Can I make X each day/week/month in the markets?

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John Forman - The Essentials of Trading author

I received the following question yesterday:

I am looking for a way to make small amounts of money (about £100) per week regularly and relatively risk free.

Am I under the misconception that, the bigger the amount of money “people want” the more risk they take, (I suppose the more chance of the trade going the wrong way), and thereby, if I only go for small amount (as below) the risk will be less (because I would not be in the trade to long (or have I gotten it totally wrong).

As I only want to make relativley small amounts (£20.00 per day = £400 per month) is this relativley risk free and easy (or easier) to achieve. (what kind of financial commitment would this plan need, could it be done with a £250 stake, £400, £1000 ?).

This is a slight variation on a question that frequently gets ask by new traders. It really needs to be addressed in percentage terms. In that regard the query of the last paragraph would get changed to something like:

Could I make 40%, 100%, 160% per month? (using the £400/mo and reversing the stake figures order)

Now, in those terms it’s a bit easier to grasp the complexity of the issue, especially when we introduce the idea of risk in to the equation. How likely are we to be able to make 40% (nevermind the higher figures) per month “relatively risk free”? I would say not very likely at all. Returns of that size imply a higher than average risk level.

But let’s back up to a more general question. Is it possible to make 40% or more per month? Sure. There are no doubt traders out there making those kinds of returns. They are most definitely in the minority, though, and even among folks who consider themselves successful traders or investors returns like that would be judged extraordinary.

The point I try to make in my book and in all of my educational efforts is that each individual needs to determine what success in the markets means to them and match it up with their own personal risk tolerance. That is the core of any realistic trading approach and the foundation of finding the best method for her or him to take on the markets.

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