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Why professionals "only" make ~30% anually

  • #61
  • Jan 29, 2007 8:52pm Jan 29, 2007 8:52pm
Quoting WHTenn
Actually, not all the best and most successful traders pull in around 30% - 60%/ Where in the world did you get these figures from?
This thread was bumped from a year ago, but who knows, maybe he'll still respond lol
To be one with the market, you must first be one with yourself.
  • #62
  • Jan 29, 2007 11:03pm Jan 29, 2007 11:03pm
I've been reading through your posts and found some interesting points. But the main reason in my view why you won't find a hedge fund manager making 100% + return is the risk managment. Basicaly they get paid for avoiding the risk where we as speculators are getting paid for taking the risk. As simple as that.
  • #63
  • Jan 29, 2007 11:07pm Jan 29, 2007 11:07pm
Quoting Aroon
Now, at this moment, my balance is € 36.000.

So actually you are up around 26% in a year...In a sense, this is within the average returns of the professionals in the financial industry that was being talked about at the beginning of the thread


Thanks,

Nader
  • #64
  • Jan 29, 2007 11:54pm Jan 29, 2007 11:54pm
Quoting Unforeseen
This thread was bumped from a year ago, but who knows, maybe he'll still respond lol
Ahh yes, but... Just because it's old, doesn't make it any less usefull. :

The Avg Post Count of Members responding 'Between the Bump & your Post' is >280 {>217 if you don't include mine},
Perhaps it is a good thing it was bumped, particularly on it's anniversary.

AND...
Some of the more insightfull answers are coming from members with less than 100 posts.

I say, I hope it gets bumped {if need be} in another year.
  • #65
  • Jan 30, 2007 12:03am Jan 30, 2007 12:03am
Quoting JimboFX
I've been reading through your posts and found some interesting points. But the main reason in my view why you won't find a hedge fund manager making 100% + return is the risk managment. Basicaly they get paid for avoiding the risk where we as speculators are getting paid for taking the risk. As simple as that.
Not quite true. Risk is a very important factor, and a proper money management is a must, but I would call the liquidity problem to be the major obstacle to higher profits.
  • #66
  • Jan 30, 2007 12:30am Jan 30, 2007 12:30am
It's easy to make 300% returns when your swinging a $5000 line. With max leverage your still only commanding about $500k. $500k is only half an interbank contract. Your trading activity is lost in the noise.

Trading the exact same system that the little forex trader does, a fund with $10m has to swing $1 yard. Now consider that when you drop a yard on the market, your going to move prices about 10 pips against you. Closing pushes it 10 in the other direction. How well does your system stand up to a 21 pip spread?

Now consider that most fund have 50-100m in capital. How does your system stand up to a 50 or 100pip spread? I GUARANTEE that watever your doing, if you tried to do it with 10 yards at a clip, it would fail miserably.

Because funds can't trade like a little guy, they can't make returns like a little guy. That doesn't mean your smarter, it just makes you different.
  • #67
  • Jan 30, 2007 12:42am Jan 30, 2007 12:42am
A SMALL {micro} 1Mill fund earing 10%/annum returns 100K. Not to be sneezed at.
30% = 300K. Wow. now that guy is going to be independant as soon as those numbers are public.

50K account returning 30%/annum = 15K return. That's not even close to hangin' up your day job.

This is not MLM where all you need is a huge downstream. This is INDEPENDANT Business where the Owner Has to Do The Work.

BUT! If you are familiar with the old anecdote of Compounding Intrest on a penny, and maintain diligence, Freedom Lives Here.
  • #68
  • Jan 30, 2007 2:08am Jan 30, 2007 2:08am
Quoting Darkstar
It's easy to make 300% returns when your swinging a $5000 line. With max leverage your still only commanding about $500k. $500k is only half an interbank contract. Your trading activity is lost in the noise.

Trading the exact same system that the little forex trader does, a fund with $10m has to swing $1 yard. Now consider that when you drop a yard on the market, your going to move prices about 10 pips against you. Closing pushes it 10 in the other direction. How well does your system stand up to a 21 pip spread?

