Saturday, January 26, 2008
This blog is replaced by a newer version: Please click here: http://marquezcomelab.com/blog/.
If you subscribed to get email updates for this website, your subscription is not affected. Do let me know if you seemed to have stopped receiving emails from my blog, however.
This blog will be active for a while for reference.
Tuesday, January 22, 2008
The advantages of being able to trade downwards becomes more apparent. I was already aware of this after the IT stock crash of 2000 when there were scarce short-term trading opportunities. It was then when I started looking for a trading arena which would allow me to trade up or down... eventually, I found forex.
Sunday, January 20, 2008
Friday, January 18, 2008
I can't believe that there's actually a debate on whether or not a trader can earn a consistent 1%/day.
That's 5.1%/week given 5 trading days per week. Given 52 weeks per year, that means multiplying one's money by a factor of 13.29. At that rate, you'd multiply your money by a factor of over 414 thousand over 5 years, 172 billion over 10 years, and 2.95*10^22 over 20 years.
Just think: It took Warren Buffett some 4 decades to multiply Berkshire Hathaway by a factor of 10 thousand. Some of you think you can do in 3-4 years what took Warren Buffett more than 10 times as much time to do.
Now I ask you:
1. Has any FOREX trader taken over the universe yet? How about the galaxy? The solar system? Even just Planet Earth?
2. How many traders are on the Forbes 400 list? If trading were such a sure path to riches, you'd think that traders would dominate the list.
3. Why didn't the book _The Millionaire Next Door_ have much to say about FOREX traders or any other kind of financial market trader? If FOREX trading were as much of a sure thing as the propaganda claimed, the world should be teeming with FOREX millionaires.
One user then responded with a list of traders who were actually in the Forbes 400 list and I post them here for my future reference.
#33 George Soros - Net Worth $8.8 billion
Now here's the king of the traders as far as making a ton of money from the financial markets goes.He's given 5 Bil away which makes 13.8 bil.
Over 30% compound returns for over 30 years, and this is where you get! In 2001 he was #23 with 6.9 Bil. In 1996 his net worth was 2.5 Bil
#40 Stephen Schwarzman - Net Worth $7.8 billion
This guy who is not well know, is a top money manager and also a top business builder. The company he founed has $90Bil under management.
He was'nt even on the list in 2001 or 2003.
#47 Steven Cohen - Net Worth $6.8 billion
Little known name in trading, but is one of the best. His fund returned 34% avg after fees (his fee is 35%!!) since 1992. 1.0 Bil in 2003 , not on the list in 2001
#57 James Simons - 5.5 Bil
Another "unheard of" gun trader. "$2.5 million investment in his funds in 1990 would be worth $1 billion today" and he charges fees of 5% + 44% !
Not on the list in 2003
#82 Ray Dalio - 4.0 bil
Bet you never heard of this guy either. His performance is 13% after fees since 1975 (32 yrs).
Assets under management: $165 billion! Not on the list in 2003/
If you think "that's easy" than ask yourself why aren't there hundreds of traders worth 4 Billion on the list?
#91 Stanley Druckenmiller - 3.5 Bil
Well know trader (spent time with Soros) returning 30% for many years. 1.6 Bil in 2003. 700 mil in 1996.
#91 Bruce Kovner - 3.5 bil
Another big name in trading. Returned 25% after fees since 1983 (24 yrs).
1.8 Bil in 2003. Not on list in 1996.
#105 Paul Tudor Jones II - 3.3 Bil
Famous name in the trading world. Avg returns 24% for tens of years. Not on the list in 2003.
#117 Kenneth Griffin - 3.0 Bil
Started with 1 Mil in 1990, now manages >16 Bil.
Returned 20% after fees. 650Mil in 2003.
#165 Charles Brandes - 2.5 Bil
Trading since 1974, manages $125 billion.
Patient investor, waits for market "adjustments".
Not on list 2003.
#165 John Paulson - 2.5 bil
"Tripled his hedge fund's assets to $21 billion while short-selling subprime credit this year."
Not in 2003 list.
#165 David Shaw - 2.5 Bil
Can't find info on performance other than no losing year for 16 yrs. Trader/Investor.
#271 Kenneth Fisher - 1.8 bil
Buy & hold equities strategy.
#286 Louis Bacon - 1.8 Bil
#317 Israel Englander - 1.5 bil
17% after fees since 1990
#317 Marc Lasry - 1.5 Bil
Annual return 15% after fees
#317 Daniel Och - 1.5 Bil
16.5% after fees
#361 James Dinan - 1.4 bil
17% a year after fees. Wiped out in 1987.
#361 Bruce Karsh /Howard Marks - 1.4 bil
Thursday, January 17, 2008
Where were we?
We were just testing out my Galileo trading system. I began trading it since September and finally after about three months, we now have an upward-moving equity curve. It took many hours of work of continuous monitoring and testing to get it going, I tell you. After the 15th of December, I did not want to look at my trading charts for a while. I put in place my strategy for the month and pretty much left it to work its magic while I focussed on more fun things like putting together holiday videos. Of course, I had to do the actual analyses myself but I did not have to worry whether or not I was going about it the right way.
