Is compounding necessary?
Jan 19, 2013 zamanından beri üye
251 iletiler
Feb 19, 2013 at 14:48
If I may add something. I for one don't believe in compounding. Nor do I believe in 'risking 2% of your account persay' Reason being. Say your an emotional trader. Yet, you have a very good system. You may very well experience a winning streak of 5 days, without a single loss. If your compounding, it is obvious to see that your profit is exponential. Yet, one loss would hit your account beyond the point of no return. You'll then become emotional, thus throwing your system out the window.
Using such low equity with a position is also very pointless to me. Only because your assuming that you'll never take a loss. In turn aiming for take profits which is 3x higher then the currency pairs monthly trading range. Most of us who experience losing positions, continue to add positions in the losing direction. Also known as 'bias trading'
I believe risk should be asset based on price action. As price action determines everything we see on the higher time frames. Many of us get in at the wrong time, because we are going with the trend, instead of trying to get in once the trend is about to change.
Using such low equity with a position is also very pointless to me. Only because your assuming that you'll never take a loss. In turn aiming for take profits which is 3x higher then the currency pairs monthly trading range. Most of us who experience losing positions, continue to add positions in the losing direction. Also known as 'bias trading'
I believe risk should be asset based on price action. As price action determines everything we see on the higher time frames. Many of us get in at the wrong time, because we are going with the trend, instead of trying to get in once the trend is about to change.
Oct 12, 2012 zamanından beri üye
70 iletiler
Feb 19, 2013 at 15:33
Bellavista? How do YOU compound?
Or not at all? If you start with a BR of $5000 you NEVER increase your stakes? Even when your BR reaches $100 000?
That's so weird I'm beginning to think that I don't know what the word Compound means...
Or not at all? If you start with a BR of $5000 you NEVER increase your stakes? Even when your BR reaches $100 000?
That's so weird I'm beginning to think that I don't know what the word Compound means...
Dec 10, 2012 zamanından beri üye
14 iletiler
Feb 19, 2013 at 18:08
Albert Einstein described compounding as the eighth wonder of the world. Think about it: If your goal is to gain one percent of your equity, it may at first seem quite small both in terms of percentage as well as in absolute dollar gains. However, once you start to reinvest a significant portion of your profits, you will quickly see that averaging one percent daily (or even weekly) adds up quickly. You may want to withdraw a small portion of your profits at regular intervals to give yourself a feeling of achievement, but leaving most of your profit in your account for reinvestment is the key to your real success in forex. That, quite simply, is the definition of compounding.
If you would like to test this theory, use different variables in your calculation of profits where you start with $1,000 as your margin. For example, compounding $1,000 at 20 percent per month yields a total balance of approximately $9,000 over 12 months and almost $80,000 over 24 months. Of course, you have to deduct your broker's spread and taxes. Still it’s not bad though, right?
If you would like to test this theory, use different variables in your calculation of profits where you start with $1,000 as your margin. For example, compounding $1,000 at 20 percent per month yields a total balance of approximately $9,000 over 12 months and almost $80,000 over 24 months. Of course, you have to deduct your broker's spread and taxes. Still it’s not bad though, right?
Rules of Trading: 1. Make Pips 2. Keep Pips 3. Repeat
Jan 19, 2013 zamanından beri üye
251 iletiler
Feb 19, 2013 at 18:09
Ironman posted:
Bellavista? How do YOU compound?
Or not at all? If you start with a BR of $5000 you NEVER increase your stakes? Even when your BR reaches $100 000?
That's so weird I'm beginning to think that I don't know what the word Compound means...
That is exactly what I am saying. Yet, most of those who use the word compound. Use it in the sense that what ever profit they have earned. Then then increase there lot size based on that profit. That is exactly what it is I was referring to. Sorry for not elaborating on it. As for me. You can check my open book to see what I've done. I may have turned profit after a few positions. I would then withdraw the profit, and continue with my principle. At that point I may increase my leverage/ lot size. Yet I have protected my profit. So in a sense I'm not compounding as my profit is protected.
Jan 19, 2013 zamanından beri üye
251 iletiler
Feb 19, 2013 at 19:54
walloj posted:
Albert Einstein described compounding as the eighth wonder of the world. Think about it: If your goal is to gain one percent of your equity, it may at first seem quite small both in terms of percentage as well as in absolute dollar gains. However, once you start to reinvest a significant portion of your profits, you will quickly see that averaging one percent daily (or even weekly) adds up quickly. You may want to withdraw a small portion of your profits at regular intervals to give yourself a feeling of achievement, but leaving most of your profit in your account for reinvestment is the key to your real success in forex. That, quite simply, is the definition of compounding.
If you would like to test this theory, use different variables in your calculation of profits where you start with $1,000 as your margin. For example, compounding $1,000 at 20 percent per month yields a total balance of approximately $9,000 over 12 months and almost $80,000 over 24 months. Of course, you have to deduct your broker's spread and taxes. Still it’s not bad though, right?
