I have been inconsistent in my thinking.

In started out thinking that I would not risk more than 1% of trading capital on a trade. I lost 1% on my first trade, and cut the maximum risk per trade to 0.5% or below; then, after more losses, I cut it to 0.25%, where it has remained since the start of January (incidentally, this means that my trading performance would look much better adjusted for risk level). I am keeping it this low because I am aware that early trading experience is something one has to pay for. I would like to pay as little as possible.

I also started out thinking that 0% would be a reasonable return for a trader in his first year. As I had some market experience, I set an objective of 10% for the first year.

Now, 10% p.a. means an average return of about 0.8% per month, or 0.8 risk units with a 1% risk per trade. Trading with lower risk should lead me to cut my return objective, so I should be aiming to make 2.5% in the first year. This translates to around 0.21% per month — the same 0.8 risk units. But I have continued to target profit from winners of 6 or 7 risk units.

So I am wondering whether I have been unrealistically greedy. A few times, I have made 1 risk unit and then lost it again as the market came back to the stop, including on my recent long USD/JPY trade. Perhaps I should be more inclined to take a profit of 1 or 2 risk units when the trade is looking shaky, and only hold out for a big move if there is a good technical reason. In the case of USD/JPY, I saw that the market had run up to its 200-day moving average and I knew there was a chance it would bounce off it. It did, and I eventually closed the trade for a loss. I considered cutting at the top for a 1-unit profit, but said to myself “you don’t get rich taking small profits”. But 1 risk unit on a trade that is looking shaky is not a small profit in the context of my return objective.

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