Why 2-8% a Month Should Be Enough For All Traders

I agree that in reality the price movement can't be predicted with any accuracy.
I too, use a method that basically relies on the fact that for the most part, the charts will be in some kind of range. Even if that range is within a trend.

However I found that no EA could correctly apply my logic to the evolving charts. Despite knowing a pretty damned good coder, the logic just doesn't exist for what I look for.

I do believe that the overwhelming majority of the time, the Fx market is a random walk and levy flight. Normal day to day operations create the sideways, until a news event drives a direction. But that direction is not clear.
If it were logical, then perhaps the direction could be predicted, but in truth it's not.
Also, the way in which institutions behave is worlds apart from what retail traders think.

I think this is the biggest hurdle in learning to trade consistently. Most people simply don't understand how the biggest players on the field go about their business.
Hence, retail traders are overwhelmingly poorly positioned in their trades.

I've posted this elsewhere a few times, but think it can never be overplayed.

At around 4minutes in, the (as he states oversimplified) scenario is a fantastic example of what drives the markets in reality. So many people scratch their heads at whipsaw events, but this is a great example of why in most cases, this happens.

It also should highlight why in most cases, a run on any currency is not in anyone's interests day to day, and is the logic behind my methods. Seems like yours too.

For me, indicators, custom or otherwise are next to useless for their textbook applications. I do use some indicators in scalping lower frames, but certainly not in the way they were intended!
I don't believe that TA works in the long term, seeing how traditional TA concepts are the most widely used in a business where 90%+ people lose money overall, it's a pretty safe assumption. You can curve fit indicators to any scenario, but when the scenario changes, the results appear as red in the account balance.

Thanks for the post. Good info there.

So what is your system based on? You mentioned it was looking for more profit then mine.

Alright everyone. I just checked our poll results. We have 36 votes so far and and the 10% option got the most votes! Because 10% was the most popular option I'm going to be adding a demo account to my trade explorer. This demo account will be using my high risk EA settings and shooting for 10-15% profit monthly. I know backtests only mean so much but I just finished running one with the high risk settings from 2010-2015 current date with only 38% DD. Now 5 years is not a lot but that's why I call it my high risk settings. You can see in the test that the total profit was $8500 on a $1000 account in 5 years. That averages out to be over 13% per month in this backtest. Because I'm using an "open prices" backtest the take profit is not always correct. All the trade entry's are though. It's likely that I'll get closer to 10% then 15% per month on the demo.

My live account is running the lowest of risk settings by the way.

I can't add the account till a trade is made. Not sure when that will happen. Probably in the next 24-48 hours I would guess. Keep you posted.

The 10-15% settings should be a lot of fun. Hope they work

I wouldn't say looking for more. I only take what the charts give me, and recently things have not been great.
Currently my bread and butter trading is in a really flat period. The whole month of March only gained a little over 1%, and brought my average gain (from 1 years trading) to a little under 15% monthly.

This method is for all intents and purposes a single candle reversal system on H1 or H4, relying on a fairly ranging condition and a good few PA parameters before I pull the trigger.

I trade it on 8 pairs, but given that for the most part lately, the moves have been directional, and ADR's on EU have been far larger than "normal" my system has suffered. Not so much in terms of excess losses, the signals simply didn't evolve.
My current max DD for 1 years live trading is still only 7%.

As a scalper at heart, I have am always playing with various scalp methods on short TF's, like the one on my TE. Put simply, it's an M1 method which counters sudden moves, particularly when new money comes into the market. London open etc. The TE looks great, but I openly admit I blew 2 other demo accounts while refining this idea.

In February I took this one live to a smaller account, and after 2 fairly large headaches, I have settled on my parameters and it's going well.
However, I'm under no illusions. The gains from this are great, and deep down I'd love to believe I could incorporate this scalping method onto my main account, but I don't think it will be the case.
It's too risky and I have grown tired of experiencing huge DD's on the account that pays the bills. It's just not worth it. I prefer slow and steady.
The scalp account is there to satisfy an itch in truth, but I can make a little money from it too.

I'm looking forward to seeing how your increased risk model goes. Using EURGBP is great for ranging, but I personally don't like the pair as I was never able to capitalize on the smaller retracements within the range.
I'm not a fan of EA's anymore. been burned too many times, and besides, I can't get the logic for my main method coded.
But I will watch yours with interest

I originally looked for a good price action method to do my strategy as I thought it would be more reliable. I'm still trying to find it but I'm now definitely less urgent as I think I found what I was looking for.

