The Holy Grail of Trading

Seeing as I have tried many of the decent (seemingly) services on the go and had next to no good news to report I decided to take a closer look at the idea of a Holy Grail in trading and investing.

At some point any reputable source has mentioned that there is no such grail and anyone claiming that they have found a fool proof method for making lots of money are just marketing their latest gimmick.

So, first is to define what the Holy Grail of trading would look like.

Fast easy money?
Low risk high yield?
High risk with low drawdowns?
Double in 1, 2 or 3 years?

How about guaranteed profits...zero chance for losses but not spectacular gains?

That last one I can live with as it is not overblown or make outrageous promises. The last one is mine and is my next pet project.

While I like the low risk of a spread I am not fond of the absolute risk involved. A $2 credit spread invariably risks $200 per contract less the premium collected for the short side. In order to show a decent profit given the commissions 5 contracts is about the minimum that will work efficiently so there is somewhat less than $1000 risked...even though it is not a high risk factor due to the strike distance from the starting underlying price it is still risked.

Keeping to my $10 per day per $5,000 target might be tough so I will throw that out the window and see what I can get...without any risk.

After my discussion with my daughter the other day and my tweaking of the annual returns and long term account growth I decided that a no risk strategy should aim for a minimum of 15% annual returns in order to be worthwhile. 15% over ten years results in a 344% simple return or $50,000 becoming $222,000. Respectable.

It should not be difficult even if it is a bit complicated to setup. Timeframes for trades could be longer, in the 6 month range perhaps, which makes the nuisance of complication easier to bear.

Upfront costs should not be huge so it can be worked in a smaller account.

Taxation is the only real hurdle here as anything I think of will most likely not work in a registered account. So I will need to determine how large a factor taxes will be... trades should be able to make use of the capital gains method of taxation at least. I believe that these are taxed as 1/2 of the gain at my marginal rate so it effectively cuts the taxes, more or less, in half.

Off to apply pencil to paper and see what I can come up with.

Jeff.