Realistic Rate of Return?

beachlife · 24 May 2013

Hi Guys
I wonder if any active derivatives traders are willing to share their average rate of return to give me something to aim for. I know those with an investment mindset are happy to just out perform the index. I am more interested in actively trading for cash flow as opposed to investing for long term growth.

For me out performing the index is not enough to live on. I see examples of traders that have turned $10k into $110k in 12 months. Daryl Guppy's newletter sample portfolio averages around 90%pa.

I currently trade CFD's long and short on asx top 200, commodities, spi, aud/usd on a daily time frame, not intra day. If all of my stops were hit today my return on capital would be 18% since Jan. If I took my open profits today it would be 40%. Trade durations are 10 to 20 days, win loss ratio is 58% wins. But it's early days yet.

What are those that trade for a living consistently making? I need a realistic target.

Thanks.

tech/a · 24 May 2013

beachlife said:
Hi Guys
I wonder if any active derivatives traders are willing to share their average rate of return to give me something to aim for. I know those with an investment mindset are happy to just out perform the index. I am more interested in actively trading for cash flow as opposed to investing for long term growth.

For me out performing the index is not enough to live on. I see examples of traders that have turned $10k into $110k in 12 months. Daryl Guppy's newletter sample portfolio averages around 90%pa.

I currently trade CFD's long and short on asx top 200, commodities, spi, aud/usd on a daily time frame, not intra day. If all of my stops were hit today my return on capital would be 18% since Jan. If I took my open profits today it would be 40%. Trade durations are 10 to 20 days, win loss ratio is 58% wins. But it's early days yet.

What are those that trade for a living consistently making? I need a realistic target.

Thanks.

How do you want to live?
500% on $20K
100% on $100K
20% on $500K

More to the equation than % wins

Trembling Hand · 24 May 2013

beachlife said:
What are those that trade for a living consistently making? I need a realistic target.

Thanks.

Lot easier to stay in the game if you have the right amount of capital. Aiming for X return is a fools game.

beachlife · 24 May 2013

% return that is consistantly possible will determine how much capital is required. It's the best measure as its scalable. 100% on $20k can be scaled to 100% on $200k, provided that initial risk is also determined by %, which mine is at 4%.

I would like to earn $150k pa.

I expect that good traders are making somewhere between 100% and 500% pa and good investors somewhere between 10% and 15% pa, but my expectations may be way off, hence the question.

Trembling Hand · 24 May 2013

beachlife said:
% return that is consistantly

I've been trading for 12 years. Nearly 9 full time. The one thing my records shows is that consistently the rate of return is erratic. Aiming for X amount will lead to a blow up. If you need 150k and you reckon you can make 30% start with 1 mil should see you survive.

The implication being that I doubt you can be profitable year in year out after the drag of Tax, Trading cost, living expense draw downs etc etc.

tech/a · 24 May 2013

Trembling Hand said:
I've been trading for 12 years. Nearly 9 full time. The one thing my records shows is that consistently the rate of return is erratic. Aiming for X amount will lead to a blow up. If you need 150k and you reckon you can make 30% start with 1 mil should see you survive.

The implication being that I doubt you can be profitable year in year out after the drag of Tax, Trading cost, living expense draw downs etc etc.

That's all you need know.

Gringotts Bank · 24 May 2013

beachlife said:
% return that is consistantly possible will determine how much capital is required. It's the best measure as its scalable. 100% on $20k can be scaled to 100% on $200k, provided that initial risk is also determined by %, which mine is at 4%.

I would like to earn $150k pa.

I expect that good traders are making somewhere between 100% and 500% pa and good investors somewhere between 10% and 15% pa, but my expectations may be way off, hence the question.

I have heard the best of the best are consistently at ~80%+pa. I don't know what percentage of the trading population are at that level, but I suspect it's quite small.

What "realistic" means for you is whatever you achieved last year. If it was 5%, then realistically, that's what you'll get next year and the year after that, unless something changes quite dramatically.

tech/a · 24 May 2013

Gringotts Bank said:
I have heard the best of the best are consistently at ~80%+pa. I don't know what percentage of the trading population are at that level, but I suspect it's quite small.

What 'realistic' means for you is whatever you achieved last year. If it was 5%, then realistically, that's what you'll get next year and the year after, unless something changes quite dramatically.

Nah!

Trembling Hand · 24 May 2013

Gringotts Bank said:
something changes quite dramatically.

That is the definition of the market though. So you can be assured that nothing is repeatable as it was last year.

beachlife · 24 May 2013

Not aim for exactly but in the ball park. For example if I am returning around 40% pa but others are averaging around 90% then I need to revisit my trading plan, but if 40% is the norm then I can just sit back and trade it.

I know of a trader that turned $10k in to $110k in 2010, that's extreme at 1100% and I doubt its consistant. Larry Williams claims $10k to $1m in 1987, an extreme year, but he claims he did it.

Daryl Guppy claims around 90% pa, without any compounding of profits and he has been above 90% return every year since 2004. It would be more if he compounded his profits. Is that closer to the norm or is he just that much better than everyone else. http://www.guppytraders.com/gup15.shtml

Somewhere there is a sensible ball park figure to measure my systems performance against.

