--- 2% Per Month Compounded Realistic ? ---

[*JDR*]

Thank you all for your responses.

Very difficult to respond to all so I'll just add to the discussion a couple of points.

Buffet et al. are buy and hold investors, so their returns are, although great, not comparable to a "trader".
There are other "traders" who have achieved better than Buffet (read that book Trend Following by Covel).

Obviously, I am not saying that I am going to be as successful as them or even that I am going to be successful, but they are a good example of what is possible.

Fund managers are restricted by the rules of the funds they manage. So although they are a nice guide to compare against, most cannot achieve what a good trader can achieve for themselves (again, not saying this is me) due to the pressures of making losses etc. Also, most fund managers are buy and hold and even in a market that is in a serious down trend they have to hold certain amounts of equities (or whatever the fund holds) to cash and usually cannot short.

I still remain optimistic. Obviously my system is not going to be designed to give me a set percentage. But I was just curious as to what other people thought achievable or had actually achieved.

Thanks again for all your replies and advice.

 

[*JDR*]

I should also add that the reason I am re-educating myself about trading is that I currently use a fund manager.

Over the past 2.5 years he has returned about 10%p.a compounded and although I am not certain, I belive I can do better.... I may fail, but I also believe it is important for me to take control of my own finances.

 

[Paddington]

Hi JDR,
welcome to the world of trading. As others have said on this thread returns vary enormously by trader and trading styles. Questions I would have would be what % of your account are you willing to risk on each trade, what edge you plan to use and how it fits you as a person, and critically how will your trading plan let you manage you emotions whilst in positions.

I know several experienced day traders who manage 10-15% a month on a reasonably consistent basis, but these are guys who have been doing what they do for quite a while - experience plays a large part in this game. These sound like mouth watering returns but only a few people ever get that far. As we know most people lose or breakeven and you should probably expect to not perform very well early on.

My suggestions would be

1. come up with your trading plan
2. Practice it with a small amount of money - don't worry about missing out - if it works this year then it will work next year for you and better now to have destroyed your account during "training"
3. read some books on trading psychology - fascinating, Trading is 80-90% mental and this is key to longevity in these mkts

it's a fascinating arena but try not to let yourself be emotionally driven around trades

good luck!
P

 

[*JDR*]

Hi P,
Thanks for your advice. I am in no rush, I have set myself a time restriction in fact. I am still many months from letting myself trade with even 10% of my potential portfolio.

 

[dbphoenix]

Obviously there will be far more that achieve far lower returns. This is a well-known fact. [snip]

In any business sector you choose, most companies' performance will be low to average. Then there will be the handful of 2/3 top performers.

It's the same with trading. We all know that 90% of traders will produce losing or break-even results, only the top 10% will be profiting.

Actually, this is a well-known belief. It is not a fact. The performance of traders is about the same as that for the class of entrepreneurs in general. Around 60% breakeven or lose money. A lower percentage outperforms the averages. An even lower percentage outperforms the averages to a substantial degree. And so on. In other words, the percentage of traders who profit is considerably greater than 10%, or even 20%.

Db

 

[*JDR*]

P.S. don't email Damian , like Mr Buffet says , BUY stocks YOU understand .

Just a point about this. I don't quite agree.

My university degree was all about fundamental analysis. You name the valuation method and I've studied it.

However, I do not believe anyone can know everything about a company to value it fairly (except for maybe buffet?) Even those fund managers who claim they meet with CEO's every day to talk about their companies, blah blah blah... Do you really think a CEO is about to tell a fund manager that he thinks his company is not that great? No they will say that the company is brilliant and everything is fine.

So based on that long winded paragraph, the only pure piece of information is price and perhaps volume. Therefore, to finally retort, I don't believe I need to know anything about any individual asset I buy or sell except for it's current price and maybe volume.

I may be wrong. But that is what I will be basing my plan/system on.

 

[henry766]

Your quite right Jdr , what I meant to say is that you should understand why you were making a trade, and not use someone else's recommendation .You may find you need a little more information than current price and volume , even the simplest systems require a few bars of data , after all , current price and volume alone won't even tell you if it's up or down on previouse price ?

 

[firewalker99]

Is 24% a year, more importantly 2% a month compounded achievable?

Thanks.

Have a look at what t2w members had in mind as a target...

http://www.trade2win.com/boards/poll.php?do=showresults&pollid=128

 

[firewalker99]

Success Leaves Clues

The sky is the limit:

http://www.performance-appraisal.com/SecretsOfMasterTraders.htm

 

[*JDR*]

Wow very interesting Poll Firewalker. I wonder how many of the 85% (approx) that had targets over 50% achieved them?

