“If there were a
cornerstone to trading it would be the ability not only to be resilient when in
drawdown but also to accept that we get things wrong. Sometimes there is a flaw
in our methodology that we have not seen and that we simply have been lucky up
until this point. This does raise the question of when do you know you have
entered this spiral of self destruction and to my way of thinking the answer is
not that hard. If you have been losing money for the better part of a decade
then it is fairly obvious that there is something seriously wrong in your
methodology.” – Chris Tate
Can you make 1,000% returns per year
from trading?
I DON’T THINK SO.
Every so I often I am party to an email from someone who should know
better. This particular email was around the topic of returns that could be
expected from a novice trader. This email asserted that they were looking at
the order of 1,000% pa, which in anyone’s language is a tall order.
I can understand how people get these figures in their heads, the
internet is awash with people claiming that you can give up your day job and
intraday trade FX with $5,000 and live like royalty with no risk. Intriguingly I
have once again started receiving spam emails from people claiming that options
writing is a no risk cash flow generating strategy.
As such it is easy to see how peoples psyche becomes infected with this
sort of nonsense and how with little real world experience they are sucked in.
However I was curious as to what the numbers would look like if you were
making 1000% pa so I fired up Excel and let it rip with a starting balance of
1,000.
Please check here to see the figure: http://tradinggame.com.au/i-dont-think-so/?utm_source=Blog+Subscribers&utm_campaign=782ff57c63-RSS_EMAIL_CAMPAIGN&utm_medium=email&utm_term=0_eb90516269-782ff57c63-43344013
I don’t even know how to say that last number. Suffice to say that
somewhere around the first months of year 7 you are the richest person in the
world and by the end of year 10 I think you have all the money.
Author: Chris Tate
Article reproduced with kind permission of: Tradinggame.com.au
Another great quote ends this article:
“You should spend a
great deal of time and thought on your exit strategies, for one very good
reason: you don't make money when you enter the market, you make money when you
exit the market. Far too many people focus only on market entry, or what to
buy, rather than on when to sell. If you approach trading with an exit
strategy, it will benefit you right away.
Your system should
reflect your beliefs (i.e., who you are as a trader and as a person). Many
people are just looking for “any system that works,” but if your trading system
doesn’t match your beliefs about the markets, you will eventually find a way to
sabotage your trading.” – Van Tharp Institute
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