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-   -   5 Times Leverage, 2% Risk Per Trade Can Make You Rich (https://www.forexfactory.com/showthread.php?t=150204)

pipexplorer1 Jan 30, 2009 9:25pm | Post# 1

5 Times Leverage, 2% Risk Per Trade Can Make You Rich
 
This is useless and so deleting it

Jay Walker Jan 30, 2009 10:36pm | Post# 2

Pipexplorer, I haven't read any of your material before so I'd like to take this as an opportunity to say hello and welcome to FF.

I am aware and sensitive to the fact that there are things that you don't want to hear as described in your post. That being said, I would like to believe that one of the reasons why you posted this is not only to try to help, but also to get some constructive criticism.

It seems to me that you neglected to calculate losses and are only calculating profits. Unfortunately, one does not come without the other. If my observation is wrong, I would welcome and appreciate that you please point it out to me.

pipexplorer1 Jan 30, 2009 10:47pm | Post# 3

Pipexplorer, I haven't read any of your material before so I'd like to take this as an opportunity to say hello and welcome to FF.

I am aware and sensitive to the fact that there are things that you don't want to hear as described in your post....
Hello Jaywalker,

The only reason I said I dont want to hear certain things is because some people are really quick to criticize unconstructively, blaming things on my newbie-ness. I am all open to constructive criticism I have read your posts before on EURUSD thread and I especially enjoy your humour.

As far as losses go, I assumed an average of 40 pips per week. Which means you don't need to aim for just 40 pips but with an average of 40 pips (which doesn't seem like an awfully large number) per week. For example, you might make 100 or 150 pips a week but with losses, if you can average 40 per week or 2080 a year, then those calculations I made would be accurate.

Gift_Art Jan 31, 2009 12:04am | Post# 4

and on a second thought

to kill my time, I prefer reading rookies posts

you know why? bcoz to simplify all the jumbled matters in the world of trading.... rookies money is our money

expand your timeframe, strecth your economic view and diversify

even 1 pip a day or perhaps 1% a day in stock is just extremely difficult and doing that consistently would put anyone above Soros or John Paulson

(I hope this would be constructive)

Ronald Raygun Jan 31, 2009 2:34am | Post# 5

Here are my thoughts:

 

  1. Forex profits come in bursts.
  2. It is not regular income
  3. Thinking either 1 or 2 is false will blow your account quickly.


pipexplorer1 Jan 31, 2009 3:17am | Post# 6

and on a second thought

to kill my time, I prefer reading rookies posts

you know why? bcoz to simplify all the jumbled matters in the world of trading.... rookies money is our money

expand your timeframe, strecth your economic view and diversify

even 1 pip a day or perhaps 1% a day in stock is just extremely difficult and doing that consistently would put anyone above Soros or John Paulson

(I hope this would be constructive)
I dont remember my last trade that never went positive before going negative. So I dont know how 1 pip a day is difficult lol.

Jay Walker Jan 31, 2009 3:35am | Post# 7

I dont remember my last trade that never went positive before going negative. So I dont know how 1 pip a day is difficult lol.
Because nobody can be right 100% of the time.

If it was that easy, Bernanke would be trading America's way out of debt.

M_j Jan 31, 2009 8:37am | Post# 8

What I do not get: if I net 2% per week
 
...
Example:
Account Value: 10000
Position size: 50000
Stop loss: $200 (40 pips)
Take profit: $200 (40 pips)

The above is what you would do the first year every week, netting 40 pips or $200.

What I do not get: if I net 2% per week there are 2 possible differences to your calculation:

1. The end outcome is much higher: because of compounded trading:

Taking 520 weeks in 10 years would make: 296,544,119 and not 12,482,503.

2. With each week your profit % would be getting less and less till the end of the year.

akukaya Jan 31, 2009 11:44pm | Post# 9

pipexplorer, try this calculation
 
i am experimenting this now...

akukaya Jan 31, 2009 11:47pm | Post# 10

forgot the attachment
 
1 Attachment(s)

ProspectCybernetprofit(1).xls

pipexplorer1 Feb 1, 2009 1:29am | Post# 11

Because nobody can be right 100% of the time.

If it was that easy, Bernanke would be trading America's way out of debt.
True. I dont claim to be right 100% of the time neither do I say its easy.What I said wasn't meant to be taken literally. I was trying to say trading is not rocket science. Its not easy but it certainly is not rocket science like certain people make it sound.

pipexplorer1 Feb 1, 2009 1:32am | Post# 12

That's pretty impressive if you can make 10%.

pipexplorer1 Feb 1, 2009 1:46am | Post# 13

What I do not get: if I net 2% per week there are 2 possible differences to your calculation:

1. The end outcome is much higher: because of compounded trading:

Taking 520 weeks in 10 years would make: 296,544,119 and not 12,482,503.

2. With each week your profit % would be getting less and less till the end of the year.
Hm. Maybe because my calculations are based on 40 pips/week with 5 times leverage. I assumed that would automatically mean 2%.

eg if you have 25K.

25000 X 5 = 125000
125000 X 40 pips = 500/week---this is 2% of 25000.

Basically its 104% per year for 10 years. 104% of the amount at the start of the year.

