So far, so good.
Originally Posted by Maira
Here's where you start to get into trouble.
Originally Posted by Maira
First of all, a 30-pip SL and a 2:1 reward/risk ratio yields a TP of 60 pips, not 70 pips.
But, the bigger problem is this. In order to make a 30-pip loss equal to a 2% dollar loss, your position size must be $6,667, which does not comply with your "no leverage" requirement. Specifically, you would have to use leverage of 6.67:1 in order to make each pip (of gain or loss) equal to $0.6666.
Let's assume that you abandon the "no leverage" stipulation, and choose instead to trade a position size of $6,667. Let's see what 50 trades would produce, using the corrected numbers, and 6.67:1 leverage.
50 trades (on average) will yield 30 winners with 60 pips of profit per trade, and 20 losers with 30 pips of loss per trade.
Overall, on average, those 50 trades will yield a net gain of 1,200 pips.
1,200 pips x $0.6667 per pip = $800 net profit.
Obviously, you will have to increase the number of trades made (by 25%) to 62.5 trades, thereby increasing your pip total to 1,500 pips gained, in order to increase your net profit (also by 25%) to $1,000 --- which is your goal.
I'll leave it to you to check the math.
Returning to your original post, and your original stipulation that you would use no leverage, let's crunch the numbers. We're about to demonstrate that Sound of Light is correct: Without leverage, you need to earn 10,000 pips of net gain in order to double your account balance. So, here goes ---
1. "No leverage used" means that your position size cannot be larger than your account balance.
Let's say that your position size = your initial account balance = $1,000. And let's say that you do not increase your position size as your account balance grows --- that is, you do not use compounding.
Let's say that you are trading EUR/USD, or some other pair of the form XXX/USD. This means that one pip is worth $0.10 per pip for a $1,000 position.
2. If you want to use the entire 2% risk ($20 risk per trade) stated in your question, then your stop-loss must be 200 pips. If your stop-loss is 200 pips and your R:R is 2:1, then your take-profit (TP) must be 400 pips.
In other words, to comply with the conditions laid out in your original post, you must trade rather large price moves --- what we call Long-Term-Swing trades. Let's assume that you are capable of doing that.
3. On average, out of every 10 trades, you will have 6 winners, with a profit of 400 pips each; and you will have 4 losers, with a loss of 200 pips each.
6 winners x 400 pips - 4 losers x 200 pips = 1,600 pips net gain per 10 trades, on average
= 160 pips net gain per trade = $16 net profit per trade.
4. In order to earn $1,000 net profit, you would need to place 1,000 ÷ 16 = 62.5 trades.
There's that number again --- 62.5 trades. It's like the Twilight Zone, eh?
62.5 trades (on average) would yield 62.5 x 160 = 10,000 pips net gain = $1,000 net profit.
5. If you were to use a 30-pip stop-loss, and a 60-pip take-profit, and no leverage, then you would be taking way less than 2% risk per trade. In this case, doubling your account balance would require many more trades (than the 62.5 trades calculated above), but you would still have to earn 10,000 pips in net gain in order to double your account.