Global Macro Trading Journal

In your example, what about the house appreciation ?

I also don't understand why you would calculate your trading returns as a percentage of your net worth - that way you should calculate your net worth return, including the returns from other elements of your net worth - it's common for people trading in equity market to pocket significant profits from other businesses.
 
Quote from luisHK:

In your example, what about the house appreciation ?

I also don't understand why you would calculate your trading returns as a percentage of your net worth - that way you should calculate your net worth return, including the appreciation of the other elements amounting to your net worth -.
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You can talk about 'trading gains net of house appreciation' if you are reporting to someone your performance as a trader but at the end of the year I will be adding that house appreciation in terms of mental gains on how I did since a house is also a bet(Incidentally I don't own one, I rent)

Another reason I like to think in terms like that is because the ideal 'benchmarks', guys like Soros, Buffett and hedge fund champs have a similar ways to report their gains, since they have the vast majority of their networth in their funds/companies their compound rate is pretty close their return as a % of networth

I don't like to think in terms of account returns because they are just not meaningful to me, what matters is how my trading is changing my lifestyle
 
A guy with a $500K house and a $200K brokerage account can take a level of risk that a guy with just a $200K and no house can't(The guy with the house knows he can bail himself out by selling the house, renting and being back in business or at least live off savings and get a job). Therefore in order to make a comparison fair between the 2 you have to add the homevalue do the equation.

The reason I came up with this way of looking at my results is because my ultimate goal would be to compound something like 20% over 20 years. But if I buy a house or other things that draw money off my brokerage account in the mean time and don't consider them, that same 20% that would have made me wealthy now will just help me pay bills and I don't like that
 
What about the person who has 10 houses and is active in real estate ?

IMO you really have to have most of your net worth in your trading account to think like this (not that this is bad).

I have about 10% of my net worth into brokerage accounts and most of the remaining in my main business, and would feel ridiculous to have to divide my tading returns by 10 to have the privilege for you not to consider me like a phony trader (not that I consider myself a trader either though... I'm definetely more skilled at my main business - so far)

In Market Wizards for instance several of the traders own significant part of their wealth outside the equity markets, and they definetely don't calculate their trading returns the way you do.
 
Quote from luisHK:

What about the person who has 10 houses and is active in real estate ?

IMO you really have to have most of your net worth in your trading account to think like this (not that this is bad).

I have about 10% of my net worth into brokerage accounts and most of the remaining in my main business, and would feel ridiculous to have to divide my tading returns by 10 to have the privilege for you not to consider me like a phony trader (not that I consider myself a trader either though...)

In Market Wizards for instance several of the traders own significant part of their wealth outside the equity markets, and they definetely don't calculate their trading returns the way you do.
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You don't have to divide your 'trading results' by 10. They can be just the account returns but at the end of the year if you add all the gains from business, real estate AND trading, what is the %?To me this number is the one that matters because trading results can be manipulated by withdrawing from the account, keeping the same risk, knowing you can bail the account out by selling other assets if you run into trouble

I'm not saying you are doing this kind of manipulation but i've seen people with commercial interests doing that and I just find it more meaningful to think in terms of that %
 
Quote from Daal:

You don't have to divide your 'trading results' by 10. They can be just the account returns but at the end of the year if you add all the gains from business, real estate AND trading, what is the %?To me this number is the one that matters because trading results can be manipulated by withdrawing from the account, keeping the same risk, knowing you can bail the account out by selling other assets if you run into trouble

I'm not saying you are doing this kind of manipulation but i've seen people with commercial interests doing that and I just find it more meaningful to think in terms of that %
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Than I would be more incline to agree, hence I wrote above :

"that way you should calculate your net worth return, including the returns from other elements of your net worth "

which I try to do although it's not as easy to give a precise value on other less liquid or publicly quoted assets of one's net worth - I actually find fascinating the way one can follow precisely and at the second the evolution of their portfolio value.
 
Yet I suspect a fund manager should only consider his account returns when looking for new investors - what's more important is the kind of returns he's able to get from the markets, rather than the way he manages the rest of his money - quite possibly in a very different way and with different goals - if you are to compare trading performance you have to compare trading accounts, although the more diversified, better funded trader,probably has advantages.
 
Quote from Ghost of Cutten:

I've never really understood this line of reasoning. In order to 'add to shorts', doesn't that mean you had to have on only a small short in the first place? And if you play a major down move with small size, then you are not making much profit when you are right.

Unless you can somehow time all the dips and rallies to near-perfection, 'adding to shorts' on rallies means that you didn't have enough size short during the prior dip.
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I would argue it depends on variance. If I knew what the future variance was then I can put on full size. But since one can't, you add a little here and a little there. Of course there are times where one can go full size, but trade frequency would drop as well (not a bad thing).
 
Quote from gmst:

Longer term, i think it is just more proof that long gold is a very good trade. This should take gold above 1900 before year end, barring major banks failing in Europe - which might take the price of gold down because of liquidation reasons.
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Tooting my own horn, ala ralph style. Been calling long gold since prior to the inception of this journal. But seriously, I'm with GOC when gold needs to go absolutely parabolic before it's over. Something like a 25% move in a month similar to the last months of 79'. I just don't see gold going lower until economic and geopolitical uncertainty goes away along with sustained global recovery. We are probably a few years off from that. Equities are a good buy here too for 5+yrs out.
 
Quote from Daal:

A guy with a $500K house and a $200K brokerage account can take a level of risk that a guy with just a $200K and no house can't(The guy with the house knows he can bail himself out by selling the house, renting and being back in business or at least live off savings and get a job). Therefore in order to make a comparison fair between the 2 you have to add the homevalue do the equation.
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Huh? I'm assuming you've never owned a house. There's nothing like seeing that mortgage statement and real estate tax bill each month to make you ratchet down your exposure. I'm far more conservative now (the proud owner of mortgages and annual real estate tax and insurance bills on several properties) than I was when I was younger and had nothing other than a few thousand borrowed from a credit card to fund my Lind-Waldock account (ugh, $30/round turn, it's a miracle I still have anything).
 
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