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Investing your bankroll

  • #1
  • First Post: Oct 15, 2015 10:25pm Oct 15, 2015 10:25pm
Hello,

Wondering if anyone has views on investing bankroll/cash reserves. I am risking approx. 0.5% of capital per trade, with usually only 1 or 2 open trades at any one time. I am targeting 15%+ return p.a. on my total bank roll per year with a max draw down of 10%.

This obviously leaves me with much of my capital free which I currently have mostly in cash (I have a separate passive portfolio in a managed fund which I do not trade with).

I am considering investing my free trading capital in a mix of cash / stocks also. I have a platform which enables me to use my investments as collateral for margin on trading positions.

Anyone else do something similar? Any thoughts?
  • #2
  • Oct 16, 2015 7:20am Oct 16, 2015 7:20am
Quoting Bungarra
I am risking approx. 0.5% of capital per trade, with usually only 1 or 2 open trades at any one time.

This sounds very wise and sensible.


Quoting Bungarra
I am targeting 15%+ return p.a. on my total bank roll per year with a max draw down of 10%.

To me, this sounds hugely disproportionate. My max drawdown is a tiny fraction of my annual profit target: it's a lot smaller than my monthly profit target.


Quoting Bungarra
This obviously leaves me with much of my capital free which I currently have mostly in cash (I have a separate passive portfolio in a managed fund which I do not trade with).

You've lost me, here: are you aiming to make from your trading an annual return of 15% of your available trading capital or 15% of your total capital? (I find it much more helpful and convenient to define an annual trading profit target in relation to trading funds.)


Quoting Bungarra
I have a platform which enables me to use my investments as collateral for margin on trading positions. Anyone else do something similar? Any thoughts?

Not similar to that, exactly: I allocate a proportion of the trading profits I withdraw to re-investment in buy-to-let property.
  • #3
  • Edited 2:01pm Oct 19, 2015 6:01am | Edited 2:01pm
Quoting Xela
..... My max drawdown is a tiny fraction of my annual profit target: it's a lot smaller than my monthly profit target.....
Shit that's impressive if you can do it consistently ..... I don't set targets for myself but I managed to hold my max DD below my average monthly gain for almost a year which I was quietly proud of. It blew out eventually, it's a bit ridiculous to expect that kind of performance indefinitely ... I don't know if it's possible to sustain that but I'll keep trying....
si hoc legere scis nimium eruditionis habes
  • #4
  • Oct 19, 2015 6:08am Oct 19, 2015 6:08am
extra liq . swap it to usd and buy some fixed papers short maturity. roll that
eur or chf is a bijatch to hold
  • #5
  • Oct 19, 2015 9:08am Oct 19, 2015 9:08am
Quoting numbnuts
I managed to hold my max DD below my average monthly gain for almost a year

That's pretty good going - sounds like you're well on the way?


Quoting numbnuts
I don't know if it's possible to sustain that

It is, especially if you select all your trading methods in accordance primarily with risk management rather than profit-maximisation.
  • #6
  • Oct 19, 2015 12:11pm Oct 19, 2015 12:11pm
Quoting Bungarra
Hello, Wondering if anyone has views on investing bankroll/cash reserves. I am risking approx. 0.5% of capital per trade, with usually only 1 or 2 open trades at any one time. I am targeting 15%+ return p.a. on my total bank roll per year with a max draw down of 10%. This obviously leaves me with much of my capital free which I currently have mostly in cash (I have a separate passive portfolio in a managed fund which I do not trade with). I am considering investing my free trading capital in a mix of cash / stocks also. I have a platform which enables...

