Please can somebody help me to understand how a 5% daily profit target by compounding

can increase ones equity reasonably.

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Hi Krista,

It would be great if anyone could make a daily profit of 5% or whatever on a regular basis. The problem is that some days you have a loss and some days you have a profit. Hopefully and everyone's goal should be to have losses will be a lot smaller than the profits.

Here's how this works.

Let's say you have a $100 account and you are a lucky trader and make 5% on day one. That means that your account is now $105.

So, day 2 $105 at 5% will make $5.25.

Here's where compounding works.

Start with $100.

Day 1 @5% =$5

Day 2 your equity is now $105

Day 2 @5% = $5.25

Day 3 you add 100 +(day 1) $5 + (day 2) 5.25 = $110.25

Day 3 @5% = (110.25*.05) = 5.51

Day 4 your equity is $110.25 + 5.51 = 115.76

Day 4 @5% = (115.76*.05) = 5.79

Day 5 your equity is $115.76+$5.79 = 121.55

Day 5 @5% = (121.55*.05) = 6.08

Day 6 equity is $121.55+6.08 = 127.63

and so on.

By day 22 which is about one month's worth of trading, you should have about $279.

 

The thing is, most traders will not be able to get a 5% profit every day. And, if the trader gets into a losing trade, he is most likely to have a greater loss than a profit.

The better way to look at this is to have shorter losses and greater profits and if one day you have a 1% win, then that maybe all you are going to get.

 

anyway, hope this makes some sense and answers your question.

By the way, if you have any kind of spreadsheet program, you should be able to get this on a chart pretty quickly.

Wishing you winning trades!

 

Hello

Thank you Joe for giving me new insight to the issue.

I never took into consideration about the loss on a trade.

This makes it a reality issue. It made a lot of sense.

However I am trying to win more trades than losses.

 

JOE please what strategy of pattern will you advise me

to study which could help my trading?

 

Thanks.

KRistofa

Hello

Thank you Joe for giving me new insight to the issue.

I never took into consideration about the loss on a trade.

This makes it a reality issue. It made a lot of sense.

However I am trying to win more trades than losses.

 

JOE please what strategy of pattern will you advise me

to study which could help my trading

Thank you.

KRISTOFA

Kristofa,

 

The main thing most traders do wrong in trading, is money management.  All professional traders and trainers will always tell you to analyze EVERY trade for its Risk/Reward, before taking a signal.  If you take every signal and not check your Risk/Reward (R/R) first, there will be alot of times you will loose more than you made on previous trades and you will end up blowing out your account and wondering why.

 

Most traders will look for a minimum profit potential (Reward) of at least 2 times the Risk (the stop loss).  This means that if you win 1 and loose 2 trades (win 1 out of 3, 33% win ratio) you still are breaking even.  33% win ratio is low and most strive for at least 50% win ratio, which means, your account would make money, even loosing 50% of the time (because of the min 2X R/R).

 

This is a much more reasonable assumption to make, versus a 5% gain compounded daily.  remember there are days where no signals may come for the entire day (depending on the time frame you are trading).

 

Along with R/R there is a general rule of thumb to never risk more than 2% of your entire capital at any given time, otherwise, you don't leave room for a bad streak of multiple losses. 5 losses in a row is very probable, and at 2% each, this is only 10%, but if you risked more, the losses can be devastating (5% each, 25% draw down;  10% each, 50% draw down).  This means it will take more time to build the account, but the probabilities of success is much, MUCH higher.  Many traders blow out account after account, not remembering the basics of money management, explained here.

 

Good Luck, and happy trading!

Shane42

Hi Shane 42,

You gave a good tonic for trading. I suppose that following your plan makes

one confident of growing his capital.

On the R/R issue, my problem most of the time is how to figure out what the

Reward % will be. That is how to be sure that % reward target will be met.

Most time the reward may be lower than I expected.

Thank you for your effort and time in giving me this good thought. I appreciate.

KRISTOFA

As far as figuring out what the reward % will be:

After a signal presents itself, I figure out my entry and stop, then:

I look at the support/resistance levels for the pair,

I then look to see what R/R is closest, but not beyond the next support /resistance (based on if a sell or buy trade). 

If the S/R comes before 2:1 or 3:1 (depending on your profit rules) then I pass on the trade, and wait for the next setup.  Probabilities say that if there is a S/R level near, then you most likely will not reach your profit target (in a ranging market).  In a strong momentum/trending market, there is much better chance to reach the target and sometime harder to find a proper S/R level.

 

Shane 42

Hi Kristofa,

Although it can be difficult to win all the time, there are traders that do that.

I came across an ebook that explains how the trader is doing 5% a day every single time.

