Some Thoughts On Reasonable Returns In Trading
What is a reasonable return on investment from trading? It depends on many variables, but don't be fooled by the scammers in the industry.
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This is a question that we frequently get asked and the answer is a tricky one. Because there are so many variables that can affect the performance and return on investment. But before we get into that, let's start by looking at a reasonable return on investment or a reasonable growth in your account. What is considered reasonable?
Now, retail traders often have an unrealistic expectation for the type of returns they can achieve in trading. And it's not their fault, it's all the false advertising of private jets and guys sitting in Lamborghini's out there that paint a very fake and false narrative of what trading is really like.
Now, some of these scammers will promise endless wealth and brag with fake accounts and fake records and fake money just to lure people into buying these signals or buying the never before seen trading course or education or whatever, but it's all bogus.
What it does is basically just place a very unrealistic expectation on what can actually be achieved in trading. Let's take a look at the industry. If you take an investment of $1,000 or $5,000, and you put that into an investment fund or bank, what do you think you are going to realistically make on that amount per year?
Yes, you can make a lot of money in a short space of time of leverage, but you can also lose a lot of money in a short space of time by using too much leverage.
So when someone asked me what they can look to make as an individual investor or trader, it really depends on so many factors.
So how much are you willing to risk in your capital? How much time do you have available realistically to trade and invest? What are your goals? If your goals are just to make a little bit of money on the side, then you're probably going to want to use more leverage than a trader like me, because a return of, let's say 30%, for me is an amazing result if you have it as a consistent track record per year.
But if you're trading with, let's say a $10,000 account, and you're making 30%, it's not really that attractive because you're only gonna making $3,000 for that year. But I would much rather do it that way, much rather do it slow and steady and build it up over time than trying to push and rush it and stand a chance of losing that hard-earned capital, because you're trying to leverage up when you shouldn't.
So if I get anything over 20% in a year, I'm basically outperforming some of the best investment funds in the world. More so if I'm consistently doing it year in and year out, then that compounding effect will pay dividends in many more ways than one.
Now, the other thing I would urge is that you need to also risk only, only what you can afford to lose. I can't stress this point enough. I have a personal trading account, and my aim with that personal account is to outperform all my other investments.
So my aim isn't trying to make a quick buck by piling everything together and seeing how much it can make out of it. The goal is completely different from that. If you're making huge amounts of profits right now, that's awesome and well done on that. But if those profits, if they're seeming to large, you might be risking entire too much.
So just be careful not to overexpose your account, don't over-leverage in any way and make sure that you're always following good and proper risk management principles. If you are making 20% annualized returns, or let's say you're making a 100% per year and you're doing it with a drawdown of eight to 10%, you're absolutely smashing it. And that's awesome but make sure to check that drawdown. If you're making 100% returns a year, but your drawdown is 50%, then that's not that good. So just make sure to always keep that risk management in control.
Don't try to get rich quick, so to speak, make sure that you're keeping your funds in control, keeping your funds safe. At the end of the day, yes, we are doing this to make a profit, but we also wanted to preserve that capital, which is a big point to always remember.
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If you find this content helpful, you’ll love Forex Source.
There’s a link below were you can learn more about it
https://bit.ly/2HFykNd
----
We interpret and explain price moves in real-time, 24 hours a day. Our team of analysts produce text, video and audio commentary.
You understand the markets and trade with confidence. Learn more at our website here: https://bit.ly/2HFykNd
-----
This is a question that we frequently get asked and the answer is a tricky one. Because there are so many variables that can affect the performance and return on investment. But before we get into that, let's start by looking at a reasonable return on investment or a reasonable growth in your account. What is considered reasonable?
Now, retail traders often have an unrealistic expectation for the type of returns they can achieve in trading. And it's not their fault, it's all the false advertising of private jets and guys sitting in Lamborghini's out there that paint a very fake and false narrative of what trading is really like.
Now, some of these scammers will promise endless wealth and brag with fake accounts and fake records and fake money just to lure people into buying these signals or buying the never before seen trading course or education or whatever, but it's all bogus.
What it does is basically just place a very unrealistic expectation on what can actually be achieved in trading. Let's take a look at the industry. If you take an investment of $1,000 or $5,000, and you put that into an investment fund or bank, what do you think you are going to realistically make on that amount per year?
Yes, you can make a lot of money in a short space of time of leverage, but you can also lose a lot of money in a short space of time by using too much leverage.
So when someone asked me what they can look to make as an individual investor or trader, it really depends on so many factors.
So how much are you willing to risk in your capital? How much time do you have available realistically to trade and invest? What are your goals? If your goals are just to make a little bit of money on the side, then you're probably going to want to use more leverage than a trader like me, because a return of, let's say 30%, for me is an amazing result if you have it as a consistent track record per year.
But if you're trading with, let's say a $10,000 account, and you're making 30%, it's not really that attractive because you're only gonna making $3,000 for that year. But I would much rather do it that way, much rather do it slow and steady and build it up over time than trying to push and rush it and stand a chance of losing that hard-earned capital, because you're trying to leverage up when you shouldn't.
So if I get anything over 20% in a year, I'm basically outperforming some of the best investment funds in the world. More so if I'm consistently doing it year in and year out, then that compounding effect will pay dividends in many more ways than one.
Now, the other thing I would urge is that you need to also risk only, only what you can afford to lose. I can't stress this point enough. I have a personal trading account, and my aim with that personal account is to outperform all my other investments.
So my aim isn't trying to make a quick buck by piling everything together and seeing how much it can make out of it. The goal is completely different from that. If you're making huge amounts of profits right now, that's awesome and well done on that. But if those profits, if they're seeming to large, you might be risking entire too much.
So just be careful not to overexpose your account, don't over-leverage in any way and make sure that you're always following good and proper risk management principles. If you are making 20% annualized returns, or let's say you're making a 100% per year and you're doing it with a drawdown of eight to 10%, you're absolutely smashing it. And that's awesome but make sure to check that drawdown. If you're making 100% returns a year, but your drawdown is 50%, then that's not that good. So just make sure to always keep that risk management in control.
Don't try to get rich quick, so to speak, make sure that you're keeping your funds in control, keeping your funds safe. At the end of the day, yes, we are doing this to make a profit, but we also wanted to preserve that capital, which is a big point to always remember.
-----
If you find this content helpful, you’ll love Forex Source.
There’s a link below were you can learn more about it
https://bit.ly/2HFykNd
