Average profit % / month for PRO traders

[dumb_mother]

making hundreds of percent per year is all fine and dandy until your system stops working for a couple months and you find yourself down 50% and then it starts working again for a while, but then eventually you have another couple bad months and end up down another 50% (but still maybe a higher low compared to the last -50% period since you made money in between)- but then this time the next couple months go badly as well and all of a sudden you are at zero. i mean maybe you have a risk-free method of making hundreds of percent each year- and i'll give you credit in a decade once you pop on the list of the richest people in the world (which i doubt will happen because gambling that hard you always go broke eventually). i would argue with a good system you could even gamble as much as 3-4% / day- but anything more than that i wouldn't feel too safe doing (and my largest drawdown in my career is -5.7 * daily risk- or in a 4% down 23%). i've managed my own money with various risk tolerances, ramping up all the way to a 17% value at risk per day for over a year making 3000% returns that year (every time i hit a new "high" balance i would divide it by 6 and make that my stop loss, willing to take 6 pukes in a row and lose my entire account because i could have reloaded had i needed to), but all songs come to an end and i threw in the towel on that risk after losing 1/3 of my profit and now am lowering my risk down to 2.5% / day.

it's fine to take a shot for a bit to try and get some capital to move around if you really are starting from scratch, but if you don't tone your leverage way down at some point you will eventually go broke, hence the 98% of all trader's fail (or whatever % the blogs are throwing around nowadays)- it's because only 10% were winners to begin with, and only 20% of those winners understood money management to survive the long run.

 

[Rickwitties]

Quote from Cache Landing:


My career went like this, I started with $1,000 after high school

1998-2003
Traded options only.... averaging 1-2% monthly with wild swings

2004-2007
Traded options still.... averaging 5% monthly with far fewer drawdowns

2008
Switched to e-mini futures.... average 5-10% monthly with few losing months

2009-2010
Finally finished developing my models to gain an edge other than just skill.... currently averaging 25-40% monthly. Frequently go for 5 week periods without a daily drawdown. Best month this year was +105%, and on track to hit the +1000% annual mark for the first time since I started trading.

The downside is that the rush is gone. I get bored frequently and have to find ways to occupy my time to resist getting anxious and entering bad trades. I used to get a little nervous when opening a large position, but now I don't even think twice about it. [/B]

This is very useful information as it reinforces my belief that it takes at least that long a period of development to become a successful trader. My guess is after about 7 years one`s gone through at least one market/economic cycle plus a few years of recognition of familiar patterns observed in the initial years. I don`t think profitability is initially as important as deep learning of market behavior by experimentation/analysis with different instruments/strategies and, of course, exorcising yourself from the 'demons' within. And only then do you really have the ability to develop models and confidently execute them.

My core capital is for long term swing trading but trade NQs as well. I would be closest there to your 2008 level. Been doing about 4-8 trades/day, mostly RTM and trying to incorporate reversals or trend following because although I have no losing months, and limited drawdowns, umph to the upside is lacking.

Since your drawdowns are few and far between, I take it you trade more frequently. Without giving away strategy would you be able to tell us frequency, timeframe,% size and whether it`s RTM, trend following, etc? And perhaps did that change from 2008? Thanks.

 

[jansher21]

Does anyone know of any brokers allowing trading in daily binary options?

What I mean by this is, for example, being able to buy a daily call on the Dow Jones.

THanks,

 

[JoePaterno]

Quote from Cache Landing:

I've had a decent career as a trader. I would consider it above average. Well, since the average trader under-performs the market by the amount of commissions, then I guess I've been well above average.

If you have no legitimate edge other than skill, then 2%/month is great and 10 years from now you'll be making decent money ($100K+ annual) if you're not living off your returns. But this is still much lower than you'll make as an anesthesiologist.

My career went like this, I started with $1,000 after high school

1998-2003
Traded options only.... averaging 1-2% monthly with wild swings

2004-2007
Traded options still.... averaging 5% monthly with far fewer drawdowns

2008
Switched to e-mini futures.... average 5-10% monthly with few losing months

2009-2010
Finally finished developing my models to gain an edge other than just skill.... currently averaging 25-40% monthly. Frequently go for 5 week periods without a daily drawdown. Best month this year was +105%, and on track to hit the +1000% annual mark for the first time since I started trading.

The downside is that the rush is gone. I get bored frequently and have to find ways to occupy my time to resist getting anxious and entering bad trades. I used to get a little nervous when opening a large position, but now I don't even think twice about it.

unfortunately, these numbers don't mean anything devoid of things like metrics and validation.

