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What is a reasonable return
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What is a reasonable return

  #41 (permalink)
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Big Mike View Post
Perhaps one day I could do a poll that is aimed only at traders that have been consistently profitable for more than 2 years, and ask the same question, to see what a more realistic return is for the group who is actually making returns on a consistent basis

I think that would be a great idea. A reality check poll. The gap between expectation and reality sows the seed for much disappointed and emotional injury. If on Day 1 you were told you were told you would return precisely 1% monthly for each month of your trading career how many would start?

Far fewer I think than if you were told you would AVERAGE 1% a month across the same period. My point is that 1% each month every month would be perceived by many as boring. Where as an average brings the opportunity of swings of wins and losses - and the excitement that suggests.

If I ran a prop firm that is a question I'd ask when scouting for talent, and only go for the trader who say 1% each month, every month.

I'm not sure how close 12 p.a.% is to the true figure for long term successful traders, closer than the results of the poll I'd guess. If you were running OPM they would probably be more than happy with the return if the risk profile reflected it.

Of course to present a 'the truth about retails traders' returns' you need to have access to a reliable data source. So Mike, if you could get access to that and people could not pick holes in it, I for one would very welcome it and the discussion it would spur.

My expectations on Day 1 were unrealistic, but not wildly so. And I have moderated them in line with what I believe I can achieve. The payoff though is likely to be far more personal that financial.

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  #42 (permalink)
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The term % per month can imply everything. I can't deduce any value of it, because the risk is not incorporated. For my own trading i compare primarily the averaged RR ratio of a trade and the underwater curve of the drawdowns (and of course many more metrics for detailed comparision). The % per month is heavily related to the applied money mangement and this can vary.

I think the averaged Risk-to-Reward ratio per trade can make a more reliable comparision.

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  #43 (permalink)
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Koepisch View Post
The term % per month can imply everything. I can't deduce any value of it, because the risk is not incorporated. For my own trading i compare primarily the averaged RR ratio of a trade and the underwater curve of the drawdowns (and of course many more metrics for detailed comparision). The % per month is heavily related to the applied money mangement and this can vary.

I think the averaged Risk-to-Reward ratio per trade can make a more reliable comparision.

Of course, but I think most people have expectations of their portfolio, and they know the value of their portfolio. Whether they are 10% cash or 90% cash is up to them, so the value of the portfolio is still a good way to compare monthly returns.

Mike

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  #44 (permalink)
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Big Mike View Post
Yes, futures.io (formerly BMT) is far and wide made up of futures traders.

Interesting comparison w/TopstepTrader, I will ask Michael Patak at TST if he would be willing to share what a longer term MoM return looks like for traders that have been in the program for say at least 6 months or a year, just to see what a long-term consistently profitable trader looks like on their side.

Mike

What a wonderful idea. Thanks Mike.

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  #45 (permalink)
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Cashish View Post
I somewhat agree with you, I think Big Mike should have signified who he wanted to participate in that poll, futures traders or equities traders, I believe this important distinction would have made the poll a lot more informative. I noticed you listed equities as a "favorite instrument" in your "description box," that might explain why 10% seems absurd to you. I'm sure in the real world there are many more equities traders than futures traders but I'll bet here on futures.io (formerly BMT), futures traders rule. As a futures trader I consider a 10% MoM return a modest goal, for a seasoned trader. Before everyone gets their panties in a wad, consider the criteria of the Top Step Combines that are posting here on futures.io (formerly BMT). Top Step is looking for traders that can take a 50k account and generate 5k of profit (10%) in twenty days, or 16k of profit from a 150k account (10.6%) in twenty days. Guys are doing it quite often, but they're not trading POT, HOG or YUM.

And thank you Cashish for presenting the idea

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  #46 (permalink)
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Big Mike View Post
Yes, futures.io (formerly BMT) is far and wide made up of futures traders.

