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

[limopcfx]

Hi guys,

This is my first post here. I am really enjoying looking at the forum and looking at forex. It is really interesting.

I am new to forex and trying to learn as much as I can. I will appreciate your help.

Just curious, why it is always said that someone with a little investment can make high returns monthly but as the investment grows up it becomes hard to achieve the same results? In both cases the investment size is negligible as compared to the total market size so in both cases his percentage of the market size is almos 0%.

So what is the difference between investing $1000 and investing $100000? if both equal 0% of the total market? I am assuming both are using the same robot for automatic trading (or within PAMM)

 

[Forexmospherian]

Hi guys,

This is my first post here. I am really enjoying looking at the forum and looking at forex. It is really interesting.

I am new to forex and trying to learn as much as I can. I will appreciate your help.

Just curious, why it is always said that someone with a little investment can make high returns monthly but as the investment grows up it becomes hard to achieve the same results? In both cases the investment size is negligible as compared to the total market size so in both cases his percentage of the market size is almos 0%.

So what is the difference between investing $1000 and investing $100000? if both equal 0% of the total market? I am assuming both are using the same robot for automatic trading (or within PAMM)

I reckon I could write a book on the reasons why - but will try and keep it extra brief

First of all forget robot trading - even if you do think it takes the emotions away

Unless you have spent over 100k's or more on a bot designed by a super computer - your normal retail type "bots" from $99 to $499 will just go stir crazy normally within 3 -6 months - buts lets say 7 months Max.

So you are back to a mechanical and or discretionary method / system and as well all know - there is not that many that can give you profits day in day out with low drawdowns etc - otherwise 85-95% of all FX traders would not be continual losers

Now - having got those reasons covered - the big reason is all down to the market and money.

I can place a live 10 lot a pip trade on within say a second - 100 lots or 250 lots might take minutes - or even up to an hour or more -o all depending on so many factors . So its easier to place trades on with smaller size lots - and easier to exit with them as well

Next point at least 95% of the working population do not earn over £100k per annum - ie £2k per week gross and say over £1400 per week net

Therefore 95% of people look upon above £1000 as a fairly large amount of money and not one you just give away

95% or so of people would all have different levels

£100 to some people is a lot and they would never risk it day in or day out gambling etc etc but then maybe 25% might say I will risk losing £250 on a trade of even £500 on a trade etc etc

Therefore to grow an account from say £500 to say £10k - or even £25 k is all within normal limits and keeping losses under say £250 or £500

BUT

Start going above 100k and then trying to grow that by say just 10% a month ( easy on small amounts ) might mean taking losses of over even £1000

Remember 95% of people think a £1000 or more is a lot to just lose on a punt

Psychology gives you a financial wall - all according to your existing wealth or earning power.

That why most traders cannot keep compounding and continually grow an account to say one million or ten million pounds in say a few years.

Maybe over 5 or 10 yrs they can -= as they adjust their psych to handle larger stakes and losses over £1k or £5k or more on losing trades.

There are another 10 reasons or so more - but said would keep it short

Hope that helps


Regards

F

 

[bredin]

Broker leverage is almost totally irrelevant since only the terminally stupid actually use that much leverage on every trade. At 500:1 you'd blow an account in 20 pips.

What matters is the amount of *your* money that can potentially be lost in a trade (ie, risk). This is what determines trade lotsize.

$150 risked over 500 pips (eg) yields 0.03 lots (3 micro) regardless of your brokers leverage ratios.

The rest of the account (say $500) determines the maximum lotsize 0.5 lots at 100:1, 2.5 lots at 500:1, 0.25 lots at 50:1.

Never let a stop get hit: Gains are added to risk, losses removed from it. this money becomes *yours* only by moving it either back to the leverage side of the account ledger or withdrawing it from the broker.


As to the OP's question: I would only say that you cant trade to pay the bills, your sights have to be much higher than that. With this in mind, annualized returns are relative to your account size and your bills

G.

 

[limopcfx]

@ Forexmospherian , @bredin

Thanks for your reply.

