Australian (ASX) Stock Market Forum

ROR on small accounts compared to large accounts

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Having been trading my simulator for a number of months now one thing I am looking to consider the the rate or return achievable on a smaller account compared to a larger one.

I am under no illusions (especially in this market and with my lack of experience) that I can double or triple my money in a few months or anything crazy like that but I am curious as to what sort of returns can be achieved on smaller accounts by fairly decent traders.

I know this will obviously differ for different markets and people. For example in a strong bull market can someone double a $25,000 account in a year with good trading? Or is simply aiming for $5,000 profit (20%) more realistic. Obviously this depends on opportunity too.

Basically, the reason I ask is that I know of people who HAVE doubled an account of that size in a year or so. Also having a look at "The Chartist" discretionary trades between Jan08-Sep08 $25,000 was turned into $68,000. Is this a thing that can have a tendancy of happening on smaller accounts in a very strong market?

Please do not jump down my throat because I am completely ignorant to this and simply want to be guided along the right way of thinking. I may be way off!
 
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It's challenging for anybody to get a 100% return in a year. Most good traders are happy with 20-30% returns on average - of course in some boom years you can easily get much more than that.

The issue with a smaller capital base of around $25,000 is that your position sizes tend to be small relative to the amount of brokerage you have to pay. Of course this can be somewhate mitigated through a position based on a tighter stop (assuming you're basing your trade on a % loss of overall capital). In addition you are limited in the number of positions you can have open at any time as you want your minimum position size to be worth the risk.

If you open a $1000 position, you need a 6% gain just to cover brokerage - some stocks can make this in a day, some need a few weeks or months, so it depends as well on the sort of stocks you buy.
 

skc

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The 2 most important parameters for your return is risk taken and trade frequency.

I can trade a small account, swing for the fence everytime and do it 6 times every hour... some years I am going to get 5000%, other times I will be -100%. That's why you see silly returns from trading competitions etc.

If you have a long only strategy then I personally think that outperforming the market by 10-15% as a beginner would be a great achievement, regardless of account size.

I think the performance of the chartist was heavily skewed by a single trade (What's that coal stock beginning with F that got taken over 2 years ago?)...
 
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Thanks I just took a look. FLX accounted for $9,250 in profits.

Removing this trade changes the ROI from 175% to 138%
 
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Having been trading my simulator for a number of months now one thing I am looking to consider the the rate or return achievable on a smaller account compared to a larger one.

As long as the market you are in can handle your level of trade granularity small account or large account makes no difference.

It only makes a difference if you are undercapitalised for trading in that market.
 

skc

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Thanks I just took a look. FLX accounted for $9,250 in profits.

Removing this trade changes the ROI from 175% to 138%

You said the account went from $25K to $68K. If this trade is $9.25K then the profit is still 235%?! What am I missing?
 
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