The Compounding Effect: A Test
Most traders are aware of the compounding effect as applied to FX trading.
And most traders will argue that it has its limitations, that the theory just doesn’t translate well in practice for most traders.
I thought I would test the compounding effect for myself, ie.,
can I employ the compounding effect in the manner shown in the chart attached below.
1. The test started with a balance of $128.60 on 2nd Nov, 2011, as documented here.
2. The test doubles lot size after each +400 pip block (refer chart attached).
3. The test aims to reach and stop at a maximum 100 lots = 10,000,000 units.
4. Deposits will not be made to the trading account, if I blow up the account, the test ends.
5. Withdrawals will at times be made from the account should it be in profit.
6. The br0ker used at present is GO Markets at 200:1 leverage; I may soon be changing to Oanda at 50:1 leverage.
7. The test, assuming I do not blow the account, I estimate will take 24 months; ie., an average of +50 pips week.
Please remember, this is a test. I make no claim that I can or cannot achieve the targets set out in the chart.
But it will be fun trying.
Most traders are aware of the compounding effect as applied to FX trading.
And most traders will argue that it has its limitations, that the theory just doesn’t translate well in practice for most traders.
I thought I would test the compounding effect for myself, ie.,
can I employ the compounding effect in the manner shown in the chart attached below.
1. The test started with a balance of $128.60 on 2nd Nov, 2011, as documented here.
2. The test doubles lot size after each +400 pip block (refer chart attached).
3. The test aims to reach and stop at a maximum 100 lots = 10,000,000 units.
4. Deposits will not be made to the trading account, if I blow up the account, the test ends.
5. Withdrawals will at times be made from the account should it be in profit.
6. The br0ker used at present is GO Markets at 200:1 leverage; I may soon be changing to Oanda at 50:1 leverage.
7. The test, assuming I do not blow the account, I estimate will take 24 months; ie., an average of +50 pips week.
Please remember, this is a test. I make no claim that I can or cannot achieve the targets set out in the chart.
But it will be fun trying.
