My friend is a long term investor but wants to become a trader

Rightly said, all these excel calculations are useless, what matters is real trades.
And one thing I have noticed is that @raoawesome has a tendency to complicate even simpler things.

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This is exactly what I am thinking :sweat_smile:

whoops my math was bad. I think i complicated lot of things here instead of saying it neatly.

But bottom line what I do want to say is if leverage is done correctly and consistently it is possible

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sorry for confusing you man :sweat_smile:

Anyways. None of the other things that you have mentioned makes sense to me.

Seriously. Very very bad. But you started your response this way.

well lets do the math here.

I can’t even quote text here because you have now deleted.

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no the return calucation 15% *2 = 45% is wrong. It should be 30 % not 45% but rest was correct only. I explained it based on below

I removed everything as people were getting confused.

But I do agree with @SpacemanSpiff and others reality can be very different , no one can project returns. I am just saying 1cr return may or may not be possible

I have a lot of points to disagree on. But it’s okay the discussion will go nowhere. Everybody has their opinion. :love_you_gesture::love_you_gesture:

@MKDan So finally, This guy came to conclusion he needs to get out of illusion. Crorepati. I strongly believe ! and you forget about trading for a while. :crazy_face::crazy_face:

My bordes are different bro.

Again - its possible that i understood it wrong, but i do want to highlight this again because this can do damage.

Your understanding of leverage and risk is completely wrong and we cannot take that much risk. Below is an example of what i consider reasonable. Now it can be different for different people to some extent but 6L risk per trade on 30L capital, 5 stops and we are out kind of thing is not reasonable.

  1. Capital 30L.
  2. Leverage - does not matter. It only allows us to take risk and sometimes lower leverage means we wont be able to take ideal risk.
  3. Max Drawdown from backtesting = 10X.
    ie say worst case in history we went down by 10 * risk per trade. This is not just stop outs but a series of wins and losses that eventually lead to equity being 10X down from peak.
    ex LLLWLLLLWLLLLWWLLL where W = 1X win and L = 1X loss.
    Better have 5-10y of data.
  4. Now say we want to keep overall max DD based on past data within 10%.
    Then Risk per trade = 1%. So we lose 1% of account if stop gets hit. If current account value is 30L, that means we lose 30k on stop out of a single trade. If trades are one after another, then estimated max DD will be slightly less than 10% as capital will keep reducing.
  5. Future is different from past. So understand that market wont care for your 10% rule and will easily and likely exceed it. Part of the reason is we tend to over optimize rules in backtests. Estimating DD = 2X past DD seems like a decent thumbrule and it has held well so far for me.
  6. Not totally related, but you can manage risk even better by deploying multiple systems that are different enough. 2 systems with 10% DD each in 50-50 ratio will likely have lower than 10% DD in combination. More like 6-7%.

Anyway, it seems i am posting too much on forums now …

Show your friend this forum link and he will be happy with he has now

This is only for reversal trader, traders that have no idea and simply jump in random direction just because there is high volatility and action, traders that have fixed position lot and then put stoploss and for traders that don’t have a plan and square out very early on instead of riding trend.

It’s different in trend trading.

average price movement of past 14 candles = it just shows how much pips price has moved for past 14 candles. The ATR indicator shows this value only

Risk is 2%.

Stp = current price + (2* ATR) for short
Stp = current price - (2* ATR) for long

Position size = risk / (2* ATR)

Number of Lot to enter = position size/ lot size

This way if your stoploss hits your risk 2% is only loss. I hope this is clear to you.

Now as far scaling out, we take half the position away when price moves 1ATR and bring the stoploss for the other half. This way you have nothing to lose on this trade.

So at 1ATR you already get 1x and when markets trends that 1x can be 3x or even 6x depending how good is the exit indicator. Remember markets always trend.

So answering back
W = 1X++ win and L = at maximum absolute be 2X loss.

If there are continuous losses it means either backtesting or forward testing wasn’t done properly or either deviating from tested strategy or trading on day which has news events.

There are no ratios here. The overall goal is capture and ride maximum trends while keeping losses to bare minimum.

Its hilarious how far this is from reality.

Problem for any newbie is that they cannot tell what is true and what is not and even more so in markets where feedback is not immediate. And someone speaking with high confidence is automatically assumed to know. That is how we get so much noise in forums and such. Wasted my initial years on traderji gyan. Thank god that’s not my problem anymore.

Good luck to you, Buy and hold on crypto has a better chance of survival than 5 stops and i am out risk management …

are you profitable now?

I thought its better not to discuss over this as question was entirely different than what we are discussing.

I’m sure your Global Sunshine has the holy grail to mint trillions!

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You want a better advice?
Don’t take an advice. :love_you_gesture:

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Trading and investing are two different things. Both require different skill set, time horizon and risk appetite as well as opinion and personalities. It is still better to be an investor, as that works for most people who can spend limited time with the market.

Beri nice story.

Maybe swing trading on a beaten-down blue chip stock is better than an intraday in a penny stock!

For example, Intel has lost its market to AMD and it is 10 years low. Intel might release the new 7nm processors next year. And the sales might pick up.

Intel was trading at $33 in 1999 and now it is trading now at $30.10. Buying Intel might double the money, maybe in a year. And dividend is 4.78%