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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).
     
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  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 .
     
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  12. Hosko

    Hosko Active 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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  15. Billv

    Billv Getting there

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    Dreaming is free Tropo :)
    If it was easy everyone would be doing this.
    so it isn't easy but it can be done.
    An average of 5%-10% per month is achievable,
    I actually know a couple of people who can make more than me trading forex

    I started trading approx 6 years ago.
    I spend thousands of $ on courses which were of little value and mostly a waste of time and money but I didn't give up. I kept on reading, studying charts, watching trading videos on youtube and practicing my skills.

    It took me a few years to become consistently profitable because l was trying to make money with a small trading account. This was an impossible task.
    I had to lower my expectations and I needed to have a decent size account.

    Anyway, I became consistently profitable 2 years ago and it was due to a number of factors but mostly due to better risk management.
     
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  16. Billv

    Billv Getting there

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    Hi Simon,

    Thanks, and sorry I've had some busy years (with property and learning to trade).

    Yes there are month to month fluctuations.
    For example the US elections caused me some headaches
    I had a low month in Nov 2% and January was also around 2%
    But I run 2 strategies and the average long term returns are above 8%.

    I manage my risk by choosing my trading pairs carefully and by hedging.
    I only trade 2 pairs so I know them very well.

    Trading has always fascinated me too but I didn't know how to get into it.
    One day some dodgy forex training company ( UK based) sold me a training course for $5K and then another 1 for $7K. I don't follow their strategies anymore because they don't work consistently. I have done other expensive courses too through the US but I have come to the conclusion that if these guys could trade they wouldn't need to teach others.

    The courses were somewhat useful but not enough to make me profitable.
    I've learned a lot over the years but a lot of it was either freely available on the web + youtube or it was self taught.
     
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  17. Billv

    Billv Getting there

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    LOL you are a funny guy ;)
    IMO the % return depends on our strategy and not on our years of experience.

    I think you will find that if this guy trades for a bank or a hedge fund,
    their strategies are meant to be low risk / low return.

    Also, the bigger the size of the trade the lower the % returns simply because you can't trade often. You can't close a large position any time you want. (you need to find buyers/sellers)
     
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  18. Tropo

    Tropo Well-Known Member

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    "I actually know a couple of people who can make more than me trading forex"
    FX may be a bit different game, depends on leverage.

    "IMO the % return depends on our strategy and not on our years of experience".
    I would say that experience and strategy are equally important.
    The longer you survive in the market the more chances you have to make money.

    "Also, the bigger the size of the trade the lower the % returns simply because you can't trade often. You can't close a large position any time you want. (you need to find buyers/sellers)"

    Well....size of the trade is mainly based on the amount of money you are willing to lose (can afford to lose), and your overall trading strategy.
     
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  19. Hosko

    Hosko Active Member

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    I've had a week where I have put $5k in the bank. Does this mean it is a good week? Hell yeah, might even get fish and chips tonight for the family!
     
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  20. Hosko

    Hosko Active Member

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    Looks like the baked beans are coming out tomorrow night. And that's a glimpse into how I think and react on a continual basis......
     
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