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BelAirCap wrote:
> Compounding 10% a
> week for a couple of years means you must now have more money than Bill Gates.
> Soon you will have ALL the money in the world.
It is not that difficult at all for a good trader to realize these gains, however,
you're missing a couple of important points here. This is merely a guideline, and
it is *of course* dependent on the size of one's portfolio. Therefore, this isn't
something that can be perpetuated to the absurd, such as "having all the money in
the world." Second, one's business and personal expenses have to be paid,
considering one is doing this for a living. You'll forgive me if I refuse to
divulge any personal financial information, but suffice to say that I *require*
very high returns to maintain my lifestyle and grow my business at a reasonable
level. Besides, I wasn't specifically referring to my personal experiences, but
instead that of successful traders generally. The bottom line is that the
potential for returns are MUCH greater through short term trading than through
investing, a fact that anyone who has had any degree of success in this timeframe
will attest to.
> If you think daytraders have no
> risk, then you obviously have never daytraded.
I said *virually* no risk - this was meant in comparison to what I would consider
to be *high* risk among investors. The main reason for this is that potential
drawdown (which is what risk *is* in this business) is MUCH lower, which can be
even be to a degree where it is virtually inconsequential. Economists classify
risk here in two categories: Market risk, which is attributable to general market
conditions, and specific risk, which is attributable to the specific instrument.
As far as market risk goes, investors are pretty susceptible to this. A
longer-term player could run into trouble fairly easily (experience significant
drawdown) during a market decline. Day traders, who restrict themselves to very
small losses, can liquidate their positions instantly, and tend to avoid bucking
trends, are pretty much immune from any of this. As far as specific risk goes, a
bad trade or two can similarly get the investor into trouble, whereas the day
trader can easily sustain even the worst bad luck that he/she is apt to encounter,
provided his/her methods are sound.
> I stand by the statement I
> made previously.
You're perfectly welcome to hold these views, Michael. However, your implication
that day traders are in trouble, or that it is a flawed strategy, does not square
with my experiences, or that of many other such traders. I wish you the best in
your endeavors in any case.
Regards,
A.J.
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