The $200 to $1 Million Newbie Challenge Part I

[TurtleForex]

OK, that should have got your attention.

So you want to turn that coffee can of change into a million dollars, huh? Can it be done? Yes. Can you also turn a $1.00 lottery ticket into $1 Million? Yes.

If your the 25% that are still reading, I am going to tell you how you MIGHT be able to turn that coffee can of change into a sum of money that you MAY be able to live comfortably off of by trading the Forex.

Now for the 1-in-20 that may still be reading here is what I would like you to do.

1. Forget about setting any goals. Goals lead to trading errors. Your only goal needs to be to follow your trading plan to the letter. So with that being said, I want you to commit to making a trading plan. I dont care if its a “system”, method or whatever you want to call it. I don’t care if it relies on an indicator, a pivot point, a trend line, a moving average or the wind direction when you wake up. But whatever you do, follow it every single time without fail.

2. Your going to grade yourself. Now this is going to require you to be 100% honest with yourself. Start a trading journal here on BabyPips.com and make your trading system and rules public so you have some accountability.

3. Now take your “system” or whatever and trade it on a demo account for 6 months or 100 trades, whichever comes first. You can use real money if you want, but I’m just letting you know that 90% of the 5% of you still reading will probably blow out your account. With that being said, do whatever your comfortable with.

4. For every trade you make there is going to be a “YES” or “NO” answer to this question; Did I follow my trading plan/rules 100%? You either did or did not. There is no in between.

5. After your 100th trade its time to grade yourself. Just like school, an “A” is 93 or above, a “B” is 85-92, a “C” is 78-84 a “D” is 70-78 and you flunked out of trading school if you score under 70.

If you scored an “A”, you may have what it takes to turn that coffee can of change into a sum of money you can live off of.

In part II we are going to take a look at your “system” and set some realistic expectations. But first I have a chicken to grill…

[nevergiveupss]

Very, Very good points my friend!

Cheers
:35:

[TurtleForex]

OK, so you got an “A” on the “discipline” test. You placed your 100 trades following your system to the letter at least 93% of the time. Great job! Your accepted to Trading School! (If you got a B+ maybe you can get in on an athletic scholarship…hehehe)

Well, how did your system do? Was it profitable? How much leverage did you use? What was your maximum draw down during the test period? Chances are your system didn’t do so well. But if you were able to follow it, even if you lost on every single trade, your moving in the right direction.

If your system was profitable during the test period and your maximum draw down was within your risk tolerance, congratulations! You can move to Part IV(when I post it). If your method did not do so well, that’s OK. We’ll work on finding you a method that trades the way you prefer and gives you a statistical edge. First let’s discuss how to go about finding a trading method that is right for you.

The first thing that you are going to have to decide is what time frame you want to trade on. Do you want to day trade where you are holding positions for a few minutes to a few hours? Or do you prefer to swing or position trade where you can be holding positions for days, weeks or even months?

A lot of what decides your time frame will be the amount of funds you have to work with to start out with. Swing or position trading requires setting much wider stops than day trading, so yo will need more starting capital. The amount of time you have to spend on trading is also a determining factor.

Next you’ll need to decide what style of trading you like. Do you like trading with the prevailing trend? Do you like to fade (go against) the trend? Or do you like trading ranges between areas of major support or resistance? Any of these styles are valid ways to trade and can be traded profitably using sound risk management rules on almost any time frame.

I personally prefer to day trade in the direction of the prevailing trend. My typical trade usually is over after 2-3 hours and I’ll place 1-4 trades a day. I try to limit myself to 4-5 hours per day of looking for trades but I love trading so sometimes that is difficult…

If you prefer “Swing” or “Position” trading I’d like to recommend an excellent book I picked up about a year ago called Forex On Five Hours A Week by Ragee Horner. Raghee is also known here on BabyPips as “Queen Cleopiptra”. Now I don’t know Raghee myself but her book is an excellent read and goes well beyond just her method of trading. In fact I purchased her book and brushed through it about a year ago. I just picked it up again a couple weeks ago and in the final chapter she had some recommended resources and among them was BabyPips.com. So it’s thanks to Raghee that I found this great site. If your out there Raghee, thanks for the heads-up on BabyPips!

