What is your annual profit goal?

[the blades]

Actually it is possible to make 1000% a year return with swing trading. If you use margin you can do that. Look at it this way:

Fully margined:

$5000 x 100% gain plus margin = $15,000
$15000 x 100% gain plus margin = $45,000

Basically you would have to double your money a little over two times per year to make 1000%. This is possible especially in a bull market.

I think margin confuses these profit aim discussions. I trade with a credit account with IG index - they've never had a penny from me. Any profits made are incalcuble interms of % gain. However, when I calculate the ammount I'm risking on any deal, it is as a % of a real trading pot. It's the value of this pot that I use to calculate % gains against.

It'd be interesting to see profit targets using this method.

UTB

 

[wisestguy]

yes , I'd like to know how margin is accounted for in % return calculations . what the hell difference does it make ? if you have $1000 in your pot , then thats the base that you will be measuring returns to .

what difference does it make how much you are margined ? that affects only your position sizes.

it is a deliberate confusion to mask the real issue about returns and that is RISK.

completely pointless if I am risking my 100% every trade even if I end up making 1000% at year's end.

all it takes is 1 bad trade and I'm wiped out .

 

[donaldduke]

You might have a credit account or margin account (where you only keep enough to cover margin)
This shouldnt effect how you calculate your figure..

As a trader you should have a notional trading amount that you use to size positions.

For example I might keep 20K in my futures account but trade (ie size my positions) as if i had 50K
(because thats how much i am prepared to dedicate to trading, if my account falls below 15K that
i would have to top it up from the 30K i have left over).

If i make 50K at the end of they year, i wont say i made 250%, but i would say i made a 100%.

 

[LION63]

Deal4Free require a 5% margin to trade shares (UK & US), as such, if your margin on a trade is £1,000, the total value of that position is £20,000. You will double your capital/margin on that trade if the shares were to move 5% in your favour. Assuming the balance in your account before the trade was £10,000, you now have £11,000 which is a 10% total return on capital employed. The figures speak for themselves and I cannot see how anyone can suggest that you have made less than a 100% return on the trade or a 10% return on total equity.

An individual who does the above successfully once a week for a year would have a 500% return. There is nothing special about that kind of performance and that is the effect of gearing.

 

[wisestguy]

well , in that case measuring returns to margin is not very helpful . if I had a credit account , then potentially , I could be making 100's% every time I had a winner - good , makes my stats even better than they are.

I agree with DD's assesment - returns should be measured by the total capital at risk not just silly margined amounts.

I must add , that some people will just put the whole pot in as margin , thereby removing this little cheat anomaly. This would be a better way to account for margins.

also , there's a good old trader's saying that goes " never meet a margin call " , and I agree with that 100% , since to do so would be to hold on to losing trades - a big no no for me.

Therefore , if you keep some of your pot extra to margins , you are already anticipating meeting margin calls - a loser's mentality , though this varies a little if you are playing shares.

 

[the blades]

Deal4Free require a 5% margin to trade shares (UK & US), as such, if your margin on a trade is £1,000, the total value of that position is £20,000. You will double your capital/margin on that trade if the shares were to move 5% in your favour. Assuming the balance in your account before the trade was £10,000, you now have £11,000 which is a 10% total return on capital employed. The figures speak for themselves and I cannot see how anyone can suggest that you have made less than a 100% return on the trade or a 10% return on total equity.

An individual who does the above successfully once a week for a year would have a 500% return. There is nothing special about that kind of performance and that is the effect of gearing.

you can calculate the % gain however you like - and it's a good barometer for your personal trading. However, the using margin calculations does seem to make comparisions between other's aims, the original topic, a bit pointless wouldn't you agree.

All that really matters to me is how much £ I've made so I can pay the bills. Then again, you need to know that you're not better off leaving your money in the bank :-0

UTB

 

[wisestguy]

I disagree , if you did that then all measurements on retruns would be meaningless , as we would all be measuring different things . anyone could then falsely boost his claim and say he was making 1500% returns yearly , and we wouldn't know what the hell he was actually measuring ! could the annual growth of his acne.

so let's be clear - returns on risk capital means , all the money in your trade account which is at risk for trading . margined money being irrelelvant to this.

also absolute returns are more relevant to large funds . if you have 300k risk capital and your return for the year is 100k , which is only 30% , but hey 100k tax free is no mean feat .
but fact remains that it could be better .

for smaller amounts , % returns to risk capital DOES matter very much . if you do 30 % on 1000 , that's only 300 a year , not terribly good , you would need higher % terms to make it truly worth your time , like maybe 200% yearly.

so absolute returns are a bit of a red herring.


" An individual who does the above successfully once a week for a year would have a 500% return. There is nothing special about that kind of performance and that is the effect of gearing. "


I also disagree with this , since one is assuming that you can make 52 winners w/o losers a year is patent fantasy.

what about the losers that will inevitably come your way , do you willfully ignore those ?

and let's be sure , topping up your margin to meet calls is a loser , since you are holding a losing position . if you are relying on always topping up margins to hold on " til they turn good " , then really your capital at risk is even higher then 1st said , since you will be pouring additional money in after the original pot to cover margin calls.

your risk will go up as well .

 

[LION63]

In the example I gave above, it was quite clear that although the return on the individual trade was 100%, the return on total equity was only 10%; I do not see how that can be disputed as that is how to account for such results. The individual using a credit account is free to decide how realistic he wants to be with his calculations, but his returns are still based on total capital available. One of the things we are forgetting is that one might try and massage the figures to fool or impress others but you cannot fool yourself.

I did not think it was neccessary to lay out a lengthy table showing various losing ratios and the effect that that would have on the returns at the end of the year, or to show how the individual doing X amount of trades per week and having a Y strike rate and a Z return per trade would fare. Next time, I will make sure I break it down in detail.

 

[wisestguy]

well , I used to use credit and damn good thing it is too.

I feel the ratios are simple . if you are on a 1000 quid credit , then your returns would be measured to that amount .

make 1000 profit for the year , return = 100% . simple . though of course return to risk on a singular trade basis is something else.

 

[LION63]

I prefer to use the ratios and accepted principles that are used by accountants, bankers and financiers but, to each his own. An individual can massage figures and statistics as much as they like in order to distort trading returns but who are we kidding?

 

[wisestguy]

well , if you genuinely feel like that , then such a discussion is meaningless . but clearly you would be in the minority , since the ratios I have discussed are well accepted in the trading communities.

figures can only be massaged if the definitions of measurements are convoluted and false , if it is kept simple and clear . I don't see the problem , especially if they can be backed with official genuine documents .


some fake traders do falsify their own records , but we still need records and measurements to tell us how we are doing . it is for us to discern what is genuine and what is not .

 

[LION63]

It is not unknown for the minority to be right. As I have previously said in respect of trading records, accounts and statistics, people can try and pull the wool over others eyes but they cannot fool themselves. The reason some major companies have collapsed in the last 10 years or so is that they started to manipulate figures and they got the help of willing professionals along the way. I prefer to do things the old way for my own clarity of thought.

 

[vetten]

Hi folks,

I`ll just put in my 2 cents worth........I think a goal should reflect at least the hours put into the game of trading + a percentage of your trading capital depending on the risks taken.
So if you`re a full time trader that`s about 40 hrs/week at say $ 20/hour for 50 weeks = $ 40,000
Added to that a percentage of your capital (not too high please) say 10% of $ 20,000 = $ 2,000
So depending on the capital one should make at least $ 42,000 a year.
Anybody doing that?????

 

[JumpOff]

Regarding margin:
Why is it usually assumed that your losses will be as large as your gains, if not larger? I hear an awful lot of 'old hands' making negative comments about the use of margin, so I'm begining to wonder what part of the whole scheme I don't understand. (and I am not being sarcastic here - I truly am concerned that I have misunderstood how margin works, becuase I do not see it in that negative way).

I thought the whole purpose of trading is to set a tight stop, and then let the winners run. Proper money management should allow you to make money even if you have more losers than gainers. Yes?

As long as your total risk per trade (including the gearing factor) is not more than 1 % of your stake (ungeared), and your risk/reward ratios are in line, what's the issue?

Vetten, you are right to point out that a trader needs to be paid for their time, but I think your hourly rate is too low. I hope a successful trader is worth more than $20/hour.

JO

 

[JonnyT]

Hi folks,

I`ll just put in my 2 cents worth........I think a goal should reflect at least the hours put into the game of trading + a percentage of your trading capital depending on the risks taken.
So if you`re a full time trader that`s about 40 hrs/week at say $ 20/hour for 50 weeks = $ 40,000
Added to that a percentage of your capital (not too high please) say 10% of $ 20,000 = $ 2,000
So depending on the capital one should make at least $ 42,000 a year.
Anybody doing that?????

In my view the target has to be £100,000 or $200,000+ else it isn't worth doing.

You can clean toilets for $42,000 per year in the UK.

JonnyT

 

[vetten]

I agree $ 20 an hour is low, but I put it there more as a basis for a discussion

 

[frugi]

In my view the target has to be £100,000 or $200,000+ else it isn't worth doing.

I'll get out of bed eagerly for 10k and consider the reveille well worth it, especially when I compare the autonomous, pure existence of literally "thinking to survive" to that of my (considerably higher earning) salaried friends. Answerable to and responsible for nobody except myself, I consider the 'lost' earnings as more than paid for by the freedom, intellectual challenge and immense personal satisfaction that trading can grant.

You can clean toilets for $42,000 per year in the UK.

You can, but would you want to? Quality of life is surely immensely more important than simple amounts of money? The work would be miserable, soul destroying, unkind to the self esteem, apt to atrophy any remaining brain cells etc., while in stark contrast the whole joy of trading is ot be found in the process of doing it, so as long as one can earn sufficient to meet a standard of living with which one is comfortable it does not matter whether it is 10k or 200k IMO.

Am I the only one who ever actually enjoys trading for its own sake? I must be doing it wrong

 

[trendie]

frugi,

nice website ! ( actually it isnt, but you admit that yourself )
your trading system is similar to JT breakout ?
( 7-9am breakout. close at 9pm. trail-stop-loss )

Is this case of great minds thinking alike ?

 

[chump]

"I'll get out of bed eagerly for 10k"...

Great ,that's very promising , let's take it further.... now what we can do about my garden that offers someone .......

" an intellectual challenge and immense personal satisfaction "...plus fresh air and zero risk !!

Jobs yours....when can you start to earn your 10k ?

Get back to me...I know you're here all week

 

[frugi]

If you grow monkey puzzle trees, maintain your ladders properly and have a circuit breaker on the hedgetrimmer I think we may be able to reach a business arrangement chumpy

Trendie yeah awful ain't it; last updated 2001 cause, erm, trading leaves me with so much free time to do my own thing, and then of course there's the night bus driving job

Re system: No, it's a case of shameless modified plagiarism and purely there to fill the gap in the middle of the screen. It did work quite well for 18 months though. I don't use it because I can't be bothered to wait for the close of every 15 min bar between 9am and 8.45pm! (This may change when TSimBO can handle closed bar BOs though.)