First of all forget robot trading - even if you do think it takes the emotions away

Why? I have seen several links of automatic trading accounts doing a decent and steady returns

Start going above 100k and then trying to grow that by say just 10% a month ( easy on small amounts ) might mean taking losses of over even £1000

I see profits or loses as a percentage of the initial investment, in any case one should be investing only if he knows the risk. a formula remains the same formula no matter the values of the variables. If a system can generate 300% annually on $1000, to me means the same system would generate the same 300% on $1000000

Of course the DD in the first amount would be less than the second, but it is the same percentage.

I am not just arguing, I am just trying to understand. I am new to this.

Therefore to grow an account from say £500 to say £10k - or even £25 k is all within normal limits and keeping losses under say £250 or £500

Considering what I mentioned above, I would like to understand more.

Would this mean that I would better keep 10 separate account each having $1000, for each to reach $10K (final result 10k turning 100k) but I can't achieve the same if all were put in a single account?

May be it will help to tell you, I am thinking of having my account(s) managed with a professional well performing account manager through PAMM, if the PAMM has 50 investors, and each investing a different amount, be it $1000 or $1000000, the profit or loss would be the same for all.

Gains are added to risk, losses removed from it. this money becomes *yours* only by moving it either back to the leverage side of the account ledger or withdrawing it from the broker

Considering the above mentioned in third quote, this means I have to keep taking profits back to my bank account or opening a new account with the broker to put small chunks in it to be traded?

Sorry if my questions seem silly or stupid, I hope you understand I am new to this and trying to understand this business.

 

[limopcfx]

Bump!

Any comments or explanation please.

 

[Forexmospherian]

Bump!

Any comments or explanation please.

Hi limopcfx

Sorry only just seen your questions

Will get round to more detail either later today or over weekend

Regards


F

 

[bredin]

@limopcfx
I really just meant that it makes a huge mental difference when you see gains as being yours.

I consider the money mine when (and only when) i move it from my broker to my pocket, until that moment it is OPM (Other Peoples Money).

Watching the absolute balance of an account can drive you crazy.

To the question of account size mattering it is more a question of liquidity at a given price, and your sensitivity to 'slippage' which is caused by either a lack of liquidity (someone has to take the other side of your trade, and if they aint there....) or the broker being a market maker aggregating a bunch of orders together for placement into the market.
If you trade big charts its less of a problem if you are hitting 100+ lots and aiming for a handful of pips liquidity is only everything.

Since youre new I would suggest a few things:
1. trade a small (<$500) account and try to double it, before depositing more. Make your mistakes here, using an 'education' account.
2. learn why markets move, and dont waste time learning every indicator (99.9% of which are totally useless)
3. write down (not here) why you want to trade at all. "For the Money" is not an answer.

G.

 

[limopcfx]

@limopcfx

1. trade a small (<$500) account and try to double it, before depositing more. Make your mistakes here, using an 'education' account.
2. learn why markets move, and dont waste time learning every indicator (99.9% of which are totally useless)
3. write down (not here) why you want to trade at all. "For the Money" is not an answer.

G.

I am not thinking of trading by myself, don't have enough time or experience. Prefer to hand it over to an account manager.
I have been to the stock market since 2003, and was doing it myself, and I can pretend I am good with charts and indicators. But because of lack of time and other reasons I changed to be an "investor" not a trader.

1- I will definitely start with a little amount and add to it depending on performance and other calculations.
2- I'm familiar with that, indicators are as they are called, just "indicators", it is you the trader who decides, who interpret the indicators. I have - in stock market- seen lots of indicators and made my decision in some cases may be contrary to the indicator according to my own judgment and I was right (most of the time), at any given moment you can see 5 indicators telling you to buy and 5 others telling you to sell... it is the trader who interpret.(this can be a long story or another thread perhaps)
3- !!

"For the Money" is not an answer.

for what anybody trades anything? :!:

 

[Forexmospherian]

@ Forexmospherian , @bredin

Thanks for your reply.



Why? I have seen several links of automatic trading accounts doing a decent and steady returns

OK - find one that as been trading with live money for over 7 months with consistent results - buy it and then check out with live small money for another 7 months plus with consistent results and you might then be OK.

Please let me know if you ever find one - and also in those 14 months in total you would need to see over at least 500 live trades take place



I see profits or loses as a percentage of the initial investment, in any case one should be investing only if he knows the risk. a formula remains the same formula no matter the values of the variables. If a system can generate 300% annually on $1000, to me means the same system would generate the same 300% on $1000000

Of course the DD in the first amount would be less than the second, but it is the same percentage.

