Dreams vs Goals – the Power of Compound Interest

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.

By defining…..

  1. Where is this beach located?
  2. For how long do you wish to stay there?
  3. How much would it cost to go there?
  4. How much would be possible to save up every month?
  5. How many months would it take before you can order the tickets?
  6. 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.

Learn more: Compound Interest Calculator for Forex and Stock Traders and Investors

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.

Published by

LuckScout Team

"Whether you think you can, or you think you cannot, you are right." - Henry Ford

49 comments:

  1. so nice article i have problem to understand english properly but i understand what u say in this articles thanks god bless u

  2. H S Asberg,

    Compound interest is very powerful tool to build account.
    But is it realistic in reality make 5% per day.It is 400% per month.

  3. This S Aaberg has previous posts that state that he has blown up a few demo accounts in a couple of months.

    “They still can convince me to hold bad positions even though I know it´s wrong. This behavior made me blow so many well groomed demo accounts the past 5-6 months. I am so glad I did not enter with real money yet. (as I did seven years ago when I blew $2k in a couple of weeks).” this was written earlier this month.

    April post, “I’m in a phase where I really needed this as I’ve already killed too many demo accounts with sloppy r/r management.”

    So how can he say that he has turned 10K to 106K in 10 weeks? This is very confusing.

    I am HUGE advocate of Chirs and now Luckscout, but we as readers need better clarification. These posts really mean nothing and makes us start to wonder the validity of any post.

    Thanks.
    Bryce

    1. Bryce,

      I will publish my own articles too.

      Members can share their knowledge and experienced through publishing articles on the site. Whether they are right or wrong is what we can discuss. Not all readers like my articles too and there are always some who think I am wrong.

      Through this article, I think S Aaberg is merely trying to emphasize on the power of compound interest which means being patient and not trying to double and triple accounts within a short time is the result of having the power of compound interest into consideration.

      From now on, I will have my own comment at the bottom of each member’s articles to make it clear that if I agree or not.

  4. Nice article thank you. Awaiting article from. I still use your trading system. Candlestick + bollinger bands.

  5. Hi Aaberg,

    Thank you for writing the article.

    Compound Interest is good and truly an 8th wonder of the world if applied to live account, not a demo account I’m afraid. We all can be genius traders by being calm, disciplined, impartial and decisive when playing with fake money.

    Did you duplicate the above success you had in demo trading to real trading?

    You see, when real money is on the line, the untrained brain/mind become anxious because it’s used to (under illusion) controlling its environment it’s in to ensure survival, but because it can’t control the outcome of a trade, the brain sees that as a threat.

    Threats has to be eliminated, so as I trader, you take small profit before it disappear. You let your losses run, because cutting them short means you admit you’re wrong, which will hurt your ego and the self image.

    These are few examples, and without real money on the line, none of these factors come into the equation of trading.

    Youness

  6. Dear S Aaberg
    Thanks for your article and I appreciate the time you spend to write it.
    I believe this way that publish member’s articles is really a great work and it helps this community to meet people like themselves which was successful in this business and it can motivate others. On the other hand it can help to live this site alive.
    Any way, Thank you.

    1. You shouldn’t think about making a fixed percentage of profit. You should think about taking the strong setups and having a proper stop loss and target.

    2. Hi Shafiq,
      Your goal in trading should never be a monetary one, because you can’t control trades’ outcome or the market structure.

      Your goal must always be peak performance trading; bring a mind that’s calm, disciplined and impartial that excute your plan without hesitation or fear.

      The analogy is a fisherman doesn’t tell himself/herself I need to catch x number of fish everyday, s/he knows no one can control that, the only thing they can control is making sure the boat and its equipments are in order including the fishing net, where to fish in the ocean?, what time to start and finish?, and is the ocean suitable for fishing today? the result is unknown. No fisherman can make the ocean give them what they want, and so no trader can tell how much return can make from the market every day.

      Youness.

    3. Hello Youness thanks a lot from my mind for giving me such ideology words taking your valuable your time. I am grateful to you for such words. Yes I will follow your words as it is mentioned here. thanks a lot once again

  7. Hi all 🙂

    It is great to see daily articles are back again.

    will you be posting any analisis this weekend?

    Dragan

    1. Dragan,

      I will have my daily/weekly analysis definitely. I cannot promise to have them from this week, because we are planning for some different things and want to have the normal posts after that. However, I will have the analysis very soon definitely.

      Thank you for being around.

  8. Hello Sir s .. Please write article by your self … I love your writing style and in the way you explain complex things in a simple way !!

    after reading this article i realized there are many articles on this same topic u already published by your self . But after read this article i felt really boring , its kind of , same things with some different words … Dear Sir please write articles about latest chart analysis , any strategy or on other new topics BY YOUR SELF .
    Thanks

    1. Dear sir criss 1st of all i am tankful to u create this website , i learned a lot due to this only website .

      sir i passed 2 staged out of five of your trading system . I learned the basic , i learned the trading system that described on this website . and now I am on my 3rd stage :: mastering the trading system via demo ..
      Sir I have a question , i did not find any answer about that , the question is :: if candle stick don’t break bolinger bands (upper/lower) .. according to ur system rules we should ignore them BUT DEAR sir I saw many many time these signals also bring a hudge move in the market .. here is screenshoot url :

      http://prntscr.com/b84cf8

      Sir please answer this my question that creating a confusion for me …i will be very thankful to you !

