Profit

juanbyte

Well-known member
332 10
Hi

I think this is the right place to post.

To develope a trading system it is necessary to first define the goal i.e. what you want.

With this in mind I would like to see if we could achieve from members a concensus or range for a monthly return on capital.

I think it is possible to get a 40% monthly profit what do others think. You can put what is possible and what you would like if the two are different.
 

Helenqu

Established member
841 3
Ok well I'd be more than happy with 10% a month, that's the figure I have in my business plan and I think that is a fairly realistic expectation with Futures.
 

Mr. Charts

Legendary member
7,367 1,184
We live on the 15%-25%, often more, monthly profits I make trading US shares intraday. So yes, sometimes 40% but not frequently.
 

nobrainer

Active member
112 2
My target is 5% per week , non compounded ,on my trading capital.My new years resolution has been to withdraw funds every month, in order to keep my available margin low, so preventing me from doing any bigger trades at gni than I already do.It also keeps me hungry and prevents complacency which has def. been a problem in the past.
Hard to compare percentage targets cos everyone starts with differing capital.Its naturally far easier to achieve a high% return on a low capital base.
 

juanbyte

Well-known member
332 10
Thanks nobrain some good points

Regarding withdrawing funds this is a good idea because if you increase your bets with inline with the increase in capital the risk of ruin is the same, a good idea is maybe to withdraw half the monthly winnings.

I do think however that comparing percentages is the correct way because if you have 100,000 it is much easier to make 1,000 per month than it is to make 1,000 starting with just 2,000.
 

Uncle

Established member
671 2
Nobrain has the right idea and 5% per week equates to my 20% per month. Remember the twin evils.........FEAR and GREED are the killers when trading.

John
 

JonnyT

Senior member
2,560 22
40% per month or more is possible but I think this entails risk of wipeout.

Certainly with futures I think using a certain amount of equity per contract is probably the way to go. I know traders who specify £10,000 per contract on FTSE whereas you can trade one contract for < £1900 if you so wish. Doing that would mean a drawdown of 190 points would wipe you out, and a very minor drawdown could stop you trading.

My backtesting suggests £2000 to £3000 profit per month per contract on FTSE is possible so this would equate to 20-30% per month using £10,000 per contract. However one system I have tested has a worst drawdown of 70 points (£700) so £5000 per contract would be OK which is nearer your figure. However when you start trading multiple contracts I think protection becomes more important.

To sum up:

When starting out maybe 40% is possible, but when it becomes a living and hence serious business 20% is more than acceptable as a target.

JonnyT
 

suggy

Active member
133 0
i would aim for 1% a day, but obviously most dont get what they want. i have read that looking at points is a good way to take the greed/fear out of trading. i.e try for 20 points a day and adjust ur stake size to suit
 

cassiopeia

Active member
133 2
juanbyte

I never understand what people mean by 40% profit.

It is possible to have an exposure of 20 times your margin or more in some cases, some people prefer to define profit relative to the margin rather than the exposure. Inevitably the profit (or loss) level is very high if defined in this way but it means very little since the profit or loss depends on the margin allowed and the volatility of the underlying instrument as much as how well you are doing

I always think in terms of effective exposure rather than the margin, as if I had bought the shares, so 10 pounds per point on the FTSE100 would be in the region of £40 000 so £4000 profit is 10%.

40% a month profit as defined in terms of effective exposure is a massive amount, even with a volatile instrument and if anyone can do this consistently he/she is doing very well indeed. This is equivalent to 5700% (57 times) :eek: compounded profit over the year, so based on £10/point on the FTSE you gain £2.26 million over the year.

Forgive my skeptisism, but achieving this sort of gain without incurring large drawdowns and thereby risking your entire capital and heart attack must be very difficult.
 
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juanbyte

Well-known member
332 10
profit

cassiopia

I would define profit simply as return on capital that is available to invest.
So for every 1000 you have at the beging of the month 40% profit would bring this to 1400.
If we have 20 trading days per month this is only 1.7% a day compounded.
We will have agree to disagree on the exposure bit, yes if you buy all the shares in the FTSE you would have to layout 40,000 and your profit would be 10% but you are not (I hope). This is why people trade futures for the leverage, sorry but I do not see the point in counting something you do not use.

This is straying a little from my original post which was what other people would think would be a reasonable return.

The 40% was just my thoughts. yes this is nearly 5700% pa but in the past I have made 5501% in a month, i.e. from just over £200 to £11,300 in just 4 weeks. This was probably a one off and I was at the screen constantly for 9 hours day and I do not think that this is how the majority of people want to trade.

I am trying to develope a system with only two trades a day and a max of one hour work and just wish to find a return that would suit most.

Today it was possible to have an 80% return on capital i.e. buying the low and selling the high so acheiving just 1.7% should be possible and have less risk.

Thanks for your imput so what would you say is reasonable.
 

ChartMan

Legendary member
5,580 46
I made 8% today. Could I have made 80%? No. I would have closed every trade after 1/2 point profit and the slightest hint of a pullback, being scared wittless by the margin.
 

juanbyte

Well-known member
332 10
Hi ChartMan

I am only aiming for 2% but like you panicked and only made 1.7% today, it did go flat at the begining.

8% is great and will soon increase your capital, I only got 8% in a year on my pension.

Use smaller stakes if you are uncomfortable with the margin


Juanbyte (cos I only got one tooth :)))
 

ChartMan

Legendary member
5,580 46
You're lucky- I got -20% on my Equitable Pension :(
Words fail me. You'd think with all their clout and expertise they could make 1% compound a month...... I'd just love to manage my own fund.
Read my post again. I didn't panick. Just the opposite .:)
 

cassiopeia

Active member
133 2
A good way to establish how much profit you can make is to plot the overall % return of your overall strategy over time. (Obviously you have to use historic data to do this with all the disadvantages this brings but how else can you estimate anything?) This is a similar concept to expectancy as explained by Van Tharp.

Once the graph is drawn you then examine the maximum drawdown, perhaps this is 5%. Compare this to the maximum amount of money you are prepared to lose over a series of losses, say this is £10 000, then the maximum amount to invest is £200 000. (If you use 10% margin as reference then the equivalent figures would be 50% of total profit, still £10 000 loss and a maximum of £20 000 to invest/trade)

The result should be equivalent in risk terms whether you base it on margin or effective exposure, you are simply balancing profits with drawdowns. Of course we should be aware that the maximum drawdown could be far greater so ideally you should include as many years as possible in the analysis.

Drawdowns are really the basis behind how much profit you can make from a given strategy since if large this can impose a limit on the profitability due to the periodic erosion of capital, or in most cases it is simply the psychological loss limit you are prepared to accept
 
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FTSE Beater

Experienced member
1,518 4
cassiopeia said:
Of course we should be aware that the maximum drawdown could be far greater so ideally you should include as many years as possible in the analysis.
Hi Cassiopeia

That's great in theory, but I would say that after trading for a number of years, you'll know what you expected return will be. Unless you can backtest the strategy.

Just my thoughts :)
 
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