Let me get this out of the way first: Setting goals for my trading performance is not the most useful exercise. The market will determine my results, but nonetheless, I can set some milestones and plans of action in the event that my account equity reaches certain preset breakpoints.

My overall goal from trading is to become financially free, and by that I mean that I would like to grow my equity to the point where my passive income covers my expenses and I no longer need a “day job” to pay the bills.  By passive, I’m talking about income from risk free investments…think T-Bills and money market accounts.  This goal seems attainable as long as I do not attach any time component to it.  I do believe, however, that it would be reasonable for me to achieve this goal within 5 to 7 years.

Now then, a backtest of System 20070110a (4) shows that a $10,000 investment would have grown to approximately $4,000,000 by the end of 2006. (40,000%) Well that sounds just wonderful, but it remains to be seen if I can actually trade a six figure or seven figure account effectively. It looks to me like I could begin to encounter some difficulty with liquidity and leverage at the $250,000 equity level, so my current plan is to open an account with another liquidity provider when my equity reaches $100,000. This will allow me to trade effectively to the $750,000 level, since this second, deeper liquidity provider allows me to automatically trade with my current leverage level up to $500,000 equity. At that time, it’s likely that I would reduce the leverage used in the system, which would allow me to trade much higher account sizes effectively, but naturally, that will severely reduce my returns.

Of course the big question is whether or not System 20070110a will continue to perform well in 2007.  I’m sure we all know that past performance is no indication of future results. :-)

To summarize: Pie in the sky goal : 10,000% return

Realistic decision points: +400% — open multiple accounts to spread risk and continue to be able to trade with full leverage

+2000%… consider reduction in leverage

-50% — temporarily suspend trading and either recapitalize the account or permanently suspend the system

-100% … curse my inability to follow my rules, or if appropriate, curse some price shock that caused sufficient illiquidity to wipe me out

100% loss (blow up): Well at that point I’ll just have to hope I can publish a riveting book about how I blew up.