Does anyone here other than myself find 20 to 30% annually not so impressive? Maybe if you are managing millions or billions? What of the 50 to100 thousand dollar accounts? Would that return be considered excellent?
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Dowlife, From my perspective 20 - 30 % returns with volatility below the s&p 500 is exceptional. I am both a trade leader and subcriber. As a trade leader I aim for the above risk and return metrics. As a subscriber im in a strategy that aims to deliver multiples of the above. However i will guarantee you my strategy will survive a black swan event or a flash crashâŚI am not sure an algo or leveraged strategy is guaranteed to survive a flash crash or black swan eventâŚLeveraged strategies or algo could wipe out your account and leave it in a negative balanceâŚThe answer to your question is simply one of risk management and i dont just mean sharpe ratioâŚi mean armageddon
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Iâd be much more impressed from a low DD system that does 20% - 30% annually, with a track record of 5+ years, than from one that does 20% - 30% a month but with a track record of 3-6 months.
Unrealistic expectations donât normally lead to better results.
Having said that, if the annual returns are say 20%, on a $150,000 model account, obviously you should check how will the fees affect your returns if you trade a small account. In this case the problem may be with the account size rather then with the system itself.
I guess having small accounts is one of the main reasons people take excessive risks.
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20-30% annually is good if the track record is long enough and the drawdown is no more that 1/4 of the annual return.
But think about it âŚhow long is good enough? 2 yearsâŚis probably ok, If you had a track record like that how long would you be giving away your signals for a % of a few hundred a month and free to those that play games with the trial period.?
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It depends on account size and liquidity of the instruments traded. Itâs not uncommon for a skilled professional trader to double or triple a small account in a year. But the bigger you get, the harder it gets to maintain those high percentage returns. Every strategy has an upper limit for how much it can handle. Thatâs why for short term trading I prefer to see it in terms of P/L, and for long term investing (lower turnover and higher liquidity) I prefer see it in terms of percentages.
That being said, 20-30% annual returns is great no matter what. Itâs guaranteed to be in the 99th percentile of performance. Buffett has returned about 20% annualized since 1965. So keep that in mind, the best investor in the world has âonlyâ returned 20%âŚbut heâs been doing it for over 50 years. Although I should point out that if you look at Berkshireâs annual performance it has gradually declined over time due to the size problem. Buffett had plenty of years of over 70-80% (a couple over 100%) from the 1960âs through the 1980âs. Extremely impressive since he was still dealing with hundreds of millions back then. Recent years have been closer to the S&P 500. Berkshire is so big now that itâs a decent sized chunk of the market itself. SoâŚbeat the market until you are the market.
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You can´t judge a system just by its performance. That way you will always go to the extreme risk vs. extreme performance systems.
It really depends on your approach on copy trading. If you risk few in terms of $ you probably want to have a high %yield and don´t bother about drawdowns (except the system collapse of course). But if you risk more $ you rather take maxDD and other risk measures as your prime concern. 20% or more on a stable long term basis is really good and extremely powerful. (just take excel and compound 20%/30% over 20 years and you´ll see what I mean.)
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Prop trading firms cater to a type of trader that might do 100% a year or more from a small account doing scalping trades. However that style doesnât lend itself to bigger accounts nor does it work on a platform like Collective2. Those traders donât think in terms of %return but in terms of $return to pay the bills. And the business model for the Prop trading firm itself is to make money off fees and commissions from the traders they attract. They want traders who make a lot of scalping trades because they make money off commissions. They sell traders on a world of high profits from leveraged accounts they provide but the reality is most traders will lose money and waste their time. Some do well but it is rare.
Anyway if youâre that sort of trader you are probably in the wrong place because that sort of trading wonât work on Collective2. Your subscribers wonât make any money after commissions due to slippage.
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All great and very insightful responses guys! I agree David. It is the approach and goal of the trader. Some trade for long-term gain, some trade for a monthly income or immediate financial needs. IMO there is no right or wrong in either method. Please do not take this as arrogance or cockiness. But I can trade either of the ways I mentioned. A good trader can trade in more than one type of market condition. He or she must be versatile. That said, I feel I definitely belong here. I can also perform well at a prop firm under the circumstances you mentioned. A 1000 dollars a day or 15-20 thousand a month is not bad money. But if one is seeking a 20% gain yearly, I can produce that as well. When one comes to a firm seeking to invest. It is imperative the firm assess the individuals needs and financial goals. Then act accordingly. If you are a one dimensional firm or trader, you may lose the perspective client. I am not implying you are that. Merely entering my 2 cents on the topic.
Traders doing well is a rarity in any case or setting. Most traders donât do well. We all know this. The failure rate speaks to this.
What do you mean survive?
Perhaps the above should read most traders found on internet sites donât do well; as why would they be here if they are already successful, and can make very good returns alone without all of the hassles of managing accounts; or trade for big banks which give them huge funds to trade and bonuses?
My common experience is that many new C2 traders have a hunch their new system will work after a few months profits / backtests, and want to milk it for all they can get for obvious reasons. It is high risk for all concerned and a steep learning curve for the new trader, managing client expectations, drawdowns, new platforms etc.
