Would you be happy with 15% a year?

[evertontrader]

Sorry... did you just post a screenshot of someone else's broker account showing a return of £834 and somehow equate that to winning the "argument"?

I do find it amusing that due to your "trading wall" you'd rather pursue a course of highly stressful scalping 5 days a week than instead put your 20% monthly generating holy grail strategy to work over a mere 2 years, compound the account and end up with ~8000% return... you could then live out your later years doing much more exciting things.

 

[Forexmospherian]

Sorry... did you just post a screenshot of someone else's broker account showing a return of £834 and somehow equate that to winning the "argument"?

I do find it amusing that due to your "trading wall" you'd rather pursue a course of highly stressful scalping 5 days a week than instead put your 20% monthly generating holy grail strategy to work over a mere 2 years, compound the account and end up with ~8000% return... you could then live out your later years doing much more exciting things.

I thought you no longer wanted to discuss this matter ??

Compounding is another reason why so many traders fail.

After working 25 yrs in the business world - both my own and Director level in large companies - only working 30 -40 hrs a week is like a walk in the park compared to the 50 -75hrs and weekends I was used to.

The "highly stressed scalping" - as you call it - is so easy when you stay well under your financial wall - its just like trading on a demo then - especially after your first 5k of live trades.

With regards to my own life - I enjoy 5 -8 weeks of holidays a year and realised when I retired first time around at the age of 50 - you need a motivation in life - I would be bored stiff sittiing on a beach all the while - plus the fact if i want tomorrow off - or a 2 week holiday in March - I can take it - I am my own boss - only reporting to the wife ( occasionally )

Regards


F

 

[SoCalSteve]

15% per year?

In my 401k - yes. In my personal trading acct - not at all.

If I can't beat money managers in my personal acct then why bother? That's what makes it worthwhile for me.

 

[evertontrader]

Coming back to the original post,

I believe people are much more likely to succeed if they set themselves smaller targets. Instead of expecting to generate higher returns, much higher than the industries best, accept lower returns per year and give yourself a break.

Too often is the sports analogy used in trading so I apologise in advance but it fits well here, expecting to generate 20% a month consistently or even a mere 100% return every year is analogous to taking up golf, playing it for a period and then expecting to become better than tiger woods, one of the best ever. In fact you're expecting to be 10 times better than tiger woods.

Instead of pursuing a high return, I believe people should aim to grow their capital base (through financial planning) so that a realistic smaller return still generates an attractive sum. In the world of business, a 15% margin will sustain an empire, if the product can consistently yield a 15% return then business will be happy to take it. It helps a lot to compare ones expectations with regards to investment and returns to that of a comparable business scenario.

 

[evertontrader]

Interesting reply.

Could you answer the below 3 questions please?

1) Would you go into any other pursuit in life with the preconception that unless you do better than the worlds best, it's not worth bothering?

2) Do you not feel that you're putting a little too much pressure on yourself?

3) What if you don't beat the money managers... will you give up?

15% per year?

In my 401k - yes. In my personal trading acct - not at all.

If I can't beat money managers in my personal acct then why bother? That's what makes it worthwhile for me.

 

[evertontrader]

Compounding is another reason why so many traders fail.
F

Could you elaborate on this point?

 

[SoCalSteve]

Interesting reply.

Could you answer the below 3 questions please?

1) Would you go into any other pursuit in life with the preconception that unless you do better than the worlds best, it's not worth bothering?

2) Do you not feel that you're putting a little too much pressure on yourself?

3) What if you don't beat the money managers... will you give up?

1 - A couple of my hobbies are photography and electric guitar. I just try to be the best I can be knowing I get a little better everyday with more experience. It's the journey.

2 - I don't feel I'm putting too much pressure on myself at all. For me, with the majority of my money in index funds or managed funds, my trading account is an enjoyable part of my life much like a hobby.

3 - I would not give up if i didn't consistently beat professionals. I would examine why and hopefully adjust for improvement.

