Many of you want to know the potential gains generated by a trading activity. However, it is absolutely useless. What is important is how much you can lose.
If you ask several traders living in trading to give you their earnings, you will have very different results. Some will tell you that he earns 10% a year, others that they double their capital every year. There is a very simple explanation. It depends on the risk level of the trading strategy .
There are thousands of trading strategies. The only limit to a strategy is the imagination of the trader. Each strategy generates a certain level of gain which must be related to the risk taken. The greater the risk, the greater the potential for gain.
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Setting a winning goal means running to its loss
If you start trading saying to 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 profit objective at all costs.
In the vast majority of cases, you will set yourself goals that are often unachievable. Earning 100 € per month does not interest anyone, what everyone wants is to earn several thousand euros to make a living from trading or make a nice extra income.
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), which of course, you don't have! As a result, you are going to take big risks (use a lot of leverage) to try to reach your winning goal with your small trading account. I will save you time and save your money, it ends in 100% of cases with a total loss of capital.
If you are new to trading, your objective should simply be to try not to lose , to last as long as possible, to train well in trading in order to define a winning trading strategy.
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The level of risk determines the gains, not the other way around
To assess the performance of your trading strategy and know the potential gains it can generate, there is only one way, it is to test it over a long period. Once you have a clear idea of its performance, simply adapt the leverage of your trading strategy to generate more or less gains.
So the question to ask yourself is: How much are you ready to lose? The more you can lose a significant amount without making it difficult for you in your life, the higher your winning goal can be.
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No need to build on existing trading strategies
Even if a winning trader gave you his trading strategy, you would not get the same trading performance as him.
The first reason is your level of risk aversion (your risk tolerance threshold). Some are more daredevil than others and will therefore necessarily generate more gains than others (if their strategy is successful). They will use more leverage. The more you take the risk, the more you can have big gains, but also heavy losses!
The second reason is your psychology. We all have different behavior in trading. Some manage to let their winnings run, others don't. Some have a lot of time for trading, others don't. Some are made for swing trading , others for scalping ... you will therefore be unable to follow the medium / long term strategy to the letter as 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 have full confidence in it. You know that it can go through phases of loss but that in the long term, it is a winner. You can also modify 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 loss phase or if you cannot reproduce the same trading performances as the author of the strategy.
All these reasons make it impossible to apply the trading strategy of another trader, and therefore generate the same gains as him. Whether a trader tells you that he makes 1,2,3,4 or 5% per month, it does not allow you to know how much to expect from your trading.
Conclusion
Instead of focusing on what you could gain, focus on your trading! First you have to find a profitable trading strategy. It is your strategy that will give you an average winning percentage per month. Depending on what you are ready to lose, you can then set a winning goal.