As much as I thought that I wouldn't do another forecast to see where I might be using some arbitrary but reasonable numbers I guess I cannot resist. This time I am using my current performance profits and applying three different methods of trade size incrementation.
I need to keep in mind that this is only for the day trading account, tax free, but only one of three current plans in play.
The first choice is to just do what I am doing sticking with the current profit levels for the next 12 months based on 3 contracts per trade. While this is not exciting it gives a certain satisfaction in knowing that I could, if I wanted to, skim off all the profits and use them as an income all on it's own. Of course this is discounting any increase in trade performance or quantity...also discounting any decreases.
Profits in 12 months = $47,925
Keep in mind this would be the forecasted annual income...but tax free or equivalent to about $75,000 depending upon the marginal rate.
Ok, not bad but hard to live off the profits and still grow the account.
Choice two is to increase by one trade per month, as I am sort of doing now although I increased to 4 trades for the last week in May.
Profits in 12 months = $135,789
Much more like it. Even though the number is already great the thing to consider is that in 12 months the monthly income would be a smidge under $18,500 or $224,000 per year. Basically if I stopped increasing my trade sizes at that point my equivalent to taxed income is $344,000.
Considering that it only takes $250 per trade, on average, to increase the size by one contract it is pretty obvious that I can increase the trade sizes faster to get to the larger monthly profit target sooner than 12 months. So let's say I just add 2 per month. The maximum size in 12 months is 24 contracts... so I will have to close trades in lower volume chains in two or three chunks to avoid block trading exits holding up the trade and this may affect my executions a bit... I could shave 5% off the forecasts but I won't right now as it is next to inconsequential.
Profits in 12 months = $ 209,000
I won't bother to convert this to a pre-tax equivalent, the monthly income is $32,000 and the annual income if I just held water on the trade sizes is $383,000.
Nice. While time will tell how accurate this is I still feel that I am fudging against my future performance as there is an option to trade stocks once I have a certain account size that allows for large enough stock trades to produce similar profits. The best thing about those is that I can use tight stops initially and let trades go with VTSOs to capture greater profits and see lesser losses which should increase my profitability overall.
If I want to go really hog wild and put no cap on trade sizes, just use 10 contract exit orders I could, in theory...as I don't think this would work unless I switched to stocks and I have no real comparison numbers yet... another post.
Hog Wild profits in 12 months = $ 919,900
Trade size is 239 contract per trade, right, trade stocks instead. Annualized income $3,818,000.
OK... so somewhere in there will be where I fall... between about $50,000 and $919,000 in 12 months. How's that for a forecast range?
Jeff.
Questrade, My direct access discount broker.
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