I have been trading Indices and Forex for over 1 year and in the cryptocurrency world for over 6 years, I consider myself a profitable Trader because my win rate is +50% with a RR of 1:2 but this year has been fatal, both emotionally and financially and just now that I find myself in a “difficult” situation is when I finally feel that I got the secret ingredient to succeed in trading and I’m not talking about some kind of analysis in particular or way of trading, Personally I have learned everything from Inner Circle Trader and I am very grateful for that knowledge but this is not about technique, it is more about statistics and I am making this post as a revelation to the current system and above all as a protest to the Prop Firms industry and their Machiavellian system of pretending to be our “friend” when they are not. This may perhaps change the industry and the minds of those who read it and even so, if I can’t move anything inside your mind I would be very grateful if you could tell me your point of view.
I am a 24 year old guy and since the age of 18 I have been in an intense struggle to achieve my financial freedom, I have had successes and failures but due to bad decisions I am at the lowest point in my life and obviously I am not giving up and you may ask, if I said I am profitable why am I not in a healthy financial situation…? Let me tell you a little bit about how I got here.
Amidst all the brainwashing and mind programming in this wild industry, I have been another victim of MFF, it was a mistake to use all my savings to pay for a funding test that I was sure I would pass, my system is good, I have good psychology and risk management but I was swimming against the tide, there was a lot of manipulation and no matter how hard I tried to move forward they would do everything they could to see me fail and now that I am at the bottom, I am desperately looking for a way out in a moral and honest way.
This is when it occurred to me how I can create a financial base with only $10 and sure you are going to say “Go get a job” but I am from Venezuela, what a normal person earns in 1 month maybe it would take me between 5 and 10 months.
This is where the Holy Grail Triad comes in, Leverage, Risk Management and Compound Interest.
When we take a challenge with any company, I won’t name any so as not to cause controversy but we already know that with 99% of traders failing they can pay the 1% who win. So supposing I submit a $100k test that comes out to $500 and they give me a maximum drawdown of 10% then I as a trader think about risking 1% per trade, that’s the norm. But we are not realizing something that 1% that we are risking represents 10% of our initial investment i.e. the $500, obviously we have the bias that it is a $100k account and we are allowed to lose $10,000 but we could make it with our own money leveraged x20 i.e. $500 x 20 would be $10,000 and I could afford a maximum drawdown of 5% which seems quite reasonable to me.
Now we understand the first part of the triad, leverage. That is to say that with a $500 account we can afford to trade with $10,000 and a maximum drawdown of 5%, although this is also a mental manipulation in the Forex market, CFDs and others that are not as regulated as Futures and Stocks but I will not talk about that, maybe you are wondering how you can control a maximum drawdown of 5% and not burn the account, this obviously works when you are profitable and know your stats.
Let’s go to the second point, the Risk Management, here we are going to use two mathematical functions, the logarithmic function and the exponential function, obviously we will limit it a little and we will adapt it to trading, with ICT I managed to understand that it is not bad to decrease the risk to half when you lose and if you lose again, then decrease the risk by half but we must set a minimum limit because if we do it to infinity if it will be impossible to lose the account but we will never get out of there and when we win we increase the risk to double, obviously with a maximum limit not to risk 100% in a hahahah operation.
For example, if you start with a capital of $100,000, you have a maximum DD of 5%, so you risk 0.50% on the first trade. If the first trade is a loser, the next trade will have a 0.25% risk. If you lose that trade, you will always risk 0.125% until your capital reaches at least $99,500 again (until you recover the balance where you risked 0.25%). Thereafter, you will risk another 0.25% (assuming you win) until your capital exceeds $100,000 (initial balance). Only then will you start risking 0.50% again.
If you exceed the $100,000 starting balance with a profit, i.e. $102,000, and suffer a 0.50% loss leaving you with $101,490, you will drop your risk back down to 0.25%. This rule applies to any capital you accumulate during your trading. Never consistently risk 0.50% regardless of how much profit you have made, this way you will need 36 consecutive negative trades to lose the account. I think many profitable traders can afford that.
Understanding this point of Leverage x20 with a maximum DD of 5% and Risk Management we are already half way there, so assuming we already know how to manage risk, exit DD and manage to win 1 trade with a risk of 0.5% on the Initial Balance. Let’s do the math $500 x 20 (leverage) = $10,000 x 1% (1:2 winning trade) = $100 and this would represent 20% of your starting balance of $500, I think these are consistent figures and we are not looking for a home run to win, we just need to have good risk management to withstand the drawdown and win just 1 trade above the starting balance. Do you think you can do this consistently several times?
Now comes the most important part, compound interest, with this we complete our sacred recipe that may very well take you 5 months or more to complete but if you want to trade professionally you know it pays to think long term. So we already know that only winning 1 operation of 0.5% on the initial balance would give us 1% profit and with a leverage x20 would be 20% based on the initial balance and this is where the magic comes in, compound interest is measured by periods and in trading we can measure them by trades, I personally call it cycles, that is every time I reach 1% profit I restart everything and use the same formula, assuming you do 50 cycles of these with a profit of 20% for each cycle and a capital of $500 then you will have earned $4,549,719.08.
Obviously for my situation I will start with $30 leveraged x25 and a maximum drawdown of 4% with the same objective and risk management but the profit will be 25% for each cycle, then I will have generated $2,101,917.7 this seems like magic to me and I know that from theory to practice there is quite a difference but I know that many of us are capable of doing this, we just need time.
Thanks for getting here and good luck in your process as a trader. Blessings and best of luck.
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