Forex % possible returns for noobs/experts etc

Hi, I’ve been thinking of putting some $ in FOREX, I’m a stock trader and think I’m pretty good at it, but want to try forex out. I’d like to know, however, what the real, legitiimate possible returns are at FOREX to get a better idea of the market potential. So I’ll propose some different levels of trading:

  1. Noob but slightly profitable, not a complete idiot and how long would it take to learn?

  2. Total expert - but willing to risk a lot of capital for high returns

  3. Total expert - more cautious, has a large bankroll relative to trades

  4. Average “good trader” who has a good sized roll and spends a lot of time trading, swing-trading day trading but not intraday trading

  5. Day trader who’s extremely devoted to it: spends 8+ hours a day trading (kind of like what I like to do)?

Of course, you don’t have to answer all the possilble returns here, but any advice on it would be helpful. Thanks for reading!!!

I’ll try to represent stock market trading to give an example of how I think replies could be constructive:

  1. Daytrading --> a noob will most likely lose money or make only a marginal amount annually. Stocks can swing wildly and from my own experience, they’d be better off doing long term trading at first, like weekly charts.

  2. Without using options, a true expert who’s willing to risk a lot can make in excess of 100% a year. Note that this is referring to true experts, probably the top 98%+ of individual traders.

  3. The same thing, only I feel like these guys perform more like a hedge fund. They have tight risk management controls like hedge funds, and thus they make a lesser amount but still beat the market substantially on average, say 40% a year or so.

  4. With stocks, this person is limited to their returns just because a. they aren’t experts and b. they have good risk management. From experience, these guys can make 50%+ a year.

  5. In stocks, they’re essentially the same as number (4) because they’re limited to the market hours of opening. (One of the reasons I might switch to forex is because I’d like to spend more time trading, so the 24hrs/day would be real great).

Note how these numbers I make are obviously subjective and based on my own experience, but I think ballpark estimates could be useful to analyze realistic goals for FOREX and stocks alike.

Possibillities are no more than mirrors and smoke. Every trader has a different success /failure rate, so expect many B/S replies. Some talk of % gain others pips made. It is not possible to give diffinative answers.

I am a noob, in that I’m not yet consistently profitable. However I’ve spent about a year mostly reading and researching trading, and I’ve been looking for the same answer you are.

From what my searches have told me, it is a frustrating thing, because rates of return are really not standard. Its sort of like any other business in a way. Starting up a restaurant can mean owning some very basic mom and pop joint in the boonies, or getting a nice place in Manhattan, or buying up a whole chain of franchises within a state. Each has different profit expectations, and in each case you can go broke. Some people push themselves to grow and get big, others just maintain the business for “lifestyle”. Some do great for a few years then something happens and they’re out of business.

The standard figure you hear is that a good trader should beat the market rate of return and strive to do double that, which is 20%, with a consistent 30% being the ultimate goal. I think most successful position and swing traders who don’t take on too much risk (stick to 1-2% risk per trade) basically net 20-25% on average. They’ll put on maybe one trade a week. This is really not much (you certainly can’t live off of that unless you have an account way into the six figures, preferably seven), but it fits for people who trade part time and have another job that gives them their main bread. Alexander Elder seems to fit into this category, he was a psychologist who began trading on the side, back in the old telephone your broker days.

After that, you have people who either take on bigger risks, and are comfortable with that, or people who spend a lot of time trading which enables them to take advantage of more opportunities and learn trading better. In my view, and I may be wrong, but it seems the real dedicated short term traders are the ones who reap the biggest rewards. Here you often hear cases of people doing crazy returns, like 50%, 100%, and even greater.

Martin Schwartz, who was profiled in “Market Wizards”, had an audited average return of 25% a month. Schwartz was a day trader, was in and out before the market close every day. He’d compound for 3 months, then take his profits, park them elsewhere, and start from scratch. He was great trading for himself, but he bombed when he started a hedge fund.

To bring it into perspective, let’s say you trade 1:1 risk reward setups all the time, and you’re 60% successful. You make 50 trades a year - 30 good and 20 bad. If you risk 2% per trade, that’s a 20% annual rate of return right there. If you risk 4% that’s 40% rate of return. On the other end, if instead of increasing your risk you simply traded better and had an average 70% success rate, your rate of return increases to 40% - with just 2% risk. Increase the risk to 4%, and you now have an 80% annual return.

Increase the frequency of your trading to 100 trades a year (2 trades a week), and assuming you maintain the same rate of success (that is, your edge transfers well to shorter timeframes), you double your rate of return.

So that in the end basically is what it boils down to:

  1. What is your edge, how many setups can you capture with that edge, and how consistent is that edge.

  2. How much risk are you taking, and how much risk can you tolerate mentally.

…and of course, luck always helps :slight_smile:

I would imagine that if this question was asked in a stock trading forum, the answers would be similar.

There is no standard as there is no standard way to trade. There are fundamental ideas behind money management and risk management, but as a trader evolves those ideas evolve as well.

This month I’m nearing a 5% return. My sole aspiration is to stay in the positive beat out my 401k’s annual return rate which is currently sitting at -1.3%.

Yea, I got the same answers way back when I was trading stocks…I think you’re making hte question too complicated. The fact of the matter is that daytraders in stocks can get a consistent 100%+ annual return, consistently.
So while your answer may seem legitimate, I don’t think it really is. People can track their records and a pattern will develop, and while most traders lose money or breakeven, there are a lot out there that get phenomenal returns.

