Returns of 20 to 30% annually..exceptional or unimpressive?

Many traders ( with any sense) use tax free ( spread bet) trading platforms in the UK, thus avoiding all income and capital gains taxes example:10K start capital @ 10% month = 100K in two years, one $ million in four - even when ratcheted down the returns don’t take decodes to accumulate if you’re any good. 2.5% monthly gains ( 30% annual) will not justify the increased risk of trading smaller amounts for many, with upwards of $300 monthly subs.

Lets see how these plethora of volatility systems do longer term… they seem to be honest in terms of expected drawdown when asked; with many approaching 25%+ DD and agree with other thread comments regarding main concern is DD: profit ratio.

That’s great if you’re in the UK and have a high return strategy for spread betting. Neither apply to most people. So it doesn’t seem particularly relevant here.

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I think the IRA is the functional equivalent here. Lots of folks have those.

it is very relevant if that trader has the option to trade independently or chose a trade copy site such as C2…

Are there spread betting strategies on C2?

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No margin on IRA accounts which means a lot of leveraged stuff isn’t doable (forex, futures, leveraged naked puts and all naked calls, also no direct shorting). So choices are narrowed to long stocks/etfs, cashed secured naked put selling, long options, and credit/debit option spreads. The closest things to getting any real leverage and shorting ability in an IRA would be the leveraged & inverse ETFs along with options/options spreads.

Anyone who has 2K today and generates 30% annual return will be billionaire in 50 years.
Now you can ask yourself can you do it?

Yes but I don´t want to wait 50 years. :smiley: :wink:

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You can’t above a certain size. Eventually you will hit liquidity limitations, or worse you become the market and then other participants can move against you with relatively small amounts of money and force you to lose over and over again.

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Liquidity limitations will indeed strike you sooner or later, I tend to view 20-30% figure as “excellent if you’re large enough to suffer liquidity issues”. As a small trader, you can definitely aim for higher (provided you have learnt psychological self control, which can take years), the main problem remains however to avoid blowing up in a Black Swan event.

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People who want to get rich quick usually end up lose money and quit. Good luck.

Forex has high liquidity.
So does forex trading still have liquidity concern?

The problem for algo developers is that FX is a gold mine for the large entities precisely due to its vast liquidity, so those entities are already doing their best in extracting available market inefficiencies from there. That said, evidently some people do succeed in FX nonetheless.

Of course, you can scale up FX returns arbitrarily with leverage, with a corresponding increase in tail event vulnerability.

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I’m curious about that as well, it seems like since FX is not centrally cleared and quoted, there could be a lot of room for FX dealer shenanigans, a bit if “tails I win heads you lose” type of scenarios for short term traders. If people complain about HFT taking their money, I can’t even imagine a FX dealer who gets a market order from a client (or a large flash order for that matter). Albeit there must be limits otherwise there would be arb opportunities between dealers if things got too out of sorts. To do size in FX I think you need to participate in the interbank market to avoid getting hammered, which is a different beast to retail brokers.

I think FX is the most liquid market on earth but things to keep in mind are that it isn’t that volatile (normally). So the liquidity is offset by things moving in .00001 increments :slight_smile: A couple % move in a major currency in a day is a HUGE move and would lay waste to a lot of participants given the leverage used since they normally are not volatile. Hence why I am obsessed with the Swissie move from years back as an example of a black swan ruining careers…

Treasuries are also quite liquid but suffer the same lack of volatility (recently at least).

I suspect the best measure is some sort of combined high liquidity (including very tight spreads / low slippage and the ability to do size at a given price without moving the market), and high volatility (daily standard deviation or somesuch).

A 2% per day move in forex (around 200 pips) can happen once a month or even more often, I wouldn’t consider it very special. Any forex trader will experience that at the beginning of their career. We had two 5%-10% a day moves in 2016, during Brexit and then the US elections.

In all of those cases, a stop would take you out of the trade without any extraordinary slippage.

Real extreme events, such as the sudden appreciation of the Swiss Franc in Jan. 2015 are a different story. That was 30% up almost instantly (around 3,000 pips), with no one to take the other side of the trade.

The risk in forex comes from the overwhelming influence a single body - the central bank issuing the currency in question - has on that currency. In that particular case, it was a shift from regulation (pegging the Swiss Franc to the Euro) to free trading that caused the move.

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I have watched a trader, trade $50k into $2M in 6 months, he traded everything under the sun, and then the next 6 months, he lost it all.

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The healthy scale there would be $50k to $250k and then the trader adjusts his position size accordingly, like a profesional - not a gambler. There’s no reason to give away that much profit so quickly if you’re getting lucky making it that quickly in the first place. Trading is essentially a casino. Those with discipline can come out on top, but it’s hard.

basically if you can run 30% consistently (at least 3 years) with DDs under 5% and no monkey business - i.e. blatant martingale moments, lucky block trades (10 trades on the year and only two produced most of the profits), and other such anomalies, you are a rockstar. That type of performance with a consistent batch of trades per week and even gains per trade, across a large enough sample - and you are going to get recruited into hedge funds.

edited for clarity on 10/12/2017 at 19:50 MST

This whole discussion all boils down to this:

Do you have realistic expectations about what can be achieved over the long-term when investing or trading?

Some of us do have realistic expectations based on many years of experience in this extremely competitive profession.

Some of us do not have realistic expectations due to inexperience, ignorance, or lack of discipline and psychological self-control.

Which category we (individually) fall into (realistic expectations, or not) today may not be the same as tomorrow or in the future. This is true for us all because mistakes (very costly ones) are always possible at any moment. This is especially true if we (each and every one of us) are not following a business plan and trading plans with diligence and discipline.

Long-term success depends on continuously learning from past mistakes and not remaking those errors in the present tense (here and now). Talking about what you will do in the future is like creating a hypothetical and historical back-test and saying “I coulda, woulda, shoulda be a billionaire by now.”

If you think you can achieve a better long-term track record than Warren Buffet (an unrealistic expectation) than put your money up against him by taking the opposite position of his trades.:cold_sweat:

C2 has a lot of cons (negative consequences of using the service); especially if you have unrealistic expectations. Every human system has imperfections and limitations.

C2 does have a lot of pros (positive consequences) associated with it if you make prudent and well informed decisions and add the live track record of system performance afforded by C2 to that decision making process. Technology allows us to do things that are impossible without it.

Short-term track records (including few trades over a longer time-span) can be just as dangerous as the improper use of back-test information (hypothetical and historical, not third-party audited in real-time). All probabilistic systems (not 100% certain) have various short-term streaks of winners and losers.

The years you have for experience in this business are inversely proportional to the expected percentage return (annualized) you will think is achievable. The goal is to actually exceed those lower realistic expectations over a longer period of time. It is better to be conservative and careful while still aiming for excellence: this is contrary to being sloppy and careless while taking on unnecessary risk for unlikely rewards.

If it is true that 90 - 95% of us traders lose money and fail and quit than almost all of us have unrealistic expectations.

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How many hedge funds do 30% yearly with an under 5% drawdown? I’m not aware of any. Buffet himself bets against hedge fund performance at times. I doubt many, if any hedge fund traders are producing 30% with under 5% drawdown.

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