Let's get real about returns

Discussion in 'Trading' started by AAAintheBeltway, Jul 25, 2003.

  1. It is frequently said that 90% of traders are consistent losers. That number apparently was derived from the records of one daytrading firm, but I would not be surprised if it was accurate. Despite the fact that many ET members are relatively new traders, it is common to see surprisingly large numbers thrown around as the bare minimum they will accept. I'm not singling anyone out, so please no angry responses that I have insulted your intelligence or ability. But let's get real.

    A 12% annual return would be better than virtually 99% of mutual funds over the past three years. A return of 24% over a period of years will put you in the same league as such neophytes as Warren Buffett, Bill Miller and Peter Lynch. Bump that up to 50% a year and they will reserve a spot for you in the Hedge Fund Hall of Fame, right between Julian Robertson and George Soros. What does that take anyway?

    One percent a week with no compounding is 52% a year. On a $100,000 account, that is a measly $1,000 a week, or about what many newbie ES traders expect to make per day trading five lots. That is only $200 per day, a crummy $.20 move on a 1000 shares of stock. How easy is that? If you traded 5 lots in the ES, that is less than a point a day. Who trades 5 lots with a $100k account, not me for sure. More likely 10 lots, so you only need TWO TICKS per day. Two lousy ticks per day and the world will literally beat a path to your door, the rich and famous will toast you, beautiful women will throw themselves at you like you were an NBA star and you will have to have a secret address to prevent people from sending you money to manage. Two ticks per day.

    If I started a chatroom and said my goal was two ticks per day, not only would I have no members, I doubt I could pay people enough to join. I certainly wouldn't join. We know it is possible to make much better returns. Honestly, it is not unreasonable to triple a futures account in a year. The trick is to do it year after year, and almost no one has ever been able to do that. Why not? Who knows, I guess because it is possible to get lucky for a few months and shoot the lights out. Markets change, but few will abandon a winning method.

    I think the real lesson of this exercise is that there is a very fine line for daytraders between being a star and being part of the 90% crowd.
  2. Actually that thread asks if you can make $ off 2k. Sure, just not a living for a little while. My 2k account is now almost 3k after a little more than a month. Give it a year and I just might be making a living off it. (unless I am just getting lucky).
  3. It looks easy looking at the chart. There are so many 1-2 point oscillations during the day. Except when you trade with your own $, you think more than twice before you press the place order button. No matter how successful you are papertrading, as soon as you switch to the real thing, your profits drop dramatically. I think the way to make a living trading futures is to decide how many contracts are a small enough risk for your account size, so you dont jump outta the window if you lose.
  4. I think we are comparing apple and oranges. I have already quadrupled my account, but it is small, and that is the difference.

    I suspect that trying to quadruple a billion dollars would be a serious problem, if from nothing else than finding enough vehicles to move that kind of money around.

    Brokers notice very large orders, and will begin to front run them, that will cut your profits down, but if I am making 5 ticks a day on 2 contracts, no one will notice, and I still get to live better than 90% of most people.
  5. Monsoon


    so are the 90% that blow out just greedy?
  6. Yep.

    Greed makes losses run and cuts profits short.
  7. They don't know how to handle Money and Risk Management.

    TM Trader
  8. ONLY Experienced Traders with proven methodology and results

    over time ( not paper trading or hypothetical )

    should be doing so many contracts at a time

    in the SPOOS , or other big time futures contracts

    <Who trades 5 lots with a $100k account, not me for sure. More likely 10 lots>

  9. As in everything else you start slow and small, build your REAL trading experience and slowly grow to trade more contracts. Of course, it's all depends, how much you are willing to risk for what kind of gains.
    #10     Jul 26, 2003