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[Caprica]

Hi,

I was just reading Credit Suisse's website (www.hedgeindex.com) which monitors the average performance of hedge funds. The average annual performance for the most profitable class of fund (global macro funds) is only a dismal 13.47%.

If a professional hedge fund is only averaging around 13%, what hope is there for the average currency trader of supporting himself? To earn a meagre $52000 at 13% per year, the average trader would need $400,000 in trading capital.

Have I missed something here? Is a private trader able to consitently average over 13% per year?

[RavenMM]

Originally Posted by Caprica

Hi,

I was just reading Credit Suisse's website (www.hedgeindex.com) which monitors the average performance of hedge funds. The average annual performance for the most profitable class of fund (global macro funds) is only a dismal 13.47%.

Despite what you read elsewhere, the average hedge fund uses very little leverage. That's point 1. Second, these funds are usually "hedged". Look at things like sharpe ratio etc to see return relative to risk. In most cases, it will be lower than an equity index.

If a professional hedge fund is only averaging around 13%, what hope is there for the average currency trader of supporting himself? To earn a meagre $52000 at 13% per year, the average trader would need $400,000 in trading capital.

Remember that a hedge fund is usually taking 1-3% annual charge and 20% of profit. Therefore on a fund of $100 million making the 13.47% annual average return they are making $1-3 million just for being there and $2.69million profit on the profit. As the fund grows, so do the numbers. That's why they don't over leverage and aim for 100% returns each year. They don't need to.

Have I missed something here? Is a private trader able to consitently average over 13% per year?

Try reading the market wizards books, pitbull etc about individual traders. IN many cases, these types of traders do make high % returns. But perhaps most importantly, they do usually start out with a large initial stake. They don't start with $3k, $10k etc.

[Caprica]

Thanks RavenMM. So what do you think is a realistic expected return per year for a retail currency trader?

[X-Master]

Originally Posted by Caprica

Thanks RavenMM. So what do you think is a realistic expected return per year for a retail currency trader?

30% per year is reasonable for large capitals
Take for example:
Starting Capital1,000,000.00
Target after 12 moths	30% =	1,300,000.00
solve for x to get the minimum required return % per month 1,000,000*(1+x)^12=1,300,000
which is = 2.2%

Some times it becomes not possbile for them to get 1% per months, therefore, 2.2% is going to be the minimum average required return to hit the aimed target.

[Caprica]

So from that, I assume you probably couldn't realistically expect to be self supporting as a retail currency trader until you can average about 2.5% per month and have about 250 - 500K in your trading account.

[Caprica]

It also sounds like, despite the high leverage of forex, you can't really expect to do any better than the stock and futures traders that Alexander Elder talks about in his books, which also average about 30% in a year.

[RavenMM]

Originally Posted by Caprica

Thanks RavenMM. So what do you think is a realistic expected return per year for a retail currency trader?

Well if the professionals are doing 13.47 average and the long term growth rate of the stock market is say 8- 10%, I'd say that anything over this is great if you can do it consistently.

As with most people on this board who would like to "trade" for a living with a starting balance of say $5k, no it's not realistic, even though you can leverage up with some brokers 400 times. That's not to say that some people don't occasionally make short term fantastic returns ( judging by posts on this board, that's 80% of traders here... LOL ).

Why not try thinking of it another way. Start trading part time with a minimum stake of $10k. See if you can compound at 30-50 % annually. If you can do this and continue adding/building your stake then after 5 years, you could start trading for a living and be comfortable because you would have proved yourself over a variety of conditions. If you can compound at 30-50 over 5 years, do the maths again to see where you would be a further 10 years down the line. Now we're talking serious money!!

After 20 years, you could retire extremely wealthy and bear in mind that for 15 of them, you would have been you're own boss working when you want from where you want. Not sexy I know, but it's a hell of a lot more realistic than make a million in 1-2 years.

Who knows, after 5 years experience you may end up being a fantastically talented trader like say Marty Schwartz and be good enough to start making even better returns.