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Average traders returns

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louisg
Super Contributor
Simon, a couple of weeks ago you mentioned that a trader with an annual 50% return would be considered an elite trader. What would constitute an average trader's one year return (before taxes)?
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29 REPLIES 29
asylum
Super Contributor
well george soros has averaged 30% per year over his trading lifetime and hes considered a top elite trader/investor.
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saash
Super Contributor
And there must be a reasonable time-frame to determine consistency - surely.
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richardw
Super Contributor
And you won't find the remains of all those who made 30%-plus and then crashed and burned, LTCM-style. Survivorship bias, basically.
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john_1
Super Contributor
I would have thought the more relavent question is "how many active investors outperform the Satix top 40 on a regular and consistant basis...because if you are going to be so inactive that you never trigger a tax event why not simply let satrix do it for you...
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SimonPB
Valued Contributor
yip, an the average trader loses money, so average return is negative .. people ahve one big trade an think they can double their money every month - zero chance .. 30% pa year after year would be an excellent return doubling your capital every 2.5 years or so ..
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john_1
Super Contributor
ya the very fact that an active trader is usually has reasonably low levels of capital..only those that have very impresive returns are still around after a couple of years..
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Not applicable
simple calculation. Assume you follow the general 2% / 6% rule. That means that a max of 6% of your capital is exposed at any given point in time. now lets say you target yourself with 2*risk as a reward, and that your opportunities present themselves once a month. That gives you a potential chance of generating 12% return 12 times. Now assume you get that right 6 times out of 12, that leaves you with 6*12% - 6*6% which is a 36% percent return. Reality is the number of times your opps present themselves, and the real returns - sometimes your trade will shoot the lights out. But the bottom line is more than 30% means you have to take a much bigger risk, or have one of those can't do anything wrong bull runs
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Not applicable
Just take note that trading in stocks, ensures only that you receive an income basis with upward trends. Following SSF ensures that you maximize profits both ways.
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louisg
Super Contributor
So let me get this right. A 30% (before tax) would be considered an excellent short term trader performance. But if this trader is paying tax at the max 40% marginal rate it will bring down his/her after tax performance to 18%. Correct me if I'm wrong, but isn't that the long term (last 20 years) performance of the ALSI/TOP40, 18,2%. Wouldn't an Alsi ETF be an easier option?
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john_1
Super Contributor
yes and no..the historic average for the worlds major markets is to have 1 negative returns/ every four years(107 years of data)...but a trader is able to profit in any dirrection therefore it is possible and probable that a trader who makes 30% a year will still make that in losing years and in booming years is very likly to outperform.... the Basic problem with trading is that very few are able to compound yearly using effective trading instuments and thats why the good traders become investors also... It is very unlikley that psychologicaly and practically I could trade the alsi index with 1000 contracts the same way I trade it with 5 contracts..there simply is not enough liquidity...
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SimonPB
Valued Contributor
nah come on .. 30% after all costs, tax is a cost .. 20 average on topi is 18.2% 1989-2008 ..
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louisg
Super Contributor
Well, if it's 30% after tax then it would certainly be worth the effort. If a trader does manage to achieve an annual 30% return, why does he/she also invest in an index ETF (say Satrix Rafi or 40)as well? Surely that just dilutes his/her performance?
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john_1
Super Contributor
18% on free money is hardly a dilution.
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SimonPB
Valued Contributor
well who says they do ?? an given that I do, it is all about managing risk .. I don't go to some casino and put everything I own on red ..
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louisg
Super Contributor
John you know better than that. There aren't any free lunches.
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Not applicable
Unless you work for goverment and are high up enough, you get free lunch and a nice Chauffer driven expensive (plus extras you have no idea what they do) BMW to take you to the next feeding frenzy ;-)
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louisg
Super Contributor
.....unfortunately, their are many that do just that. All or nothing.
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john_1
Super Contributor
that my friend is the crux...as long as you believe that there are no free lunches nothing I say will convince you diffrently...A trader to be sucsessful needs to believe with all his beeing that money can come easy and is in no way correlated to his "work or time" when the ladies stand in the passages at cavendish at cristmas handing out Lint choc's do you take one or do you think there must ne a catch.....There was a prank done on 5th avenune NY were a well dressed guy stood with a suitcase full of cash and sign saying free money...guess how many took the cash..1..and all he asked for was train fare....
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louisg
Super Contributor
And us poor kippies footing the bill.
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