What is a reasonable rate of return? It is determined by myriad factors. These are internal factors and external factors. Internal factors depend upon the individual. It is within the individual and the decision is taken by him. Such as his risk acceptance level, the amount of capital he is willing to invest for stock trading, his trading plan, etc. The external factors are the outside factors which are not under the control of the individual. They are the market trends, expectations of the market, news reports, the state of the economy, political conditions, etc.

Bench Mark Rates

We need some bench mark rate of return to arrive at a reasonable rate of return from the stock market. Bank deposits are safe assets with very little or negligible risk. We can take the rate of returns on bank deposits as our bench mark rate.

Risk acceptance levels

Next comes the risk level. You have to decided whether you are satisfied with a return which is 50% more than the bank deposit rate or are looking for 100% more than it. If the bank rate is say 8% pa then if you are a low risk investor you may look for a return of 12% pa as reasonable. If you are a high risk investor then your reasonable return may be even more than 24% pa. Risk and returns go together. If the risks are high then the returns are also high and if the risks are low the returns are also low. If you are a high risk investor then the capital required will also be high. These are very personal decisions which you will have to take.

Conclusion

The initial steps that a trader has to complete before starting trading is