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What is a typical return per year ?

Hi all !

I am a new member of this forum, and also a newbie in trading stocks. I would like to ask one simple question:

What is (from your experience) a typical return on investment per year when trading stocks?

Reading some books about Warren Buffett, I found out that he averaged about 20% of return per year. Does the return depend a lot on the initial amount of money. Is it possible to get higher returns (year after year) when investing (trading) just about 10,000$ instead of millions? Is it realistic having 50% or 100% return year after year? Using which technique (swing and day trading or value investing?)?


By the way I meant to say 10year or longer graph.

(Many of the more experienced investor are not voicing their thoughts about your question and high returns. There are entire threads on this topic.)

(I added the bold to the text below. His examples are 1942 so $1,000 is about $15,000 today)

"From W.D. Gann "How to make profits in Commodities" p13

How MUCH PROFIT To EXPECT: Many traders make the mistake of expecting too much profit in a normal market. They hope for more than
they get. The idea is to follow the trend and to determine whether you are in a war market, an abnormal market or just a normal trading marĀ­ket. Do not expect too much profits but follow up if you are right and protect your profits and get out when the trend changes, not before.

The average man or woman who goes into trading or speculation of ComĀ­modities expects too much gain on their money. They expect to double their money in a few days, a few weeks, or a few months. This can be done at times, but these opportunities are rare and far between. The man or woman who expects big profits the first time a trade is made usually lose all the money they put up.
The way to succeed is to have a rule, so that when you start trading with a certain amount .of capital, you will never lose the capital and
over a period years you will make better than the average return on the money. Did you ever stop to figure what a gain of 25% per year means, over a period of 20 years? Suppose you start with a capital of
$1,000.00 and increase it 25% a year for 10 years, it amounts to
$9,313.25. $10,000 increased at the rate of 250/0 a year, amounts to
$93,132.17 in ten years. You can see how easy it is to accumulate a moderate fortune in a reasonable length of time, if you are conservative and do not expect too much. Most traders are too greedy. They want to get rich in too short a period of time. They OVER TRADE. The result is that they lose their capital and then b1ame the Chicago Board of Trade, Wall Street, or someone else. The trouble was that they fooled themselves and gambled instead of making a conservative investment or speculative trade.
Learn to LIMIT YOUR RISKS. Do not expect abnormal profits in normal markets. By doing this, your chances for success are greatly increased.

How To ANSWER MARGIN CALLS: When you buy or sell a Commodity- and put up a certain amount of money, which is the amount required by your broker as margin, and later you are called on for additional margin, it is evidence that you are wrong and that the market is going against you. If you put up 10c per bushel and the market has gone against you 6 or 7 c, you are wrong for that much and the chances are that you will be wrong -for 6,7, or 20c more. Why hold on to a losing trade? The way to answer the margin call is to sell out. Find out what is wrong and make the next trade according to a well-defined rule and you will not have to put up additional margin.
Well said blue,

I think every daytrader to investor ought to read how to profit in commodities from W.D. Gann. If any trader followed his rules with his MM laid out on page 13 they would never have a busted account. As a matter of fact its time to read it again

Also I have seen bear markets erase profits that took months to build in stocks. Over trading is my arch enemy....I trade best after a weekend or after a large loss, cause at which time I take time away from news, markets and trading to clear my head. Some of my worst trades are after large winning trades which leads to over confidence and thinking that I can predict the market and make a quick call and jump back in without thinking (aka over trading).
We have a Day Trader Millionaire Calculator on this site and this is the type of calculation that new traders typically do and they say if I can start with $10k and make just 1 point a day in a couple of years I'll be a millionaire. The calculator and logic and theory work very well and they are not deceptive. What is deceptive is that it's very very difficult to make 1 point a day. (In this case I'm talking about 1 ES point.)
Originally posted by blue

You mentioned "had negative profitabilities during the last week, month and year. Then I check if everything is OK with their fundamentals (earnings, P/<E>, P/B, current ratio, asset turnover, etc."

A question: negative profits doesn't match with good earnings and good PE. Perhaps you meant something else?


you are right. I used a word that is not correct ("profitability") just because my broker calls it in such a way ("rentabilidad"). In fact, it is just a drop in price (or price movement) during the last week, month and year. Looking for 3 red numbers, I find stocks that are close to the bottom. So, just the price movements, not the earnings.

And, here are my transactions for August, if you want to take a look (prices in euros):

1. Natra (Mercado Continuo)
Entry date and price: 23/07/2009 - 3.22
Effective entry price: 3.26
Exit date and price: 27/08/2009 - 3.51
Effective exit price: 3.48
Gain: 6.79 %

2. Sniace (Mercado Continuo)
Entry date and price: 23/07/2009 - 0.79
Effective entry price: 0.80
Exit date and price: 19/08/2009 - 0.93
Effective exit price: 0.91
Gain: 13.98 %

3. Realia (Mercado Continuo)
Entry date and price: 24/07/2009 - 1.58
Effective entry price: 1.60
Exit date and price: 13/08/2009 - 1.77
Effective exit price: 1.75
Gain: 9.12 %

4. Genzyme (Nasdaq)
Entry date and price: 27/07/2009 - 52.43$, 07/08/2009 - 47.96$
Effective entry price: 35.42 (euros)
Exit date and price: 25/08/2009 - 55.45$
Effective exit price: 38.45 (euros)
Gain: 8.56 %

5. Mecalux (Mercado Continuo)
Entry date and price: 14/08/2009 - 9.90
Effective entry price: 10.01
Exit date and price: 27/08/2009 - 10.45
Effective exit price: 10.34
Gain: 3.23 %

6. Nokia (Eurostoxx50)
Entry date and price: 20/08/2009 - 8.70
Effective entry price: 8.82
Exit date and price: 27/08/2009 - 9.51
Effective exit price: 9.39
Gain: 6.46 %

Very often I sold stocks too early.

Hi Charter Joe,

Yes I must reread my Gann as well.
It is ironic that I have a book with so much wisdom and yet I need to relearn through losing $$ the lessons he gives.
Hi Igor,

Yes I was wondering if you meant price drop.

So basically, you buy what you feel are solid companies whose stocks are at what you feel are temporary dips.

Don't forget the graph e.g. DOW for ten years, or S&P whatever you chose with your trendlines on it and then I can explain the earlier post.

Originally posted by day trading

What is deceptive is that it's very very difficult to make 1 point a day. (In this case I'm talking about 1 ES point.)

Ouch ain't that the truth!