Figuring out 3000% per annum profits

...cont'd from yesterday...

Day Five.

Risk 1D on each trade PLUS one third of yesterday’s profit. In this case that would be
= Risk 1D + (Yesterday’s Profit of 12D/3)
= 5D Risk

Then:

Trade One: lose 5D
Trade Two: lose 5D
Trade Three lose 5D
Trade Four: win 10D
Trade Five: win 10D
Trade Six: win 10D

Net profits for the six trades today is (10 + 10 + 10- 5 -5 -5)D = 15D

Total Net Profits For The Week
Day One + Day Two + Day Three + Day Four + Day Five
= (3 + 6 + 9 + 12 + 15)D
= 42D

Now if 1D is equal to 2% of your account balance, then your Net Profits Per Five Days
= 42 x 2%
= 84% in Five Days

There are about 52 “Five Trading Day Weeks” each year. To be conservative, allow for four day weeks and frequent lengthy holidays so as to round that 52 down to 40 such weeks. Then your annual net profits would be
= 84% x 40
= 3360%

In other words, in one year you have multiplied your starting account balance by more than 30 times. That’s 3000%.

Limitations and Shortcomings

In real time, the foregoing results are only one of many possible outcomes. Here are some reasons.

With any system, the order in which your wins and losses manifest are unknown. You could get six losers in a row or six winners in a row or some other combination of winners and losers instead of the 3 losers-followed-by-3 winners as illustrated.

Six trades is too small a sample to use in a scientific test. However, six trades per day is what was used in the examples. Therefore, the examples do not meet scientific standards.

The system would have to be altered to address for the foregoing and other issues. DO NOT USE the system exactly as given.

These limitations and shortcomings will be further discussed next week along with possible solutions.

...cont'd next week...

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Copyright 2008 Raymond T. Lee. All rights reserved.
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