Is 2% return per week realistic?

[Black Swan]

Why is 2% a week compounding a myth? You were banging on about 10% a week from a 10k account the other day so given that, how is 2% compounding no do-able?

Hope that helps..

 

[Splitlink]

what is the right way ?

I have been fairly successful as an interday trader, just doing the mornings. Now, getting older, I want to trade longer term and get a bit of peace! Making the change is proving bloody difficult! So your question has to remain unanswered by me for the time being!

But. I used to be a trendfollower. I've discovered that trendfollowing intraday can be topping out long term. with a bigger stop and bigger losses if one is not right!

 

[scose-no-doubt]

Hope that helps..

So what's your upper limit for earning 10% a week then? Is it possible to earn 10% a week on 20k then?

 

[Dubai]

correctamundo..also folk get far too hung up re. % returns, which IMHO is far more relevant for investment as opposed to trading... Discussion last week re. under-capitalisation, my tuppeneth was that with a 10K account making 200 quid a day should be the minimum aim.."shock horror, 2% a day!!? Impossible.." were some of the cries...

Honestly, if you cannot make 200 quid a day (most trading days) from a ten grand forex account then find another job or up your game..and quickly...

So you're saying unless you can make 30-40% a month you're a crap trader?

 

[Splitlink]

So what's your upper limit for earning 10% a week then? Is it possible to earn 10% a week on 20k then?

Black Swan is right. If you keep increasing your stake size, sooner or later, you will take a loss that will destroy your profit calculations. You should keep your calculations based on the original capital, IMO and, then, aument your capital to a prudent level that can be achieved.

The question mentioned 2%. You are, already, talking about 10%. Such is the typical attitude of investors who do not keep their feet firmly on the ground.

 

[scose-no-doubt]

Black Swan is right. If you keep increasing your stake size, sooner or later, you will take a loss that will destroy your profit calculations. You should keep your calculations based on the original capital, IMO and, then, aument your capital to a prudent level that can be achieved.

The question mentioned 2%. You are, already, talking about 10%. Such is the typical attitude of investors who do not keep their feet firmly on the ground.

I think you've mis-read my post

 

[Splitlink]

I think you've mis-read my post

Yes, I did. Sorry about that.

 

[4xpipcounter]

When you mention the 2% you want to make or is reasonable, it is also taking into account the losses that you will endure along the way. I know someone mentioned that, but is immaterial, considering losing trades makes up the totality of the total trading scheme of things.
I don't trade stocks, but I do try and add a perspective to someone's questions or comments. I trade forex. I use 10% margining on all my trades. I opened a long on the EUR/CHF last night. As of this writing it is up by 30 pips, which is 3% overnight, and the EUR/CHF is one of the slowest moving pairs. From a forex perspective, and essence of my point, you are looking at 20 pips per week in order to realize 2% per week. Personally, that is a very poor week for me.
It is okay to show what compunding will do to your gains, but only if you never plan on withdrawing the money within the frame of time in question. If you are looking at making a full-time living in trading, then in respect to the total gains, you need ot have enough initial capital in your account in order to justify the low end probability of your gains, and also have enough money backing you up in a private account to cushion the stress and help when you have a dry time.
Someone mentioned that within certain criteria, you will be a millionaire in 7 years. This is a game for millionaires. If you manage your trades and funds correctly and consistently, and have an excellent methodology in place, then pull the top off. There is no limit to what you can accomplish. Having said that, as you are on the journey, there are many issues that have to be addressed. First and foremostly, it is a proper methodology. If it has proven to be a winning methodology for you, then work it. Prove to yourself what the gains are from it. Afterwards, do the calculations that are needed to steer you towards your financial goals. As long as you have an excellent methodology in place with all the other necessary principles in place, then you can attain your goals if you start with $1,000 or $100,000. The number one thing that will breed an unabashed confidence is the experience. Yet, until you develop the experience, there is no real confidence in what you can really and honestly do.
BTW, my inference to making 2% in one week is a very poor week is not a knock on someone who does that. I've alluded to this in other posts. If you are gaining even the most miniscule gains in any time frame, then you are in the upper 10% of all traders and are to be congradulated. 90% of all traders open an account and bankrupt it.

