Trading - what are the odds of making enough money to be worth it Best answer on the web
Assume that starting captital also equals x.
What expenses might be involved (pc, software, etc.)?
Trying to beat them at their own game (computer model driven trading) is the equivalent of betting on your son's little league team against Major League All Stars.
Let's assume you need to earn $100K in returns every year as a trader. Let's assume you have no costs. Let's assume you can earn a 100% return. That means you'll have to put up $100K at the outset.
Would you take $100K to Las Vegas and play it? Think about that for a second.
Many casino games pay out ~90% of bets in the long run, so you could reasonably expect to lose only $10K. On the other hand, the financial markets are not kind to amateurs trying high-risk strategies. Could you expect losses of no more than 10%?
In version 5.0 they are talking about a broker interface. My understanding is that the software will make the trades for you. One more way to take emotion out of trading.
I do want you to know, so that you can take want it into account, that I'm listed on their web site as one of the Real Traders. I also will be beta testing version 5.0.
If you use this software it will not be necessary to spend 40 hours a week trading - unless you want to daytrade - and even that, once the models are built - won't take 40 hours a week. If you daytrade, staring at a computer screen waiting for a buy or sell signal can become kind of a drag.
The best models I have built, trade during the day but not necessarily daytrade.
Can you make a living? That's the question. I believe that you can only after you have been burned really bad. Why would I say that? Once you have been burned really, really bad - only then will you understand margin and not following your systems buy and sell signals.
Start slow, build models that trade over a couple of weeks time - long and short. Trade mutual funds - I like Profunds. You can go long and short. And they have "ultra" funds. Which are double funds.
Once last thing, daytrading has to be a job - it can not be fun. Fun stuff excites you, jobs do not. If you are daytrading for the "fun" of it - and it becomes not fun - well guess what will happen - you will make it fun and there is only one way to do that - taking larger and larger risks.
One last hint if you do decide to buy the Trader, use walkforward testing and paper trading. It's easy to build models that look great when YOU DON'T TEST THE MODEL OVER DATA IT HAS NOT SEEN!
In other words build the model from, let's say, 3/12/1994 - 3/12/2004 then paper trade the model on data it has not seen from 3/13/2004 - 3/12/2005. And even that is a bit on the short side, I will sometims paper trade 3 or 4 years.
I hope this helps.
1. Discount - inexpensive, however you will receive little service or help if you need it. 2. Full Service - Costs vary but will be more than discount but you will typically get some great service (depends on the company of course) and a broker will usually fight for your fills and market position if you feel short changed.
I would suggest researching the net for brokers, to start try this one http://www.ifgfutures.com" target=_blank">International Futures Group I have used them in the past and they helped me along when I didn't have the time to sit and watch the markets.
Try futuressource.com for a good place to find a broker. Or simple google it and do the leg work yourself!
but a lot of knowledge and pain must be endured first...take it from me I wiped out my account a few times following "get rich" systems off the internet..
try dowloading the free e book fromhere and also there is a demo trading account here...which is a fully functional realtime account with virtual money....so you dont have to lose the real stuff whilst testing out any software you may purchase..
http://www.livecharts.co.uk/daytrading.htm
so your orders don't experience slippage. and of course a
decent pc (most trading systems only work on pc unfortunately)
- a slow pc or connection WILL ruin your trading efforts.
Before you invest in software, try some of the online trading games where you don't spend actual money.
If you'd like a suggestion, right now the US dollar is dropping and oil is going up - both look like long term trends so look at the charts for GLD, XLE, EWZ, and EWA then think about whether buy and hold would be a better alternative to day trading. I'm not recommending you invest in those, just that you take a look and think for yourself rather than betting on an equation.
For trading profits you want volatility - there hasn't been much in recent months. Also, check out the stock trader's almanac, most profits are made in just a 6 month period of each year and that time is just about over.
When volatility is low, look to fundamentals. Coal is doing great and most people haven't noticed yet.
If you're looking for good information, read the Financial Times for about six months before doing much investing.
If you're looking for a broker, Ameritrade has decent rates and some first rate streaming quote tools.
good luck
When you look at active trading, don't forget to factor in the trading costs.
BTW, if you do daytrade, try to get some other hobby to keep busy while watching for good trends - such as perhaps answering questions online.
It's like a casino.
Check out www.forex-traders.info where they offer managed forex accounts
resp. forex managed accounts with outstanding traders who do the trading for you.
Start with a model simulator if you can't afford the 25k minimum needed to day trade. Use long term options to multiply your buying power. Beware of fear and greed. Get out of losses fast with short stops and let profits run. The biggest uncontrolable aside from an external crisis and above mentioned factors is overnight and weekend where a stock or option may change drastically in price from one day's close and another day's open on news you haven't heard until too late. There is almost always a trend you can see and it is within this trend that you should operate. If you concentrate on relatively large orders rather than lots of smaller opportunities you will make (or lose) more on each trade, and can stay close to 3-4 issues whose movements you can get in sync with.
I would say that once the techniques are learned the play is more like surfing than science.
TJ
but forex is much better than stocks.
and it doesn't need to involve expensive
software, signals, or hefty broker commissions.
i've traded with success starting with no previous experience
using the system i found at http://www.rapid-forex.com
(there's a free 20 part ecourse about it there)
of course you need to do free demo trading to practice,
and be certain you're not undercapitalized or impatient!
the options technique there even shows how you can use
other people's 'supercomputer' calculations for yourself.
as for mechanical trading techniques, they CAN work over
time but mostly they only make a small percentage profit
overall. people and funds do use them, but depending on
the computer model's filter it will enter in too many
flat (inactivity) trades, losing money from the spread.
it's better to have some trading knowledge before embarking
on this road anyway so you can protect any profits during
news announcements which computers can't take into account.
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July 30th, 2010 edit