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What is a reasonable return
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What is a reasonable return

  #11 (permalink)
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I think it is very reasonable and realistic to achieve between 20% and 50% per year if you really know how to trade and apply at the same time proper risk strategies like professional institutions and funds do...

Of course on some years you might score lower, maybe just 10% or even go negative, while on other years you could run into 80% and 100% returns if not more - it is all possible, and it would even happen to you every now and then.

But if you are working out an average to perhaps determine the minimum capital required for you to become independent or something of this type, please multiply by two any figure you get for safety reasons.
During these preliminary planning phases we really tend as humans to underestimate our expenses, and overestimate our returns and gain. this is just the nature of the beast

Now if you don't know how to actively trade the market, a simple and effective investment strategy like the dogs of the Dow, or better the small dogs of the Dow would have returned so far YTD 2012 (at the morning of the 1st of October) +15.10% on investment, plus 3.57% of dividends in total.

See... that's already close enough to my lower limit given above and you didn't spend your days staring at your screen. But again, if you really swing the market's up and downs, a good trader makes much more than that especially in bear years and crisis times when that simple strategy would turn negative.

For those saying that a reasonable return would be as much or more than the S&P for that year; this is clearly the agreed upon benchmark that all hedge funds and mutual funds compare to. But you also know that these type of institutions have several constraints of being continuously invested in the market up to a certain percentage, have quotas and restrictions in sectors and industries or instruments that can trade, etc...

An independent and private trader that is well versed can easily exceed the return percentage of these institutions. Of course not by value, these guys turn over billions of dollars, but I am referring purely to the percentage figure.

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  #12 (permalink)
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Can you tell me what "dogs of the Dow" is? Are you talking about investing in the stocks that make up the Dow?

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Market Sniper 88 View Post
Can you tell me what "dogs of the Dow" is? Are you talking about investing in the stocks that make up the Dow?

Dogs of the Dow
After the stock market closes on the last day of the year, of the 30 stocks that make up the Dow Jones Industrial Average, select the ten stocks which have the highest dividend yield. Then simply invest an equal dollar amount in each of these ten high yield stocks. Then hold these ten "Dogs of the Dow" for one year. Repeat these steps each and every year. That's it!

Small Dogs of the Dow
On the last day of any given year, select the ten highest yielding stocks as described above. Of these ten Dogs simply select the five Dogs with the lowest stock price and you will have what we call the Small Dogs of the Dow (Sometimes referred to as the Puppies of the Dow or the Flying Five). Then invest an equal dollar amount in each of these 5 high yielding, low priced stocks. Then hold these five "Small Dogs of the Dow" for one year.

Investing in the Puppies of the Dow would have resulted in a 20.9% average annual return since 1973!
- As reported in U.S. News & World Report, July 8, 1996

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  #14 (permalink)
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What is a reasonable return?

For all of us that have been traing for a while, a resonable return is anything greater than zero.

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  #15 (permalink)
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Fadi View Post
For those saying that a reasonable return would be as much or more than the S&P for that year; this is clearly the agreed upon benchmark that all hedge funds and mutual funds compare to. But you also know that these type of institutions have several constraints of being continuously invested in the market up to a certain percentage, have quotas and restrictions in sectors and industries or instruments that can trade, etc...

An independent and private trader that is well versed can easily exceed the return percentage of these institutions. Of course not by value, these guys turn over billions of dollars, but I am referring purely to the percentage figure.

You're forgetting that 90% of traders fail.
Anything over 20% is really not that reasonable for the average trader.
Most go negative. Some stay up for a period of time but eventually get their clocked cleaned.
If you are just breaking even at 0% for the year you are doing well as a trader
Obviously this won't pay the bills but at least they are not in the negative, while most are.


I have a close friend that has over 100% returns in a year and he is exceptionally talented.
He has down years as well but overall has amazing returns. What he does is not reasonable for most people.
I would say he is 1 in 10,000 if not less.

Psychology > Strategy ≥ Money
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  #16 (permalink)
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If "reasonable" means "compared to others" then yes, positive is reasonable.

If "reasonable" means "compared with what else you could be doing with your money," then > S&P 500 is reasonable (otherwise, you should just park it in an index fund).

