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Reasonable monthly/ annual returns
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drgoodvibe

Mitglied seit Oct 19, 2009  22 Beiträge drgoodvibe Nov 25 2010 at 00:34
I totally agree that there should be no set in stone %ROI to realize on a monthly basis -- When a new trader is starting off consistency is key versus any set returns per week or per month. However I think one should keep a close eye on %ROI on a month over month basis as well. Here's why..

The SP-500 index has realized as of end of day today (EOD) 1.28% return. If you bought the index at the beginning of the month and held until EOD today you're gains would be +1.28%.. Guess what..l.. any idiot can go and do that.. The whole point of trading is to have outsized gains on a daily weekly basis that can beat that. It's about using your intellect, ingenuity etc to beat what the other guys are doing and have greater gains then what the broader market is doing. Otherwise an investor can just invest in a broad market index fund and be done with it! Why would any investor pay you 2% in fees and 20% of profits when you can't beat a standard buy and hold strategy on a broad market index like the SP500?

See what I mean? You have to compare your results against something that's relative.. Not some arbitrary chosen 5%/10% return per month. However though your main goal is to be consistent, your ROI should be used as a measure of your consistency as well as how many trades you win. You can trade a scalping system that has a high win ratio but what happens when 1 loss equates to 5 wins.. See what I mean?

A high win to loss ratio doesn't explain the entire picture. You're accuracy can be 98% but that 2% can drawdown your ROI considerably if you're not watching.

Last of all the Forex markets are not normally distributed. That means that socio-economic-political events cause huge amounts of volatility. Trading like I said before is about outsized gains. If North Korea decided to invade South Korea do you know how to take advantage of that event in a trade? Do you also know that the outsized gains you're going to make on that single trade is going to throw your whole idea of consistency in trading returns out the window?

I've said time and time again you're goals should be 50% of a move you're' assuming is going to happen. Not any particular Pip amount or dollar amount per week or per month but keep a close watch on %ROI because that's what your investors care about most. They want to see you beat a buy-and-hold strategy. Otherwise what's their incentive for letting you trade their money?

-----

Chikot, yes Sharpe ratio is a representation of risk adjusted returns. It's a measure of your returns versus a risk free rate and volatility. It's usually used relative to a broad market index like the SP-500 or the MSCI Index etc..

Get up, dust yourself off.. and ride!
AIG3

Mitglied seit Dec 01, 2010  3 Beiträge AIG3 Dec 02 2010 at 04:42
The sharpe ratio is an important factor in determining your risk model along with your margin to equity ratio.

 5-10% monthly is excellent but with what kind of risk?

When I first started trading, my first and last high net worth investor (Fund of Fund manager) asked what my monthly goal was and at the time it was 20%. He said that was too high and asked to only get him 6% monthly. I found it odd why he would turn down money like that but since he was the fund of fund manager, I listened. Ever since that initial conversation, I have noticed that 6% monthly seems to be the general consensus among QEP's. Compounded it is 100% annum, but when dealing with institutional investors 6% is ideal in order to reduce excess risk.

My trading models are set at 10% monthly. Sometimes I hit it but most of the time I hit it at just under 10.

Also, keep in mind Goldman Sachs biggest month was 14% this past year and that was unheard of for an institution of that magnitude.


marketsfollower

Mitglied seit Dec 07, 2010  5 Beiträge marketsfollower Dec 07 2010 at 13:58
Reasonable return actually depend on DD.... So it is about how much DD can you take...

flyingfx

Mitglied seit Apr 13, 2010  6 Beiträge flyingfx Dec 08 2010 at 03:23
Hello Chickot and others
Agree with all above. Oanda forums getting too weird.
Agree consistency is v important, more than return. One question, in myfxbook is the drawdown is for the entire account history, or if you customize a start date does it reset to zero. I think it doesn't. Can you tell from the orange line distance from red line what DD was?
Another question...why would anyone want to trade someone else's money? To take a cut of the top? Is that lucrative? Say you could take 1% a month, you'd need say $1MM invested to make it attractive. I'd be pretty scared of having responsibility for that much of other people's money...but that's me. Anyone doing that and doing well?


