TOTW What is a reasonable annualised rate of return for trading?

Sharky

Admin
5,647 439
This week's TOTW is about managing your expectation as a trader.

What is a reasonable annualised rate of return for trading?

Unless you have a standard by which to judge your performance, it's impossible to know how well you're doing, or what you're doing wrong.

For the purposes of the question, let's assume that the rate of return is calculated after costs and on an unleveraged basis.

Last week's TOTW: If you could go back in time, what trading advice would you give yourself?
 
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ffsear

Senior member
2,250 497
Depends how you look at it...

If i have a £10,000 account and I end the year with £20,000 then I've made 100% right?

Or have I?

If for every trade i'm risking 2% of my initial £10,000 (Or £200 per trade).
Lets say that it took me 300 trades to make that £10,000 profit. Then actually I've risked more in the market then my account suggests. 300 trades risking £200 each is actually £60,000

So maybe my return should be 16% not 100%
 
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NVP

Legendary member
37,768 2,101
well +0.0001 % is more than reasonable for first few years in the game ........until you get your sh*t really together............

then for me its simply the volume multiple of % return per trade.....the more volume you can trade in the year the more you will earn ..........

N
 

Sonicscooter

Experienced member
1,811 351
I'm sorry Sharky, the thread has to stop at Dow Jones's post........well at least for 90% of members.......this could be your slowest Friday thread ever......:LOL::p:LOL:



Happy Days.......:)
 

Pferd

Active member
132 16
Bearing in mind we are in the age of leverage or super leverage, this is a question I ask myself often....

It is really fair to calculate ROI on your capital or in the nominal amount you actually trade? I understand you can blow your whole account with one very bad leveraged trade, but equally I don't think it is fair to calculate your return based on a figure that actualy has no relation to the amount you are actually trading (in case of using leverage).

Somewhere in the middle must be the answer....

It is like the guys who bet in sports (surely somebody can go deeper into this). Some of them don't count the ROI on the capital they have but on the volume they bet. Surely they follow risk percentage based bets, but it is not the same to bet 10,- EUR in a match than the same 10,- EUR in ten matches, give or take wins and losses. If I understand correctly this is in line with the point NVP is trying to make.
 

NVP

Legendary member
37,768 2,101
agreed - scalping is "super leverage" because it can be ............
 

donaldduke

Experienced member
1,665 257
This is like asking how longs a piece of string.

You ror depends on your method + market conditions.

In outlier years like 1987 or 2008 you can print money with most good methods, 400%+ returns.

But most of the other times you going to be lucky to make over 100% a year.

You can always leverage and bet big any time you want to and try to make 100% in a month, but you can lose big just as easily.

50% a year is a realistic return target, and if market conditions are very favourable you get to make a lot more. Also to bear in mind, just like there are upside outlier years, you will also get some on the downside to, you could have a losing year even when trading with a good method.
 
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brewski1984

Senior member
2,073 356
An uninterestingly boring low percentage. The problem is unless you have enough money that a 10% increase is a worthwhile use of your time then what's the point. The only way I'd ever make a living from trading is to start with 1k and in one trade majorly leverage my way up to a decent bank roll... and we all know how likely that is to happen!

I'm literally better off doing 1 hour overtime a week.
 

Forexmospherian

Legendary member
39,928 3,301
This is exactly "how long is a piece of string " question - as donaldduke has already said.

Yes - I would nearly agree with DJ that maybe 85% of all retail traders lose 90% or more of their money invested - the retail brokers obviously sell the good side saying 25 -35% of all traders make money and the institutions due their best to hide all their gains - using every excuse and cost possible.

I am just waiting now for a newbie trader to say and prove via his live account that all the pro's in the trade are useless and I as a retailer who has made between 250 and 400% per annum off a decent size retail account is also useless - via the following facts - ie

Ok so a newbie - only been going 6 months and he has in two months just taken his live account up 500% - yes in 2 months- - Then they show the facts -

14 trades - 10 correct - (4 brilliant) - and the capital account goes from $100 to $510 - in yes approx 8 weeks.

He is immediately visualising in his mind - well if I can do that - I should make at least 1000% per annum and if I grow from $1 a pip to say $100 a pip - I will be a millionaire next year

Why are all these Hedge Funds so useless only making 25 -50% per annum on a good year ??

Then you start looking at the facts

Firstly - maths anomalies - yes 500% increases on small amounts of money say just £10 are easy to obtain

Try doing that with a few million of capital - ie taking $1 million to $5 million is like comparing running a marathon in say 4 hrs - to running round the world in just 40 days - lol

Conclusion here then - the smaller the capital account - the easier it is to grow - whether using 2% stake size or even 10% stake size - its just does not really matter - its money that most retailers can afford to lose

Moving on - if you were working with a say $50 million capital account - there would be no way you would put 10% or even 3% on as stake. I have never worked in La La land - ie a Banks tradings division but I have heard the risk might be kept to like 10 to 20 times smaller % than what you would use as a retailer.

Any Bank trader please tell me if I am wrong etc.

