The numbers in this example are kind of hypothetical, aren't they?
1. Why does the trading system only works up to $500k? If it is so small a market, I bet you the returns won't be 25% consistently.
2. You'd think little Johny would be wise to, during that first 17.5 years of compounding, investigate different strategies on a larger, more scalable instruments. When I first started out trading I found this edge which got me 10% return per month... I knew it was too good to last and so while I traded that I spent time looking for different strategies. It turned out that the edge only lasted 3 months and a bit. A trader who doesn't evolve with the markets will not be consistently profitable in the long run.
Oh yeah... and there's the tax issue and living expense etc as mentioned by Tech/A.
The numbers are hypothetical but i am trying to get a "feel" for the odds and capital.
1. What is realistic capital base for the ASX? 1 million? 2 million?
2. The point is if a trading system is scalable to a certain amount of capital then the trading system can be used for income if there is sufficient return, however the income will stop growing and in the long run you will start earning less. This has to be compared to just sticking your capital into an index tracker fund.
The numbers are hypothetical but i am trying to get a "feel" for the odds and capital.
1. What is realistic capital base for the ASX? 1 million? 2 million?
2. The point is if a trading system is scalable to a certain amount of capital then the trading system can be used for income if there is sufficient return, however the income will stop growing and in the long run you will start earning less. This has to be compared to just sticking your capital into an index tracker fund.
For example I'd imagine it would be more difficult to produce returns of over 25-30% on a $500,000 account than on a $10,000-20,000 account? ....
...I ask because I hear people, including professionals make huge returns on small accounts, so I am wondering if this is generally achievable by a good trader?
Imagine little Johnny is a 20 year old student with $10k of initial capital and has after many hours research created a simple trading system that produces a consistent return of 25%, but the simple trading system only works up to a capital amount of $500k. Assuming little Johnny retains all returns and does not add further capital, he will have $500k in approximately 17.5 years due to compounding. 37.5 years old and a capital base of $500k. Now little Johnny’s simple trading system is no longer able compound returns. Each year he earn $100k on his trading capital of $500k which he saves so by the time he is 60, he will have 22.5 * 125k + 500k trading capital. Little Johnny is now worth $3.3million. All good. 40 years later he has turned $10k into $3.3 million, which is a CAGR of 15.6% over 40 years, good effort. Playing round with the numbers, it starts to get scary, keep the consistent return at 25% but drop the capital amount to $250k, and little Johnny has a CAGR of approx 13% over 40 years, now this is more or less index tracker fund returns. Interesting results, especially when you have to take into account trading consistently for 40 years one could say that Little Johnny at 20 should put down the trading book, read John Bogle, get an index tracker fund with his $10k then spend his time surfing. He will probably be better off in the long run.
doesnt this calc leave out the returns that would be made on the 125k banked each year, which should be compounding up as well, unless he keeps the 125k under his mattress. that would make a huge difference to the end result
I'm curious to know the results (ROI) people have made with large v small accounts and what can be expected of those who trade them.
For example I'd imagine it would be more difficult to produce returns of over 25-30% on a $500,000 account than on a $10,000-20,000 account?
Is achieviable to say double a $10,000 account in a year without gambling? Or would, say a 30% return, on a $10,000 account be all that can be expected from a good trader?
I ask because I hear people, including professionals make huge returns on small accounts, so I am wondering if this is generally achievable by a good trader?
IMO the sensible approach is to have the majority of your money (maybe 90%) in safe instruments like shares with minimal leverage - steady gains of a few hundred RIO per year; and a small portion of your money (maybe 10%) in highly speculative and highly leveraged instruments - unlimited potential gain, small potential loss. But that's just me.
Ok so very soon I shall have at least 10k to play with...
I have made approx 50 -100 paper trades gaining 3% every 3 weeks... i have been correct 85% of the time so That
s an increase of 44.2% pa (less some for brokerage)
In reality i reduce the figure to give myself a conservative estimate.
Maybe Im not being realistic i dont know... oh and the psychological factor does not effect me... i don't care about money
What's the %gain if you have to brokerage? Can $10k support all the positions that you paper traded?
Ok so very soon I shall have at least 10k to play with...
I have made approx 50 -100 paper trades gaining 3% every 3 weeks... i have been correct 85% of the time so That
s an increase of 44.2% pa (less some for brokerage)
In reality i reduce the figure to give myself a conservative estimate.
Maybe Im not being realistic i dont know... oh and the psychological factor does not effect me... i don't care about money
if i use a conservative return of 30%pa it would bring it down to28%
if i use a conservative return of 30%pa it would bring it down to28%
ok lol
so im obviously not being conservative enough
whats a realistic return for an above average novice chartist would you say?
ok lol
so im obviously not being conservative enough
whats a realistic return for an above average novice chartist would you say?
Long term avg would realistically be 0 or lower. No trolling.
Sorry you've misunderstood, i didn't explain myself properly.
the 75+ paper trades are so i acn learn how to chart and see what my sucess rate is... i chose a large number of stocks so i had a larger data set.
OK so lets take 10k to trade with 2% increase over a 3week period. 80% succsess rate. 10 (x2) brokerage. stop loss at -2%.
52weeks divided by 3weeks = 17.3 weeks. 17.3weeks multiplied by $20 brokerage = $346.66
$10000 x .02 = $200 (1st 3week period) + 204 + 208 + 212 + 216.5 + 216.8 + 221.15 + 225 + 230 + 234.6 + 239.3
+ 244 + 249 + 254 (14week series = 80% success rate
Total gain = $12946 - 346.66 (brokerage) - approx $589 at 20% fail rate = 12010.34
17% increase from 10k
My 3week fake trades thus far are closer to 4% so the above example is a modest estimate
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