BarroMetrics Reviews: Reasonable Expectations II
Let’s turn now to the nub of Gary’s question: should his goal be a big or small one?
Gary, my view is if I am a trading newbie i.e. someone who has not made money over three more or less consistent years, then I’d focus on:
- completing and learning from my micro account trading. Once I have completed 15-20 trades and I have shown a positive expectancy, I’d then trade my normal size and ensure
- consistent execution of my trading rules and risk management plan
- learning from my mistakes (this assumes I am keeping a record my trades)
- aiming to breakeven for year 1. Thereafter gradually increase my outcome goals to around 15% to 20% p.a.
I don’t know what $500 p w x 52 represents a percentage return. If you are expecting to return hundreds of percent a year, then I would suggest you are on a hiding to nothing. A consistent three figure return on capital with low risk of ruin is a black swan event for most, if not all, traders.
The question we need to ask ourselves is: do I want to accumulate wealth slowly or do I want to run a high risk of ruin?
Most newbies act as if they want the latter. And that is one reason why one recent study showed that 92% blow their account within the first 10 months of trading i.e. they either have to top-up or stop trading.
Speaking for myself, I’d rather produce as consistent return of around 20% pa return on capital with as low a risk of ruin that is consistent with my goal. This means I double my money every 5 or so years without endangering my capital base - at least not so far.
Refer this blog post to a friend or colleague…
