Reasonable Expectations???

[diallist]

I would really appreciate the opinion of the experienced traders in this forum on the following. It seems reasonable to me all the way up to the last part, which seems unreasonable to me.

I would really like to know if my thinking is right or wrong and whether my expectations are reasonable in the real world of trading forex.

(1) Account balance = $50,000.
(2) Risk per trade = 2% of account balance = $1,000
(3) Pips risked per trade = 30
(4) Dollars risked per trade = $300 (assuming $10 per pip)
(5) Position size = $1,000/$300 = 3 standard lots.
(6) True leverage with 3 standard lots = $300,000 / $50,000 = 6:1
(7) 6:1 leverage is too high. 2:1 is preferred so only 1 standard lot
will be traded.
(8) Expected average weekly gain of 100 pips (IS THIS UNREASONABLE???)
(9) Expected average weekly gain of $1,000. ($10 x 100 pips)
(10) Annual profit is then $52,000.

Step 10 seems unreasonable to me since it is a greater than 100% annual rate of return. Most books and articles I've read state that the best professional money managers can only do between 25% and 40%.

How then can I expect a greater than 100% return. I'm confused because steps 1 - 9 seem to me to be reasonable and conservative.

Please, is trading forex really this profitable, or am I totally screwed up in my thinking?

Thanks in advance for your replies.

[bobnat]

Your entire premise being successful rests solely on #8. The number crunching is fine, and you obviously understand the need to control your money management. But what's your plan to make 100 pips a week, 52 weeks a year? That's the crux...that's the $52,000 question.

I don't even live in the US, but I know how bad the touting of FX has become.

Now, stop for one minute and think about this. If making money trading Fx was really such a doable thing, such an easy thing to the point that you can make a 100% return p.a. without really knowing much, don't you think that everybody would leave their shitty jobs, mortgage the house to the hilt, along with their kid's future, and sit in front a pc all day making 100% p.a? Forget about your dreams and your greed and really think hard about this for a few days.

Being a successful trader requires years of study, hard work, spending and losing lots of money, and going nuts. It has to be the most boring job in the world, right behing watching grass grow and paint dry. I liken it to combat...long, interminable stretches of mind-numbing boredom punctuated with moments of sheer terror. It takes a long time to learn to control your emotions...it's about 80% of the battle. As one wit said, "If you want the perfect opportunity to discover just how screwed up your life is, start trading."

Finally, the standard number is that 90% of all individual traders will lose all of their capital in two years. So, you have to ask yourself, does this statistic apply to me?

Other than that, trading is really cool.

Nat

[James]

Originally posted by bobnat
...long, interminable stretches of mind-numbing boredom punctuated with moments of sheer terror. It takes a long time to learn to control your emotions...it's about 80% of the battle. As one wit said, "If you want the perfect opportunity to discover just how screwed up your life is, start trading."Nat

Nat that is the funniest and truest thing I have read for a long time. After 6 years of trading, I am still a quivering wreck!

[gregh285]

dialist,
it all depends on your trading style which many people fail to realise is one of the biggest factors that must be taken into account when modeling.
You are assuming a 30pip risk which is not a large stop for position trading which if u r part time will probably be.

I see a lot of new traders on these boards shouting about some systems etc producing 400pips month profit but stops can run anywhere between 80-150 pips, thereby reducing your position by a factor of 4, nett gains only 100pips as opposed to the original 400pips based on 30pip stops.

100% pa is possible and it sounds you have the money management side well planned.

[MickMason]

Originally posted by diallist


Most books and articles I've read state that the best professional money managers can only do between 25% and 40%.

How then can I expect a greater than 100% return.

Please, is trading forex really this profitable

Hi diallist

But what time frame are money managers trading, how much attention do they afford one account, what are the risk profiles of their customers? I don't think you can compare fund management returns to returns from intraday speculation by the private individual, the percentage success rate is vastly different for a reason.

As Nat said, 80% of this game is psychology, but yes, your projected annual profit is feasible, some traders here actually trade for a living not a hobby!

Mick

[amarnath]

Hi diallist,

It is quite possible .

1. Preserve your capital

2. Don't over trade

3. Don't paint your picture on charts

4. Don't think right hand side is as easy as left hand side of chart

5. Wait for oppturnity for every entry , exit and don't trade with two ideas

Then it is very easy to make 100% p.a

[philhackett]

Hi

If you are serious about trading go to www.sta-uk.org which is the site of UK Society of Technical Analysts. Follow the links to your national association, join, take the courses and qualify as a Technical Analyst. You will meet the real professionals there. Most of the people on this site are amateurs who do not have the remotest idea what they are doing and even worse, do not realise that they are amateurs!

The problem is that trading looks simple and it is; but it isn't easy!

I have offered advice elsewhere on this site and I offer it again here. I am a qualified Technical Analyst and member of the Society of Technical Analysts here in the UK otherwise referred to as and MSTA. I trade Forex full time, 12 hours a day.

Money Management:

I suggest that you start trading with the smallest amount that your broker will allow. If you email Wes Newman at Dealbook wnewman@gftforex.com or telephone him 001-616-956-9273 x 3793, give him my compliments and say that I said he would set you up with a low risk account, he will do so.

You learn very little when paper trading but learn a lot when there is risk involved. If you follow my advice you will rarely lose money.

I have three screens linked with a Parhelia Matrix card. You should aim to have the same as a minimum.

How And When To Trade;
Set up your screen with the following studies;
Keltner Channel
Bollinger Bands
Dema (Double Exponential Moving Average) which is a sophisticated 5 day moving average only available from Dealbook.
Put Kagi on 20% of your screen, probably on the right hand side. This means having two charts of the same currency pair on the same screen, but one is narrow and set for Kagi not candles.

You do not need anything else, but you may feel comfortable with a CCI at the bottom of the screen. It will show you the crossover points and the depth of a move. By placing trend lines top and bottom on the peaks, you will be able to anticipate significant crossover moves.

I make the upper and lower bands thicker and use a strong colour to make them very obvious. Do the same with Dema.

How to trade as the professionals do;

When the candles move out of the Keltner Channel together with the Dema, you have a trade. Enter at this stage with confidence. The Bollinger Bands will also spread apart and the candles will track the relevant Bollinger Band. Always place a stop immediately after you enter a trade, literally as fast as you can because market makers and National Governments sometimes manipulate the market and it will move fast against, you literally in a millisecond if you are careless.

Never stay in a losing trade.
If you are uncomfortable or panicking, do not enter a trade.

Always pay yourself 50% of your Bank at months end.

Sincerely

Phil Hackett

[amarnath]

Hi philhackett,

Thanks for sharing some info related to how and when to trade .
If you post some charts it will be more easy to get more ideas