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10%, 15%, 20% - what is a consistent realistic expectation?

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damok

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29 August 2006
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G'day everyone,
First of all many thanks to everyone for replying to my last post. I've ordered a couple of books, downloaded ebooks, subscribed to podcasts and am all in all excited about the process I am about to undertake. The areas that I am particularly interested in is technical analysis with trend trading and CFD's.

So to my first question (sorry I have two):
What is a realistic consistent return? A return that you can expect per year regardless of normal market fluctuations. It appeared that my 40% expectation was a unrealistic... so what is?

Now my question is pegged to people who are 'proficient' traders that have proven their returns over a 'suitable' period of time. By 'proficient' I mean someone who has confidence in a market and applies a strategy that gives them a certain amount of consistency. By 'suitable' time, I'm not so interested in what someone has done over one month, but more what you achieved over an entire year... or even more.

So for those experience traders amongst us (I know your out there!), what do you consistently return.

Now to my second question:
Trading with CFD is it realistic to expect a relatively simple 20x return? Before I get stomped on, here are my assumptions:
*5% Margin
*good money management limiting potential loss
*stop losses to manage the above

So whilst I accept that there is a much greater risk, using the above assumptions could you apply your normal trading strategy to CFD's to increase your return by about 20x?

Thanks again,
damok
 
I'm not experienced enough to answer your question, but on leverage, see this thread.

Well re: expectations, you won't know until you test your system/style, whether paper trading or mechanically. Even then it's no certainty.

I'm not into "realistic expectations", and yes I'm a newb, but I don't want to limit myself by thinking 40% (or any figure) is the grail. There are many traders who return much more, some who lose everything, some who only just beat the market, etc. There are some who don't need to return much, because they have large banks, yet it doesn't mean they are poor traders.

Test your system, work out how many opportunities you could find and trade realistically (you could paper trade historical data and find heaps of opportunities, but if you don't plan on constantly eyeing the market when you begin live, then you'll probably miss a lot), what you could expect to make per amount risked, and then you might have some idea.
 

Can u stop trying to be a hero and do things one step at a time?

I reckon without ever going near CFDs and the rest (because u will get burnt for sure) just try trading normal FPOs to begin with

Secondly, as somebody new to the game, trying to beat the risk-free rate would be a good start

Increase returns by 20x??

Do u think making money in the stockmarket is that easy??

U need to read and read and read and then u can start doing some more reading; trading stocks is what they call a zero-sum game, somebody wins, somebody loses. You are up there against professionals, and since ur new, the average would probably know more than u, wat makes u think that initiall u will win?

Many successful traders today lost heaps of money in their first few years...

Take your time and u may get there, but slow and steady wins the race, and nobody starts off at the top...
 
I apologise for my heroic tendencies. I'm just trying to ascertain of people far more knowledgeable than me, what at some point in the future (distant or otherwise) might be possible.

I'm sorry for being the type of person that might be motivated by the possibility of future success. I don't expect to make a profit tomorrow, but I would in 12 months. I might also hope that in a couple of years I might know enough to pull profit consistently. My questions are posed with a number of assumptions, and certainly do not reflect my immediate plans or expectations.

yours most humbly,
damok
 
Human nature to try and run before you can walk.

Good advise by nizar.

What return you accept .......depends wether your a Trader, Day Trader or Investor. And your financial situation.

Good luck ....Hope you succeed

Royce
 
I only started trading in March of this year and have returned 250% - not just a one-off lucky punt but quite a few sustained returns. My tip is to thoroughly research the fundamentals of the company and then develop an instinct for market sentiment - its strange how sometimes u can get an inkling that a share is gonna run. Remember: just because its the hot topic of some sharemarket forums doesnt mean its a share worth buying. (ie-AEX, EXT, RRS)
 
Damok,

Experience and success are two different things.

Returns are somethng that I have chased alot in the past especially when you here stories of this return and that return.

I am slowly coming to learn that consistancy is far more important and leverage blinds you from reality. Rather than trying to increase returns from leverage (and suposably improve my performance) I have come to realise that I should concentrate on my underlying performance. If you set a target to make 40% Pa and use leverage at 4X then you are really only making 5% PA, which is really very lousy for all the risk that is taken. I have come to realise that concentrating on the pre leverage (I have stoped using leverage for the moment) is far more effective at forcing improvement.

If you return 40% PA (leveraged) then you are likely to feel really good about your sucess but in reality you have only returned 5% PA.

To this end I have set myself a target of 15% PA return which is about 2.5% above the long term avg of most decent asset classes (shares, property etc etc)

You, as well as others may think that a rather small figure but I have come to realise that the turtle wins the race, not the hare. When I am confident that I can return 15% Pa very consistantly (over a 5yr + period) no matter what the market as a whole or the economy etc is doing then I may look into leverage again.

At the end of the day if you can return 15%PA year after year after year then you are better than 95% of the market participants. (how many managed funds can you find that have returned 15+% PA for 10 or more years?).
 


Nizar,

Senior Member?

What is the bull**** mate? How helpful are you being here?

Dont respond without something constructive, whats the point in telling someone what they shouldnt do without telling them what they should?

Flame away mate i really dont give a ****.

A response like Clowbosy's is helpfull, where yours is well what's the point?

Your annoying!

Stink
 
Its a question that really has no specific answer.

Is running a 12 sec 100 meters realistic?
Is gaining a degree in Economics realistic over 3 yrs?
Is it realistic to run a business profitably in 1 yr--2 yrs--etc?
Is becoming a consistantly profitable trader realistic--in 1 yr--2 yrs---etc.

It depends on the individual, their resources, their PASSION,their ability to recognise the wood from the forest.

Not to mention the economic climate.

Profit wont come on its own---you need much more before you even think about profit.