He is a much more experienced trader so is able to win more often than he loses. Also, when he trades he also makes a lot more money than someone just starting out. This trader also has put together some tools that you get when you work with him and it is really not very expensive when you think about all the money that you could loose until you learn what it takes to make money.

I think you should invest in this program and test this or use a demo account until you are familiar with it. Once you know you can make it consistently then put what you learn into practice.

Definitely check it out.

http://bit.ly/lA0xJF

You can get started with just investing a few dollars into this training and then continue if you think it is worth it learning this technique. It will be the best investment in your trading career you make.

Good luck

Thank you dear Rosdi. I am learning to take my time now than before

Rosdi,

There are all kinds of patterns that can be used to make profitable trades. The problem with most traders is that they look at the pattern and assume that it is a winning trade and immediately place the trade.

Unfortunately they fail to look at the time frame the pattern happened as well as the overall situation for the currency pair and the trade goes totally against what they expected.

For instance, let's say you look at the 5 minute chart and find a head and shoulders pattern. You think it probably is going to break out so you place your trade for the upside trend that you just "know" is going to happen. Unfortunately, the 30 minute chart had a different pattern, sideways with no clear direction type of trend, and what's worse, the 8 hr chart had something totally different, a downtrend that had been going on for some time.

The thing is, the patterns are good to give you an idea of what could happen, if everything else stays the same, but with Forex things never stay the same for very long. All it takes is for someone from a Central Bank to sneeze and the markets will change direction in a hurry. The pattern was right up until it ended and that's all the pattern was. You still need to look at more than just patterns to decide what a winning trade is going to be. That comes with time. And, unfortunately for many traders times is something we think we don't have so we lose our money instead.

By the way, do check out this program http://bit.ly/lA0xJF as the person who put it together is making 5% quite often and he has the videos that show exactly that. Keep in mind though, he's been doing this for a while.

The thing is, he is doing it, a little bit at a time and he takes his time doing it.

Check it out. It's not very expensive to start and you can learn quite a bit even if you don't follow his direction.

All the best.

Joe Cepeda

I am learning that it takes much more than indicators or time frame to succeed in forex trading. As you rightly pointed out,that even all time frames hardly 'says' the same thing the same time. Also a phrase from a central bank figure helps to be an enemy or a friend to a trader at times. I wil certainly check out the program and decide on what to do.

Thank you dear Joe Cepeda.

Actually, to get profitable in demo account I have moved to bigger time frames 15/30/1 removed almost all indicators still using fibo. Also made my stop loss wider to accept more market fluctuation also have started to experiment with pending orders. Also do not forget trailing stop not perfect but works to cut losses short.

 

My reasoning why I'm accepting wider stop losses is if market moves in bigger swings than your stop loss for you will be constant looser. so now it's somewhere around 30pips, i'm still checking this system second week now, but results so far seems good.

Hi Marius,

Before I got a little wiser and it took quite a bit to get there, I used stop losses, trailing losses and what-have-you but still got lost and lost money left right and center.

Just to give you an idea, every time I placed a trade, the trend would go against it immediately and the trailing stop would stop me out.

As I read more about it, I found that quite often the trade I was placing was used to stop me out by the market trader. So, not only was I fighting the market and losing I was also fighting the market maker. Not a good place to be.

After loosing 25% of my stash - real trade accounts, not demo - I figured out something wasn't right. So, I stopped trading and went back to studying.

This is why I recommend a mentor. This is why I recommend working with someone who is already doing what you want to do. And this program did that for me. Check it out. It doesn't cost much to start and you will learn a few things. Really.

click here now http://bit.ly/lA0xJF

Since working with this course I have built up my 25% loss and have not had a single lost trade. Even trades that were badly placed ended up making a few pips. In one instance I waited over a weekend before I was able to cash out, I usually do day trading, and cash out I did.

I don't make 5% a day, but am able to make a 2% to 3% on average with no losses.

It wasn't all a result of that course but that course gave me a lot of information  that's been very helpful in getting me to the next level.

There's always a next level :)

I really think that many of us new traders are seduced by the shiny tips and tricks here and believe that we'll also make it like the big guys. The difference is that the big guy can go through a loss of 100 pips and not even realize it. A small trader like me can't. 100 pips is the difference between staying alive or going to the unemployment line.

But, when you know you have the fundamentals, the technicals, and the moon is the right color, then you know you have a chance of getting a profitable trade no matter which direction the trade is going. Trading 1hr or 1 minute will not make a difference because you know that the trend is going your direction eventually.

The main thing is to be able to stay in the trade and knowing that after it goes down(up) it will also go up(down). Eventually even your so-called losing trade will be in the money. You just have to be patient.

Good luck with your trading.

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