EurAnalysis

Well, there is lot of time to practice it. Maybe not a lot of cash to practice, though. But hopefully my entry rules will keep working for me a little bit longer then only last few days.

Many people see forex as a way of getting rich fast. One of the ways they hope to get rich fast is by compounding their winnings. This means they will place a trade, win, and then increase the size of their next bet, using the winnings from the previous bet.

This can seem like a great way to make loads of money. After all if your strategy allows you to win an average of £10 with every £100 bet, you should be able to win £20 with each £200 bet. Right?

Let’s go with this assumption for now and have a look at what happens if you compound your winnings.

First of all what is a reasonable amount of money to start with? Let say 1000 units of your currency. This could be 1000 Pounds, 1000 Dollars, 1000 Euros, it doesn’t matter the result is the same.

If you have £1000 to start with then let’s say you are able to increase your capital by 1% per day. That would mean turning £1000 into £1010 on the first day. How hard could that be? You have a whole day and you only have to make £10. On the next day we’d place bets using our £1010 and we should be able to turn it into £1020.40.

It doesn’t sound difficult does it? Of course some days may be better than others but for the purposes of our experiment we are assuming an average of 1% per day increase in capital.

Compounding your way to a million

How long would it take to make £1,000,000 (one million) using 1% compounding?

After day 232 you would already have made £100,000 (one hundred thousand), and by day 695 you would have your million. Here’s a graph to show the effect of compounding up to one million.

Maybe you think 1% is too much or too little for your strategy. Here’s another graph which shows compounding with 0.5%, 1% and 2%.

With a strategy that compounds your winnings by 2% each day you will be a millionaire in 232 days. That is achievable in less than a year, just working 5 days per week!

At 0.5% you will have to wait 1386 days to make your first million, but if you average the million over the 1386 days that works out at 721 Pounds/Euros/Dollars per day. Not bad going!

Can I become a billionaire with compounding?

So far I’ve just looked at compounding up to a million. But what if we kept on compounding for longer? How long would it take to make 10 million, 100 million, a billion, or even more? Here’s a graph that uses 1% compounding for a much longer period of time.

Remember at 1% it takes 695 days to make a million. Getting to 10 million will only take you another 231 days (926 in total).

You will have made 100 million by day 1158, and by day 1389 you will be a billionaire! If we assume you work 6 days per week (you can’t really do 7 days a week with forex) you will be a billionaire in 4 and a half years!

Let’s not stop there. At day 1620 you will have 10 billion, and by day 1782 you will have 50 billion. Whether you are betting in Euros, Dollars or Pounds you should now be the richest person in the world by this point.

It all sounds so easy.

Back to reality

It can be fun to think about compounding winnings in this way, but now it is time to go back to reality.

It is just not possible to keep compounding like this. You can probably do it for a few weeks but then you will run into trouble.

If it was this easy don’t you think the rich lists of the world would be full of forex traders who are compounding their winnings in this way? As the rich lists aren’t full of these people there must be something that prevents it from being this simple.

As the stakes get higher you will suffer more from emotions as you realise you are playing for much bigger stakes. You are likely to make mistakes, or modify your strategy in a way that makes you less likely to win.

Even if stay as cool as a Vulcan you will run into other problems. When the bets reach a certain level your broker will begin to notice. They may start referring you to the dealer rather than taking your bets direct. This can cause you difficulty with making or closing your bets at the price you want. This will reduce your profit, and maybe turn your winning trades into losers.

If your bets get even larger (and assuming your broker can handle it) you will get the attention of the markets. Your bets will begin to influence the forex market, meaning your strategy will further break down.

When your trade sizes are larger than normal trading volumes the spread will widen as you won’t be able to easily find buyers or sellers for your whole trade size. The spread has to widen in order for you to get enough buyers or sellers to take your huge trades.

This widening spread will again affect your strategy and in all likelihood will turn a winning strategy into a losing one.

