How to plan your financial goals?

How much money can you make with trading?

So many brokers, suppliers, traders talk about trading, indicators, charts, rules and these sort of things but they try to avoid the money topic. It's weird, isn't it? Trading on the market is all about the money! Before you start trading you should know that how much money you can expect or if you've already been trading you have to know that if your result is normal and safe or extreme ( low or high ) and need to be changed.

The market is always right.

First of all we can agree on the fact that: 'Anything is possible on the Stock Exchange, and so it reverse.' (Andre Kostolany) You can double your capital on a monthly basis and you can lose all your financial resources within a couple of days. But these scenarios are NOT NORMAL! None of them.
You have to develop your personal financial strategy to ensure that your capital is safe and you reach your goals as scheduled.

What does my profit depend on?

These are the main conditions you have to consider first:

-Which market(s) do you want to trade on? (Nasdaq, NYSE, ASX, or commodities, futures, options, currencies )
-When can you trade ? (intraday, morning, during working hours, afternoon or late night)?
-How much time do you want to spend with this activity? (20 mins daily, 8 hours a day, or just 2 hours weekly)
-How many trade signals do your strategies give you and how often? (12 signals daily, 10 signals weekly or just a few monthly)
-How strict Money Management rules do you use?
-How efficient is your strategy that you trade with?
-How much money do you trade with?

According to my opinion and experience if you KNOW the rules and FOLLOW the rules with everyday trading, you can make 15%-35% of your capital safely on a monthly basis. If you ignore the rules ANYTHING can happen with your account.

Let's see an example:
NYSE, NASDAQ, end-of-the-day trade strategy. Maximum Risk taken : 2% of total capital. Risk Reward ratio: 1:2.
No. of Trade signals:~7-12 signals monthly

Calculation:

You have 10 trades per month. 70% winner, 30% loser. Risk reward ratio is 1:2, which means that when you win you usually win twice as much as you lose with a losing trade. ( Take Profit = 2 x Stop Loss )

7 trades x 4% = 28% winner
3 trades x 2% = 6% loser
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Balance: +22% monthly

If you have your account $20 000, it gives you $4 400 profit monthly.
It is easy to understand that if you have $100 000 account to trade with the same scenario you can reach $22 000 per month (still 22%).
Be sure that your goals are realistic when you set them. Do not be greedy, do not chase the market. Strive for even rising account balance, avoid the hectic movements on it.

Next time I will write about my everyday routine preparing for trading.