Small time Daytraders - what is a good return?

Discussion in 'Trading' started by ninety, Jul 28, 2008.

  1. ninety


    How do you define a "good" ROI in Day Trading. I know there are numerous definitions of ROI in books, magazines, ,webinars etc . But for small time traders, what is your expectation and actual experience?
  2. I don't have a good number to throw out.

    For myself personally, I have set a weekly goal, and I'm attempting to go only for the highest probability setups per my trading strategies....for day trading anyways.

    That's my goal. I have reduced the level of stress in my day trading by doing this.

    My long term goal is to be able to comfortably increase leverage to those higher probability trades to make money on that weekly basis instead of trying to add MORE trades to increase profits.

    Last week I hit my target on Monday. It was hard to not trade the rest of the week.

    Usually in the past I would make money early, and wind up giving my profits back by the week's end.

    So I would suggest finding something you would think easy to hit on a weekly basis.
  3. bighog

    bighog Guest

  4. My goal is in points, not dollars. I can always add more contracts if i can make a certain amount of points consistently. monetary goals only make you more greedy/fearful IMHO

    The way I see it is as that the daytraders make their living off of the natural inefficiencies that come when large orders are entered, especially fearfully or greedily. The orders come from all the various institutions that are trying to chase after a 25% (or 15%, or 10) annual return on vast sums of money.

    A good daytrader can consistently profit on a monthly basis by getting in front of institutional orders and profiting off of natural intraday inefficiency. With a $10,000 deposit he can make several hundred thousand dollar in one year - a return of perhaps 2000%. However, that percentage is meaningless because the daytrader can only take so much size, and the more size he takes the more he becomes crippled and prey for other daytraders and market makers. A daytrader who makes $500,000 in a year is a superstar.

    Let's say you have a way to fully and without error program precisely the strategy that a trader uses to make $500,000 per year. Because that trader only can monitor limited information and thus can't trade all the setups, let's assume there is $3,000,000 in that strategy if it's traded by a computer.
    The strategy only utilizes $500,000 BP, but just to be cautious you use $1,000,000 with a $100,000 deposit, thus your return will be 3000%.

    Someone with $100,000,000 to manage can do better putting his money in the bank than he can with a daytrading system that makes 3% per year.

    You can bet your ass whatever $3,000,000 that is left on the table is being fought for by hundreds - perhaps thousands - of daytraders and investment banks, hedgefunds, market makers, market manipulators, and all the other various participants.

    For anyone trying to make a living off of fees on asset management, it is not worth it to try to make $3,000,000. They must instead try to make $30,000,000 on $200,000,000 for a hedgefund, or manage $1,000,000,000 for a mutual fund. Because the positions required to achieve such returns are so large, it makes it very difficult to freely get in and out of a position in response to short term market action - something daytraders can do - so as long as thousands of institutions are fighting to make $20,000,000 or $300,000,000 on huge sums of capital, we daytraders can fight for our $150,000 - and if we keep $10,000 up at our firm, we can call it a 1500% return, even though whoever is making 15% on 100,000,000 laughs at Joe Daytrader's huge % return number.

    Conclusion: percentage return comparisons of daytraders vs. asset managers are completely useless because of the way the markets work.


    What's good for a daytrader? 6 figures per annum is good.
  6. NoDoji


    To me, a good ROI is enough profit after taxes to attain your goals. My goal was to make a living off my $130K trading account. I never earned more than $35K a year in my life, so .5% - 1% a day I've been averaging is well beyond my goals so far. Talk to me in 5 years; by then I might feel confident in the ROI I can generate :p
  7. ninety


    Good input. It makes sense.
  8. gaj


    most of my trades are NOT scalable. most of my trades are AM-only or PM-only, most (99%+) trades closed by end of day.

    it's not really judgable on a % basis or even cash basis - i've now gotten myself accustomed to trying to just trade well, within my parameters and system.

    as a sidebar - the "superstar" numbers for hedge funds have no meaning to me.
  9. This is how I tend to look at things also, good ROI is relative, so as long as you are on your way towards a set mark/goal you are on the right track. When you forget to put things into perspective of your ultimate or short term goal you are in trouble

  10. basically, daytrading is a stupid business. Capital doesn't scale. You have huge variance in your expected earnings. You face gambler's ruin. Unlike most businesses, the longer you're profitable, your business isn't any financially stronger. You're just as likely to blow out.

    As stated, I'd rather offer a 10%/year absolute return strategy, manage a cool billion with a 2-20 fee structure and sleep at night. I'd take my annual earnings and invest in real estate and other assets with no correlation or exposure to my strategy. If you take basic finance, you learn to create a balanced portfolio, that is to underweight the industry you already work in. When you daytrade, you concentrate your wealth entirely into your profession, by definition; it's like holding all your wealth in company stock.
    #10     Jul 29, 2008