Realistic ROI and Account Size | Forex Factory

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Realistic ROI and Account Size

  • #1
  • First Post: Jun 2, 2010 11:28am Jun 2, 2010 11:28am
Just wanted to highlight the realism about ROI and account sizes. Ive been studying trading for a few years now and come to the conclusion that long term consistent profitable trading is possible.

However the expected monthly profit averaged out will rarely be above single figures. From the experienced traders that have lasted, 4% to 8% a month seem normal.

From this we can see that trading with less than say 50k is going to require a long slog to get a decent account size built up. This fact has taken me a a while to come to terms with and has made me stop trading while I work towards getting a bigger account size.

Any thoughts?
Economists have forecast 9 out of the last 5 recessions
  • #2
  • Jun 2, 2010 12:19pm Jun 2, 2010 12:19pm
I agree.. .and along with that you would need the higher initial deposit so that you can start with a proper broker... maybe direct connection to a broker with multiple bank feeds. The spread and execution and reliability of your platform may make or break your system over time.

With starting ~25k you can make a sustainable living if you have a consistent strategy. That's what I gather anyways.

Thanks,
Jag
  • #3
  • Jun 2, 2010 12:32pm Jun 2, 2010 12:32pm
Hi Markmm !!

Quoting markmm
Ive been studying trading for a few years now
What does that mean ? You've blown more than 1 account ?


Quoting markmm
From this we can see that trading with less than say 50k is going to require a long slog to get a decent account size built up. This fact has taken me a a while to come to terms with and has made me stop trading while I work towards getting a bigger account size.

Any thoughts?
50k doesn't seem enough and even though it looks like you're making the right decision (waiting before having enough $$), I'd suggest you to continue trading with true money. Without excepting to earn a living that way. That should help you keep in touch with the realities of trading and you won't be lost when you start over.
  • #4
  • Jun 2, 2010 12:39pm Jun 2, 2010 12:39pm
Quoting markmm
However the expected monthly profit averaged out will rarely be above single figures. From the experienced traders that have lasted, 4% to 8% a month seem normal.
Those are quite high figures, 4% per month is 60% in year (or over 1000% in 5 years)

8% in month is over 150% per year (or over 10,000% in 5 years)

If one can hit those targets consistently there is no need to work ever again.
  • #5
  • Jun 2, 2010 12:42pm Jun 2, 2010 12:42pm
Try to find a "good" part-time (25-30 hours) per week job, that covers your living expenses. Obviously, you want this geared towards the evenings so that you can have the daytime free to trade.

With that, and I realize it's not so easy in our current economy, you are free to trade in your recreational time and you don't have to worry about trading to "pay the bills" just yet.

Monitor your personal expenses. If you can cut back $300 a month, you've just made an equivalent of 3% of a $10,000 account with no risk.
  • #6
  • Jun 2, 2010 12:57pm Jun 2, 2010 12:57pm
Quoting mikkom
Those are quite high figures, 4% per month is 60% in year (or over 1000% in 5 years)

8% in month is over 150% per year (or over 10,000% in 5 years)

If one can hit those targets consistently there is no need to work ever again.
lol i read it wrong at first. i thought the original post said 4-8% a year. investors would kill babies to get 8% a month. most people expect 20% or less a year.
  • #7
  • Jun 2, 2010 1:00pm Jun 2, 2010 1:00pm
Quoting blacksun1
investors would kill babies to get 8% a month
lol

Anyway 8% a year is the basic rate of return of PIMCO-Allianz's funds. If you can't beat that, that's what any investor should invest in.
  • #8
  • Jun 2, 2010 1:01pm Jun 2, 2010 1:01pm
Quoting mikkom
Those are quite high figures, 4% per month is 60% in year (or over 1000% in 5 years)

8% in month is over 150% per year (or over 10,000% in 5 years)

If one can hit those targets consistently there is no need to work ever again.
I disagree, with a medium sized account (i.e. not a multimillion hedge fund) it is achievable, plenty do it here.
Economists have forecast 9 out of the last 5 recessions
  • #9
  • Jun 2, 2010 1:11pm Jun 2, 2010 1:11pm
Support and resistance, trend, and....

defenseless babies!

