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What kind of returns are possible?
- Thread starter Cutten
- Start date
Quote from neutrino:
Given the restriction for 20% drawdown for a period of 10-20 years, I'd say a return of about 10% is what can be expected. I base this on analysis of the performance of the best CTAs. Of course if you think you can do better than them, you can achieve a higher return with the same risk. But I think anything over 15% return with that level of risk is very unlikely.
Here is a graph I made for the distribution of the maximum drawdown for a period of 20 years, if you aim at 10% average annual return based on the performance of best CTAs:
Edit: maxDD is based on monthly data, I don't have daily data, so actual DDs will be higher as makloda pointed out.
Interesting results, thanks. The best hedge fund managers seem to do a bit better.
IMO it is hard (at least with larger accounts) to compound at much more than your maximum drawdown e.g. if you keep drawdowns to 20% or less, it is pretty hard to exceed 20% annual compound returns.
Quote from Cutten:
Assuming a reasonable size account (7 figures), what are the maximum feasible compound returns possible over a 10-20 year period through trading, whilst keeping drawdowns below 20%?
Oh, what a bunch of jokers. Risk 20% probably means you'll make about that much. Trying to make 100% will usually cut you in half. And, I might add, if there were traders out there that do that, we'd have a lot more Warren Buffets. Since we only have one, I can safely assume there's probably only going to be one.
Probably most of the 100% plus voters are paper traders, so you get what you pay for...
it says the returns are annual, so it is clear that it is not total_return/20_years.
what i don't understand is whether the working capital is presumed to stay the same (~7 figures) or grow with the profits.
i think cutten meant to keep the account size stable and pocket the profits periodically. but by using "compound" he made this poll confusing (at least to me)
what i don't understand is whether the working capital is presumed to stay the same (~7 figures) or grow with the profits.
i think cutten meant to keep the account size stable and pocket the profits periodically. but by using "compound" he made this poll confusing (at least to me)
Quote from shortie:
when you say "compound", does it mean the account used to trade keeps growing or is it kept in 7 figure range?
Keeps going. Otherwise, it's not compound returns.
Oh, and I am asking for a *maximum*, not the average. I.e. I am talking about what is realistically possible as a best performance.
Put simply, what would be the trader equivalent of Ty Cobb's batting average.
Quote from shortie:
it says the returns are annual, so it is clear that it is not total_return/20_years.
what i don't understand is whether the working capital is presumed to stay the same (~7 figures) or grow with the profits.
i think cutten meant to keep the account size stable and pocket the profits periodically. but by using "compound" he made this poll confusing (at least to me)
Yeah, for maximum clarity I should have said "annualized" not annual. I just thought it was obvious what it meant, since annualized compound return is the way all long-term performance is measured.
So I am talking about someone making say 30% and growing 1 mill to 190 mill over 20 years by compounding the return each year.