How much money in your account to bank your monthly income?“How much money would you like to bank a month?”
$3,000
$5,000?
$30,000?
To answer this question and to get you on the path of achieving this income, you’ll need just one tool.
Pull out your profitable trading plan
You and I both know that to set a monthly income goal for trading, you’ll need a solid, proven and easy to follow game plan.
If you do have a trading strategy that you’re happy with and works for you, then great.
You should already have a strong indication on how your portfolio has performed during an array of different market environments.
Obviously the more data you have on your trading, the higher the reliability that you’ll earn similar monthly returns in the future.
Once you have gathered your historical trading data, you’ll then need to jot down four important stats namely:
Four stats to create a desired income per month
Stat 1:
No. of expected winning trades per month.
Stat 2:
Average % gain in rands per trade.
Stat 3:
No. of expected losing trades per month.
Stat 4:
Average % loss in rands per trade.
To choose the monthly income you’d like to pocket per month, you’ll need to know how much you’ll need in your trading account.
Let’s say you want to bank an average $3,000 on average per month, with both winning and losing trades.
For this article, let’s use the metrics of the MATI Trader System that I’ve back and forward tested for the past 20 years.
Let’s plug the stats into the table to see.
Expected return a month: $3,000
Stat 1:
3 Winning trades per month.
Stat 2:
4% Average gain per winner.
Stat 3:
2 Losing trades per month.
Stat 4:
2% Average loss per loser.
We now have all the information to calculate how much money you’ll need, in order to bank an average monthly $3,000.
1 Formula to calculate how much you need in your trading account
Step 1:
Find out the total percentage gain you can earn per month
= (Winning trades X Gain % per winner)
= (3 Winners X 4% Gain)
= 12% gain.
Step 2:
Calculate the total percentage loss you can lose per month
= (Losing trades X Loss % per loser)
= (2 Losers X 2% Loss)
= 4% loss
Step 3:
Finally calculate the amount of money you can net on average per month
= (Total gain %) – (Total loss %)
= (12% Gain – 4% Loss)
= 8% Net gain
Step 4:
Know your trading account size to pocket a desired monthly income.
= (Expected amount to earn ÷ Net % return per month)
= ($3,000 ÷ 8% Return)
= $37,500
So to bank around $3,000 on average per month, with 3 winners and 2 losers, you’ll need to have a trading account of $37,500.
Don’t be fooled if you think you’ll bank $3,000 EVERY month!
As you know, my goal through sharing this information is to show you how realistic successful trading works
With pretty much every trading system, you can expect around three to four losing months a year. This year I had around 5 losing months - It's been a tough one.
Some months you may be down $2,000 and other months you’ll be up $5,000, we never know for certain how the future will pan out.
However, with a proven and a long back and forward tested trading system, with this formula will give you the edge of what the likelihood of your returns will be.
The formula works on any size portfolio or desired income - I am just giving you an example with banking a $3,000 a month...
If you enjoyed this article or would like to share feedback I'd love to hear it :)
Trade well, live free..
Timon
MATI Trader
