How much should a "good" trader earn?

Discussion in 'Professional Trading' started by Cutten, Nov 14, 2003.

  1. Boomer

    Boomer

    where is the line that one has a hard time crossing? in terms of volume. for instance, if you trade 5 es, and you are constantly make your desired pts. per week, say 10. what goes through your mind when you think about going up to 10,15,25 contracts. if you have found an edge, where do you draw the line based on volume? i know it depends on your account size, but if you have been successful and profitable, you can increase your account? i have been thinking about this question and wondered what yall thought. thanks
     
    #11     Nov 14, 2003
  2. m22au

    m22au

    Sdtrader,

    A more relevant measure would be return on trading capital (return on total assets, not return on equity), regardless of the amount that is borrowed.

    I chose the 'pays the rent' option because like others have mentioned, it depends on your trading capital.

     
    #12     Nov 14, 2003
  3. I like the way you put that, especially the latter part.
     
    #13     Nov 14, 2003
  4. lescor

    lescor

    Yes, if you trade with retail margin. This has been discussed many times here in the past. You can't use a 'return on capital' number for a prop trader, it's meaningless. If you start with no capital up front and make $100,000 'from nothing', what does that mean? You could keep $10k or $100k in capital in your account, but still trade the same way with the same net results.
     
    #14     Nov 14, 2003
  5. TGregg

    TGregg

    Presuming that one scaled up to a captial level that was appropriate, I'd say 250k, AKA ~1k/day. That's figuring for daytrading ES. Give or take about 200k. :D
     
    #15     Nov 14, 2003
  6. TGregg

    TGregg

    But you forget to pay your employee (you). A common mistake. If you wish to compare trading to a "regular" business, don't forget to include a wage for the head trader/CEO.
     
    #16     Nov 14, 2003
  7. I was talking about own business, and 15-20% net profit
    after tax and all other expenses
     
    #17     Nov 14, 2003
  8. m22au

    m22au

    The same measure (return on trading capital a.k.a. total assets) can be used for a prop trader. The total asset figure can be the amount of buying power that the trader has.

     
    #18     Nov 14, 2003
  9. TGregg

    TGregg

    You missed the point (that's OK, I try to hard not to "overstate" my points, so I tend to understate them). Yes, we are taking about a business, owned by the trader. Yes, we are deducting expenses. Yes we are talking fundamental accounting.

    However, one also needs to include a wage for the workforce.

    Imagine a one-man, pick-it-up restaurant. Only takes one person (pure theory here) to operate. He works 12 hours a day, 7 days a week. Let's say he put 100k into this operation, and "nets" (less expenses, but with no wages for himself) 20k/year. So that's 20%, pretty good, eh?

    Not so fast. Our hero is putting in 4383 hours/year (12 hours x 365.25 days in a year). That's about $4.56/hour he was making, and that includes his capital. If you figure he was worth $5 an hour (under minimum wage, I might add), his operation is operating at a loss!.

    And that's my point. That one needs to include a wage in one's business calculations.
     
    #19     Nov 14, 2003
  10. In general, to be a good trader, he or she needs to grow his or her account an average of 100% in 6 to 12 months.

    :p
     
    #20     Nov 14, 2003