UKC

Can someone please explain the following....for some reason my brain isn't working....

If i invested £1000.00 with a predicted return of 150% what would be the total i would be left with?

so if it was a return of 20% that would be £1200.00
50% = £1500.00
100% = £2000.00
150% = £2500.00

I don't think that is correct, but i don't know why?

In reply to GoneFishing111:

I'm fairly sure that ROI is usually calculated as Total Return / Investement. So in this case 150% return would be £1000 * 150%, which equals £1500.00.

In reply to catherine4331:

Hi Stuart,

Ive just been chatting to a guy on an online trading platform about his returns that are 150% for 2016 and 100% so far for this year, you can see this in his stats.

I put the above example (albeit at 5k) to him and he reckons my example is correct?

Working on 5k at 150% and then at 100% that put the end sum at 30k.....surely not?

In reply to GoneFishing111:





Are there insufficient warning signs here?

In reply to Shani:

well yes, hence the question, but your comment isn't particularly helpful.

Im using a virtual account at the minute and i have 10k invested showing a profit of 1k, in the next column this is represented as 10%.

In reply to GoneFishing111:



Apologies Denzel. My comment was along the lines of "if a deal appears to be too good to be true....", and those returns are spectacular. I would proceed with extreme caution.

In reply to GoneFishing111:

Your initial maths is correct - a 150% return on £1,000 would indeed leave you with £2,500.

Starting with £5,000 first at 150% yields £12,500 then a further year at 100% gives £25,000.

I'm thinking that the incredulity expressed in your posts might be a reaction to the suggested returns, rather than to the maths, if you get my drift.

In reply to AdrianC:

Thanks Adrian, and i agree that it does indeed appear to good to be true, ill have to look into it more, i was more wondering if my maths was right, which it was....sort of.

Yes 25k not 30k doh.

In reply to GoneFishing111:

Just to clarify I'm not intending to give this guy my money, thats not how it works. It is a social trading platform where you 'copy' other people's trades.

I just found it an interesting concept especially when i saw this guys returns!

In reply to GoneFishing111:
Imagine ten thousand traders making random trades. Allow them to run for three years. You will end up with (roughly) a normal distribution of gains and losses. The average will probably be a small loss, but there will be plenty of gains too. Now pick the very best of that ten thousand - he will have an apparently faultless record, with big wins all round. And if you ask him about it he'll honestly think he's amazing. But he's still trading randomly, so if you copy him you'll do no better than random.

Now, actual traders on copyop and similar are not trading randomly, but frankly, there's a lot of traders out there who's strategies are no better than random. Out of many thousands with rubbish or meaningless strategies, one will get lucky. You should convince yourself that they are good, not lucky, before you try to follow them. Or you'll get bitten by regression to the mean.

And all of that assumes that this guy is actually above board - it's also worth reading about and understanding "pump and dump" scams. Buying into one of those will probably be even worse than following a trader who's just lucky.

In reply to Jack B:

Im fully aware of "pump and dump" this is forex/paired currencies.

The site in question is eToro and from what I've found it is legit, similar to copyop. I get what your saying and your probably right although I'm not sure about the randomness, i can't see someone being consistently lucky for 4+ years.

Anyway thanks for the input, ill stick to virtual for now!

In reply to GoneFishing111:
If 10% of traders are "lucky" in any given year (assuming that trading success occurs completely by chance, and that results will not correlate across years), 1 in 10.000 will be "lucky". The actual fraction of lucky ones will be slightly higher for various reasons (a strategy someone stumbled across may work in consecutive years, idiots lose money on idiotic deals, lowering the average the "lucky" ones need to beat, etc.), so in a sufficiently large social trading platform you will statistically find someone who will luck out over a few years.

None of this needs any true insight into the market. Of course, someone may have a good idea that has some effect, but overall managed fonds barely do better than index fonds that simply mirror a given market, suggesting that trading skills are overrated and luck is essential.

The only reliable way to win this game is to cheat (or at least obtain some unique while legal advantage over the competition), which is why large professional traders even build direct physical connections to the actual trading servers. Even shaving only a few ms off the transmission times will give them a huge advantage.

CB

edit: the 1 in 10,000 ratio refers to the four years in the post I replied to

In reply to GoneFishing111:

depends on the definition or description of "predicted return" - i.e. % of what?
I'm very skeptical of quoted %s unless you know for certain exactly what is taken in proportion to what.

say
"predicted return 100%" - 100% of your investment is returned; net gain = 0 ?.............
"predicted return 150%" - 150% of your investment is returned; net gain = +50% ?.............
(see comment from Stuart133)

In reply to AdrianC:




The OP's original confusion I think arises from the treatment of the initial investment - "return" is ambiguous and may not mean the same as "yield".
Strictly the yield is only the surplus above the initial investment - so a 10% yield on £1000 is £100. Some people would call that a 10% return (including me); others would say the total sum returned is 110% of the original. The yield is 10% though, and that's what matters.

In reply to Deadeye:

The OP should really have been titled "English problem", the maths looks very straightforward!

In reply to Andy Hardy:

Thats rather apt Andy, as your comment makes zero sense.

In reply to GoneFishing111:

The title of the thread is Maths Problem. The maths I've seen so far consists of multiplication.

The OP's problem is "what is meant by a return of 'x' percent?"

HTH

In reply to Andy Hardy:


Yes, I always like a good maths thread and was disappointed to find this wasn't one!

In reply to Robert Durran:

Yep this was the kind of maths you learnt in primary school. I too was disappointed it wasn't a fiendishly difficult puzzle to solve,

In reply to Lion Bakes:


it was a perfectly good question (to which I wasn't sure of the answer). But it was just a definition, not maths.

In reply to Robert Durran:

You really should (I humbly suggest) have a look at Project Euler https://projecteuler.net . There are 100s of maths problems there. Most of them are hard. Normally you can't solve any of them without doing some coding, but, equally, you can't normally solve them just by being a coding whizz. You need some understanding of the maths if you don't want your code to take centuries to get the answer.

All the answers can be found on the internet, but there is a strong culture of not cheating. The forums to which you get access once you have solved a problem are a goldmine of ideas and insights, to which you are very receptive at the point of entry.

I've solved 188 of them in just over the last two years. Over 400 to go!

In reply to mbh:


Thanks, yes, I have dabbled but kind of avoid it like I would living in a fine wine cellar - I could easily turn into a complete alcoholic!

In reply to mbh:

Great link. Thanks for that!