Realistic signal growth/gain. Mt4 Vs Mt5 - page 2
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I haven't got a clear statistics of equity and returns as such. But if at all it is imperative that we subscribe to signal, go for provider who doesn't hold more than 2 position at a time and focus on individual positions with decent SL of % less than TP.
Remember, we are trading against best brains in the world.
- If your trading is news driven then some days the price will go up on good news and on some other days go down during a similar good news.
-A bullish pattern will turn bearish and bearish pattern will turn bullish in matter of no time
-When number of long positions are high at a price the price start falling and contrary when number of long positions are high at a price the price start rising
-There will be U turns after triggering your stop loss and if you don't place a SL it will keep going in reverse directions to generate more losses.
The only way to be in the market is go for 1% trade of your equity. I personally feel a draw down of 10-20% is more than enough for an alert. for $1500 equity max volume should be 0.02 lot. Can we follow that rule?
That sounds like a very sound conservative rule that would ensure a trader's longevity in the forex world. It would certainly protect their followers' accounts should they choose to publish their signal.
My basic thinking has always been to look to keep drawdown at
a) less than 5 % per month
b) if drawdown is > 5% per month, then the gain for that month should be at least twice the drawdown to make the risk worthwile.
In addition, just like you, for me breaching 20% drawdown on a regular basis is a canary in the coal mine of account busting trading practise. Lets take the money management example that you've suggested and apply it to a trading system that has a risk reward ratio of 1:2 and wins 60% of the time. Lets also assume its a day traded system that trades once per day for 20 days in a given month.
As the system risks only 1% of equity per trade set-up, then we can deduce that such a system can expect an 8% loss (1 x 8 days) and 24% gain ( 2 x 12 days). Net gain would be 16% and assuming all losses occured on consecutive days, then maximum drawdown for the month would be 8% .
That rule you've suggested is one that must be understood before it can be bent but never broken!
And to answer my own question, it now appears that a realistic conservative average monthly gain is around 15% with a drawdown of less than 10% . This is what is sustainable over a long period of time.
Thanks for sharing...feel free anyone to add your thoughts
That sounds like a very sound conservative rule that would ensure a trader's longevity in the forex world. It would certainly protect their followers' accounts should they choose to publish their signal.
My basic thinking has always been to look to keep drawdown at
a) less than 5 % per month
b) if drawdown is > 5% per month, then the gain for that month should be at least twice the drawdown to make the risk worthwile.
In addition, just like you, for me breaching 20% drawdown on a regular basis is a canary in the coal mine of account busting trading practise. Lets take the money management example that you've suggested and apply it to a trading system that has a risk reward ratio of 1:2 and wins 60% of the time. Lets also assume its a day traded system that trades once per day for 20 days in a given month.
As the system risks only 1% of equity per trade set-up, then we can deduce that such a system can expect an 8% loss (1 x 8 days) and 24% gain ( 2 x 12 days). Net gain would be 16% and assuming all losses occured on consecutive days, then maximum drawdown for the month would be 8% .
That rule you've suggested is one that must be understood before it can be bent but never broken!
And to answer my own question, it now appears that a realistic conservative average monthly gain is around 15% with a drawdown of less than 10% . This is what is sustainable over a long period of time.
Thanks for sharing...feel free anyone to add your thoughts
5% DD is unrealistic and unsustainable, unless you are going for a very small monthly gain of 1-5%.
A good rule a friend told me is to keep DD lower than monthly profit. For example a 20% DD is not bad for 20-25% monthly profit, as 5% DD is not bad for 5% profit.
5% DD is unrealistic and unsustainable, unless you are going for a very small monthly gain of 1-5%.
A good rule a friend told me is to keep DD lower than monthly profit. For example a 20% DD is not bad for 20-25% monthly profit, as 5% DD is not bad for 5% profit.
I agree, monthly profit should be targeted to be at least equal to if not higher than working drawdown. Otherwise, the system is working too hard for its profits. Keeping a lid on drawdown however, goes a long way in keeping a trader solvent. I start to get worried when crossing the 20% mark. North of this is where prayer and hope takes over and trading stops, imho.
The odd month that working DD is above 20% does not worry me so much, its when it becomes a habit that concerns me. But then again, that is why traders categorize their systems as either conservative, moderate or high risk. Therefore, its important that a signal follower be clear what type of signal they have choosen to subscribe to. No point in blaming the provider if you wish to partake in a high risk signal and things don't work out as planned.
As a signal subscriber, it is just not enough to look at the growth/drawdown or any other performance statistics because numbers can be easily manipulated by using some kind of dirty tricks. For example, high growth low drawdown can be achieved by using account balance manipulation. As a signal service platform developer, Metaquotes should at least employ some strict policies to protect the interest of signal subscribers.
EXACTLY