 

[4xpipcounter]

I view "keeping your feet firmly on the ground" is staying consistent with my margining on each trade. I know if I go through a losing streak, and lose 10% of my account, what is a given is that I need to gain 11.1% to get back to the original amount. This means, given those parameters, that 52.61% of the trades have to be winning trades in order to break even. (10 going backwards, 11.1 breakeven; then, 111/ 211.) That example is just a short microcosm of the whole.
The thing that never changes with me is the % of margining. My gains are going to increase, overall, so in lieu of that my stake or lot size will increase.
In developing a comfort zone, I do agree with you, Splitlink. if that is how someone wants to trade. But, if that initial point of margining worked, then why would it not continue working?

Black Swan is right. If you keep increasing your stake size, sooner or later, you will take a loss that will destroy your profit calculations. You should keep your calculations based on the original capital, IMO and, then, aument your capital to a prudent level that can be achieved.

The question mentioned 2%. You are, already, talking about 10%. Such is the typical attitude of investors who do not keep their feet firmly on the ground.

 

[alan5616]

Thank you, I've come to realize that if I manage my losses and stick with my rules, the profits will take care of themselves. I'm not going to concern myself too much with the end result right now. Just wanted to try and figure out risk/reward, etc for my trading plan.

I will be starting with 20-40K so using a risk/reward of 1:2 (risking 1% for a potential of 2%) might work for me - does that logic sound right?

Hi Tammy,

Welcome to the world of trading. Your journey will begin by trying to gather as much information as you can on what the leading traders do. You'll hear all sorts of advice from fellow traders (mainly losers) and so-called trading gurus.

If you manage to avoid blowing your account, then, one day, hopefully, you will see that all that "good" advice was utter claptrap. Not only will you be looking to make 2% a week but, you'll make that, and more, every day.

 

[4xpipcounter]

In my opinion, there is no right or wrong way. If someone is a consistent winner, then that way is right for them. If they are losing consistently, then that way is wrong for them.
Crowd mentality says to use stops. I don't use them. No one can tell me that is the wrong way for me, because of my overall success. For a newbie, or anyone else without a proven track record, it would be the wrong way.
As inidividuals, we are all made differently. We all have diffeent mindsets. Therefore the trading style we develop has to adapt to our individuality. This includes the term of the trade, the approach, margining principles, which indicators we choose to trade with, and the overall useage of those indicators and its implementation.
Risk:reward ratios are also something that has to be of a personal issue. After all if you have a 1:4 trading ratio, but win 90% of the trades, then your RR has proven to be good for you. If you have 3:1, but lose even 30% of the time, then shipwreck awaits.
I trade what I would consider to be the highest probability trades. I entered the EUR/CHF long, because the probabilities are very good for a return to the 1.35's. I have a short on the GBP/CAD, knowing I could also get a pull against me, but also in knowing, in the near future, I will get a strong splashdown south.

what is the right way ?

 

[Black Swan]

So you're saying unless you can make 30-40% a month you're a crap trader?

this compounding 5hite again...OK, if you have ten grand in play in an account/various accounts and you don't make 200 quid most days give it up...find a better job...

 

[alan5616]

In my opinion, there is no right or wrong way. If someone is a consistent winner, then that way is right for them. If they are losing consistently, then that way is wrong for them.
Crowd mentality says to use stops. I don't use them. No one can tell me that is the wrong way for me, because of my overall success. For a newbie, or anyone else without a proven track record, it would be the wrong way.
As inidividuals, we are all made differently. We all have diffeent mindsets. Therefore the trading style we develop has to adapt to our individuality. This includes the term of the trade, the approach, margining principles, which indicators we choose to trade with, and the overall useage of those indicators and its implementation.
Risk:reward ratios are also something that has to be of a personal issue. After all if you have a 1:4 trading ratio, but win 90% of the trades, then your RR has proven to be good for you. If you have 3:1, but lose even 30% of the time, then shipwreck awaits.
I trade what I would consider to be the highest probability trades. I entered the EUR/CHF long, because the probabilities are very good for a return to the 1.35's. I have a short on the GBP/CAD, knowing I could also get a pull against me, but also in knowing, in the near future, I will get a strong splashdown south.

