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Abhijit wrote:
"What if you say my stock traders results were too rosy to begin with? If the trader is only making 20% on the account? I dunno about you - but someone making 20% in a year trading stocks *fulltime* is certainly good, but surely no guru material."
Not to start a fight, but "20% trading stocks *fulltime*" IMHO is GURU MATERIAL... If you are able to return 20% per year for an extended period (5-10) years through various market cycles (not just 1998-1999 bull market geniuses) you are the man.
People looking to return 40%+ per year on their over-leveraged $25,000 account are in for a big dissapointment, and anyone claiming to do this on a regular basis is smoking crack. Any hedge funds returning, including this year, 20%+ every year over the past 5 would be in the top 1% of the industry.
Increasing leverage increases volatility. It is unavoidable. The best way to trade for a living is to be properly capitalized. If you have to go get a job trading for an investment bank, prop shop, hedge fund or even plain vanilla mutual fund. Roger Sheppard's e-mail is the first response I have seen to this discussion that made sense to me. In fact, I could have written it--It is very similar to the situation I am in.
I have been involved in trading for almost 15 years. I have been trading for a living for over ten years, and was a clerk for the first five. Around 1999 I was a prop trader for Spear, Leeds and Kellogg and posted a message on the O-list looking for successful prop traders seeking positions trading firm capital. I can't tell you how many people told me how stupid it was to do trade for a 35% payout when they could trade their own capital and keep 100%. Even when I pointed out that they had the potential to trade an account much larger than 3X their PA it did not register... Why risk your own capital if you can risk someone elses for 1/3 the payout on 3X (or much more) the money (plus have a salary, benefits, etc.?) I bet 99% of the people that attacked me for my post have since blown out and are now mortgage brokers...
Trying to trade a $25,000 account a make a living is a recipe for DISASTER.
Sorry if I started ranting a little. It is just frustrating to see people led to believe they can make 100% per year on a regular basis. It is not that easy...
Good luck trading,
Seth
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