Let me digress from trading for a bit... if you have video footages of a previous holiday or a special event in your life, try setting aside time to do put them together in a documentary-like presentation. You can add music to them, captions, effects, etc... It is so much fun!
Now back to trading...
It seems that our trading had been going very well since the 15th December, when I last made some huge modifications to the Galileo trading system. In the chart below, you can see how the first account (the one that trades 18 pairs) and the second account (the one that trades 10 pairs) as well as the sum of the two.
Using the results from the start of December onwards, the results are encouraging. If, and only if, our system continues the same tangent for the next year, we can get competitive rate of returns.
For the first account, we can expect 12% return by the end of the year.
Calculation 12% = (( [0.0238-0.0107] / 6 weeks ) + 1) ^ 52 weeks
For the second account, we can expect 15.6% return by the end of the year.
Calculation 15.6% = (([0.0210-0.0042] / 6 weeks) + 1) ^52 weeks
Of course there are no guarantees. There are never guarantees in the market.
What's the plan for 2008?
I will continue to make finer adjustments to my weekly trading and aim to minimise the number of weeks we lose twice in a row. That is my objective before April. After I come back from my trip to Europe, I will see what my results will be by then. If I am still on the right track, my next ambition would be to continue working on my method so it does not lose any given week at all. That would be great, wouldn't it?
Also, I will be creating another trading account and trade this account using a higher level of leverage to see if, by doing so, it will improve the rate of return with minimal drawdowns.
Let's make it happen in 2008!
Tuesday, December 25, 2007
Thursday, December 20, 2007
You just need to register before you use this site. After registering, you are free to post and reply to articles and comments that are posted there. So be one of the pioneers and start posting.
Go to: http://www.theparttimeinvestor.com/forum/.
Tuesday, December 18, 2007
Rape under Saudi Arabian law is punishable by law, but from what I understand, the court did not impose it because there were no witnesses and the rapists did not confess to the crime. Furthermore, they also revoked the license of the woman's lawyer and asked the lawyer to appear before a disciplinary panel. (Source)
Thursday, December 13, 2007
I have had plenty of time to browse through a couple of trading books but lately, I have been reading science books mainly on evolution, the origin of life and how life evolved after that.
Over the last four weeks, I have read:
1. The Selfish Gene,
2. River Out Of Eden and
3. The Ancestor's Tale.
All these books were written by Richard Dawkins, author of The God Delusion. I cannot believe I never heard about these before, especially since they have been around for a while. They are opening up my mind to new ways at looking at humanity, the world, life, what we are and who we are. I urge you to read them as soon as you can regardless of whether you believe in the idea of creation or evolution.
HOLIDAYS AND HOME-MADE VIDEOS
I never got around to the task of putting together clips of holiday footage from last time, I am going for another break to Europe in a couple of months. I think it is about time I allocate my attention on learning how to put together home-made film clips. I'm sure it will be fun.
I come across so many news items and other interesting materials and ideas but I have been reluctant in posting them here because they are non-forex material. I will post them because many things about trading, about life and about the universe are fractal-like, in concept.
Everything is connected to each other and like a friend of mine once said: by understanding the micro, we can understand the macro, and vice-versa. If we are to be successful in any field, it is also important to be knowledgeable about developments in other fields. A talented artist cannot make a living, if he does not go out there and sell his artworks. To do that, he must learn how to sell. As it is in the markets, it is those who foresee coming trends in the world who can position themselves for future opportunities. If we want to succeed in trading and investing, we cannot afford to confine our vision only to trading and investing. There are always lessons to learn from other fields, which we can use to improve our trading and investing.
Tuesday, December 04, 2007
I don't know what to think.
"...scientists are discovering that the date we are born can affect our later lives. Research has revealed the time of year a person is born can influence his or her personality, health and even whether they are male or female. But rather than being written in the stars, studies are showing that it is the season of birth that predisposes individuals to different traits."
Astrologers, of course, have seized on the findings as evidence that the stars influence personality. But scientists insist there are biological reasons behind the effects. Many of the effects reverse in the two hemispheres. They think that the results of the finding can be attributed to temperature and seasonal fluctuations in nutrition during summer and infections during winter.
Saturday, December 01, 2007
"Pope Benedict XVI has launched a powerful attack on atheism, saying that it was responsible for some of the 'greatest forms of cruelty and violations of justice' in history", according to The Telegraph.
The Pope then agrees to talk to Muslim leaders (Source: The Guardian).
In the mean time, the Turkish Islamist Government is also calling to ban and punish the publisher who published The God Delusion. (Source: The Independent).
I do hope that this will trigger engaging conversations around the world about superstition, religious beliefs and scientific reason based on evidence. It is important for such discussions to take place. My only concern is that there are plenty of groups and individuals who cannot discuss ideas, but are easily incited and are quick to resort to use coercion, fear or violence. If they do, however, it would prove Dawkins' point: that having faith in a belief that is not grounded on scientific evidence, is dangerous.
