Is this a flawed theory/concept? Is 5-8%/mth TOO conservative?

I've heard many a times about how the most consistent and realistic figures to aim for is 5-8% a month. Compounding that over a few years will indeed provide some serious increase in your account.

However, speaking to a full time intraday trader, he opened my mind to something else.

Why only aim for 5-8% a month?

He says let's assume your system has a win rate of 60%. And you use a 1:1 RR ratio. And you risk 2% a trade.

Let's say there's 4 trades done a day. And that's 20 trades done weekly. So that's 12 wins, 8 losses. Total nett profit of 8%. Multiply that by 4 that's around 30+% a month.

I do know if anyone consistently does 30+% a month he's going to be the richest person on earth in the next 1 year. However, the point isn't whether it's realistic or practical, but rather what's wrong with that calculations above?

Note that it's an extremely conservative number (win rate and RR). So am I wrong to think that 3-8% range is WAY too conservative?

(PS: This isn't about a 1 million dollar account. It will be a smallish 5 figure account with frequent withdrawals)

Hello alfis,

Is it too conservative?? I will give you my experience but that does not mean that it goes for everyone, I have learned in trading nothing is right or wrong or some things do not stand for all traders.
After the first 10 years of trading I used to straggle to make 5% a month(I used to try to use all the conventional "ideas" that fly around)... but that has changed in the last 10 years where I changed things really unorthodox and just did not stick to the rules. Also my mind set changed totally witch I believe does the trick of breaking the barrier to higher percentages on its own. (cause some strategies that I played with in my first 2-3 years started working only from this change alone.)
Another thing is what type of market is it every month....if my system will make 70% this month it does not mean that "that" particular system will make the same the next it might only make 5% this month, or even lose. But from my experience till now once you break the 30% barrier a month you rarely if ever see negative months. The market is not a salary that it's percentage is standard every month.
That is the reason that I always try to create different approaches and strategies.
Below is 2-3 new strategies that I am working on, you will see the different returns every month.
Now the above stands for me and my trading and does not necessarily stand for all traders. Hope it helps.

https://www.myfxbook.com/portfolio/bigtime/1159138

https://www.myfxbook.com/portfolio/u...apital/1196210

What I would like to mention is that you do not necessarily have to risk the bank to make a lot once you have got your stuff together.

4x

if you do 3-8% a month as a pro working with a lot of asset under management , you will be a billionaire pretty soon... A lot of people take numbers from the industry and think they can apply it to the individual retail trader which is not the case. The pros are in the business of maximazing fees, not returns. People who invest with them are usually risk averse, meaning they dislike drawdowns more then they like high returns. So for the pro institutional guy it make sense to aim for the higher risk adjusted ratio which means that the money manager might need to scarifice expected returns for less drawdowns and volatility in performance. This way it is easier to keep more asset under management so their fees are bigger and less volatile. Also they have to deal with liquidity issues, which makes it harder for them to be in and out of the market quickly and for a quick profit.

I think the picture is different for retail, the dynamic is different, If I start with a 10K account and I only trade the majors then liquidity is not an issue so your math make sense. The problem does not come from theoretical feasibility but from how you handle the high growth and the higher drawdowns that comes with it. Most people are risk averse and are much more affected by losses then anything else. If you can deal with the psychological issues that comes with having to sustain extended periods of drawdowns and you effectively have a proven edge that gives you 60% hitrate that will not falter with time then sure, anything's possible. But still, if you can only mangage 5 to 8% percent a month, you will still outperform the vast majority of the rest of us and be able to live a very prosperous life...

I second this reply .... I am talking retail on mine .... when I was trading for the desk my return was less than 5%....

4x