How is this trader doing?

I received this email from an email trading buddy and wanted to know how you thought he was doing.

I hope you are doing great. I just wanted to remind you who I was so I attached the below email. I was wondering if I could run a question past you. It’s tough here at the home office to get some perspective on how I am doing. I think you are the perfect person to ask this question since you are immersed in the trading community and know so many that trade successfully and unsuccessfully.

I have been profitable every month since and including August of this year. Month to date December I am profitable as well. Before that I saw trickles of black but was always losing on balance and never had two consecutive profitable months until recently. I would greatly appreciate if you could shed some perspective on how I am doing based on my results. I am taking the money up every month so the only way to assess my results is based on percentage gains for a given month based on the account size traded that month. 2011 is my 4th year as a developing trader. For August through December (MTD) I sat down to trade 76 days and took 118 trades averaging 1.55 trades per day. My win ratio is 55.78% excluding scratches. My winners are 43% larger than my losers on average. I am in my winners 2.68:1 longer than my losers. My average risk per trade is 1.02% of the account size for a given month. The max risk I took on a trade was 1.65% of the account size. Nothing crazy risk wise. I always have a hard stop in the machine -always…and I never ever cancel it. For the 4 months August through November (2011), I have an average gain of 2.32% of the account total for that month. (6.7% the best/August -3.3% worst/September)

Obviously these gains annualized would produce a 27.84% gain. These percentage gain figures exclude December’s results as the month is not over yet. MTD December I am up 1.24%. In December I am trading a $40,000 account. I am in a position to take my account up to $200,000 and plan to do so if I could sustain this profitability. What do you think? How am I doing?? Thx a million for your response. I really appreciate it. How’s Dr. Steenbarger doing?

How is this trader doing?

One Good Trade

16 Comments on “How is this trader doing?”

  1. Are u swing trading? Any investor would kill for 20%+ returns, so id say you’re on the right track with your system. Obviously we know intraday trading is not investing and 1.5 trades/day isn’t enough volume for an intraday trader. Your win% is really high, nice job! Most traders can’t consistently produce those numbers over the long haul. They would be happy around the 30-40% range.

  2. Hi, my name is Eddie and I’m the trader that contacted Mike.   First, I’d like to correct an mistake in my email to Mike.   I stated that each month since August 2011 was profitable.  This is inaccurate.  Apologies.   September was a losing month of -3.3%.  This is clear towards the end of the email one could see.  All other metrics and percentage gains figures are accurate and include September’s trades.  I am not a swing trader.  I never carry a position overnight.  I too am impressed by my own win rate.  For my first 3 years I never bested 50%.  That’s part of the reason why I am looking for feedback on my performance.  Honestly I am insecure about them.  I think I am so bruised by chronically losing for my first 3 years that I simply cannot believe that I might be turning the corner.   By the way I trade the SPY exclusively.  I always have.   Yes, I do not trade frequently/actively.  In the morning as I begin the day, I don’t even consider myself a trader. I picture myself as a sniper.  I am a Dr. Brett Steenbarger follower/diehard.  I learned that thinking from him.  I learned much of what I know from him.  I also spent a year mentored by Corey Rosenbloom speaking to him weekly.  Selectivity is a tough game.  It’s boring and missing moves is the toughest part.  In October, for instance on 5 out of the 18 days that I sat to trade, I did not take a trade.  I am in front of the screens all day but I take frequent short breaks.    I would greatly appreciate any feedback from all of you out there.  I’m in this game alone.  Don’t get me wrong, I love it that way.  I may wrong about that and time will tell to see how I do in the future.  4-5 months of good trading does not mean all that much.   But, I have always believed the way to do it to just sit here and figure it out.  Thx!!

  3. Hey Eddie,
    Obviously each trader has their own trading style. What works for u may not be what I can use to be profitable with and vice versa. Developing trading skills everyday and finding your weaknesses and improving those everyday are two of the most important things. Just improve every single day and the gains will take care of themselves. I admire going solo, I did that for 6 mos (I placed about 1200 trades in that timeframe), but why not make it easier on yourself and your development? Turn one trading day into 10 🙂 surround yourself around other traders, watch film, etc. Good luck with ur trading!!

  4. Great post!

    I’m also SOLO trader. I’ve never had a teacher who could advise me and tell me what to do or not to do. That is why I wasted so much money for the learning process. Well.. I think I’m still learning, but the P/L curve is going upwards. Anyway, personally I think you are doing very good! Keep doing it! 

