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What is the Annual Rate of return we can expect trading?

Discuss What is the Annual Rate of return we can expect trading? at the Futures within the Traderji.com; Originally Posted by suri112000 Friends, I have been scratching my head all through............seeing posts which ...


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View Poll Results: What is the reasonable Annual Rate of Return we can expect trading
0 to 25% 17 18.09%
26 to 50% 30 31.91%
51 to 75% 9 9.57%
76 to 100% 7 7.45%
101 to 200% 8 8.51%
201% or more 23 24.47%
Voters: 94. You may not vote on this poll

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  #11  
Old 4th March 2014, 11:28 AM
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Default Re: What is the Annual Rate of return we can expect trading?

Quote:
Originally Posted by suri112000 View Post
Friends,

I have been scratching my head all through............seeing posts which claim to have scored about 300% per annum.

I would like to have honest feed back so that I can test a system so as to expect atleast a medium rate of return.

Request all successful traders, seniors to give their feed back in this thread.
As far as I know, most of the claims were just projections, and not actual results - returns that have not actually been replicated consistently year after year. I am one of the persons who is hopeful of such results based on some choo-mantar backtests that I did.

But to answer your question, generally we should expect a -ve annual rate of return from trading.


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  #12  
Old 4th March 2014, 11:30 AM
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Default Re: What is the Annual Rate of return we can expect trading?

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Originally Posted by augubhai View Post

But to answer your question, generally we should expect a -ve annual rate of return from trading.
Absolutely true Augubhai!
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  #13  
Old 4th March 2014, 11:40 AM
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Default Re: What is the Annual Rate of return we can expect trading?

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Originally Posted by quinox View Post
Wrong Question.

The question you should be asking yourself is - What is the "RISK ADJUSTED" return that I should be looking for.

Let me give you an example. Lets say 3 traders ( A, B, C) each make 100 points in nifty futures in a month. Now depending upon their capital each will have a different return percentage. Hence just knowing annualized return percentage will not help you. You need to know what kind of risk they are taking to get that kind of return.

You can search on google and read various trading articles on how to measure risk adjusted return. A general layman rule that i apply in my trading is -to achieve at least 3 to 4 times return of my worst draw down annually.

For example lets say my trading capital is Rs 100,000 and i trade 1 lot of nifty futures with this capital. Lets say by back testing for the last 2/3 years, i found that my worst drawdown ( peak to vally on equity curve) in a year has been 200 points i.e Rs 10,000. This is 10% of my trading capital. So I will try to achieve a minimum annual return of 30 to 40% on my capital. This is the minimum and anything above it is good. An experienced trader might set a higher return target. Hope this helps.
Well.......a nice explanation of risk adjusted return. Its really thought provoking.

I have apprehensions whether it is right or wrong to compare risk free investments with that of trading.

Say capital is Rs.2 lakhs for both. A bank deposit is risk free and without drawdown. it is carrying 9% p.a. return. Since drawdown is nil let us for calculation purpose consider -1% drawndown. The annual return is 9% which is 9 times the drawdown.

A trading system has a drawndown of 22.5% and the annual return is 100 to 200% based on year to year basis. That comes to 4.5 to 9 times of the drawndown.

Now to compare these two, which is the best parameter. Annual rate of return or risk adjusted return?
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  #14  
Old 4th March 2014, 12:07 PM
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Default Re: What is the Annual Rate of return we can expect trading?

Quote:
Originally Posted by suri112000 View Post
Points wise poll is not helpful for me because some may trade nifty with bare minimum capital with negligible drawdowns and others may trade nifty with a much more capital to withstand deep drawdowns. Same number of points scored by different people will give different percentage of returns.
Quote:
Originally Posted by suri112000 View Post
Now to compare these two, which is the best parameter. Annual rate of return or risk adjusted return?
Hi Suri,

Just sharing my thoughts...

The questions that u r asking are the same questions that I have been asking myself over the past few days.... I have been thinking about this. I am in this business to get money, not earn points, so I think I should focus on the return on capital. Which is why I am focusing systems that allow me deploy a high % of capital to work everyday.

This was also the problem that i had with ur system - on the first trade, ur system could not utilize more 50% of the capital... more points, but less return on capital... (just saying, I am not nit picking ur system)

As somebody mentioned, it should be about sound money management, and optimized leverage (without leverage the big returns are not going to happen)
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  #15  
Old 4th March 2014, 12:49 PM
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Default Re: What is the Annual Rate of return we can expect trading?

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Originally Posted by suri112000 View Post
Well.......a nice explanation of risk adjusted return. Its really thought provoking.

I have apprehensions whether it is right or wrong to compare risk free investments with that of trading.

