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Rags to Riches in 10 or 20 Trades - Simplicity at its finest

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  • First Post: Edited Oct 18, 2013 1:36am Aug 27, 2013 7:31pm | Edited Oct 18, 2013 1:36am
  •  Rag2RichesFX
  • Joined Jul 2012 | Status: CME seat owner | 6,134 Posts
1) Disclaimer
Before we begin, just know, this is all simple in theory, but difficult in practice.

2) Affordable Risk
Start off with whatever you consider "affordable" risk.
For the sake of this thread we will just say $50.

3) The Mental Attitude
You have to treat it like digging a hole to find the buried treasure. Wins make the hole deeper.Losses make the walls of the hole cave in.

4) Don't Think of the Money, Think About Net Winning Trades (NWT)
When you use a 50% stop loss and 100% take profit, a losing trade will only cause you to lose the profit you made on the last trade. When you scale your leverage down to compensate for the loss, a winning trade will get you back to where you were before the last trade.

This is why you shouldn't think about the money, but think about the Net Winning Trades (NWT).
What is a NWT? It simply means how many more wins you have had than losses.

5) 9 NWT = 100,000% Gain
If you have 9 Net Winning Trades, scaling up after each trade, you will make a 100,000% gain.

9 NWT examples

9 wins 0 losses
18 wins and 9 losses
30 wins and 21 losses
50 wins and 41 losses
150 wins and 141 losses

You get the point? As long as you get those 9 Net Winning Trades, you will make a 100,000% gain.



6) The Math
T1 -Balance $100 - Risk $50 - Take Profit $100
T2 -Balance $200 - Risk $100 - Take Profit $200
T3 -Balance $400 - Risk $200 - Take Profit $400
T4 -Balance $800 - Risk $400 - Take Profit $800
T5 -Balance $1600 - Risk $800 - Take Profit $1600
T6 -Balance $3200 - Risk $1600 - Take Profit $3200
T7 -Balance $6400 - Risk $3200 - Take Profit $6400
T8 -Balance $12800 - Risk $6400 - Take Profit $12800
T9 -Balance $25600 - Risk $12800 - Take Profit $25600

which totals.....

Balance $51200


7) Stop Loss and Leverage
This should be pretty self evident but here it goes

If you use 300:1 leverage, 17 pips is your stop loss. Your target is 34 pips.
If you use 200:1 leverage, 25 pips is your stop loss. Your target is 50 pips.
If you use 100:1 leverage, 50 pips is your stop loss. Your target is 100 pips.
If you use 50:1 leverage, 100 pips is your stop loss. Your target is 200 pips.

8) Image #1 - Digging for Treasure (Net Winning Trades Concept Illustration)

9) Image #2 - Example of a 200,000% gain in 4 days of swing trade the 30 minute time frame

10) What to do after making $50,000
After reaching $50,000 (or whatever you feel comfortable with), you should start trading lower leverage and lower risks. Here is what I would do, but you can do whatever you want.

a) assuming i made the $50,000 profits in 1 year or less, i would be taxed and only have $35,000 to $40,000 remaining (unless tax free)

b) i would take the $40,000 and attempt +to make 20% gains every month, which would give me around $400,000 at the year end, and after taxes i would have roughly $300,000 remaining.

c) now i would reduce my leverage by HALF, and trade the exact same way i traded the year previous. i would aim for 10% gains per month, and at the year end, my profits would be $600,000 with a total balance about $900,000. after taxes remaining balance would be about $750,000

d) the next year i would aim for 6% per month, and double my money by year end to $1.5 mil. repeat for next 5 years and retire (semi retire, i would still trade weekly charts, just no scalping, probably more stock and commodity investments to be honest)


Variation
Using 1:4 RISK REWARD and initial stop loss of $25

Account balance = $50, giving two attempts to get going.

Risk = 50%
Reward = 300% (4 fold)

$50 total, first trade risk $25
Win = $150 total
Win = $450 total
Loss =$225 total
Win = $675 total
Win = $2025 total
Loss = $~1000 total
Win = $3000 total
Win = $9000 total
Loss = $4500 total
Win = $~13000 total
Win = $39000 total
Win = $117000 total

9 wins, 3 losses.

The order of the wins and losses doesn't matter.
___________________________________________________________________________________________

This thread is open for discussion, feel free to ask questions or make observations..
Attached Image(s) (click to enlarge)
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Be hopeful in a winning position, and fearful in a losing position.
  • Post #2
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  • Aug 28, 2013 2:12am Aug 28, 2013 2:12am
  •  Rag2RichesFX
  • Joined Jul 2012 | Status: CME seat owner | 6,134 Posts
Man, no one realizes the power of this huh?

