I had yet another email today from a new member of my mentor group who is blowing up forex accounts due to bad management and unrealistic goals. He was 30%+ in profit in a week and then lost the lot by the end of it! Unfortunately its not an unusual story and I think that the marketers who pitch the “make $10.000 a day” nonsense are partly to blame for these unrealistic targets that folks try to achieve in a matter of weeks.
The secret to becoming a successful trader?
Small, consistent gains. That’s it!
Consider your current investments. If you have money in a savings account in a bank you will be fortunate if you are earning 2 or 3% PER YEAR!
Similarly many hedge and pension funds run by professional traders with tons of experience fail to make more than a few % per annum in correct markets so why do novice traders armed with a few weeks or months of trading time believe they can thrash the markets?
If you can make just a few $’s a day on a a $1000 account, by compounding your stake and therefore your results you CAN turn that initial stake into mega bucks in a just a few short years, but not weeks nor months! The difficulty is its boring! To trade all week and make $50 is not going to pay the rent BUT it WILL give you the opportunity over a couple of years.
If you can make profits consistently using correct money management rules THEN you have the opportunity to add capital to your account and even trade for others over the longer term. I know a guy who makes a $Million per year whose daily target is just 5 pips! How does he do it? He trades a multi million $ account for other people. If you have at least 12 months proof of performance then you may have the opportunity to trade for others. That is the minimum period of time I look at when considering folks to trade for me & is fairly standard in the industry. I then follow folks on a live account to make sure that there are no bad practises such as moving stops etc.
Try this on your kids:
“If you do all your chores & homework this month I will pay you megabucks. You have two choices. I can give you $10.000 now or I will give you 1 cent today, 2 cents tomorrow, 4 cents the day after, 8 cents the day after etc until the end of the month. In other words the amount doubles every day until the end of the month. Which would you prefer?” It’s a no brainer right. I’ll take the $10.000 please!
WRONG ANSWER. If you take the 2nd option your 1 cent doubling per day will be worth $10.737.000 after 31 days. Thats right, over $10 million !!
Get a calculator and do the maths to prove it to yourself/kids.
What you will find is that after;
10 days you will only have $5.12
20 days it starts to get interesting $5242.88
28 days amazingly we hit our 1st $million $1,342,177.28
31 days an incredible $10 MILLION $ 10,737,418.24
Make The Magic of Compounding work for you.
Please don’t write to me saying that “this means we will be staking over $1000 a pip by month 26,” I know that. Yes of course you will have losses along the way, but all we are looking for here is a net gain of 75 pips per week! What is important here is to get your mind around the FACT that if you look for small, consistent gains in a controlled and disciplined manner you CAN get seriously rich at forex if you learn to take your time. By being patient and disciplined. By making a plan and sticking to it.
In Part 2 of this article I show you how you can turn $1000 in to a $million in less than three years. CLICK HERE for part 2 Where I show you how to make compounding work for you and help you to achieve your trading goals
Author: Marc Walton