25-40% a month, if you have a high RoR, terrible expectancy and other things are the only things that show whether a method i

There have been a number of traders seemingly with good numbers and knowledge that suddenly disappear off a trading forum, or will confess to blowing up due to a disruptive market move. That is one of the things that tells whether a trader may have arrived.

 

[anesthesiaman]

Quote from Cache Landing:

I've had a decent career as a trader. I would consider it above average. Well, since the average trader under-performs the market by the amount of commissions, then I guess I've been well above average.

If you have no legitimate edge other than skill, then 2%/month is great and 10 years from now you'll be making decent money ($100K+ annual) if you're not living off your returns. But this is still much lower than you'll make as an anesthesiologist.

My career went like this, I started with $1,000 after high school

1998-2003
Traded options only.... averaging 1-2% monthly with wild swings

2004-2007
Traded options still.... averaging 5% monthly with far fewer drawdowns

2008
Switched to e-mini futures.... average 5-10% monthly with few losing months

2009-2010
Finally finished developing my models to gain an edge other than just skill.... currently averaging 25-40% monthly. Frequently go for 5 week periods without a daily drawdown. Best month this year was +105%, and on track to hit the +1000% annual mark for the first time since I started trading.

The downside is that the rush is gone. I get bored frequently and have to find ways to occupy my time to resist getting anxious and entering bad trades. I used to get a little nervous when opening a large position, but now I don't even think twice about it.

Cache,
Having started around the same time as you (1999 for me) and also trading options exclusively then moving on to futures, I think we're at about the same place. But I'm a little behind you in terms of development (probably because I focused on medicine instead of trading). For me the rush is mostly gone - basically negligible - on profit or loss. I presume this will wear off after about 3 more months of trading - it is mostly due to the fact that I'm coming back to trading and doing it seriously now on the side while keeping my day job.

I don't have an edge unfortunately just a little skill in looking at price action. Can you tell me how you "developed your models" to gain that edge? Are you a discretionary trader like me? I don't know how to develop a model if there is nothing systematic about my trading. For me, it depends on price action and fundamentals - which are always changing and can't be pegged to a system.

Thanks.

 

[Cache Landing]

Unfortunately, no I can't tell you how I developed my models in any detail. My strengths are in math/stats, but I am a horrible programmer. I had to hire out the programming, but I kept everything so vague in the programming that he would not be able to use it. IOW, there are many data fields that need to be entered manually. I don't simply press go and print money every day.

Quote from anesthesiaman:

Cache,
Having started around the same time as you (1999 for me) and also trading options exclusively then moving on to futures, I think we're at about the same place. But I'm a little behind you in terms of development (probably because I focused on medicine instead of trading). For me the rush is mostly gone - basically negligible - on profit or loss. I presume this will wear off after about 3 more months of trading - it is mostly due to the fact that I'm coming back to trading and doing it seriously now on the side while keeping my day job.

I don't have an edge unfortunately just a little skill in looking at price action. Can you tell me how you "developed your models" to gain that edge? Are you a discretionary trader like me? I don't know how to develop a model if there is nothing systematic about my trading. For me, it depends on price action and fundamentals - which are always changing and can't be pegged to a system.

Thanks.

 

[Cache Landing]

I understand your sentiment and agree, except that there are more details that I don't really wish to argue, but will take a second to elaborate slightly. I didn't develop something that would only work under a single condition. As conditions change (high vol to low vol, bearish to bullish, or any other combinations), my application adjusts for it.

To make a long story shorter... A month where I would be net negative more than 1/2 the days has a prob of far less than 1%. But there are two main kickers;

1) The gain of the average winning day is almost double the loss of the average losing day.

2) Simultaneous losses dramatically reduce both the probability and size of additional immediate losses. But, simultaneous gains have no effect on either the probability or size of additional immediate gains.

I'm not stating that it is risk free, but you were suggesting that in order to make those gains, I must be assuming abnormal risk. That is not the case. I generally hold my VAR well below 10%, and my worst case daily drawdowns are right in line with normal daily drawdowns of investing non-leveraged in an index ETF.

The only problem is that I've already run into scaling problems and every analysis indicates a complete inability to scale at all after $4MM. At that point, daily gain percentages would be reduced to 1/8 of current. Any additional gains would need to be directed elsewhere as they would not be able to be used in the current instruments.

So under the best case scenario, 20 years from now, I would still only have a net worth of about $300MM, which wouldn't even get me close to making any "rich people" lists. Thing is, you'll never know any different anyway, because even if I made the list you refer to, you wouldn't know it was me and I wouldn't be telling the world how I did it. My point was to suggest to the OP, that the expected returns without a developed edge are far different than returns when a legitimate edge has been developed.

