Goals and timeframes

Hi all :slight_smile:

Iā€™m new.
Iā€™d like to thank the people behind BabyPips. Its by far the best place for online Forex Education (apart from the kind you study for years). Easy to understand. No nonsense. I love it. So many many thanks.

I debated myself whether to write this or not, but Iā€™ll just say it and you can comment as you like (if you like).

I have a goal:
I want to make 150K a year on trading! I have 20K to start up with. I have 6 months to practice and Iā€™ve set myself a 3 year timeframe. So in 3 years Iā€™d like to make 150K pr. year from trading forex.
It might sound really ambitious, but I did some figures and if I put everything I make back into the pot and keep making bigger returs from the same margin (2%) then it should be doableā€¦ According to my clueless plan of course.
So far I havenā€™t seen too many post their earnings here (unless Iā€™ve been looking in the wrong place of course) so I really donā€™t know how realistic it is.
But youā€™ve gotta have goals, right?

I now understand candlesticks!

Thanks :slight_smile:
Mike

Iā€™d love to see the math on this one.

My math shows that youā€™d need a 140% gain per year to get that goal. While I do think thatā€™s [I]possible[/I], itā€™s probably not going to happen.

Iā€™ve made that much in a year before, but I wonā€™t make anywhere near that this year. And I canā€™t imagine doing it 3 years in a row. :slight_smile:

How much time per week do you have to devote to learning forex during those 6 months? If you only have a few hours per week after work then there is no way youā€™re going to be ready in 6 months. But, on the other hand, if learning forex is now your full-time job then it probably shouldnā€™t even take you 6 months. :slight_smile:

LOL ā€¦ yeah :slight_smile: I guess Iā€™m getting carried away. Iā€™ve only started learning.

I may be out in the fields here, but if you can make a 2% return pr. week (on average throughout a year) and I start out with 25K. That should amount to 50K in a year. Then 2% (pr. week) off of that would be 50K next year. And so onā€¦ As of now this is my only job. I can, like Phil, spend 8 hours a day or more for the next 6 months learning as much as I can. ā€¦ but if my math or expectations is totally out of touch with reality Iā€™m here to learn and would be happy to take onboard any advice.

Youā€™re not totally out of touch with reality. The initial reaction of most people on this forum will be to say you canā€™t do it, but thatā€™s because we see a dozen people per week that want to turn their $100 into $100,000 in less than a year starting today! :smiley:

If you have $25,000 to start and 6 months at 40+ hours per week to learn then I say you most definitely [I][B]might [/B][/I]make that kind of money. To be honest 2% average per week is not very hard to do, if you know what youā€™re doing. I made 1.1% this week and it was a crappy week.

My first piece of advice would be to drop the three year goal though. Goals are nice, but can also cause you to overtrade and make mistakes if you are falling short of your goal. Just learn to trade and take whatever profits come your wayā€¦ :slight_smile:

Let us not forget that youā€™ll be paying taxes on your gains. That means a 100% return is really going to be something well below that when netted out.

@ Phil838:
Thanks. I take that as words of encouragement. Iā€™ll resist spilling my whole history and everything here. Its probably not that interesting to other forum members. I did tremendously enjoy your post on how you became a pro trader. And your tips for the road. Many thanks for that :slight_smile:
The 3 year goal isnā€™t important to me. Its just that Iā€™m extremely motivated to make this happen. And I like to think that there is a carrot ahead of me in terms of a decent salary (if I keep it up and make it to the pros) So I have a mental plan to work very hard for a few years and then, once I have a solid trading account, I can be a little more selective about trades. And so on.

@rhodytrader:
Indeed there are taxes. But Iā€™m not trading from the US. We have different laws here. As long as I keep my winnings in the bank they wonā€™t be taxed. And then there is always the possibility of an off-shore account :wink: But sureā€¦ there is the possibility of tax somewhere down the line.

The main reason I want to get into trading is not the cash. The number one reason is Freedom. Freedom to live where ever I like and work whenever I like. And hopefully, with time, freedom from worry over money.

BLOMSTERGUTT. The real question is can you have you made consistant gains over an extended period of time? If the answer is yes, than thats fine (money management aside). But if not or if your new to this, then take a step back and start off with say $100 and see how it goesā€¦ dont want to find you hanging from a tree in 6 months :mad:

The Power of Compounding in the Forex Market

If you can be consistently profitable with your trading strategy ā€” whatever that strategy might be ā€” you can make big money trading currencies.

There are many strategies for making money in the forex market. As an example, letā€™s consider just one: a 10-pip breakout strategy. The objective in this strategy is to find specific chart patterns which have a very high probability of leading to price breakouts, and then trading those breakouts for a net 10 pips. If you can do this TWICE a day, with a high success rate (say 85%, or better), you can earn 1% per day on any size account, without taking extreme risk.

Then, if you have the focus and discipline to maintain your consistency for 3 or 4 years, you can turn a starter account into significant trading capital. Or you can turn a well-funded initial account into real wealth. Letā€™s look at the numbers.

Letā€™s assume that you have developed a reliable 10-pip strategy. You have tested it thoroughly on paper, and in your live account. Your strategy is 85% successful (17 trades out of 20, on average, are winners). Every trade is structured the same way: 20-pip stop, and 10-pip limit. Your risk/reward ratio is 2:1 (yes, this is reverse money management). On average, you make 2 trades per day. You trade 1 mini-lot per $1,000 of account balance. This means that your risk on each trade is 2% (or less) of your account balance:

1 mini-lot x 20 pips per $1,000 = $20 risk per $1,000 of account balance = 2% risk

Initially, letā€™s say that you have a small, starter account with an opening balance of $1,000. And letā€™s say that you trade currency pairs whose pip value is $1/pip. In the first two weeks, you place 20 trades (2 trades per day x 5 trading days per week x 2 weeks). 17 trades are winners, 3 are losers, and your net profit for the first 2 weeks is:

(17 winners x 1 mini-lot x 10 pips) - (3 losers x 1 mini-lot x 20 pips) = 110 pips = $110

For the 2 week period, your account has grown by 11%, and you have just averaged a gain of a little over 1% per trading day in your account balance. Letā€™s see what would happen if you kept doing this same thing for a year.

There are 52 weeks in a year. Letā€™s say that you take a total of 4 weeks off for holidays and vacations each year. That leaves 48 weeks in the year for trading. 48 weeks x 5 trading days per week = 240 trading days per year. So, the question we want to answer is this: how much would your account grow in 240 trading days, if you earned a 1% per day compound rate of return on your account balance. If you have a pocket calculator that can compute powers and roots, the answer is easy to get: 1.01 raised to the 240-power = 10.89, which says that every dollar in your account at the beginning of the year will grow to $10.89 by the end of the year; and ā€¦

your $1,000 account will grow to $10,890 (assuming you make no withdrawals)

Letā€™s assume that you withdraw half of each quarterā€™s profits at the end of each calendar quarter, in order to pay taxes, to sock away some savings in a safe investment, and later to support your lifestyle.

A steady 1% per day compound rate-of-growth in your trading account, with no withdrawals, would produce 81.67% growth per quarter (based on 60 trading days per quarter); but, you are going to withdraw half of this, so your account will show a net increase of 40.8%, quarter-over-quarter. Letā€™s round it off, and say 40% per quarter.

If you kept doing this same thing for 3 years (earning 1% per day, 240 days per year, and withdrawing half of your quarterly earnings at the end of each quarter), you would achieve the following results:

Over the course of 3 years, your little $1,000 account has earned $111,400, of which $55,700 is still in your trading account, and $55,700 has been withdrawn for your business and personal use.

This gives a whole new meaning to the concept of compound rate-of-return. This is compound rate-of-return on steroids!

Keep in mind that, as your account balance increases, the size of your trades increases proportionally; this is how the power of compounding is harnessed to grow your account exponentially. When your $1,000 account has grown to $2,000, you will increase the size of each trade from 1 mini-lot to 2 mini-lots; and, when your account balance reaches $3,000, you will start trading 3 mini-lots on each trade; and so forth.

A 1% per day compound rate-of-growth in your account will double your account balance every 70 trading days (i.e., every 14 calendar weeks), and the size of your trades will double every 70 trading days, as well. Even as the size of your trades becomes very large, you will still be risking only 2% of your account balance on each trade.

The 10-pip breakout strategy used in the example above is just that ā€” an example. Any consistently profitable trading strategy can produce the rate-of-return described above, or more. In other words, any forex trader who is serious about achieving major success in this market can do so, using the trading style and strategy which best suits his or her temperament, time-availability, and risk tolerance.

Time for a Reality Check

You can play all sorts of games with the numbers shown above ā€” and maybe you did, as you were reading this.

ā€œWhat if I donā€™t take any money out of my trading account, and let ALL my earnings compound?ā€

ā€œWhat if I start out with $5,000, or $10,000, or $20,000 instead?ā€

You can make yourself a millionaire in a very short time ā€” in theory, on paper ā€” playing these games.

But, letā€™s get real.

Letā€™s go back to the beginning of this post. The wonderful numbers shown above are based on a big if ā€”

ā€” if you can earn a NET 110 pips every two weeks. Thatā€™s 55 pips each week, NET after all losses, week after week, for three years. Can you do that? Can you trade that consistently? In other words, are you a trader?

If you canā€™t consistently earn 55 pips, or 20 pips, or 10 pips, every week, week after week, year after year, then you shouldnā€™t waste your time dreaming about hypothetical riches.

You should spend your time perfecting your methods, your timing, your money management, and your emotional control, until you become consistently profitable.

After you achieve that, there is no limit to how much you can earn.

Clint

Well said.

Everything Clint posts is always well said! Great Job!!

Great to see you back again R Carter!! :slight_smile: :slight_smile:

Hopefully you will stay to make some great posts!! :slight_smile:

Thanks TYMEN, been real busy at work these last few weeksā€¦ Newbie intake time of year again.

CLINT what an outstanding piece of work! Bet your account balance is solid. Your about as conservative as I am at work. On my personal account, I never exceed 1% and often its 0.5% or 0.25% of balance trades. But on my set up, I usually make around 80 - 100 pips a day at 3 - 5 trades during the London open - New York Close.

Also got a smack on the wrist for posting my email address (didnā€™t know it was against the rules). Got a 1 point sanction? Thought this site was all about helping newbies make profitable trades? Was just gonna send a screenshot of my set up to a fellow member. Told off for ā€˜solicitationā€™??? :eek:

hi Robert, Mike here, you can post a screen shot here for all to see. or start another thread and give some information about how you trade. The emails youā€™ve sent me have been helpful.

Thanks TALOND, But iā€™m old school and still regard my home computer as a type writer. I struggle with a screenshot and email. Get one of my sons to do it for meā€¦ Iā€™m absolutely hopeless! Never thought the time would come. My son has a phone that all but makes you lunch! I have a mobile phone, but thats it. Its a mobile phone! I donā€™t do text??? Do I put on the TV to listen to the radio???

Just had an interesting chat about stops. As you know I always open every trade with a 50 pip stop. Too excessive I hear the cry! Two real good reasons for this. 1) Your broker has all the figures in front of them. Call me a skeptic, but if your stop is 10 - 20 pips your fair game! 2) Interbank plays this game every so often (and yes Iā€™m guilty of this). If your a global bank and need more $ than ļæ½ what do you do? Trade the marketā€¦ nope. You wait till its quite and dump $1b and the other side of the pond mirrors your trade in a fraction of a second. Result youā€™ve just moved $1b with no risk (and I might add no profit) the point being youā€™ve moved the money without risk.

So my point is this. Trade the set up I have outlined and use a 50 stop it hardly ever gets hit with our shannagins! Plus the ma will always tell you where price action is really heading.

The interbank action I have described is charaterized as a candlestick wick that is way out of proprtion to the the price action overall. Just ignore it it signifies nothing other than what I have just descibed. Keep trading the way you originally thought.

Hey, just noticed iā€™ve become a junior memberā€¦ hehe. Funny on two levels!

[B]Phil and Robert, [/B]

Thanks for the kind words.


[B]Robert, [/B]

I didnā€™t know there was a prohibition against posting your own email address! I did it in a post (in April, I think), and never heard a word about it. Maybe I slipped under the radar.

Did you have to go and stand in the corner? How many ā€œsanction pointsā€ get you banned for life?

Iā€™m wondering whether PMā€™s (personal messages) sent through this Forum have different rules. You might try that.
You could write in a regular post: ā€œIf you want a copy of such-and-such, send me a Private Message with your email address.ā€ Maybe the moderators would jump on that as well; I donā€™t know.

Now Iā€™m getting curious: Do the moderators read Private Messages? I havenā€™t used PMā€™s much ā€” but, when I have used them,
I assumed they really were private. Maybe that was a stupid assumption.

The bad news for you, since you ā€œstruggleā€ with email: PMā€™s are a lot like email.

Since you know about interbank operations, I want to give you a link to an article I read recently about what really goes on at the top tier of this market, and get your take on the points made.

Iā€™ll have to hunt for it, and put in another post.

Thatā€™s all for now.

Clint

I do believe we had one of those in the cable last Tuesday at 19:55 GMT.

This is a 5-minute chart of Bid prices. The spike in the Ask price was not so severe.

Now you can post links, if you want to. I wonder whether that also applies to posting your own email address?