How much time will YOU need to get rich?

This is a reply of mine from another forum which I thought was fairly succinct and summarized why fund managers don't do as well as you'd expect them to do.

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Re: How much time will YOU need to get rich?

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Originally Posted by titi911
just a tought... the best hedge fund are returning something like 20-30 per cent per annum.... so 10 per cent a month...is ridiculous.... unless you are using big leverage which is going to whipped out your account in a very short period of time.

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Remember that the best individual trader at the best fund manager will not last very long there... he/she will leave and be day trading for him/herself. So by implication, if you are a highly talented trader you would not be working for a fund manager. Why take the stress when you can trade for yourself and have no one to account to?

So the best fund managers do not have the best traders. The best traders are at home trading for themselves.

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short answer: as long as it takes

long answer: probably longer than i think

eventually, i will realize and truly internalize the fact that with disciplined high-probability trading, my profits will take care of themselves. i don't pay my mortgage in ticks or points, but that's the game i play. Shawn Alexander broke the record for most touchdowns in a regular season (28). if he only focused on how much money he might make (incentive bonuses, playoff bonuses, etc.) he'd never come close to the record; he would never be in the right place (The Zone) to do his actual work.

anyway, it'll be a while and that's okay

take care

omni

Hey omni - I was focusing on the fact that I don't believe that fund managers have great traders although your comments on how long it takes are much appreciated

My theory is, that at best, bad-average-good traders will work for fund managers and other people while great traders will work for themselves. Does that make sense?

I could of course be wrong. Perhaps there are some amazingly good traders that work for fund managers but my question is why? Surely after a couple of years of stellar performance and presumably fantastic bonuses they'll start trading their own accounts and leave fund management...

DT -

i saw your original point and assertion; just decided to take a personal tangent from one individual trader. since i don't yet fit into the mega trader, maybe i should apply to a fund manager

as for your theory, i think it is completely sound. i think it pretty well follows nearly any other group scenario. the VAST majority of a group will cluster MP style in the middle. within trading there are several sub-groups, each with its own normalized distribution. i think the extreme traders (you know, the ones trading on Quotreks while base jumping ) know they are not like the middle-ground and know that the rewards are diproportionate to their individual abilities. meanwhile, mediocre to poor traders can actually fare much better trading for a fund manager. if i suck as a trader, but can get a job trading OPM that has juicy salary, perks, and incentives, WTH not? for me the middle-ground is a step up from my skills.

what's funny is even extremes end up with their own intra-group normalized distribution. it's like pro sports, like basketball. millions play basketball. tens of thousands letter in basketball in highschool. thousands play ball in college. hundreds enter the NBA. but in the end, you will have one scoring champion (the extreme extreme) and a large midsection of high-scorers (the 'regular' extremes). this group of middle extremes would still lay waste to the tens of thousands not playing in the NBA, but within their very narrow sub-group they are 'common'. same in trading and funds, i would guess.

take care

omni

BTW: dunno if it's obvious yet, but i LOVE the constant parallelisms between sports and trading.

The parallelisms are good
That's how executives of big companies justify their salaries - they compare themselves to rock-stars. They say that they are the corporate equivalent of rock-stars.
Personally I think that all executives should be paid a very small salary and the incentive should be from delayed stock or stock options. Delayed by about 10 years so they can't cook the books etc...

The reasons that someone might put on a trade are amazingly diverse. If you ever get the chance to go into a prop shop and watch the individuals trade and ask them why they traded then do it. You will learn so much about human psychology and how many different ways the market is being traded.

Can you make 10 ticks profit a day? Every day? On average?

If so you' can be a millionaire in a few years. Even when you start with only $10,000.

I found a quote in some book:

The best way to have one million dollars when trading futures is to start with two million...

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Originally posted by rverheyen

The best way to have one million dollars when trading futures is to start with two million...

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Yes, this is a famous quote:

How do you become a millionaire trading the stock markets?
Answer: Start off with several million.

Remember that this is not a net-zero game. This is a negative game. If you combine the winners and losers money each day it is less that the two parties started out with. A chunk of that money has been skimmed off in services: Commissions, software, feeds, equipment etc.