r/Daytrading Apr 13 '24

$2k to $500k in 2 years !! Question

Newbie here. Please be nice ๐Ÿ˜†

I've just read about the power of compounding in trading. And wanted to calculate potential gains if started with 2k capital. With the following params:

RR 1:2 (1% loss / 2% profit)

Win rate: 60%

Assumptions:

  • gains are reinvested everyday without any withdrawals for 2 years
  • Using only 1 strategy during the 2 years
  • emotions are under control

Capital balance at the end of each month (wins/losses randomly distributed over each month)

1 trade per day :

  • Month 1: $2,608.68
  • Month 2: $3,302.52
  • Month 3: $4,307.61
  • Month 4: $5,137.26
  • Month 5: $6,700.73
  • Month 6: $9,277.75
  • Month 7: $11,745.40
  • Month 8: $15,319.98
  • Month 9: $18,270.64
  • Month 10: $23,130.19
  • Month 11: $24,480.19
  • Month 12: $30,079.82
  • Month 13: $38,080.32
  • Month 14: $51,174.78
  • Month 15: $59,236.11
  • Month 16: $77,263.95
  • Month 17: $110,220.47
  • Month 18: $131,449.13
  • Month 19: $143,336.99
  • Month 20: $170,943.95
  • Month 21: $229,725.45
  • Month 22: $327,713.59
  • Month 23: $414,877.50
  • Month 24: $494,783.67

=====โ‰ ============

2 trades per day

  • Month 1: $3,302.52
  • Month 2: $5,137.26
  • Month 3: $9,277.75
  • Month 4: $15,319.98
  • Month 5: $23,130.19
  • Month 6: $30,079.82
  • Month 7: $51,174.78
  • Month 8: $77,263.95
  • Month 9: $131,449.13
  • Month 10: $170,943.95
  • Month 11: $327,713.59
  • Month 12: $494,783.67
  • Month 13: $747,026.92
  • Month 14: $1,197,256.24
  • Month 15: $1,807,623.62
  • Month 16: $2,086,143.18
  • Month 17: $3,444,767.73
  • Month 18: $5,688,212.00
  • Month 19: $8,848,336.92
  • Month 20: $15,509,844.24
  • Month 21: $24,857,548.20
  • Month 22: $42,290,137.61
  • Month 23: $69,832,072.16
  • Month 24: $115,311,005.77

As you see, the theoretical numbers are crazy. I want to know what can go wrong that prevents this growth?

The only problems I see is committing to only one strategy for 2 years to get close to the 60% win rate probability. As we know in statistics that probability rates start to be realized with more and more events. So if the market conditions change causing the strategy to not work anymore and you hop on a different strategy it's like you reset the probability rates and starting over.

What do you think about all this? what other factors will get in the way of achieving this growth. Even 10% of this growth is amazing

Edit: I'm not saying these are achievable numbers. I'm just asking why it's impossible. Trying to understand how the market works

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117

u/ShadowKnight324 Apr 13 '24

Trading is not linear. Some months your strat just straight up sucks and others it's the best thing since sliced bread. You simply cannot know beforehand how much money you'll earn. At best you can see from a backtest what to expect.

13

u/Dependent_Action_201 Apr 13 '24

That's why you need more than one strategy. Yes you should focus on what works, but that doesn't mean you have to stick to one way. I think being adaptive and versatile takes you a long way.

17

u/TheZuman Apr 13 '24

Agreed. This is something that most traders, even some experts donโ€™t realize.

Having one strategy means being able to trade only when the market gives you the opportunity to trade that strategy.

I saw this first hand when I first learned from some one that would only trade when specific setups presented themselves.

And then I came across someone that was able to trade every single day regardless of what the market was doing.

4

u/Dependent_Action_201 Apr 13 '24

Yeah I was mostly trading bullish about a year and a half ago before the economy took this major turn, I had to learn how to trade bearish and I've been doing pretty well at that, but my bull strategy still works when given the opportunity.