Steve

 

[evertontrader]

It's important to point out that when you started out in photography and playing the guitar, you were likely not great. I suspect over time you improved to a standard you are happy with but haven't quite reached the levels of David Bailey or Jimmy Hendrix. Also, I dare say you won't give up either hobby if you sadly never reach the levels of the Bailey or Hendrix.

Measuring yourself up against the best in the world at a particular activity could invite unnecessary pressure into a pursuit that brings enough of its own.

To bring this back to the point, I think what I've described above is similar to what happens when people allow the expectation of unrealistic returns to be accepted. Between novice and worlds best, there is plenty of space for everyone else to fill. Expecting to be the best or to earn beyond what the best generate is not sensible. Lowering inflated expectations and growing a capital base over time gives much firmer foundations to build on than aiming for the top at day one and walking away if you don't reach it.

1 - A couple of my hobbies are photography and electric guitar. I just try to be the best I can be knowing I get a little better everyday with more experience. It's the journey.

2 - I don't feel I'm putting too much pressure on myself at all. For me, with the majority of my money in index funds or managed funds, my trading account is an enjoyable part of my life much like a hobby.

3 - I would not give up if i didn't consistently beat professionals. I would examine why and hopefully adjust for improvement.

Steve

 

[Forexmospherian]

Could you elaborate on this point?

Yes - no problem

I can use my own experience as an example.

Before I went full time - I had the normal ideas put out by the industry

ie Learn to trade - start with say $5k or $10k then after you had successful method - compound ie grow your account balance and keep increasing your stake size in correlation with your increased capital. So If I could grow my account to say $25 k I could trade with say 1 or 2 lots . If then after a year or two I got to $40k or $50k I would be on 3 or even 5 lots etc.

Maybe after 5 years of continual growth - you would make it to say $100k and then you would carry on growing to say a quarter of a million - or even a million all within 10 years or so.

Well to me - its all just theory if you are using your own money and trading it yourself

In my case I got to over $200k and was increasing my lot size by 5 lots every few months and at that time thought i would make half a million within the next 2 years.

Unfortunately - my larger stake entries - took longer to get on - in some case - a whole minute or more and then my exits were no longer instant etc etc.

Then I had a couple of bad days and first time after a few thousand live trades had 7 consecutive losses - and I wiped out my last months gains.

That when I hit my wall - and panicked. The Psyche problem kicked in . I was no .longer thinking rationally - It took me than another nearly 6 months to get back to a decent size of stake again - and I was now flawed or "stained" - i realised that I could have bad runs - like my own black swan events and although I could accept a loss of say $1000 on an intraday trade - I could not except $2500 or $5000 - even thought it was all relative in size to my account.

Mine was at 25 lots per pip ( in those days approx £170 per pip) Other traders using there own money might be OK at 2 lots or even 5 lots but at 50 lots or more - they would freak out on losses - as it would be their own money they would see evaporating out of their capital account - not a banks etc

I then realised normal retail traders will never get their heads around seeing losses of say $5k or $10k - even if they have similar size gains - its too large amounts for traders who are not already worth say half a million or more.

The psychological issue is huge.

However - if you can live within your limits - and still make a great return - do it that way - take your profits often - use them elsewhere - diversify in property or other investments - dont have all your eggs in one basket.

I had to completely change and nowadays I am far happier trying to make 25 to 50% every month on a 50 -70k size account and withdrawing profits fortnightly.

Please dont say it cannot be done. I and a few other traders I know are living proof

I agree 90% of all FX retail traders cannot keep it going for 3 or 5 yrs plus - but then there are guys like me - who have found the way to do it - trading in the now - not fortune telling

Would I do it for other traders - NO

Would I help other traders try and do it - free of charge - YES

Yes compound up to your financial wall limit - and then trade comfortable and forget trying 50 lot size etc etc

Regards

F

 

[malaguti]

I'd like to know how the traders across this forum would react to a 15% annual return, would you be happy with that return?

Today, I think it's an excellent return... but 3 years ago, when I read you could make 5-10% a week across the retail trading spectrum, I would of thought it wasn't worth getting out of bed for in relation to what I others were saying was possible.

Trading capital is a very important factor when considering return as it's directly relative to your trading capital e.g. 15% of £10,000 (£1,500) isn't going to change your life... but 15% of £500,000 (£75,000) is a respectable sum and would put you in a top 5 percent of salaries across the UK.

