“How to Swing Big Doors With Small Hinges When Trading The Financial Markets”
Earlier this year I was interviewed on the good, the bad and the ugly of being a financial trader!
One great question I was asked was…….…..
“How much money do you need to get started in financial trading when compared to say starting your own business or putting a deposit down on an investment property?”
My reply…. “Anyone could start with as little as £2000 as they have no other overheads, except the cost of their time”
Her reply “But it would take a lifetime to turn £2000 into a meaningful sum of money so why even bother starting!”
My reply “You are saying this because you delegate the management of your money to an investment adviser believing that you are doing well if you make 6-8% a year in a shares related investment” So yes if you did this, it would take a long time to grow £2000 but financial trading is totally different!
I added “You can get exponential returns if you have the patience, discipline and a bit of time. You also need to grow your trading account incrementally like you would a business and very importantly manage your risk properly”
She said “Okay prove it!!!!!”
So that’s how my £2000 compound interest financial trading challenge got started in March of this year!!
I can reveal that the £2K trading account is now up by 716% from 1st March to 30th October and even more since then and I’ve only just got started.
Now there is a well known saying that when it comes to making money, some things are too good to be true and probably a scam so that’s why it’s a good idea to get empirical evidence.
You can see proof here in the recording of last week’s webinar as all the trading results were downloaded straight from my trading account with IG.
In the webinar I went through a live trade (the before and after) and the trading results so far over the last 8 months.
I demonstrate how I have systematically and consistently compounded up the trading account with no big thrills but a bounty of consistent wins. There have been no withdrawals as the account needs time to compound up using the previous month’s takings from the markets.
Every month is always in profit and my DAX Income Optimiser strategy has a Win Ratio of 84%.
So from 154 meaningful trades this is calculated on 130 winning trades compared to just 24 losing trades starting on 1st March 2018 to end of October.
In fact on the webinar you will see me go through the trading results where there were 73 large winning trades compared to just 5 big losses. So from 78 trades that’s a win ratio of 94%. That’s pretty good, knowing the majority of traders struggle to get a 20% win ratio and are forced to give up!
What’s the difference that makes the difference?
It is the power of intention in focusing on a monthly target of 20% per month.
In the webinar I go through how I use my Trading Compound Interest Calculator. As the target is always 20% per month I always know the amount I need to achieve at the start of each month based on the trading balance at the end of the previous month. So the trading account just gets fatter and fatter meaning I can increase the trade sizes whilst never risking any more than 2% of the new trading balance on any one trade.
A key discipline is that you can be cool, calm and collective when you risk no more than 2% of your trading account. The moment you break the 2% rule you put your trading account at risk and skew the numbers. Your emotions will also go up and down like a wind vane and you are likely to act irrationally.
So for a £18,000 trading account you should risk no more than £360 (i.e no more than 2% of the trading balance at the time of making the trade).
On the webinar you will see a LIVE TRADE using my own Income Optimiser strategy which gave a signal to BUY the DAX at 11316. The stop loss was 110 pips so I could risk no more than £3 per point (no more than 2% risk i.e £330).
I explain in detail why I believed the DAX price would hit 11539 to give me a tasty profit of 223 pips.
“Making money as a trader is all about seeing what is not yet seen“
After the webinar finished I posted the result of the live trade which was closed on autopilot the following day. I also did another trade after the webinar that banked another 179 pips on Wall Street. The risk was just 30 pips so 0.1% risk of the trading account.
The purpose of doing the compound interest trading challenge was to 1) Illustrate my point to the lady who interviewed me and give belief to new and struggling traders that you can start with as little as £2000. This is a much smaller amount to risk than if you were starting a new business or investing in property.
So as a long in the tooth financial trader, what I will share with you is this:-
1) To borrow from Warren Buffet – Rule 1 -Don’t lose money and that means always protect your start up trading capital (remember you will always have some losing trades but you always keep them small as you will see on my trading statement on the webinar)
2) As long as you stick to the rules with monk-like discipline you can build up a meaningful account that will make a real difference to your financial well-being.
3) If you have a profitable and powerful trading system you cannot blow up your trading account, providing you risk no more than 2% of your trading account on any trade.
4) Be patient and let the winning trades compound up naturally so as the account grows you can increase the trade sizes still within 2% maximum risk on the new trading balance.
5) NEVER trade a 100K account unless your win ratio is at least above 53%. If you can’t make money on a £2000 account why would you risk losing more of your hard earned money? If your win ratio is lower than 53% never trade a large account until you consistently increase your win/trade ratio every month.
If you are consistently losing money at £1 or £2 per point you are insane if you trade at £5 or £10 per point whatever your account size!! That’s unless you definitely want to lose all your money and frazzle your mind!
6) Financial trading is about playing the long game if this is how you want to build your fortune.
7) If you want instant gratification of getting the big bucks now, I wish you the best of luck and point you to the 79% of all traders who lose money, according to the leading brokers. So watch out, I will always be on the other side of your trades. So if you are buying, I will be selling and vice versa.
8) Stop getting distracted by shiny new objects!! No doubt you will have read all the cryptocurrency hype of coins shooting to the moon and making newbies millionaires overnight. People were sold the dream of making 1000% returns in just 3 months. You just have to read some of the comments in the crypto forums. Many are licking their wounds with huge losses of 95% of their money in just six months. This is a great example of wanting instant gratification instead of patiently and diligently growing your trading or investment account over TIME.
9) TIME is always your greatest ally when it comes to compound interest. It truly is the eighth wonder of the world. That’s how you grow a £2000 account to £100,000. You will break the compounding power if you withdraw any money before you get to at least £100,000 even if it takes you as long as 2 or even 3 years to get there. I promise it will be worth it in the end!
10) If you do need to intend to draw a nice income, make sure you take no more than 5% of the trading account when it gets to a meaningful sum such as £50,000. That’s if you want to keep growing your account. So if your trading account is only growing by 10% per month it will still keep compounding.
11) Any successful business owner will tell you that they made their fortunes by continuously reinvesting profits back into their business, not by wasting the money on Ferrari’s. It was the compounding effect of all the long hours and good decision-making in the formative years that made them who they are today.
Taking risks with your money can sometimes pay off. If you start your own business, statistically the chances of surviving the first year are very low. It’s the desire to leave the 9-5 and be your own boss that drives people to take the risk.
How much capital and borrowings you need from day one depends on the business but if you start a franchise in the UK the start-up fee can be between £500 and £300,000. You then you have all your other running costs before even making a profit. So the risk of losing a sizeable chunk of your money is high if things don’t work out.
Financial trading is highly speculative and if you don’t know what you are doing you are 100% guaranteed to lose money.
Risking £2000 of your money I think is less outlay though than starting a new business or investing in property. Also, do the math on how long it would take for £2000 to grow to six figures in a traditional savings account!! There’s inflation risk with that too!!
If you are intrigued to see how big the trading account grows to then make sure you subscribe to my YouTube channel.
To your success, Adam