I knew I was missing something.
Sorry, couldn't resist.
  • #10
  • Jun 2, 2010 1:13pm Jun 2, 2010 1:13pm
It depends on the account size.

From an 10M account, 4% per month = 400 K per month, this probably is hard to achieve consistently. But from an account size of 100K, 4% a month = 4,000 a month, not a big number to get consistently though.
  • #11
  • Jun 2, 2010 1:17pm Jun 2, 2010 1:17pm
Quoting Intensity
Hi Markmm !!

What does that mean ? You've blown more than 1 account ?


50k doesn't seem enough and even though it looks like you're making the right decision (waiting before having enough $$), I'd suggest you to continue trading with true money. Without excepting to earn a living that way. That should help you keep in touch with the realities of trading and you won't be lost when you start over.
I have blown 1 account, 100 buck Oanda. I have been studying various trading styles and absorbing the vast amounts of information on the web. From PA to Fibs to Order Flow to Automated Trading and so on. All these styles work for many people, so far only 1 worked for me.

I have learnt loads from great traders and just need to get the account size up.
Economists have forecast 9 out of the last 5 recessions
  • #12
  • Jun 2, 2010 1:29pm Jun 2, 2010 1:29pm
Quoting markmm
I have blown 1 account, 100 buck Oanda. I have been studying various trading styles and absorbing the vast amounts of information on the web. From PA to Fibs to Order Flow to Automated Trading and so on. All these styles work for many people, so far only 1 worked for me.

I have learnt loads from great traders and just need to get the account size up.
You've kept your losses very low, congrats

It's a good thing that you've found a system that work for you. It took me many years and I'm still not convinced I've found some sort of a holy grail What have been the average monthly result of your method so far?
  • #13
  • Jun 2, 2010 1:33pm Jun 2, 2010 1:33pm
I believe the growth and profit comes from frequency. If we are traditionally risking say 1% of the account per trade with an R:R of 1:2 or maybe 1:3... you need trades. Across all pairs, every reasonable signal you get, you need to have your capital at risk, as often as possible.

So, you need longer hours, or more trades, or a combination.

All these market wizards (Dennis, Tudor Jones, Kovner, etc.) were doing huge returns with small accounts before they were fund managers. They were pros, every day, putting in the hours. No reason you can't do the same. We have access to a marketplace, relatively cheap trade costs, and low entry (no exchange seats to buy).

You just have to be honest with your methods and expectancy. Betting 1%, winning 40% of the time, and having an R:R of 1:2, is profitable. If you make 100 trades a month, it's 20% profitable. Thats an average of 5 trades every day. Now if you can get reasonable signals for 10 trades or 15 trades a day, and put that money to work.... crazy growth!
  • #14
  • Jun 2, 2010 1:34pm Jun 2, 2010 1:34pm
Quoting Intensity
You've kept your losses very low, congrats

It's a good thing that you've found a system that work for you. It took me many years and I'm still not convinced I've found some sort of a holy grail What have been the average monthly result of your method so far?
No Holy Grail, I mean a method of trading that suits my life style. One that allows me to work full time. No staring at screen all day simply a few hours a week looking at charts. Price action and Support and Resistance.
Economists have forecast 9 out of the last 5 recessions
  • #15
  • Jun 2, 2010 4:43pm Jun 2, 2010 4:43pm
Quoting mikkom
Those are quite high figures, 4% per month is 60% in year (or over 1000% in 5 years)

8% in month is over 150% per year (or over 10,000% in 5 years)

If one can hit those targets consistently there is no need to work ever again.
That's why good traders trade. The problem that arises when people talk of returns is that there is not usually consideration to the level of aggression. We can take two traders who are equally good, have one risk 0.25% per trade, and another risking 2% per trade, and the trade risking 2% will do far, far, far better over time. We're lead to believe that a 20-30% return is good, but I'd call it marginal unless someone is trading extremely conservatively due to having huge amounts of Other People's Money behind them.

Quoting blacksun1
most people expect 20% or less a year.
Because that is what they're lead to believe is a realistic return.

Quoting rovver
It depends on the account size.

