Need some wisdom from fellow traders

Here's what I am thinking:

That to be a full time retail Forex earning around the US national average income you need:

1. A big amount of capital and
2. The skills to squeeze a profit out of it consistently.

Most retail traders, when they start to trade, don't have both.

If they're lucky enough to be able enhance their skills to a level where they can make consistent profits - they are still left earning peanuts.

Don't get me wrong, when I started out trading I didn't really started with the aim of making millions.

The motivating thought that I had while suffering emotional pain and learning lessons the hard way was that once I started making consistent profits out of Forex Markets - all the hard work will be worth it.

I guess I started trading with the intent to learn a skill valuable enough to make me a living.

After sixteen months of making mistakes and evolving as a trader, my trading style is such that I managed to churn out around 4% per month since January with a max drawdown of less than 10% and around 80 trades per month.

I do manual trading, requiring four to six hours of screen time per day. I agree that the sample time is small and I am sorry I do not have a link to myfxbook or other third party sites to prove my statements - so let's just go with the assumption that I'd average 4% in the future also.

I say trading style and not trading strategy because I think it is the style that is being honed and crafted - strategy after some time becomes a method to achieve relatively high level of confluence in entries.

Like many others, right now, I do not have a large trading account - in fact I have around $2800 in my account. So essentially I have earned $110 to 180$ per month since January.

Reading around Forex Factory it seems many people agree on the conclusion that making 8 to 10% per month consistently will be an outstanding performance. So when I look at that fact, my own performance of around 4% doesn't seem that bad.

Now a person earning 7$ per hour, working at Mcdonalds in US for 40 hours a week - makes roughly $1120 per month. And for someone like me - who makes 4% per month of trading capital - to earn that much, I'll roughly need a trading capital of $20,000.

Keeping the 4% per month criteria in mind, to match average national income of US in 2014 - $53,000 - I'd need around $115,000 to be a full time trader.

I thought of trying to have an EA built but my style doesn't really has one set rules to follow I mean I keep in mind several methods by which I can make an entry and keep in mind some other things when exiting but can't really write that down in a fixed, to be followed way by a bot.

So I looked into the option of becoming a signal provider. I thought there were bound to be people looking for consistently profitable signal providers and I was ready to put in the X number of months required to show that I was consistently profitable.

Turns out that the most followed traders at MQL5 are employing a variation of the martingale style of trading with success ratios of 97% and above - were willing to provide their services for 20$ a month per subscriber and the most followed signal provider had 230 something subscribers. Essentially if you do not trade the martingales you won't be able to boast of awesome success ratios and subscribers would rather follow a ticking time bomb with 99% success ratio than some sensible trader (there were actually five or six very good providers who only had 20 to 40 subscribers paying 20 each).

Signal Providers at myfxbook had both demo and live subscribers listed combined so I couldn't tell how much they were making. Suffice it to say, reading from a comments there, that one can perhaps earn around a 1000 bucks being a signal provider - and that too after months of trading and everything.

I am aware that earning constant, low amount of profits will gradually compound my trading capital. But if I'd be making let's say 50% per annum from now with 3000$ capital - I'd have around 10,000 dollars of trading capital after three years of trading four to five hours per day.

So I ask those traders with experience and wisdom - what should my next steps be if I cannot arrange even a $20,000 trading capital. Do I continue to earn peanuts or accept the fact that for a retail trader, just having the skills isn't enough - that a retail trader should have a big amount of capital and skills.

Wouldn't the best option at this point to save up money from your dayjob until you have enough to to comfortably trade and live off the profits?

This will be a contentious point, but you could consider increasing your lot size (with a commensurate increase in drawdown).

It's an option, but increasing lot size could affect trading psychology. I think if you have a winning formula I would hesitate to start throwing wrenches around.

@mhirama - it's kinda tough to save up to $120,000... and then invest it in forex when that level of capital can be employed in relatively safer businesses (friends of mine are minting real $$ with e-cig shops or buying cars from auctions and selling them to people or other businesses)... but I understand your point, perhaps I can save and invest a smaller amount but nevertheless I do feel bit stuping buying into the myth floating around of not needing big capital to be successful in Forex --- thanks for taking your time and replying.

@honestknave - I trade 15 markets - and I have assigned a maximum value of 0.07 lots per market, which means I may have 7 positions of 0.01 lots at one time per market - altogether as of now I can have potential maximum trading size of 1.05 lots - keeping in mind my trading capital of around 2800 - I think that's plentiful, cuz if I increase the size of one position to 0.02 lots then it comes to potential maximum trading size of 2.10 lots which might take drawdown beyond 30% --- thanks for taking your time and replying.

If you are truly committed to the idea of earning a living from trading you CAN do it. Show the same dedication and commitment to raising capital as you did to learning your trading craft. Remember back how many hours you dedicated to learning and failing and then learning again. If you're anything like me you have spent at least 16-18 hrs a day at this for YEARS. Now that you have a groove and a plan don't let go of it...

