2009 and 2010 were good for most trend followers(bulls) who bought and held tight onto their positions. 2011 was a totally different story. It was basiclly a big range bound market caused by the problems in Europe. There were many opportunities on both sides. That is why I like range bound markets better. How [...]
A simple answer is the more, the better. Under capitalization is one of the major problems that traders have. First of all, trading is one of the most difficult professions on the earth due to its very high earning potentials. If you have a few grand trying to make a living at it, then what I can tell you is that it is impossible. You need at least 100k to even stand a chance to make a modest living if (a big if) you have the skills.
For example, your objective is to make 50k per year consistently, which is 50% of your 100k. A 50% annual return year over year WITHOUT compounding is very hard to achieve even for the most experienced traders. With compounding, not even Warren Buffet could . I believe Warren Buffet’s track record is perhaps around 15%-20% minus management fees with compounding. Madoff’s “track record” was around 10% compounding. You know why I mentioned “Madoff” here. Stay away from anyone who claims something like that.
As I always mentioned in the past, a few lucky shots or even a couple of years of lucky shots mean nothing to me. A trader must prove herself through at least one major crash like the dot come bust or the financial crisis that we just had, and a major bull market. If you have gone through these cycles and still made some decent money, you are all set for the rest of your life since trading will never change. It is this way today and was like that 100 years ago because it is all about human psychology.
A consistent 50% annual return without compounding is hard. But I believe a 30% without compounding is doable. But 30% of 100K is only 30k. 30K is around the poverty line in the developed world such as the US, Canada or Japan. But 30K packs a lot of purchasing power in a developing country like China. The purchasing power of 30k US dollars in China is equivalent to 150k in the US and you do not have to pay taxes on capital gains. The beauty of trading is that you can do it wherever there is an Internet connection. I believe the income tax is around 17% in Hong Kong and 15% in Singapore. We will explore this option in another post.
So obviously 30k is not good in the US. If you need to make 60k per year, you would need 200k trading capital. I am every bit against using leverage/margin. So let’s not even go there. If you have 1 million, you could make 300k theoretically provided you trade liquid stocks. That is one of reasons why I never trade those thin penny stocks. The more liquid, the harder they are to trade such as GS, APPL, RIMM or GOOG because there are too many professionals in them. But you have to go compete with them head on.
Now you see why it is “the more, the better”. But this does not mean people who are temporarily under capitalized should not even try. You should. But you should not focus on how much you can make in the first couple of years. Instead, you need to focus on your trading plan/system because all it matters in the end is your percentage. If you could trade a 10k account well, you should do well with a 100k account.
Just kidding… I took 3 trades in the AM last Friday(6/3/11). Check them out in the charts below. One reason I love TradeStation is that it marks all your trades on the screen. A cyan line means a winner. A red one means a loser. So the first one was a loser and [...]
It is Miranda, my one year old daughter. She actually is holding a long position in RENN @ 12.51. Well, I asked her if she wanted that stock. She said “Yesh”. Well she says “yesh” to just everything. She will join forces with her Mom in just about 20 years …:) A lot [...]
It has been a while since I updated my blog and my portfolio last time. Some people asked If I stopped trading. The answer is “No”. For a housewife like me, I do not see anything else except day trading as a viable livelihood. If you ask around, most people will perhaps tell you that [...]
I think a lot of traders are. Look at the chart below. If you were long before point C and you are disciplined, then you would have been stopped out of most of your positions. 70-80% of your portfolio follows the general market. That is why some people prefer trading E-Mini. If you were ambitious, [...]
Here are a few stocks that have been performing much stronger than the general market. Click on the image to have a better view Netflix, Inc. (Public, NASDAQ:NFLX) I have Netflix’s 2 DVD package. Service has been great and their competitors are weak. Valeant Pharmaceuticals International (Public, NYSE:VRX) This stock just made [...]
The general market has been stuck in a range for a while. A short term trend following system will fail miserably in a situation like this. Oscillators, pivots , support and resistance work better here. The overall market sentiment is perhaps still slightly bearish mainly due to the problems in Europe. So we can [...]
I took a small long position in EURUSD @ 1.1963 on 6/7/10. It is only 1 lot (worth 100k), which is considered a small position in Forex. Now I have over 400+ pips in profits on paper now. I was aiming for a 500 pip move here. And the initial stop loss was set @ 1.1877, [...]
As I mentioned in my previous post, we would expect to see some range bound moves. It has been the case for the past 2 weeks partially because some bullish news from China provided some balance to the bad ones from the EU. Let’s take a look at the daily chart of the SP 500. [...]
I receive automated calls from Telemarketers and debt collectors every day. I told the debt collectors that they got the wrong person. They just kept calling. I am home 24×7. This really annoys the heck out of me especially when I am napping. I have registered on the National Do-Not-Call list. But it does not [...]