Now consider that most fund have 50-100m in capital. How does your system stand up to a 50 or 100pip spread? I GUARANTEE that watever your doing, if you tried to do it with 10 yards at a clip, it would fail miserably.

Because funds can't trade like a little guy, they can't make returns like a little guy. That doesn't mean your smarter, it just makes you different.
Exactly my understanding. It has come to my attention that currency market is so enormous that big fishes and small fishes don't eat the same kind of foods.
  • #69
  • Jan 30, 2007 3:44am Jan 30, 2007 3:44am
I think that the problems lies in the definintion of a "trader".

Trader is a businessman not an investor!

Trading is more like having a shop - buying and selling stuff and using your initial capital for additional earnings. We shouldn't think of it in terms of investment - when you put your money and get some interest for it.

Therefore, asking a trader for his returns it's like asking a hairdresser what are his returns for his first investment (shop rent, dryers, taxes Etc.) or like asking Bill Gates how much he did from his initial investment (50K I think)...


Another thing to consider is the leverage.

If you are starting out with 10K it's going to be quite hard to turn it into 20K within one year.

But when using leverage (lets say X10) and trading with 100K- it means you should make only 10% (or 25 pips a week) which is quite reasonable.

Good luck
  • #70
  • Jan 30, 2007 8:58am Jan 30, 2007 8:58am
Quoting Bemac
Ahh yes, but... Just because it's old, doesn't make it any less usefull. :

The Avg Post Count of Members responding 'Between the Bump & your Post' is >280 {>217 if you don't include mine},
Perhaps it is a good thing it was bumped, particularly on it's anniversary.

AND...
Some of the more insightfull answers are coming from members with less than 100 posts.

I say, I hope it gets bumped {if need be} in another year.
100% Agree - bumps of good threads like this would be very positive. I am very happy someone bumped it, otherwise I would have never been aware of it.

My point was just to allow others to be aware that they likely may not get a response... but hey, I guess asking the question in the first place answered or not is always beneficial in some way
To be one with the market, you must first be one with yourself.
  • #71
  • Jan 30, 2007 9:28am Jan 30, 2007 9:28am
So you's are saying that its achievable to turn $10,000 into $20,000 within a year using forex?

(without stupid amounts of risk etc etc)




Thanks
  • #72
  • Jan 30, 2007 9:45am Jan 30, 2007 9:45am
Quoting tom.hunter
So you's are saying that its achievable to turn $10,000 into $20,000 within a year using forex?

(without stupid amounts of risk etc etc)




Thanks
When you know what your doing you can do it in 3 months without taking on excessive risk...
  • #73
  • Jan 30, 2007 9:50am Jan 30, 2007 9:50am
Quoting tom.hunter
So you's are saying that its achievable to turn $10,000 into $20,000 within a year using forex?

(without stupid amounts of risk etc etc)
Well, it depends what you are refering to "stupid" risk. I stand to my opinion - in order to make a "killing" in the market you have to take the risk not to avoid it. In order to do that you there are coulpe of things you need to look for like cutting your losses short, letting your profits run, adding to your winnings, etc.

Hope that helps.


P.S. BTW as for the liquidity - guys, it's the forex market we're talking about, right ? And the other thing is the leverage - the smart money are using 1:1, not 100:1 like we do.
  • #74
  • Jan 30, 2007 10:05am Jan 30, 2007 10:05am
Quoting JimboFX
BTW as for the liquidity - guys, it's the forex market we're talking about, right ? And the other thing is the leverage - the smart money are using 1:1, not 100:1 like we do.
I've watched billion dollar orders hit the market and the effect they have on prices. The forex market isn't anywhere near as big as it seems.

