This week I received an email from a trader, who was very unhappy with his trading results:

He has been trading a $10,000 for 6 weeks and made $600 in profits. He was disappointed, because he thought he could make more money with trading. Just as a background: This trader is day trading the e-mini S&P, and he has been trading 1 contract.

$600 in six weeks means that he made $100 per week. That's really not a lot, is it? He could be flipping burgers at McDonald's and make more money, right?

Wrong!

When it comes to day trading, it is all about consistency. This trader is already making a fortune, he just doesn't know it yet. Once he learned how to make consistent profits with day trading consistently - even if it is just $100 per week - he need to apply sound money management strategies and achieve stellar results.

Let me run it down for you:

First of all, $100 per week would amount to $5,200 per year; a 52% return on his account. That's already excellent. But wait, it gets better.

In our Day Trading Coaching Program, we teach Ryan Jones' Fixed Ratio Money Management Technique. I believe that this technique is far superior to the commonly used "Fixed Fractional Money Management", and I am planning to write a blog entry about that soon.

Anyhow, back to our example: If he would apply sound money management techniques and increase his contract size according to his plan, then he should increase the number of contracts every $800, i.e. approximately every 8 weeks assuming that he is making consistently $100 per contract per week per contract.

Let's take a look at his hypothetical account growth using these rules:

Start: September 1st, 2008

Profit per contract: $100 per week
Initial Account Size: $10,000
Planned profit per week: $100

November 1st, 2008

Contracts traded: 1
Realized Profits in the past 8 weeks: $800
Account Size: $10,800
Planned Profit per week for next 8 weeks: $200 (trading 2 contracts)

January 1st, 2009

Contracts traded: 2
Realized Profits in the past 8 weeks: $1,600
Account Size: $12,400
Planned Profit per week for next 8 weeks: $300 (trading 3 contracts)

March 1st, 2009

Contracts traded: 3
Realized Profits in the past 8 weeks: $2,400
Account Size: $14,800
Planned Profit per week for next 8 weeks: $400 (trading 4 contracts)

May 1st, 2009

Contracts traded: 4
Realized Profits in the past 8 weeks: $3,200
Account Size: $18,000
Planned Profit per week for next 8 weeks: $500 (trading 5 contracts)

July 1st, 2009

Contracts traded: 5
Realized Profits in the past 8 weeks: $4,000
Account Size: $22,000
Planned Profit per week for next 8 weeks: $600 (trading 6 contracts)

September 1st, 2009

Contracts traded: 6
Realized Profits in the past 8 weeks: $4,800
Account Size: $26,800
Planned Profit per week for next 8 weeks: $700 (trading 7 contracts)

Let's pause here for a moment. As you can see, the account has grown from $10,000 to $26,800 within only one year, by consistently increasing the position size and achieving "only" $100 per week per contract.

What do you think: What will be the size of this trader's account on September 1st, 2010 - assuming he is able to achieve $100 per week per contract and increased his position size by 1 contract every 8 weeks?

Leave a comment with your answer.

I'll give you the correct answer in my next blog post.