1% profit—super

“There is a world of difference between a net profit trader and a super trader”, Schwager says in The New Market Wizards.

Getting to the level of net profitability is an exciting achievement. Not to be undermined. However, to graduate as a super trader, which I guess means being super-profitable, is every trader’s goal.

That sentence will mean entirely different things to each individual. But if we say it is relative to account, then the meaning ought to be proportional to everyone—to some extent or other.

But let’s not get too carried away with the term ‘super’. We’re not some Marvel reincarnation. Indeed, we should not associate the word exciting with trading. Better to use, calm, focused and flow.

What is possible

My aim is 1% profit per day. As a day trader, this is appropriate. Traders using, say, daily signals will need to determine their profit timeline. But that is the beauty of day trading—precisely bracketed, a start and a finish.

I previously thought that a profit for each trading session (a day for me) was inappropriate. I thought it was too precise and that a week, month or quarter was a better profit timeline. But it is too loose, too undefined. It allows inappropriate bets because we feel that we have time to correct. Trading is not an allowing game!

But I agree, a beautifully crafted methodology, edge and management come first. Once sorted, we take responsibility and narrow our profit goal to the finest of timelines.

Is it enough?

One per cent does not sound a lot. But over 200 trade days a year (allowing for weekends and time away) We are considering a 200% annual mark-up. Is this not worth the trading perseverance necessary? If we sensibly compound our risk-reward (such an increase is a challenge in itself), then we might conceivably be looking at a significant increase on the original sum.

Is this possible? It seems to have been for a very select few. But as Schwager mentioned in The New Market Wizards in the late ’80s, we are up against tens of thousands of professional traders.

Goodness knows what the figure is today and with computer algorithms.
However, if we work our edge with patience, confidence and attention, the consistent 1% incremental results are (super) achievable.

The super tanker of markets

Can we move the market? Possibly, certain markets. But we want to trade a market that has unusually high liquidity. In other words, the ability to buy and sell an asset easily and quickly.

We trade major currency pairings for this reason. But how big is the currency pairing that we trade, and can we influence it a bit?

If we consider the market we trade as the most prominent supertanker – the one that is more than four football pitches set end to end – then to move this supertanker the retail trader is as if spitting (horrible habit) at the hull.

Ah, but now we are a professional trader surely we have more influence at the level we trade. Yes, we do, we currently don’t spit too often, we have graduated to a feather duster.

To move our chosen currency pairing market, (Trillions of dollars are traded daily, particularly during the period of the Frankfurt, London and New York trade times) there are probably millions of spitters, many thousand feather duster types and everything in between right up to dozens of tugboats.

The tugs, in this analogy, represent the financial institutions – banks, pension funds, big hedge funds and the like. A few tugs need to push or pull in the same direction to move the market.

Our job is to determine, before hand, which way.