Expected Return On Capital Query

This is a discussion on Expected Return On Capital Query within the Fixed Odds & Binary Betting forums, part of the Markets category; Hi All, New to the board, Trading and to Binaries. Do however have over a decades experience in the Investment ...

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Old Jan 15, 2005, 9:01pm   #1
Joined Nov 2004
Expected Return On Capital Query

Hi All,

New to the board, Trading and to Binaries. Do however have over a decades experience in the Investment Banking field in a non trading/dealer role based on the trading floors so have a reasonable understanding of some of the markets and how pro's trade/deal as I have worked closely with them for a long time and on their advice now decided to try this myself & see if I have the aptitude & ability to succeed.

As the heading suggest please can someone tell me what would be a good return on capital as last week after paper trading for 5 weeks I took the plunge and finally put the hard earned real stuff down on the FTSE100.

Over this 1st week made a 75% profit. Which using pure logic I believe is a very good result.

However, I am a little disappointed with myself as it should have been much closer to 90-105% but I made 2 novice errors. First was Buy instead of Sell as I made a snap decision just before the Trade based on 1 piece of late breaking news. Lost 30% of my capital on that 1 error as could not get out of the trade in time as tied up in meetings allday. The next was just pure human nature Greed by not selling when the market was clearly not going to recover yet I dearly wanted it to so could recoup my earlier losses. It only made me more determined and I then later in the week fully recovered my Capital & a tidy profit on the next batch of trades. I look on my mistakes as positives as I only lost high 3 figures and not more serious money.

For this next trading week I am looking for 75% again. Am I being overly ambitious here?

Gentlemen your thoughts on this would be most welcome.
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Old Jan 15, 2005, 9:57pm   #2
Joined Dec 2001
How long is a piece of string?
If Trader A makes 30k a year from a stake of 10k is he better than Trader B who makes 250k a year from a stake of 250k ?
It all depends on how much you need to make in order to support your lifestyle.People hark on about ROCE but it all boils down to pounds and pence at the end of the day imo.

Personally , I aim to achieve 10% a month non compounded from a six figure capital base.Basically means I have a poor ROCE compared to other traders but earn a lot more in £'s and pence.

If you are making 75% a week you must be some of genius or are playing with peanuts or in your case , paper!!
Any really good trader just needs to protect the downside, the upside comes naturally in any type of market so perhaps losing 30% of your capital on 1 trade is what should concern yourself with.
Good Luck.
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Old Jan 15, 2005, 10:48pm   #3
 
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Joined Oct 2003
75% a week, imagine how much you could make in a month, a year, 2 years. You'd be a millionaire. I guess you've already done the calculations.

Also you are probably filled with confidence , but in reality your early big wins may do more damage than good. Emotions are a very bad thing in trading, most of us find this out the hard way.

If you are trading with low capital, often the only way forward is to take high risks and with it comes high gains or losses. If you do have a decent run and make some money, withdraw some and at least enjoy it, because with a 30% loss per trade a bad day or two and you are bust.

Last year I traded a fixed odds ccount, I started with just £70. After the first week I had £500, the second I had got it up to £1000. After that I withdrew £500 everytime I got to £1000. After a month I had made £2000. I then turned the £500 into £20 with some bad/unlucky/stupid trades. I had a good run and made £2000, so I was pretty pleased and got a nice holiday out of it. You can make money with fixed odds, but it is as difficult as any form of trading. Take too high risks and in the end you will give all the money back.

My main account this month is up 34%, which is a good result. I have won 38% of trades and my average win is 22%. My average loss is 8% (largest loss was 11%). Even though that is a lot better than 30%, my risk is still to high and I am pretty lucky to have made the profit I have.

5 weeks paper trading and 1 week real trading will give you no idea of how you are going to do, it could be more luck than judgement. If in 6 months time you are still bringing in results like that on a consistant basis, better to keep quiet and bank you profits.
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Old Jan 16, 2005, 7:58am   #4
 
BroadSword's Avatar
Joined Mar 2004
Quote:
Originally Posted by nobrainer
...People hark on about ROCE....
Excuse the basic question...I assume ROC is 'return on capital', but what does the 'E' mean?
Thanks.
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Old Jan 16, 2005, 8:32am   #5
Joined Aug 2004
Quote:
Originally Posted by BroadSword
I assume ROC is 'return on capital', but what does the 'E' mean?
Expected or expectation? (Probably not expectoration, that's something different, isn't it?).
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Old Jan 16, 2005, 10:52am   #6
 
pogle's Avatar
Joined Apr 2002
Quote:
Originally Posted by BroadSword
Excuse the basic question...I assume ROC is 'return on capital', but what does the 'E' mean?
Thanks.
Return on Capital Employed

i.e. the return on how much of your capital is actually working (the margin you have to put up) rather than the capital sitting in your account.

I'd imagine this figure is usually significantly higher than ROC (unless you've bet the farm).

pogle
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Old Jan 16, 2005, 4:01pm   #7
Joined Nov 2004
Greed Is Good started this thread Thanks for all the feedback everyone. Most helpful.

I don't actually need to trade for a living as I already have a fairly substantial income from my regular day job in the square mile. I am merely seeing if I can become profitable @ this. Hence my username!!

If I can maintain my winning streak then I already have a long term plan & several exit strategies already mapped out to minimise loss & am disciplined enough to bank 50-75% of the winnings. Eventually I hope to get into the position where I am trading with someone else's capital all of the time.

I suspect that the new trading week ahead will prove whether or not I really have what it takes as I cannot believe it is all luck as I won 10 out of 12 trades (7 of these were because I made the right call @ the right time based on my market knowledge). I took what I believe were calculated risks along the way but as I am not playing with large capital to start with seems to be my only way to increase my leverage without taking a lifetime.
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