Risk % ???

[Mr.G]

what is the meaning of leverage adjusted?

kindly explain Mr.G

Divide your net return by the multiple of leverage or margin you use.

260% per year = Net return
X10 = margin used
M.A. Return = 260/10 = 26%

I have seen hundreds of people hide their poor or mediocre performance behind high margin. You must have seen that all experts in the market tell you not to use margin and if you dont follow that one day you will end up without a house car and clothes on the roadside and blame the markets for everything.

 

[Cubt]

But wats the use of trading in futures then?

Futures trading is all about margin. If leveraged trading is not there, then no one would give importance to trading

 

[Tamil trader]

But wats the use of trading in futures then?

Futures trading is all about margin. If leveraged trading is not there, then no one would give importance to trading

Hello Kiruba sir,

Mr.G is a fund manager......

 

[Mr.G]

Trading is more risky than investing right? general knowledge. Now if we dont use margin for investing then what logic dictates to use in trading? It's like playing with fire. Every single finance professional in the world has condemned use of leverage. I am against losing money I down own.

 

[nac]

But wats the use of trading in futures then?

Futures trading is all about margin. If leveraged trading is not there, then no one would give importance to trading

I think he just wants to know the numbers...

G,
Most of us (or atleast the people you are asking) are trading intra day or swing trading. Maximum holding period would be around a week or 10 days.
- We don't calculate annual returns, but weekly/monthly.
- I don't understand what is "X10" (reminding my olympus camera model )

I googled "leverage adjusted return", but I couldn't get a clear view from there. So many terms are popping up, risk adjusted, beta adjusted, sharpe ratio...

Kinda I gone into a temporary dyslexia

Let's take real time example here...

Trade: Long
Symbol: Nifty Future
Price: 5325
Lot size: 50
Margin: 10.2%
Stop loss: 5299

Sold: 5380

Can you clear my doubt?

 

[Mr.G]

I think he just wants to know the numbers...

G,
Most of us (or atleast the people you are asking) are trading intra day or swing trading. Maximum holding period would be around a week or 10 days.
- We don't calculate annual returns, but weekly/monthly.
- I don't understand what is "X10" (reminding my olympus camera model )

I googled "leverage adjusted return", but I couldn't get a clear view from there. So many terms are popping up, risk adjusted, beta adjusted, sharpe ratio...

Kinda I gone into a temporary dyslexia

Let's take real time example here...

Trade: Long
Symbol: Nifty Future
Price: 5325
Lot size: 50
Margin: 10.2%
Stop loss: 5299

Sold: 5380

Can you clear my doubt?

NIFTY future contract is worth 2.66lac, You pay 26K for it.

Profit you made is 55 point or rs.2750. Which is a 10% gain.

But since you you got a 10 multiplier leverage. Then we assume the return if leverage was not used is only 1% instead of 10.

We adjusted the gain to reflect the actual gain if you did not use leverage. which is 1% instead of 10%.

A personal thought, I am strictly against using leverage except when:
1. Doing arbitrage
2. Reacting to news (non-directional)

Hedge funds use leverage for everything. And after the lose even 10% of the original corpus they go belly up. Hedge funds today after not what they used to be in their true sense. Hedge funds were known in earlier times to protect downside by hedging. Now they don't hedge anything they just leverage everything to the hilt and do speculation on steroids, without protecting the investors.

Derivatives are the roots to all speculative evil. They are the mortal enemy of investment. - Ghanisht Nagpal (You can quote me on that anywhere you like just give me credit for it.)

 

[nac]

So...
Change % = Leverage adjusted return

Am I correct???

 

[Mr.G]

So...
Change % = Leverage adjusted return

Am I correct???

Yes. The profit gained on 2.66lac is the leverage adjusted return.

 

[nac]

I would like to ask you guys few questions/queries...

What do you mean by under-capitalized?
I mean not the dictionary definition. What's the optimum amount a full time trader needs as capital to trade intra-day/swing trading? (equity and equity derivatives)

What would be a decent return the above trader can expect on monthly basis?

Let's assume that the trader is a beginner.

 

[Tamil trader]

I would like to ask you guys few questions/queries...

What do you mean by under-capitalized?
I mean not the dictionary definition. What's the optimum amount a full time trader needs as capital to trade intra-day/swing trading? (equity and equity derivatives)

What would be a decent return the above trader can expect on monthly basis?

Let's assume that the trader is a beginner.

one lakh capital and ten percent return is always achievable