labor and costs plus 25%
Return on Investment
- Thread starter TDMA
- Start date
Setting up an amount you expect to earn is foolhardy. The reality of investing or trading is that you will have losses. Focus on risk management first, so you do not blow up and lose all your monies! Also, you have no control over the markets. Volatility related to news can crash or skyrocket your position. Too many variables to count. You may expect to get say 8% per annum and instead, lose 25% of your monies. It could also, happen that you expect to earn 8% and your investment goes up 120%. Most hedge funds would be happy with 10-12% per year. There are years they have negative returns say, -11% or more. Other years, they earn 20%, 5%. etc.
On average, you probably, will win 50% of the time and lose 50% of the time on your trade or investments. Focus on managing your risk. That is the only thing you have control over. Not what the market will give or take from you!
If you trade a consistent system you will you an average performance metric.
And you will also have large dispersion around the average in any given year.
eg. I currently trade a system that has an expected mean return of 40% per year, but the range of returns is anywhere from -20% to +100% in any given year.
I can only do this because i have a small account and can day trade in and out some less liquid markets without much impact.
My end of year numbers, average and range, are quite similar to, but not as good as, the Rentec Medallion fund, but how they do those kind of numbers with 10 Billion under management is just mind boggling.
The following data is from a recent ET thread, Rentec Medallion has averaged 40% per year after fees, with a range of -4% to +99%:
1988 9%
1989 -4%
1990 56%
1991 39%
1992 34%
1993 39%
1994 70%
1995 38%
1996 32%
1997 21%
1998 41%
1999 25%
2000 99%
2001 33%
2002 33%
2003 27%
2004 29%
2005 33%
2006 51%
2007 86%
2008 98%
2009 47%
2010 34%
2011 37%
2012 29%
2013 47%
2014 40%
2015 36%
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Why waste time looking at the performance of mediocre funds like AHL?
Why waste time on funds that aren’t investible?
As traders, we can easily beat AHL type performance using our own capital. They are a low benchmark.
I would never invest with anyone with that kind of weak performance anyway.
I like to compare my results to the best.
Reward follows from the risk undertaken.
The reward 'standard' you're looking for follows from the risk that each input undertook to gain whatever measure of success was gained.
That said, as a standard, the S&P500 is pretty.... standard.
You could say "8.5% annual" for a lifetime standard.
You could say "SPX or NDX, since 2008" -- WOW -- "Good Luck with that!"
(But jeez, the popular expectations are exactly that, aren't they? And when you try to explain to people how fleeting that all could be, they look at you like you're trying to hand them some old line. Ohhhhhh boy.)
Often, how much risk you undertake is a function of how close you monitor stuff. Once upon a time, I tick-scalped in a market I thought would last forever. (Or, better put, "in a market I did not know was a passing phase...") I got ridiculous returns. "Like milling money."
But the returns went down, the account blew up, and I lapsed into the staid, boring old world of index option credit spreads. Week after week (so, that puts a date on it), it was plant on Thursday, harvest last week's on Friday. Rinse&repeat. "Who can't do this?"
5% Heart Attack City
4% CBOE
3% Indianapolis
2% Asheville (North Carolina -- Smoky Mtns due west)
1% Key West
Sweet, eh? So, 3%/week was the reasonable thing, from Indianapolis, 40+ hours per week, or so. Friday comes. Rinse&Repeat. Harvest. Plant. "Cycle of Life" and all that......
Then volatility started its insidious shrinkage, over 3 years in particular, ending just last Christmas. For that 3 years, producing 1% (just 1%) was a big, freakin' 50-60 hour-a-week deal, with me inventing more tools, methods, analytics, mappings, graphings, charts, ANYTHING to help make my nut, while trading other people's money, HOLY COW.
And the whole time, I'm wondering, "What happened to my 'locational returns' scale??" Had I lost my touch??? Was selling credit spreads simply *GONE*??? It took me a LOT of wrestling to work things out.
And where did I end up?
"Reward follows from the risk undertaken."
Also, you have to work the market you're presented, and have the guts, when the market is not there, to look, to see that, and to quit. Always have other tools in the fire -- always be learning -- always testing -- always trying. Last year, I posted some things on calendar spreads: something about which I know little, have little feel for, no second-nature fast-response skills.... but I made some dollars to assist things, when THE MARKET said not to engage in what I'd been doing. (It did so by having a 3-year declining IV regime, and then HV>IV. That's not "hard" to trade, it's *suicide*.)
So! The short answer to your question is, "It depends."
On what?
On the risks undertaken.
A standard remains as the SPX.
BSDs might aim for the NDX.
But the activity has to match the market, and then, it has to *work*.
If you want to stay away from your screen, put it on in the SPY.
If you want an hour a week, sell calls on what you own, and sell puts on what you want to own.
If you want to gain more than that, hire out.
The reward 'standard' you're looking for follows from the risk that each input undertook to gain whatever measure of success was gained.
That said, as a standard, the S&P500 is pretty.... standard.
You could say "8.5% annual" for a lifetime standard.
You could say "SPX or NDX, since 2008" -- WOW -- "Good Luck with that!"
(But jeez, the popular expectations are exactly that, aren't they? And when you try to explain to people how fleeting that all could be, they look at you like you're trying to hand them some old line. Ohhhhhh boy.)
Often, how much risk you undertake is a function of how close you monitor stuff. Once upon a time, I tick-scalped in a market I thought would last forever. (Or, better put, "in a market I did not know was a passing phase...") I got ridiculous returns. "Like milling money."
But the returns went down, the account blew up, and I lapsed into the staid, boring old world of index option credit spreads. Week after week (so, that puts a date on it), it was plant on Thursday, harvest last week's on Friday. Rinse&repeat. "Who can't do this?"
5% Heart Attack City
4% CBOE
3% Indianapolis
2% Asheville (North Carolina -- Smoky Mtns due west)
1% Key West
Sweet, eh? So, 3%/week was the reasonable thing, from Indianapolis, 40+ hours per week, or so. Friday comes. Rinse&Repeat. Harvest. Plant. "Cycle of Life" and all that......
Then volatility started its insidious shrinkage, over 3 years in particular, ending just last Christmas. For that 3 years, producing 1% (just 1%) was a big, freakin' 50-60 hour-a-week deal, with me inventing more tools, methods, analytics, mappings, graphings, charts, ANYTHING to help make my nut, while trading other people's money, HOLY COW.
And the whole time, I'm wondering, "What happened to my 'locational returns' scale??" Had I lost my touch??? Was selling credit spreads simply *GONE*??? It took me a LOT of wrestling to work things out.
And where did I end up?
"Reward follows from the risk undertaken."
Also, you have to work the market you're presented, and have the guts, when the market is not there, to look, to see that, and to quit. Always have other tools in the fire -- always be learning -- always testing -- always trying. Last year, I posted some things on calendar spreads: something about which I know little, have little feel for, no second-nature fast-response skills.... but I made some dollars to assist things, when THE MARKET said not to engage in what I'd been doing. (It did so by having a 3-year declining IV regime, and then HV>IV. That's not "hard" to trade, it's *suicide*.)
So! The short answer to your question is, "It depends."
On what?
On the risks undertaken.
A standard remains as the SPX.
BSDs might aim for the NDX.
But the activity has to match the market, and then, it has to *work*.
If you want to stay away from your screen, put it on in the SPY.
If you want an hour a week, sell calls on what you own, and sell puts on what you want to own.
If you want to gain more than that, hire out.
Is it practical to divide the expected ROI (whatever it may be) in this case 25% by the number of trading days you expect to trade per year (let's say 220 days) which equals 0.11% and then set your daily target there?
