I've posted on this subject before but here are some more realistic numbers: Assume you can make a Sharpe Ratio of 0.5. Maybe you'll do better - bravo. Maybe you'll do worse (most retail traders lose money, so 0.5 would be much better than average). That implies a full Kelly risk of 50%, and half kelly of 25%. I'd use half Kelly maximum. That equates to an expected return of 12.5% a year with 95% of your annual returns falling in a range of -38% to 63%. Your probability of losing money in a given year is around 30%. Your probability of making less than 12.5% in a given year is 50% (assuming symmetric returns). You clearly can't expect to make money every year so you need to either have (a) several years of living costs saved up to cover the times when you will don't make enough money or (b) passive income from dividends / bond coupons or (c) a combination of both (or (d) another job or income from a spouse but we're talking about 'making a living from trading' so let's assume that's what you're doing). Let's focus on (a): Mathematically over 5 years you have roughly a 3% chance of not making 12.% in any of those years so I'd personally want to save 5 years of living costs in cash. Let's say that you want to replace $50K in income (I'm ignoring taxes). You're probably going to want to have 5 years of living costs, minimum, which is $250K. At 12.5% to generate $50K you need $400K. That's a total of $650K. GAT
You are talking 12.5percent real returns. Overtime you will need to grow your account for inflation and to "keep up with the jones's" who are receiving salary increases and job promotions.
You're right however since Sharpe Ratio is an excess return over the risk free rate, if you assume risk free rate ~ inflation, you're close enough. But yes, to be safe add another 3% on for inflation. GAT
%% Your $50 option post; maybe much more accurate, but havent checked it out this quarter. I use a profitable 50 day moving average, but that is with cash stocks. i dont mean quarters like we gambled for in a poolhall LOL , but OCT-DEC. LOL
That's fine if your going to live for ever and don't mind dying having never spent a penny of it, I'm more of a short term constantly needing cash injections to have fun with and eat and pay bills, you know real world sucky life!
I trade for a living. My personal goal is to make a profit every day, I don't care if I made it from dividends or if a stock has a nice little jump like GPRO today.
Because option premium strategies are easy as is just collecting (large) dividends. It's not like the high dividend paying stocks are risky or anything. If it's how you say it is, why isn't each and every small hedge fund doing it? 25% will make you a star.
%% Great name GoPro; i cant buy or sell with a 52 week chart like that, but like long lasting trends...... Good profit today