Your system idea looks great! Sounds like our systems both look for price reversals. Yours has less draw down and more profit which is awesome. You've tested it for how long? Sounds like over a year live? Whatever you're doing on this explorer demo account really seems to be working by the way.

I'm also always scalping on the side. The dream behind a profitable scalper will probably never go away but I do realize it's extremely unlikely I'll ever use a scalper live as well.

Yeah, I was burned many times by others EA's. That's why I decided to have my own created. I knew exactly how mine traded and what to expect profit and DD wise. This helped in gaining more confidence with EA trading.

So I did a more extensive backtest with the high risk settings. The EA did very well from 1994 to the beginning of 2008. Then it blew up in mid 2008/09. It was fine again starting in 2010-15. I guess the stock market crash was to much for it to handle with high risk settings. So as long as a 2008/09 mess does not happen again I should perfectly fine with these settings. As long as 2008 doesn't happen...lol. Who knows... any day it could again which sucks.

My other EA....the one on my live account, I just found out could be pushed harder as well. I can squeeze out 28% average per month with an account of $1000. 3 points during the 21 year test the draw down exceeded $1000. So chances are I can probably get away with pushing this one up as well if it likely blew up only 3 times. Once in 94, once in 2001 and once in 2004.

All us real traders do know that we need to prepare for the worst when it comes to live trading so I'm still unsure if it's smart to run these settings live. Any tips on this thread?

As i said, i think the title of your thread is about the most realistic and grounded I've seen so far.
That's what drew me here.
Without knowing a little more about the specifics of your entries, I can't really add too much in terms of trade advice.

All I will say, is that to all prospective traders (and supposedly experienced ones) this type of target is far more sustainable, and along the lines of what the true Fx money managers achieve in the long run. If it is sustained, then watch closely!! This is the way forward!

Yes, I have added a TE that is pretty good in terms of gains. Not the most outstanding I've seen here, but not bad.
BUT!! This is a demo account which, as I have the chance, is copy trading a smallish (I don't mean to be rude, but it's smallish to me) $1000 account that I run live simply to satisfy my need to scalp. I love the high risk high reward. And, I am able to think in terms of %. The dollar value doesn't concern me so much i this case.

This in no way reflects the reality of trading for a living! If this is your goal.
It's easy on a demo, and an account you don't care to lose. You hit the button, and let it go. Today I suffered massive DD on my demo, but pulled it back to a great win. Why? Because I don't care about it. Scalping to me is just the fun part of this game. If you can make some money, pull it out ASAP. But you won't get rich from it long term.

Trading with a decent balance, say $10k+ requires a different mindset, unless you can simply throw away $10k. Most of us can't.

I truly believe that small risk and sustainable reward is the only way to turn the average trader's dream into reality. Sure, most are lured in by amazing TE's run on demo accounts, or $200 live accounts. But this won't free you from the 9 to 5. Only sustainable growth will.
With the way that most nation's interest rates go, and even the best index tracked managed funds, 2-8% is going to beat most of the projected growth they can offer by far. Anyone should be happy with this, trading Fx.

With regards to your specific EA, of course, no one can account for a 2008 style crisis. But I would say, that when the Fed decides to raise rates, there may be a similar event. If I were you, I would switch off the EA at ANY impending US rate decisions. I simply wouldn't risk it.
I believe the market is random with levy flights, so that levy flight can theoretically happen anytime. Any EA you use should really have wide enough parameters to absorb a good run against you. Again, not knowing your specifics I can't say how much trouble you'd be in if this happened, but I would hope you have factored in some decent pip moves.

I would ask, your current BT results from the EA...is this using the same parameters and increased initial risk, or does it use widened parameters across the boards?
The live one, you mentioned potential $1k losses, during the BT. Of course if you are sitting on $3k profit at the time, it's not so bad, but is your initial risk % based or do you use a fixed lot size regardless of account balance?

The reason I ask of course is because compounding is the devil in disguise for most traders.
All are happy when their compounding gets them from a $1k account to a $3k account in 5 months. But, if the risk is % based, when a 30%+ DD happens, they are crying at the loss. I know this well, I've been there!