When you look at compounding 15% annually, it becomes even more impressive. See the following balance growing at 15% a year:

Start Balance
£10,000

Year Balance
1 £11,500.00
2 £13,225.00
3 £15,208.75
4 £17,490.06
5 £20,113.57

That's over 100% return in 5 years.

So... do you think 15% a year is worth getting out of bed for? I'm interested to see the opinions on this.

I'm with you..I think its a great return.
Trading or investing, if you can return 15% (on average, if I could qualify that) on your total capital I can't think of anything else out there other than property where those returns are possible. Property on the other hand takes weeks to months to liquidate whereas my trades are a click away
My highest returning account where my money is completely safe returns just 7%. THAT's my benchmark. When I beat that, I'm happy and I still get to enjoy my day job

 

[Fugazsy]

Yes - no problem

I can use my own experience as an example.

Before I went full time - I had the normal ideas put out by the industry

ie Learn to trade - start with say $5k or $10k then after you had successful method - compound ie grow your account balance and keep increasing your stake size in correlation with your increased capital. So If I could grow my account to say $25 k I could trade with say 1 or 2 lots . If then after a year or two I got to $40k or $50k I would be on 3 or even 5 lots etc.

Maybe after 5 years of continual growth - you would make it to say $100k and then you would carry on growing to say a quarter of a million - or even a million all within 10 years or so.

Well to me - its all just theory if you are using your own money and trading it yourself

In my case I got to over $200k and was increasing my lot size by 5 lots every few months and at that time thought i would make half a million within the next 2 years.

Unfortunately - my larger stake entries - took longer to get on - in some case - a whole minute or more and then my exits were no longer instant etc etc.

Then I had a couple of bad days and first time after a few thousand live trades had 7 consecutive losses - and I wiped out my last months gains.

That when I hit my wall - and panicked. The Psyche problem kicked in . I was no .longer thinking rationally - It took me than another nearly 6 months to get back to a decent size of stake again - and I was now flawed or "stained" - i realised that I could have bad runs - like my own black swan events and although I could accept a loss of say $1000 on an intraday trade - I could not except $2500 or $5000 - even thought it was all relative in size to my account.

Mine was at 25 lots per pip ( in those days approx £170 per pip) Other traders using there own money might be OK at 2 lots or even 5 lots but at 50 lots or more - they would freak out on losses - as it would be their own money they would see evaporating out of their capital account - not a banks etc

I then realised normal retail traders will never get their heads around seeing losses of say $5k or $10k - even if they have similar size gains - its too large amounts for traders who are not already worth say half a million or more.

The psychological issue is huge.

However - if you can live within your limits - and still make a great return - do it that way - take your profits often - use them elsewhere - diversify in property or other investments - dont have all your eggs in one basket.

I had to completely change and nowadays I am far happier trying to make 25 to 50% every month on a 50 -70k size account and withdrawing profits fortnightly.

Please dont say it cannot be done. I and a few other traders I know are living proof

I agree 90% of all FX retail traders cannot keep it going for 3 or 5 yrs plus - but then there are guys like me - who have found the way to do it - trading in the now - not fortune telling

Would I do it for other traders - NO

Would I help other traders try and do it - free of charge - YES

Yes compound up to your financial wall limit - and then trade comfortable and forget trying 50 lot size etc etc

Regards

F

F

Good post.

Fzsy

 

[evertontrader]

Well speaking from my own personal experience, compounding returns works very well. Especially when building up consistent returns and reinvesting them into subsequent positions.

I think for your own personal experience, the issues you state, both psychological and execution related issues don't really bring into doubt the effectiveness of compounding returns, but instead just highlight your own personal limitations which sounds reasonable. Some people are scared of heights but that doesn't mean no one should skydive.

Horses for courses, as they say.

Yes - no problem

I can use my own experience as an example.

