Reasonable yearly profit threshold and expectations

Setting your thresholds is too prone to personal bias. Quick and dirty way is just extrapolate from how you did in the past, if you have a long trading history.

I have been looking for an application to do most of the leg work in showing my profitability/Sharpe ratios from various accounts/trading methodologies. Afterwards, I set reasonable expectations.

This seems promising and reasonably priced:

http://www.tradingdiarypro.com/


Can anyone else post some examples?

( Yes, I can build my own. I just don't have that time+skill for now.)
 
Quote from bln:

Well if you look at the majority of the hedge funds and professional traders running CTA programs they don't make money every month or year. All traders go trough periods of draw down, that is just the reality of the business, unless you are Madoff of cause.
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Because hedge funds have large AUM and size is their major problem. A trader with a (sub)100k account doesn't have that problem. They're not like traders, as people in the field have mentioned - it's so much more about having the right contacts and pedigree, results are almost of secondary importance.
The 1.5m number is ridiculous but I wouldn't even think about doing it with a 30-50k account, at bare minimum 100k is needed.
 
Quote from total_keops:

Two questions:

1 - For all you hustling hard to become a profitable full time trader and make a living of trading, what are your realistic yearly profit expectations. Assuming you start each year with 30-100k and can use some leverage do you expect to make an average professional (IT, engineer type of job) salary (50-70k) or do you expect to make over 100k-300k or even millions per year? The reason you put so much effort into becoming a full time trader is money, I would like to know what are most people expectations. For those alreading trading full time for a living, how much do you think is a reasonable yearly profit (no need to put you numbers)?

2 - There are clear disavantages to be a full time trader over working for a steady corp job like the stress of trading, variable income, risk of capital, ... There are also some advantages like freedom, being your own boss, ... Considering both sides, what is the yearly profit threshold would you accept as minimum to quit a job and live of trading? Would you prefer earning 30k instead of 50k in a factory because you love trading or you would require over 100k because of the stress, risks and uncertainties?

I am curious if people here ever thought about it because I faced this choice years ago and decided to go back to the corporate world because my trading was not earning enough on a risk adjusted basis and I'd like to compare my numbers to others.
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If a trader can consistently make at least 2% per month profit with less than 15% maximum drawdown he is already part of the tiny percentage of profitable traders.
 
2% per month underperformed the market this year. But ET loves the "per month" and "per day" thing, as if trading were a job with a salary.
 
Quote from billyjoerob:

2% per month underperformed the market this year. But ET loves the "per month" and "per day" thing, as if trading were a job with a salary.
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The annualized return for the S&P 500 Index (and its precursor the S&P 90 Index) during the last 85 years is less than 10% (9.77% to be exact).

If you make 2% a month on average, that means you are making close to 27% a year, or almost 3 times the S&P 500 return.

Are you consistently making that kind of return, Billy? If the answer is yes then let me call Warren Buffet right away, he would love to have a word with you.
 
Speculative trading returns are subject to statistical variance.

0% in a bad year.
50% in an average year.
100%+ in a really good year.

You can try and double or triple that with leverage, but drawdowns and transactions costs go up as well.
 
Quote from slumdog:

0% in a bad year.
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No, in a bad year you can theoretically lose 100% of your trading capital, and much more if you trade on margin.

Remember, if the most you can lose in any given year is 0%, then you are set for life. :cool:

Quote from slumdog:
50% in an average year.
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50% in an average year, eh? You are kidding, right? :confused:
 
More leverage requires more stable expectations.

Journaling and attribution analysis will definitely show you how you are currently extracting money from the market. From there, you can set reasonable threshold and expectations. Then, you can decide if you want to leverage that ( perceived or imagined) edge even more.

Sure you can back test, but the amount of data points needed to back test seems to take you back thru regimes that you would have traded differently or barely remember.

Btw, traders have memories very similar to fishermen when it comes to trading performance.
 
Quote from xelite777:

The annualized return for the S&P 500 Index (and its precursor the S&P 90 Index) during the last 85 years is less than 10% (9.77% to be exact).

If you make 2% a month on average, that means you are making close to 27% a year, or almost 3 times the S&P 500 return.

Are you consistently making that kind of return, Billy? If the answer is yes then let me call Warren Buffet right away, he would love to have a word with you.
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Warren Buffett is an insurance industry executive. His job is to achieve consistent results and preserve capital. That's not a traders job. A trader should be taking advantage of asymmetric risk/reward opportunities. A trader looking to grind out 2%/month is thinking like an old man or somebody with a salary. Small traders that do stupid stuff like sell options are thinking like insurance companies. They don't have the bankroll or stamina to achieve results by piling up a thousand tiny small wins, 2% at a time. That misunderstands their role in the market.

Buffett has also said that he could achieve 50% year with a smaller amount of money. He's probably being modest.
 
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