It’s New Year’s Day, Forex is closed and I happen to have a hangover. It seems you guys out there enjoyed this blog so far since I have some questions coming in. So bear with me, I’ll try to clarify some things.
In this screenshot I came up with some calculations that need to be unfolded. First of all, there will be failure in trading. You will take hits, no matter what. These hits shouldn’t diminish your outcome by more than 30%. The 15 pips opportunity I illustrated can’t be expected to be captured accurately all the time. After you got some screen time under your belt you should be able to get 10 pips out of it. With 10 pips as your daily goal and 30% failure factored in, you may build your business plan based on an average of 7 pips per day or 35 pips per week.
How much money you can earn (or loose) per pip is defined by the size of your trading account. In the example with $1,000 in your account you can trade up to $2.50 per pip. If you manage to capture our average of 7 pips and leave your earnings in your account, your account will show $1,017.50. Now you could load your gun with $2.54 per pip but it can only be an amount that is rounded down to 10 cents. So in our case we are stuck with another day with $2.50 per pip and end up with a balance of $1,035.00. Same thing here, $2.58 rounded down to $2.50. Next day’s balance is $1,052.50. This time we can take $2.63 and round it down to $2.60.
A year has about 260 trading days. If you keep compounding your earnings as above, your account will show $89,181.80 after 1 year. This balance allows you to pull $209.10 per pip. 7 pips per day equal an earning of $1.533.70 per day at this point. And you’re not going to stop there!
This business plan is certainly streamlined. It’s assuming that you capture exactly 7 pips per day and never take any money out off your account. In reality, you will have negative days or days and weeks when you exceed your goal by far. Also, at some point you want to transfer money from your trading account to your checking account to enjoy the rewards for your effort.
I’d be happy to send you an Excel spreadsheet upon request. You can insert different values like monthly withdrawals and see how this changes the all-over outcome.
A happy and successful year 2014!