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I've been an investor for about 12 years now. My annual return, November 2008 until today, is 25.77% on my stock portfolio, which is heavy on AAPL, BRK.B and recently TSLA. Mostly buy and hold, hardly any trades.

I'm starting to expand my financial endeavors into day trading, specifically scalping futures on equity indexes. With about 50 trades or so, I made over 25% in less than a month now, that would be 14x p.a. OK it might beginner's luck, I don't expect these kinds of returns to persist.

I did all these trades manually, and am transitioning to automated trading using IBKR and Pyhton.

I'm reading what experts say about expected returns in day trading. Andreas Clenow prouds himself with a track record of 20% in trading futures (trend following) over the past few decades. This all seems really low to me - why do people go through all the hassle of trading if buy and hold gives equal or better returns?

I would love to get some real life examples about what kind of returns I can expect with trading futures on the Nasdaq100 or S&P500?

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Renaissance Technologies averaged 66% a year since 1998. The worst funds will lose all their capital and then some.

A small time investor like you can expect to make not more than than buy and hold before fees. I advise you to read up on the efficient-market hypothesis, when you have digested that and you've come to the conclusion that it doesn't hold for you because you have a special edge, the next step could be a book about active portfolio management.

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Note that your buy and hold returns of 25% are extremely atypical, partly because you started at a very good time (right in the middle of the credit crisis so you missed the majority of the 2008 drawdown, and just before the biggest bull market for US stocks in history). You also appear to have got lucky with stock selection, with overweights in Apple and Tesla which both did very well over this period.

You should not expect your buy and hold returns to be this good in the future - personally I think upper single digits is a reasonable expectation for buy and hold US stocks.

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    $\begingroup$ Not to mention that you traded S&P futures (presumably mostly from the long side) during the sharp snapback (from 2250 on 23 March to 2968 on May 20) following the Covid-19 break. Imagine your performance if you had traded similarly between 19 Feb (3375) and the aforementioned 23 March (2250!). You have been almost unbelievably lucky. $\endgroup$
    – nbbo2
    May 25, 2020 at 12:52
  • $\begingroup$ Thank you, Chris, very helpful. Though I personally wouldn't choose the language "got lucky" because my stock picks were made out of pure skill and talent, not luck, lol. $\endgroup$
    – AllBlooming
    May 25, 2020 at 21:36
  • $\begingroup$ Thanks noob2. I acknowledge that. Though on some days, I mostly entered short positions because I felt the market was mostly trending downwards on that specific day. And I help most of my positions for only a few minutes, only very few for a few hours. So I'm hoping to be able to sustain similar returns, but time will tell... :-) At the moment, I'm in the process of baking my manual strategy into some Python code since I don't want to spend hours in front of a trading terminal each day. $\endgroup$
    – AllBlooming
    May 25, 2020 at 21:42
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What hasn't been mentioned so far is the investment size which plays a big factor here as well. A multi year buy & hold can accommodate a very large position, whereas your scalping was probably done with very few contracts and could not be expanded to similar position size.

TLDR: 20% on a small account is not the same as 20% on a large account.

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  • $\begingroup$ Thanks! I absolutely agree. I don't manage other people's money (and don't intend to ever do so), I just trade for fun and to make some returns on my own money. Over the next few years, it's probably going to be just a few hundred thousand dollars, and I absolutely confirm that it's way easier to get exceptional returns on these amount (or even a few million), than it is to make good returns on several billion dollars. $\endgroup$
    – AllBlooming
    May 25, 2020 at 21:31

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