I'm curios to see how your EA manages the forthcoming events, particularly in June when most predict the Fed to take some action. At the very least, we should see some severe volatility.
In general terms I am very skeptical of BT results that go beyond 5 years. Especially when you talk about the 90's when the internet was in it's infancy and Fx trading was a totally different game. I would say that for the most part, any BT more than 3 years old is fairly meaningless, because the market itself moves in cycles, both in volatility terms, and in trend. Knowing what happened in 2001 won't be of much use to us now, because the market is dynamic and evolves with new information. Each time new information becomes available the market becomes more efficient in absorbing the information and reacting to it. It's just my opinion but I'm sticking to it

As far as my main live account (the one that pays the bills as it were), yes the DD is great and I have live traded it for 1 year when May comes. I demo traded and BT'd for far longer obviously.
But this won't win any contests or draw attention! It's just a slow gainer, and really reliant on a "normality" in the major pairs which has been absent of late. But, I'm not worried. Sooner or later it will come back to expectations, simply because it relies on the fundamental nature of the market. I don't mean analysis, I mean the way in which the institutions interact, and affect the price.
At the moment, they are all a little over exuberant. But this can't be sustained.

If you don't mind elaborating a little more regarding your parameters, entry signals, indicators etc, we can discuss more. But I understand if you'd rather keep this to yourself.

In general I'm just interested in how your low risk model compares to the higher now.

Keep up the good work, and good luck to you!

P.S sorry, I tend to be long winded!!

Wow! What a response! Haha.

Thanks for the comment. I wanted to try to start a thread that was realistic but strangely enough it doesn't seem to be what most traders are looking for as the interest with the thread has not been big. Maybe it's because I haven't said much about how I'm trading. I at least wanted some good discussions which really only happened between you and me.

Seems like you have a good grasp on the market which is helpful to not just me but others as well. Yeah, I think you may be right. Just because the market crashed in 2008 doesn't mean if it happens again my EA is automatically doomed. Price is always different. An interest rate change could even do me in if things really go crazy. The EURGBP would need a massive trend with almost no bounce back for months. As we know anything is possible. If the rate change is happening in June I think it's wise to keep my high risk settings on at to least to see how it's handled.

Back-testing the past 5 years has been a piece of cake for both my EA's. The best performance time really.

My system is based on 2 indicators. The arrow indi is signal and the second indi is the confirmation. Trades are entered on confirmation. The EA is used on the 1 hour with these 2 indicators using a similar management method described in my first few posts. As you can see the system is quite simple. It trades simi-martingale. In most cases this is dangerous in trading but because signals are not taken very often the 2 indi's in tandem can find good ranges. If it misses a range because of a strong trend then it will try to catch the next one.

The heart of it is the signal indi. It's quite good actually. Both indicators are custom and can be found online.

I attached a picture of trade entry's

This is what a big draw down looks like with my none-martingale EA. (The one on my live account)

2-8% monthly return is realistic and achievable if you have a good system. over 10% is hoping for too much.
The more important factor is controlling risk, and don't worry, profits will come.

I my self prefer auto over manual trading.

Good Luck

Someone in an earlier post said...." In answer to your question 3-5% anything less then you should just be investing, not trading."

What do you think of this? Do you think he's right?

I didn't know there was a difference between a trader and an investor.

I doubt the lack of traffic on this thread is due to you not specifying your methods.
Sadly, it's probably a reflection of the disconnect from reality people have when it comes to expectations from forex. Most likely if you had started the thread with claims of making 50% weekly, or turning $500 into a million you would have 50 pages by now! Even myself, I put up my demo TE a few days ago and all of a sudden I have subscribers!

No one's interested in the fairly dull business of consistent profits. You see it all the time. Some guy puts up a demo TE with 1000% gains in a month and people flock to him. They treat him (or her) like a master and follow every word.
Then, next month when the account is blown, and the creator moved on to some other crap all the disciples are still moping around the thread looking for guidance. Never admitting the guy probably never traded a real dollar in his life and simply got lucky, once.
It's only made worse when said "master" then takes people off to some Skype group for "education" at a neat (and disturbingly consistent) $200 fee. I think we both know a good example of this recently on that other thread.
Unfortunately these guys keep popping up, with the same scam in different forms or with different usernames. Thankfully the mods have acted in this case.

Anyway, rant over! Sorry I just really hate this pollution of the forums.

So, your system looks interesting. May I ask do you only trade this on EURGBP? To be honest, if that's the case then extracting 2-8% monthly is pretty good especially on H4 charts.
The Indi combo is interesting. At first glance I though the arrow was some kind of modified fractal, but if it is, I can't discern it from the patterns.

So, if I understand correctly, just to follow the idea; you wait for the arrow to form to give your direction, then a little diamond thing pops up to give you the trigger?
Seeing as it's counter trend trading, I assume you have a fixed set of parameters regarding PT? Your own, or does your indi give it?

You mentioned Martingale on one method, but not live account. From the shot of your live DD, it seems you held trades in DD for a long time, but obviously took more signals as they came. I guess you didn't increase the risk, but it seems at the end you held the last trades in the basket for more pips? I guess this is how you offset the carried losses from the earlier, negative trades?
How do swaps affect you in holding trades for so long?