In part III of the $1 Million Newbie Challenge, I’ll go over the method I use to find trades. If day trading is not your thing, that’s OK. Go grab a copy of Forex On Five Hours A Week. If you’d like some other recommendations, shoot me an email to <[email protected]>. I’ve read 25-30 trading books over the years and depending on your trading goals I’ll try to recommend one to you.

That’s all for tonight. Have a great day!

[RainMan]

Good stuff here.

[sgpilot]

I’m new and have done a few trades only on MT4. But still considering to join Oanda and I think that they don’t use MT4, and have their own platform. Oh well. Anyway, I haven’t completed the pipsology school yet. I should also watch ICT’s videos. Then I would understand what EMA SMA and other martian acronyms.

[RainMan]

I’m new and have done a few trades only on MT4. But still considering to join Oanda and I think that they don’t use MT4, and have their own platform. Oh well. Anyway, I haven’t completed the pipsology school yet. I should also watch ICT’s videos. Then I would understand what EMA SMA and other martian acronyms.

Pips school is a really good place to start and build a strong, basic understanding of all things Forex. I think beginners, like me, should focus heavily on getting through all the lessons, while playing a bit with your Demo account so you can better relate the material to real world experience. Don’t get distracted with other material and limit the time you spend on aimlessly browsing and posting on forums. Steadily plowing through Pips school is a more productive way to spend your time.

Oanda is off topic, but I will address it briefly here. If you have more questions, we should take it to an existing Oanda thread, or a start a new one. I’m using Oanda Demo. They have both MT4 and their own platform, called FxTrade. I’m using MT4 for charting and indicators and stuff like that. But when it comes to executing trades on Oanada MT4, I noticed sometimes it take 30 seconds. So to execute, I use Oanda’s platform, which is real pretty. I’ve also notice with Oanda MT4, some really long periods where the price freezes for 30 seconds. I haven’t decided if this happens on FxTrade also. I’ve also read about slippage problems with Oanada, but haven’t decided if that is to be expected from time to time, and people complain about it with all brokers.

[sgpilot]

Yea RainMan, I went to find out if they have MT4 shortly after that post and just got one demo MT4 from them. I read some reviews and yes, some say they freeze you up on profitable trades lol. Anyway I have a HotForex MT4 too. They seem to have a LOT of good reviews.

[PaladinFX]

That OP was pretty entertaining to read, and 100% accurate, in my opinion.
Very nice post.

The only thing I disagreed with at first was the grading system (A = 93% or above, B = 82-92% etc) … but that was because I initially misunderstood the reference to be ‘profitable trades’, when in fact Turtle referred to ‘YES/NO on having adhered to the trading plan’.

Enjoy your chicken.

O.

[MoneyNVRSleeps]

Nice idea,

Im down for this, but I will use real money. $200 is cool…

Maybe even linking up to myFXBook…

When do we start?

[Fxmall]

Not a bad idea for a thread and on making trading journals public, yes that will bring in some degree of accountability. And on newnies, while the idea sounds good [making a million], you got to put in some grunt work, so head over to pips school, learn all you can and get started!

[TurtleForex]

Hey Money!

You can start whenever you want. Start yourself a trading journal here on BabyPips or if you want right here on this thread. The whole idea behind this challenge is to develop the consistency you will need to be successful in the long term. Starting with real money is fine. I am not going to recommend anything as far as leverage, stops, profit targets or whatever. That’s for you to decide. I will be outlining the method I use in my next “Challenge” post for those that want some kind of guideline to follow.

[PaladinFX]

Not a bad idea for a thread and on making trading journals public, yes that will bring in some degree of accountability. And on newnies, while the idea sounds good [making a million], you got to put in some grunt work, so head over to pips school, learn all you can and get started!

Yep.
The funny thing is: you [B]can[/B] make a million out of a thousand bucks, trading forex … if you don’t insist on having to accomplish it within a month (or five years, for that matter).

O.

[TurtleForex]

OK, part III of this little series of posts will cover the method I personally use. I’m not going to get into deep detail and some of how I trade is discretionary and that just comes with experience.

I am going to make the best possible analogy to what it takes to become a successful. I apologize to any non-athletic readers out there, but I think you’ll get what I am trying to say.