Now this is someone who knows how to trade

 

[4xpipcounter]

What if someone is making 100 quid per day, and they are happy with it, and they do it regualrly like clockwork? Should they give it up?
The point Dubai made has nothing to do with compunding. He asked about 30-40% per month. That is simple interest at 2% per day. Based on 20 trading days per month, that is 40%--2*20=40. Your statement that I am addressing is 2 % per day.

this compounding 5hite again...OK, if you have ten grand in play in an account/various accounts and you don't make 200 quid most days give it up...find a better job...

 

[4xpipcounter]

Trading is not a subjective vacuum. Many people can sit and talk trading or have high aspirations to trade. If anyone wants to walk the walk in a world full of lions (Afterall, 90% fail.), then they must implement the proper work ethic to properly develop their personal trading system or methodology to trade by.

Now this is someone who knows how to trade

 

[alan5616]

Trading is not a subjective vacuum. Many people can sit and talk trading or have high aspirations to trade. If anyone wants to walk the walk in a world full of lions (Afterall, 90% fail.), then they must implement the proper work ethic to properly develop their personal trading system or methodology to trade by.

Another statistic; I'm afraid

Not only do 90% of new traders fail but, 95% of day traders fail (according to stats gathered from 100 brokers worldwide). Why do 5% succeed? There are a few reasons:-

1. We've had to adapt or die. The days of 2008 volatility are history.
2. The trend is not our friend; it's our enemy
3. We don't let our profits run
4. We don't cut our losses early
5. We don't follow the herd

As Warren Buffett said "Buy when everyone is selling and sell when everyone is buying".
It applies to forex just as much as equities.

Just watch any forex chart for a few weeks and you'll see the pros doing the things that newbie and losing forex traders don't do.

 

[4xpipcounter]

Those statistics were the same in 2008.
What you alluded to actually started in 2007. Many forex pairs, and the stock market, hit S&R extremities. Now, there is a consolidative process and all kinds of corrections, and corrections within corrections going on. The "trend is your friend" is more of a cliche that many people buy into. The cliche was started with vendors of trading systems. Having said that, there have still been a lot of good one-way trips, such as the one on cable from 1.4229--1.5998. The USD/JPY also continues to tumble from its peak established in Aug. 2007 at 124.13 to its presnt position.
Better to ask why that 90-95% fail, as opposed to why the 5-10% succeed:
Foremostly, it is the lure of the money that can be made in this industry. Many people would love to stay home behind their computer, work their own hours, do as they wish, and make 100's even 1,000's per day. That perception is further exploited by how easy it could appear. Just click the mouse, kick back, and wait for the pips to roll in. That caters to people's general laziness. The rewards are great in this business, so the price and the work needed has to correspond to the reward. Part of that work is working the countless hours that is needed in experimenting with indicators, candle and price action while developing a methodology that is catered to that individual.
Once all that has happened, the road to live trading has only begun. Now, that prospective trader needs to work on what is the acceptable margining practices for him or her. How much risk tolerance can they take. What is the acceptable % of margining? Many questions need to be addressed and answered just ion that area.
While all of the above is going on, that prospective trader should be demo trading just like it was a real business. In 2004, when I started, I couldn't wait to get home from work, so I could see what my next opportunity was going to be. And, BTW, I bankrupted copious demo accounts while in training. I still have a demo account open that I use for trying new things.
Afterwards, we come to the mental part of trading. Part of the mental aspect should be addressed while demo trading. How long of TF's do I like to use? Do I have them mindset to scalp? Or, hold trades for weeks and even months? What strategy do I want to develop for screen time? What is my total commitment?
Up to this point, if everything is satisfactory and there is a no-doubt plan in place, and the prospective trader has demo traded and won consistently for a solid period of time (My thinking has always been 6 months or more.), then he might be ready to go live.
He/ she should open a live account with a punitive amount. There should be no stress involved. This will be the phase that the other part of the mental makeup will be tested, and that is fear and greed (May seem idle rhetoric, but still a necessity. Very vital.). A lot of times something happens when the trader goes from a demo account to a live account. The trader has the mindset of being so good that there is no chance of failure, and then overmargin, and try and hit the big jackpot. That is greed in action. The idea is consistency.
The other part is fear. It used to be on the demo account the trader let the trades run and make good profits. Fear says, "I got some profits, and I am afraid the trade will go against me, so I am getting out right now."
If the new trader finds something happened since he went live, then it is time to stop and reevaluate. In other words, time for more demo trading. If everything is working, then he may want to ante up more in the account (optional).
Regardless, as the tradder continues the journey, there will be times when the markets will still have a humbling effect. There are times you feel you are bigger than the markets, then reality sets in. The trader needs to have lots of personal confidence, but not be over-confident. He needs to realize his limitations. I am 100% close-minded to others' views of the markets, but 100% open-minded to anything someone has to offer that could make me a better trader. It's six years since I started. I can now go to work in my pajamas in the morning, and take Tucker with me to work, but....it still takes work. I consider myself just an insignificant peon in the markets, even though I am in the top 5-10%.
I have another response below:

