How people balance risk and reward?

Just want to know how average people balance risk and reward?

I see systems with 2-3% profit per month, and 5% maximum drawdown.

I see systems with 20+ profit per month and 25% maximum drawdown.

Both kind of systems got subscibers.

Do more people like former or later system?

Or maybe most poeple like the kind of system in between, like 10% profit per month with 15% maximum drawdown?

If a developer wants to get more subscribers,and he can develop all three kind of systems mentioned above, which one he should choose?

To be considered a very good system, with 5% profit per month, what is maximum drawdown most people can tolerate?

With 10% profit per month, what is maximum drawdown most people can tolerate?

With 20% profit per month, what is maximum drawdown most people can tolerate?

I also like to see everyone describe how his favorate system like to be, with regards to profit per month and maximum drawdown.

First of all, a 20% profit per month is, completely, unsustainable. Compounded, that’s a nearly 800% gain for the year. 10% gain per month is pushing it, too (that’s a little over a 200% gain for the year).

So, we need to get a little more realistic on the expectations, first. A system, which averages a 5% gain per month would be outstanding (nearly 80% gain per year). Assuming that system could maintain an equally impressive MAR Ratio of over 5, that would produce an expected, maximum drawdown of around 15%.

Therefore, my goal with my system would be somewhere between:

5% gain per month with a maximum drawdown of 15% on the low side

10% gain per month with a maximum drawdown of 40% on the high side

So, to answer your questions…

20% profit per month is unsustainable and I wouldn’t even touch a system rolling along at that rate.

10% profit per month is possible, and very attractive, but I’d be surprised if more than a handful could accept the inevitable 40% drawdown that comes with a system like that.

5% profit per month may not be super attractive, but is a reasonable goal for the best of the best, and a 15% maximum drawdown should be small enough to keep most on board.

Thanks. You have answered the most important thing I want to know.

Also I want to point out, the maximum drawdow can be controlled by trade size.A system can lower its DD by reducing trade size, and reducing profit at the same time.And when DD is fixed, amount of profit depends on a system’s edge.

Hi Jack,

It seems to me that monthly return of even 5% are practically unsustainable over an extended period of time, lets say 2 years.

If you look at the grid (which does not show the CAGR) for systems over 2 years old and exclude some of the wild forex systems with huge draw downs you won’t find a system with over 80% CAGR after you make adjustments for commissions and sub fees.

But please check my math, maybe I made a mistake.


Oops, I just found out that CAGR is available on the grid. Now that makes it much easier to get a clearer picture of returns for systems older than one year.

There are several Wang Wei here, are you the same person? I found several systems develped by Wang Wei blowed out but it is not visible to subscribers now.

Calmar ratio (CAGR / max drawdown) is also available on the grid. That pretty much normalizes the leverage thing. The only catch is the C2 stats don’t include any costs so you need to dig a little deeper when you see something that looks interesting.

It is a very elite group, those over one-year-old with a CAGR greater than 80% and a drawdown less than 40%,

Whenever I see a three or six month old high-flier (usually charging some ridiculously high subscription fee) I always go to the Grid and remind myself of how nearly impossible it is to maintain those performance numbers over any length of time. It’s a nice way to stay out of trouble.