Hi there, i was just wondering as per the topic.
As we know all business at initial stages grows rapidly and then eventually evens out to steady growth at small varying %
Does this applies to forex too?
Would there one day come a time whereby an account size would be large enough to not able to execute one’s trade flawlessly?
Just food for thought, anyone?
Love the name Fartist!
I’ve always thought that the only limit would be when you reached an account size so big that if you were to risk 1%, it would be too many units for a broker to support. But if you consistently traded 1% of your account, how big would that be? $10,000,000,000,000?
I’m interested to hear the answer too!
haha thanks thewallhitme!
That’s quite a tough name to spell out, heh.
yeah me too, eg: a 10m account and you risk 1% of it is a 100k.
However depends how much you will borrow from your broker for that 100k trade.
Could easily be millions or something.
hmmm
Yes it would depend on your leverage! I know OANDA (back in the days I messed around with $100,000,000) wouldent let me trade more than 10million lot size regardless or leverage etc. Hope someone can shed some light on this.
Well, just for argument’s sake, let’s do some math, then we can look at options.
Let’s say that you had a very successful strategy that risked .5%, but netted and average 1% daily.
Let’s say you had 48 weeks of trading.
48 x 5 = 240% growth annually.
Let’s also say you started with $1,000.00
So, the first year compounded would look like this:
1 : 1051.16
2 : 1104.94
3 : 1161.47
4 : 1220.89
5 : 1283.35
6 : 1349.01
7 : 1418.03
8 : 1490.58
9 : 1566.84
10 : 1647
11 : 1731.27
12 : 1819.84
13 : 1912.95
14 : 2010.82
15 : 2113.7
16 : 2221.84
17 : 2335.51
18 : 2455
19 : 2580.61
20 : 2712.64
21 : 2851.42
22 : 2997.3
23 : 3150.65
24 : 3311.84
25 : 3481.29
26 : 3659.39
27 : 3846.62
28 : 4043.42
29 : 4250.29
30 : 4467.74
31 : 4696.32
32 : 4936.59
33 : 5189.16
34 : 5454.64
35 : 5733.71
36 : 6027.06
37 : 6335.42
38 : 6659.55
39 : 7000.27
40 : 7358.41
41 : 7734.88
42 : 8130.61
43 : 8546.59
44 : 8983.85
45 : 9443.48
46 : 9926.63
47 : 10434.5
48 : 10968.34
Quite impressive.
So, you take out the taxes, and have roughly $6,000 to start your second year.
It looks like this:
1 : 6306.97
2 : 6629.64
3 : 6968.83
4 : 7325.37
5 : 7700.15
6 : 8094.1
7 : 8508.21
8 : 8943.51
9 : 9401.07
10 : 9882.05
11 : 10387.64
12 : 10919.09
13 : 11477.73
14 : 12064.95
15 : 12682.22
16 : 13331.07
17 : 14013.11
18 : 14730.05
19 : 15483.66
20 : 16275.84
21 : 17108.54
22 : 17983.85
23 : 18903.93
24 : 19871.09
25 : 20887.74
26 : 21956.39
27 : 23079.73
28 : 24260.53
29 : 25501.74
30 : 26806.46
31 : 28177.93
32 : 29619.57
33 : 31134.96
34 : 32727.88
35 : 34402.31
36 : 36162.39
37 : 38012.53
38 : 39957.32
39 : 42001.62
40 : 44150.5
41 : 46409.32
42 : 48783.71
43 : 51279.58
44 : 53903.14
45 : 56660.93
46 : 59559.81
47 : 62607
48 : 65810.09
Again, you take out the taxes, and at the end of the third year, you now have roughly 400k. Take the 30% out one more time, and have another great year, and your 1k has turned into 4 million.
So now, the smart thing to do would be just to lay off because 4 mill compounded at the rate of even .5% a day would be hard to spend fast enough to go broke with, unless one was just stupid.
Now, the other drawback is size of lots. I’ve seen depth of market orders of well over 400 lots gone in less than 2 seconds during the couple hours that London, and NY are open together. With every 10 standard lots being a million dollars, that’s over 40 million on the line at once, and it was not even blinked at. Not to mention, that would be $4,000 dollar pips.
I’ve personally traded 10 standard lots on a live account, and not once ever had even a hiccup getting into, or out of a trade. Not in any of the three sessions, or even after the Asian open on a Sunday night in the US.
The next step would be to ditch retail, and open a small institutional account. Your spreads would be almost non-existent in comparison to retail, and your liquidity problems would be almost nil as well.
With a 10 mill account, and using the smaller gain rate of .5% while risking .25% daily, your annual return for that year over 48 weeks would look like this:
1 : 10252884.56
2 : 10512164.2
3 : 10778000.61
4 : 11050559.61
5 : 11330011.21
6 : 11616529.72
7 : 11910293.83
8 : 12211486.78
9 : 12520296.44
10 : 12836915.42
11 : 13161541.2
12 : 13494376.27
13 : 13835628.22
14 : 14185509.91
15 : 14544239.57
16 : 14912040.95
17 : 15289143.45
18 : 15675782.3
19 : 16072198.65
20 : 16478639.75
21 : 16895359.12
22 : 17322616.68
23 : 17760678.93
24 : 18209819.1
25 : 18670317.32
26 : 19142460.84
27 : 19626544.14
28 : 20122869.16
29 : 20631745.47
30 : 21153490.47
31 : 21688429.61
32 : 22236896.53
33 : 22799233.33
34 : 23375790.76
35 : 23966928.44
36 : 24573015.08
37 : 25194428.71
38 : 25831556.94
39 : 26484797.16
40 : 27154556.81
41 : 27841253.65
42 : 28545316
43 : 29267182.99
44 : 30007304.89
45 : 30766143.33
46 : 31544171.62
47 : 32341875.05
48 : 33159751.17
Better start looking for some healthy tax shelters, and an awesome accountant.
One could become a very very rich individual, and trade lot sizes that would make mere mortals blush before they had to worry about diminishing returns.
I would say the smartest thing to do, would be to keep shrinking your risk as your account grew. And not for any other reason than to protect gains.
Earning say… 20% annually on a 1k account is good.
But earning 20% on a 10 million dollar account would be great steady wealth growth, with less risk than when you started.
thanks for sharing Master Tang!
You guys ever heard of a retail trader, a lady in japan who made over 400m in forex?
Wonder if she faces any of this issues, heh.
Whoa thanks for sharing cuban! 