I have no name, just call me "Speculator" @ The Eye of Sauros

http://blog.thelordoftrading.com/2009/12/i-have-no-name-just-call-me-speculator.html

Some trade for a living, I trade to get rich. The trading is a too risky business and the success rate is too low to rely on it for a living. Unless you have an equity of a few millions, you need to achieve to be able to live from trading a performance of 30-40% at least per year, I don't say it's impossible: you just need to beat on a regular basis the average annual performance of Soros or Buffet or any legendary investor. More importantly, you don't let the performance compound in your trading account if you need to withdraw money from it to eat: if you withdraw 10,000 quid now, assuming you have the outstanding (but required) performance of 30% per year, you'll have roughly 138,000 quid less in your trading account in 10 years (ahhh the power of compounded interests...). Let’s be realistic Fellow Traders, if you want to spend your day trading or investing for your own account, you need to have a source of regular income to feed you and give you a roof.

Read the full post here

I didn't read the full post yet, but based of the description. Doesn't that go against the t4l principles? Is that not what some aim for? I say for those starting late in the game and that has a job already perhaps this make more sense for? But actually I just met a t4l guy at a holiday party recently who has been t4l since 1995. There are some years where he will only trade in high volumes for 3-4 months and then stop. Other years are more consistent and spread out evenly. From what i understood he may have not moved millions but he certainly was moving in the high 6 digits. And he at least on the minimum made 12-15% a month averaged out.

Anyway, I guess im just trying to say that you can survive on t4l on much less than you perhaps suggest? Then again Im still green so who knows my view on this may change if the markets scar me enough ;-) ]

anyway off to read your post...

-snapman

Snapman wrote:

actually I just met a t4l guy at a holiday party recently who has been t4l since 1995. There are some years where he will only trade in high volumes for 3-4 months and then stop. Other years are more consistent and spread out evenly. From what i understood he may have not moved millions but he certainly was moving in the high 6 digits. And he at least on the minimum made 12-15% a month averaged out.

Hey Snapman, I guess the guy you met who's made 12-15% per month since 1995 came out from a chimney at the party, had a white beard and a red hat like that :

More seriously, I'd say firstly that a performance of 12-15% a MONTH is far above the 30-40% per year I indicated.
Now, let's assume this guy has made 12% per month from 1995 to 2009: he would have multiplied his initial capital by 185,621,298 (=1.12^(12 *14)-1) over these 14 years should he let the money compound in his trading account and not spend it to live. It means if he started with an initial capital of $1,000, he would now have a wealth of around $200 billion (which is roughly the aggregated wealth of the Forbes top 5), with a starting capital of $10,000 he would have today around 2 trillion, roughly the amount of the currencies reserve of the China, we're talking about a 13-digit figure. So let me be a bit skeptical about his performance...

Note that in this example, if he has spent on a regular basis for a living all or most of the profits he earned from his trading, his account would be after 14 years not far from his initial capital (that makes at the end a few billions/trillions difference whether he has withdrawed or not): that highlights my point when I argued that when you trade for a living, you don't let the compound interests play in your favor as you spend your earnings to live.

Now the equity you need to trade for a living is not rocket science: if you target a performance of 20% per year (and believe me, it's quite hard to achieve) and if you need, say, $1,000 per week to live, you'll need to have an equity of: $1,000*52/20%=$260,000 (assuming your trading profits are tax free, otherwise double).

Keep in mind that if you have an average performance of 30-40% per year over the long run, say a decade, you're among the trading legends. I know, I know, everywhere you have guys arguing they do much better and found a method to turn 10,000 in a million overnight. First those guys have a low probability of survival in the long run secondly we would know about them and they would be famous as in a few years they would be among the wealthiest people on earth. There was a guy in France, Sylvain Duport, who became a bit famous a few years ago as he won a stock trading game 2 years in a row. That was a 6-month contest and the first year he multiplied his equity by 37 or so and the second year by almost 80 .... (a shame for him that was paper gains...), a few things:
- He himself confessed he would not have achieved such performances with real money. To be in the top with this kind of contests you must take all the risks and have a high probability to go "broke" in which case, you just reset your account and start again, in the real life it's a bit different...
- After he made it, he was pitched by plenty of investment banks and hedge funds. In the latest news I saw on him he joined a hedge fund. So we have here the example of a guy who has the skill to make a performance close to 8000% in 6 months who chooses the security of a pay check and the rat race
- You'll always find the example of a guy who wins at the lottery then a guy who wins two weeks in a row,.... But I wouldn't account on this kind of odds to plan how I make money for a living