You want to know what kind of returns you can make?

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John Forman - The Essentials of Trading author

I saw that question again - “How much can I make….?” There are numerous variations on it, but if you frequent any of the major trading discussion boards you will see that question on a pretty regular basis. This, of course, is the result of marketing. Some of it’s overt and intentional. Some is not. Either way, the message is out there that one can make loads of money in the markets. Granted, there is truth to that, but a whole lot is left out. Even when the risks are mentioned, though, it doesn’t really matter. Folks fixate the upside, which is why that “how much” question will continue to get asked.

The problem, of course, is that no one can answer that question for anyone else. There is too much left out - details that need to be known. Potential returns are contingent upon a lot of different factors, most of which a great many traders don’t think enough about.

Every trader needs to define for themself what kind of trader they are. That means things like timeframe, market(s), instrument(s), and risk tolerance. Experience is also a significant consideration in one’s odds of success, because frankly a new trader (little to no experience) is going to be prone to making mistakes that will probably lower their potential returns.

Too few traders think about these things. They instead see gaudy return figures some traders achieve and want to know how they can do that. I can tell you that I have personally experienced triple digit return years in my trading. I can tell you exactly how I did it. Chances are, it won’t make too much difference to you. Why? Because something in the way I achieved those returns won’t fit for you.

I am not saying that trading system or methodology results cannot be duplicated. They can, but only if they are traded in the intended and defined way. One year I made over 200% trading stock options. That is a market many folks cannot or will not trade for one reason or another. My holding period on those trades was longer than some folks can tolerate and shorter than what some others would want. The risks I took were more than some folks would want to take and less than some others might.

The point is there are a lot of variables in there that could make the approach I used to achieve those results unworkable for someone else.

You want to know what kind of returns you could potentially achieve in the markets? Then first you have to define all the elements that are part of your trading. Once you can clearly verbalize the trading approach you will take (the one that best suits you), then and only then can you start addressing the question of the types of returns you can achieve with trading or investing.

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Here are some other posts which might interest you:

Can I make X each day/week/month in the markets?
What are your trading expectations?
Assessing Your Trading Expectations for Your Trading Plan
What’s the secret to making a living from internet based forex trading?
The Difference Between Trading and Investing