How much should a "good" system make annually?

[expensif]

Hi, I'm playing around with making my own system.
I'm only curious of how much a system should make to be really good!

Ok, I understand that a system that makes 1% is effective when you reinvest over a thousand years and all that bull. But I would like to know how many percent anually one really should be aiming at?

Beating the S&P or other index? That doesn't seem to be hard, or is it?

 

[Trader333]

There are traders on this board who make upwards of $2000 a day. If you multiply that by 5 days and then again by say 40 weeks a year then it is possible to make $400K a year.


Paul

 

[hornblower]

depends on what you trade,
and how long you trade,
and how much you have on the trade
spread betting £1 per point
£10 per point
£50 per point ,
you will have to work it out yourself

trader 333 is a very experienced trader, and I hope will be making good money each week

 

[dc2000]

are you talking about a system or a trading plan

A system is only a pre defined way of entering and exiting a market

Capital management is what makes money

aim for 15% I would say thats reasonable in the early years

 

[pssonice]

How much should a "good" system make daily? should be your question.

every system is making money anually.

The most important question is :How much could a "good" system lose daily?

 

[pssonice]

"How much could a "good" system lose daily?"

How much should a "good" system make daily? should be your question.

every system is making money anually.

The most important question is :How much could a "good" system lose daily?

 

[hornblower]

How much should a "good" system make daily? should be your question.

every system is making money anually.

The most important question is :How much could a "good" system lose daily?

the advice was so good you said it twice

 

[expensif]

are you talking about a system or a trading plan

A system is only a pre defined way of entering and exiting a market

Capital management is what makes money

aim for 15% I would say thats reasonable in the early years

Well I guess I'm talking about a system, i have started to learn to program metastock
and thus have developed a bunch of systems that I would like to know if they are any good or just garbage.

I don't really like to talk about dollar amounts, I'd rather talk in percentage. Because if i invest 1000000 i am more likely to get $10 every day, than if i invested 1000, just to give an example. right?

Therefore a system that gives a profit of over 15% (annually) or beating the index or beating a buy and hold approach could be considered worth using?

What is a realistic gain for a pro then? Can 100% ever be reached?


Isn't a system that makes 15% annually (or whatever amount) really the holy grail?

 

[Windowsill]

depends on what you trade,
and how long you trade,
and how much you have on the trade
spread betting £1 per point
£10 per point
£50 per point ,
you will have to work it out yourself

trader 333 is a very experienced trader, and I hope will be making good money each week

The above is right. However if you worry about all this you will not get anywhere.Just focus on Pips/system, so long as you find a profitable way of trading, regularly/often, make sure you have the downside sorted as well as the probable gain.....you should be able to compound gains and this is a very profitable way of making money..

 

[Tuffty]

Money management can increase or decrease the % gain, along with risk. I relate % gain to risk taken. A return of 15% may be great or not depending on what has been risked to get it.

 

[fxfollower]

reduce taxes ?

There are traders on this board who make upwards of $2000 a day. If you multiply that by 5 days and then again by say 40 weeks a year then it is possible to make $400K a year.


Paul

Paul,

Do you know of any profitable traders that trade under a limited liability UK company to reduce taxes, or are there better ways to reduce taxes for traders who prefer direct market access executions and live in the UK (rather than spreadbet or live elsewhere)?

 

[dc2000]

Well I guess I'm talking about a system, i have started to learn to program metastock
and thus have developed a bunch of systems that I would like to know if they are any good or just garbage.

I don't really like to talk about dollar amounts, I'd rather talk in percentage. Because if i invest 1000000 i am more likely to get $10 every day, than if i invested 1000, just to give an example. right?

Therefore a system that gives a profit of over 15% (annually) or beating the index or beating a buy and hold approach could be considered worth using?

What is a realistic gain for a pro then? Can 100% ever be reached?


Isn't a system that makes 15% annually (or whatever amount) really the holy grail?
__________________

The "Grail" no but a system that gives a consistant profit over time can be considered an edge

100% on capital return possible but very rare
Pro's make relatively small % gains on capital

 

[frugi]

Moved from another thread as it seems more relevant here ...

im not one to blow my own trumpet, but i did over 25% easy this month. it has been a good month, but not fantastic.

there is no way i would consider myself the best in the world.

i know guys who regularly pull down 50%+ easy - but then its all down to money management and how much you keep in your account v margin required.

Hi Charlie!!!

when you say you made 25% easy I presume you are talking about return on margin right??? who would you say are some of the worlds best equity traders?? The first name that springs to mind is Steve Cohen at SAC, undeniable one of the best equity trading funds. His average return is 45% net over the last 10yrs or so... so seriously if you made 25% per month you would be the worlds best trader! I dont know how much in terms of size you trade but i sugggest if you want to trade serious bucks, professionally, you got to look at nominal returns, not returns based on leverage trades through margins...this is the industry norm....

I think it is fair to state returns in terms of margin used, or actual capital employed.
E.g. £25k will allow one to trade say 30 lots of YM futures which are worth about $1.7 million.
If I made £6250 per month trading 30 lots with £25k in my account, I'd call it a 25% return not a 0.69% one. Not that I'd recommend going in fully margined for every trade, of course.
This way one is simply stating the return on one's own capital employed, regardless of size per trade or what any position is notionally worth.

