Profit Question

Ok guys,

I have had a demo account for about a week now, and by Wednesday I had moved more toward sticking to a strategy than going on gut feeling and guessing (gambling).
It went quite well. I traded in mainly 1 Lot sizes, but ventured into 2 lots (on a $5000 demo, is this too much to trade ?).

In two days my demo balance reached $6700.
Now, Ive read somewhere that the best trader makes roughly 32% per annum. Is this right, or am I heading for another lesson pretty soon ? I can post my statement if that helps you see what Ive done. The bigger losses on it happened when I didnt keep to the strategy, other wise I reckon my account could have grown past $8000 easy.
My major mistake was making a bad trade and waiting to see if it would come back round again to break even, then cutting it at a $2-300 loss :-). I dont mind just now as Im learning and its play money.

I have another question though. Im not asking for private details, but how many people just pay the bills with this, how many make a living and how many make an absolute huge profit ?

I am hoping to just make a living off it eventually, maybe travel a bit.


If you are talking about mini lots, you may want to cut it in half to 0.5 lots. I have found that putting too much into a single trade does not allow enough wiggle room if it temporarily goes against you. Also using smaller lot sizes allows you to use a multiple trade strategy which I like very much. If it is a standard lot, you are in way to deep for that size account.

so 1 LOT is too much to be trading on a $5000 account.

0.5 LOT would be better ?

Its just that I was going by the rule of not risking more than 2% of my capital on a trade. When I trade 1 LOT, then 1 pip = $10. So I would stop the loss at between $40 and $100 at the most. Then I would try again.

Is this wrong ?



that’s only 4 to 10 pips for your stop loss, doesn’t give you much room for error.

You should first decide where your stop should be based on where you think price is going. Then size your trade accordingly.

I wouldn’t trade anything bigger than 1 mini lot per 1000 in the account. And even that may be kind of high.

I agree completely

If your strat uses a 4 pip thats probably to tight, but since this is demo I say keep at it you will see the effect of spread. As for lot size 2% per trade is the “acceptable amount” it looks like you figured it out correctly.

If you have a really tight stop my guess is you are making allot of trades, if this were real money I suggest you risk .5% to 1% per trade it will allow you to have a losing streak with out decreasing your capital to fast. When you capital goes [B]up[/B] or [B]down[/B] to fast people do stupid things;).

position size = risk / stop loss.

If you have a $5,000 account and risk 2% per trade with a 10 pip stop loss then

risk = 5000 * 0.02 = $100

position size = 100 / 10 = 10 mini lots.

Changing your stop loss, will change your position size.

That’s the reason why noobs and inexperienced traders burn big holes in their account balance…they look @S/L placement [U]first[/U].

If my trading strat has a 3R expectancy for every trade I place I look for trade setups that match my 3R expectancy.

Once I have identified such a setup I look @S/L placement in line with my 3R expectancy.

So I look @S/L placement [U]second[/U] in accordance with my money management rules, R/R & 3R expectancy.

Therefore for every $ at risk = S/L…I have the potential through my identified trade setup to profit $3=3R.

What are your money management rules?

  1. max. Risk = .75% account balance
  2. min. Reward = 1.5R

People who even think about trading R/R = 1:1 are doomed.

No person in his right mind who understands money [management] would put a $ at risk to earn a $.

The sum of money put @risk needs to have the potential to return a sum greater than the original sum of money put @risk.

Any trader who trades to the contrary is destined to fail.

Cas I don’t quite understand what you are saying? what is 3R?
shouldn’t you determine your stop loss based on price action?

If I’ve got it backwards, help us noobs understand.

3R = 3x Reward potential for every $ Risk of Capital.

shouldn’t you determine your stop loss based on price action?

What you should and shouldn’t do is entirely up to you. What works for me might be of no use for you. And vice versa.

If I don’t identify a trade set up in PA with 3R potential I won’t even think about taking the trade. Because it doesn’t comply with my rules in a particular strat that requires a 3R.

I am looking at potential Reward first. Then I look where I might place my S/L based on PA.

And I have no intention that my determined S/L gets hit.

I don’t sit there and staring at PA…waiting to hit my S/L. I don’t trade like that.

so even on something like the bb bounces you determine first that your profit potential is at least 3 times the stop loss ?

I said if I use a 3R strat. :smiley:

My min. Reward = 1.5R at [B]all[/B] times.

So if I put 10 pips S/L in a BB bounce @risk I want 15 pips reward…[U]minimum[/U].

If I don’t see that…no trade. I wait until the opportunity arrives.

What you are asking is really a money managment/ risk question.

There are a few ways to go about it:

  1. Risk only 1-X% of your account per trade, for any trade, regardless of what you think about the probability of winning. Most here will tell you, you should never risk more than 3% per trade no matter what. That is the accepted doctrine for most. If you keep winning you compound up, if you lose you compound down. So, if you win say 10 trades in row, that 3% grows rapidly as your account size has grown.

  2. Decide your risk per trade on how likely you think it is you will win… compound up or down.

  3. Instead of trading x percentage risk, base the lot size on how many hundreds or thousands in your account. Every K is a new level. For example: $1000, account $1.00 per pip lot size. When you reach $2000, you trade $2.00per pip.

Mathmatically, that is on paper, compounding x percentage works faster.

I’ve found that in reality that trading levels, that is #3, seems to work better. As you are not constantly changing your lot size up and down for every little loss or win, you only change it up or down once you gain or lose a level. So, when you lose, it’s easier to make it back with the next win as the lot size hasn’t gone down…provided you haven’t lost a whole level. (you still need a good win ratio, as with any method)

I personally also change my lot size based on how probable I think the win is. I will risk more if I think it’s highly probable I’ll win.

P.S. 32% per anum for a day trader is not good. That would be awesome for a yearly investment where you let someone manage a fund or something and you already had at least 100k. But, for a day trader that is piss poor.

Consider a day trader who only risks/makes 1% per trade, and trades regularly and compounds their account (that is they don’t take out their winnings and keep trading larger as their account grows). That would mean out of possibly hundreds of trades they only made 32%…might as well pack it in.

On an account that’s a few K, I made +44% last week, and that wasn’t even a good week, pip wise I only took in 203 pips. Did I risk more than 1%? Yes, but I knew the trades were high probability to win, so I risked more and traded with bit of larger lot size.

In the end you should always consider your risk first. If you can’t stomach the risk then either take down your lot size or don’t take the trade.

If PA changes to where it looks like your 3R will not be hit, do you then manually close the trade early?

Yes…I bail out and manually close the trade early.

Looking for re-set and re-entry.

Spread cost for a re-entry are lower than giving earned pips back.

I have seen people sit there and watch +20,+30 pips or more melting away to 0 pips or even -x pips.

People that want to stay in trading longer than the 95% group need to get rid of that habit real quick.

Thanks for the advice Cas. My EURUSD trade is working out nicely doing just that.