  5. you have a win rate of about 55% and your winners are 43% larger than your losers on avg. first of all, you keep stats which is a very good thing considering most people don’t have a clue. you have a slightly positive expectancy, but you should work on having winners at least 100% larger than your losers on avg, and of course raising your win rate wouldn’t hurt, but that’s not as important as improving your payoff ratio to at least 2:1 at this point. good luck

  6. Hey guys,  thx for your much appreciated comments and encouragement.    It’s good to hear feedback from you guys who are hitting the button, winning and losing.   Trader in the Zone:  Your insight is helpful.  I know that my winners should be much larger than my losers than they have been in the period mentioned.   The stats always tell you the story.  Although my winners are 43% bigger than my losers on balance, this is accomplished really from cutting losses.  My winners are not large relative to risk.  I rarely have a risk/reward ratio on my winners of 2:1 and more than 1.5:1 is infrequent.   Other metrics I keep track of are the ratio of position size and risk taken on my winners vs. losers… guess what;  they both are almost exactly 1:1 in the months I mention.  So I am letting my winners run and cutting my losers.  But my weakness is that I am not adding to my winners.  That’s where I need work.  I am beginning to understand my edge.   I make money not by fabulous risk reward ratios, (this is really a function of wider stops working better for me) but by letting my winners run, cutting my losers, and being right more than I am wrong.  The way for me to expand the winner vs. loser ratio is to add size to my winners.  That takes two things:  know how and the brass ones.  I think I am figuring out when and how to press my bet.  Getting the courage is a different story.  I’ll get there… working on it.   Thx again for everybody’s comments.  I really appreciate the feedback.  

  7. I think it depends on what Eddie’s goals are.  Is he spending every day in front of the screens and trying to make a living from trading?  If that is the case, then to be honest he is not cutting it.  If he has some other source of income (wife with a great job, inheritance, huge savings), then I guess he can try to build on what he has done so far and continue to get better.  While I think that in some ways every trader, no matter how experienced, can still be considered a developing trader, after four years of trading you need to be better than just break even or slightly positive.  Eddie has said that he is strictly an intraday trader, and I don’t think intraday traders should look at their results on a percentage basis.  It is just not that relevant.  While it is great to be selective, it is pretty unlikely that an intraday trader can make a decent living making only one or two trades a day.  All of these things said, Eddie is doing the right things by breaking down his performance, reaching out to more experienced traders, and trying to evaluate his performance and figure out how he can get better.  Good luck!

  8. SP,  I am glad to read your comment, thx so much.    I wish I had the confidence to say that I could sustain 28% annualized returns.  I don’t.  But if I was able to accomplish sustained 28% annual returns why is that “not cutting it”?    What is the reason intra-day traders should not look at their results on a percentage  basis?     If I wanted to talk to a potential investor to run money for one day, wouldn’t he ask what my returns were?    What is the reason that you think it is unlikely that an intra-day trader cannot no make a living from one or two trades per day?   Are you suggesting that more frequent trading means more profits? Thx so much  for your thoughts. 

  9. As an intraday trader we look at results daily even hourly. Why percentages don’t work, say you have a $40,000 trading account and you post a 25% annual return. That’s $10,000. Not bad if ur an investor, but intraday traders aren’t investors. I don’t know many people who could survive a whole yr on $10k (not including ur tax liablity). If u break down the 10k on a per day basis u start to see why you wouldn’t be cutting it as a trader. Let’s say u trade 20 days a month, 12 months, that’s 240 trading days. $10,000 divided by 240 =$41.67/day. Now if ur placing one or 2 trades a day that’s not an unrealistic goal, but not a sustainable way to make a living. You need to trade your system more frequently to produce higher daily gains. Its basic math at that point. If we trade the same system, have the same stats, but I trade 10 times more volume than u, we know in the long run who wins. I hope this helps. Good luck!!

  10. Hi Bobby,  Thx so much.  Your explanation makes great sense and I really appreciate your points.  I understand.  It’s not that making 25% a year is not good performance.  It is.  But what is relevant is, in absolute terms, how much money did you take home and earn a reasonable living.     Thx for your good luck wishes.   

  11. Bella, Steve

    Could we have your take on this please?  I think many of us would be greatly interested in your opinion.

    Thx in adavnce


  12. One of the things I hope to teach is that you do not need my opinion.  Some great discussion here.  I have done my job.  I will let you guys make your own decisions on how he is doing.  

  13. I think you are being to selective and not pulling the trigger enough. Realtime experience is essential and you are not getting enough of it with your emotions involved. I think limiting yourself to only trading an etf is going to lengthen your learning curve considerably. I would love to chat with you more if you would like. Please pardon my being somewhat blunt. Email me if you want to talk further. [email protected]

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