I'm interested in what people have to say about the following logic. You have to remember this is coming from a semi-novice. Some assumptions first:
Profitable system(s) that average 300pips a month
Trade size is 2 mini lots (20K)
3% risk per trade
75 pips is the average losing trade
$150 is the average dollars lost per losing trade
$5000 capital (starting balance)
Even though, I consider myself a novice I have been trading Forex on and off for almost 7 years. So, I do know a little about trading. Generally speaking the assumptions above are probably not too far off, right? At least the above parameters fall within acceptable range(i.e. risk level) for a successful trader.
If you do the math (below), based on the assuptions (acceptable?) above, it just seems way off to me. In other words, I'm plugging in what should be accetable paramters; however, I'm getting yearly profit results that everything tells me is not realistic for the long-term (i.e. 100%+ returns). Sure maybe over a short period of time but not long-term! Particularly some of the more experience traders...what is wrong with this thinking?
300pips profit x $2(2 mini lots) = $600 per month profit
$600 per month profit x 12 months = $7200 profit per year!!
This works out to 144% profit for the year. I know it has been done by a some people for a year or two or even three, but not consitently year after year after year. I've been around long enough to know that 144% is not a realistic number year after year. For that matter, I'm guessing if you change the 300 pips profit a month to 150 pips a month the same question still exists. If you half the profit to 150 pips then the yearly profit would be 72% per year. Possible but not likely to maintain 72% for 10-20 years.
So what is it that is so wrong with my assumptions, please advise.
MillionPips
Profitable system(s) that average 300pips a month
Trade size is 2 mini lots (20K)
3% risk per trade
75 pips is the average losing trade
$150 is the average dollars lost per losing trade
$5000 capital (starting balance)
Even though, I consider myself a novice I have been trading Forex on and off for almost 7 years. So, I do know a little about trading. Generally speaking the assumptions above are probably not too far off, right? At least the above parameters fall within acceptable range(i.e. risk level) for a successful trader.
If you do the math (below), based on the assuptions (acceptable?) above, it just seems way off to me. In other words, I'm plugging in what should be accetable paramters; however, I'm getting yearly profit results that everything tells me is not realistic for the long-term (i.e. 100%+ returns). Sure maybe over a short period of time but not long-term! Particularly some of the more experience traders...what is wrong with this thinking?
300pips profit x $2(2 mini lots) = $600 per month profit
$600 per month profit x 12 months = $7200 profit per year!!
This works out to 144% profit for the year. I know it has been done by a some people for a year or two or even three, but not consitently year after year after year. I've been around long enough to know that 144% is not a realistic number year after year. For that matter, I'm guessing if you change the 300 pips profit a month to 150 pips a month the same question still exists. If you half the profit to 150 pips then the yearly profit would be 72% per year. Possible but not likely to maintain 72% for 10-20 years.
So what is it that is so wrong with my assumptions, please advise.
MillionPips