When you have the "Much more"-------Profit WILL come----Not before!!!.
 
thanks tech/a,
I'm not sure if this is too personal a question... what have you personally found to be realistic return expectations from your time as a trader?

Obviously will be affected by your philosophy, but what is your personal approach?
 
stink said:
Nizar,

Senior Member?

What is the bull**** mate? How helpful are you being here?

A response like Clowbosy's is helpfull, where yours is well what's the point?
Click to expand...

Brother i didnt label as myself anything, "senior member" title just came by itself (probably because of #posts)

Why dont we have a poll which posts are more helpful/knowledgable/constructive generally, yours or mine... ??

Damok and Royce saw the point in my post, tech and clowboy no reponse, but u gave that type of response, maybe you are the one with the problem..??

I replied in a manner which i saw fit; and just for the record; ur post wasnt that constructive either...

Stink said:
Dont respond without something constructive, whats the point in telling someone what they shouldnt do without telling them what they should?
Click to expand...

Read my post again; I told him to read, and this is what i honestly believe to be good advice. I read heaps before i even opened a brokerage account and i think this was the best for me so this is how i advise others...

Stink said:
Flame away mate i really dont give a ****
Click to expand...

Hmmm... ok then...
 
Hello Damok,

Your comments suggest you have decided that trading is going to bring you greater profits than longer term investing. I'm just wondering how you came to that conclusion?

Julia
 
Nizar,
Are my leveraging sums incorrect? Will my profit/loss be magnified by a factor of 20 if using CFD's on the above assumptions?

Not assuming a profit, but if over a period of time I return just 1% in real terms but have that leveraged at 95% whilst securing myself with money management and stop losses..... that would work wouldn't it?

(don't worry, I'm not about to sell the house to do it)

damok.
 
Royce said:
Human nature to try and run before you can walk.

Good advise by nizar.

What return you accept .......depends wether your a Trader, Day Trader or Investor. And your financial situation.

Good luck ....Hope you succeed

Royce
Click to expand...

Royce,

Apologies for being off topic, but did you on another thread say that you were a teacher?

Julia
 
Julia,
I've haven't made any real conclusions, just interested in regular trading.... and if it brings returns similar or better than other strategies - then I've gotta be happy with that!

damok.
 
damok said:
could you apply your normal trading strategy to CFD's to increase your return by about 20x?
Click to expand...
In short, no you cannot. The problem is that a combination of drawdown and maximum losses in a row will guarantee that you blow up your account.

Let's say you decide to risk 2% of your capital on each trade, no leverage. 10 losses in a row will see you down 20%. Painful, but recoverable.

If you leverage to the max using CFDs (x20) you increase the risk to your money from 2% to 40% per trade. With this degree of risk, you need 3 losses in a row and you're finished. It won't take long to rack up 3 losses in a row.

CFDs are expressly designed to transfer money from mug punters (us) to the bookmakers (the CFD providers). They can only be used safely if the risk is understood and planned for. Using them at maximum leverage is fatal.

Never, ever approach trading with the question of "how much will I make". Approach it with "how much could I lose". If you control your losses, a reasonable ballpark guesstimate for how much you will make is 2 x your drawdown. The profits come as a side effect of trading well.

The average successful trader will;
1. Lose money in year 1
2. Break even in year 2
3. Start making profits in year 3

The key is to SURVIVE until year 3. The great majority don't.

I was like you when I started - I just had to jump in there and make LOTS of money NOW. Not tomorrow. NOW. Be patient. The market will reveal itself to you if you survive long enough.

I'm not sure who said this, but - "The market will always be there". It'll be there tomorrow. It'll be there next week. It'll be there next year. The profits will be there for the taking when you understand where they come from.

Nizar's words, whilst harsh, are very true.
 
Julia said:
Royce,

Apologies for being off topic, but did you on another thread say that you were a teacher?

Julia
Click to expand...

No Julia I am not a teacher, though few of the members seem to think I am.

Royce.
 
Well,when I first started out(12 yrs ago) I completed the Technical Analysis E101 with the Securities institute.I was top of the State and thought I was a genius.

Well the genius then proceeded to lose $20k in 6 mths.

So in all honesty I would say the first target should be to make "A" profit---"Any Profit".

Back to the loss. Was it poor analysis? Was it that technical analysis doesnt work?
After another 4 yrs (around 6 yrs ago) I finally understood the Mechanics of Trading as a business.I understood the NUMBERS of trading--what REALLY gives you an opportunity to make CONSISTANT profit and analysis plays a very small part.

ANYONE CAN MAKE A PROFIT but very few can make a CONSISTANT PROFIT.

If you can make a consustant(Thats the New Zealand equivilant to consistants!!) profit of over 20% a year then your pretty good---you could then leverage that and make 40-60-80-100%.

Personally I'm happy with the 32-38% the 3 mechanical methods I trade return and margined that equates to Around 90% Compounding that they return.

I'm no genius Trading/investing is just a part of my investment planning.I've not spent a great deal of time refining and improving the way I trade since the success of the mechanical methods.
Ive been happy with a Round Wheel!!

But for me what could be realistic if I did spend that time.

Well I think it could be doubled.

Back to a newbie---staying in the game is THE most important first step--to be able to get through that learning process---some take years like I did.
Some NEVER "get it"

But once they do they will know the return they can achieve and that will be clearly defined in their methods "EXPECTANCY".

Add leverage and compounding (Like any good business would) and seemingly impossible figures become possible---for some consistantly (While the market is favorable) Some futures traders dont even need favorable markets!!


Its a long road and choice of Correct path can mean years cut from the apprenticeship--indeed even survival!
 
Excellent posts tech/a and Michael D

I appreciate u taking the time...

Cheers
 
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