Gringotts Bank · 24 May 2013

Trembling Hand said:
That is the definition of the market though. So you can be assured that nothing is repeatable as it was last year.

Allowing for that....his ability to read those changes would need to improve quite dramatically, if last year he made 5% and this year he wanted 100%. Something would need to change in his ability.

I know fund managers have a saying "past performance is no indicator of future performance", but capability is a highly reliable in its repeatability. One year Fund X makes 20%, but all it did was track the index. Next year the very same fund makes -20%, but all it did was track the index. The capability of the Fund is still zero, only the market changed.

At school, when the test results came out, there were rarely any surprises. The smart kid always got above 90%. The repeatability of this was extremely high. Everyone else's score was also highly repeatable. Only if a kid made some huge change in his approach, effort, or understanding, would this be reflected in his score.

Trembling Hand · 24 May 2013

beachlife said:
Somewhere there is a sensible ball park figure to measure my systems performance against.

Yeah thats un-leveraged return from month to month, year to year. To make sure your "system" isn't broken. Anything else is a function of leverage and luck that your approach fits the current market.

Once you actually have experiences and you can answer your own question you will know that its the least of your on going concerns.

How many months have you been running for.

skc · 24 May 2013

beachlife said:
What are those that trade for a living consistently making? I need a realistic target.

This really is "how long is a piece of string" type question. While you can get a numerical answer, it means absolutely nothing to you.

If you want to become a full time trader, have a look at this thread as well.
https://www.aussiestockforums.com/forums/showthread.php?t=26543

As a guide:

1. If you have a second income (e.g. partner or other passive income) that is sufficient for living expenses, then something like 3-4x your target income is a good start.

2. If you don't have a second income, you should have minimum of 3 years living expense put aside, in addition to your trading capital (which is 3-4x your target income).

3. If you only have $10k and have no hope of saving the $450k required... work hard on trading a small account, master a few instruments and take your stats to a prop shop and get funded there.

beachlife said:
I see examples of traders that have turned $10k into $110k in 12 months. Daryl Guppy's newletter sample portfolio averages around 90%pa.

If you speak to enough traders you will find someone who turned $10k to $110k in 12 months. What you don't know is if they are consistent, a leveraged nut, or just plan lucky. You will also come across plenty of traders who blow up $10k in 3 months.

BTW is the Guppy portfolio verified independently, and are they real trades?

beachlife said:
I expect that good traders are making somewhere between 100% and 500% pa and good investors somewhere between 10% and 15% pa, but my expectations may be way off, hence the question.

I think you will be very disappointed if you are aiming for 100-500% pa.

beachlife said:
I currently trade CFD's long and short on asx top 200, commodities, spi, aud/usd on a daily time frame, not intra day. If all of my stops were hit today my return on capital would be 18% since Jan. If I took my open profits today it would be 40%. Trade durations are 10 to 20 days, win loss ratio is 58% wins. But it's early days yet.

Without knowing too much about your trading... I think your stops are too wide if you have 40% open profit vs 18% if all stops are hit. I doubt too many full time traders would have 22% portfolio heat at any one time.

beachlife · 24 May 2013

That's a good point, his results are on shares, without leverage, but usually with a 2% risk rule. They are documented in real time in his newsletters, examples published here http://www.guppytraders.com/gup198.shtml

I have been using my current rules since Jan.

beachlife · 24 May 2013

skc said:
This really is "how long is a piece of string" type question.

No it's not, I asked others if they would share their results, not speculate on my abilities, so far no one willing to share.

Trembling Hand · 24 May 2013

Gringotts Bank said:
At school, when the test results came out, there were rarely any surprises. The smart kid always got above 90%. The repeatability of this was extremely high. Everyone else's score was also highly repeatable. Only if a kid made some huge change in his approach, effort, or understanding, would this be reflected in his score.

We are not at school GB thats exactly the same same year in year out. Was talking to the CEO of a place that has 80 discretionary traders of the highest calibre. Serious dudes - serious money.

His thoughts were that out of the 20 years he has been doing it he has only seen a couple that are consistent over a long period (1 of them trades 25 mil per clip and has never had a down month F me ) He stated that to do what they do, back good traders, you have to let them have some sort of drawdown from year to year or else you would have NO traders..............

Of course in interwebland we are all profitable all the time.....

Trembling Hand · 24 May 2013

beachlife said:
No it's not, I asked others if they would share their results, not speculate on my abilities, so far no one willing to share.

Last month my turn over was about 800 mil and I made 2 grand after cost.......

Howz that for a return.

McLovin · 24 May 2013

Trembling Hand said:
Last month my turn over was about 800 mil and I made 2 grand after cost.......

Howz that for a return.

Trembling Hand · 24 May 2013

LOL McLovin.... Exactly!

beachlife · 24 May 2013

Trembling Hand said:
Last month my turn over was about 800 mil and I made 2 grand after cost.......

Howz that for a return.

LOL, if your turnover was derived from a $20k capital base then better than most fund managers.

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