Also you would have to adhere to very strict rules and disciplines etc - ie you dont just have a punt etc

So 2% to 5% gains on a massive capital account per month would be looked upon as being good

On $10k or even $50k - its really cr*p -

Retail traders have so many advantages over the trade. They are their own boss and can use their own rules. If they want to put just 1 % stake on or 5% stake - its up to them. They only have to follower - not lead etc

If they lose $1k or even $5k - they will not get sacked and its hardly the end of the world if they are young with a possible 25 -35 years of earning money ahead

So all retailers should be - once they are experienced and have a plan that works - not on 14 trades - ideally 500 or if a scalper - a thousand or so be looking at a 20 day trading month and making anything from 2% to 10% per day - knowing normally if they day trade they might have 6 -8 bad days a month.

Bad days need to be limited to really under 4% if you are using 1 or 2% stakes - not losing 10 or 20% - even if only on just a $1000 account.

Then when they get more confidence and have even suffered a few black swan events like losing 10 trades in a row or something higher they will act differently .

They will not be looking at then 100 or 500 or even 5000% increases every month ( yes as we know all possible on small accounts ) but think - anything over 10% net per month risking max of 2% stakes is good

Just to explain now that if you try and add compounding into the equation as well - you will do your head in as well .

Trading on say 15 lots or 25 lots is just totally different to trading on $5 - your head might cope with losing $200 of your own money in a few hrs - but it will not like losing $20k in the same time - even if you r capital account is well over $100k +

Personally if you are a retail trader with an account of under $25k - if you cannot make over 50% part time then you are still not quite there and if you are full time with an account between $30k and say $120 k - you should be setting your bar at over 15% per full month - otherwise change your method - or improve - easier to say than do I know - but its all possible - believe me - its just that it is with only maybe 5 -10 % of all retail traders

Its all in the mind as darktone says - and of course its a really good point - sort your mind out and then trading is easier

Regards


F
 
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kimo'sabby

Experienced member
1,622 287
This is exactly "how long is a piece of string " question - as donaldduke has already said.

Yes - I would nearly agree with DJ that maybe 85% of all retail traders lose 90% or more of their money invested - the retail brokers obviously sell the good side saying 25 -35% of all traders make money and the institutions due their best to hide all their gains - using every excuse and cost possible.

I am just waiting now for a newbie trader to say and prove via his live account that all the pro's in the trade are useless and I as a retailer who has made between 250 and 400% per annum off a decent size retail account is also useless - via the following facts - ie

Ok so a newbie - only been going 6 months and he has in two months just taken his live account up 500% - yes in 2 months- - Then they show the facts -

14 trades - 10 correct - (4 brilliant) - and the capital account goes from $100 to $510 - in yes approx 8 weeks.

He is immediately visualising in his mind - well if I can do that - I should make at least 1000% per annum and if I grow from $1 a pip to say $100 a pip - I will be a millionaire next year

Why are all these Hedge Funds so useless only making 25 -50% per annum on a good year ??

Then you start looking at the facts

Firstly - maths anomalies - yes 500% increases on small amounts of money say just £10 are easy to obtain

Try doing that with a few million of capital - ie taking $1 million to $5 million is like comparing running a marathon in say 4 hrs - to running round the world in just 40 days - lol

Conclusion here then - the smaller the capital account - the easier it is to grow - whether using 2% stake size or even 10% stake size - its just does not really matter - its money that most retailers can afford to lose

Moving on - if you were working with a say $50 million capital account - there would be no way you would put 10% or even 3% on as stake. I have never worked in La La land - ie a Banks tradings division but I have heard the risk might be kept to like 10 to 20 times smaller % than what you would use as a retailer.

Any Bank trader please tell me if I am wrong etc.

Also you would have to adhere to very strict rules and disciplines etc - ie you dont just have a punt etc

So 2% to 5% gains on a massive capital account per month would be looked upon as being good

On $10k or even $50k - its really cr*p -

Retail traders have so many advantages over the trade. They are their own boss and can use their own rules. If they want to put just 1 % stake on or 5% stake - its up to them. They only have to follower - not lead etc

If they lose $1k or even $5k - they will not get sacked and its hardly the end of the world if they are young with a possible 25 -35 years of earning money ahead

So all retailers should be - once they are experienced and have a plan that works - not on 14 trades - ideally 500 or if a scalper - a thousand or so be looking at a 20 day trading month and making anything from 2% to 10% per day - knowing normally if they day trade they might have 6 -8 bad days a month.

Bad days need to be limited to really under 4% if you are using 1 or 2% stakes - not losing 10 or 20% - even if only on just a $1000 account.

Then when they get more confidence and have even suffered a few black swan events like losing 10 trades in a row or something higher they will act differently .

They will not be looking at then 100 or 500 or even 5000% increases every month ( yes as we know all possible on small accounts ) but think - anything over 10% net per month risking max of 2% stakes is good

Just to explain now that if you try and add compounding into the equation as well - you will do your head in as well .

Trading on say 15 lots or 25 lots is just totally different to trading on $5 - your head might cope with losing $200 of your own money in a few hrs - but it will not like losing $20k in the same time - even if you r capital account is well over $100k +

Personally if you are a retail trader with an account of under $25k - if you cannot make over 50% part time then you are still not quite there and if you are full time with an account between $30k and say $120 k - you should be setting your bar at over 15% per full month - otherwise change your method - or improve - easier to say than do I know - but its all possible - believe me - its just that it is with only maybe 5 -10 % of all retail traders

Its all in the mind as darktone says - and of course its a really good point - sort your mind out and then trading is easier

Regards


F


What kind of clown sits at home all day gambling with a 100k spot forex account? Are you ill?
 
 
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