After the initial day of trading, the initial statements regarding this project are not going to be suitable for anyone are evident.
The preliminary observations highlight several key issues:
- Achieving a consistent gain requires substantial daily profits, which may not be feasible given the volatile nature of the market.
- Effective risk management is challenging, if not impossible, to implement within this framework. The strategies only work within extremely narrow margins due to the assets’ minimum loss thresholds and ATR.
- The project’s structure mandates a minimum trade size of $1,000 (equivalent to 0.01 Lots), making leverage an indispensable component to attempt profitability.
- The cost of executing trades is a significant factor that could undermine potential gains due to the overhead and the necessary volume of trading activity to achieve the desired profit margins.
Maintaining a reasonable gain
The term “reasonable” is subjective; however, aiming for a substantial and tangible return, such as $1,000 within two months, necessitates a daily gain of 5%. While this goal is not unattainable, it operates under the assumption of a flawless trading strategy with no losses, an unrealistic expectation in any trading environment. Additionally, maintaining an average daily gain of 5% presents its own set of challenges, highlighting the complexity and risk involved in achieving such ambitious financial targets.
Risk and Leverage Dynamics
Achieving this objective is feasible; however, it necessitates leveraging at a ratio exceeding 1:500. While high leverage does not intrinsically increase risk, it becomes significantly problematic when combined with price volatility in the market. Indeed, it’s not just a possibility but an inevitability that this combination can lead to challenges and failures.
actually not can, it WILL!
here is a example, a trade i made today.
i went short on in the time i made the screenshoot, right at vwap, but as you can see on the scale, the atr is pretty high so the stop/hedge location needs to be extremly close in order to keep the exposure low, or the risk will be substantial, which can lead to ping-pong hedging and massive acceleration of size. and sooner or later will lead to a massive (maybe even total) loss.
so the way to do this here is to anticipate very very tiny movements. over larger swings as you simply can;t afford a retest of structure or a larger pullback since the 0.01 lots put on are already 3-4 times too large.
with that in mind i made 2 short sells and called it a day as there was no more setups presented itself.
Cost of trades
another thing of trading this way (even with larger accounts) is the fact that trading will be quite expensive,
this comes from the fact that you going to need a certain distance to cover in profit, in order to Break even.
let’s say for the sake of the argument, you will need 1 pip in order to break even, meaning you will be at Net-zero when your trade traveled 1 pip in profit.
meaning the profit generated – cost of the trade > 0
When you engage in trading with very tight ranges, for example, a move of 5 pips, your trading costs amount to 20%, independent of the specific dollar value. Conversely, executing a similar trade over a larger range, such as a 50 pip movement, under the same size conditions, sees the cost reduce to merely 2%.
However, this strategy can compound losses rapidly on the downside. Incorporating a 20% cost to each loss significantly exacerbates the financial impact, demonstrating the scalability of risk with such narrow trading ranges.
After concluding the first day the numbers are like this
Total positions opened: 6
Total Traded volume: 5900 USD
True drawdwn was at: -0.27%
Total Net Gain: 2.746%
Total Cost: 0.421%
This implies that I needed to generate a gross profit of 3.167% just to cover the cost of trading. As evident, these figures are quite impactful, stemming from the significant cost associated with each trade. It’s worth noting that the cost of these trades would remain consistent even with larger trading ranges, although that’s not the primary focus here.
in short those are the main reasons why trading an account below 12.000 USD is not very realistic.
to keep track of things i will use the tag 50€
