Let's get real about returns

candletrader · Jul 26, 2003

The great thing about this trading game is that fact that it allows people with more volatile drawdowns (me) and people with tiny drawdowns (Mr NBBO) to come out as winners... there are many ways to skin a cat...

dbphoenix · Jul 26, 2003

Quote from DT-waw:

People who claim such superb performance are not telling the true.

Most people lie to themselves about their returns. Therefore, it should come as no surprise that they lie to others, even while they believe that they're telling the absolute truth.

DT-waw · Jul 26, 2003

Quote from dbphoenix:

Most people lie to themselves about their returns. Therefore, it should come as no surprise that they lie to others, even while they believe that they're telling the absolute truth.

Yes, that is an possible explanation. I wouldn't be suprised if FasterPussyCat, mrmarket or other internet sick freak will claim super high returns. But guys like MrNBBO, Scientist seem to be rational people.

Pabst · Jul 26, 2003

For the short term trader commissions are usually the difference...

Cdntrader · Jul 26, 2003

Quote from AAAintheBeltway:

It is frequently said that 90% of traders are consistent losers. That number apparently was derived from the records of one daytrading firm, but I would not be surprised if it was accurate. Despite the fact that many ET members are relatively new traders, it is common to see surprisingly large numbers thrown around as the bare minimum they will accept. I'm not singling anyone out, so please no angry responses that I have insulted your intelligence or ability. But let's get real.

A 12% annual return would be better than virtually 99% of mutual funds over the past three years. A return of 24% over a period of years will put you in the same league as such neophytes as Warren Buffett, Bill Miller and Peter Lynch. Bump that up to 50% a year and they will reserve a spot for you in the Hedge Fund Hall of Fame, right between Julian Robertson and George Soros. What does that take anyway?

"The speculator is not an investor. His object is not to secure a steady return on his money at a good rate of interest, but to profit by either a rise or fall in the price of whatever he is speculating in."

"For three weeks my average profit was 150% per week. From then on a steadily increasing scale."

Jesse Livermore

Scientist · Jul 26, 2003

Quote from AAAintheBeltway:

It is frequently said that 90% of traders are consistent losers. That number apparently was derived from the records of one daytrading firm, but I would not be surprised if it was accurate. Despite the fact that many ET members are relatively new traders, it is common to see surprisingly large numbers thrown around as the bare minimum they will accept. I'm not singling anyone out, so please no angry responses that I have insulted your intelligence or ability. But let's get real.

A 12% annual return would be better than virtually 99% of mutual funds over the past three years. A return of 24% over a period of years will put you in the same league as such neophytes as Warren Buffett, Bill Miller and Peter Lynch. Bump that up to 50% a year and they will reserve a spot for you in the Hedge Fund Hall of Fame, right between Julian Robertson and George Soros. What does that take anyway?

One percent a week with no compounding is 52% a year. On a $100,000 account, that is a measly $1,000 a week, or about what many newbie ES traders expect to make per day trading five lots. That is only $200 per day, a crummy $.20 move on a 1000 shares of stock. How easy is that? If you traded 5 lots in the ES, that is less than a point a day. Who trades 5 lots with a $100k account, not me for sure. More likely 10 lots, so you only need TWO TICKS per day. Two lousy ticks per day and the world will literally beat a path to your door, the rich and famous will toast you, beautiful women will throw themselves at you like you were an NBA star and you will have to have a secret address to prevent people from sending you money to manage. Two ticks per day.

If I started a chatroom and said my goal was two ticks per day, not only would I have no members, I doubt I could pay people enough to join. I certainly wouldn't join. We know it is possible to make much better returns. Honestly, it is not unreasonable to triple a futures account in a year. The trick is to do it year after year, and almost no one has ever been able to do that. Why not? Who knows, I guess because it is possible to get lucky for a few months and shoot the lights out. Markets change, but few will abandon a winning method.

I think the real lesson of this exercise is that there is a very fine line for daytraders between being a star and being part of the 90% crowd.

Dear Brother AAAInTheBeltway,

Wise words from you. Congratulations on this great post and great topic for a thread!

To the subject: It is much easier for us as small traders to make a high% return than for the "big guys".

It's about the "law of diminishing returns" and I've written a very detailed post on this at this link:

http://www.elitetrader.com/vb/showthread.php?s=&threadid=20180&perpage=6&pagenumber=2

-Please disregard whatever was written on that thread after that post, since it really is all nonsense. Enjoy yourself.

Have Fun and Good Luck to You!
~The Scientist

alfonso · Jul 26, 2003

Quote from DT-waw:

I guess it's 9th losing day in your 7 years trading career, am I right?
http://www.elitetrader.com/vb/showthread.php?s=&postid=261456#post261456

There're two possible explanations:

1) There's sharp disparity between
the best CTA's & hedge funds
vs
the best individual traders
performance or big vs small players, if you like to call it like that.

2) People who claim such superb performance are not telling the true.

And they're both probably true.

1) seems likely to me, because of the big difference in account/position sizes being traded and the subsequant effect this has on the types of strategies available.

2) You think so?

ps - in the case of our esteemed Scientist, I wouldn't confuse rationality with out and out honesty, if you get what I'm saying.

MR.NBBO · Jul 26, 2003

Quote from DT-waw:

I guess it's 9th losing day in your 7 years trading career, am I right?
http://www.elitetrader.com/vb/showthread.php?s=&postid=261456#post261456

There're two possible explanations:

1) There's sharp disparity between
the best CTA's & hedge funds
vs
the best individual traders
performance or big vs small players, if you like to call it like that.

2) People who claim such superb performance are not telling the true.

Actually, I believe it's #10......I had another super small loss since the last post. It was just enough to tarnish the record.

AAAintheBeltway · Jul 26, 2003

Quote from Cdntrader:

"The speculator is not an investor. His object is not to secure a steady return on his money at a good rate of interest, but to profit by either a rise or fall in the price of whatever he is speculating in."

"For three weeks my average profit was 150% per week. From then on a steadily increasing scale."

Jesse Livermore

I realized I was comparing apples to oranges in using mutual fund managers and hedge fund managers with huge amounts of capital. But it makes my point even more clearly. Certainly it is easier to make high returns with a small to moderate trading account, yet few seem able to do it, at least consistently.

Livermore's story and insights are very interesting, but he blew up a number of times.

AAAintheBeltway · Jul 26, 2003

Quote from Scientist:

Dear Brother AAAInTheBeltway,

... .
To the subject: It is much easier for us as small traders to make a high% return than for the "big guys".

It's about the "law of diminishing returns" and I've written a very detailed post on this at this link:

http://www.elitetrader.com/vb/showthread.php?s=&threadid=20180&perpage=6&pagenumber=2

-Please disregard whatever was written on that thread after that post, since it really is all nonsense. Enjoy yourself.

Have Fun and Good Luck to You!
~The Scientist

I agree it's easier for a trader with adequate but not enormous capital to make higher returns. In fact, this is a recognized risk factor with CTA's or hedge funds. I'm not sure where one begins to be constrained, but there certainly have been S&P traders like Paul Tudor Jones who swung a pretty big line.