From an 10M account, 4% per month = 400 K per month, this probably is hard to achieve consistently. But from an account size of 100K, 4% a month = 4,000 a month, not a big number to get consistently though.
Account size is an issue, but you're thinking far, far too low. 10 mil isn't even a drop in the bucket. We also have to consider strategy - the point at which a position trader starts losing efficiency due to account size is far, far higher than for a scalper. Personally, I wouldn't suffer any loss in efficiency if I suddenly had 100m behind me; in fact my efficiency would increase, as my orders would be broken into more orders, allowing smoother entries and exits.
  • #16
  • Jun 3, 2010 1:51am Jun 3, 2010 1:51am
Quoting Mr J
That's why good traders trade. The problem that arises when people talk of returns is that there is not usually consideration to the level of aggression.

[..]

We're lead to believe that a 20-30% return is good, but I'd call it marginal

[..]

Because that is what they're lead to believe is a realistic return.
If you are saying that a average trader can consistently make 10,000% in 5 years, you can't be serious. The amount of return has nothing to do with what a trader believes, It's all about how well you can exploit inefficiencies.

Aggressiveness (obfuscated word for the amount of drawdown you are willing to take) of course is one of the most important parts of calculation of how much your profit you are going to get because the profit can be directly calculated from the drawdown you are willing to take [of course assuming you are doing things in a consistent way and your past reflects how well you trade in the future]. Not many people understand this btw.
  • #17
  • Jun 3, 2010 2:21am Jun 3, 2010 2:21am
"Investing" and "trading" are different things.

Also, what a multi-billion dollar fund can do for ROI and what you and I can do with our little 5- or 6-figure accounts are different things.

There are no valid comparisons between either of these disparities.

So, how hard are you willing to work? How smart are you? How tough, emotionally, are you? Your trading results will answer these questions for you.

Just mho, but I suggest a competent "trader" consistently can net profit 100 pips a week, even at low (say, 2:1) leverage on a $100k account this is 1% per week; judicious application of leverage may amplify your results, allow less of a stake to start.

I guarantee you there are small-account traders who are consistently making xxx% annual returns. Is it "realistic" to expect that you can do so? Nobody else can tell you what you are capable of...so, good luck.
"If The Fool persists in his Folly he will become wise." - William Blake
  • #18
  • Jun 3, 2010 2:42am Jun 3, 2010 2:42am
Quoting mikkom
If you are saying that a average trader can consistently make 10,000% in 5 years, you can't be serious. The amount of return has nothing to do with what a trader believes, It's all about how well you can exploit inefficiencies.
Where did I mention belief? I was talking about level of aggression. And yes, I do think a good trader can make 10,000% in 5 years, while not being overly aggressive. Consistently? That well depend largely on their approach. A position trader is going to have a very different experience to a scalper. 10,000% is what, 250% a year? That's very doable for a good trader who isn't trading like a mouse.

Quote
Aggressiveness (obfuscated word for the amount of drawdown you are willing to take) of course is one of the most important parts of calculation of how much your profit you are going to get

Which is why it's not sensible to compare a 20% industry standard to a private trader. A trader running a large fund that makes 40% a year will likely trade his own account more aggressively, and achieve a far better result. It's also not reasonable to compare a trader looking for growth to an already established trader with a large amount of capital. The best traders don't achieve the best returns.
  • #19
  • Jun 3, 2010 2:53am Jun 3, 2010 2:53am
For the risks involved in trading over investing ...... 50-120 % per year is good performance.
heres an example of realistic returns from trading (yeh....stocks ....i know but fine for comparison)
http://www.guppytraders.com/gup15.shtml
  • #20
  • Jun 3, 2010 3:04am Jun 3, 2010 3:04am
Quoting Mr J
A trader running a large fund that makes 40% a year will likely trade his own account more aggressively, and achieve a far better result.
And faces a larger risk of ruin. There is a reason why funds have risk measures.

Note that in nowhere I say that that kind of return is not possible, I'm just saying that doing it consistently means you are an above average trader (I think about one of the top 1-5% of all traders there are).

Anyway I think I have said all I can about this issue. Good discussion to everyone else.
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