rjm77me's Blog : An alternate way to calculate your true return

If you had your money all invested in one pick at a time, your calculations would make sense, otherwise I say trust the computer. It is too hard to calculate your true return manually.

Maybe im misunderstanding you, but ur returns of 600% dont take into account that in a true portfolio sitution you have to devote limited capital to each of your picks. I for one dont carry 50 stocks at a given time in my portfolio, however i do keep them on P&P, thus my 19% isnt really accurate at all.

i rarely carry more than 20 stocks on this web site on any given day - the number used to be 5 to 10 - now i have increased to about 20

RJM - I mentioned this several times with other participates about picking over 10 stocks at any given time. I do not believe for this site to be as realistic as possible that a person should have more then 10 open positions. I am curious to know why you changed your position of 5-10 to covering 20-30 positions. Is it merely for points and score, I hope not. I would much rather see 10 stocks and have you supply reasoning and supporting evidence for your stock selection. I currently have 12 positions and am working it back down to 10 stocks as a ceiling. Happy Trading.

sporthunter,
Say you start with $50,000 capital and make $30,000 profit. You have two choices - one put more money on say 10 stocks or say you invest $5000 on each stock - then you can buy 16 stocks. This does help the way this site works. The numbers have been reasonably OK - no big up or down swings - some slow and steady progress.
For me I am not trying to prove to any one. I am just gaining confidence with my style of trading. This site does not permit as much control as I can have with real time trading where limit orders can help the cause. Like I sold INSU in personal account with $22.43 more or less the high for the day for Friday. i did buy back 50 cents cheaper - meaning I am still in trade for few more days. Pocketed extra $100 or $96 after commision with out loss of stock in portfolio. I did sell a bunch of stuff on Friday's mad rush on upside and did buy back some in the day - like selling some options at $2.47 and buy back at $2.23. which is 10% extra money in bank account - what happens in next three days is just guess work. My stock picks normally are decent (my opionion) and one can hold for longer time frame. I pick on technical and fundamentals combined togather. There will be few bloopers which are beyond control. Like explosion on the rig or CEO getting fired or bad earning report missing or beat by a penny makes a huge difference in today's market, Some you win big and some you loose big. if you win 8 and loose two = do your own math.
Some one commented on my IPI trade which i closed on this web site on thursday and closed in my personal account on Friday. On this site I substituted IPI with AXP - which is less volatile and was oversold on thursday. Both went up by same amount on Friday.
Thses are the only comments I am adding as an exception for next 7 days and want to enjoy my free family time.
My trading style is not for every one - I can be profitable with lesser risk at a given time due to market conditions. Normally i used to hold stock for 15 to 20 days. The market is pure yo- yo these days - five up day - 7 down days and what ever in between. I have entered new trades almost every day and closed some every day.

OK guys.

One cannot invest more than 100% of his capital at this site. When we add picks without selling others, its not like we are investing more.

What it is like is selling some of everything which is already in our P&P portfolio and then buying those tickers with the proceeds. We must have a minimum of 10 tickers to be invested 100% ( I think). Adding more than 10 just dilutes each stocks contribution to the portfolio's gain ... just like in real life.

There is a difference between pick scores and gains and it is the gains which go into the calculation of portfolio score (total gain % and annualized %). Anyway, rjm77me, the proposed method of calculating true gain will not work.

But lets say it were representative of performance over the average 1 month period and you are fully invested. Let's also say that the typical gain is 1.78*.8 = 1.424%. If this compounds monthly the:

annualized gain = ((1.01424^12) -1)*100
= (1.1849 -1) * 100
= .1849 * 100 = 18.49%

But your pick score isn't probably a good indicator of your gains. Since you have primarily been trading the bull market your gains are probably higher than the average pick score. Others who were here during the bear market may have positive pick points on some trades which lost significantly. Your average pick score is probably at least a couple percentage points above your average pick score. Let's say 3.78% (but if you can calculate it from your historical data and calculate the average holding period we can get a better idea) and lets say the average holding period is 1 month. Here is annualized gain:

annualized gain = ((1.03.78^12) -1)*100
= (1.561 -1) * 100
= .561 * 100 = 56.1%

If you have achieved that since January of 2009, that is annualized gains of 56.1 % (total since January 2009 would be about 110%) IN REAL LIFE, then this is a pretty good way to estimate your fully allocated returns going back to January 2009 from your pick score. How did I do with this calcuation?

TB and sporthunter

You are right on money. My money turn over was 50 times in a year - average holding period 1 week. 50 times average gain per trade is actual return. I like to concentrate on actual gain or loss in real terms and not beating the market numbers.
i am not sure if the same could have been achieved by buy and hold during last 8 months. One has to adjust trading style to market conditions.
I feel the total return should be closer to 55% annual based on efficient use of same capital every 5 days. I normally stayed in a trade for 5 days. My net dollar gain on 500 trades was $44941 and based on investment $5000 on each trade - Max capital used on any given day was no more than $80,000(accum of gains in first 6 months) - no more than 16 trades held on given day (Average)
So a gain of $44,941 on initial capital of $50,000 from sept 2009 to Aug 2010 - 12 months. Allow for any data error - it is still plus $35,000 on initial investment of say $50,000.
The trades could have been duplicated - some times the stock went down after initial purchase and some times went up next day - wash as a duplication of trade system. In real world one can buy at open next day - more or less replicating the trades entered.
All this based on 80% accuracy - I never dropped below 80% accuracy level in last 11 months. I am happy with my learning curve.