How much do you think a great trader makes each year, on average?
What if I told you it’s not like that at all?
Professional traders and money managers sometimes talk about percentages, but this is not the real game they play.
Percentages are just a measuring tool for comparison. You cannot transfer “%” to your bank account. And you can’t pay your mortgage with “%”
What pro traders really measure…what they really care about…and what You should really care about is Dollars and Cents (or Pounds for many of you).
You see… it’s true that the top performing traders in the world make millions. But would you be surprised to hear that this often comes with buying power (or capital under management) that is 10 to 20 times their returns?
What does that mean?
That means they make $1MM or $2MM on $10-20MM of available assets.
That’s right… they often return about 10% to 20% of the total available assets.
But what about all the systems and traders and gurus who are making hundreds of percent on their “accounts”?
I can tell you from personal experience and behind-the-scenes access to hundreds of pro trader’s businesses, that most of these traders have either re-funded their accounts at some point or only use a fraction of what is available to them.
Did you catch that?
So while one account may have outlandish ups and downs, the impact on their total available capital is relatively small.
Why am I telling you this?
I have seen too many people do significant harm to their personal finances because they want to mimic what they think they are seeing from top traders.
They want to make 70% in one year. So they look at how much money they have and multiply it by 70%.
But, when just a normal drawdown in trading occurs, they experience a reduction of assets that makes it nearly impossibly to recover at the same rate of the decline (you know… if you lose 50%, you have to earn 100% on the remaining capital to be back to even).
A successful pro trader sizes correctly and can keep going while the inexperienced and inappropriately sized trader is stuck in the mud.
A successful pro trader may make 70% on the account deposits, but only make 15% on total assets available.
This allows the successful pro traders to keep going after a draw down. From there, they can compound and grow while others are left behind.
Some even raise big money to begin doubling and tripling their DOLLAR returns while they gladly stick with somewhat modest % returns on the net worth of the combined capital sources.
What is the takeaway?
I don’t know your financial picture. Maybe you have a deep pool of assets available and I hope this helps you realize that modest expectations are actually on par with the top performing professionals.
Maybe you don’t have a lot of assets and you are trying to turn a huge % return from your modest base. If that’s you, then I encourage you to consider a business plan that allows you to prove your ability to safely manage money. After you prove this ability, you can either scale up through funding or continue to allocate from your paycheck to grow your base.
If you find this attitude toward trading expectations refreshing and you’d like to work more closely with people who take a realistic and practical look at how to face the markets each day, then I invite you to join one of our programs today.