Maybe this is just my experience in stocks and its not true in forex :(, but I know that 100% is attainable at stocks, so maybe I’m better off going back to them? I just have read that FOREX trends really well and has many advantages over stocks (and some disadvantages like candle sticks are less useful because there aren’t gaps, no way to measure volume etc).

Any thoughts?

Do you swing trade, day-trade, intra-day trade?

I’ll generally hold positions for days at a time, weeks if I need to.

don’t you feel devastated and frustrated when after holding the position for days, your stop gets hit? Then you have to enter another trade and wait for days again.

You trade which chart timeframe?

In theory holding a position in Demo works very well but in real life your brain will eplode, unless you passed level 5 in trading forex. If you trade mini lots, then I recommend you try 10 std lots. The only way to to this is you trade with a partner, so you can get rid of psy. Trust me I learned this from a pro trader.

The main problem with this question is that on these sights you will not find the traders you would like to ask . Those that are making it. Some very big. But if your aim is less than 20% a week. I would invest and resell used cars.

The goal of 20% a week is based on a 40 pip per day gain risking $1 dollar per $1000 equity. That is a very realistic goal actually bottom of the ladder stuff.

I do live off my trading and my equity is not as big as you would think. But I can consistenlly acheive gains in that range and I am no way a good trader even .

If you have been a successful eguities trader and have already had to tame yoru emotions you are ahead of the game. It is that one thing that has held me back the most.

I believe thus to be very poor advice. Perhaps Ken you defy the norm, but you are essentially saying you can turn $1000 into over 13 million dollars on one years time.

Certainly that is a fantastic feat that is next to impossible to achieve for the new trader.

While the math fits, that is only a fraction of the actual battle. To suggest anyone attempt to achieve 20% on a consistent basis is nothing short than a recipe for disaster.

Good Luck to you all … Ken Lee

I’ve summed rate of return down to the following variables:

  1. The consistency of your edge, its robustness and your faith in it (which feeds your discipline).
  2. The amount of risk you take, and the amount of drawdown you can psychologically tolerate without having it affect your discipline in a negative manner.
  3. The amount of opportunities you can realistically take advantage of where your edge would apply.
  4. Your trading discipline, and how much it wavers.

Of all the things we can control, it seems these four components are what make up your rate of return. After that it’s just straight math:

(Percent gain per win X number of winning trades) - (Percent risk per loss X number of failed trades) = Percent return on the account.

This excludes any compounding effect.

10,000,000% Daily, with 1 -2 seconds of work a week. At least that’s what others are making. I can’t seem to match it though!

Professional money managers with strict risk guidelines are fortunate to make 18-20% annually. Most make 10-15% annually over the life of their fund. There will be negative years. Anyone here doing better than that and will share results?

  1. In stocks, I had a method to avoid getting emotional that included in it some wild drawdowns, but up overall. Basically, rather than a standard bankroll, i’ll put a smaller amount in and do my best with it. If i go bust, it’s not psychologically devestating because it changes my mindset: I realize i could lose this smaller amount and am not too worried about losing a couple of these “micro-rolls”. Seems to get rid of the emotional part of trading for me.

First off, your sarcasm is really unoriginal and just skews everything. Noone is claiming it’s easy; the reason I put up different scenarios was to get realistic answers for different traders of different levels and risk. So be more clever before you try to bomb a thread next time please, I think this thread could clear a lot of things up if people would seriously participate.

Oh, and by the way, professional money managers are holding a lot more money so it makes sense to be cautious with it and get 18-20%…you should be aware of this IMO. Got to say your post was pretty poor and didnt have much insight in it.

edit: oh and btw, I spend a lot more than a few minutes every day trading, it’s more like 8 hours+

Original questions deserve original answers. Wanna BOMB? Here you go. Realistic returns for 95% of traders entering the market is -100%. Even if you religiously read this beloved babypips forum, including this rehashed unoriginal question.

Once again, you’re showing a lack of intelligence: let’s think about this for a second.

  1. I never claimed to be making an original thread, and I have no need to be original as I’m simply seeking answers to a question I have.

  2. I responded to your post because you were being sarcastic, but sarcasm is only good when it’s got a little more juice to it than the way you posted it.

  3. Based on 1 and 2, you:
    a. assumed I was trying to be original in making this thread, whereas it should be clear I’m just looking for some general answers
    b. felt the need to respond because of your mis-perceptions stated above

basically just don’t post in this thread please… it’s not helpful in any way except for entertainment purposes.

edit: Oh and why do “unoriginal threads deserve unoriginal posts?”. Again, before you say or write something you should think about it first. There are many unoriginal threads that are being repeated from the past, but the people reading the posts could benefit if someone decided to try to answer the question, as opposed to seeing a (badly played) sarcastic comment in the thread that accomplishes nothing…lol

Mine may show in an inability to genuinely express sarcasm, while yours shows in an inability to navigate a search bar in this and many other forums for the answer to your question. Instead taking the easy way out and posting first instead of searching.

So, referring to my last post, most lose everything because they are looking for an easy way out. Since we are attacking each other, I’ll say you seem to be in that group, simply based on your question and your replies so far.

Look, just leave the thread I’ve gotten some decent input from others on the original question, and hope to get more. When I was trading stocks I ran across a lot of people like you, and found that you’re not constructive at all. The fact is I’m good at trading stocks, but I know forex is a different beast and I’m trying to gauge possibilities before I make a switch.

Please just leave the thread, your posts are useless and it’s important to get some responses here before I make a decision. That’s why I attacked you (also because your post was just dumb…) but people like you ruin threads because you like to shoot vague dogma into posts. So please move on because you’re not offering anything worth reading in this thread…go look at your post and see how helpful it could be to anyone reading it.