M_j Feb 1, 2009 7:26am | Post# 14

Hm. Maybe because my calculations are based on 40 pips/week with 5 times leverage. I assumed that would automatically mean 2%.

eg if you have 25K.

25000 X 5 = 125000
125000 X 40 pips = 500/week---this is 2% of 25000.

Basically its 104% per year for 10 years. 104% of the amount at the start of the year.

Sorry I think you are wrong: e.g

Example weekly:
1.week
Account Value: 10000
Take profit 2 %: $200 (40 pips)
End amount: 10200

2. week
Account Value: 10200
Take profit 2 %: $204 (40 pips)
End amount: 10404

3. week
Account Value: 10404
Take profit 2 %: $208.08 (40 pips)
End amount: 10608.08

..... After 1 year (52 weeks): End amount: 28003
..... After 2 year (104 weeks): End amount: 78418

So good for you as this compounds to 296.544.119 in 10 years ;-)

pipexplorer1 Feb 1, 2009 4:23pm | Post# 15

Sorry I think you are wrong: e.g

Example weekly:
1.week
Account Value: 10000
Take profit 2 %: $200 (40 pips)
End amount: 10200

2. week
Account Value: 10200
Take profit 2 %: $204 (40 pips)
End amount: 10404

3. week
Account Value: 10404
Take profit 2 %: $208.08 (40 pips)
End amount: 10608.08

..... After 1 year (52 weeks): End amount: 28003
..... After 2 year (104 weeks): End amount: 78418

So good for you as this compounds to 296.544.119 in 10 years ;-)
I think we're both right. You're just seeing it a little differently.

Because what I did was to keep the weekly profit constant. So for example, on a 10000 account, it will be $200/wk for the entire year. (2% of 10000). For year 2, it will be $408 every week- 2% of 20400. In my calculations, the weekly profit for any given year are the same--2% of the amount at the start of the year.

But you're right. Compounding makes it much bigger.

Lamdun Feb 1, 2009 4:51pm | Post# 16

I was trying to say trading is not rocket science. Its not easy but it certainly is not rocket science like certain people make it sound.
That might be the only thing I really agree with you in this thread.

Trading is definitely not rocket science. At least with rocket science, if you get your physics right and make every calculation 100% correct, the chances of your rocket failing are nil barring any human error.

Whereas in trading, every single fundamental and technical factor might be going your way and there is no possible reason that your trade should go against you, but the market can go the opposite way regardless.

Trading is not rocket science, but it is certainly not any easier.

I'm not trying to be a prick, but your estimates are grossly over-optimistic. Getting a consistent 40 pips a week for 10 years is beyond the wildest dreams of even the best traders out there.

I really do hope that you're not trading anything that you can't afford to lose at the moment. But heres some advice, open a small live account with just enough money so that it won't prove to be a financial burden to you if you fail. Trade for a couple of months and then come back and tell us if averaging 40 pips a week is still "super modest and reasonable".

pipexplorer1 Feb 1, 2009 6:32pm | Post# 17

That might be the only thing I really agree with you in this thread.

Trading is definitely not rocket science. At least with rocket science, if you get your physics right and make every calculation 100% correct, the chances of your rocket failing are nil barring any human error.

Whereas in trading, every single fundamental and technical factor might be going your way and there is no possible reason that your trade should go against you, but the market can go the opposite way regardless.

Trading is not rocket science, but it is certainly not...
I hope you read my first post in its entirety especially where I said "I am not over excited at all". I know 40 pips a week for 10 years is not easy. Not just that, even crossing the road safely for 10 years each and everyday is not a guarantee. Read the part where I said "Im not overexcited" and you won't feel the need to challenge me (the 2 month challenge). When someone says he or she is not overexcited, it means that person understands it is not a cup of tea.

40 pips a week is modest because some people try for 150/day or 1000 pips per month etc. Considering that 40 a week seemed modest to me.

Sorry for rejecting the challenge, it is because I was not overly joyous in the first place. You just misunderstood.

Lamdun Feb 1, 2009 6:35pm | Post# 18

I apologize for the misunderstanding. I was just addressing the part of your post where you claimed that "40 pips a week is super modest and reasonable" and I am just letting you know that neither of those are close to being true.

You have better chances of being hit by a car on a country road in North Dakota tomorrow at exactly 2:30pm than being able to make 40 pips/wk for 10 years.

pipexplorer1 Feb 1, 2009 6:37pm | Post# 19

I apologize for the misunderstanding. I was just addressing the part of your post where you claimed that "40 pips a week is super modest and reasonable" and I am just letting you know that neither of those are close to being true.
Its alright! I did it all just for the heck of it. I am not following that template in real life. Its just interesting though.

ForexDude Feb 1, 2009 8:04pm | Post# 20

yeah yeah.. we will all become RICH overnight, dude... heh..

We all know, it's already a FACT that 95% of people lose money in this biz... while the 5% collect that money. It is a ZERO-SUM business, which means that those who win money, earn what the others lose. There is no magic machine that will make you money. Only a PhD, control of tech analysis, plus 5 years of experience in the biz, could "maybe" make you a living.

Forex is FULL of scammers.

http://en.wikipedia.org/wiki/Forex_scam


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