It is now time to get even more intense and start doing anything you can to raise your capital. Sell stuff, get another job delivering pizzas, heck shine shoes...anything to start raising your capital. It will go faster than if you did nothing. Meanwhile your trading will also produce results.

Making just another $500 month even washing dishes will yield, double your current capital, in a year. Do that for another two years, and dedicate your funds to trading...then grow, grow, grow that money...

BTW if you can truly make 50% annually, and word gets out about that, the WORLD will beat a path to your door. Don't discouraged get INTENSE.

Hi
I averaged last 4 months about 22% I can provide my stats if needed.
I noticed you said you trade 4-6hrs every day.I trade 3hr or less most days 2 and some days none just glancing at screen.Trick is to know when NOT to be trading and when to be.When to hummer trades and when to WAIT.
Think of trading like hunting majority of time is spent waiting right time to strike.
Read this article and truly think about it.
http://www.learntotradethemarket.com...-forex-trading
Best thing I ever read on Trading other then Stock operator by Livermore

16months making 4% is not bad better then blowing accounts but seriously it takes average 5yrs to see the bigger picture.Challenge is overcoming once's own impulses ,bad habits,psychological handicaps.
Try something interesting don't trade for 1week and just look at the prices and write down whatever that interest you.By not trading you just developed a discipline to take only trades with an edge.This is hard to do but do it.Become a hunter and develop predatory eye for it.
Regards

This.

You have given your scenario, but you haven't given your risk profile. How much do you risk per trade? Do you scalp, or swing. Do you scale in or scale out? Do you hedge? Do you build millipedes, or are you a one in and one out trader.

All these questions are asked because they matter as to how much profit you can safely make, and how much time it would take to make them. If you can compound at 5% a week for three years, you will easily be a millionaire starting with 2k. Your trouble will not be with your system, your trouble will be when the lots get to a point where each pip won or lost could pay a bill. When numbers start to get big the mind can play all manner of tricks on a trader. Few people if any ever talk about this.

excellent response!

First of all, congratulations on making steady profits!

Please remember that this is only my story and only one way out of unlimited ways of attracting funds.

In order to attract larger funds, you have to be able to communicate the numbers and statistics behind your trading system to friends and family. It should not be hard to attract somewhere between 1.000 - 25.000 $ if you have some decent results to tell your story around. Some years ago a friend wired 30.000 $ minutes after I gave her a presentation of my trading strategy and showed the results for the past year. And I wasn´t exactly J. Livermore back then.

I´m telling you this because attracting funds is some of the easiest part (after a while) of being a trader.

Now there is 2 concerns I´d like to address:

1. A trading systems average monthly/yearly return in terms of % is an useless number and only shows 1 dimension of a multi-dimensional story.

I have some friends that trade stocks and I always hear the sunshine stories about huge returns. But when I ask about the risk involved in just 1 particular trade, they cannot give me a straight-forward answer. Reason? They don´t trade as professionals with pre-defined levels of stop. If you don´t have a clear strategy of when to get out, the market will soon enough easily flush you out.

So my concern is your drawdowns (DD). 4 % monthly is great, but not with 10 % DD. Last month you return was better than mine - but my total risk and actual DD for April was extremely (and unusually) low - only 0,5 %. Do you understand why I´m sharing these numbers with you?

2. The mental stress of trading too large, too soon. 5-6 years ago I was contacted by some investors from USA (I live on Norway) that wanted me to manage up to 1mio $ in funds, if I did well. My system was just taking form back then, and I traded peanuts.

"Do you have any issue about trading much larger than you do now"? Of course not, I was telling them. Boy, did I lie to myself - and them, without knowing it. So they opened me a trading account of 35.000 $ or so, and I signed tons of papers, had a million conference calls and then I was ready to aim for the 7-digit account. Did I mention that DD was unacceptable, and at best should only be a few % in total (which of course is fine)?

I have never been more nervous in my entire life. The fear of screwing this up could not be any worse. Can you imagine how this affected my trading?

Moral of the story? You need to average your account up in your own pace, else you´d most likely cripple. Can you mentally accept losing 1000 $ in less than a minute? No/Yes? Where is your pain level?

I have not shared anything practical tips with you here, only my story that might help you to see things in perspective, hopefully. If you like, we can have a chat Skype someday, if you´d like to get a some insight/feedback on your risk profile or even your strategy.

By the way - I screwed up with NYC investors. I think I had 3% DD in a few months before we both understood that I was not ready. But the experience itself was worth more than money :=)

My view on your story is different from your, when you say:

"or accept the fact that for a retail trader, just having the skills isn't enough - that a retail trader should have a big amount of capital and skills."

