Making Small Consistent Gains and Forecasting Profitability
Article Series: Your Trading Business Is Your Trading Plan
“Making Small Consistent Gains and Forecasting Profitability”
The topic of money is always an interesting one when it comes to trading the markets. It is probably the very best example of a true double-edged-sword. On one side we are obviously trading to make money and on the other side that “idea” of making money is what can literally kill our trading business at any given point in time. In this seemingly two sided scenario, the trader can be left on the sidelines “bleeding and flat broke. That my trading friends is a reality that you must chew on, swallow, regurgitate, and live with from day to day. And, I might add, you must become comfortable with that reality.
What does this reality mean? Well, if you are a serious trader and you have made the sound decision to build a trading business and ultimately become one of the few who successfully trade for a living then you have put your capital on the line. Further, if you are like all traders I know, including myself, you have blown up an account or two and you have lost more than a few dollars along the way. You cannot become a successful, profitable trader without losing money! You cannot remain on a demo account, using fake money, and be a trader who will one day be making a life sustaining income from trading the markets. And you definitely cannot become financially free from trading without having the scars to prove it. I, yes, the writer of this article has lost thousands over the years. But, for every dollar I lost, I learned something and it brought me to where I am today. Where is that you ask? The place I have reached is consistent profitability and well on my way to a ten year plan of financial freedom in an early retirement. