Expected Return On Capital Query

[Greed Is Good]

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.

 

[nobrainer]

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.

 

[adrianallen99]

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.

 

[BroadSword]

...People hark on about ROCE....

Excuse the basic question...I assume ROC is 'return on capital', but what does the 'E' mean?
Thanks.

 

[Roberto]

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?).

 

[pogle]

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

 

[Greed Is Good]

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.

 

[Greed Is Good]

Just a quick update for those still interested.

Yesterday had another incredible day. Did approx 70% ROCE.

Today blew the lot and then some by being as overconfident as Adrianallen99 said I would be!! LOL you were so right.

However, have managed to stage a strong recovery by jumping onto the DJI this afternoon and am currently looking @ recouping almost my entire loss so will only finish £50-75 down overall on the day. Not bad considering but obviously I need to examine why I made the wrong decision earlier today as I should have been well up with the market swings today....

 

[Greed Is Good]

Another quickie update. Still up over 75% ROCE (on this weeks not last if I combine the 2 then it is over 150%).

Just had another incredible run on the DJI. Got in around 14:00 after tracking it for 3 hours and holding fire. Trusted my instincts as could not see any major upward trend or market news to stop a retreat. Got handsomely rewarded with yet another huge drop.

Can it last I ask myself as also had a few losing trades on the FTSE midweek when it dithered around the 4800 mark but even with those still well ahead.

Next week I aim to do better!

 

[Greed Is Good]

Now up a quite incredible 700% plus ROCE in 3 weeks. Is that good or bad.

Won over 80% of my trades this week. Lost interest in the FTSE midweek when there was little movement moved over to the DJI and got in on almost every major shift @ the right time.

Wonder if it is still just an incredible lucky streak or I actually have real talent @ this. Guess the only way to find out is to keep on improving.

 

[stevespray]

Greed is Good…..

I don’t want to bring you down to earth with a bump but you can not carry on with this type of trading – what you appear to be doing is little more than gambling. I’d be very surprised if you ever find yourself managing other peoples money based upon what you have written. The key to trading over the longer term is capital preservation. Please don’t take offence – for someone who works in the ‘square mile’ you appear to have very little appreciation of capital preservation or money management. These two aspects are actually more important than the choice of ‘the right trade’. You have quoted a number of percentage figures based on your dealings to date. These quoted figures appear to show that you are more than likely exposing yourself to risk of considerable draw down. Draw down is when you suffer a loss to your trading capital. When you trade big lots (which require huge percentages of you capital) you risk a situation developing where you would be forced to downsize your trade size due to a run of losses. Everyone experiences a run of losses. Your overall success will be determined by how well you deal with your losses. Most experienced traders, who have been around the block a few times, will tell you that they will rarely risk more than a few percentage points (normally 2% or 3%) on any one trade. I grant you that there will always be exceptions to any set of rules and some traders do survive in the longer term even though they don’t follow such a tight money management plan. It should be noted however that these people don’t succeed because they break the rules, they succeed despite breaking these rules.

I would personally suggest that anyone who can return 10% per month on a sizable lump of capital, over an extended period of time, should be considered an exceptional trader. These people are few and far between. Many people who turn a profit in the short term think that they have sussed it and go on to fall foul of the probabilities created by poor money management when they try to trade for more than a few months.

If you really want proper advice then you are going to have to post more about your trades. To adequately asses what is going on we need to determine the risks that you are taking. To me they currently sound unacceptable – little more than betting on the Red / Black at a roulette table.

Sorry to burst the bubble,
Steve.

 

[Greed Is Good]

Dear Steve,

Thanks for your wise advice.

Do not worry about bursting my bubble as it is currently made out of titanium

I wish to be a little vague here as I believe I have a genuine edge on the market mainly due to my personality type & IQ but will say that I am doing very nicely indeed and not losing very often.

Have also taken yours & others advice about risk aversion & reducing bet size to protect my trading capital to fight another day etc etc.

Last week was just amazing for me as I hit a lot of the market shifts @ just the right moment.

I hope that you & everyone else reading this has a very profitable week ahead of you.

 

[Smalldog2]

Good work, most of the poor old traders here are just making a break even exercise, because they are applying what they have read in the books. I started making my own rules and my trading took off like a bullet.

I trade 2.5-3% of my capital on any one trade. I look for an average return on the day of 10% of my capital. I am averaging a 67% winning trades a day, I think that is not to bad, if I took the cream of my signal I could hit 80%, I like to trade hence, I take the marginal ones as well.

If you are 80% correct you can risk more of your capital, even 20% on a trade is acceptible, don't listen to the skeptics here, it's all about win to loss ratio, yours is good.

Since throwing away the trading books and starting from scratch I average my account up by about 50-100% in a week for the last 3 months, after loosing well over 30K, my wife said no more until you can do it. Thats when I thought all I have learned is wrong, and I started to write my own rules on trading. They work, sounds like yours do too.

My minimum target is a modest 10% a day, sometimes when I can get the streak days I can make a lot more, 200 points on a sigle trade.

I think your doing well, keep it up. I would say be carefull on your risk, my max on some of my better signal would be 10% of capital, but these are like 80% probability and above.

I find this a very uplifting post, and its time to start educating traders that what they are taught does not work, there are better alternatives.

Smalldog

 

[Greed Is Good]

Good work, most of the poor old traders here are just making a break even exercise, because they are applying what they have read in the books. I started making my own rules and my trading took off like a bullet.

I trade 2.5-3% of my capital on any one trade. I look for an average return on the day of 10% of my capital. I am averaging a 67% winning trades a day, I think that is not to bad, if I took the cream of my signal I could hit 80%, I like to trade hence, I take the marginal ones as well.

If you are 80% correct you can risk more of your capital, even 20% on a trade is acceptible, don't listen to the skeptics here, it's all about win to loss ratio, yours is good.

Since throwing away the trading books and starting from scratch I average my account up by about 50-100% in a week for the last 3 months, after loosing well over 30K, my wife said no more until you can do it. Thats when I thought all I have learned is wrong, and I started to write my own rules on trading. They work, sounds like yours do too.

My minimum target is a modest 10% a day, sometimes when I can get the streak days I can make a lot more, 200 points on a sigle trade.

I think your doing well, keep it up. I would say be carefull on your risk, my max on some of my better signal would be 10% of capital, but these are like 80% probability and above.

I find this a very uplifting post, and its time to start educating traders that what they are taught does not work, there are better alternatives.

Smalldog

Quit while your ahead. 4 years ago the markets & the binary platform suited this strategy for a small period of time & I was able to exploit this to my advantage. Now the conditions are not viable you have to find another binary strategy.Trust me that this strategy cannot possibly succeed over time you will gain confidence and lose your shirt. Binaries are just not a viable way to make huge amounts of money on a regular basis. I had a golden streak for about 3 months where I was on fire and making healthy returns but then the company I used decided to slow me down and delay my communications so trading became impossible. Binaries are not FSA regulated nor ever likely to be & most if not all binary platforms can/will cheat you if it suits them. Proving this will be legally difficult. I think their odds are something like 105% in their favour before you even place a trade then when/if they slow you down it will shift drastically against you.