hey I am a beginner in the stock market so I would like to know if 8 percent monthly profit is sufficient or is it very less compared to other traders.
set index like nifty or sensex as the benchmark… if you are continuously able to beat returns of the index then surely whatever you earn is great tbh… but all this is not easy to achieve… good luck.
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thanks for the reply
@sajid_ahamed , say your trading capital is 1,00,000.
8% profit per month is 8000. (ignoring slippage/costs).
So, in a year that would be 96,000.
Wouldn’t that mean 96% profit in a year? Is that a realistic target? is that possible?
Some of the people I know try to achieve a yearly profit like 15-20% hoping to beat the index mentioned above by @FancyyCosmonautt. And again this is an average profit, which means some months and years they’ll see drawdowns/losses.
What I am trying to say is that we may not really be able to achieve that fixed target every month consistently.
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thankyou for ur reply,
ok @Nishantr let us assume my probability of profit is 80 percent ie win 4 in one trades but the risk-reward ratio is very bad for example 1 is 10 ( one rupee profit or 10 rupee loss)
do u think this strategy will be feasible in the long run.
You are trying to bite more than you can chew.
What happens when your risk-reward meets the probability? Consistent net loss of 6 rs for 5 trades.
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It’s personal choice
For me it is not sufficient
But always remember one thing If you need big returns you must be ready to face big drawdown
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With 8% monthly profit , you can easily make double of your money in a year. It is more than sufficient , as per the index fund returns or FD raturns. I mean, with index funds, you get 15-20% returns yearly & in bank Fixed Deposit, it would take around 8 years to double ur money.
But consistency is the major factor here. Getting 8% monthly profit would be good job.
Also try to find different trading system where risk to reward ratio is not that bad. Ideally, it should be 1:2(Risk:Reward). Have a trading plan. What if u get 7 to 8 loss trades in a row.
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“Everybody has a plan until they get punched in the mouth.”
Mike Tyson.
All theories are great, till you put real money on the line.
This one is realistic. But be prepared for more. Trade like you ll get 20 losses in a row.
No one likes to talk about losses. The more you accept the random nature of outcomes, you can built your own narrative.
Most won’t just have the grit to hang on, when losses come. Any potential strategy, they just won’t be there till the end.
It’s hard, cuz you have to find an edge. It’s more harder, since it involves you.
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I never thought of 20 losses in a row. But yes it is possible , one should be prepared for that also.
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The number is just hypothetical. I wanted to point how much ppl do not want to talk about losses, but focus only on profits.
8% dream can be a reality, but when drawdown happens, the brain will just shut down. And every strategy faces a drawdown. It’s a normal variation, or there isn’t any edge left.
It’s that one has to account 8% loss to. Now, that’s more like trading.
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In strating of career every trader must face the situation to doubt their strategy and will modify their plan with out giving time to the strategy to work.
Facing drawdown is the toughest part of this game.
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@ramu this was my exact concern. but is there any strategy that would be profitable if the risk-reward ratio meets the probability of profit I would definitely like to know?
@Mohammed_Yasin_Shaik t if i go for a better risk reward ratio the porbabilty of profit or winning trades comes down.
im trying to find a balance beween both
simple mathematical formula
Expectancy = avg profitwin% + avg loss * loss%
Reward to Risk is 1:2
And win% is 75. ie you win 3 out of 4 trades
after 4 trades you will get 31 - 1*2 = 1
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If we are to solely rely on risk-reward and profitability - simply flipping the trades will turn numbers in your favor. But will it even work? Simple way to verify it is to backtest.
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Most people aim for 3 to 4 percent monthly on a consistent basis. 8 percent consistent returns every month with decent capital is next to impossible.
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Ok. let us look at this with an example.
Assume your trading capital is 1,00,000
Risk Reward ratio defined by is like you are likely to win 1,000 rupees every time you are ina winning trade. And you are likely to risk 10,000 rupees every time you are in a losing trade, right?
80% probability profit means a 20% probability of loss.
Your “best case” winning streak will mean you win a max of 80 trades in a row. So you win 80,000 rupees after 80 trades. That sounds cool. You suddenly almost double your capital to 1,80,000.
But, what if you don’t get that best-case winning streak in the beginning. You actually hit your worst-case max losing streak of 20 losses in a row? after successive 10 losing trades (you lose 10k with every trade) you have no capital left to trade and last even those 20 losing trades.
I feel we overrate “trading strategy”. What we ignore the most is “money management”. We need to cut losses strictly so that we don’t lose more than 1 to 2% trading capital in each losing trade.
@sajid_ahamed i hope I was clear in what I was trying to convey to you. Good luck.
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It is a decent profit but for that, you have to trade in perfect stock and you have to learn indicators for that
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