Retail Trading - What's the catch?

[Brendan Burgess]

Hi Guess who

I am trying to understand what you are doing.

You have a fund of €100 . No leverage of any sort.

You back €10 a time.
If you lose €3 - you are out. So you have lost €3 on that trade.
If all your open trades go against you suddenly, you lose €6 as you have never more than 2 open.
But most of your trades are profitable and run to €10.

So your account looks something like this
-3
-3
+10
-3
+10

And these are your profits after all costs including the costs for any subscriptions you have to make.

And do you have to give up your day job to do it?

I know a guy who was making money exploiting free bets on gambling websites. But he was making about €5,000 a year whereas he should have been earning €50k a year.

So do factor in the cost of your own time.

Brendan

 

[bankrupt]

I assume that Guess_Who has identified a few programmatic trading strategies that have a positive return (currently - no guarantee that will continue of course). It could be that the strategy loses most often and hits a stop loss or perhaps it trades very infrequently and mostly wins - if it both trades frequently and wins frequently then I expect guess_who does not have any need for advice from AAM
The overall success of the strategy can only be gauged as Brendan says by totalling the wins/losses and expenses over a period, the win/loss ratio is not really that useful as a metric.

There is a collection of interviews with successful traders in the "Market Wizards" series of books which I found interesting/entertaining (Schwager), the one common theme is how essential it is to carefully control your losses, the wins look after themselves for the most part. The books also confirmed to me that there is no way I would ever have the commitment to become an active trader, it's not for the faint-hearted.

 

[Spud50]

@guess_who if you want to find out about mechanical trading writing code for trading forex , curve fitting, minimising drawdown , position sizing etc., research Andrea Unger or Kevin Davey or PM me.

 

[Gordon Gekko]

A good example is betting on roulette.

If you keep doubling your bet, you will always win.

So bet €1 on black, and black comes up, you win €1.

Bet it again, and if red comes up, you lose €1.
So the next time bet €2 and if black comes up, you win €2, so your total win from this second series is €1.

Then you run into 4 reds in a row but black comes up on the 5th roll.
1) Bet €1 - lose €1
2) Bet €2 - total losses €3
3) Bet €4 - total losses €7
4) Bet €8 - total losses €15
5) Bet €16 , black comes up - cumulative win €1.

So your "system" is working.
But eventually you will hit a run where you lose everything.

Brendan

Yes, either a house limit or running out of money kill the strategy.

I remember having a similar “bright idea” in my early 20s to make €200 beer money every weekend. I’d make “educated” bets on even money sports shots and double the bet if I lost…