I think its realistic per WINNING trade. Problem is, you average in your losing trades, and unless you are really, really good, that average isn't going to happen imo. Sounds like you have been paper trading, or ya wouldn't have asked that question. Once real money is on the line, if you are like the vast majority of people, you winning % is going to drop quite a bit. This happens even to serious systems traders. Why? Because they don't always follow the system when there is real cash. Amazing how often this happens (most of the time). That said, give it a try, and report back and let us know what happened. For reference, I make an ave of only $35 per contract traded, day trading mini spoos and R2K. I'm not a scalper either, thats just what it comes to over time. As I ramp up size, my income tends to rise (usually), but ave per contract is pretty flat. I make a little more than that in currencies, but don't trade them with such a short time frame, and make no where near the return you are looking for. I may not be the best around, but am pretty efficient, and for me, those numbers would be impossible. Jay
thanks for all the good feedback. well perhaps I am a bit too overconfident from some recent forex paper trades I made with a demo account. I am not trading now at all and have not since about a year ago.. but soon I would like to jump back into the markets and test out my little plan.. I will probably have to refine it a bit depending on how things go for the first X number of trades.. what I have realized over time is that my biggest failings were directly related to overtrading, lack of a specific trading goal or plan, lack of keeping paper records of trades by hand, profit targets that were too high and unrealistic. but I know that if I wait and do not rush a trade, that I will be able to find high probability setups good enough to give me the 5%. It could be that I will have to wait days, weeks or even a month to find them... but I would rather wait then enter a low probability trade that keeps me away from each trading target profit.. Well in my case I will follow the details of my plan like a robot.. in the past I never really had much of a plan and changed the rules many times.. But THIS time I am going to follow my plan like a robot... and I will use a psychological trick to keep me focused laser sharp on it. ultimately what matters is how good of a tape reader I am.. that will determine how far I go.. either way, i may start a new thread eventually on here to detail how things are going.. peace.
its more important how much you are willing to lose on each trade, and it should be 1 to 2 percent equity max. Thats the only number you can quantify, or even should quantify. The winning trades should have a trailing stop based on the movement of the instrument you trade. In this system of money management, you will always take money out of winning trades, allow for wiggle, and be able to ride huge winners that you NEED in order to make up for losses, slippage and commissions. I would not set a target for size (percentwise to equity) of winning trades. You take what the market will give you, and do that every time you win. With a trailing stop as part of money management, you leave yourself open to potentially huge trades that do occur. You also do not make trading mistakes because you 'expect' a certain amount from a winning trade.
You also need to take opportunity cost in consideration, you can make 5% per trade but then you might just trade once or twice a year. I would suggest to focus on your risk to reward ratios and make sure you excecute your trading plan excactly according to the rules( which is where most traders fail).
Definitely start a new thread. I would love to see the process of switching from paper trading with your system. I have spoken with a few people who followed their systems as you intend to follow yours. Its always interesting to see what happens. What is your time frame BTW? I understand it can vary if riding a move, but do you ride a 15 min pattern, or daily for example? This obviously can have a huge effect on % gains, but trades only as often as the setup. And the risk varies huge too! Cheers, Jay
I don't think 5% for some trades is unrealistic. But for EVERY trade.. yes, it is unrealistic. I frequently make 10 - 15% per trade, but I may only make a few trades per rear. Some trades only net <1%. Risk is the most important factor as you have heard many here say. If you consistently risk more than 2-3%, you will eventually go broke. You may get rich before, but it will happen in time. The reason for this: if you risk more, you will have spectacular gains and be convinced you are a genius. The markets love geniuses. They go broke the fastest. Second, avoid arbitrary goals like 5%. If you have it set in your mind that you are shooting for 5%, you will probably stay in some trades too long and others not long enough. If you have such a goal in mind, your subconcious mind will ignore the signals to exit or not exit. Instead, take your system, go for those high-probability trades and take whatever the market gives you. Get out once the market stops giving. It may be 1%, it may be 20%. Don't marry a trade because you have a goal of 5% or whatever. Slow consistent profits is the key. Take a real life lesson: panhandlers make far more money on average than bankrobbers. And they have a far better chance of staying out of jail.
The balance between taking what the market gives and your "PLAN" seem unrelated. Does the market know what your "PLAN" is? Does your "PLAN" know what the market is giving? Many traders devise ways to pull the trigger and to feel fullfillment in following their "PLAN" and taking the emphasis off of how they deal with the emotion of trading, which is fine. But always try to optimize and leave less on the table. MAE and MFE studies is step one. Create your trade profile, deviations., reaction to charactarization and patterns of the big picture...etc As far as greedy (its an adjective) ....thats like a Doctor asking, am I too helpful? We are traders and we make money...(don't try and justify it) Michael B.
This is very good trading advice. Especially the part about setting up a trade based solely on getting 5% off it. Risk on that set-up would go through the roof. Per trade... hm... it could be done. You'd have to be at master trader level to pull it off. To walk out each time with 5% you'd be facing-off full market forces for months on end. And you'd better be ready to see your entire account go up in smoke. Other than that, yes, I think it could be done. Advisable? No. Suicidal? Yes. A Coinz trade.
well I think i will use a range target instead of one solid percent like 5%. so perhaps 3-5% is better... and I could add the use of trailing stops to get better gains when available and appropriate.. but the reason I do not want to just generally accept 1% to 20% is because of the psychological factor and for reasons of needing laser sharp FOCUS. FOCUS is what I need to survive in the market. And to achieve the account growth I desire over time. If I have it in my mind that a 1% return is ok, then it will likely temp me to pick out less than perfect trade setups and lead to other troubles. I only want to aim for the best trade setups. The absolute best. I have watched the markets long enough to know which setups are less than perfect and which ones are 'blockbuster' setups. I am sure all of you have found trades, that before you entered them, had a very high degree of confidence in (perhaps 70 to 80% confidence) I too have seen these trade setups and I will wait for them patiently. And when I find them I will only seek 3 to 5% returns on them and then record the profit in my logs and then search for the next one patiently. I am not a 'buy and holder' but part of the inspiration for this comes from warren buffet who once said that if you had a punch card with 12 slots in it, and could only punch out one slot per year after finding the best investment for it, you will be very rich..