Rating: Empty Star Empty Star Empty Star Empty Star Empty Star
Why not trade your own money?
Previous 1 2 3 Next
wilfredoaa

Member Since Jun 07, 2010  82 posts Sir. Williams (wilfredoaa) Sep 16 2010 at 18:34
If you have something that works, you can make that into big money over time. Enough to pay bills,
make you rich and give you financial freedom.

When it comes to MM i think in ratios. Whatever you do with 100, 1,000 or 1 Million will be the same. If You can make a small account grow. You will do the same with a bigger account. If you blow up an smaller account than you will do the same to a bigger account too.

For the ego of course is better to have a bigger accounts... but does it make you a better trader?

If I was to manage a trading account for somebody... what I would do is make sure I get some kind of fee up front and a promise to get a percentages of profits at the end of the month. I can't be liable for losses because Forex by nature is too risky. If an investor thinks this is asking too much. He would be better off trading his own money.

Or get a trader who really loves stressing out and has big appetite for risk.

Forex is too risky and no matter how right you think you are because of technical analysis, fundamentals or other. Forex always has a way to surprise you some how or is there any trader out-here who is always right?

Grace is the greatest thing ever!
jebuskrust

Member Since Oct 19, 2010  2 posts Jebus Krust (jebuskrust) Oct 20 2010 at 13:19
Ahoy!

First of all I would like to say that Foreign Exchange is quite an exclusive 'business'.
20% income, is perfect. 20% out of a hundred bucks? not really? If you can afford an account of only USD 100, go find a job. Or demo trade until you are 6 months on the + side - time in which you put 100usd every month aside.

20% of USD 100 in the first month is not much, i myself can't even afford the cigarettes i'm smoking. However, think quantity, think money management and get some time on your side.

After 2nd year maybe you can start thinking at going full time, but not before. And this is if you are lucky to still get constant pips.

Happy pipping!

wilfredoaa

Member Since Jun 07, 2010  82 posts Sir. Williams (wilfredoaa) Oct 26 2010 at 18:19
Is just the principal. You obviously not going to live out of it. But if you can manage to multiply that then there is a good chance you will multiply a 100k. But what is important is how you trade it. Because how you loose on small accounts will say a lot on how you will loose on big accounts.

The other thing is that you can make 1 cent a pip with about 100 units and you can make .10 cents a pip with 1,000 units and about $1 a pip with 10,000 units and if you would to buy 100,000 units you make about $10 a pip and if you buy or sell 1,000,0000 units you would make a bout $100 a pip.

What seems interesting is that across the different values, a pip remains the same. So how many pips you loose and how many pips you win is important and you don't need big lots to find that out.

By the way guys I just did an ebook of a strategy that I love and developing. Is work in progress so feel free to give me any feedback. Go download the book here. https://ewilfredo.com/forex.html

Grace is the greatest thing ever!
Chikot

Member Since Jan 14, 2010  2299 posts Chikot Oct 27 2010 at 15:26
I think if trader has skills but has no funds, it is better to manage OPM. Nothing wrong to make money for someone and earn good living from this. this is my goal. I am not lying to myself what is possible and I know that to make some bucks over time much bigger starting capital is necessary which I do not have.
I do not believe in 20-40% monthly consistently over long term with low risk but I believe that anyone who is aiming so high consistently will burn himself and burn his account. I myself pushed for higher returns and lost all earnings within one month, so, i am quite sure other traders not different. It's better t to take it slowly and not to push things.

trixifx

Member Since Jan 16, 2010  41 posts trixifx Oct 29 2010 at 16:33 (edited Oct 29 2010 at 16:34 )
Managing OPM does have a benefit that is not yet covered here.

If I as a trader manage my money and get returns of let's say 35% p.a. with associated drawdowns of 20%. My MAR on my own funds would be 1.75.

If I now get a client who matches my money in my account, i.e. doubles the capital I have to trade, I can effectively cut my risk in half by trading at half the size. I will now be reducing my returns to 17.5% and drawdowns to 10%. While this may seem to be a bad deal, at this point, the math is before any performance or management fees. Once these fees get taken into consideration (on the manager's account and not the client), the manager's MAR would increase to more than 1.75, while the clients will decrease to less than 1.75.

By doing the above, the risk of blow-up has been significantly reduced, I have increase my MAR on my account, plus I earn fees on a monthly / quarterly or annual basis. I consider this to be a major advantage.

However, the above does not take into account the headaches associated with annoying regulators and even more annoying clients that aren't really comfortable with your approach, but hope you will make them rich.


pip2cash

Member Since Mar 04, 2010  423 posts SIM (pip2cash) Oct 29 2010 at 16:59 (edited Oct 29 2010 at 17:00 )
trixifx posted:
    Managing OPM does have a benefit that is not yet covered here.

If I as a trader manage my money and get returns of let's say 35% p.a. with associated drawdowns of 20%. My MAR on my own funds would be 1.75.

If I now get a client who matches my money in my account, i.e. doubles the capital I have to trade, I can effectively cut my risk in half by trading at half the size. I will now be reducing my returns to 17.5% and drawdowns to 10%. While this may seem to be a bad deal, at this point, the math is before any performance or management fees. Once these fees get taken into consideration (on the manager's account and not the client), the manager's MAR would increase to more than 1.75, while the clients will decrease to less than 1.75.

By doing the above, the risk of blow-up has been significantly reduced, I have increase my MAR on my account, plus I earn fees on a monthly / quarterly or annual basis. I consider this to be a major advantage.

However, the above does not take into account the headaches associated with annoying regulators and even more annoying clients that aren't really comfortable with your approach, but hope you will make them rich.





Hi trixifx,

The topic is about why not trade own money. Without an extra fund from client and if you still want to decrease the DD from 20% to 10% and reduce the profit from 35% to 17.5%, then by trading your own money you are still manage to get the same result. You only have to trade half of your normal lot size.

Regarding MAR, actually your MAR increase because you earn money from management other people fund, is not from your trading result. Therefore in my opinion, your MAR increase and you earn monthly fee are same, it is not a 'plus' as you mentioned above.

Just my 2cents.

Regards,
SIM

 

Chikot

Member Since Jan 14, 2010  2299 posts Chikot Oct 29 2010 at 17:02
Unless I have at least $100 000 of my own to risk, it makes no sense. I would put more to my account, but it is onoy to show clients, not that trading $500 or $3000 make s any difference. With goal of 30-50% annual return trading $500-3000 account makes no sense. But it is a good show of my skills.

trixifx

Member Since Jan 16, 2010  41 posts trixifx Oct 29 2010 at 18:10 (edited Oct 29 2010 at 18:11 )
pip2cash posted:
    trixifx posted:
    Managing OPM does have a benefit that is not yet covered here.

Hi trixifx,

The topic is about why not trade own money. Without an extra fund from client and if you still want to decrease the DD from 20% to 10% and reduce the profit from 35% to 17.5%, then by trading your own money you are still manage to get the same result. You only have to trade half of your normal lot size.

Regarding MAR, actually your MAR increase because you earn money from management other people fund, is not from your trading result. Therefore in my opinion, your MAR increase and you earn monthly fee are same, it is not a 'plus' as you mentioned above.

Just my 2cents.

Regards,
SIM



Hi Sim,

Agreed the topic is about trading own money, I was merely pointing out a benefit to managing OPM that you do not have on your own account. For larger accounts, managing OPM can very desirable. Bruce Knover compares it to a call option and I tend to agree with his conclusion.

Regarding MAR - If you look at it purely at the trading stats, you are correct. However, I was referring to the total return received (profits + fees) and this is probably one of the reasons people manage OPM. If you include these fees in your return calculations (not technically correct, but this would still be the manager's money for a period), you will find that you have more cash (profits + fees) than you would have without these fees. Thus, the manager increases his own MAR, and not that of his managed accounts or funds.

That being said, I am still content to manage my own money, which is mostly growing through my own capital contributions and some occasional profits. Looked into managing OPM once, but found that potential clients would not trust my trading methods. I guess they might have trusted me more, if I had already made $1 million in the markets.

trixifx

Member Since Jan 16, 2010  41 posts trixifx Oct 29 2010 at 18:46 (edited Oct 29 2010 at 18:52 )
Attached a spreadsheet to better express what I meant.

First column is a purely independent trader with no external funds. Second column is a trader managing OPM in a 50:50 relationship with his risk cut in half. Third column is the client's account.

The second and third columns show the effect fees have on both manager and client level returns. While the return for the year is still 17.5%, the manager gets 21% and the client 14%. Unfortunately in this example, I can't quantify the effect on the drawdowns, but the manager's drawdown will decrease slightly and the client's drawdown will increase slightly.

This is intended to show that managing OPM can have the benefit of actually reducing risk for the manager and this is one of the cons of only trading your own money.

wilfredoaa

Member Since Jun 07, 2010  82 posts Sir. Williams (wilfredoaa) Nov 04 2010 at 17:28
If you really have a profitable system that you tested and are totally satisfy with the returns and losses. You can always get a small capital and start trading your own money. Maybe your family, friends or others can give you a small loan or some kind of seed money to get you started. You won't have to respond to anybody but yourself and the market. Is almost as you if you were running your own business. Trading other peoples money could more stressful and is almost like working for somebody else.

I was trading an account one time and the owner of the account never paid me any fees for profits. It wasn't a lot of profits but still got no rewards. My biggest punish was to stop trading the account. But this sort of things happen. Is almost like you show up to a job and spec to receive money at the end of the week and you don't. Nothing is guarantee in life.

Whether you are trading OPM or trading your own money. One thing you have to know for sure is that your system is profitable. Not that it never looses but it is profitable. Because in the end you will have wins and looses but if you can make your wins bigger than your looses you will have a good Return of Investment.

By the way I am starting a thread on a simple strategy based on Eur/Usd H4 time frame.
Help me out testing it. Check it out here.

https://www.myfxbook.com/community/new-traders/simplest-forex-strategy/63720,1

Grace is the greatest thing ever!
Previous 1 2 3 Next
Loading
Loading
EURUSD 1.12806 GBPUSD 1.25294
USDJPY 107.564 USDCAD 1.36017

Tools

Community

Reviews

Brokers

Platform

Support


Twitter |  Facebook |  Site Map  |  Terms  |   Privacy Policy
©2020 Myfxbook Ltd. All Rights Reserved.
HIGH RISK WARNING: Foreign exchange trading carries a high level of risk that may not be suitable for all investors. Leverage creates additional risk and loss exposure. Before you decide to trade foreign exchange, carefully consider your investment objectives, experience level, and risk tolerance. You could lose some or all of your initial investment; do not invest money that you cannot afford to lose. Educate yourself on the risks associated with foreign exchange trading, and seek advice from an independent financial or tax advisor if you have any questions. Any data and information is provided 'as is' solely for informational purposes, and is not intended for trading purposes or advice. Past performance is not indicative of future results.