Another statistic; I'm afraid

Not only do 90% of new traders fail but, 95% of day traders fail (according to stats gathered from 100 brokers worldwide). Why do 5% succeed? There are a few reasons:-

1. We've had to adapt or die. The days of 2008 volatility are history.
2. The trend is not our friend; it's our enemy
3. We don't let our profits run
4. We don't cut our losses early
5. We don't follow the herd

As Warren Buffett said "Buy when everyone is selling and sell when everyone is buying".
It applies to forex just as much as equities.
How do you know when everyone else is buying, or everyone else is selling? Warren Buffet is worth billions, but he is also full of cliches. He makes a comment like that, but what principle of concrete and evidential fact is there in that comment to help a trader.

Just watch any forex chart for a few weeks and you'll see the pros doing the things that newbie and losing forex traders don't do.

What is your interpretation of that with regards to what the pros are doing and the newbies are doing? Or, how do you know what the pros are doing. What is a pro? Is he one that trades full-time for a good profit? If yes, then I am considered a pro. How do you know what I am doing?
That was not meant as an obstinate reply, but to challenge the reasoning. I'd love to hear the reply.

 

[alan5616]

Those statistics were the same in 2008.
What you alluded to actually started in 2007.

I have another response below:

What is your interpretation of that with regards to what the pros are doing and the newbies are doing? Or, how do you know what the pros are doing. What is a pro? Is he one that trades full-time for a good profit? If yes, then I am considered a pro. How do you know what I am doing?
That was not meant as an obstinate reply, but to challenge the reasoning. I'd love to hear the reply.

You're right to say that the downturn, for some currencies started in 2007. However, the really large volatility took place between Aug & Dec 2008. I was trading GBP/JPY at that time and remember 600+ pt daily ranges as being normal.

By pros, I meant those traders working for the large banks and financial institutions. I don't intend to do a forex trading master class here, suffice to say that trading is a battleground between buyers and sellers with zones of control moving backwards and forwards between them.

 

[4xpipcounter]

The reason the GBP/JPY does not move like it used to is the mathematical relationship. The daily range for the USD JPY is about 115. The daily range for the GBP/USD is 150. GBP/USD * USD/JPY = GBP/JPY. The difference between the ranges is 1.3043, which means if the price on the GBP/JPY is 130.43, it is a virtual even. The only deviation you will get is what ever move there is away from the mdian range. That means when the GBP/JPY was 240.00. The pair naturally moved faster. If in the event it drops to 80.00, it will move as fast as it did when it was at 240.00. That's because, on a percentage basis, it is equi-distance from the mean at 130.43.
I hope that didn't bore anyone. I just love the mathematics of forex.

You're right to say that the downturn, for some currencies started in 2007. However, the really large volatility took place between Aug & Dec 2008. I was trading GBP/JPY at that time and remember 600+ pt daily ranges as being normal.

By pros, I meant those traders working for the large banks and financial institutions. I don't intend to do a forex trading master class here, suffice to say that trading is a battleground between buyers and sellers with zones of control moving backwards and forwards between them.

 

[Dubai]

this compounding 5hite again...OK, if you have ten grand in play in an account/various accounts and you don't make 200 quid most days give it up...find a better job...

Where did I mention compounding?

I know you said most days hence why I said 30-40%. Hell, lets call it 20-30% over a month.

You still think an average trader should be making 30-40% a month? Lets even say 15-20%!!!!