You see many threads on here talking about 10-20% being a good return on your account per year.
If we are risking 2% per trade and getting it right 80% of the time, shouldn’t you be getting a lot more than a 20% return on your account?
Assume 5-10 trades per week.
Personally, I am comfortable with a 5% risk but that’s me.
That is a very high target in my humble opinion.
Professional fund manager looking at 5% return p.a.
If we are risking 2% per trade and getting it right 80% of the time, shouldn’t you be getting a lot more than a 20% return on your account?
You are assuming a 4:1 ratio in your favour eg. 4 winners and 1 loser for every 5 trades [B]consistenly[/B].
What happens if you are having a losing streak?
The drawdown depends on many factors eg. Risk/Reward, size of account ect. ect. and you haven’t given enough information in order to do the maths.
Personally, I am comfortable with a 5% risk but that’s me.
If you are experiencing a 1:4 ratio against you eg. 4 losers and 1 winner for every 5 trades your would have burned +/- 20% of your capital depending on your 1 winner.
Personally, that’s why I am comfortable with a 0.75% risk but that’s me.
You fail to include in here the return side of things.
Also, I think the 10%-20% annual return rate is probably something used by less frequent traders. Generally speaking, you should expect higher returns for higher market involvement - meaning your profits should probably relate in some way to the amount of time you put into trading.
I agree with Rhodytrader. 10-20% sounds like a return rate for long-term investors whose primary job isn’t forex trading.
I make way more than 20% per year. In fact, I’ve had two months in the last year where I made more than 20% in a month. You should (in my opinion) at least double your money in a year if you’re a professional forex trader trading your own money.
The primary task is to get the entries fine tuned until they are right most of the time.
The profits in forex can be greater than super if the trades are well done.
My experience in trading has taught me that disciplined entries can be the greatest profit maker… repetition of what works… and when I have that going for me… great fun… when I have chosen to be less disciplined there has been severe losses…
Blaiserboy put it right.
You can get 50% per year on average consistently if you’re skilled enough. 50% is a very reasonable target for any accomplished trader.
Overtrading is not the answer, the answer is to only select the BEST TRADES, no matter how long one needs to stay on the sidelines, be it one hour or one week. Most traders that become profitable for the long term trade less (unless he’s a scalper, but then again most traders get tired of the emotional demands of scalping and start trading less).
The reason money managers don’t perform as well is because there are too many factors making their lives more difficult. The biggest among them are too much money (making it impossible to get in and out of the market at a fast speed when needed), and pressure to perform (like pressure to at least break even after say 2 months of losses in a row; losses in a row are bad bad bad for attracting new investors to your fund or keeping old ones), the need to decentralize investment decisions because of lack of time to do everything, etc.
Individual investors with relatively small funds can make big returns over time. But it takes a lot of hard work and practice to get at that level.
In my experience the answer lies in a trading system [B]YOU[/B] have developed and [B]YOU[/B] [U]know[/U] is profitable.
Because if [B]YOU[/B] know it is profitable than [B]YOU[/B] will have the discipline and confidence to execute the generated signals according to [B]YOUR[/B] trading system rules.
The trouble is that most people don’t have the dedication, patience and discipline to develop their [B]OWN[/B] trading system. They rather look for the quick fix.
I would like to recommend the book “Way of the Turtle” written by Curtis Faith who was one of the turtles.
The turtles followed their [B]OWN[/B] trading system with 100% discipline based on 3 Ma’s, ADX, ATR and naked price action.
The turtles are legends because of the profits they archieved through their approach and discipline.
I agree with the sentiment, but ironically, the turtles didn’t develop their own system - it was Richard Dennis who gave them the system that eventually returned profits. Those who succeeded simply followed the rules. Those that failed injected their own spin on the system and fell flat.
Agreed. Richard Dennis taught the turtles the system and he developed it in the first place.
The point I was trying to make was in regard to confidence and discipline in executing the system.
Would need to be a viciously bad losing streak to wipe out your account.
If you are experiencing a 1:4 ratio against you eg. 4 losers and 1 winner for every 5 trades your would have burned +/- 20% of your capital depending on your 1 winner.
Personally, that’s why I am comfortable with a 0.75% risk but that’s me.
Again, if you have an overall 80:20 strategy, you wouldn’t be getting that many losers. If you apply a worst case losing streak to the calculation then that should give you a risk percentage to apply shouldn’t it?
Most good traders on here don’t have losing streaks longer than say…what…6.
Again, you’ve failed to include the return side. 80/20 means nothing if we don’t know the size of the winners and losers. That sounds like a good win rate, but not so much if you’re average loser is 10x the size of your average winner. You may think that’s an extreme example, but the fact of the matter is that as you increase win % you almost invariably reduce the winner/loser ratio. There are strategies out there that win 95%+ of the time, but the losers could wipe out an account.
Good case in point is the scalping EA’s you see out there. They rack up a lot of small profits, then bam :eek:, your account blows up due to a large loss.
Assume a minimum of 1:1