Settings goals and working backwards

"What is stopping you from achieving your 10 year goals in 2 years?"

Some time ago, I saw a post on social media asking something along these lines. It wasn't anything groundbreaking, but it stuck with me.

About a month ago, around the same time I set up this website, I decided to set myself a long term goal for my trading portfolio. I basically just picked a big number I wanted to reach (30x my current portfolio), and instead of trying to achieve it over 15 years, I decided I should try to reach it in 5 years.

Odds are low (as per my lack of proven track record), but just for fun, I decided to break down what the journey would look like if it was broken down into smaller steps.

I would need 97% CAGR over 5 years to do that. That seems unrealistic, especially when you consider that many trading greats have long term compounded annual returns of just 20%-30%.

Regardless, the next step is to break up that 1 year into shorter time frames. Given I am mostly a swing/position trader, tracking returns on a daily or even weekly time frame doesn't make sense. Quarterly feels about right though. How much would I need to compound quarterly to get to a certain yearly return?

~20% per quarter compounded gives me around 100% return over a year - that feels a bit more realistic.

Another way to look at it is to look at it from the POV of expectancy:

So according to the table above: To achieve a 109% yearly return (with the above trading stats), I would need 100 trades a quarter, or 1.6 trades per day (63 trading days a quarter) to achieve my goal. Sounds doable.

What does this tell me (in practical terms)

The above numbers are just to give myself an idea for what it would take to get there, and is not actually a step by step guide I can follow. If I were to break it down further though, I could think about how to tweak my trade statistics (risk per trade, win rate, risk-reward), but I don't track my statistics now because I put on a lot of trades with many small adds and trims. I also make it a point to reduce exposure quickly when the market doesn't feel right. All of which would mess up the trade stats. But to think about it purely from the expectancy formula variables, there are 3 levers to pull:

• Risk per trade
• Win rate
• Reward : Risk

Knowing myself and my trading history, I need to focus on:

• Patience:
  • To wait for the individual chart to set up. This will help with the win rate, as well as allow tighter entries, which give better r/r
  • To know when the broader environment is supportive, and increasing risk per trade and number of trades accordingly. This will help win rate, and give better r/r. Conversely, also to reduce exposure and wait, when the market feels like is close to short term top.
• Respecting stops - this is obvious - this ensures risk stays fairly constant, and there are no blowout losses.
• Managing positions:
  • Discipline to lock in profits at certain points
  • Trailing stops so that further upside is captured
  • Not letting weak positions round trip

Additionally, a few other areas I am working on, to help boost returns, are to know when it is appropriate to:

• Employ more leverage
• Size up much bigger for high conviction trades
• Expressing some trades via options

In conclusion, I'm not sure if I'll be able to achieve my goal in my intended time frame, but by working out what the journey there could look like, and knowing what levers to pull to help boost my performance, the path there is at least a little clearer.