As the stakes get higher your chance of making a fatal mistake increase. You only need one big mistake to take your account back down to zero. If you are hoping to win day after day for hundreds of days you are almost certain to be disappointed.

It is good to know about the effect of compounding, but don’t get carried away. You can’t keep compounding your winnings forever.

RodMca
Member
Member Since Jul 2011
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I also have closed all positions scalped another 15 pips 230 for today and 830 for the week my most profitable week yet

See ya all on Monday to scalp a few hundred more pips

Rod, Since I can't private message you yet. Would you consider sending your MA's that allow you to scalp so many pips per week?

Closed down the 1.3770 at BE

Took off rest and snagged total of 238 pips today. Time to

If this gaps up a good short opportunity, if gaps down, good short on close of gap..............Still looking for that 1.3925 right shoulder!

Right now I'm looking for a big score on a short due to fundies, but a scalping long pays just the same!

I guess when one tries to use this idea, the you should keep checking your progress and when it starts to go different to the charts (estimates) you made, move some cash to different assets. Probably fixed-income. Or try investing earned money in sth else. And shrink account back to the initial size Repeat the cycle over and over again, until too rich to bother.

Yeah, sounds so simple. Much harder to make...

Happy weekend all.

I opened a small E/U short for the weekend at 1.37676

Not sure why.

Perhaps these pictures made me do it

.

Also opened a small short just before you @ 1.37688, just on a whim that somebody in EU was gonna surely screw something or other up over the weekend .. of course it shot off upwards immediately afterwards but that's just par for the course with this pair I suppose..if pairs had a gender then she's quite definitely a temperamental female! But as the saying goes .. can't live with 'em, can't live without 'em
Oh, and still a great thread and learning a lot from you guys so thanks for that everyone.
Nice wknd to you all & gd luck nxt wk.

If you really want to make it sound easy to become a millionaire... All you have to do is take 1000 and double it 10 times.

It's a lot harder than it sounds in shark infested waters.

RodMca, how did you come to your decision to long it at 3745?

that's 1K --> 2K --> 4K --> 8K --> 16K --> 32K --> 64K --> 128K -->256K --> 512K --> 1.024MM

10 times... but it's actually 102 400%, get that in a year...
100% return a month, and change the lots per month... mmm,

Let's say you do 2 times leverage trading (as I do)... you need 5K pips to make 100% a month...

That's not really easy but it's not impossible either.

Pbh

his scalping strategy

5000 / 22 (left out the weekends) = 227 green pips per trading day every day

It's hard for most people to make even 22.7 green pips a day.

It's really easy go through 227 red pips a day though.

I did see it this way:

5 pairs = 1000 pips each, 5 days a week, 4 weeks a month... I would position trade, BUT.. if you want to look at it as pips a day.

1000 pips / 4 weeks = 250 pips a week = 50 pips a day per pair, 5 pairs, 250 pips.. scalpers can do that if they trade in cable

Pbh

Greek PM survives confidence vote

Greek Government Wins Confidence Vote Papandreou Still In

http://www.wise-gazette.com/top-news...reou-still-in/

ahhhhh but alas him surviving may be bad for euro as he has been part of the problem and not the solution. Ppl don't generally change so he probably won't succeed at whatever new idea he thinks he has.

Politicians do whatever they can to hold onto power. If he has survived the confidence motion, now he will be back into same old thing to align with on-the-street sentiment.

Overall the 1% Concept is to teach you how to keep survive in the market

Its takes times and patience - everytihing takes times - needs proccess
sound simple but people always lost their patience and mind when enter the market

Most of people lost when trading its not because their system or skills,its about their greedy,fear,ego,proud,etc

The key with the 1% model is your success V lose rate and your RR. The problem with both is that there is no reliable way to calculate both until after your trade result is in. Forex is not like professional gambling because a gambler works in a finite world... forex works in a infinite world. Another way to put this is... a gambler only has 4 aces in the deck... but in forex there could be 8 or 0 depending on the day.

I find it far more useful to focus on edges... specific things I can do that will increase my chance of winning as opposed to losing.

A