Quote from dumb_mother:

making hundreds of percent per year is all fine and dandy until your system stops working for a couple months and you find yourself down 50% and then it starts working again for a while, but then eventually you have another couple bad months and end up down another 50% (but still maybe a higher low compared to the last -50% period since you made money in between)- but then this time the next couple months go badly as well and all of a sudden you are at zero. i mean maybe you have a risk-free method of making hundreds of percent each year- and i'll give you credit in a decade once you pop on the list of the richest people in the world (which i doubt will happen because gambling that hard you always go broke eventually). i would argue with a good system you could even gamble as much as 3-4% / day- but anything more than that i wouldn't feel too safe doing (and my largest drawdown in my career is -5.7 * daily risk- or in a 4% down 23%). i've managed my own money with various risk tolerances, ramping up all the way to a 17% value at risk per day for over a year making 3000% returns that year (every time i hit a new "high" balance i would divide it by 6 and make that my stop loss, willing to take 6 pukes in a row and lose my entire account because i could have reloaded had i needed to), but all songs come to an end and i threw in the towel on that risk after losing 1/3 of my profit and now am lowering my risk down to 2.5% / day.

it's fine to take a shot for a bit to try and get some capital to move around if you really are starting from scratch, but if you don't tone your leverage way down at some point you will eventually go broke, hence the 98% of all trader's fail (or whatever % the blogs are throwing around nowadays)- it's because only 10% were winners to begin with, and only 20% of those winners understood money management to survive the long run.

 

[boba15]

Quote from Cache Landing:

Unfortunately, no I can't tell you how I developed my models in any detail.

Maybe you will be willing to share your thought process, not particular details of strategies you developed?

Like, initially you've been trading for 10 years and then something suddenly clicked and the idea came to your mind. Or 10 years of toil and tears which gradually led to the result. Or heard something from somebody which gave a clue, etc. This kind of things. Methodology of devising a strategy. Thanks.

 

[bone]

On my website, I show a statement where my return for that year on that particular strategy (the ICE-Europe Gas/Oil Crack spread) was gross 1,500% and net right at about 950%. Using about $50K worth of margin capital per day, I could average over a 100% return per month. And that is not at all uncommon in the Chicago futures prop world.

Does that mean that I'm a better trader than an equities guy who returned 30% on the year? Not necessarily.

For many years, I traded electronic futures spreads at very high frequencies on an intraday basis. And whether it was Eurex, or Liffe, or ICE, or Nymex I could always return on average 100% of my daily margin capital per month. Just about any successful Chicago prop futures trader can.

Swing trading is different than high frequency trading and equities are different than futures. It is much easier and scalable to trade size positions if your holding periods are longer. With high frequency trading, you run into a brick wall in terms of profitability and scalability unless you can branch out to different names or hold positions longer - it's just a fact of practical market mechanics.

The better yardstick IMO is a trader's winning days versus losing days, top five winning days for month, top five winning days for the year, top five losing days for a month, top five losing days for a year, max daily return, average daily return, max daily drawdown, and average daily drawdown. My feeling is that a trade can be scaled and leveraged accordingly depending upon the strategy's holding timeframes and signal frequency.

Just my 2 cents based upon the clients and funds I work with every day.

 

[Cache Landing]

Quote from bone:


For many years, I traded electronic futures spreads at very high frequencies on an intraday basis. And whether it was Eurex, or Liffe, or ICE, or Nymex I could always return on average 100% of my daily margin capital per month. Just about any successful Chicago prop futures trader can.

Just to make things clear. I'm not talking return on margin. 100% return on margin used each month is a cake walk, relatively speaking. The numbers I stated are net returns on the entire portfolio. It is very different.

Examples for those who don't understand the difference....

1) Prop trader has $500K capital available. His strat dictates that he only ever risks 10% of that capital at any given time, so as not to blow up. So he is using $50K margin. He then states that his positions are returning 100% monthly. What he means is that he was net positive in the amount of $50K. To the retail trader, this is not 100% return, but it is still a very respectable 10% monthly.

2) A retail trader maintains a $500K account. His strat also dictates a max 10% at risk. He is also using $50K margin. He states that he's getting 100% monthly returns. This doesn't mean $50K net profit. This means $500K net profit.

Prop traders don't have a good way of figuring portfolio returns, because they don't manage a personal account with a definite cash value. Subsequently, they frequently state return based on margin used. As shown above, this is not at all similar to the way the rest of the industry reports returns.