Profit targets in trading

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Many of you want to know the potential gains generated by a trading activity. Yet it's absolutely useless. What's important is how much you can lose.

If you ask several live traders to tell you their earnings, you will get very different results. Some will tell you that they earn 10% a year, others that they double their capital every year. There is a very simple explanation. This depends on the risk level of the trading strategy.

There are thousands of trading strategies. The only limit to a strategy is the trader's imagination. Each strategy generates a certain level of gain that must be related to the risk taken. The greater the risk, the greater the potential gain.

Setting an earnings target is doomed to failure



If you start trading by telling yourself, I want to earn x euros a month, you will get nowhere. You only impose an additional pressure on yourself in your trading, that of reaching your earnings target at all costs.

In the vast majority of cases, you will set yourself objectives that are often unattainable. Earning €100 a month doesn't interest anyone, what everyone wants is to earn several thousand euros to make a living from trading or make a nice income supplement.

The problem is that to succeed in winning such amounts, you need a large trading account of several tens of thousands of euros (see living from trading, user guide), which of course you don't! As a result, you will take big risks (use a lot of leverage) to try to reach your earnings target with your small trading account. I will save you time and money, it ends in 100% of cases with a total loss of capital.

If you are new to trading, your goal should simply be to try not to lose, to last as long as possible, to learn how to trade well, to get to define a winning trading strategy.

It is the level of risk that determines the gains, not the other way around



To evaluate the performance of your trading strategy and know the potential gains it can generate, there is only one way and that is to test it over a long period. Once you have a clear idea of its performance, simply adjust the leverage of your trading strategy to generate more or less gains.

So the question to ask yourself is: How much are you willing to lose? The more able you are to lose a large amount without putting yourself in difficulty, the higher your earnings target can be.

No need to rely on existing trading strategies



Even if a winning trader gives you his trading strategy, you will not get the same trading performance as him.

The first reason is your level of risk aversion (your risk tolerance threshold). Some people take more risks than others and will therefore necessarily generate more gains than others (if their strategy is a winner). They'll use more leverage. The more risk you take, the more you can have big gains, but also big losses!

The second reason is your psychology. We all behave differently in trading. Some manage to let their winnings accrue, others don't. Some have a lot of time to devote to trading, others do not. Some are made for swing trading others for scalpingetc.You will therefore be unable to follow the medium/long term strategy to the letter because it will not be adapted to your investor profile.

The third reason is the level of confidence you have in the strategy. If you have built your own trading strategy, you have tested it extensively and you have full confidence in it. You know that it can go through phases of losses but that in the long run, it is a winner. You also know how to change it if market conditions change. On the other hand, if you copy the strategy of another trader, you will doubt the strategy at the slightest phase of loss or if you cannot reproduce the same trading performance as the strategy’s author.

All these reasons make it impossible to apply the trading strategy of another trader, and therefore to generate the same earnings as him. Whether a trader tells you he makes 1, 2, 3, 4 or 5% a month, it doesn't tell you how much you can expect from your trading. Every trader is different.

Conclusion



Instead of focusing on what you could earn, it might be better to focus on your trading. First you have to find a profitable trading strategy. It’s your strategy that will give you an average percentage gain per month. Depending on what you are ready to lose, you can then set yourself a winning goal.

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