It's incredible to think everyone uses traditional risk reward on an account that is made up of their life savings (highly non affordable risk)

Rather than using this type of risk reward on FREE MONEY
(highly affordable risk is essentially free money, money you never needed)
Be hopeful in a winning position, and fearful in a losing position.
 
2
  • Post #3
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  • Aug 28, 2013 3:21am Aug 28, 2013 3:21am
  •  AcesHigh
  • Joined Feb 2011 | Status: Scalper | 86 Posts
Sounds great if you have 100% winning ratio..which is Impossible for me ..
Revenge of Scalper
 
 
  • Post #4
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  • Aug 28, 2013 4:07am Aug 28, 2013 4:07am
  •  ReiAtzhu
  • | Joined Aug 2013 | Status: Member | 7 Posts
need more explanation please, explain in number building please?
 
 
  • Post #5
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  • Aug 28, 2013 4:36am Aug 28, 2013 4:36am
  •  syfqffndy
  • | Joined Jan 2012 | Status: Member | 1 Post
It's not that no one is interested, I think. I guess it's more towards the question of, how exactly the trades are made? Identifying the 'best possible setups' as you mentioned? I'm definitely interested, and would like to hear more explanation, too.
 
 
  • Post #6
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  • Aug 28, 2013 5:19am Aug 28, 2013 5:19am
  •  hollowhead
  • Joined Mar 2013 | Status: Putting it all together... | 1,185 Posts
Quoting AcesHigh
Disliked
Sounds great if you have 100% winning ratio..which is Impossible for me ..
Ignored
I am not sure you need a 100% winning ratio. Surely the principle works if you have anything over a 50% winning ratio. A 60% win ratio will mean the hole will take longer to dig than if you have a 80% win ratio. I think if you got 3 or 4 wins off the bat then it would be well worth carrying on. However, the psychology (greed and fear) will be the killer when you get to risking 50% of £12.8k, $25.6k or £51.2K etc. Maintaining patience and disciple will be very hard.
 
3
  • Post #7
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  • Aug 28, 2013 5:34am Aug 28, 2013 5:34am
  •  realjumper
  • Joined Feb 2009 | Status: Hasta la victoria siempre - El Che | 19,542 Posts
Quoting Rag2RichesFX
Disliked
Man, no one realizes the power of this huh? It's incredible to think everyone uses traditional risk reward on an account that is made up of their life savings (highly non affordable risk) Rather than using this type of risk reward on FREE MONEY (highly affordable risk is essentially free money, money you never needed)
Ignored
Yep...in theory this is one of those 'do-able' missions that is worth the risk. As with all trades, imo, patience is the key and if you can wait for the perfect setup, then what you say is possible.

There are many ways to look at this type of trading.....for instance, starting with $100 and trading at a lot size of 0.01 and a goal of (say) 50 pips/day, and when $200 is reached, the lots size goes to 0.02.....$300 = 0.03 etc etc. Once you get to 0.5 lots, the exponential curve steepens considerably......soon you'll be trading with 2.0 lots...still 50 pips/day. In 6 months of this type of compounding, you will have a very large account.

That's just another way to do it, but your way is faster and just as feasible, as long as you're patient to wait for the good 2:1 trade to come to you.

Give it a shot....and more power to you
Doing what you like is Freedom. Liking what you do is Happiness.
 
2
  • Post #8
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  • Aug 28, 2013 5:35am Aug 28, 2013 5:35am
  •  QuadrupleX
  • | Joined Aug 2011 | Status: Member | 338 Posts
Quoting Rag2RichesFX
Disliked
Man, no one realizes the power of this huh? It's incredible to think everyone uses traditional risk reward on an account that is made up of their life savings (highly non affordable risk) Rather than using this type of risk reward on FREE MONEY (highly affordable risk is essentially free money, money you never needed)
Ignored
Just do it man !

