Is It possible To Be Profitable Every Month?

When people first step into trading they often have this idea that they will be able to generate a profit month over month I even fell victim to the same mentality too at the beginning of my trading career.

However what a lot of people fail to realise at the beginning is that trading is a business and works like any other business where you have operation costs known as expenses or overheads. An example of expenses in trading are losses, not one single trader likes to lose but unfortunately they are a part of the process when it does come to trading the markets. They are unavoidable and while we can do our best to minimise the impact they have on our accounts and returns the fact remains they will always happen at some point throughout your trading career.

If you are following your trade plan and did everything your trade plan told you to do and you still incurred a loss then it should not be seen as anything else other than an expense. As it is simply the cost of participation and opportunity, without taking the trade you don't have the opportunity to make a profit so if it does not work out remember it was the an expense for the opportunity to participate in the markets in the first place.

This is why it is important to remember process over outcome, as you will incur losses but so long as when we are right we are able to over time make more money than when we are wrong then we can remain profitable.

So, to the answer the question can you be profitable every single month?

The answer in my opinion from many years of experience is no. The reason why is because we don't know the short term outcome for any single trade we decide to get involved in. Even if we know through back testing our trading strategy and we know what to expect in terms of P&L, drawdown and so on that only tells us what the long term end result should look like.

So while we know the expected long term result, the short term is quite uncertain as we never know what the market will do next.

This is what makes trading more unpredictable and inconsistent to other businesses.

As each business (Trading & Traditional) has expenses but other businesses know what figure they need to achieve each month to then hit the projected annual target. They calculate the monthly targets using variables such as expected footfall, conversion rate and so on.

This allows some levels of certainty, as they know what periods of the year will be more quiet and what periods will be busier and so that business can account them variables when calculating monthly projection figures and targets.

However, with trading we have no idea when the next trade setup will present itself or what the outcome of that setup will be. All we know is that when a setup meets all of our specified criteria of our trade plan we have to take the trade.

This then means we could potentially be waiting a week until we finally get a valid trading setup in the markets, only for that setup to then fail and result in a loss. We can't make projections using different periods of the year because the market can do what it wants, when it wants. So we have to be patient and take each setup as it presents itself to us.

Lets say in January the result is -5% DD (DrawDown), February +3%, March +2% & April +6%.

In that example we wasn't then back in profit and out of the DD until April. As while we did see two separate profitable months (February & March) the profit achieved only made back the loss we incurred from January and so it wasn't until April our account was in profit.

That is a very real example of what trading month can be like because of the short term uncertainty we don't know if we will be profitable each month of the year, as we don't know when we will get another opportunity to trade the markets and the outcome for that trade.

So while we can predict our potential annual returns using a trading strategy built around specific principles, what we don't know is the result of each month from the 12 in the year. All we know is that by following the plan that we should get that end figure.

To finish this is why it is so important to focus on the process and not the short term outcome, as despite the short term result it is part of the process to get closer and to eventually achieve the long term result.

Trade with confidence,


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