Compounding and its effect on forex (Forex Millionaires, Billionaires & above)

Beginner Questions
1

Hello Guys,

I was wondering whether you could help me clarify something about the forex market. I have devised a strategy in which I’d open an account with $1,000,000 over a period of 10 years - and gain 26% per month from the strategy I want to implement which involves compounding. If this is possible it’d mean in 1 month, my account would have moved to $1,260,000 - and at the end of that 10 year period (120months) I’d have made $1,107,810,339,213,200,000. And from the research I’ve made - it seems to me that the forex market is very profitable achieving a $5.3trillion daily turnover.

I’ve only tested this strategy on paper not physically on forex trading accounts but before I do that I’d like to know the possibilities, whether it’s possible to achieve this remarkable feat - on paper compounding it appears like it is but realistically speaking, taking out the “Everything is possible” It’d want to know whether it is or not. If yes why? Or if no why?

It’d also like to know the possible likelihood of become a forex millionaire, billionaire, etc. I’m really keen in the forex markets and I’d say I have the adequate knowledge to start trading - but there are just some things like this that I’d like to realise.

Please I’d welcome fully elaborated answers as I’d need to understand it set by step

Thank you

2

One major issue with your plan is that you are basing it off of paper trading. Are you consistently making 26% per month? Including your losers? While paper is good for practicing, it simply cannot simulate the actual market. With a $1,000,000 account, taking large positions means your orders have to be filled. Someone has to be on the other end of your trades buying and selling to you. This issue is never apparent in paper or demo trading. I believe this is also why you often see stories of people growing $1k to $100k in a short time, but takes just as long (if not longer) to get to $1mil. The orders aren’t executed as easily, and when they are filled, it’s a big enough position to potentially move the market itself: another thing paper/demo cannot simulate.

But then again I’m still a newbie so I could be wrong.

3

Think about what you wrote there. You’ve just suggested that in 10 years you could have an account that would be larger than the total daily trading volume of the whole market - not just by a little, but by orders of magnitude. That should tell you straight away about how likely it is that you’d see the kind of performance you’re talking about here.

4

It’s clearly possible, because there are a few (actually very, very few) people who have achieved millions, even if not billions.

That doesn’t really matter, though. What matters, given that you’re asking about realities, and how to assess whether you’re likely to achieve it, is looking at it on the basis of a realistic comparison.

Apart from what I can guess from your username, I know very little about your background, and nothing at all about your familiarity with statistics and probability, but the comparison I offer you - just for thought - is the one between yourself and the top-producing trading-floor traders at places like Goldman Sachs. It’s a [I]far[/I] from perfect analogy, I know, but it will perhaps alter your perspective a little, and that would clearly be [B][U]really[/U][/B] helpful to you, at the moment.

These are people with first-class master’s degrees or PhD’s in math. They’re very carefully selected, not only according to their previous education but by psychometric testing, too; they’ve been given many hundreds of hours of expert tuition distilled, honed and refined into professional training courses; they’ve put in [U]many thousands[/U] of hours of screen-time; they have a similarly professionally trained risk-manager effectively watching over their shoulder for at least their first few years. I’d respectfully suggest that your own realistic prospects, on balance, must - however you look at it - be considered lower than theirs, collectively?

What’s my point, here? Well, those are traders whose growth target (to keep their jobs, get promoted and earn their 7-figure annual bonuses) is typically in the region of 5-7% per month. In contrast to that, you’re “really keen” on the forex markets and are planning to make a steady 26% per month, compounded monthly. That’s about [B]five times as much[/B] monthly return as some of the top, most experienced, most professional, most successful traders in the world.

Sorry if I sound disparaging, but you did say that you want to know what’s “realistic”.

Let nobody tell you that what you’re asking is “impossible”. It’s perhaps possible … but the outcome you’re asking about isn’t, realistically, the way to bet, is it?

5

Lexys is right.

The average “pro” trader is happy when he is doing 1-2% per month, the below average are happy when they dont have a minus at the end of the year (yes even the professionals end up in minus here and there) and only the best traders and strategists (the superstras in trading and investing) in the world have a 50-80% surplus calculated over the entire year.

It is not hard to make 100% plus on a €500 account in one day but the higher the numbers go, the bigger the account the harder it is. out of several reasons.

So calculate your own numbers with the reality, how many people do you know who made 100 billion out of 1 million in ten years? i only know two people who made billions (but not hundret billions) in “investing” (not trading) and they needed 40 years for that and they did it not with their own money but with the combined money of other people through their own funds which rose to very high numbers so that even 2% bonus is already a sum of several hundret millions for them.

I started a “play” account a month ago with €365 and made 3400% gain in one month, but take it realistically, would that be possible with a account that is not “waisted for fun”-money? for sure not as there come other considerations in every trade of yours etc etc

6

Why would you not try with real money?

Forget realistics, realistics means averages over the combined outcome across the broad range of successful AND unsuccessful traders.

Realistics is just an imaginary median in your minds.

Did Micheal Jordan think realistically when he got cut from his high school basketball team?

7

Because trying with real money [I]before[/I] you know what you’re doing is a way of actively [U]hindering[/U] yourself on the learning-curve you need in order to achieve any success.

The typical difference between someone who genuinely has 5 years’ trading experience and someone who thinks s/he has but actually has only the same couple of months’ trading experience repeated 30 times over is that the first person started real-money live trading [B][U]after[/U][/B] putting in all the hours of education and non-trading screen-time, while the second one unwisely decided that real trading experience from the outset would be more worthwhile and productive even before s/he understood what s/he was really looking for.

Most “traders” think the opposite; but most “people [U]making a living[/U] through trading” (a strikingly different and incomparably smaller group of opinions) think what I’ve said above.

What’s needed, to achieve any success, is to combine hundreds of hours of trading-oriented education from reliable sources with thousands of hours of screen-time study, without entering cash trades. The easy mistake is to imagine that only real, live trading is a valuable source of education. That isn’t so. And for most people doing that is actually of very limited value without having done the education and screen-time first. Failure to appreciate this is a big part of why overall trading success-rates are so low.

Since you ask … :rolleyes:

8

And that is much easier said than done
These places are chock full of time wasters, egocentrics & jawboning gurus
Attempting to separate that chaff from reliable source wheat is a skill it itself

As with most things directly related to this game, if you have the aptitude (& that’s a huge if for the vast majority of folks) it’s not the quantity of time & information but the quality that will determine how fast & indeed whether any degree of success is achieved.

I’d much rather work smart than work hard any day of the week
Life’s too short

You can study till the cows come home but it’s a pointless & futile exercise if your valuable time is constantly being wasted & diluted jogging down blind alleys, & believe you me there are a plentiful supply of those both on here & likeminded forums

9

this is real money. i call it “play account” because it was set up only with 365€ (real money). my real accounts (not play) are not touched by this account. wgy i dont do it with the big accounts like this? simply because i had ups and downs in this “play” account, within 13 days i was plus 16.000 then blew most of the money having a drawback of 90% then up again to the actual number of 11800.

immagine id do that with a 500.000 account loosing 450.000 in one week. not good

the hardest thing is trading is self contgrol and to keep your own psych and mental wellbeeing in tact and healthy, i had to learn that in a very expensive way many years ago.

this is the reason why i set up this "play"account with €365:

http://forums.babypips.com/newbie-island/77975-big-deal-365-1-million-1-year.html

10

Yeah, i seen your thread, U havent updated in 2 weeks over ther.

Just keep practicing, youll know when its time