[MightyMouse]

Originally Posted by BlowFish »

I wonder if you fully understand compounding? The wonderful thing is that you can compound less aggressively as time goes by, and so reduce your risk whilst still achieving geometric growth (as opposed to arithmetic growth). This is what the race is all about.

Even if you had a tiny edge and risked a minuscule amount on each trade you would be very hard pushed to take that long. Of course if you have no edge or are prone to risk too much the outcome will be consistent and much quicker than 20 years!

The only place luck enters the equation is in 'streakiness' of results. As time goes on you can be more resilient to streaks by decreasing your risk a little.

Blowfish,

Luck enters the equation before you place your first trade. Your tiny little edge has to continue to be a tiny little edge in the future. You have zero control over that or anything else that happens in the future. It could be that the edge you found, stops being an edge altogether and it could be that your edge performs even better than you thought. You simply do not have control over that. If you did have control over the performance, the CIA, Mossad, and the Vatican would all want to speak to you.

At the end of the day, it is going to take 15% per year compounded annually to turn 5k into 100k. Most successful traders do not peform at that level. I guess 15% sounds too low for most, but it is all relative.

[MightyMouse]

Originally Posted by bakrob99 »

IMO, the returns from daytrading have absolutely nothing to do with the returns one could expect from an investment in a portfolio of stocks/bonds.

Trading is about finding an edge and applying that over and over.

You obviously have no edge in your trading style and so you can not understand what the traders in theis Race are trying to demonstrate. If you did have an edge - you would realize that your beliefs are misplaced when applied to the traders in this race.

Trading lessons cost money

[atto]

Most of the people in this forum are on paper or are trading small account. I do neither, so have a little bit of experience to back me up.

Originally Posted by MightyMouse »

If you can demonstrate the ability to turn 5k into 100k in 20 years, you will get you a top trading job at any of the major investment banking firms or hedge funds. They would kill each other to hire you since most of their traders do not come close to the annual return they would have to consistently do to turn 5k into 100k in 20 years.

Actually, no. That's only 11.51% ROI per year, compounded continuously (which is very close to how compounding works for day traders). We don't compound annually. No one would care for those returns on a $5k account, especially with a sample size of 1. I did a similar run in a little less than two years. Did I benefit from an outlier in returns? Possibly some, but that same run encompasses roughly 900 trades, which is a large enough sample size to reject random fluctuations of luck (in fact, it's large enough to reject anything lower than your 11.51% or 15% ROI with well over 99.9% confidence).

I simply could not experience the same returns on a $5mm account (expecting a $100mm account in less than two years). Liquidity would severely hurt performance, even on a "highly liquid instrument" like ES. Also, as capital increases, capital preservation becomes a lot more important. Blowing a $5k account is not the end of the world. Blowing a $5mm account is a pretty big deal.

Trading is simply the exploitation of an edge, again and again. The best analogy I've come up with is with blackjack card counting. By default, the casino runs about a 0.5% edge against the player. By counting and changing bet size, the player can do about a 1% edge on the casino. So, his goal is to simply press that edge again and again, as many times as he can. Trading is slightly different, as we never can be completely sure what our edge is exactly. However, with enough testing and experience in different market conditions, we do know confidently that we do have an edge. Once that is established, we run it as many times as we can. Sure, variance plays a large role in returns. However, given a large enough sample size and a positive expectancy edge, you can do quite well.

Here is a simulation of 900 trades (sample size 200) with the same average return and standard deviation of returns that I had (this is all per contract, so no compounding). As you see, variance does play a large role in returns (over 100% difference, just based on "luck"). However, you can also see that there is a statistically significant edge here.

[Tams]

Originally Posted by MightyMouse »

...
If you can demonstrate the ability to turn 5k into 100k in 20 years, you will get you a top trading job at any of the major investment banking firms or hedge funds. They would kill each other to hire you...

If you can turn 5k into 100k... you don't need a job.

[TMBTC]

Originally Posted by Tams »

If you can turn 5k into 100k... you don't need a job.

You do if it takes you 20-25 years...that's an average of $3,800-$4750 per year...and that's average...the trader would start with a substantially smaller income in the beginning of the period.

EDIT: Of course, it goes without saying that if you have a much much larger account and could produce the same returns, you'd be all right...

[MightyMouse]

Originally Posted by atto »

Most of the people in this forum are on paper or are trading small account. I do neither, so have a little bit of experience to back me up.
Actually, no. That's only 11.51% ROI per year, compounded continuously (which is very close to how compounding works for day traders). We don't compound annually. No one would care for those returns on a $5k account, especially with a sample size of 1. I did a similar run in a little less than two years. Did I benefit from an outlier in returns? Possibly some, but that same run encompasses roughly 900 trades, which is a large enough sample size to reject random fluctuations of luck (in fact, it's large enough to reject anything lower than your 11.51% or 15% ROI with well over 99.9% confidence).

I simply could not experience the same returns on a $5mm account (expecting a $100mm account in less than two years). Liquidity would severely hurt performance, even on a "highly liquid instrument" like ES. Also, as capital increases, capital preservation becomes a lot more important. Blowing a $5k account is not the end of the world. Blowing a $5mm account is a pretty big deal.

Trading is simply the exploitation of an edge, again and again. The best analogy I've come up with is with blackjack card counting. By default, the casino runs about a 0.5% edge against the player. By counting and changing bet size, the player can do about a 1% edge on the casino. So, his goal is to simply press that edge again and again, as many times as he can. Trading is slightly different, as we never can be completely sure what our edge is exactly. However, with enough testing and experience in different market conditions, we do know confidently that we do have an edge. Once that is established, we run it as many times as we can. Sure, variance plays a large role in returns. However, given a large enough sample size and a positive expectancy edge, you can do quite well.

Here is a simulation of 900 trades (sample size 200) with the same average return and standard deviation of returns that I had (this is all per contract, so no compounding). As you see, variance does play a large role in returns (over 100% difference, just based on "luck"). However, you can also see that there is a statistically significant edge here.

Looks like a great curve.

I assume you are starting with 5k?

[ekshay]

MM, would you recommend then...

That if I am lucky enough to make $500 in my $2,500 account (a 20% return) in the next month,
then I would be wise to just withdraw the money, and wait until June 2011.

Then in June 2011, if I can make another $600 on my $3,000 account (a 20% return),
then I would be wise to just withdraw the money, and wait until June 2012.

This way my performance would not only be better than the average trader, but also the average money manager, fund manager, CTA, etc.

That it would be wiser to wait 11 months, and unwise to continue trading through August 2010.



[BTW, I am still breakeven. Getting in the groove yet. Will post the statement when it comes.]

[Bil Gadzooks]

Originally Posted by yeaheah »

Hey guys, i'm still alive and will try another or some new strategies.

My balance is still $108.17

Haven't traded the last 3 weeks.

Sadly, I'm dead, but Is there anything in the rules that precludes me from entering The Race?