Friday, October 15, 2010

Trading for a living: do you know how much you want from the market?

It's interesting to remember that while I was trying to make a killing in the markets I could almost never make good trades, with rare exceptions like in the fall of 2008, for instance, actually most of the time I was losing money, but once I realized I don't need to make 100 ES points a month to get a decent living from trading, I started doing much better, today all I want is 10 ES points a week.

As an Israeli friend of mine says: "You don't eat with two forks." :-)

Think about it for a moment: how much do you want to make per week to steadily grow your account and be able to live from trading?

I think that by fixing an achievable target (neither too small, nor too big) makes it "easier" for us to try and go get it.

So let's have a look below to see how much we need to invest x how much we can make weekly with a "small" 10 ES points target, after fixing the weekly target that you think you are able to achieve you just have to know how much capital you'll need to put at stake so that you will respect some risk management rules not to get wiped out when you are wrong, because no matter what you do, you'll lose in some of your trades.

If you've read my previous posts you know that the maximum risk my system allows me to have is 3% from my whole trading capital per trade, so based on that figure, let's get to the numbers:

So, if you want per week:                       Your minimum investment will have to be:
                                                                  (1st (#) setups for max 6 pt STOP, 2nd 3 pt max)

       US$ 500                                            US$ 10,000 (may trade with 1~2  lots)
       US$ 1,000                                         US$ 20,000 (may trade with 2~4 lots)
       US$ 2,000                                         US$ 50,000 (may trade with  5~10 lots)
       US$ 5,000                                         US$ 100,000  (may trade with  10~20 lots)
       US$ 10,000                                       US$ 200,000  (may trade with  20~40 lots)
       US$ 50,000                                       US$ 1,000,000 (may trade with  100~200 lots)
       US$ 100,000                                     US$ 2,000,000 (may trade with  200~400 lots)
       US$ 500,000                                     US$ 10,000,000 (may trade with  1,000~2,000 lots)

So, as you can see, with 10 ES points you may make an average of 5% profit per week, much more than any imaginable investment! And still very possible to make.

Even if you make only half of it, it's already very good, or even 1/3 of that target! Think about it.

For instance, if I had invested US$ 10,000,000 this week I would have made US$ 372,500! As I've made 7.45 points, wow! Really impressive. :-)

The beauty of having a small target is that it will help you work like a bricklayer, week in and week out, always repeating the very same process, and little by little taking bites from the market that will add up every day, and if you're able to reach that weekly target you'll be able to double your account every 4 to 6 months, isn't that awesome?

So, make sure you have an edge that works most of the time and play the game to win.

Best of luck in the markets!


  1. Renato, thank you for this fine quality post! Can you please elaborate on this part:

    1st (#) setups for max 6 pt STOP, 2nd 3 pt max

    I'm not sure I understand what this means. You recommend a fixed 6 point stop, regardless of lot size? Or does it mean something else altogether?

    What about scaling in and out?

  2. Thank you for your comments, much appreciated.

    I thought it would be a bit confusing, thanks for bringing it up. Between the brackets where I put the number of lots to trade with, the first number (1st #) is the # of lots to trade with a setup that allows a STOP of 6 points, for instance, and the 2nd number for a setup that allows a STOP of only 3 points, got it?

    But that does not mean you can't have different setups with different STOP sizes, it depends on your own style of trading.

    One might have a STOP of 20 points and still risk only 3% of his/her account.

    Hope it is clear now. ;-)

  3. Yes, makes sense now.

    And your thoughts on scaling in/out of trades? I'm sure you also hate experiencing immediate heat when entering a position so have you/do you scale in to mediate drawing heat?

  4. I am so happy to have found your blog! I just read your prior posts and you are certainly an inspiration to small traders like myself.

    Would you be so kind as to share one or two of the trade "setups" you typically look for out of the 10-20 that you mention?

    That would be amazing!

    Also, I don't see a "donate" button on your site. Do you have a favorite charity you would like a donation sent to?

  5. Ars, I won't share only 1 or 2 setups that I use each and everyday as I'll share all the 10 Diamond Setups as I call them, please wait, I'll let you know when they will be available through my Twitter posts soon. Stay tuned. ;-)

  6. Renato, as always a great, common sense post.

    Keep up the good work and good luck to you.


  7. Thank you for your comments Adam, much appreciated.