Hello,
I’m new to this site, but it looks great, I’ll hang around a while.
Hi Pepper,
Damn, it wont let me add a link… oh well. Maybe when I’ve done the 5 posts.
Pepper, I can’t help thinking that you may be still confused by some of the answers to your question.
I reckon that, while the guys were quite right, the explanations certainly weren’t aimed at a newbie’s level!
So may I add my two penn’eth?
I WAS going to give you a link to a brilliant set of short videos made just for newbies… but never mind.
Try doing this:- Get hold of a pen, a notepad and write this heading:
"Starting with (say..) $100 bank"
Then 1 to 12 vertically:
1,
2,
3,
etc etc
Now, these are ‘end of month’ numbers, ok?
Ok, so now you trade for a month and let’s say you make a 6% profit.
So, at the end of month one, (Jan?) your bank has grown by that 6% to $106.
THIS is your new starting bank for month two, trade another month, add 6% to your $106 and write it down at 2.
It’s $112.36, right?
Similarly, trade month three, profit the same 6% and you now have $119.10, after trading for 3 months.
Now, I’ve got a bit of time, so I’ll do the next nine months for you… but DO do this exercise YOURSELF afterwards, it’s a great way of it really getting into your head.
1, $106
2, $112.36
3, $119.10
4, $126.24
5, $133.82
6, $141.65
7, $150.36
8, $159.38
9, $168.94
10, $179.08
11, $189.82
12, $201.21
You’ve doubled your starting money in just one year!
Right, want to REALLY feel amazed? take 10 minutes and do the same again for another four years… (your 5 year plan?) It comes to… well, you do it… haha. I’ve done it… and it’s enough to make you giggle all day long :).
THIS is what compounding your profits is all about.
Save all the clever maths for later, when you “have things at your fingertips”.
See? There’s a lot to be said for K.I.S.S.
Come back and let me know how you get on.
Oh, and don’t forget, 6% isn’t THAT hard to achieve, and here’s the BEST part that many many traders don’t see…
You’ve seen that your bank can build steadily, even at a very achievable 6%… this means that YOUR STAKE PER PIP can grow steadily also… can you see where this is going…???
It means… that on a shorter and shorter timescale, you can steadily reduce the NUMBER OF PIPS that you need to chase!!
THIS MEANS that you do not need to hang on with fingers crossed so much that the pips go far enough to make something…
If you trade at, say, a dollar a pip, yes it will take a while to make a great wad of cash.
This is daft thinking mate, and is why newbies (and not so new… crash).
listen…
Actually DO that compounding exercise… write it all out.
See that AS WELL as your profits going up… you can keep to your rule of staking, say, 2% per pip… but that 2% is now on an increasing bank isn’t it… in time, you could, and will, be staking LOTS more per pip… but with a MUCH more conservative safety strategy in place.
Get it?
2% of month 12’s bank is quite a bit more than your starting 2% of $100 isn’t it. Sounds too simple and still a low figure to bother about doesn’t it. Wait untill you see what 2% of year five’s bank is.
At 200, 300, 400, dollars a pip, you can take earlier, SAFER profits and get out before things go pear shaped!! Sure, you might think “ohhh damn” when you see the chart going further your way when you’ve closed… but you have pulled out a large profit to bank, be happy about it! It’s nice only needing to chase five pips, or ten pips… instead of ‘hoping’ for that 100 pip run.
Get your pen out and start writing. THEN try the same thing at a still achievable, say… 13%, 17%.
You’ll wet yourself.
Just be firmly, FIRMLY… disciplined with yourself. KNOW what you are getting into, on every position you take.
Never, EVER think "oh I’ll just have a go and see what happens"
Because something WILL happen… but you wont like it.
Enjoy,
Slow.