Here is an example of how you can make money with FX Trading while winning only 40% of your trades. FX Trading Systems are important and help you succeed. Hopefully, this trading scenario will hel you!
Lets set it up…
Suppose that you decide the following:
- You will trade Monday – Friday
- You expect to loose 60% of your trades and win 40%
- You are aiming for risk:reward ratio of 1.0 : 2.0
(that is, for ever $1 you risk you expect to make back $2) - You will be trading on a $300 micro account
(in an effort to continue with our micro account currency trading example) - You will risk no more than 2% on any given trade, or $6. That means, for every $6 that is risked, you will be aiming to make $12
With a micro account, as explained above, risking $6 (or, 2%) of your account will enable you to place stop losses of 60 pips, which will help tip the odds of winning a trade in your favour.
Lets see how this currency trading example works out:
Out of 20 trading days, you profit 40% of the time (so, 8 trading days). For the remaining 12 days, you incur losses. This is how your profit/loss scenario would look for your entire trading month:
- PROFITS: $96
- LOSSES: $72
- NET GAIN: +$24
- ROI: +8%
On a $300 account, that $24 net gain equates to a 8% ROI over the entire month. Now, you may look at $24 and think that it is not a lot of money. That is, of course, true. However, look past the actual dollars and cents and realize what you have actually accomplished. A return of 8% in one month is a yearly ROI of 96% – that’s pretty much equates to doubling your money every year.
Consider this:
Suppose you start forex trading with $10,000 and keep the above plan in motion for 10 years, how much would your account grow? Lets assume you get a ROI of 100% each year and we use simple compounding, just to keep this example simplistic. Your $10,000 would grow as follows:
Starting Balance $10,000 … By the end of:
- Year 1 – $20,000
- Year 2 – $40,000
- Year 3 – $80,000
- Year 4 – $160,000
- Year 5 – $320,000
- Year 6 – $640,000
- Year 7 – $1,280,000
- Year 8 – $2,560,000
- Year 9 – $5,120,000
- Year 10 – $10,240,000
Curious to see what happens after year 10?
- Year 11 – $20,480,000
- Year 12 – $40,760,000
- Year 13 – $81,520,000
- Year 14 – $163,040,000
- Year 15 – $326,080,000
If these numbers look obscenely unrealistic to you, fear not… They are very real. Forex Trading has very little to do with skill and has so much more to do with mindset and emotion. These results are very possible. The big question is, do you believe it?
How does that 8% ROI this month look now?
Your local bank will barely pay you a measly 2-3% per year! In the foreign exchange market, it is very realistic to expect 8% returns in any given month, even if you’re loosing 60% of the time!
Even if you just traded for one month each quarter, you would still realize an attractive 32% return every year.
Now that is something worth looking at! Look past the actual dollars and cents because a micro account is merely designed to help you become better. Once you can consistently get your desired returns every month, you can then upgrade to a standard and/or mini account and create massive returns on your capital.
It’s all about perfecting your trading and then scaling up!
Case-in-point: become an outstanding Forex Trader first and foremost. Practice with demo accounts, trade real money on micro and/or mini accounts if you can do it and develop solid skills. You will then make a lot of money in the Forex Market.