Interesting comparison w/TopstepTrader, I will ask Michael Patak at TST if he would be willing to share what a longer term MoM return looks like for traders that have been in the program for say at least 6 months or a year, just to see what a long-term consistently profitable trader looks like on their side.

Mike

Would be interested to know the sample size of this/number of live traders they have at TST long term as well.

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  #47 (permalink)
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Yes, futures.io (formerly BMT) is far and wide made up of futures traders.

And I think this was the reason why futures.io (formerly BMT) users expectations are between 5-10%. Futures are leveraged between 15-20 to 1, so this 5-10% would mean less than 1% if we were trading stocks with no leverage. Basically, around or below S&P 500.

Am I missing something?

Thank you,

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  #48 (permalink)
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Well this question comes in two parts - 1. how much would you tell a beginner trader they'll make monthly and 2.
how much would an experience trader make monthly

Every trader starts out with a compound calculator anticipating the excitement. first year trading for me was more or less figuring out how much money I'd allow myself to lose before giving up. I think we could all write a book on it. It's not easy taking other people's money. If you can grind through 20 trades a week and you're up 1 trades worth of money after commissions and do that month after month, you have a career. I don't think its uncommon even for professional traders to have losing months and still make a living at the end of the year.

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  #49 (permalink)
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Why Unreasonable Expectations Are Set

Here is my explanation as to why people set unreasonable expectations and hence the results of this poll:

Legendary Traders There is a reference to small groups of legendary traders that made above average returns.
These traders looked upon as stars but the truth is that they are a small group of people. You can learn about their way thinking, their methods, etc but don't think for a minute you can be them. The truth is that everyone just talks about their success, and no one mentions the fact that many of them lost in the millions, and remortgaged their house twice prior to becoming successful. Marty Schwartz tried to have 4 apprentices and non worked out (food for thought)

Educators Your early education will shape your expectations in the market place.
if you went with "1% a day" and "Make $200 in a day before the wife wakes up" then "Houston, we ..."
There are legitimate people who trade and teach, but it's your job to decide who is a salesman and who is a trader.

Capital Differences If you had a year where you took 5K to 8K in percent it's 60% BUT it's only 3K.
Try that on 50K to 80K or 500K to 800K and realize what it's like to have only 5 filled out of 20, or setting a target on 20 lots and only 3 get filled and then you need to exit as the market as it starts to go against you.
I am not here to say you can take an account from 5k to 8K, but rather demonstrate that traders think exponentially in terms of the growth of their account without realizing the implications of it.

Income Beginner traders reflect what they want to earn, not what is realistic. Psychologically that achieves the comfort of thinking that there is income consistency and there is actual high reward behind their efforts to learn the markets.

As Mike said: there is a diverse group of guys here. You have 3 kinds: Traders who actually trade and put $ on the line, perpetual papers trader and the "academics" who know every platform, read every book, and even have programming skills (but do not trade or trade minimally as time allows). Therefore you will have people coming from different angles when all asked the same question.

Here is Matt's realistic" return: Survive year one and year two with real funds.
Any positive return there after in an achievement because most of those that started with you dropped and gave up.
I had good mentors in my business, trading and personal life. They shaped my life with a sense of realism that gave me a measuring stick against my achievements.

Dont set unrealistic expectations, because if you fail to meet them you will simply get disappointed and you will have a sense of underachievement. There are so many threads about money management, positions sizing, etc that you can learn plenty from and apply in your trading to improve your method and execution.

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  #50 (permalink)
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lugopt View Post
And I think this was the reason why futures.io (formerly BMT) users expectations are between 5-10%. Futures are leveraged between 15-20 to 1, so this 5-10% would mean less than 1% if we were trading stocks with no leverage. Basically, around or below S&P 500.

Am I missing something?

Thank you,

Yes. Drawdown. This leverage is never fully used with directional bets.

"A Jedi's strength flows from the force."
-Yoda
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