If I could equate trading to a sport it would be golf. With trading, it’s you against the market. With golf its you against the course. In both sports the more risk you take the more you can be rewarded…or punished. With both you can use past experience to make your decisions, but you know that no matter how much things look like they did before, there will always be some unknown factor that may cause a different outcome. The comparisons can go on and on.

But most of all with both you can have the best equipment, read books and articles written by the best in their fields and even watch how they do it. But until you get out on the “range” and actually start hitting thousands of balls or making hundreds of trades you will never be able to get to the level that you want to. So get out there and start hitting balls!

That being said, I am going to briefly give an overview of how I find trades. This is very brief and not intended to be an exhaustive article on trading using the method I use. Use this as a starting point to develop your own method. If you want, you can join me in my Live Trading Room at TurtleForex.com where I discuss what I do in a little more detail between trades.

90% of the time I scalp trades in the direction on the prevailing trend. Here is my top down approach:

1. Determine a directional bias by looking at the 2hr and daily chart for a clear trend which I define and successive higher highs and higher lows for an uptrend and and lower highs and lower lows for downtrends. If I can’t see a clear direction I tend to leave that pair alone. If it looks like a trend is shifting, I may test the waters, it all depends.

2. Now that I have my “watch list” I mark what I consider significant areas of support and resistance. I also have daily and weekly pivot levels and draw Fibonacci levels where I need them. These are on 30 minute and 2 hr charts

3. On my 5 minute chart, which I use for timing, I have 50% and 100% of the 2hr ATR plotted on the price panel and as a singe indicator I use a 15,5,5 Slow Stochastic. But you could use an RSI or any indicator that shows overbought and oversold levels that you are comfortable with.

Once I have all my “ducks in a row” I wait for price to move to levels of support or resistance. This can be a retracement to the 50% 2 HR ATR on the 5 minute, a pivot level, a trend line, a Fib level or an area of past support or resistance.

What I am looking for is confluence. Which just means that I want at least 2 of the above in agreement. So at a bare minimum I’d like to see an up trending pair move below 50% on the 2 hr ATR and below 20 on the 5 min 15,5,5 Stochastic to consider a long position. The very best signals have 3 or more.

As an example, last Friday afternoon I was looking at GBP/JPY. Now I had no intention of taking a trade that late on a Friday but in the trading room I noted that the GBP/JPY was sitting on my trend line support, s1 pivot, 38.2% fib, 50% on the 2HR range and below 20 on the 15,5,5 Stochastic. It’s was screaming for me to buy! Long story short I took a pass with it being late Friday. I had already took a couple losses and didn’t want to risk any more, but sure enough the GBP/JPY ran up close to 40 pips before the day ended!

In part 4, we are going to to set a projection, not a goal, on where we want to be. Will it be $1 Million in 2 years? Probably not. But I think those of you out there that think realistically will be pleased with what I show you.

Happy Trading!

[TurtleForex]

Just wanted to give a visual using the GBP/JPY example mentioned in part III.

First here is my 2hr chart showing an up trending GBP/JPY. Now just be aware that drawing trend lines is descretionary and there may be some “trend line purists” that don’t agree with where or how I draw my lines. In my opinion, what is important is that you draw them consistently and learn to recognize how price behaves when it moves to your levels and ingrain that in your memory. As far as I am concerned, drawing trend lines does not have to be an exact science. And like with anything there will be those that do it better than others. Just give it your best shot!

Next look how on the 30 minute we are at S1, trendline support and 61.8 fib and support from the previous day. Can you say BUY ME NOW?

Last we see an oversold 15,5,5 Stochastic on the 5 minute. At the time price was also crossing below the 2 HR ATR, but that indicator updates every 2 hrs so it is not showing on this screen shot. Bottom line, this was a screaming BUY at around 1:45 EST Friday afternoon and one I wish I took a shot at in hindsight!

[TurtleForex]

We are going to call this the “crystal ball” post, because we are going to “see into your future” as a Forex Trader!

