Is 10% per month unrealistic? wouldn't that double your account every year?

Beginner Questions
1

I am now into my 4th month of practice account trading. I guess I am onto maybe my 10th practice account…
When I first discovered Forex, I thought I was going to be able to invest $50 and retire in a year :o:
Then I thought if I could just raise $1k I’d be able to stop work in a year and do this for a living:o:o
For a while I thought it was a pointless exercise, but that didn’t last long.

The idea of being able to make a living with no reliance on anyone else’s business decisions i.e a boss who doesn’t make good long term decisions for the business I am employed in. The idea of making a living income with no boss, no customer, no supplier, no colleagues, no employees, the idea of making a living by being emersed in an enterprise I could enjoy, in an enterprise where I used my wits was too strong and I started to try again.

My latest thoughts are this…

If I can increase my account by 10% per month I could have a future in Forex trading.

My idea is this.

Start with $2500
add 10% of $2500 per month for one year
10x$250=$2500 (10 months increasing by 10% and a $500 or 2 month buffer… thus doubling my account in the first year…

year 2
increase my $5000 by 10% per month, with the same 2 month allowance for losses
10x$500=$5000
leaving a balance of $10000

year 3
10x$1000=$10000
=$20000

year4
10x$2000=$20000
=$40000

year5
10x$4000=$40000
=$80000
etc
etc
So I basically have a 10 yr retirement plan:) I am 33

I have read in various places that professional traders add about 20% per year, and that this is the benchmark, others have said on this forum that they can double their accounts in a matter of months continuously

does anyone have any thoughts on this???

On my latest 5k practice account, I have added 12% in the last two weeks. I have finally got to grips with MM a little. I rarely risk more than 0.5% of my balance on each trade. I keep my usb margin over 95%, I let my profits run by moving my stop as the pair moves and taking what the market wishes to give me from day to day. I still have issue with wanting to be in the market all the time, but I am learning to handle that… I like to trade the news and I like to enter small trades at the start of the day to “test the direction”. I only risk 0.01% of my balance on these feeling out trades. I am learning all the time.

Are my profit porjections at all realistic???

2

Switching to a live account is a whole new game. You will see a change in your performance when you make the switch. Once you get your new trader impulses out of the way 10% a month is a reasonable goal. You may be smart to set your initial goals a bit lower to keep from getting discoraged and over trading.

3

There is a well known trick to figure out how long it takes to double your money called the Rule of 72 if the interest is compounding. So if you make 12% per year you double your money in 6 years. The rule can also be used for other periods. In your case the doubling period would a little over 7 months.

4

I had to laugh when I read the initial posting because it so closely mirrors my own situation, whatsmore I made a post in the Newbie section discussing the same exact issue (The dreaded question of rates of return and trading for a living), where I provide quotes and examples from different sources.

It seems all the big honchos always talk about 30% a year being the mark of a good trader. We all know there are people who’ve done much better, but the argument usually goes that 1) they don’t pull those returns consistently, and 2) they take on too much risk. Its a bit of a conundrum.

I personally have the same exact goal, I want to be able to make 10% a month on average, and compound every two months until my account size is large enough so I can live off my trading (I figure once it reaches $50,000 - that should be sufficient to start living off it). I’ve got a few thousand bucks ready to move with, but I’m still not profitable on my micro account, because I haven’t yet developed a solid strategy that I’m comfortable with - I’m a bit too arbitrary at the moment.

It seems to be the biggest fear is the long drawdown period, where you get so many losers in a row and you start to really wonder what is going on. That will mess up your compounding plans pretty seriously.

5

If you have a 1:1 risk reward ratio and you make 10% per month, does that mean you are risking 10% per month? If you follow the usual advice of risking no more than 2% per trade then does that mean you are only making 5 trades per month?

6

Sure its doable :).

10 % a month adhering to the less than 5% per trade rule means that you earn on average 15 Pips a day, or 75 pips a week. can you do that?

7

One of my forex mentors is an aggressive yet successful trader who truly has a story to tell. I am not trying to speak for him but his credo is “scared money don’t make no money”. I’m not telling you to go over 2% account risk per trade but he has worked his tail off being aggressive and has made a living in this forex industry–a living with a $ sign followed by several numbers combined with several commas before you even get to a decimal point. In any event, he tells me my goal should be to increase my account by 20% per day.

Also, there is a gentleman on youtube who is chronicling his attempt to make 1 million dollars in a year trading forex. I understand that I may not post a link, but if you search google for daytrademillionaire you will find it. He has calculated that an increase of 3.55% of your account per day for a year and starting with $100 will get him to his million bucks. I haven’t checked the math and, I don’t know if he has to buy groceries or keep the lights on either! :slight_smile:

Best of luck with it. Work hard and good trading!

8

10% a month is easily doable.

I look for 10% per week;) fell short this week though only 9.05%

Cheers

9

For new, non-institutional traders with small accounts, I would think the probabilities go something like this:

97% - Blow the account out in a matter of days
2% - Break even or close to it
1% - Make a small profit, maybe 1-2%/month
0.000001% - Make a consistant >10% monthly profit for years. I doubt there’s more than a handful of guys on the planet that have accomplished this.