Maybe not your first, but by your second winner your thread will be full of newbies worshiping you as a god
 
 
  • Post #9
  • Quote
  • Aug 28, 2013 5:49am Aug 28, 2013 5:49am
  •  KecoaKecil
  • Joined Aug 2013 | Status: Member | 917 Posts
Quoting Rag2RichesFX
Disliked
Man, no one realizes the power of this huh? It's incredible to think everyone uses traditional risk reward on an account that is made up of their life savings (highly non affordable risk) Rather than using this type of risk reward on FREE MONEY (highly affordable risk is essentially free money, money you never needed)
Ignored
First, please forgive my ignorant. Okay, now what i have been thinking? Yes, its do-able task. To dig the hole, i need several conditions, first finding a good spot, the land (trend) is holding, i dig more. If signs of cave in, i stop, admit my wrong, looking for other spot. The more often i find good spot, the more tools i can use. So my big question, CAN i find a good spot? OFTEN ENOUGH? as new baby monkey here (joking) its rather hard for me. ^_^ anybody one to help the poor monkey here?
Don't blame the tools. Blame the carpenter.
 
 
  • Post #10
  • Quote
  • Aug 28, 2013 6:18am Aug 28, 2013 6:18am
  •  Rag2RichesFX
  • Joined Jul 2012 | Status: CME seat owner | 6,134 Posts
Quoting AcesHigh
Disliked
Sounds great if you have 100% winning ratio..which is Impossible for me ..
Ignored

100% not needed.

Even with 75% win ratio,
it will only take 20 trades to turn an initial risk of $25 into $50,000
Be hopeful in a winning position, and fearful in a losing position.
 
 
  • Post #11
  • Quote
  • Aug 28, 2013 6:22am Aug 28, 2013 6:22am
  •  Rag2RichesFX
  • Joined Jul 2012 | Status: CME seat owner | 6,134 Posts
Quoting syfqffndy
Disliked
It's not that no one is interested, I think. I guess it's more towards the question of, how exactly the trades are made? Identifying the 'best possible setups' as you mentioned? I'm definitely interested, and would like to hear more explanation, too.
Ignored
How to enter the market, that is not what this thread about.



I'm just giving people something else to consider besides the traditional "risk 1% to make 2%".

The only reason people risk such small percentages is because they are not confident in their ability to

a) win over 50% of their trades with a 1:2 risk/reward
b) not have large losing streaks, such as 5 or 10 losing trades in a row (to undo all the hard work)
Be hopeful in a winning position, and fearful in a losing position.
 
 
  • Post #12
  • Quote
  • Aug 28, 2013 6:24am Aug 28, 2013 6:24am
  •  Rag2RichesFX
  • Joined Jul 2012 | Status: CME seat owner | 6,134 Posts
Quoting KecoaKecil
Disliked
{quote} First, please forgive my ignorant. Okay, now what i have been thinking? Yes, its do-able task. To dig the hole, i need several conditions, first finding a good spot, the land (trend) is holding, i dig more. If signs of cave in, i stop, admit my wrong, looking for other spot. The more often i find good spot, the more tools i can use. So my big question, CAN i find a good spot? OFTEN ENOUGH? as new baby monkey here (joking) its rather hard for me. ^_^ anybody one to help the poor monkey here?
Ignored
Can you wait for the best 20 trades of the year --- meaning you take one trade per two weeks on average

And then win 75% of those trades?

If you do, welcome to $50,000 with an initial risk of $25.
Be hopeful in a winning position, and fearful in a losing position.
 
1
  • Post #13
  • Quote
  • Aug 28, 2013 6:25am Aug 28, 2013 6:25am
  •  Rag2RichesFX
  • Joined Jul 2012 | Status: CME seat owner | 6,134 Posts
Quoting QuadrupleX
Disliked
{quote} Just do it man ! Maybe not your first, but by your second winner your thread will be full of newbies worshiping you as a god
Ignored
If I successfully do this I will post the trade explorer.
Be hopeful in a winning position, and fearful in a losing position.
 
 
  • Post #14
  • Quote
  • Aug 28, 2013 6:27am Aug 28, 2013 6:27am
  •  Rag2RichesFX
  • Joined Jul 2012 | Status: CME seat owner | 6,134 Posts
Quoting realjumper
Disliked
{quote} Yep...in theory this is one of those 'do-able' missions that is worth the risk. As with all trades, imo, patience is the key and if you can wait for the perfect setup, then what you say is possible. There are many ways to look at this type of trading.....for instance, starting with $100 and trading at a lot size of 0.01 and a goal of (say) 50 pips/day, and when $200 is reached, the lots size goes to 0.02.....$300 = 0.03 etc etc. Once you get to 0.5 lots, the exponential curve steepens considerably......soon you'll be trading with 2.0 lots...still...
Ignored

Thanks for the kind words.

I agree with that slower type of money management,
and I do use conventional low risks (1-3% drawdown) on my larger account that trades the daily swings.


