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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 sibu3168 If out of his 50% loosing trade, 30% loosing trade comes ...


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View Poll Results: What is the reasonable Annual Rate of Return we can expect trading
0 to 25% 22 21.15%
26 to 50% 33 31.73%
51 to 75% 9 8.65%
76 to 100% 8 7.69%
101 to 200% 8 7.69%
201% or more 24 23.08%
Voters: 104. You may not vote on this poll

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  #21  
Old 17th March 2014, 07:00 PM
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Default Re: What is the Annual Rate of return we can expect trading?

Quote:
Originally Posted by sibu3168 View Post
If out of his 50% loosing trade, 30% loosing trade comes first, then what will happen?
Nice Question ,

This is one reason why even calculated traders also losses in this market...
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  #22  
Old 17th March 2014, 07:12 PM
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Default Re: What is the Annual Rate of return we can expect trading?

Quote:
Originally Posted by sibu3168 View Post
If out of his 50% loosing trade, 30% loosing trade comes first, then what will happen?
Good question, but I guess Saravanan just gave an example, ideally there are two types of strategies, one is win/lose percentage will be more but R:R percentage will be less or win/lose percentage will be less but R:R percentage more.

Yo have to risk according to your system. I will show a simple system analysis template for example,

win percentage = 40, lose percentage = 60, points won when trade is a winner is 100, points lost when a trade is loser 50. Lets take all the calculations are after deductions and taxes. So here we will consider 50 as R.

so,

Expectancy per hundred trades = (40 * 2R) - (60 * R)
= 80R - 60R
= 20R

So for every 100 trades you will make 20R as your return. Now, drawdowns and can be derived by back testing only.

If your system can generate 500 trades per year or about 40 per month whether in swing trading or day trading, you will be making 100R, if you don't change your Risk R with capital accumulation or Capital reduction.

I have seen traders who risk about 2.5% max per trade among day traders and 5% per trade among swing traders.

I guess, this might throw some light for some one who is confused on returns in trading.

But before entering into trading please do remember paretos principe applies here too,

Only the top 20% rule here, remaining 80% either quit or just break even.

If you are in the top 10% you are on your way to untold riches that even if you say the truth people around you will think that you are a liar and belong to asylum
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  #23  
Old 17th March 2014, 10:02 PM
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Default Re: What is the Annual Rate of return we can expect trading?

Quote:
Now, drawdowns and can be derived by back testing only.
Tlahuicole, (very tough to spell your name and even tougher to remember the spellings)

The drawdown is the decider than the return when it comes to long term survival in trading, I feel, especially when it is a dig in the original capital. How many traders can withstand a drawdown of 30% in the original capital to continue making their further trades? The trader who thinks in percentage returns will in all probability see the drawdown as negative returns and try to shut the shop.

When backtesting the system on past data, we tend to loose sight of drawdown figures in the face of exorbitant returns it reflects. Then the real problem arises when we start implementing it on real trades. We tend to face the least expected drawdown right away at the start of trades. Though we know, the system experiences drawdown, we are not prepared for it at the initial stages. The truth is that it can hit you at any stage.

It is felt by experienced traders that our initial capital should consist of :-
a)Original capital + b)150% of the drawdown. This cushion enables the traders to face the inevitable events of drawdowns in the original capital. However, this cushion adversely effects the return generated.

IMO, we as traders should strike a balance between drawdown and expected return to sustain for longer periods in the trading world.
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  #24  
Old 17th March 2014, 11:35 PM
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Default Re: What is the Annual Rate of return we can expect trading?

Quote:
Originally Posted by sibu3168 View Post
If out of his 50% loosing trade, 30% loosing trade comes first, then what will happen?
Even one Faces 30 Continues Loss in using 5% Risk Per Trade he will never loose the Trading Capital


if he gets more than 30 Consecutive Loss Trades then it is better for him to stop Trading
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  #25  
Old 18th March 2014, 09:15 AM
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Default Re: What is the Annual Rate of return we can expect trading?

Good one. I think the loss of Trading Capital happens only when we forget about our risk management. Here is a very interesting post by master of TJ (none other than ST)

THE POSITION SIZING AND MM GAME

Make 40 small pieces of paper,on 20 write SUCCESS and on 20 write "FAIL" and fold them and put them in a glass bowl. Then ask a small child in the family to pick up each slip from the bowl and you read whether success or fail.

The sttarting capital is Rs 1,00,000/- and At each trade you will risk 25 % of the capital. If the trade is success,you make double the amount of money risked on a trade and if it is failure,you loose the amount risked on that trade. So for first trade your cum equity balance is Rs 1,00,000/- and the amount risked is 25000/- so if the slip says success,you make 25000*2 =50,000/- and your cum equity is 1,50,000/- now and on next trade you bet 25 % of 1,50,000/-. so go on like this till 40 trades are over.

The final amount you will have is not dependent on the sequence of your winning/loosing trades,consecutuve looses,wins etc and final amount is over Rs 10,50,000/- Dont believe me ? Try it out. I have spent 3 hrs on this game early in my career and tried coin toss,various sequence of alternate win/loss,10 losses and 10 wins in sequence etc…But the final wealth is same not even a rupee more or rupee less.

What does this prove ? Have a competent system,backtest,have a good mm and trade with confidence. Your sequence of losses and gains make no difference in ultimate results of building your wealth as long as your method has a positive expectancy and edge. Hope you enjoyed the game and learnt something from it…..About expectancy, we will discuss later...

I am no way advocating risking 25% on every trade. This is just illustration because optimal f for this system is 25 %. But 25 % is way tooo high. Start with 1-2 % and put your profits to work for you….