Not bad at all! Yet your speaking in 'THEORY'. Theory mostly shows you a one sides equation. Even a FLAT pancake has two sides my Mom always told me. I won't sit here and become pessimistic in order to disprove your 'theory'. Instead one has to factor in losses. The only expense which your accounting for is 'spread, and taxes'. Yet, those should be the least of your concern. The issues with compounding is with one loss, you can easily wipe out the last 10 trades profit. That is by simply reinvesting with profit.
Take a look at my last 14 trades on myfxbook. I have only lost 2 positions. Yet, I have not compounded at all. Although I have increased my lot sizes during certain positions (Only, because my system revealed to me that it was a high probability trade). On avg I keep my lot size to 5 dollars per point with a 10 point sl.
Jan 14, 2013 zamanından beri üye
25 iletiler
Feb 22, 2013 at 10:23
As Peers mentioned compounding is the key to earn money from money, as an example;
Trader A is making average 8-10 % profit monthly on his initial deposit, without compounding Trader A will have made roughly 100% profit in 1 year which is great.
Trader B is making average 6% profit monthly ( note i didn't say on his initial deposit), with compounding he is making profit on top of last month's profit. Trader B will have made roughly 100% profit in 1 year whit a lower percentage of gains.
After 4 years Trader A is 400% in profit.
After 4 years Trader B is 800% in profit.
There is a significant difference between them. Eventhough the time span mentioned are rather long term the same is applicable in a shorter term.
Cheers.
Trader A is making average 8-10 % profit monthly on his initial deposit, without compounding Trader A will have made roughly 100% profit in 1 year which is great.
Trader B is making average 6% profit monthly ( note i didn't say on his initial deposit), with compounding he is making profit on top of last month's profit. Trader B will have made roughly 100% profit in 1 year whit a lower percentage of gains.
After 4 years Trader A is 400% in profit.
After 4 years Trader B is 800% in profit.
There is a significant difference between them. Eventhough the time span mentioned are rather long term the same is applicable in a shorter term.
Cheers.
Not giving a quarter away.
Jan 19, 2013 zamanından beri üye
251 iletiler
Feb 22, 2013 at 11:13
kasravi posted:Yes it is all in theory. Yet, people who have PAMM accounts. Those people aren't compounding. As I mentioned if you compound you better be sure that your entries are picture perfect. As if it isn't and you end up in the hole maybe 20 pips. You will let that losing position ride, and you wont have an free margin to try to make better trades. The key to forex is not only making profit, but your recovery factor. Please look at my linked account, and look at my recovery factor.
As Peers mentioned compounding is the key to earn money from money, as an example;
Trader A is making average 8-10 % profit monthly on his initial deposit, without compounding Trader A will have made roughly 100% profit in 1 year which is great.
Trader B is making average 6% profit monthly ( note i didn't say on his initial deposit), with compounding he is making profit on top of last month's profit. Trader B will have made roughly 100% profit in 1 year whit a lower percentage of gains.
After 4 years Trader A is 400% in profit.
After 4 years Trader B is 800% in profit.
There is a significant difference between them. Eventhough the time span mentioned are rather long term the same is applicable in a shorter term.
Cheers.
Sep 14, 2012 zamanından beri üye
5 iletiler
Feb 22, 2013 at 22:11
walloj posted:
Albert Einstein described compounding as the eighth wonder of the world. Think about it: If your goal is to gain one percent of your equity, it may at first seem quite small both in terms of percentage as well as in absolute dollar gains. However, once you start to reinvest a significant portion of your profits, you will quickly see that averaging one percent daily (or even weekly) adds up quickly. You may want to withdraw a small portion of your profits at regular intervals to give yourself a feeling of achievement, but leaving most of your profit in your account for reinvestment is the key to your real success in forex. That, quite simply, is the definition of compounding.
If you would like to test this theory, use different variables in your calculation of profits where you start with $1,000 as your margin. For example, compounding $1,000 at 20 percent per month yields a total balance of approximately $9,000 over 12 months and almost $80,000 over 24 months. Of course, you have to deduct your broker's spread and taxes. Still it’s not bad though, right?
The problem with compounding in Forex is the possibility of taking a bit hit unexpectedly. Now I just invest %80 of my capital in automated risk free sports betting (%1-%1.5 daily) and the other %20 goes into Forex. Of course, views differ. This is just my personal definition of 'Safe'
Jan 14, 2013 zamanından beri üye
25 iletiler
Feb 24, 2013 at 06:19
Many people talk about losing trades, which effectively ruins all your gains after compounding right? not really once you lose your account gets a hit anyway, with or without compounding. Technically it's a double edge sword, because you gain more after compounding as well. I think Bella vista507 has effectively compounded multiple times with results which in my humble opinion is an example of how to take advantage of compounding.
Cheers.
Cheers.
Not giving a quarter away.
