Looking at populations in trading
As mentioned, the markets are not random, some traders do not have set stop losses and take profits. Many close on an decision unrelated to strategy, or hold in hopes of getting a winner, double up on trades, alter the risk on a trade or decide to miss trades. This makes perfect paper trading not be so perfect when it comes to real life. Another vital aspect for statistical tests is epidemiology or population studies. Although it is nice to think of ourselves as a unique special individual trader that can work miracles, it is best to have a realistic view of ourselves and what can be achieved. If you want to see what a good trader is capable of, then you should take a look at a top trader and what it takes to get there. If you are able to access their trading record then you will have information on what sort of drawdown to can expect as well as knowing what returns you can get.
There is a ready source of this information on sites like myfxbook which depending on the individual trader gives you ideas of drawdown, trade size and trade selection. There are also other sites such as investegate which covers hedge funds and gives the equity growth. There are lots of traders who claim they make millions, but these sites are the only indication they do - plenty of people talk big, but cannot back up their statements. Of course, boasting that you make 25% per month sets a very large precedent for others to look up to, which is why it should not be looked upon as a competition when you have no idea how the others are running.
If you aspire to making a certain amount per month via a certain number of trades and via a certain amount of drawdown you should vie to find someone who has achieved similar statistics. A lot of traders have come and gone, and if you are chasing for a trader who has a risk/reward ratio of 1:5 and a drawdown of <5% with 30% gain a month by scalping, and you can't find someone like that then the chances are that you will not be able to do it. I am not saying that it is impossible. If you can find a significant amount of people who are able to do it for a month, then you can probably manage it for a month. If you can find one person that can do it for 3 months, then it is unlikely that you can do it for 3 months. If you cannot find one person who has been able to manage it for a year, then you are not going to be able to do it yourself, unless you consider yourself above and beyond everyone else.
There is a reason why many people are not forex millionaires, because it is a hard job with a high failure rate. If you think about a career you generally look at what a realistic salary you can achieve with 1 year, 5 years, 10 years etc. For instance, if someone was to look at becoming a lawyer, they could look at earning $20k per year initially, $80k within a few years, and $200k as they became a partner within 10 years (this is in the UK). You do not immediately assume that you will be earning like the UK top lawyer (see this article:
Revealed: Britain's best paid lawyer | Mail Online). If you worked in the civil service in the UK, you would expect $30k initially, followed by incremental increases each year with about $50k after 5 years, and $80k after 10 years. You not assume to be earning the same as the Prime Minister. In trading, performance is even more highly related to success, so do not automatically assume that you will head and shoulders above everyone else - it is not realistic, not humble and can lead to arrogance, over trading, over competitiveness which I have mentioned is one of the downfalls of traders.
If you are a scalper then follow the best scalpers and see what they can achieve. If you are a long term fundamental trader then follow them and see what they can achieve. If the best scalpers are making 200% per year, the chances of you making 500% per year consistently are so impropable and divorced from the real world, that you should re-examine the way you look at the world.
When I was at school there was a envelope making/selling job at the local postal service that paid per envelope that you made/sent. The average wage for this was minimum wage ($9/hr at the time), but my fellow pupils eagerly added up the potential to make an envelope every 10 seconds (based on how fast they could do one) and thought that it was going to be an incredibly well paying job paying over $100/hr just for making envelopes incredibly quickly. Don't have unrealistic expectations - great things are theoretically possible but the wiser trader looks at things as part of a larger, more realistic scheme.
