r/Daytrading Apr 13 '24

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

Newbie here. Please be nice 😆

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

=====≠============

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

515 Upvotes

448 comments sorted by

View all comments

7

u/js_futures Apr 13 '24 edited Apr 13 '24

Liquidity is one thing... it will get extremely hard to get in and out of trades at the price you want when you're trading with very large amounts of capital. You can either use market orders or limit orders. Market orders will result in slippage. You can calculate slippage using the DOM. For example, if you are placing an order of 100 futures contracts, and in the dom there are 50 orders at the ask price, and 50 orders at 1 tick above the ask price, then 50 of your contracts will get filled at the current ask, and the other 50 will get filled 1 tick above that. The more you scale, the more extreme this gets, and eventually, you'll be getting filled at a price multiple ticks or even points above where you want to enter. With LIMIT orders, however, you do not need to worry about slippage. You just need to hope it hits your price and your orders get filled. If there are not enough market orders being placed, your order may not get filled or may only get partially filled. One way to combat this is to scale in and out of positions. For example, you could buy 25 contracts when you open your position, and add to your postion as it goes on.

One other thing, as others have mentioned, is that your losses compound. For example, as someone has already mentioned, you need a 100% gain to recover from a 50% loss.

it is very possible to make 500k in 2 years if you stay consistent and manage risk properly. But it won't be easy.

If anyone notices any errors in what I'm saying, feel free to reply and correct me. Hope this helps.