And your right about the lower leverage. That was the point. At 100:1, you can make a 1% return on 1 pip. At 1:1 you need 100 pips to make the same return.
  • #75
  • Jan 30, 2007 11:49am Jan 30, 2007 11:49am
Darkstar,

Out of curiosity, what was the effect of the 1 billion dollar order and on which currency was it? I've been trying to find out for a while how liquid spot GBPUSD really is at the highest level (D2/EBS). I trade with MBFX where the highest market depth I've seen is 50m bid and ask. Given that I don't have an interbank account, the closest I've come to an estimate for trade impact of large orders is from the following snippet from an ECB article.

Thanks.
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  • #76
  • Jan 30, 2007 12:42pm Jan 30, 2007 12:42pm
As I heard if you have an order greater than 50mil$ you can hide it. So I guess we can't see what's above 50mil. I might be wrong.
Try hard, think fast, die young
  • #77
  • Jan 30, 2007 12:47pm Jan 30, 2007 12:47pm
The reason why is because once you hit that level you are very risk averse.

There are few who make huge returns mainly because they don't need to. They reach a level that they are comfortable and there's no need to take on more risk.

Every single successful trader that I know (and I know a few) all have this exact same characteristic. That is the common denominator amongst them all.

Something to think about...
Mr. Trend
  • #78
  • Jan 30, 2007 3:44pm Jan 30, 2007 3:44pm
Quoting zeroz
Darkstar,

Out of curiosity, what was the effect of the 1 billion dollar order and on which currency was it? I've been trying to find out for a while how liquid spot GBPUSD really is at the highest level (D2/EBS). I trade with MBFX where the highest market depth I've seen is 50m bid and ask. Given that I don't have an interbank account, the closest I've come to an estimate for trade impact of large orders is from the following snippet from an ECB article.

Thanks.
The ebs data you site is good, but they arrive at those numbers mathmatically. Using "average depth" it would only move that much, but liquidity is not distributed evenly across all prices. Most traders on here trade without any regard to liquidity because it really doesn't matter for them. There are ofcourse pricelevels where $1billion can be traded without much impact, but having to wait for a trade that met the signals (as used by participants around here) AND was close enough to a liquidity hotspot to consume the order wouldn't generate many signals at all.

I have seen several. 2 yards on eur/jpy spiked the market 30 pips. 1 yard on usd/jpy spiked 10, and another 1 yard spiked it 15. The worst part is that within 2 mintues of all these spikes, prices dropped back significantly below the entry levels.

There was just a ~$3bil GBP/JPY order worked from around 12am to 4am est today. That was done properly, but you can still see the result for yourself...
  • #79
  • Jan 30, 2007 4:01pm Jan 30, 2007 4:01pm
Quoting zeroz
Out of curiosity, what was the effect of the 1 billion dollar order and on which currency was it?
I remember that our 1.6 bio USD/JPY market order Tokyo session "sell" once was executed in average about 30 pips below the price and the overall downside impact was about 100-110 pips. Often someone else's stops also get triggered by such a trade. I guess that was the case then. It took a couple of hours however for the price to get back where it started from.
Also as far as I remember, BoJ used to spend on a single intervention attempt $4-7 bio, each time causing market volatility to be anywhere between 150 and 350 pips. The impact hugely depends on time and trading levels.
  • #80
  • Jan 30, 2007 5:40pm Jan 30, 2007 5:40pm
Thanks for the prompt reply. Very interesting. How is it that you're able to see how much people are buying and what orders are being worked in?

Yes, I'd imagine institutions trade in a completely different way than most systems outlined here for that simple reason of liquidity (buying dips) and reduction of risk. While I'm not near the levels to need to be worrying about this, I'm interested in understanding how scalable forex is as well as how institutional traders make the transition to trading with increased size, though I imagine it would be learned empircally as their funds/limits grow and liquidity issues begin to arise. What do you think the most you could move in and out under most market circumstances would be, maybe having an effect of 1-3 pips?

I've seen historical charts of the BoJ interventions, but I thought that a large part of the move was attributed to the fact that BoJ is willing to defend a certain level and not to the wash of liquidity. For a supposed trillion+ dollar market I wouldn't think 4-7 billion would by itself move the market many multiples more than its daily range?
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