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Points and Percentages
- Thread starter NeoRio1
- Start date
Quote from NeoRio1:
Why does the majority of trader's here state their results in points rather than in percentages? When the results are always in points it is impossible to guage how good or bad the results are.
I can't speak for the options and equities folk, but for futures... would you prefer the percentage of actual margin used, percentage of the exchange minimum (overnight) margin, percentage of the notional value of the contract, or percentage of tradable account value?
Quote from NeoRio1:
When the results are always in points it is impossible to guage how good or bad the results are.
It's actually the other way around if you trade futures. Stating your results in percentages would be misleading, because the margin requirements are different from one broker to another. For example, on a given day, your gain was 5 ES points trading 1 contract. This translates into $250 profit. Now, if your margin requirement was, say, $5000, it means that you made a 5% gain. For another trader whose brokerage requires a $2500 margin, the same 5 points would mean a 10% gain.
Even if you are trading stocks, stating percentages can be misleading when trading on margin. For example, trader A bought 100 shares of stock for $100 and sold them for $110. That's a $1000 gain, or 10% return on investment. Trader B made the same transactions, but he only used $5000 of his money, while using the margin to borrow another $5000. His percentage gain for the same transaction is 20%. It doesn't mean that he is a better trader, but simply that he assumed twice larger risk for twice the return.
Quote from nonlinear5:
It's actually the other way around if you trade futures. Stating your results in percentages would be misleading, because the margin requirements are different from one broker to another. For example, on a given day, your gain was 5 ES points trading 1 contract. This translates into $250 profit. Now, if your margin requirement was, say, $5000, it means that you made a 5% gain. For another trader whose brokerage requires a $2500 margin, the same 5 points would mean a 10% gain.
Even if you are trading stocks, stating percentages can be misleading when trading on margin. For example, trader A bought 100 shares of stock for $100 and sold them for $110. That's a $1000 gain, or 10% return on investment. Trader B made the same transactions, but he only used $5000 of his money, while using the margin to borrow another $5000. His percentage gain for the same transaction is 20%. It doesn't mean that he is a better trader, but simply that he assumed twice larger risk for twice the return.
In the above statement the profit is not 5% in the first example or 10% in the second. Because the margin you have to put up is not your total equity I assume. You trading results can only be given by a percentage of your total equity. In that way you can see how somebodey uses MM in a clever way.
Quote from Rimping:
In the above statement the profit is not 5% in the first example or 10% in the second. Because the margin you have to put up is not your total equity I assume. You trading results can only be given by a percentage of your total equity. In that way you can see how somebodey uses MM in a clever way.
So let me get this straight...
Account "A" with total equity of 20K takes an intraday ES trade for 20 ticks NET profit, x 10 contracts, with $500 intraday margin required per contract, for a total of $2500 profit, or 12.5% of total equity.
Account "B" with total equity of 5K takes an intraday ES trade for 20 ticks NET profit, x 1 contract, with $500 intraday margin required, for a total of $250 profit, or 5% of total equity.
20 ticks net profit (the number of contracts isn't even important) is the measure, not the size of the account, or profit amount. If you want to learn about money management of the individual traders, the initial stop and trade maintenance stop adjustment, if any, is the measure.
Quote from NeoRio1:
Why does the majority of trader's here state their results in points rather than in percentages? When the results are always in points it is impossible to guage how good or bad the results are.
Americans use points and Europeans and a few others use percentages.
If you are in the US, people rarely talk about the Dow Jones daily change in percentage but they use points.
Europeans, very rarely use points and report price changes as percentages.
I think using points is more relevant to trading. Percentages are for banking etc.
Ron
Quote from nonlinear5:
It's actually the other way around if you trade futures. Stating your results in percentages would be misleading, because the margin requirements are different from one broker to another. For example, on a given day, your gain was 5 ES points trading 1 contract. This translates into $250 profit. Now, if your margin requirement was, say, $5000, it means that you made a 5% gain. For another trader whose brokerage requires a $2500 margin, the same 5 points would mean a 10% gain.
Even if you are trading stocks, stating percentages can be misleading when trading on margin. For example, trader A bought 100 shares of stock for $100 and sold them for $110. That's a $1000 gain, or 10% return on investment. Trader B made the same transactions, but he only used $5000 of his money, while using the margin to borrow another $5000. His percentage gain for the same transaction is 20%. It doesn't mean that he is a better trader, but simply that he assumed twice larger risk for twice the return.
That is true, BUT , Never trader 1 contract of ES with only $2500 in your account.
You always have to have room for draw down time period. Many traders I know, will recommend to have twice as your allowance margin for each contract, if you are trading everyday. So if your broker lets you trade 1 ES for 5k, you better allocate 10k for it.