I’m rather curious. I’ve been backtesting my own strategy back to 1990 and my expected return is around 10% per trade. Would this be pretty good, okay or crap?
Depends what you mean
If 10% per trade means 10% of your account balance and you’re only risking 2%, that’s a 5x payoff which is huge. Given you might expect to lose - say - half your trades, this means your TP/SL is 6/1. That’s a great strategy and you should write a book on it! Royalties of $1 a copy and you will sell millions…
If however 10% a trade means you risk 2% but gain 2.2% in case of a win, that’s entirely doable. I’m assuming you would then have a high win-rate as a result, so the economics would be pretty appealing.
Can you give more details on the structure and strategy?
Sorry. When I mean expected return per trade, I’m referring to the amount you risk. So say if you risk $100 and you expect a 10% return per trade, you should receive $110. Or if you risk 2% of your account, you expect to gain 2.2% from your trade.
An example: your strategy uses a 1:1 r:r ratio with a win% of 55%, so your expected return per trade would be 10%.
I don’t think that the way the poll options are laid out you are going to get a reliable answer to the question you are asking, sorry. I just read the options, and read the explanation you outlined in your last post, and came to a completely different conclusion each time. Not knocking, trying to be helpful. I’d edit the poll to be clearer, if you can. I risk 1% per trade, almost all of the time my return per trade is 1-5% of my total account balance. Not sure which poll option that makes me!
I guess that’ll put you in the ‘[I]40% and above[/I]’ category, judging from KingKaivar’s post #3 (in which he specifies that he means Return on Risk), since your return on money risked is 100-500%.
In reply of the topic of this thread: My profit margin greatly varies from trade to trade, since I calculate S/L and T/P according to price movement preceding my trade.
If I’d have to estimate, I’d say I’m averaging about 80-100% Return on Risk … I’m mainly trying to trade with a Risk:Reward ratio of 1:2 (which equals 100%) while also having trades of 1:1 and, occasionally, 1:5 or higher.
It’s a hard question to answer.
Cheers,
O.
But then why is there an option for ‘under 2%’, which two people have ticked?! Does that mean that they would risk £100 per trade and then make only £2 back? Or am I missing something? That seems… unlikely. But then why would that option exist at all in the poll if that is what it means? I think I’ll go get some lunch - losing my grip on all this complicated trading stuff lol.
ST
Yeah, sorry, maybe I should’ve put “expected return on risk” which would probably make it easier to understand.
Haha I was expecting someone to put a troll vote just to botch the numbers.
When I saw the over 40% I had to laugh I thought this person must be risking a large quantity of their account or they are playing pairs only at their extremes.
wow over 40% I guess Its safe to say that it varies, I don’t focus on it too much!
lol, yeah, I guess it doesn’t happen to often … but it does happen:
A few minutes ago I’ve closed a trade at something like 2-3% Return on Risk; it’s been sucky since I’d opened it yesterday afternoon, always in the red … so I’ve lost my trust in it and just manually closed it as soon as it was green with a few bucks.
O.
Absolutely, I get that, happens to me too - but the poll says ‘expected’ return per trade. So presumably those who answered already did not understand the question as it was being asked (which is not a dig at them, neither did I!), as I doubt they set out aiming for 2%…
ST
Oh yeah, I didn’t even see the ‘[I]expected[/I]’ … of course nobody would aim for 25 bucks when risking a thousand; that’d be a less than optimal R:R ratio, lol.
Haha, naturally the damn pair moved 20 pips in my direction, a few minutes after I’d closed the position … I hate it when that happens … shows I still need to work on my patience.
O.
The ‘expected’ is even more confusing (like ST, not meaning to be critical here but just was trying to understand the question) since ‘expected’ means ‘average’ in statistics (which is what all trading is).
So when I saw ‘expected’ that made me go beyond risk/return (ie by which as KK describes they meant TP/SL-100%, or 100% for a 2:1 TP:SL ratio) to the outcome (which would be trade size and win-rate weighted).
For the record KK, if your TP/SL is 110% which is what I understood, that’s perfectly respectable since you only need 50% win rate (after spreads and costs) to be making money. Though this strategy would need more capital or lots of trades (50% win rate means you can only trade smaller % of balance since you can have long losing streaks).
If you can find strategies with high win rate (eg 65% or more) then a 110% TP/SL starts looking much more interesting. Of course higher TP/SL all else equal reduces win rate… Otherwise the world would have more millionaires!
Long story short: we can make 10-20% reliably each month. We use a 1:1 TP/SL although without formal SL, ie once the trade is 100% underwater compared to our target we
- scale in if the thesis still holds (so now start profiting once the original trade is back to 50% out of the money)
- scale out (with an opposite direction hedging trade) if the thesis no longer holds (in this case we will then scale in in whichever direction becomes our preferred side)
So our strategy is a 1:1 TP/SL but the scaling means out basket profits at lower outcomes for each trade. Win rate around 75%. Pips per trade average +10 across all trades. But very reliably we make ~80-100 trades a month, so ~1000 pips per month profit. 75% win rate means we could risk significantly larger % of free margin though the trade basket strategy means that we often have 3-7 trades in a basket, which becomes a limiting factor.
I always expect to get Over 40%, I never seem to get it though!
No seriously, it depends on the trade, and 40% is not impossible, I did do a 40% profit trade once, when I was new admittedly, but it really was 40%, I thought that was it, I have cracked the market, stopped trading for the day so I wouldn’t overtrade, then the following day, promptly lost more than all of it. Oh there are some very distinct trades one remembers on the way to continuous profitability.
Yes it depends on the trade, at the extreme I do get trades with a 1% risk, and be looking at targets of 15%+, but generally I think, risking 2% and looking for 5% as a target.
Oddly enough, when they do turn up, it’s the lower risk tight stops that pay off best, it’s because the market has consolidated or should I say accumulated so much, it will burst out of the seems.
Its good to know u guys make up to 5% per trade of your total account…As for me, I do make 1-2% on every trade I make risking 2%…Although some do fall below 1%(say about 0.5%-0.8%). However the major problem I do have is not staying till the end of the trend due to fear of reversal, at the end of the day I discover that 55% of my trades earn me up to 3-4% if I were to hold on till d end…Most times my trailing SL cuts the slight reversal of the market before it goes full throttle
Anyways am still working on it:22:
There will always be something you need to work on, and sometimes you just can’t win, it’s just winning overall that counts.
Had a great example of this on the VSA thread today, I stayed in, got stopped out for BE+, another trader got out, took profit and got in again, and scored, I opted for another trade on another pair and I stayed in, at the end of the day - samish result - PROFIT.
PPF you are so on the money.
LordPipi, if you’re only risking 1-2% of balance per trade and consistently making 2% you should celebrate! Trends will always keep running beyond where a successful trader exits. How far is just a question of experience and a little luck. You are sensibly avoiding the latter while developing the former.
Well…Thank you Elegy400…I try to do well on my trades and I still got a lot to learn…I guess we all do till the day we retire…
Happy slashing :51: