Humor me,
This thread is intended to be entirely theoretical .
I have been reading threads on BabyPips for a few months now and I have also been going through the BabyPips school of Pipsology (mainly to learn the terms to understand what the heck people are talking about!). Anyways, I haven’t really stumbled upon too many numbers, as in, profit expectation.
Again, humor me.
Compound interest is a wonderful mechanism in regards to income… if one could achieve a high interest rate that was compounded very frequently then that person could achieve vast wealth in a very short time frame.
Gains through forex can be directly compared to compound interest, except there is no definite gain (as opposed to a bank account).
Here is where I beg again, humor me.
Let’s say that someone begins an account with $1,000 and (theoretically) achieves growth in their account by 50 pips a day. They are trading 3% of their account each trade, with a 100/1 leverage. They trade for 250 days a year (the max is roughly 260, because of closed markets) and always, every single day they trade they gain 50 pips. I’ve calculated that a 50 pip gain while trading 3% of your account with a 100/1 leverage nets 1.5% growth of your overall account each day. So in 250 days their account will have grown 375%, compounded 250 times. At the end of the 1st year this person would (still theoretically, and still humoring me) have increased their $1,000 account to a $41,353.34 account. In 2 years, with the same process and results, that $1,000 account would grow to $1,710,098.49… 3 years $70,718,279.62… 4 years $2,924,436,860.39… 5 years $120,935,223,493.91… and finally 6 years $5,001,075,071,788.00.
First, I would like to ask if these calculations are correct? It is hard to believe that compound interest could turn $1,000 into 5 Trillion Dollars in just 6 years. I understand that trading is not this (again theoretical) sure-fire thing. I understand that the market actions cannot be “known” that they can only be estimated based on all sorts of trends, indicators, etc.
But, this is where my main question comes in. Are there any limitations that would prevent someone from earning that 5 trillion dollars in 6 years? Limitations not associated with poor trading, or any of those variables that the market so truly loves to exhibit. I am talking about limitations like maxed out lot sizes? How much can be traded at one time? Is it limitless? Could someone trade billions or trillions of dollars in currency in intraday trading? If someone could simply gain 50 pips a day, 250 days a year, trading 3% of their account, with a 100/1 leverage, what is there to stop them from making 5 trillion dollars in 6 years?
(please no hate replies, saying “this is just another idiot thinking they can get rich quick,” I purposely applied the words, “humor me” and “theoretically” multiple times for a reason).
This is not my plan, nor anyone elses, just a completely theoretical situation that I am having a little bit of trouble defeating. It truly is a situation that seems too good to be true… then again, most theoretical situations are too good to be true!
As one last added note, I was inspired to ask this question after I saw/read so many threads that insured, “Hey, I’ve got a system, and I easily make 50-100+ pips a day, and I wager 10% of my account each trade! Wahoooo!” and then the classic, “I have never lost a trade… I show profit in every trade I have ever committed to! I know where the market is going, because, simply… I am GOD!” It makes me wonder… if this person is honestly achieving this growth then wouldnt they be a millionaire/billionaire/trillionaire in a matter of a couple years!?
Thank you,
Big Spoon
Also, I would like to thank everyone on the BabyPips forums for being so motivating and resourceful to so many people. I truly feel that this is a place where learning and growth can occur. A 2nd thanks to the BabyPips school of Pipsology, what an amazing resource for a Forex Newb!
(please no negative responses, I am looking for actual answers/opinions on the matter, this is not a thread intended for harrassment… although I do enjoy a good heated discussion every once and while! Please keep it clean and impersonal)