associations.
     
  3. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    I recall sitting around at an investor meetup with a bunch of (amateur) traders comparing the size of their ... "returns" (expressed in percentages of course). When pressed about their massive percentage gains they admitted they only had a few thousand dollars exposed to that trade and their total trading capital was in the order of $20K or so.

    That's fine - you have to start somewhere, but don't boast about huge percentage returns until you can do it over and over again and have at least a six figure exposure to the markets - then I'll be very interested in learning how you manage your risk.

    If you can afford to absorb your loss using your salary income - you're not seriously investing and your risk profile is completely different to having enough exposure to cause some serious issues if you don't actually have a risk management strategy in place.
     
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  4. Billv

    Billv Getting there

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    Aaron
    big % gains in general means that we are taking big risks.
    I'm happy with 5-10% gain per month, it can double the account in approx. 12 months.
     
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  5. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    Hi Bill - great to see you back posting again!

    Have you been able to consistently generate returns of 5-10% per month from your trading over a long period? I'm assuming there would be a bit of fluctuation in returns month-to-month? Many negative months?

    I'm very interested in your risk management strategies.

    (I don't trade - but it's something that has always fascinated me)
     
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  6. Tropo

    Tropo Well-Known Member

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    I'm happy with 5-10% gain per month, it can double the account in approx. 12 months.[/QUOTE]

    Nice dream !

    Real return ..... Assume that in Year One of your trading career you make a 100% gain and in Year Two make a 50% loss.
    1. What is your average return for the two years?
    2. How much money have you made?
     
  7. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    I'm pretty sure Billv has been doing this for a long time.
     
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  8. Tropo

    Tropo Well-Known Member

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    And he is still dreaming (nothing wrong with that).
     
  9. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    And your point is?
     
  10. Tropo

    Tropo Well-Known Member

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    No matter how long he is in this business (trading/investing), his goal in not achievable.
    One pro US trader (I forgot his name) after 25 years of trading was averaging 22.5% per year.
    So, do you think that gain say 5%~10% every month (year in/out) is achievable?
    It would be nice to make approx. 100% a year in/out, but as you know life is not meant to be easy.
     
  11. twisted strategies

    twisted strategies Well-Known Member

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    i ( technically ) don't trade either , but will take opportunities ( like reducing/profit-taking , even and exit into a better vehicle .

    personally i would find 50% gains a year ( solely on SP rises ) quite difficult .

    but a bit of trend trading for a skilled player might get there most years , basically trading the smaller cycles in the market ( the yearly oil cycle , the Xmas shopping surge etc. )

    Billy is just as likely to come back with such ia simple system , we are all going to look embarrassed .
     
  12. Hosko

    Hosko Member

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    I'm not a professional but in general I work in dollar terms. I've never been able to go and buy a beer and ask "How many % is that going to cost me?".
    Although I do look at the end of the year how many dollars made/lost and then work out a % return on funds in play.
    Like I said, I'm no pro and do have a job that pays a regular income so the trading activity is a bit of an interest. Different ballgame if this was the only income to put food on the table.....
     
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  13. twisted strategies

    twisted strategies Well-Known Member

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    i absolutely agree , whether you define 'professional ' as a sole-income skill , or a task others pay you to do ( on their behalf ).

    the extra pressure , is a litmus test . ( you need to succeed very often )

    unlike myself , with some fortunate ( and unexpected ) big wins .

    regular monthly AND yearly gains .. not me .
     
  14. Aaron Sice

    Aaron Sice Member

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    Lol - one person couldnt do it so its just not possible!
     
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