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  #17 (permalink)
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SammyD View Post
Hi all,
I'm curious what you perceive as a reasonable annual return on a percent basis. I'm not asking for proof or statements, simply from experience as a day/swing trader. Thanks.

Its hard to put a % on it. Depends on what type of lifestyle you want to live and how much experience you have plus your account size.

If your new to trading then not blowing up your account in the first month would be a reasonable return. Not blowing up your account the first year would be a excellent return.

After you learn how to trade they it really depends on your goals. If your trading as a hobby then something matching the return on S&P would be outstanding. If your trading for a living then your goals could be much higher.

It also depends on account size. a 10% return on a 500K account would be 50K. Most people could live well off of that amount. Where as you would need a 50% return on a 100K account to achieve the same amount as above.


Robert

nosce te ipsum

You make your own opportunities in life.
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  #18 (permalink)
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According to Jack Schwager, Marty Schwartz (the "pit bull") averaged about 25% per month over 10 years. (he pulled money out, it was not compounded of course). Yes, that's right, 1% per day.

You will find returns and losses across the board, owing to a variety of variables, but the foremost being the actual trader(s) who manages the money. Average investors dream of 15% per year returns, or just breaking even.

So, it depends.

Small account or large does not matter that much when we are talking percentage returns, as the risk should be a function of the account size. Having a $500K account means only that one will lose more money if he does not know how to trade. He would be better off to be much less capitalized. Think of it this way. If I have a $10K account, what good does it do me to have $20K? All it does is it allows me to lose $10K, which is a 50% drawdown, and still be in business. To a 50% drawdown, I say "no thanks" and also, "something's wrong" if your drawdown is 50%. Schwager's "Hedge Funds" book gives max lifetime drawdowns for many of those excellent traders at 10-15% or less. Being undercapitalized such that it severely limits your strategy is not good, but it's a lot better than being overcapitalized and being a bad trader.

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  #19 (permalink)
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Massive l View Post
If you are just breaking even at 0% for the year you are doing well as a trader

This describes my trading career so far. (1.5 years on and off)

I refuse to trade again until I find a clearly defined quantifiable, tradable edge.



Massive l View Post
I have a close friend that has over 100% returns in a year and he is exceptionally talented.

What do you think his success is down to?

"The primary thing required to obtain what you want from life, is simply the will to pursue it, and the faith to believe it is possible." - Author Unknown

"The ability to maintain discipline and stick to the rules is the hallmark of the experienced successful trader" - Curtis Faith

Last edited by PositiveDeviant; October 3rd, 2012 at 01:31 AM.
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  #20 (permalink)
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You should be able to have quite a good idea what will be your income from trading IMHO. If you donīt know that and you are trading live, something is wrong. I love this business for several reasons and one of the best reasons is that you can test how "your business" will do before you start live.

The problem is that IMO this is the part which most traders skip because of lack of patience.

Than they:

1) Donīt have enough confidence to overcome some issues of trading (drawdowns etc.)
2) Donīt have the answers to the valid questions of which the most repeatable is how much I can make.

It is like asking how much can I make running a 7/11 business?

There is not an easy answer to that. You can just build up one grocery store and employ yourself there as a clerk and work there your whole life - making more or less average salary. Or you can build a whole empire of international grocery stores around the globe and make billions of dolars.

To answer the question:
You can make more than you dreamed of or you can loose everything and more. To have a very good idea about how much it will be in your case follow the following manual:

1) Study the markets
2) Create (this is IMO important - you have to CREATE not just copy someone elses work) your own strategy/plan. You can also backtest it to see if it works (and if it is possible to backtest).
3) Papertrade your plan for at least a period where you can make statisticaly viable amout of trades. If you daytrade than I suggest at least 150 trades (beginner)
4) Adjust your strategy
5) Papertrade your plan again for good amount of time

Now you analyse the outcome and do a statistics of most important values - RRR, win%, Drawdown. With help of these you get pretty accurate answer to your question. There is just one BIG catch in this. When you start trading live than suddently your outcomes will become slightly different when you are not psychologicaly prepared for what is comming.

Not an easy way but the answer will be closer to reality than any reply you can get on internet forum

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