Annual Returns

Does anyone know what is considered to be a very good annual return on investments when it's pertaining to trading?

I mean, how much do professionals, like hedge fund managers and such, generally make for their clients?

10-20% is considered golden. When you get to the top, you're talking about 10% of $100mio at least, and that's a fat wad of cash.

Smaller personal traders can rack up over 100% returns in the retail market. Doesn't always happen, but you do have the agility to do so.

Oh I see.

In your opinion, how long of a track record is needed to anticipate the ability of a good broker? I mean you said 100% returns can happen in the retail market; which is what I'm in I guess. For the past four years I was able to go over that goal. With backtesting, I was able to get around 40% returns each quarter for the last 17 quarters. The lowest quarter was around 15% return.

I know there aren't guarantees in this market, but how long do you think a good track record would be?

In short terms, as long as you can make it. Sounds a bit simple, but it's true.

It's easier to double up $500 in a micro-account than to try and double up $100mio in the span of a year. Being aggressive enough I could double up that $500 in a week's time. The difference is, one is being reckless, and the other is sticking to strict standards of risk mitigation. The number 1 goal in this game is capital preservation. One key criterion isn't necessarily how much of a return you can get, but what's the worst draw down you're going to encounter? How much do you have to risk to get those 40% returns?

It's also a lot easier to maneuver around positions of only one to five standard lots instead of trying to helm a ship where positions are five hundred standard lots.

Ohh I see what you mean now. That's why I actually made my trading system to handle drawdowns.

For instance, my main trading strategy is for one currency. I just actually finished programming it. Anyway, whenever a trade is made on that pair, other orders are placed on three other currencies depending on how the market moves. Overall, this decreases the drawdown if you look at it total. For the past 17 quarters the largest drawdown was around 20%. Of course if you start from the beginning and never took out any money, the 20% greatly diminishes.

So i guess my question is do you know what a standard drawdown, or risk, is for most professionals? I know the lower the risk the better, but what would you consider to be an acceptable drawdown for a trading system?

Typically, 25-28% MaxDD is acceptable. Some people can handle more... some can handle less. But that number is what almost everyone should be comfortable with if they're a client and they plan on being realistic...

Regarding annual returns, 20-30% annually is considered pretty darn good. The key with that is consistency.

I have seen consistent 50% compounded annual returns. However, this doesn't come alone!!! It comes with a maximum drawdown from peak to trough of approximately 55%.

Best Regards,

Nader