The other link is also great. Thanks

 

[firewalker99]

Wow very interesting Poll Firewalker. I wonder how many of the 85% (approx) that had targets over 50% achieved them?

The other link is also great. Thanks

Glad I could be of any help. Just to put things in perspective, I don't think the very successful traders will be wandering this forum (although some might) and I'm convinced that 2% per week or even 2% a day can be achieved by those who are able to develop a plan and follow it with utter discipline. And you know what Einstein said about compound intrest... (and the rule of 72)...

I don't what to get your hopes up, because there is no easy way and furthermore it also depends on the size you're trading. And last but not least, don't measure yourself by what others achieve.

 

[henry766]

You'd need some sort of margin for 2% per day surely?

 

[firewalker99]

You'd need some sort of margin for 2% per day surely?

You always need margin, but why should it be any larger than otherwise?
Suppose you risk only 1% of your account per trade. Your system shows a win:loss ratio of 60%. Your stop is placed in accordance with your plan, and the number of contracts or size you're trading is calculated based on your stop and maximum risk of 1%. The target is two times as far as the stop (2%). These numbers are imo realistic and not too optimistic, I know people who trade systems with 80% success ratio.

Suppose we have a lucky day (or week) and 3 out of 5 trades are winners, we would gain 3x2 -2x1 = 4% that day (or week). Our maximum number of successive losses is 3 (proven through backtesting, forward testing, papertrading), if we get a fourth, we stop trading. In that case we would still only lose 3% of our account...

 

[crazy trader]

Now I am really stoked. I have achieved 30% in 2004 and ~25% in 2005 but thought that my system was wrong. I have been in fear all year that I would take a downturn so have adjusted my agressive system to not as stellar results 16% year to date. But my system is now in my opinion less risky.

The reason for this was reading many of the posts across the internet that detailed out how I was not supposed to make this much money. Sometimes it does not pay to listen to others. I guess trading scared is the absolute worse position that you can be in.

 

[firewalker99]

Now I am really stoked. I have achieved 30% in 2004 and ~25% in 2005 but thought that my system was wrong. I have been in fear all year that I would take a downturn so have adjusted my agressive system to not as stellar results 16% year to date. But my system is now in my opinion less risky.

The reason for this was reading many of the posts across the internet that detailed out how I was not supposed to make this much money. Sometimes it does not pay to listen to others. I guess trading scared is the absolute worse position that you can be in.

More risk implies more potential reward. But if you are confident in your system, you've tested it, it's proven itself in real situations ànd you've achieved good returns, why change it because somebody else says you can't possible be doing so good? I think those who are making that kind of remarks haven't been able to come up with that kind of profitable system. Sure enough, many posts will argue that, but of all the traders out there, how many are truly very succesful?

 

[*JDR*]

Now I am really stoked. I have achieved 30% in 2004 and ~25% in 2005 but thought that my system was wrong.

I think the key is that if you are comfortable with your level of risk and it is not so high that should you take a hit you lose your whole account, then why change it just because you are doing well?

I have read a quote by Ed Seykota, can't remember it but I will paraphrase:

"Everyone gets out of the market what they want"

I guess that is relevant to whether you are losing, winning, and by how much of each.

 

[damianoakley]

Hi JDR,

I would agree with you that being comfortable with risk is key if a trader is to have the discipline to continue trading their system day in, day out.

A system might look great on the surface when it's making 300% in a year, but if during that year you had to face a 60% drawdown on your account, then there are not many traders who could continue trading the system through that kind of losing streak.

In my view, it would be better to make 100% in the year and only have to deal with a 20% drawdown. A trader is more likely to stick with a system through a 20% drawdown and come out of the other side to make the 100% return.


Thanks


Damian

 

[henry766]

Dear Firewalker , i never said there was anything wrong with margin , however i don't think you always need margin either .

 

[Market Wizard]

"Everyone gets out of the market what they want"

Quite right. I know traders who acheive five figure returns monthly. Theses are private individuals who trade from the comfort of their home and their own account.

Surely these sort of figures must amount to more than 10% or 20% annualy.

Reach for the sky. Nothing is impossible.

 

[henry766]

traders who achieve 5 figure returns hardly means "thateveryone gets out of the market what they want", it seems clear to me very few do.