What kind of returns are possible?

Discussion in 'Trading' started by Cutten, Dec 9, 2008.

What's the highest practical long-run compound annual return, keeping drawdowns <20%?

  1. 10% - you can't beat stocks

    4 vote(s)
  2. 10-20%

    9 vote(s)
  3. 20-30%

    14 vote(s)
  4. 30-40%

    7 vote(s)
  5. 40-50%

    4 vote(s)
  6. 50-75%

    0 vote(s)
  7. 75-100%

    1 vote(s)
  8. 100%+

    36 vote(s)
  1. Cutten


    Assuming a reasonable size account (7 figures), what are the maximum feasible compound returns possible over a 10-20 year period through trading, whilst keeping drawdowns below 20%?
  2. unlimited if you havea crystal ball
  3. I voted <b>Cutten</b>, but the problem remains:

    What strategy can average an APR for that long?

    Answer: it has to be designed as such (as mine are) to take into consideration. . .

    a) will there be an economy?

    b) will people be working?

    c) will companies continue to try and profit?

    d) will they allow for stock to be openly traded?

    If these are in place, then. . .

    a) does the strategy take into consideration all market periods (flat, up down)?

    b) Can gains be held and losses minimized (per your DD rule)?

    c) can the strategy remain liquid w/ growth and not be affected by revealing "secrets"?

    I clearly don't know everything, but many do not even understand that compounding a larger annual return is powerful, let alone that the system may be inherently flawed (by any of the above detractors).

    That is why you never see that kind of "success". Many do "work" however, for a <i>while</i>!

    pay$ :p

    hey - just ask stock_trd3r!

    Bill Miller mistepped, too:

  4. Cutten


    I notice almost half the votes are for 100%+. If you can compound at a 'mere' 100%, that would take a 1 million account to 1 billion in 10 years, and 1 trillion in 20. A tad optimistic!
  5. Drawdowns measured intraday, end of day, end of month (which would be the standard for hedge funds)?

    In my own experience a 20% drawdown measured at month's end likely represents a 30-35% DD end of day (sometime in the middle of the month).
  6. Given the restriction for 20% drawdown for a period of 10-20 years, I'd say a return of about 10% is what can be expected. I base this on analysis of the performance of the best CTAs. Of course if you think you can do better than them, you can achieve a higher return with the same risk. But I think anything over 15% return with that level of risk is very unlikely.

    Here is a graph I made for the distribution of the maximum drawdown for a period of 20 years, if you aim at 10% average annual return based on the performance of best CTAs:

    Edit: maxDD is based on monthly data, I don't have daily data, so actual DDs will be higher as makloda pointed out.
  7. Every ET poll is amusing in its own way. According to this one, 90% of the participants think they can beat the market. As someone said, this world is full of unrealistic motherfuckers.
  8. I find it quite interesting that <b>Cutten</b> did not get very many replies. Could that be that most here on ET do not strategize for a long-term APR?

    Well duh! They are mostly day-traders. So this begs the question for the rest of us:

    Where can I find a forum that can be similarly "entertaining" (lol), but generate more discussion along managing for a longer-term return?

    Any good websites that ET guys and gals know?


  9. As Louis Armstrong famously observed (when asked what Jazz was), "If you have to ask, you'll never know."
  10. tradersboredom

    tradersboredom Guest

    daytrading swing trending et or market making is a business so performance will vary depending on skill o trader.

    As for investment buy and hold will depend on overall market or health of economy.

    #10     Dec 10, 2008