As for investor expectations, because I view any Internet based service as high risk, I expect returns to be much higher than 30% annually and much higher than any drawdown.
Risk control is the key factor and being consistent as well as % returnâŚas no investor is going to risk large amounts initially if they have any sense; and as C2 subs are astronomically high compared to any other internet trade copying service, returns have to justify depositsâŚ
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Well spoken Peter. I would expect higher returns also.
You might think any strategy leader that is successful could trade for big banks or easily launch a hedge fund but that simply isnât true. Banks donât just fund anyone, and a track record is not enough. Getting seed funding for a hedge fund is very competitive and difficultâagain a track record is not enough. It also costs significant $$ up front for the team required for a fund: marketing, lawyers, accounting⌠thatâs a big risk to take even if you have the $$ with no guarantee of getting any funding.
Itâs also not true that anyone that trades successfully can do well enough alone. If you donât already have a $million or two it takes decades to build up enough to support yourself through trading. Imagine you can do as good as the very few top hedge funds and make a consistent 30% a year after fees. After taxes take half of that youâre down to 15% a year. At that rate you trade for 20 years and turn $20,000 into about $330,000 which is great but still not enough to support yourself.
And lastly your expectation of more than 30% a year is a dream. Itâs a great dream and if you can realize it more power to you⌠but objective reality argues it is not likely to happen. 30% returns over the long term are top notch and 20% is greatâpositively crushing the market. You should be thrilled to get such returns because almost nobody manages it. Weâve been in a roaring bull market for over 7 years yet go to The Grid on Collective2 and filter for return >= 30% and Strategy Age >= 5 years⌠youâll see a total of 2 systems, both doing about 33% average return. As additional evidence, right now most hedge funds are under performing the market, and itâs only the very few best hedge funds that manage to do over 30% a year for a decent number of years. So though I appreciate the desire to make more than 30%, and you can argue returns need to be high to compensate for high fees (which are actually very low on Collective2 compared to alternatives like hedge funds), it doesnât mean what you desire is in line with what is likely to happen.
For those that join systems that make very high returns best of luck to you. Live the dream. I have a high return system or two in my list of subs. But the sad fact is most people on C2 do exactly that and most people on C2 lose money. My personal opinion is you will do better to shoot for good returns from systems with solid track records doing things you fully understand.
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Interesting points and I am aware banks have their own way of training and developing traders, many of which do not succeedâŚthat said the few that do earn multi million salary & bonuses in many cases⌠the âBig Shortâ is a great reference read by the wayâŚ
It also certainly doesnât take decades to build up enough to support yourself through your own trading - it all depends on your start capital, risk control and strategy - the wonders of compounding do the rest.
C2 is way more high risk than hedge funds ( in that the providers are not vetted in any way) - and can only be compared with other trade copying internet sites in terms of risk/return; ie very high risk in most cases. How many âoutstandingâ looking systems still average down?
Lastly ( and sorry to paraphrase), but 30% + a year has and is being achieved here by several providers alreadyâŚwithout averaging downâŚOK not for 5 years as yet but several for over year.
I gave very real numbers in my example, including the wonders of compounding. Unfortunately taxes are a killer for short term traders. If youâre not already starting with a lot it does take decades. And thatâs assuming you can do 30% a year which is a dang lot tougher than some here seem to realize.
During a bull market. Wait until the market turns. I wouldnât be surprised to see some explosions from the many doing well selling volatility right now. I have a feeling there will be no more of the longer term 50%+ systems at that point.
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This is a marathon not a sprint. The first order of business is survival. The long term publicly available data doesnât lie. If you arenât engaging in illegal activity or some sort of structural monopolistic trading (which wouldnât work on C2 anyway), and you are trading highly liquid instruments, there is a natural outlier level of long term returns, and 30% is probably around that number. Also Calmar ratios over the long term are extremely hard to find above 2. Sharpes rarely above the mid 1s.
Lack of realistic return expectations hurt a ton of people.
Most fall into:
- Not much capital, trying to swing for the fences and get rich quick
- Not much experience, havenât been actively trading or running fund of funds for more than 1 or 2 business cycles
- Confusing bull market effects with skill / long term results
The leveraged short vol traders (in all their forms) who arenât tail hedging on here will get smoked one day, mark my words. Something like a Fukushima happens and it may not even be the account went to 0, it could be they owe the brokerage (significant / time for bankruptcy filing to protect their primary residence) money. Donât let 7 years of a bull market confuse you about realistic returns. Iâve heard all this before and in 2000 for stocks and 2006 for real estate.
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Hi Traders,
my goal with my strategy https://collective2.com/details/107003652 is to gain contantly between 2 and 5% per month with small risk and a max. Drawdown below 10%. That would result in a yearly performance between 25% and 50% which is from my perspective very good if that can be achieved every year.
Heiko
Some strategies have leverage and a stressful event or black swan event would wipe out the account completely.
A % annual return number without mentioning max drawdown is meaningless.
If strategy A get 100% annual return with 30% max drawdown, strategy B get 20% annual return with 10% max drawdown, most subscribers would choose strategy B.