I think thats a pretty good model you are trading..though Id agree with numb in that Id take what the markets give..

the industry looks at a 5-Times ratio as an un-written rule for draw-downs So, if you average Monthly return is a positive 2% ( over 12 months) expectancy of your deepest peak to trough draw-down could be a max of 10%.. beyond 10% and you might want revise your trade plan.. Obviously this rule is an approximation but its a good guide to start with..
Memories caught in time but never forgotten
  • #7
  • Oct 20, 2015 12:51am Oct 20, 2015 12:51am
Quoting 21vs7
extra liq . swap it to usd and buy some fixed papers short maturity. roll that eur or chf is a bijatch to hold
Thanks for your reply. I have no idea what your talking about....

I live in Australia so getting better rates than USD/EUR/CHF at the moment...but looking to move some liquidity into more risk (if conditions are supportive). Wondering if others do this also?

In some instances I have no trades on at all, so all funds just sitting in cash....
  • #8
  • Oct 20, 2015 12:56am Oct 20, 2015 12:56am
Quoting j4d
{quote} I think thats a pretty good model you are trading..though Id agree with numb in that Id take what the markets give.. the industry looks at a 5-Times ratio as an un-written rule for draw-downs So, if you average Monthly return is a positive 2% ( over 12 months) expectancy of your deepest peak to trough draw-down could be a max of 10%.. beyond 10% and you might want revise your trade plan.. Obviously this rule is an approximation but its a good guide to start with..
Agree - at the end of the day I take what I can get. I have a 'target' for precisely the reason you mentioned - if my system(s) move out of expectation (being 10% DD) I stop trading them.

I agree with the numbers you quoted, I would be very happy with 2% average return and 10% DD - compound that consistently and you've done very well. I am actually happy with 1.25% average monthly return (15% p.a) - more than enough for me.

Still wondering about investing surplus cash / liquidity though. Thoughts on moving some into riskier assets over cash? Not all but some portion?
  • #9
  • Oct 20, 2015 12:57am Oct 20, 2015 12:57am
Quoting Xela
{quote} That's pretty good going - sounds like you're well on the way? {quote} It is, especially if you select all your trading methods in accordance primarily with risk management rather than profit-maximisation.
Xela - sounds like you are killing it in the markets!!

How are you trading at the moment? What's your approach?
  • #10
  • Edited 2:42am Oct 20, 2015 2:30am | Edited 2:42am
Quoting Bungarra
{quote} Thanks for your reply. I have no idea what your talking about.... I live in Australia so getting better rates than USD/EUR/CHF at the moment...but looking to move some liquidity into more risk (if conditions are supportive). Wondering if others do this also? In some instances I have no trades on at all, so all funds just sitting in cash....

Im talking about FX swaps and going into short maturity 1-3 month bank papers.

..what i understand at this point is that you hold AUD, so generally you are already in risky mode. But you are aud spender also so primary currency is ok.

what do you mean by more risk? and how one predicts moving liquidity into more risky environment? where to? Equity,real estate, commodity, CFDs, etC?

When your trade begins, arent you in a more risky play, or you are able to trade with strong win rate and good rr to say that trading fx is less risky than holding AUD liq on the account?

gl
  • #11
  • Last Post: Oct 20, 2015 6:57am Oct 20, 2015 6:57am
Quoting Bungarra
Xela - sounds like you are killing it in the markets!! How are you trading at the moment? What's your approach?

My approach is one of risk management. Patience, discipline, statistics, probability, education and practice (there are no productive short-cuts): taking only trades predicated by methods with a reliably proven edge, and with appropriate position-sizing.

I'm a price action trader: like many people making a living this way, my trading became consistently profitable only after I (eventually) learned to abandon "indicators".

In my opinion, one needs either to copy and/or to develop things that work, but doing either successfully necessarily entails first learning to distinguish accurately between what works and what doesn't.

Doing so is no trivial matter at all, because (for various reasons - some very obvious but others far from it) the internet, in particular, is full of misinformation about trading. In a field of endeavour from which so very few people ever manage to make a living, it stands to reason, in my view, that the overwhelming majority of the "information" with which one's presented is likely to be seriously misguided.
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