    2. We never know what will happen when a setup, either strong or weak, forms. Sometimes a weak setup makes the price move very strongly, and sometimes a too strong setup hits our stop loss.

      All we can do is that we stick to our system rules and take the too strong setups that meet all the conditions, because these setups usually have a lower.

  9. It is truly great to see some articles again.

    Hope everything has been good in your absence trust you have been well.

    Keep moving forward for us all.

  10. Hi,

    I also think it will be very useful for us to express your opinion at the end of each post which was not written by your own hand,that we would not have thought it was a common opinion luckscout team.

  11. Hi,, how are you doing? It is so good to see the site posting new articles after so much time. I was afraid not to see you again, I’ve missed your analyses and wise advices. But isn’t the article a bit against the philosophy of this site? You have talked about compund interest, but it was monthly compound. How can you have a certain amount added everyday with only daily chart? It’s impossible. Too strong candle setups happen so rarely, even using levels, trading the daily often means not having a single signal. Are you still against trading lower timeframes such the 1 hour? What do you think about adding ribbon lines to your normal system and trade the 1 hours chart, as long as the signal are not against the general trend? Do you find it too risky or good way to improve monthly return and have more opportunities, that we will not otherwise have with only the candle+bollinger bands system? Hope for a reply. Thanks.

    1. Hi Titanium,

      I am fine. Thanks 🙂

      You are right. Maybe it is impossible to have so much profit every day. This can be related to the writer trading style. Of course I have always been against day trading and scalping, because I have never seen a consistently profitable day trader or scalper. However, what I like about this article is that it recommends traders to be patient and not to try to double or triple their accounts within a short time which is what most novice traders try to.

      I don’t recommend trading 1hr and even 4hrs chart. Daily must be the shortest time frame we follow. This is not only safer and easier, it can also make more profit in long term.

    2. Thanks for the reply. Very appreciated. Well, at least we know you’re the same we know and respect. The article got me confused at first, cause I thought you had changed your mind. I know the daily is the more reliable and easier, but it creates too few signals. What I’m looking is a reliable system that can create me more signals, till my account is big enough that I can only trade the daily and aim at yearly profit rather than monthly. Ribbon system taught by raj, who seems a very expert trader, look like the more reliable in this aspect. Have you written about it or have some thoughts about the quality of the system?

  12. Nice to see the new post! Thanks a lot for’ clarification to take strong setups with proper stop loss and target.

  13. i also listened ribbon strategy but its not full profitable there is only one profitable way bb + candlesticks which teach us by and kamal

  14. Hi, dear inderjeet singh

    you are right totally one profitable way Dbb + candlesticks

  15. i guess you cant have a daily income like its mentioned in the article but with daily setups if it runs for two weeks or a month you will have a daily income or at least income per day.

    the only downside would be the inability to reinvest that money back to benefit from C.I., right? Because for that you need to close the trade and open a new trade according to your new balance. so i guess this is why “daily fixed income” table above doesnt make sense with bb and cs system because you cant re invest your daily income for C.I since your trade would be running.

    as for me i’ll start using cs and bb strategy beginning with June after meaning to start it for a long time and like everyone else i suspect the number of signals but that would be a temp issue once you get rolling.

  16. Hi,

    Nice to see you back. I noticed that you have changed the website to luckscout.com,

    Also, you have deleted many articles as well from the previous keys.com …?

    Am I wrong or you have stored it somewhere else …?

    Hope to hear from you then.

    Thanks and have a nice day.

    Rgds,
    Wesley

  17. 1000% in ten weeks? How is one supposed to earn more than 4.5% daily consistently while still applying sane risk management? Seems impossible.

  18. hi
    very happy to hear from you again
    a question out of this article:
    how many positions can we take in daily time frame set up. i mean the max and min number of position can we allow to have.
    thanks
    mehdi

  19. His
    Very nice to see you back in action. Hope you are fine.
    Request your views on the trade setups formed in the below daily charts on 06.06.2016
    AUDCAD,EURJPY,NZDCHF,NZDCAD,CADJPY,CHFJPY

    REGARDS

  20. Really interesting article. I can see behind the things you said, the real things and the subliminar message. Amazing. Congratulations !

    I only add one thing, we should never attach money to objects, if we are winning good money we should money only as..money, not as a car or a house.

  21. Hi! I have an enquiry if i may,

    We park stop orders on break out of the High or Low of a particular setup candle and it trade will be triggered once price hits. The thing is, do you park at the specific Market Opening Time (Australia Open, Asia Open, Europe/US open) for different pairs?

    For instance, say there is a Eur/Gbp or Nzd/Usd trade setup. Do we park orders only just before the Europe Trading hours or you would park it once the market opens (The earlier Australian Market opening).

    thank you!!

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