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Dick, These are all hypothetical numbers, trades, and have nothing to do
with the wasting value of options, etc. These numbers would represent what
one could achieve in a stock, index, or fund, or simply placing the $10,000
in a bank with %60 interest, where the amounts are fixed, and the system
represented the historical values of the trades made. As you know, just
because one could invest $X in AOL a few years ago and achieve a gain of $Y
does not necessarily indicate that this same system would produce the same
returns in the future. Even So, It is much better to use a back tested
system, for even if it fails, it is usually a far better system than a
system? whereby one uses guesses, for usually when one guesses, he is wrong,
except for Warren Buffet, and a few other individuals who have that knack
for picking stock winners.
As someone mentioned in a previous email, back testing a possible future
system in options is a difficult task, at best, just because of the wasting
values of the options, and the sheer number of them. I believe around 5,000
NYSE stocks, 10,000 NASDAQ stocks, 100,000+ options. As you know, a 10
point move on the OEX at the beginning of the month does not move the
options nearly as much as a 10 point move at the end of the month.
Kohath
----- Original Message -----
From: Dick Webb <dickwebb711@xxxxxxxxx>
To: kohath <kohath@xxxxxxxxxxxxx>
Sent: Wednesday, June 30, 1999 2:20 PM
Subject: Re: Ira's method..do the math
> Kohath your numbers are correct
> do they assume options not futures?
> and even in options it doesn't really work
> the reason is that the amount invested needs to be
> greater than the amount risked. Therefor if you risk
> 10K you probably need to put up 15 or 20k
> otherwise you get wiped quick.
>
> or what is your money management that supports this?
>
> Dick
>
>
>
> --- kohath <kohath@xxxxxxxxxxxxx> wrote:
> > The calculations are as follows:
> > %80 win - %20 loss = return of %60.
> > If one places $10,000 on each trade, once per week,
> > 52 times per year, this results in
> > 52 * 6,000 = $312,000.
> > If one re-invests the original principal + the
> > profit of each trade the formula is
> > Principal * (1 + Interest)
> > ToThePowerOfNumberofTrades.
> > This results in the amount of
> > 10,000(1 + .6)^52 = 10,000(41,137,613,933) =
> > $411,376,139,330,300.
> > Don't be astonded by the amount, this is just the
> > result of compounding. 1 penny, if doubled every
> > week, after 1 year, would result in the sum
> > of $225,179,988,136,850. Thats 225 Trillion.
> >
> > Kohath
> >
> >
> > > Kohath,
> > >
> > > I looked at your numbers below and there are a few
> > > things that do not make sense in sugesting that
> > Ira's
> > > system would make him richer than Gates. I'll show
> > why
> > > $50,000 grows to only one Million or so in a year.
> > >
> > > We start with the basics...
> > > 80% winners 20% losers
> > > 60% net winners
> > >
> > > 40 trades a year in bonds and S&P
> > > average net per winning bond trade $2930 S&P 4965
> > > average loss 1060 bonds 2535 S&P
> > >
> > > Assuming that a trader starts with 50K and has 4
> > > winners and 1 loser in every cycle. Trades one S&P
> > and
> > > two bonds per signal (per 50K in account). After
> > every
> > > cycle the trader re sets the number of contracts
> > to
> > > trade in the next cycle by seeing how many units
> > of
> > > 50K the trader has. i put the numbers in Excell
> > and
> > > after a year 50K turns into a million and then the
> > tax
> > > man takes 1/2 of it away.
> > >
> > >
> > > Good Trading
> > > Dick
> > >
> > > --- Neal Hughes <neal@xxxxxxxxxxxxx> wrote:
> > > > At 09:41 PM 6/29/99 -0500, you wrote:
> > > > >If there is in fact a system that is %80 / 1
> > on 1,
> > > > and if that system
> > > > >traded once per week, the system should give a
> > > > return of (0.8 * 1) - (0.2 *
> > > > >1) = 0.8 - 0.2 = 0.6. This would be
> > multiplied
> > > > times 52 weeks, or 52 * 0.6
> > > > >= 31.2. Therefore, given the %80 probability
> > of
> > > > this system with a %60
> > > > >return, one could expect to gain, given 1 trade
> > per
> > > > week, with 1 years
> > > > >trading, placing $10,000 on each trade, 10,000
> > *
> > > > 31.2 = $312,000. If one
> > > > >decided he wanted to own the universe in a few
> > > > years, simply re-investing
> > > > >the profits in each trade would result in a
> > balance
> > > > at the end of 52 weeks
> > > > >of
> > > > >10,000 * (1.6) ^52 = $411,376,139,330,300. Not
> > bad
> > > > for a years trading.
> > > > >That is 411 Trillion. I would submit if this
> > > > system actually does exist, I
> > > > >would certainly like to look into it, to see if
> > I
> > > > would possibly be
> > > > >interested in using such a system.
> > > > >
> > > > >Kohath
> > > > >
> > > >
> > > ===
> > > Big Lucky Dick
> > >
> > >
> >
> _________________________________________________________
> > > Do You Yahoo!?
> > > Get your free @yahoo.com address at
> > http://mail.yahoo.com
> > >
> >
> >
>
> ===
> Big Lucky Dick
>
> _________________________________________________________
> Do You Yahoo!?
> Get your free @yahoo.com address at http://mail.yahoo.com
>
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