But this thread is more to teach others that perhaps, less is more when it comes to the amount of trades taken.

Although if I successfully reach 1.6 mil using this money management, I'll post the explorer no doubt.
Be hopeful in a winning position, and fearful in a losing position.
 
 
  • Post #15
  • Quote
  • Aug 28, 2013 6:31am Aug 28, 2013 6:31am
  •  realjumper
  • Joined Feb 2009 | Status: Hasta la victoria siempre - El Che | 19,542 Posts
Quoting Rag2RichesFX
Disliked
{quote} Thanks for the kind words. I agree with that slower type of money management, and I do use conventional low risks (1-3% drawdown) on my larger account that trades the daily swings. But this thread is more to teach others that perhaps, less is more when it comes to the amount of trades taken. Although if I successfully reach 1.6 mil using this money management, I'll post the explorer no doubt.
Ignored
Well you could take several attempts to get it, but in theory, the price of each attempt is $50. Big deal......that's about the cost of a decent meal out! Even if it takes you 10 attempts...who cares?....it's still a do-able project and the odds are that you will succeed to some degree, as long as you're patient. I like the idea
Doing what you like is Freedom. Liking what you do is Happiness.
 
 
  • Post #16
  • Quote
  • Edited 6:46am Aug 28, 2013 6:36am | Edited 6:46am
  •  Rag2RichesFX
  • Joined Jul 2012 | Status: CME seat owner | 6,134 Posts
Also consider if you use a 1:4 risk/reward ratio -- very difficult --

Risk $25 initial

$150
$450
$1350
$3050
$9150
$27450
$82000
$246,000

with only 8 net wins?

oh actually, you must consider that a loss using this strategy
is not as large to the overall account balance, as a loss using the 1:2 risk reward.
Be hopeful in a winning position, and fearful in a losing position.
 
 
  • Post #17
  • Quote
  • Aug 28, 2013 6:50am Aug 28, 2013 6:50am
  •  realjumper
  • Joined Feb 2009 | Status: Hasta la victoria siempre - El Che | 19,542 Posts
Quoting Rag2RichesFX
Disliked
oh actually, you must consider that a loss using this strategy is not as large to the overall account balance, as a loss using the 1:2 risk reward.
Ignored
But the trade opportunities would be less frequent??
Doing what you like is Freedom. Liking what you do is Happiness.
 
 
  • Post #18
  • Quote
  • Aug 28, 2013 6:53am Aug 28, 2013 6:53am
  •  Rag2RichesFX
  • Joined Jul 2012 | Status: CME seat owner | 6,134 Posts
Account balance = $50, giving two attempts to get going.

Risk = 50%
Reward = 300% (4 fold)

$50 total, first trade risk $25
Win = $150 total
Win = $450 total
Loss =$225 total
Win = $675 total
Win = $2025 total
Loss = $~1000 total
Win = $3000 total
Win = $9000 total
Loss = $4500 total
Win = $~13000 total
Win = $39000 total
Win = $117000 total

9 wins, 3 losses.

The order of the wins and losses doesn't matter.
Be hopeful in a winning position, and fearful in a losing position.
 
 
  • Post #19
  • Quote
  • Aug 28, 2013 6:53am Aug 28, 2013 6:53am
  •  Rag2RichesFX
  • Joined Jul 2012 | Status: CME seat owner | 6,134 Posts
Quoting realjumper
Disliked
{quote} But the trade opportunities would be less frequent??
Ignored
definitely. you have to be pretty precise to make 120 pips off a 30 pip stop loss

but its doable, done it before many times.


the question is can you do it somewhat consistently?

a losing streak of 5 or 10 trades kills all the profits.
Be hopeful in a winning position, and fearful in a losing position.
 
 
  • Post #20
  • Quote
  • Aug 28, 2013 7:09am Aug 28, 2013 7:09am
  •  realjumper
  • Joined Feb 2009 | Status: Hasta la victoria siempre - El Che | 19,542 Posts
Quoting Rag2RichesFX
Disliked
{quote} definitely. you have to be pretty precise to make 120 pips off a 30 pip stop loss but its doable, done it before many times. the question is can you do it somewhat consistently? a losing streak of 5 or 10 trades kills all the profits.
Ignored
Yeah...I did it yesterday in fact, but those trades are the exception, not the rule for me!! Perhaps after a loss you could pull back to 1:2 until the loss is replaced, and then back to 1:4.......
Doing what you like is Freedom. Liking what you do is Happiness.
 
 
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