Smart_trade


Quote:
Originally Posted by SaravananKS View Post
Even one Faces 30 Continues Loss in using 5% Risk Per Trade he will never loose the Trading Capital


if he gets more than 30 Consecutive Loss Trades then it is better for him to stop Trading
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  #26  
Old 18th March 2014, 09:37 AM
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Default Re: What is the Annual Rate of return we can expect trading?

Quote:
Originally Posted by Tlahuicole View Post
So for every 100 trades you will make 20R as your return. Now, drawdowns and can be derived by back testing only.
Once u get the sysytem expectancy right, u can use this tool to estimate drawdowns... http://www.sbrforum.com/betting-tool...ak-calculator/

This does not calculate the probability of a drawdown, but only calculates the probability of a single continuous losing streak. I mean, it does not indicate the probablity of a drawdown bigger than an individual streak - for example; a streak of 10 losses, followed by 1 win, and then another 10 losses. So, we will have to add additional buffer to handle that... or search the net to find a drawdown calculator

Quote:
Originally Posted by suri112000 View Post
Tlahuicole, (very tough to spell your name and even tougher to remember the spellings)
We can call him Thalli-kollu, which means beat him to death... and that meaning suits the historical persona of Tlahuicole.

Quote:
Originally Posted by suri112000 View Post
It is felt by experienced traders that our initial capital should consist of :-
a)Original capital + b)150% of the drawdown. This cushion enables the traders to face the inevitable events of drawdowns in the original capital. However, this cushion adversely effects the return generated.
Drawdown is a function of %wins and R:R ratio. So, if these parameters are good, u should be able to allocate lesser capital for drawdowns.
http://www.traderji.com/trading-diar...tml#post945775
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  #27  
Old 18th March 2014, 09:56 AM
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Default Re: What is the Annual Rate of return we can expect trading?

Quote:
Originally Posted by augubhai View Post

We can call him Thalli-kollu, which means beat him to death... and that meaning suits the historical persona of Tlahuicole.

this is a common word in ur mind when u drive thru kerala

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  #28  
Old 24th May 2015, 03:52 PM
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Default Re: What is the Annual Rate of return we can expect trading?

Quote:
Originally Posted by Tlahuicole View Post
Good question, but I guess Saravanan just gave an example, ideally there are two types of strategies, one is win/lose percentage will be more but R:R percentage will be less or win/lose percentage will be less but R:R percentage more.

Yo have to risk according to your system. I will show a simple system analysis template for example,

win percentage = 40, lose percentage = 60, points won when trade is a winner is 100, points lost when a trade is loser 50. Lets take all the calculations are after deductions and taxes. So here we will consider 50 as R.

so,

Expectancy per hundred trades = (40 * 2R) - (60 * R)
= 80R - 60R
= 20R

So for every 100 trades you will make 20R as your return. Now, drawdowns and can be derived by back testing only.

If your system can generate 500 trades per year or about 40 per month whether in swing trading or day trading, you will be making 100R, if you don't change your Risk R with capital accumulation or Capital reduction.

I have seen traders who risk about 2.5% max per trade among day traders and 5% per trade among swing traders.

I guess, this might throw some light for some one who is confused on returns in trading.

But before entering into trading please do remember paretos principe applies here too,

Only the top 20% rule here, remaining 80% either quit or just break even.

If you are in the top 10% you are on your way to untold riches that even if you say the truth people around you will think that you are a liar and belong to asylum
fine explanation.
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  #29  
Old 8th June 2015, 01:07 PM
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Default Re: What is the Annual Rate of return we can expect trading?

Quote:
Originally Posted by manishchan View Post
Good one. I think the loss of Trading Capital happens only when we forget about our risk management. Here is a very interesting post by master of TJ (none other than ST)

THE POSITION SIZING AND MM GAME

Make 40 small pieces of paper,on 20 write SUCCESS and on 20 write "FAIL" and fold them and put them in a glass bowl. Then ask a small child in the family to pick up each slip from the bowl and you read whether success or fail.

The sttarting capital is Rs 1,00,000/- and At each trade you will risk 25 % of the capital. If the trade is success,you make double the amount of money risked on a trade and if it is failure,you loose the amount risked on that trade. So for first trade your cum equity balance is Rs 1,00,000/- and the amount risked is 25000/- so if the slip says success,you make 25000*2 =50,000/- and your cum equity is 1,50,000/- now and on next trade you bet 25 % of 1,50,000/-. so go on like this till 40 trades are over.

The final amount you will have is not dependent on the sequence of your winning/loosing trades,consecutuve looses,wins etc and final amount is over Rs 10,50,000/- Dont believe me ? Try it out. I have spent 3 hrs on this game early in my career and tried coin toss,various sequence of alternate win/loss,10 losses and 10 wins in sequence etc…But the final wealth is same not even a rupee more or rupee less.

What does this prove ? Have a competent system,backtest,have a good mm and trade with confidence. Your sequence of losses and gains make no difference in ultimate results of building your wealth as long as your method has a positive expectancy and edge. Hope you enjoyed the game and learnt something from it…..About expectancy, we will discuss later...

I am no way advocating risking 25% on every trade. This is just illustration because optimal f for this system is 25 %. But 25 % is way tooo high. Start with 1-2 % and put your profits to work for you….


Smart_trade
where is the "like" link below the post ? i mean the "thanks" link.
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  #30  
Old 17th June 2015, 04:20 PM
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Default Re: What is the Annual Rate of return we can expect trading?

-100% to+10000% Period!
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