I never set numerical goals on trading

Happy New Year!

I am planning to focus on Forex trading this year, and am not planning to move my assets easily for mid term investments. Among the capital allocated for Forex, I will put 25% into actual Forex account, and the rest (75%) will be sitting as a fixed income securities. The important point here is not to expose the 75% to risks.

I never set a numerical goal for trading. People have different opinions on this point, but I think it would be a big psychological risk if I get pressure from the urge to accomplish the goal. I will just dispassionately repeat the process of entry, loss cutting, and profit taking according to the rules.

As I always refer to, here is an episode from “Reminiscences of a Stock Operator“. Jesse Livermore lost the fortune he had striven to make, and made a great deal of debt on top of it. One of the reason his decision was clouded was that he needed some money to pay the medical bill for one of his family members.

“What does a man do when he sets out to make the stock market pay for a sudden need? Why, he merely hopes. He gambles. He therefore runs much greater risks than he would if he were speculating intelligently…To begin with, he is after an immediate profit. He cannot afford to wait.”

For a similar reason, I will not set a goal that would be a psychological pressure. Looking back, because I made over 20% reason in the last 4 months of 2010, a 72.8% annual return sounds like a reasonable challenge (or estimate), but I take it as a light dream that would be nice if I make it, and if not, it’s OK too. That is how I take it.

The other take home message from Livermore’s episode is to calculate your regular expense and leave enough emergency expense, put them in saving accounts, and never use them for investing or trading. I also have the rule not to stretch my living standard beyond what my paycheck and savings can afford.

(Note: The capital growth in 2009 since August 10 inception was 21.72%)

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Current risk exposure:

Rational Move always use stop loss orders, and this is the worse case potential loss over the capital for the currently open positions. This is unrealized loss is less or equal to the risk exposure.

Capital growth

From recent 100 trades (%) The growth right before the 1st trade is set to 0%.
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From recent 100 trades (%)
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Total returns

Since inception
(Aug 10, 2009)
Year-to-date Quarter-to-date
0% 0% 0%
This is a normalized value: the return on each trade is normalized against the capital just before the trade execution. This way, it is eliminating the effect by the capital change from deposits and withdrawals. The calculation thus reflects the trading performance of each trade. The value does not contain unrealized profits and losses. RM's trading strategy never risks more than 5% of the present capital. Not including subtraction by tax.

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