Before I went full time - I had the normal ideas put out by the industry

ie Learn to trade - start with say $5k or $10k then after you had successful method - compound ie grow your account balance and keep increasing your stake size in correlation with your increased capital. So If I could grow my account to say $25 k I could trade with say 1 or 2 lots . If then after a year or two I got to $40k or $50k I would be on 3 or even 5 lots etc.

Maybe after 5 years of continual growth - you would make it to say $100k and then you would carry on growing to say a quarter of a million - or even a million all within 10 years or so.

Well to me - its all just theory if you are using your own money and trading it yourself

In my case I got to over $200k and was increasing my lot size by 5 lots every few months and at that time thought i would make half a million within the next 2 years.

Unfortunately - my larger stake entries - took longer to get on - in some case - a whole minute or more and then my exits were no longer instant etc etc.

Then I had a couple of bad days and first time after a few thousand live trades had 7 consecutive losses - and I wiped out my last months gains.

That when I hit my wall - and panicked. The Psyche problem kicked in . I was no .longer thinking rationally - It took me than another nearly 6 months to get back to a decent size of stake again - and I was now flawed or "stained" - i realised that I could have bad runs - like my own black swan events and although I could accept a loss of say $1000 on an intraday trade - I could not except $2500 or $5000 - even thought it was all relative in size to my account.

Mine was at 25 lots per pip ( in those days approx £170 per pip) Other traders using there own money might be OK at 2 lots or even 5 lots but at 50 lots or more - they would freak out on losses - as it would be their own money they would see evaporating out of their capital account - not a banks etc

I then realised normal retail traders will never get their heads around seeing losses of say $5k or $10k - even if they have similar size gains - its too large amounts for traders who are not already worth say half a million or more.

The psychological issue is huge.

However - if you can live within your limits - and still make a great return - do it that way - take your profits often - use them elsewhere - diversify in property or other investments - dont have all your eggs in one basket.

I had to completely change and nowadays I am far happier trying to make 25 to 50% every month on a 50 -70k size account and withdrawing profits fortnightly.

Please dont say it cannot be done. I and a few other traders I know are living proof

I agree 90% of all FX retail traders cannot keep it going for 3 or 5 yrs plus - but then there are guys like me - who have found the way to do it - trading in the now - not fortune telling

Would I do it for other traders - NO

Would I help other traders try and do it - free of charge - YES

Yes compound up to your financial wall limit - and then trade comfortable and forget trying 50 lot size etc etc

Regards

F

 

[Forexmospherian]

Well speaking from my own personal experience, compounding returns works very well. Especially when building up consistent returns and reinvesting them into subsequent positions.

I think for your own personal experience, the issues you state, both psychological and execution related issues don't really bring into doubt the effectiveness of compounding returns, but instead just highlight your own personal limitations which sounds reasonable. Some people are scared of heights but that doesn't mean no one should skydive.

Horses for courses, as they say.

Compounding originally worked well for me up to the $125k - 200K capital area size

Then I hit my own "wall" and it left me scared

I hope if you are not there yet - ( using your own money ) that you make it through the 10 / 20 / 25 lot per pip / point stage and are able to carry on compounding and growing your own account - Good Luck

Regards

F

 

[tomorton]

I'm with you..I think its a great return.
Trading or investing, if you can return 15% (on average, if I could qualify that) on your total capital I can't think of anything else out there other than property where those returns are possible. Property on the other hand takes weeks to months to liquidate whereas my trades are a click away
My highest returning account where my money is completely safe returns just 7%. THAT's my benchmark. When I beat that, I'm happy and I still get to enjoy my day job

But the risk in trading is what counts, and what drives the acceptable ROI. In order to accept the level of risk inherent in trading we absolutely cannot accept a 15%pa return. After all, we are risking the total loss of the capital 'invested', not something that crops up when considering many other investments. And its not like 100% losses are a once in a lifetime exceptional market events - statistically, many traders, maybe the majority, will empty their account more than once while trading.

Not only that, but trading usually brings the possibility of losing more than your original capital. Traders have to reject a 15%pa return as not worth the risk (let alone the considerable time and effort).