I am not just arguing, I am just trying to understand. I am new to this.

Theory and real world is different - as mentioned before so many other factors come into the equation



Considering what I mentioned above, I would like to understand more.

Would this mean that I would better keep 10 separate account each having $1000, for each to reach $10K (final result 10k turning 100k) but I can't achieve the same if all were put in a single account?

Maybe yes - larger lot sizes put on in one go dont always get immediately filled at the price you want nor the time you wanted



Sorry if my questions seem silly or stupid, I hope you understand I am new to this and trying to understand this business.

Dont worry when I started in Fx I also thought I could compound a successful strategy that worked on a small account up to a multi million account - After 5 yrs - I realised all the flaws and problems - and now dont even bother compounding - instead just drawing out profits and using the money for own personal use along with investing in other safer more secure assets

Hope that helps more

Regards


F

 

[limopcfx]

OK - find one that as been trading with live money for over 7 months with consistent results - buy it and then check out with live small money for another 7 months plus with consistent results and you might then be OK.
s


F

Thanks for the reply.
This comment reminded me of a question buzzing in my head for some time and I could not find an answer to it.

I have noticed many account or systems performance starting with a great leap over a short period but after that it gets almost flat or grows very little... I assume that trading forex is mainly technical analysis, not fundamental analysis as such, wonder why this great inconsistency in their performance chart? Even big DD does not get repeated...

What would you advise me to do? (I want to get my account managed and simply imagine there should be some account manager who can make roughly net 7% - 8% monthly with some ups and downs and even DD of course) This would be the main account, the main investment in forex, and considering setting up another account for a "crazy" trader to try to duplicate the amount in a month or two, then move the profits to the main account, and so on, not gambling, just taking higher risk for higher returns on a very small amount.

I have seen a lot of people counting that 5% to 8% monthly is reasonable and achievable. What you think?

Thanks

P.S.
Am I allowed to post links to performance charts on other forums? just to discuss... I am not promoting anything of course as you said above I should let you know.

 

[limopcfx]

I would have to agree with the first part of your comment - ie assuming your profitable in the first place - and we all know 80 -90% re not even going to be profitable for one year - never mind - many years

But surely we are not talking Institutional / Commercial trading rules and results - using multi million dollar capital accounts we are talking retail trading - with most capital accounts under $10k - not even $50 or $100+k needed for full time retail trading .

Then its a different ballgame

Take a look at these - LIVE trading results over last 3 years - audited by a top accountancy company as well

http://www.ironforex.com/en/promotions-contest/past-live-competitions/2012

Ok these traders are taking big risks and using leverage - and of course - are good - so they will not do 1000 - 5000% every few months - they will drop down to 20 -50% per month - playing safe with proper retail MM - not ultra safe commercial MM -

Now there's over 20 top FX traders here with results with real Live money here who make over 1000% ror in a few months

So if they stopped and did no more trading that year - then they have made over 1000% ror per annum - some even 2000 -3000% on live money.

Get real 5% - yes that a stage for the 10 -20% of traders who can even make a profit - but then real top retail traders - 5% per annum is just an insult - or joke - either way

Regards

F

Who are these guys? How to get to them?
15% to 20% monthly would be great!

 

[limopcfx]

As to the OP's question: I would only say that you cant trade to pay the bills, your sights have to be much higher than that. With this in mind, annualized returns are relative to your account size and your bills

G.

Just paying the bills is not a reasonable target, it should be much more to cover in addition to the bills:
1- Trading a fixed amount will theoretically generate a fixed amount, so you need something to be reinvested to cover for inflation, your growing needs (school fees would be college fees)
2- Reinvest something to put you on a higher financial status.
3- Redirect some of the returns into more secure real assets/ investments as you grow older.
4- Same as 3, but to keep your investment mix reasonable, as forex is still counted high risk.

This is what i think

 

[bredin]

Just paying the bills is not a reasonable target, it should be much more to cover in addition to the bills:
1- Trading a fixed amount will theoretically generate a fixed amount, so you need something to be reinvested to cover for inflation, your growing needs (school fees would be college fees)
2- Reinvest something to put you on a higher financial status.
3- Redirect some of the returns into more secure real assets/ investments as you grow older.
4- Same as 3, but to keep your investment mix reasonable, as forex is still counted high risk.