I remember another case about a year or two ago. The Pope said the following (translated from German): "Show me just what Mohammed brought that was new, and there you will find things only evil and inhuman, such as his command to spread by the sword the faith he preached"(Source).
Muslim reaction had been vehement. Straight after this comment, two Islamists shot dead an Italian nun, her bodyguard and worker at a hospital in Mogadishu, Somalia. (Source). Quite ironic. Someone says you are violent, you disagree, and you go ahead and prove him right by killing someone else.
This is why it is very important for people to read the book entirely, with a will to understand, so they can intelligently discuss the ideas and help guide others to behave like sensible human beings. Let's all just focus primarily on discussing and debating ideas.
Friday, November 30, 2007
Please go to: http://www.theparttimeinvestor.com/.
Thursday, November 29, 2007
A novice trader puts on a winning trade and gains between ten to fifty percent of his trading account. He forms a belief that, by trading, he can quickly become a millionaire. Indeed, if we assume a 20% return per month on a $10,000 trading account, we can expect $89,161 by the end of our first twelve months of trading. What if we assume an estimate of 50% return per month? We would have $1,297,463 by the end of the year. Of course, the problem with expectations like these is that they are unrealistic. Even most of those who claim to have made these types of returns have only done so in simulated environments, in trading competitions using game accounts, for example, where real money was not at risk.
It is possible to make these types of returns for a short while but I have not heard of anybody achieving such steep returns consistently year after year. After testing hundreds of trading systems and ideas I have come to believe that systems, which seem to promise exorbitant returns, turn out to be over-optimized for the period they have been tested on. Or even worse, they have flaws in their logic or assumptions.
Lately, I have been looking at the performance reports of trading firms in the USA. What would you say if I told you that the top trading firm over the last ten years only made an average return of 25% a year and the median trading firm made somewhere around 15% a year? Well, this is in fact what I am telling you.
A 20% and a 15% return a year is ‘only’ 1.877% and 1.171% return a month, respectively. I am sure that many novice traders and investors reading this article will have a mix of reactions towards these figures. Some might laugh and scoff at such ‘paltry’ returns, secretly believing that they can do a lot better than just 1.877% a month. Others may be surprised or even disappointed because their dreams of living rich will not come as quickly as they hoped.
Setting aside your initial reaction to these figures however, let us refocus on what these numbers actually mean in the real world. I would like to show you that these types of returns are very powerful. With time, these seemingly small, but consistent, gains will give you enormous profits in the future.
15% A YEAR RETURN ON A $10,000 ACCOUNT
Let us start with the assumption of having a $10,000 account, making at least 1.171% return a month, or 15% a year, trading the market. Based on these, the projections are:
1. $11,500 (15% growth) after 1 year.
2. $13,223 (32% growth) after 2 years.
3. $20,108 (101% growth) after 5 years.
4. $40,432 (304% growth) after 10 years.
5. $163,475 (1535% growth) after 20 years.
6. $660,960 (6510% growth) after 30 years.
25% A YEAR RETURN ON A $10,000 ACCOUNT
Let us now assume having a $10,000 account, making at least 1.877% a month, or 25% a year, trading the market Based on these, the projections are:
1. $12,500 (25% growth) after 1 year.
2. $15,625 (56% growth) after 2 years.
3. $30,519 (205% growth) after 5 years.
4. $93,140 (831% growth) after 10 years.
5. $867,512 (8575% growth) after 20 years.
6. $8,080,034 (80700% growth) after 30 years.
It is very important to note that not all fund managers make money. Returns of 15% or 25% a year belong only to those money managers who were consistently profitable. Furthermore, these types of returns are out-of-bounds for most investors. To invest in such schemes, most of the fund managers I have been looking into will deal with you only if you are a ‘sophisticated’ investor with a spare $500,000 minimum to invest. In fact, the highest earner only took on investors with a minimum of $25,000,000 US dollars to invest. (I will not mention any names here, however, you can do your own research by typing “commodity trading advisors” in your favourite search engine.)
I do not know about you but I certainly do not have 25 million dollars lying around, to hand over for someone else to manage. The dilemma, however, is that life is way too short for me to be satisfied with a 7% annual return either. I guess this is why you and I have taken the decision to trade and invest in the financial markets ourselves. At least there, we have full control and responsibility over the returns we get. It has its risks, but we can all avoid being reckless if we keep realistic expectations.
(This article was first published in The Part-Time Investor Magazine, Issue 3.)
(You can republish this article on the condition that you mention include the phrase: “This article was first published in The Part-Time Investor Magazine” and the information about the author below.)
Marquez Comelab is a private trader in Melbourne, Australia. He is the author of The Part-Time Currency Trader, a book on how to develop trading strategies. He is also the founding editor of The Part-Time Investor Magazine: an online magazine for traders and investors. See http://www.marquezcomelab.com.
Thursday, November 22, 2007
Please go to: http://www.theparttimeinvestor.com/.