Say capital is Rs.2 lakhs for both. A bank deposit is risk free and without drawdown. it is carrying 9% p.a. return. Since drawdown is nil let us for calculation purpose consider -1% drawndown. The annual return is 9% which is 9 times the drawdown.

A trading system has a drawndown of 22.5% and the annual return is 100 to 200% based on year to year basis. That comes to 4.5 to 9 times of the drawndown.

Now to compare these two, which is the best parameter. Annual rate of return or risk adjusted return?
You still have not understood the concept. There is nothing called annual rate of return VS risk adjusted return.

Every annual rate of return should be measured as risk adjusted return.
In case of bank, the 9% per year annual return that you are talking about is also the risk adjusted return, because the risk is ZERO. But in case of your trading system there is risk involved and hence your annual return from trading should be expressed as risk adjusted return. That is how performance is measured in professional money management world.
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  #16  
Old 16th March 2014, 01:28 PM
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Default Re: What is the Annual Rate of return we can expect trading?

Hi
the rate of return is a function of Nifty or Nifty fuures index movement.
If nifty is in strong uptrend returns of 100% or more are easy.
If nifty goes into downward spiral, like religare pms lost,losses of 63% become reality.
Your poll missed this vital factor.

Investng against index results in huge losses.
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  #17  
Old 16th March 2014, 01:56 PM
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Default Re: What is the Annual Rate of return we can expect trading?

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Originally Posted by rvlv View Post
Hi
the rate of return is a function of Nifty or Nifty fuures index movement.
If nifty is in strong uptrend returns of 100% or more are easy.
If nifty goes into downward spiral, like religare pms lost,losses of 63% become reality.
Your poll missed this vital factor.

Investng against index results in huge losses.
yes. you are right. I missed out on vital point ie losses that i have realised after the poll is made out.
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  #18  
Old 16th March 2014, 04:41 PM
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Default Re: What is the Annual Rate of return we can expect trading?

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Originally Posted by suri112000 View Post
Friends,

I have been scratching my head all through............seeing posts which claim to have scored about 300% per annum.

I would like to have honest feed back so that I can test a system so as to expect atleast a medium rate of return.

Request all successful traders, seniors to give their feed back in this thread.
Hello,

No one's answer/explanation will satisfy u....b'coz no one knows ur comfort level/risk level......

every trader has gone through this state/type of thinking.....to help u out in this...here are some points u need to consider......

1) Intial Capital ur willing to put in ur trading....as ur intial capital increases u can expect/happy with low returns...

lets say trader "A" has put Intial Capital of 100000 and trader "B" has put Intial Capital of 500000. in this Scenario Trader A can/may/want to expect more returns than trader B(u know the reason)....so IMO Intial capital is responsible/impact when expecting returns...

2)After deciding ur Intial Capital u need to decide ur Trading vehicle...in which ur expecting(possibility of having) ur desired returns.

3)After this u need to design ur trading System based on ur trading vehicle and ur risk parameters...

4)In ur trading system ur Risk parameter is having direct impact on ur returns ...so choose wisely and always be conservative/defensive....

5)above all u need to have solid trading psychology...to convince urself to the decisions u have taken/made(like why ur trading?...what if u loose m oney?....how much time ur willing to spend?....and so on).

.Trading systems are easy to modify to suite ur psychology.

Regards,
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  #19  
Old 17th March 2014, 04:54 PM
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Default Re: What is the Annual Rate of return we can expect trading?

Here my View on Risk Adjusted Return.....

suppose if one takes 2% Risk for each trade(ie 1R) then after some Period (here one Year) what % gained from trading... Suppose He gained 20% from his then he earned 10R on that Period...

Suppose this System has good Risk Reward Ratio then more trades would give more return

For Example

One Traders has a system with RR 1:3 and gets 50 Trades in a month and he risks 2% in a Single trade at the end of month I would get 50% Return in one month on 50% winning trades

in same System if he risks 5% for each trades then he would earn 125% at the end of month(ie 1500% Return on annual Basis)

if one compounds the capital the return would be more
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Old 17th March 2014, 06:47 PM
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Default Re: What is the Annual Rate of return we can expect trading?

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Originally Posted by SaravananKS View Post
Here my View on Risk Adjusted Return.....

suppose if one takes 2% Risk for each trade(ie 1R) then after some Period (here one Year) what % gained from trading... Suppose He gained 20% from his then he earned 10R on that Period...

Suppose this System has good Risk Reward Ratio then more trades would give more return

For Example

One Traders has a system with RR 1:3 and gets 50 Trades in a month and he risks 2% in a Single trade at the end of month I would get 50% Return in one month on 50% winning trades

in same System if he risks 5% for each trades then he would earn 125% at the end of month(ie 1500% Return on annual Basis)

if one compounds the capital the return would be more
If out of his 50% loosing trade, 30% loosing trade comes first, then what will happen?

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