This is what i think

This is a fancy way of saying "For the Money"

Nice try tho.

Beyond survival, money is not a motivator.

Either learning to trade or managing a robot (I have yet to see one that is truly hands off) takes time and effort. If you are already financially comfortable, all this stuff is meaningless.

When you can answer the question you will be ready enter a market via whatever method you want.

Before that your experience will almost certainly be exceedingly painful.

Brain First, Then Money.

B.

 

[kwickwool]

Just to comment on a post a few back regarding robots and automated trading for purchase with good returns.

Does not does not does not ever exist on the retail market. Think for just a second on the value of that? What that is actually worth in real money as in profit of 20% per year? It is almost priceless when you think of how it can be used and to think you can buy that for for what £100 to £500.

If you happen to buy one and it works is pure luck and cannot and will never last and that is just logic.

The big boys may have millions going into this but that will always be for their eyes only.

kwickwool

 

[limopcfx]

This is a fancy way of saying "For the Money"

Nice try tho.

Beyond survival, money is not a motivator.

... If you are already financially comfortable, all this stuff is meaningless.

...

Brain First, Then Money.

B.

Honestly, your previous post when you said

"For the Money" is not an answer.

I thought either this guy is so smart, or me too dumb! But I was sure I am not that dumb! So I expected you are so smart and I was right!

I totally agree with you 1000% Brain first, this is the most valuable asset we have... I always keep learning new things as much as I can... oh.. don't want to change this thread to a philosophical debate, it's a long story. I started long time ago before the internet and.. etc to study the stock market, though me trading or investing in the stock market was just hallucination, but I studied it on my own out of curiosity, hoping that someday I will benefit from just the knowledge, even if not related to the stock exchange itself, and it did.

This is why I am here, asking, discussing, reading, thinking.. etc to know about forex though I am not going do trade by myself as I have no enough time and looking for having my account managed, but still I believe learning and knowledge are goals by themselves, even if I ended up not investing in forex at all. It will definitely benefit me as technical analysis and indicators in the stock market is the same in forex and even binary options or commodities.

So, I totally agree, it is for the brain then the money, and "for the brain" it goes without saying.

 

[limopcfx]

...

If you happen to buy one and it works is pure luck and cannot and will never last and that is just logic.

The big boys may have millions going into this but that will always be for their eyes only.

kwickwool

I agree with you on this, I saw many offers selling robots and was thinking, if it is true that this robot makes 100% a month, why bother selling it for 100 or 1000 even! Simply dump a few dollars and you get 100 compounded to 12974 in 12 months if doing only 50% monthly.

I don't remember seeing a real chart showing performance of the same guys selling the robots.

But I believe some account managers use their own robots but for their own business, they won't sell it of course.

 

[limopcfx]

Bump
@ kwickwool @bredin @ Forexmospherian

Where are you guys!

 

[Forexmospherian]

Bump
@ kwickwool @bredin @ Forexmospherian

Where are you guys!

I am here normally 5 days a week trading - as full time from approx 6 30 am to after 5 pm most days

What is your next question ??

Regards

F

 

[limopcfx]

I am here normally 5 days a week trading - as full time from approx 6 30 am to after 5 pm most days

What is your next question ??

Regards

F

Thanks. I hope I am not distracting you.

Please check my 2 posts no 54 and 55 on this thread especially

I have noticed many account or systems performance starting with a great leap over a short period but after that it gets almost flat or grows very little... I assume that trading forex is mainly technical analysis, not fundamental analysis as such, wonder why this great inconsistency in their performance chart? Even big DD does not get repeated...

and

Who are these guys? How to get to them?
15% to 20% monthly would be great!

 

[chocabloc]

easy just make 5% per month and if this is consistent then it will take care of itself because you can invest more in yourself thats would be the message to take . keep the risk at 2% dont over leverage eg never ever more than 4x and instead of upping leverage just get more positions so the answer to the question in my opinion 5% a month unleveraged is realistic to expect after consistency invest via leveraged but never ever 4-5 x . should make good money i guess