A lot of wild claims get made in our business. You hear of annualized gains of 20%, 40%, 100% 1,000%. But how should we really measure our trading performance? Many seem to suggest you count Points, or Units, "Made 2 points today". Presumably one then multiplies that by however many contracts or shares you actually traded based on your money management strategies. The "points" approach is fine for measuring "trading acumen", but what about return on equity as well? In other words, if I have $200K set aside for the "business" of trading, but only use say $25K of that in a futures margin account, and do a superb job of actually making a nice profit in that futures account, I still might only generate a small return on that $200K - say 20% over one year. Not very good given the risk of trading futures. But I might eventually triple up on my contract size, use the same "trading acument" skill and achieve the same "trading results" then be making a boat load of ROE - say 100% annualized. I know there is a whole world of difference between a trading strategy and money management, but I am asking what you all think should be the "benchmark" for measuring your overall performance. You know, what to say at cocktail parties when someone asks "how are you doing" in the markets. Seems to me most people can relate to an ROE number and that if we have $x in a pot to use in our trading business, we should measure our results by what we generate after expenses and before taxes on that number, even if 80% of it is sitting in T-bills for 60 percent of the year. What do you think? Rob.
How much money I'm making. Simple as that. No percentages, just how much hard cash am I making each day, week, and/or month. Then I compare that to how conducive the market is for making money. I know how much money I should be bringing in for different market conditions. I just have to have a realistic view and I have to be honest with myself.
I measure my performance by the net dollar profit amount at the end of the day. If a fellow trader or the office manager asks how I did for the day, my answer will depend on whether the market had given a lot of opportunities on that particular day, so I might say I did pretty good when I was down 1000 dol but the market was really bad, or I might say, I sucked today, although I had made over 5000, but it was a really good trading day and much more money had to be made. If people outside of the office ask how I did (neighbors, friends, etc) I always answer "Pretty good, thank you" Forgot to mention that I trade at a prop. firm, and that's the reason I'm not concerned with the % returns.
For me it's the points per month. For my wife, it's the dollars per month. Now, why is that not a surprise?
By my consistency. Never by the amount of money i make. Becuase, if i am consistent, all i have to do is increase the number of shares i buy in each position, and that will generate more money. Therefore, consistency is the most important thing in trading. "Simple as that."