By Jimmy Young
The tough love is this – if you try to double, triple, or quadruple your trading account in a short time (let’s say a year or less); there is a very high probability that you will blow out the account (lose everything).
And that is because you will be taking on too much risk. For example, you might be risking too large a percentage of your account on a single trade and a series of consecutive losers blows your account.
Or you might be repeatedly risking small amounts to win a very large amount – unfortunately, the chances of “winning that lottery” (catching that very large winner) are very small and your account might slowly dwindle to nothing without getting that “winning ticket” (very large winner).
I am not against you trying to make an extraordinary profit. Provided you understand the risk. In fact, many times I’ve let a good profit slip away in search of the “home run” trade.
Over the years I have tried many approaches and this
approach is my best suggestion
AN APPROACH WORTH CONSIDERING (educational; not investment advice)
- Set a goal of a 20% annual return
- Risk 2% of your account on each trade and try to make 2% on each trade
- You have a 10,000 trading account; 2% is 200
- You risk 200 on each trade and try to make 200
on each trade
If you did one trade a day (250 trades for the year):
- And 120 trades were losers (48%)
- And 130 trades were winners (52%)…
Net 10 trades winners X 2% per trade = 20% annual return
You can lose “almost” as many as you win and still make 20% return.