10

Well thats the problem with making money, you have to pay tax on it… While of course i wish that weren’t so but I would rather make money and pay tax on it that make nothing and have less tax…

Incidentially, it is my belief that it takes 2-3years of live trading before you really start to make any money. so you 10 year plan should really be 13, with negative losses for year 1 maybe 2 and breakeven at 3… then onto the rest

Cheers

11

I realized that table is wrong haha. Got me before I could delete it :).

12

With $5,000 in a Roth IRA, if you managed to do month to month 10% consistency averaged over the year, and compounded only at the end of the year, in seven years you’d have about 1.2 million bucks. If you compounded once every six months, you’d end up with 3.6 million. Tax FREE. Assuming a 4% annual rate of inflation that’s 2.7 mill in today’s purchasing power.

Work your butt off for 7 years trading a parallel taxable account to make a living of of, then park the Roth earnings into inflation protected TIPS bonds while continuing to trade a taxable account. When you’re 59 1/2 years old, assuming the US gov’t won’t reneg on its Roth IRA promises (i.e. institutes some special social fairness tax for people who just got too rich putting their money to work in their IRAs), you can live off today’s equivalent of $100,000 a year in muni bond income assuming an after tax yield of 4%. Again, that’s assuming we don’t run into heavy socialism or tax/n’ spendism here, the systematic risk element.

13

Taxes have nowhere to go but up :). The local government here claims that they “have NO CHOICE but to raise taxes since so many people are unemployed and not paying taxes.”

14

His plan allows for 7 days trading per week… so its not going to work… LOL

I didnt check the math either, but its the old saying get rich slowly, little by little, in the end it all adds up.

cheers

15

Of course, and there’s the good old rule of double taxation. If you go abroad and trade remotely, either pay your taxes to uncle Sam or turn in your passport at a foreign consulate, pay a nasty exit tax, and don’t come back for at least two years. Pretty nasty when you think about it.

16

Talon D
No. Sometimes I make more than 10 trades per day. Especially if I am making very small trades at the start, or just before London open. If I risk less than 0.5% on each trade then thats just what I do… I can’t bear to watch a trade go beyond 25 or 30 pips… Sometimes I will close a trade if the spread doesn’t get covered inside 5 mins. But, taking today as an example… 5 mins after the NFP, I decided that the direction had been set and was going to continue… I opened 2 10k lots on my micro account, so I picked up 100 pips instead of 50, even though I came in late and exited early. I can routinely make between 10-50 pips a day on average. I’d say closer to 18-30 on average. Maybe a bit less, but on an average week, if I stick to my own rules I pick up around 120-150 pips. Now on a micro account, that’s 120-150$us per week, but if one were to stay in a job and compound those pips, even at 100 pips a week, that’s 5k/year. 2nd year at $2 per pip thats $10k etc etc
I’ll keep y’all posted as to if it works out or no

17

Let’s be conservative. Only risk 1% of the account per trade. For each $1,000 that would be $10. Keeping our stop loss tight at 10 pips gives us:

POSITION SIZE = RISK / STOP LOSS

POSITION SIZE = 10 / 10 = 1

We trade 1 mini lot. A 10 pip move in our favor yields a 1% gain. Do this once a day and you are making 5% per week.

18

That’s the point I was trying to get at and hoping someone would catch on. The point is, if you risk 1% or 2% and if you have a r:r ratio that is right then your reward is at least as much as what you risk. I think if you only make 30 40% or whatever it was in a year then either you aren’t trading very often or your lot size is very small compared to your account size. Not saying there’s anything wrong with that, just that it seems very conservative to make so little compared to what can be made with a reasonable amount of risk.

19

Glad I helped. Making 30 - 40% annually, would make you one of the better money managers year after year. Trading frequency should not be a concern. Trading when you shouldn’t or not trading when you should are the errors to avoid.

20

I often hear this 20-30% a year target figure as being the big golden trophy. Yet there’s evidence to the contrary that there are small retail guys who are making considerably more.

For a fact, Martin Schwartz (Market Wizards, Pit Bull) was able to average a 25% MONTHLY rate of return when he was a retail trader, and he had a six figure account (every three months he’d put his profits away and start afresh). He sort of bombed when he began trading other people’s money, and realized he’s only good trading retail. Schwartz was a daytrader, he went for quick moves, in and out.

There are other examples in “Millionaire Traders”, and then there are numerous people who claim to reach such high percentages on internet forums. Unfortunately, with internet forums you’re really down to what you choose to believe (although unless someone is trying to sell you something, there’s not much motive in fibbing).

The only possible explanations that I can see are:

  1. These high percentage traders are taking on very high risk and are teetering on the edge of a precipice (i.e. using Kelly Criterion or Optimal F money management instead of the 2% rule)
  2. These traders have a small size which doesn’t move the markets, get good quick fills on their orders.
  3. These traders are braver because their capital is smaller and the money is less “scared”, therefore they trade better with that money.
  4. Trading an intraday strategy is more higher probability than a longer term swing strategy, the latter being what big money managers rely on.
  5. They are retail traders and are more motivated to work hard than the guys who get paid a salary and work in an office 12 hours a day, trading what mostly goes into someone else’s pocket and they get a small piece of.
  6. They are 10% of the 10% of those who succeed in trading :slight_smile:

It would be interesting if we got some firsthand opinions of the consistent 5-10% a month traders here and let them share how they managed to do it, are they intraday, swing, how many trades a week, and what their maximum drawdown period is.