How much should a "good" trader earn?

[Boomer]

where is the line that one has a hard time crossing? in terms of volume. for instance, if you trade 5 es, and you are constantly make your desired pts. per week, say 10. what goes through your mind when you think about going up to 10,15,25 contracts. if you have found an edge, where do you draw the line based on volume? i know it depends on your account size, but if you have been successful and profitable, you can increase your account? i have been thinking about this question and wondered what yall thought. thanks

 

[m22au]

Sdtrader,

A more relevant measure would be return on trading capital (return on total assets, not return on equity), regardless of the amount that is borrowed.

I chose the 'pays the rent' option because like others have mentioned, it depends on your trading capital.

Quote from sdtrader:



Well, if you always talked about return than most people I know would be in the thousands percent. If you start with 10K in a prop account, most decent traders make at least 15-20k/month.

 

[I Missed Boat]

Quote from caplan8293:

It depends on your initial trading capital.
If one started with $10 million, $50k would seem lame. However, if one started with $25k, $50k would be pretty good.
Questions like that are too subjective. Honestly, the more the better. I would say that if you are making as much trading as you were with your previous job, you are doing decent, since you can only go up from there.

I like the way you put that, especially the latter part.

 

[lescor]

Quote from m22au:

Sdtrader,

A more relevant measure would be return on trading capital (return on total assets, not return on equity), regardless of the amount that is borrowed.

I chose the 'pays the rent' option because like others have mentioned, it depends on your trading capital.

Yes, if you trade with retail margin. This has been discussed many times here in the past. You can't use a 'return on capital' number for a prop trader, it's meaningless. If you start with no capital up front and make $100,000 'from nothing', what does that mean? You could keep $10k or $100k in capital in your account, but still trade the same way with the same net results.

 

[TGregg]

Presuming that one scaled up to a captial level that was appropriate, I'd say 250k, AKA ~1k/day. That's figuring for daytrading ES. Give or take about 200k.

 

[TGregg]

Quote from Nana Trader:



You have to compare your annual trading profit with
an average you can do in most general type of business,
and not compare with top performing traders.


An average business makes a return of 10-15% after
tax. If you can return 100% on your capital, then you
are succussfull.

But you forget to pay your employee (you). A common mistake. If you wish to compare trading to a "regular" business, don't forget to include a wage for the head trader/CEO.

 

[Nana Trader]

Quote from TGregg:



But you forget to pay your employee (you). A common mistake. If you wish to compare trading to a "regular" business, don't forget to include a wage for the head trader/CEO.

I was talking about own business, and 15-20% net profit
after tax and all other expenses

 

[m22au]

The same measure (return on trading capital a.k.a. total assets) can be used for a prop trader. The total asset figure can be the amount of buying power that the trader has.

Quote from lescor:



Yes, if you trade with retail margin. This has been discussed many times here in the past. You can't use a 'return on capital' number for a prop trader, it's meaningless. If you start with no capital up front and make $100,000 'from nothing', what does that mean? You could keep $10k or $100k in capital in your account, but still trade the same way with the same net results.

 

[TGregg]

Quote from Nana Trader:



I was talking about own business, and 15-20% net profit
after tax and all other expenses

You missed the point (that's OK, I try to hard not to "overstate" my points, so I tend to understate them). Yes, we are taking about a business, owned by the trader. Yes, we are deducting expenses. Yes we are talking fundamental accounting.

However, one also needs to include a wage for the workforce.

Imagine a one-man, pick-it-up restaurant. Only takes one person (pure theory here) to operate. He works 12 hours a day, 7 days a week. Let's say he put 100k into this operation, and "nets" (less expenses, but with no wages for himself) 20k/year. So that's 20%, pretty good, eh?

Not so fast. Our hero is putting in 4383 hours/year (12 hours x 365.25 days in a year). That's about $4.56/hour he was making, and that includes his capital. If you figure he was worth $5 an hour (under minimum wage, I might add), his operation is operating at a loss!.

And that's my point. That one needs to include a wage in one's business calculations.

 

[QdzResurrection]

In general, to be a good trader, he or she needs to grow his or her account an average of 100% in 6 to 12 months.