Picture yourself resting in the shadow under a palm tree. The sand is white and soft, the ocean is blue, so is the sky. You are feeling all relaxed knowing that your VISA card is filled and even more is in the pipe.
That’s a wonderful dream!
Dreaming is important. It’s the very fuel of progress in life. But without converting the dream into a goal, and then breaking up the main goal, the dream will probably remain just a dream.
- Where is this beach located?
- For how long do you wish to stay there?
- How much would it cost to go there?
- How much would be possible to save up every month?
- How many months would it take before you can order the tickets?
- When will you start saving up money, and when are you ready to order?
….would make the trip a whole lot more realistic, wouldn’t it?
That’s an achievable goal!
Skills and experience, self confidence / self control, level of risk, choice of tools; those are parameters that will define profitability in the long run. But how profitable?
Well, it depends of course on the mentioned parameters which can all be fine tuned, but also on the market conditions (volatility / sideways).
My demo account grew from 10k to 106k in ten calendar weeks, 50 market days. That equals an average growth of around 5% per day, which was my goal. The method was simply to put some emphasis on constantly matching the lot sizes along with the equity balance.
It’s remarkable how tiny differences in daily average growth percentually affects the outcome, even after a few weeks. This is the real power of Compound Interest. Of course it is impossible to predict the market situation, nor calculate every single position. Bottom line is that it’s healthy to be aware of the C.I phenomena over time. It kept me from overtrading since I knew from the start that a very small percentage growth on daily basis is enough to make a decent profit measured in dollars already after a short period of time. That was a truly comfortable pillow to rest upon when the impatience, fear and greed kicked in at some point.
Here are a few examples based on 50 / 100 business days, 10 / 20 calendar weeks:
|Start with||% Daily average||…after 50 days||…after 100 days|
|$1 000||3,00||$4 384||$19 219|
|$1 000||4,50||$9 033||$81 589|
|$1 000||4,75||$10 179||$103 610|
|$1 000||5,00||$11 467||$131 501|
|$1 000||5,25||$12 915||$166 806|
|$1 000||6,00||$18 420||$339 302|
It goes without saying that this way of thinking has its lower and upper limitations. On small accounts the size of the lots will be “pixly” compared to equity. On large accounts the markets ability to swallow huge orders will at some point hit the ceiling. But these are limitations that exists no matter if you are aware of the power of compound interest or not. So you might as well take the advantage of the awareness.
My point is, just like when planning a vacation, it’s always a good idea to convert a dream into a goal, and to break it up into partial goals. Then, if you stick to the plan, your chances of succeeding are a lot bigger.
If you know where you are going, you will get there. If you don’t, you’re lost.