Like many other traders, I dream of The Big Win.
I know we're supposed to grind it out and take the long view. I know it and I believe that to be true.
But that doesn't help me double my account this month.
The Big Win can change lives. The Big Win is exciting. The Big Win is the straw that stirs a trader's drink.
After all, why was The Big Short such a fun movie? It wasn't because the main characters made a few dollars with a reasonable trade size.
It was because they made millions and billions on one single trade.
So can we do that? Can we double our account in, say, a month and get our Big Win? Or is that just the stuff of movies?
Well, last week we learned that it is indeed possible to double an account in a month. It's not reasonable or recommendable, but it's possible.
I should just drop the subject and move on.
Except I can't. The concept is just too exciting.
So what if we used a different trading system? Would it be more plausible if we went for it with a system other than basic trend following?
What if we used the Heron instead?
If you don't know, the Heron is a robot I trade that goes with the trend and enters on pull-backs.
In its current form, it goes for small wins and a high win percentage, and I like it very much.
But a small target won't double our account, so let's modify the Heron for this experiment. Let's put a target on it that, if hit, would double our account.
We'll use the EURUSD again because of the high leverage.
Let's move to a Daily chart instead of daytrading. Daytrading can be very twitchy and won't get to a big target as easily.
Furthermore, let's put a big stop on it so that we have a better chance at a big win.
And let's only go Long. Why? By specializing in one sort of trade (the EUR going crazy up), we might have a better chance of hitting the jackpot.
So what was the result? Can we get The Big Win by doing such a thing?
Once again, the answer is yes.
Keep in mind that every single trade was an Event. Every time we got in the market, we either lost everything or more than doubled our money.
In short, on a $10,000 account, we either lost it all or made $14,000.
Because of that, we would have to keep some money separate. Otherwise, the game ends if our first trade is a loser.
The longest losing streak for the Heron we're talking about is 2. So let's portion our money into thirds. That way, we stay in the game hopefully for many years to come.
If we employ that strategy (dividing up our money into three accounts), then we survive from the year 2000 until today in 2018.
All told, we would make $182,000 of profits in eighteen years. That sounds great!
When we break it down, though, it's only pretty great. If we started with three chunks of $10,000 ($30k), that ends up being a compounded annual rate of 11.48% per year.
That beats the market, of course, but is it worth the stress of possibly losing $10k on every trade? Probably not.
And check this out.
If we take the exact same system, but lower the trade size down to where we'll never blow out the account, we have the option compounding our gains.
If we take that route, slowly building our account and raising trade size as we grow, guess how we'd do?
We'd have a compounded annual rate of 13.22%.
Not going for The Big Win actually makes more money in the long term.
Maybe The Big Win isn't everything it's cracked up to be.
Maybe one day this revelation will sink in and I'll stop trying to find ways to go for it.
To follow the Heron's performance (and all the other robots, too) you can go here: https://www.scottwelsh.me/performance-tracking/
Get the Heron Course here.
"The Greatest Strategy of All Time" Course is now available. You can find it here: https://www.kajabinext.com/marketplace/courses
Get the Weekly Pivot robot (which is inside the 50% on Purpose Course) here.
My website is here: https://www.scottwelsh.me/
My new eBook, The Inevitability of Becoming Rich: An Interview with a Master, is available on Amazon, and you can get it here.
For information on all my trading courses, go here: https://www.scottwelsh.me/courses/
The recordings of the Thursday webinars go on my YouTube channel. You can Subscribe by going here: https://www.youtube.com/channel/UCxAWDDaTLVy_diMVJCkGl3A
If you'd like a copy of my free eBook, go to https://www.scottwelsh.me/free-ebook/ and just fill out the form.
My Big Points blog is here: https://www.scottwelsh.me/big-points-blog/.
Follow me on Twitter @swelsh66.