 

[Fugazsy]

Compounding originally worked well for me up to the $125k - 200K capital area size

Then I hit my own "wall" and it left me scared

I hope if you are not there yet - ( using your own money ) that you make it through the 10 / 20 / 25 lot per pip / point stage and are able to carry on compounding and growing your own account - Good Luck

Regards

F

your post make sense in a way that traders need to know about themselves and their limits and taking trades should not bring any anxiety for consistent profits.

but when you got to your threshold did you try to settle there for a while and then increase your stake to a minimum, in a manner that did not have an effect on your mind?

 

[verial]

Over what period have you consistently generated 20% a month... and what is the max draw down that the strategy has experienced?

I'm running through the calculations this week for my subscribers. Some stats:

The max loss was 17%; the max gain was 122%.

The average loss was 7.7%; the average win was 34.9%.

Average return on all trades was 21%.

Cumulative annualized return is 208%.

I started back in November.

 

[evertontrader]

I'm yet to hit the metaphorical wall as you describe it but I will agree that moving into larger positions does have it's own psychological pressures. These nerves ease (or at least did with me) as you become used to entries at such levels. I ignore unrealised P/L mainly due to having multiple broker accounts, each accounts P/L doesn't mean a great deal indivdually, it's the overall that I spend more time watching.

We have very different approaches, I trade weekly charts across stocks/indices/commodities/FX pyramiding positions over time following the prevailing trend, this happens over weeks and months so my position sizes are smaller than yours but aim to capture far more points (or pips if it's an fx entry). Due to this, execution problems like slippage and delays don't impact me as much.

To give an example of an existing position, I've been short EURGBP for the last 5 weeks, entered at 0.76268 and then recently pyramided at 0.74012. EURGBP at pixel time is trading at 0.73661 via LMAX so the combined gain is around 290 pips at current. To me, this represents a 2% profit but to you with your lot sizes, I suspect it would represent significantly more.

Compounding originally worked well for me up to the $125k - 200K capital area size

Then I hit my own "wall" and it left me scared

I hope if you are not there yet - ( using your own money ) that you make it through the 10 / 20 / 25 lot per pip / point stage and are able to carry on compounding and growing your own account - Good Luck

Regards

F

 

[evertontrader]

I categorically disagree with this post.

Traders should instead reject the fantasy that you can consistently double/triple/quadruple your capital base over short periods of time (months/years) through trading performance alone. It's simply a myth that distorts what's possible and encourages traders to take on far too much risk in search of a golden unicorn.

If you are right, ask yourself, why do so many people fail to generate such astronomical returns consistently? Where are these people? Why is the wash out rate so high in retail trading?

Forum wisdom will have you believe that your average retail trader is simply not good enough, doesn't have the right strategy, the right broker, the right indicator, the right psychology. Very rarely do people consider that extremely unrealistic expectations on returns are what cause people to take unnecessarily high risks in the form of massive position sizes relative to their available capital which ultimately ends in disaster.

But the risk in trading is what counts, and what drives the acceptable ROI. In order to accept the level of risk inherent in trading we absolutely cannot accept a 15%pa return. After all, we are risking the total loss of the capital 'invested', not something that crops up when considering many other investments. And its not like 100% losses are a once in a lifetime exceptional market events - statistically, many traders, maybe the majority, will empty their account more than once while trading.

Not only that, but trading usually brings the possibility of losing more than your original capital. Traders have to reject a 15%pa return as not worth the risk (let alone the considerable time and effort).

 

[Forexmospherian]

Hi everton trader

Actually - I do agree with some of your points - then disagree strongly with others. I notice I have a couple of questions to answer from other members and for now busy trading - but look forward to getting involved in this overall discussion a bit later on today.

Regards


F

 

[Cubed]

I trade weekly charts across stocks/indices/commodities/FX pyramiding positions over time following the prevailing trend, this happens over weeks and months so my position sizes are smaller than yours but aim to capture far more points (or pips if it's an fx entry).

Just an observation from my experience. More profit can be obtained trading intraday than longer term trading. Maybe this is just an outcome of my method and perhaps it doesn't hold true with other methods. I just find being able to catch 5-6 intraday moves a week yields 200+% more profit than my longer term trades. Admittedly i only take about 1 longer term trade a month.