Jan 19, 2013 zamanından beri üye
251 iletiler
Feb 24, 2013 at 13:03
kasravi posted:
Many people talk about losing trades, which effectively ruins all your gains after compounding right? not really once you lose your account gets a hit anyway, with or without compounding. Technically it's a double edge sword, because you gain more after compounding as well. I think Bella vista507 has effectively compounded multiple times with results which in my humble opinion is an example of how to take advantage of compounding.
Cheers.
Yet, the difference between my system and everything else seen online is that others don't focus on the entries. I can care less about my tp. I just want to be sure that upon entering. I won't end up 5 pips in red! If I'm able to perfect this form of entry. Then I would say compounding would make sense. Yet, it all goes back to what I said in the prior post. 'You must make sure you entry is picture perfect'. If it isn't then you will end up hurting yourself then helping yourself.
Jun 26, 2012 zamanından beri üye
192 iletiler
Feb 24, 2013 at 13:23
n what u r doing to make sure that u got the perfect entry?!
Jan 19, 2013 zamanından beri üye
251 iletiler
Feb 24, 2013 at 13:37
My entries are pre-determined by calculating the extreme ends of daily pivots using fibs. I then get 16 possible entries. My larger wagers are on the first and second crosses of those entries. Through out the week those very prices remain the same assuming we have not broken the extreme prices. Very simple. The only things I respect are News releases along with nearing of pivots. In no way do I use higher time frames.
Jun 26, 2012 zamanından beri üye
192 iletiler
Feb 24, 2013 at 14:16
sorry to tell u i checked ur orders histroy,,,, ur entries accuracy never exceed 50% on roughly average...
Jan 19, 2013 zamanından beri üye
251 iletiler
Feb 24, 2013 at 14:54
why should you be sorry? You've failed to point out the following things
1) Most of my winning positions doesnt reveal the accuracy of the position
2) My avg pip drawdown even on losing positions (this month) has been 10 pips
3) I also dont trade on avg. As using the compounding method one can have a 95%win percentage and margin call their account.
4) fxbook also doesnt display how their accuracy is calculated. is it based on the currencies daily, hourly, or 15 min range.
Please don't be swayed by avgs.
1) Most of my winning positions doesnt reveal the accuracy of the position
2) My avg pip drawdown even on losing positions (this month) has been 10 pips
3) I also dont trade on avg. As using the compounding method one can have a 95%win percentage and margin call their account.
4) fxbook also doesnt display how their accuracy is calculated. is it based on the currencies daily, hourly, or 15 min range.
Please don't be swayed by avgs.
Jun 26, 2012 zamanından beri üye
192 iletiler
Feb 24, 2013 at 15:04
i guess they r tarking price action after ur entry which is -in my opinion- a good to determine entry n exit accuracy for every trade.... however in feb 21 u got a DD of 35 pips...
seems we r not at the same page...
anyway thanks for ur reply...
seems we r not at the same page...
anyway thanks for ur reply...
Sep 30, 2011 zamanından beri üye
72 iletiler
Feb 24, 2013 at 15:17
If you want to get significant result, yes compounding is necessary.
Earning money should be boring. If you feel excited or worried, your risk settings are too high.
Jan 19, 2013 zamanından beri üye
251 iletiler
Feb 24, 2013 at 15:31
We're not on the same page, because you've decided to be selective as to the information you reveal. Yet that is expected.Yet for mosst of my entries my pip drawndown is under 10. I did have one trade reach 33 pips yet i experienced a glitch with the ea i used top place an automatic sl. Most important only that trade. Simple compounding would of earsed the entire account. Which is why I dobt recommend it. As for assumtion as to how its calculated. You may be right or wrong. Yet if that was the case. It still should be able to calculate the information even if i held the position for 2 mins.
Jan 19, 2013 zamanından beri üye
251 iletiler
Feb 24, 2013 at 15:32
websmith posted:
If you want to get significant result, yes compounding is necessary.
I havr not compounded and was able to earn 100% this past week.
Oct 12, 2012 zamanından beri üye
70 iletiler
Feb 24, 2013 at 15:43
BellaVista507 posted:websmith posted:
If you want to get significant result, yes compounding is necessary.
I havr not compounded and was able to earn 100% this past week.
Of course, but after a few weeks, months like that you will compound and increase your stakes?
No?
Jan 19, 2013 zamanından beri üye
251 iletiler
Feb 24, 2013 at 16:31
Ironman posted:BellaVista507 posted:websmith posted:
If you want to get significant result, yes compounding is necessary.
I havr not compounded and was able to earn 100% this past week.
Of course, but after a few weeks, months like that you will compound and increase your stakes?
No?
Well honestly no. I mean its very easy to get tempted to. I have seen many good traders blow accounts due to compounding. Only to make back all the losses about 2 weeks later. Which of course would of resulted in more profit if he/she did not increase their risk. The temptation is there, yet one wrong move, and its all over. Only for you to have to start all over again.
A person who is starting with maybe 50 usd can try compounding. Yet, there comes a point in which you must decrease your risk.
