Your Profit Is Not Everything
In this weekly video:
00:29 – Profit is not the most important number
01:15 – Real examples – with a 421% return
02:17 – Trade Copier at +20% gain in 6 months
03:30 – A massive drawdown
04:15 – Look at the bigger picture
I'm going to talk about why the profit you make as a Forex trader is not the most important number. Sounds interesting. Let's talk about that and more right now.
Hey Forex traders, Andrew Mitchem here, the owner of The Forex Trading Coach. Video and podcast number 280.
Profit is not the most important number
And it's a bit of an odd discussion. Why is the profit that you make not the most important number as a trader especially when so many people don't make money or don't make a profit through Forex trading? You've all heard the stats, 90, 95% of people fail to make money. So, why is it then that I'm saying, well, those who are profitable, it's not the most important thing to know that I've made so much money per year. Because here's the problem, for the people who don't make money, it's very easy to criticise the people who do make money. It's the whole social media hide behind the screen type of thing, and it just happens all the time, and I get it consistently.
Real examples – with a 421% return
I'd like to share with you a few examples, two from myself and one from another company. So, with my own example. If you had started following my daily trading suggestions with a $100,000 account back in 2011, and today, that account would be, with compounding, $521,000. So, it's a $421,000 profit that you've made on your original 100,000 in seven and a bit years. Now, that works out at a 60, six, zero percent return per year on average on your original funds. Quite an outstanding figure for something that all you need to do is copy what I'm putting on the membership site each day at half a percent risk per trade.
So, that becomes part of the equation, the half percent risk per trade to make 60. So, that's one example. So, I think that's a very outstanding figure considering it's just one time frame, five minutes work, once a day.
Trade Copier at +20% gain in 6 months
The other example is this. My trade copier which is running on the combination of trading robots that I've created myself. So, so far, in just over six months, it's up plus 20% right now. And again, it's quite an outstanding figure considering the drawdown is very low and the risk per trade is very low, but a lot of people don't see that as exciting. And I had a discussion with somebody this week, and he was saying, “Look, here's another trade copier service and it's made 200% so far this year, and we're only at the beginning of July.” And I said, “Very good. That's outstanding. Why don't you go and join it?” Because he said that my 20% wasn't good enough.
Now, the thing here is that the company that was selling the 200% profit in six completed months to this guy sounded outstanding, and to most people it would sound outstanding too. The problem is, is that when I actually pointed out that the drawdown had been over 81%, I don't think he quite understood the importance of that. Think about it this way.
A massive drawdown
You have $100,000 there. Let's say you've got that drawdown right at the very beginning when you joined. Would you really want your $100,000 to be worth $19,000? Think about it.
So, yes a 200% return in six months sounded amazing, but an 80% drawdown is not realistic, in terms of, do you really want that? So, maybe the 20% return is actually not too bad after all, or the daily trades worth 60% return, considering we're controlling risk and our drawdowns are small. So, that's the message of this video on podcasts.
Look at the bigger picture
Just always look at the bigger picture. Don't just look at the returns and think, “Oh, this guy's made so many pips,” or, “This guy's even made percentages.” Yes, that's important to look at, but in the context of the overall scheme of things, look at the bigger picture, look at the drawdown, look at the risk, and then make your decision. It's likely to change the other way.
So, once again, this is Andrew Mitchem, The Forex Trading Coach. I'll see you this time next week. Bye for now.