For this post we are going to use some facts and some assumptions. These are the facts:

1. You placed 100 trades or traded your system for 6 months
2. You followed your system exactly 90% of the time or better.
3. Your system had a proven 6 month track record of being profitable with a draw down that your level of risk tolerance (and your account) can handle.
4. You have realistic expectations

Here is what I am going to assume:

1. You have a starting balance of $200.00 USD
2. You are using roughly 5:1 leverage. You may be using more or less.
3. Your average monthly profit over 6 months after draw downs is 10%. This is mid-to-upper range realistic. Your system may do better or worse than this. Plug in the numbers.
4. You will compound your trade size monthly based on your account balance and 5:1 leverage.

Based on this, it will take you 90 months to turn that coffee can of change into $1 Million. (1.06 Million actually). That’s 7-1/2 years. It’s absolutely doable, but very, very few will have the patience and discipline to achieve this. Maybe one in 50,000 traders if that.

But let’s look at things a bit differently. How about we look at it as if we would be happy to make a comfortable living, doing something we enjoy. I’ve been self-employed my entire adult life. I’m tired of employees, customers, chasing down money and all the other B.S. that goes with being “The Boss”.

I’ve traded off and on for over 15 years when I had the time. I’ve traded just about every kind of instrument you can trade with no better than average success until recently when I decided this is how I’d like to make my living some day. I’m a “type-A” kind of guy. I know I will work until I die so I want to do something I like, and that I only have to rely on myself to do. Trading is the perfect occupation. (Or pro golfer…hehehehe).

So for this next “view into the crystal ball” let’s tone down our goals a bit and see how long it would take to tell the boss “I’m taking an early retirement” or in my case tell my kids “It’s all yours, enjoy!”

We are going to assume all the same facts above in the “Facts” section. But for the assumptions we are going to make the following changes and assumptions:

1. A $5000.00 starting balance
2. 8% average monthly return
3. A $5000.00 monthly income requirement. That means we will need a $65,000 USD balance and we will pull out profits every month.

Based on the above, it will take you 34 months to get to the point that you are earning $5000.00 +/- a month from your trading capital. Your needs or goals may be more or less than this. Just plug in the numbers to see how long it will take to get where you want to go based on REAL RESULTS NOT HYPOTHETICAL RESULTS ON AN EXCEL SPREADSHEET.

My personal goal is to be able to cover all my bills and put a little away each month from my trading. As of now I will need about 29 months to have enough capital to be where I want to be based on my average monthly profit over the last year and my income requirements.

I hope you found this little “series” helpful! If you have any questions or comments, feel free to drop me a line at <[email protected]>. Or visit TurtleForex.com for live trading and commentary every Monday-Friday from 6:30AM-12:00PM!

Good luck and Happy Trading!

Joe

[TurtleForex]

One thing I failed to mention in my last post was that when you get the point where you can make a realistic projection based on your past results, don’t make that monthly average your monthly goal. This will undoubtedly lead to trading errors as you try to squeeze out pips that are not there on hold onto losing trades too long in attempt to hit your “goal”.

Your one and only goal should be to plan your trades and trade your plan. Continue to “grade” your performance in this department. If you see yourself slipping a bit, it’s OK. It happens to the best of them. And keep in mind that most methods will go through periods where they perform poorly compared to their average, that’s when your discipline will really be tested.

I wish everyone here the best of luck (or should I say skill!) and Happy Trading!

Joe

“The trend is your friend, until it bends at the end!”

[MoneyNVRSleeps]

good stuff Joe,

[Fxmall]

Oh yes! A million bucks overnight and most of the EA promos tend to blast out this message…and they wonder why so many EA’s crop up all over the net!

[Kiwi_Pip_Squeak]

Hi. Thanks for this thread. Brilliant idea - Game On!
As a newbie I just couldn’t resist the challenge. $200 is an insane starting point! It goes against everything you read about starting trading, but wow, does it teach you good money management from day one! I’ve started a blog on meetpips (admittedly I’ve waited a week before making it public - there are so many ways this could go horribly wrong!) which will keep me more focused on good trades and hopefully will give me some feed-back on how I can improve (please don’t be too hard on me - I am a raw beginner!). Unfortunately I can’t post my trades using MT4 as I use a Mac and it’s not compatible, I do have all of my brokers statements if anyone wants verification that I have placed the trades. Thanks again
PS It appears that I can’t add a link as I haven’t posted enough on BabyPips yet so you’ll just have to search for me on meetpips.

[TurtleForex]

Hi Kiwi!

Stay focused and learn from each trade! Best of luck to you!