Let's get real about returns

Quote from AAAintheBeltway: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.
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There is a difference indeed, my Brother.

If you can manage not to lose anymore, there's no reason why you shouldn't be able to make 100%pa+ on a futures account, particularly cumulative and after you've been over your losing period for 6 months to 2 years.

Once you got it, you can just improve. Theoretically, anyway.


However, AAA, this be said, there still is a (not very fine at all! line between being a "good trader" and a "star".

To me (personal opinion), anything between 50% and 300% annual return is a "good trader". Anything above is "star".

Just have a look at the Robbins World Cup Standings: http://robbinstrading.com/worldcup/futures/standings.asp

Most "star" traders don't even bother going there, because of Robbin's commission structure etc. It's all just a gig to promote Robbins. Nevertheless, the results are real (they do the brokerage) and audited.

Many of the really big "star" traders were interviewed in "Market Wizards", a very englightening book on the subject.

I quote from the book, about Marty Schwartz (one of my rolemodels);
<i>Schwartz trades independently from an office at home ... Solitary traders of this type, no matter how successful, are usually unknown to the public.

Schwartz, however, has attained a degree of fame through repeated entries in the U.S Trading Championships ... His performance in these contests has been nothing short of astounding.

In nine of the ten four-month trading championships he entered (typically with a starting stake of $400,000), he made more money than all the other contestants combined. His average return in these nine contests was 210 percent - nonannualized!

... In his single entry in a one-year contest, he scored 781 percent return.</i>

Period.

Average of 210% over 9 contests with 4 months duration. So, can we conclude that over a year, this would be 610% on average - NONannualized? (Or 1,944% annualized?)

So what's "realistic", folks? Huh? It has been done, so saying that is is "impossible" is nothing short of ignorant and immature. Never limit yourself to the upside in a competitive endeavour like trading. It's a recipe for failure / monotony.

Myself, I realized that limiting myself was one of my greatest habits and I've worked on overcoming it, the same way Buzzy has. I'm not a "star" trader yet myself, but I'm determined and set out to be one not too far in time from now. I will walk with an iron stride and not deviate or sleep until I realize my next goals.


Traders - Oooraaay!
~Scientist :cool:
 
Quote from AAAintheBeltway:



but he blew up a number of times.
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I always read people saying this.

Blowing up is not a bad thing imo. The lessons gained are immeasurable and probably the key to raising one's tolerance to handling larger risk/return strategies successfully.


Although imo, blowing up using a low risk/low return methodology would have far more negative implications for the abilities of a speculator.
 
Quote from AAAintheBeltway:



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.
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There are many factors you could see as "frontiers" to pass on your way up.

For example the "250-lot" rule on the ES. You cannot trade more than a 250-lot of ES at any one time. So if your margin is $10kpc, then you couldn't put anymore than $2,500,000 into a single trade.

Sounds funny to us, but certainly matters if you have to make returns trading a $100m-account... :)

However, I believe that if you can trade the big contract (S&P), your limits are much higher (as proven by Jones and Schwartz).

Also, if you're trading Forex, there shouldn't be any limits at all - No matter how big your size - It simply doesn't matter until you're turning over $500 Billion per trade. And this is not possible as a trader, unless you've made a detour via starting off in some kind of low-overhead industry (i.e. microcomputer software).
So good luck getting there in the first place. :p


~Scientist
 
Quote from AAAintheBeltway:

Livermore's story and insights are very interesting, but he blew up a number of times.
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Yeah. So did Marty Schwartz.

But at the end of the interview, he had turned $40K into $20,000K ($20m) in about 10 years, and decided to "go a bit easier from now on".

Mind you, Schwartz was literally paranoid about heavily diversifying his assets, such as buying gold, real estate and all kinds of investments, in case a crash/disaster happened. These investments, obviously drawn from his trading account, wouldn't exactly have contributed positively to his 1,000%+ annual trading returns during that period.


~Scientist
 
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.
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How very true. Particularly when beginning as a trader.

The only problem is that your accountant simply always knows better :p

Lying to yourself, whichever way it may be in, is a terrible handicap and needs to be alleviated asap, or it will soon lead to failure in this business. The secret is to constantly and critically evaluate yourself, looking at net returns, gross returns, equity curve, annual performance, etc etc.

Just assume you want to go for a competition in a world cup soon (myself, I'm planning on it, too). With that competition in mind, how much self-evaluation would you have to do in order to find your weaknesses, improve them, and to find out if you'd have a chance?

-Plenty.


Peace, Brother phoenix
~Scientist :cool:
 
Quote from Scientist:




Just assume you want to go for a competition in a world cup soon (myself, I'm planning on it, too). With that competition in mind, how much self-evaluation would you have to do in order to find your weaknesses, improve them, and to find out if you'd have a chance?

-Plenty.


Peace, Brother phoenix
~Scientist :cool:
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If it's a paper-trading world cup, you don't have to do any self-evaluation. Just trade with huge size and if you're lucky, you'll win. If not, you can just enter the next one and try again.
 
AAA Wrote:
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?
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A very honest post about returns for a change.
 
Quote from candletrader:

I have complete faith in my methodologies and in the long run trend of my equity curve... that confidence allows me to absorb drawdowns with the mentality that is akin to knowing that I will be just fine... the positive flipside to the drawdown volatility is of course the disproportionate upward thrusts on my equity curve...
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Good point, candletrader. In fact, if Mr. Scientist is making money but only having tiny little drawdowns, he could be making so much more money if he leveraged up and stomached the larger drawdowns. 25% per year with a 5% max drawdown is equivalent to 100% per year with a 20% drawdown at 4X leverage. I'd rather have the 100% return, thank you.
 
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