Chikot

Mitglied seit Jan 14, 2010  2199 Beiträge Chikot Dec 09 2010 at 22:31
I think that 5-10% DD is a reasonable.
I used to risk 2-3% per trade but decided to forgo this kind of risk. I am only risking up to 1% per trade and have no more than 2 trades opened same time.
I think it will certainly protect me against kind of DD I had in November. I also was not taking profits in November despite having really good trades with up to 200 pips in profit at maximum. all ended as BE trades but took losses. so, I am taking reasonable profits now. 3% left to trade back by now. i am not going to push myslef these last 2 weeks of the year. probably will make a break in a week till the beginning of 2011.
My maximum was about 18% since the end of August and I am 14.5% up now.
I guess 5-6% monthly is not far fetched. It is actually what i am doing on average in the past 6 months. I see big progress in this regard and need to work on avoiding November kind of DD.

ghanima

Mitglied seit Dec 13, 2010  9 Beiträge ghanima Dec 13 2010 at 13:00
hi Chikot
as you've been patted on your shoulder for 4 pages I'll feel comfortable saying something a bit less encouraging.
Those people mentioned above make so little because they are handling millions. If you trade a 4-5 digits account I'm afraid you really need to make more than 5-6% monthly for people to consider you interesting professionally.

mistificator

Mitglied seit Aug 16, 2010  452 Beiträge Raa (mistificator) Dec 13 2010 at 16:00 (bearbeitet Dec 13 2010 at 16:00 )
5 digits is only 10k to 99k - this is in fact very little money. Most methods will work fine until your orders hit 100 lots and above, then you will start getting issues even on a high liquidity network. I am not talking about little bucket shops of course. With 10-20 standard lots orders you won't move market even by a pip.

Was mich nicht umbringt, macht mich stärker.
Chikot

Mitglied seit Jan 14, 2010  2199 Beiträge Chikot Dec 13 2010 at 18:52
Hello Ghanima, thanks for comments, however i know I have my own opinion which is backed by the fact that 5-6% is really a good return and saying that if I trade smaller amount I must make more % means that you imply taking more risk, which is not good. 4-5 digit account can be ruined same way as can be a really big account and visa versa. If I can do it is small account I can do it with big if I trade small account same way i am going to trade a big one. which means risking 1% per trade. What is important how much you risk to make certain return. when you tarde like me without risk of blow out and make money you will be interesting to prospective investors.

    hi Chikot
as you've been patted on your shoulder for 4 pages I'll feel comfortable saying something a bit less encouraging.
Those people mentioned above make so little because they are handling millions. If you trade a 4-5 digits account I'm afraid you really need to make more than 5-6% monthly for people to consider you interesting professionally.
</quote>

Chikot

Mitglied seit Jan 14, 2010  2199 Beiträge Chikot Dec 13 2010 at 18:58
I am not a greedy person. May be I am not looking to manage those kinds of money. I will be connect to trade with account which is big enough to have a good life from my trading results but not to have liquidity issues.
The fact is that not many make money in this business at all high returns almost always mean high risk.

mistificator posted:
    5 digits is only 10k to 99k - this is in fact very little money. Most methods will work fine until your orders hit 100 lots and above, then you will start getting issues even on a high liquidity network. I am not talking about little bucket shops of course. With 10-20 standard lots orders you won't move market even by a pip.

mistificator

Mitglied seit Aug 16, 2010  452 Beiträge Raa (mistificator) Dec 13 2010 at 19:05

Chikot posted:
    I am not a greedy person. May be I am not looking to manage those kinds of money. I will be connect to trade with account which is big enough to have a good life from my trading results but not to have liquidity issues.
The fact is that not many make money in this business at all high returns almost always mean high risk.

mistificator posted:
    5 digits is only 10k to 99k - this is in fact very little money. Most methods will work fine until your orders hit 100 lots and above, then you will start getting issues even on a high liquidity network. I am not talking about little bucket shops of course. With 10-20 standard lots orders you won't move market even by a pip.



That is what I am saying: one shouldn't be thinking of liquidity issues at least during normal conditions unless trades positions 10M and above, but even then in normal times it means position get filled some 3-5 pips away on liquid instruments, anyone can verify it on Level II.

5-6% average monthly on 1M and above account is excellent.

Was mich nicht umbringt, macht mich stärker.
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