Remember the leverage will magnify any losses in the same way.

If I lost all my £25k stake doing this I'd call it a 100% loss not a 2.8% one. The former is a practical, real world measure.

If one uses this accounting method, there are plenty of profitable traders who make >1% a day or >20% a month consistently. Very talented ones can make much more. It really isn't that unusual.

However I am painfully aware that were I forced to use $1.7m to trade DIA stock with exactly the same method (but with no leverage) then that 25% monthly return would deflate to a pitiful 8.3% per year. Quite a sobering thought and almost makes me feel sorry / have new respect for these fund managers who have to trade this way. Thank goodness private traders can enjoy the benefits and flattery of margin. And the added risk / magnification of losses, of course, which goes some way towards justifying the way we calculate our returns, I would say.

 

[Trader333]

Do you know of any profitable traders that trade under a limited liability UK company

I dont know of any but it is important to understand that each individual circumstance is different. As such there is not a one size fits all approach and professional advice should be taken as to the best approach for tax purposes.


Paul

 

[tech_trader]

Lots of good answers. I look for a system to make 10-15% per year using no leverage. Drawdown should be no more than 3% or so at that level.

 

[fxfollower]

I dont know of any but it is important to understand that each individual circumstance is different. As such there is not a one size fits all approach and professional advice should be taken as to the best approach for tax purposes.


Paul

Very very aware about the individual cases, circumstances, trading styles etc etc. Thanks for your answer.

 

[NotQuiteRandom]

Hi, I'm playing around with making my own system.
I'm only curious of how much a system should make to be really good!

Ok, I understand that a system that makes 1% is effective when you reinvest over a thousand years and all that bull. But I would like to know how many percent anually one really should be aiming at?

Beating the S&P or other index? That doesn't seem to be hard, or is it?

In my opinion it is not relevant 'how much' you make in a year as this will always be a function of the quantity of capital that you employ.

More to the point, how consistent are your returns?

A few simple measures that you may consider would be your variance of returns from time t0 to t1, t2, tn etc. Your maximum drawdown, your downside deviation and the statistical significance of your results.

If you are getting an (unleveraged) Sharpe ratio > about 1, have a maximum drawdown that you can live with and can remove any subjective process from the system, you are probably onto a winner.

I have designed many systems over the years and much of what constitutes a 'good system' is a matter of personal taste.

I have one system which uses a money management module comparable to the martingale betting model. It has some fairly major draw downs but reverts quickly when it does. The issue here is maintaining margin (and faith!) when things get messy.

From a 'sleeping at night' perspective however I prefer this to my vol arb system which sometimes runs some sizable naked index option puts. Both work but nothing is perfect when sufficient risk is deployed to generate alpha.

So, my long winded answer to your question..... Look at the risk / return, not the return.

Good luck.

NQR

 

[damianoakley]

Well I guess I'm talking about a system, i have started to learn to program metastock
and thus have developed a bunch of systems that I would like to know if they are any good or just garbage.

I don't really like to talk about dollar amounts, I'd rather talk in percentage. Because if i invest 1000000 i am more likely to get $10 every day, than if i invested 1000, just to give an example. right?

Therefore a system that gives a profit of over 15% (annually) or beating the index or beating a buy and hold approach could be considered worth using?

What is a realistic gain for a pro then? Can 100% ever be reached?


Isn't a system that makes 15% annually (or whatever amount) really the holy grail?

Hi expensif,

To give you an example of what is possible, I personally make about 50% a year on my trading account. My best ever year was about 108%.

I am happy with those percentages as I only spend 1 hour each day trading. There will be traders who trade more actively than me who can probably make much more than the returns above because they are using a different trading style and physically putting in more trading hours.

For example - if I was a daytrader at the computer for 6 to 8 hours a day, then I would probably want more than 50% a year in order for me to justify my considerable time investment.


Thanks

Damian

 

[RunTheNumbers]

Hi expensif,

To give you an example of what is possible, I personally make about 50% a year on my trading account. My best ever year was about 108%.

I am happy with those percentages as I only spend 1 hour each day trading. There will be traders who trade more actively than me who can probably make much more than the returns above because they are using a different trading style and physically putting in more trading hours.

For example - if I was a daytrader at the computer for 6 to 8 hours a day, then I would probably want more than 50% a year in order for me to justify my considerable time investment.


Thanks

Damian

I trade a number of swing trading systems (all EOD) - I still work. I have a fairly high tolerance for drawdowns and use leverage through a spreadbetting platform in a controled but reasonably leveraged manner.

My performance has been satisfactory this year. I have matched the theoretical performance of my system quite accurately (including slippage) and in doing so have achieved over 500% return since the beginning of March 06.

I now trade an account in the 6 digits as a result.

Regards

Ben

 

[damianoakley]

Good on you Ben.

When you say that you "have a fairly high tolerance for drawdowns", does that mean that your risk per trade is therefore quite high?


Thanks

Damian