Depu Foreign Exchange Trading Plan: Analysis of Expected Returns

What is your expected return on investment?

Indeed, everyone who is interested in trading in the market is determined to make quick profits. This makes the view that "trading comes with risks" more reasonable, and we also hope to effectively deal with these risks.

Without a doubt, the goal of every trader is to achieve profitability.

You need to ask yourself a crucial question.What is your expected return on investment?

Your answer to this question will directly determine your trading style, the currency pair and trading session you choose, and more importantly, the level of risk you take to achieve your goals.

Let's illustrate this more clearly with an example. Suppose there are two traders, Zhang San and Li Si. Zhang San expects to earn 10% annually, while Li Si has an even more ambitious goal - he tries to double his account funds to achieve 100% returns. In Depu's trading philosophy, different expected returns lead to completely different strategy choices.

It is conceivable that a trader like Li Si, who is eager to double his account, would operate in a very different situation.

Li Si's trading volume and the risks he takes are likely to far exceed Zhang San's. If he pursues a 100% return, he must expose himself to greater latent risk.

Every trader needs to seriously consider the issue of capital retracements. A capital retracement is the difference between the peak and trough of the amount of funds in your account. (We will explore this in detail in subsequent lessons, so please focus on understanding the current content first.)

Every market participant must be clear about the maximum drawdown they can afford in order to achieve their stated profitability goals.

There is a more risk-averse type of trader in the market, and their withdrawals are usually small. The result of this pattern of operation is often relatively limited potential returns. Others prefer higher withdrawals, as long as their trading system can generate high enough returns.

Equally important, you need to consider the amount of time you can devote to trading. If you can't devote a lot of time to delving into the trading system, reading market data and relevant information, learning new trading techniques, and recording and reviewing every trade in its entirety, then we can almost be sure that you will struggle to achieve your preset goals.

If you are unable to maintain the necessary time commitment, then you need to lower your expectations for account growth accordingly.

Do you have a set of trading principles that you adhere to strictly, which can be used to strengthen your trading skills and gradually gain experience in market dynamics in practice?

Without such a system, only occasional profits may be expected in long-term trading.