I don't mean to be trying to reverse engineer your EA, and I won't mind at all if you don't want to give answers. I'm just thinking out loud really.

But yes, looks interesting, and suits my style as I am also a counter trader.
The equity curve is steady, even with that DD, which is good.
I would imagine though, that this type of method won't play well on something like GBPUSD or EURAUD which tend to be bigger movers? Or could you adjust some parameters in the EA if the indis still have the same strike rate?

Anyway, thanks for posting the details. Looks interesting. It needn't be one way. I don't want to clutter your thread, but if you care to see some shots of the basic method I use I'm happy to post some. There's nothing special in them, nothing flashy. But if you're interested I'm not secretive.

You can simply pay the $200 to my Nigerian bank account!

I am sorry but your quote makes no sense and his does. Have been trading for institutions for a very long time and there are people that make money and have found there way, if you have not it does not mean that others cannot.
And if you claim that there is not a way to trade the market, why are you charging $200 .... to teach them what?? to make a pip and risk 10 pips,(this is your experience and hours you put into it), PLEASE !!!
Sorry Cubbybgood but when people talk from there ars.... it is not fair for the noobs....

Back to the topic of the thread....I would say minimum 5% would be a good conservative monthly return. For a Pro Trader could be a lot higher....20% + always of course with a small draw down, you do not have to risk the bank .... that is where you see the experienced trader.

4x

I like to look at it from an annual point of view, because at the end that what really counts.
2-8% monthly translates to 24-96% annual return, and that's a wide range. Which segment fits each trader depends on annual expenses for running the business.

The lower segment of 20-25% annual return might be OK for an auto trader who already has a full time job and spends minimum time on trading.
While an 80-100% would be more suitable for a full-time trader.

Differences between traders and investors include leverage, time frame used, holding period and type of analysis.

It happened that I started a thread only few days before you started yours which talks about similar discussion regarding returns. HERE.

I actually tend to agree from a technical perspective. Forex trading is not investing, as there is no underlying value to the asset. If you buy 3 lots on EURUSD you can't exactly rock up to the broker and ask for your Euros!
If you buy shares in a blue chip company, you own part of that company and you are extremely unlikely to lose all of your invested capital. The same can't be said in Forex trading.

Yeah, I've always tried shooting for a consistent 10% a month but I didn't realize how hard it would be. I just kept cutting my expected profit down and down till I could make just 1% per month safely. Took me years to even do that. You guys are right. 1% per month is just not enough to bring home the bacon unless you have maybe 200-500k.

Cutting my risk back has opened my eyes to new types of trading though. I think it was very good form me. It taught me to be patient which is what I needed as a trader. As for my 10% goal I'm getting closer. Right now I'm at 2-8%. I'm sure I could push my EA's and trading just a few % more. It's all about finding a good risk reward balance which is never easy.

Hi Cubbybgood important to remember that 5% calculated monthly does not equate to 60% yearly but effectively a compounded 80% which is a great return. Really any return pitching above 10% a month is near impossible for a long term life in trading. If you are trading part time and can achieve 3 - 5% then compounded 100K is a great return for a part time venture and would work out to approx 1.6m. Consider investing your 100K in a 10% down, on a million dollar property, returning 8% per year. This comes close to your results, is the same leverage but considered less risky. You are effectively taking the same leverage as the property deal but if you can achieve the 5% on a leveraged 1:10 trading account then you will be ahead.

This is the difference between investing and trading. Trading you are active, possibly full time, in and out of the market and do not care about the long term value of the asset or derivative you are trading, Investing in mostly long term no touch deal.

Where a lot of traders go wrong is in the patience of return as they are mainly, young, impatient and highly leveraged. So they invest 5K into leverage 100 - 500:1. and blow it within a year.

Anyway its a good thread and think about the lack of traffic as a good thing! and a verification of where you are as a trader.

the problem with a system like this is that the risk is not controlled, it keeps adding to loosers, a set of orders is always closed when there is an overall profit, the number of open orders until set is closed will be unknown, the downside is unlimited

the deeper the open equity draw down the more risk is taken by adding new positions and when the EA is working well it only opens one order, doesn't pyramid winners so the winnings are small

risk should always be in proportion to account balance/equity...that is why accounts blow, too little money, too much risk

there is one stop loss in this system: the account balance, so my suggestion is that on a monthly basis remove the profits from the account, so when the account blows you will not loose everything, it may never blow in the next 50 years or it may blow next month...you just don't know

this EA shows the basic human cognitive bias which are harmful in trading : cutting winners short and letting losses run