I think the highest annual return in long run that is known by public is Medallion Fund by Renaissance Technologies earning 35% after fee(actually it is 80% if we don't count fee)for around 25 years. http://en.wikipedia.org/wiki/Renaissance_Technologies Here is a news shows it is around 80%: http://www.bloomberg.com/news/2013-...o-shield-profit-from-taxes-draws-irs-ire.html Its flagship Medallion fund has returned about 80 percent annually before fees since 1988, according to the Bloomberg Billionaires Index. Another news: http://www.nasdaq.com/article/how-to-invest-like-the-worlds-most-expensive-hedge-fund-cm269533 Simon's flagship fund, Medallion, requires aminimum investment of several million dollars and charges a 5% management fee and a jaw-dropping 44% performance fee. The fund is closed to new investment and has returned an astounding annual average net of 38% (remember, that's after the high fees). Since its 1988 launch, the fund has lost money in only one year, 1989, which saw a drawdown of 4%. So there is a guy in a popular local forum claims that he constantly earns over 70% per year. He sound like he keeps improving to over 100%. He only day trade local index future. He buys and sells average around 3 rounds per day, and the index is just normal 9am to 4pm kind of trading hours but not like US future 24 hours a day kind. He uses IB to automatic the day trade process. Base on what he showed before, his way is trend following, and somehow he can get in the trend very early and leave at right timing. He uses second as time frame unit to do analysis. He definitely sounds like he knows what he is doing and he knows how to use IB well. He is a full time trader and gave up a good financial job to do that. He has a lot of professional financial qualification. For other giant famous hedge fund, I find out the average performance over long term is not more than 15% per years: http://www.hedgefundintelligence.co...-Years-of-Absolute-Return-Top-10-of-2013.html Personally I don't believe any human can constantly beat or even come close to the 80% mark of Medallion by himself. Since all those big hedge fund other than Medallion Fund can only make 15% the most, while there are so many hedge fund making much worse, I expect a very outstanding individual can only earning around 20% or the most 30% in long run. What do you think?
Researched this topic some years ago from audited and published results. They were from all categories of managed money... stocks, options, mutual funds, futures, hedge funds, leveraged/non-leveraged, etc. <.1% averaged 30% for 10 years. <10 averaged 40% for 10 years. This was before the days of HFT. Therefore, I'd say for a trader to average 20%/yr on his total capital is excellent.
There is a difference between trading a small amount of capital and trading millions/billions. Could your guy that trades 3 contracts do the same with 300 or 3000? I find that as I go, preserving capital becomes more important and I am willing to risk less and in turn make less.
Let's run the numbers. If you have $100k pool capital, 1% of that is $1000. If you are trading equities that range between $25-50, you can hold 2-4 positions at any one time. Holding 4 positions of 1000 shares (2 x $25 x 1000 shares = $100k pool capital) requires you to pull out only $0.25/trade to make $1000 (or 1% of the pool capital)/day. If one is a decent trader, many more than 4 positions can be had during the trading day. If successfully done, with keeping losses as small as possible, you can end up making 250%/year (1% return/day x 252 trading days/year). Of course commissions, fees, taxes etc may bring this down a little, but that shouldn't throw it too far.
What you have to understand is that a lot of the funds follow fundamentals. In addition to that, the amount they get in with is huge and so it has to be done over time. This makes it an unfavorable environment for them in terms of getting the best price. An individual trader can get in and out with ease in instrument trading over 2 million in vol/day. Btw, these funds have extremely high overhead costs that bite into their profits. Retail traders not so much.
Well... I say "averaging 20%/yr is good", while you say "If you're worth your salt, you should be doing 250%/yr". One of us is waaay off. (As your hypothesis is theoretical, I'm guessing it's you.)
Early in trading, you're more likely to "go for the gusto". As you progress and accumulate, you also gain experience and respect for the potential downside. As a result, you likely get more conservative. That's not only OK, it's good.... as you "need to get rich only once"... if you can.
But how much are you willing to risk to pull out that $.25? What if it is .50 against you? I do know some intraday traders who make returns that I wouldn't think possible, however they constantly pull money out and leave the account at a minimum level. Reason being is that they know they can lose just as much as they make and they don't want to blow out a large account. I trade a lot of options and I know I traded a completely different way with a 25k account than I do today. Drawdown is what puts the brakes on a lot of these funds.
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