That is a non sense, either you have the skills or you don't, and if you have the skills, 2800 usd are more than enough to grow them up to 20k in a month or two.

If you don't have such skills, even a 1million account will be useless to you.

What you should ideally do: just use bigger lotsizes (bigger risk), and let that 4% become 40% or 400%, for a few months, so you can have a big account.

Of course i read that your max potential DD with your current risk settings is of 30% already, so using bigger risk is out of question.
30% risk for 4% monthly profit, is pretty bad IMO.

Keep practicing

Great post.I love the DD emphasis. To me shhhhhhhhhhhhh keep it secret! Trade small enough that stress does not influence judgment. Often price returns to mean average something above 70% hence temprory DD can become a profitiable trade if the trade was small enough vs forced early loss due to panic because of position size.
I can't possible dwell into this due to shortness of time but look at any chart and you'll see false spikes...THat's MM taking average retailer out.One must design a system or trading style to overcome this , a daily occurrence.
Regards

@Gspajon -
Spent around 10 to 14 hours a day for quite some time, not years though, but thank you for your kind and motivating words - means a lot coming from a trader like yourself. You'd be glad to know I've started planning out how I'd get my trading capital to a respectable size and that I won't be trading with serious amount of capital (above $20k) till I've made consistent profits for at least a year. Thanks for taking the time to reply.

@Davit -
Thank you for the article - I do get the point of waiting for good high quality set-ups and I tried that but it didn't work out for me, so hats off to you for being capable enough for doing that. I am more of the multiple trades with mixed quality type. And your last reply is such that it makes me think you're doing it without risking too much and avoiding the spikes... nice. To each his own I guess. Thanks for taking the time to reply.

@Jmn5611
When I lose, it's around 1 to 2% of capital - don't really have a fixed percentage but the style is such that it comes to about that much.
Average holding time around 8 to 10 hours I think. So scalp/intraday - not swing.
No to scale in/scale out - No to hedge - No to millipede
Yeah mostly one in, one out but do take multiple positions in the same market
I said 4% a month, not 5% a week - growing 5% per week will be awesome, I agree.
Will keep in mind your advice of handling big money -- Thanks for taking the time to reply.

@Aediaz1
Thank you for your advice. To be frank I just won't feel comfortable trading with friends or family's capital. It will affect my trading. I'd rather save and trade with whatever I have.

I have a very clear idea when to get out and close a trade - assuming the trade isn't going my way. When in profit it becomes more murky and try as I might it just can't be perfected. Sometimes I could have closed earlier, sometime I could have waited it out more.

Concern 1: I said less than 10% but it was definitely more than 0.5% (I'm including floating loss as part of draw down so that is why can't really state an exact figure but the floating loss hovered around 4 to 6% when max I think) - awesome trading by the way, having that drawdown of 0.5%, keep it up.

Concern 2: If it's my own money I hope I will be able to handle the stress better. Thanks for the heads up.
As of now I've decided to just record my trading at myfxbook and build up a statistical data to back up my claims. So I'm really grateful for the offer of feedback/insight and talking on skype but I'm sure that will be more helpful if I have some verified stats.

Thanks for taking the time to reply.

@Tunera
If you'd take time and think about it, Davit answered as to why I can't do what you're suggesting. I'd love to earn 400% but it's unstable. Thanks for taking the time to reply.

I think 4% for four months is too little over too short a time for you to contemplate going full on with trading. And those who say 8-10% are right but that is for a much much larger account. The sad truth is for most guys on FF, you have to really rake in higher percentages (with greater DD and risk appetite) to have a sizable trading capital. Your estimate of 20000 is extremely low for going pro. Your estimate of 115000 is about right but not because it will give you an average US income but because you should divide that amount into four and use only one quarter as your trading capital. The rest is for a rainy day. Actually three rainy days. You cannot cannot cannot think of making anywhere close to the average US income for a long time to come. But I am not here to dishearten you. Many of us are in the same boat so if anything take this as an advice from a well wisher and friend.

Here is what you should do (in my very humble opinion):
1) Improve your strategy. It IS possible to increase your capital through trading but you need to rake in much much higher percentages. You need to use full leverage. Yes I repeat. You need to use high leverage like 50:1 (but not crazy ones). You might blow up accounts so if you want you can demo but I do not recommend demos much. You need to make less trades but with more accuracy. THIS IS VITAL FOR SMALL ACCOUNTS. DO NOT OVERTRADE. Be like the sniper. Those who suggest anything else for your situation is bullshitting. We can feel good about our trading by averaging small percentages and sticking to all the rules but honestly that will get you nowhere with small accounts (unless your only goal is to become a forexfactory hero). Remember, do not be limited by conventional wisdom.
OR
2) Find a side gig and start saving.
OR
3) See if you can rake in 4% consistently for at least a year. Use that record to raise capital from friends and neighbors.