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Hi All,
I've been a registered member now for 391 days and this is my first post. I've read the board off and on during this period and find the conversations insightful and thought-provoking. A big thank you to Mike!
Here is my current predicament …
). At the time I wrote this post over half a year ago, I was considering wiping the slate clean, which I did. I am now trading PA. Nevertheless, it is always nice to have some figures behind annual returns so I can compare my own progress.
Can you help answer these questions from other members on NexusFi?
I get this question regularly, and it is a very fair question.
The answer has two sides:
The general answer - of course it all depends on your aggressiveness, resources and talents, so yes, you can target anywhere from 2% per day (which compounds like crazy) to 100% a month - and these are achievable. while not commonplace nor probable for a novice trader. A conservative and very achievable target would be 25% a year or 2% a month.
More specifically, what I have found reasonable based on the traders I've worked with, 10% monthly return is a reasonable general target for a relatively new trader to pursue with a moderate ($25-50,000) account.
Many businesses in many industries look to realize 6-10% net profit, and since trading does have its unique qualities and certain advantages over other businesses, again 10% is not unreasonable.
This is one of my favorite things about trading! It is also one of the aspects that make it unique.
In every other business I can think of, you have to invest to find out if an idea will work - otherwise it's just speculation.
Trading is the only one where you can test your ideas in the real world (both historical data and live in demo account) with having to risk any capital - and find out exactly what to reasonably expect.
From a business venture standpoint, this is fantastic.
I'd say turn this question around - how much money are you prepared to lose in a year, then apply this figure to your historical stats and see what return you would get. If you are short of your goal, whatever that is, this is the gap that needs filling. Thinking that way around focuses on what you can do to improve; the improvement fills the gap. Self improvement is the currency of trading, the less you can think about the money the better IMHO. I suggest the feeling of winning is more worthwhile than the feeling of being paid your winnings. Easier said than done of course!
Maybe not entirely on topic, but your post reminds me of stages in method development. In earlier times, when was searching and constructing a method for trading, I wanted to find a profitable method too much. I started deceiving myself, cooking my own statistics, to make the method profitable. For example, finding some reasons to not take some losing trades, or finding a ‘filter’ which had no logical basis. This kind of self-deceiving is very sneaky, and it took some time before I recognized my behavior.
This behavior reminds me off the general trait known as backwards rationalization: after some facts happened, your minds finds reason to make you feel better( or rationilizes it ). For example, how many times after you lose something (material possession / job etc) you told yourself ‘ it wasn’t that good anyway’ ? If you not already have done, look around at people and you will recognize that almost everyone constantly applies this behavior. It is very deeply rooted.
Off course, when I started trading the ' profitable' method with real money, I always had problems pulling the trigger. Probably because deep down I knew, the method wasn't that good, and I had been self-deceiving.
Then at a moment I recognized this behavior, and I flipped it around: I constantly try to find holes in a method, and try to find reasons why it will not work. Only if a method survives this stage, I will find it tradable - robust. Be very hard for a/your method, or in the end you will pay for your behavior.
One of my worst enemies are my own false assumptions
That would definitely depend on instrument traded and the inherit leverage.
If I have $10K and buy 65 SPYs and it goes up 1% (~14 S&P500 points), my profit will be around 1% of my total account (no leverage).
If I have $10K and open Long 2 ES contracts and it goes up 1% (14 S&P500 points), my profit will be around 14% of my total account.
The minimum daily ATR for S&P 500 in 2012 is above 7. If someone managed to get 2 ES points daily on 1 ES contract, one gets over 50% profit in a month over the ES initial margin.
So it always depend on instrument traded and the leverage it has.
maybe 1% a month per year you've been trading would probably be a round-about average to look forward to. Obviously starting out in the first year has the most sporadic draw-downs, at least that's what happened for me.
R.I.P. Joseph Bach (Itchymoku), 1987-2018.
Please visit this thread for more information.
A comparison to the SPX is not relevant because the SPX could easily move in a 500 point range in a year and still show no return at a given point. Short-term (full-time) traders would obviously have the *opportunity* to exploit such a wide range in order to *attempt* a return.
That being said, anyone who expects more than 1-2 % per month is probably living in a dream world. Yes, we've read about those who have achieved incredible returns --- just like we read about Warren Buffett and those who win lotteries. The reason they are being written about is because they are extreme abberations. Someone has to be "the best" or "the winner" in any endeavour of participation where results are calculated. I wouldn't count on it being you --if I were you.
To test time (5-10 or more years) and average more than 12-24% annually would likely (I'm guessing here) put you in the top 1/4% of all people who have ever attempted to actively trade financial markets for their personal own accounts.
Sometimes I think that people are fooled into believing that because they happen to trade money for a living (as opposed to a product or service) -- that they are entitled to get rich? Well, there's no more chance of that happening than the guy who opens a sandwich shop or a hardware store turning it into McDonald's or Home Depot.
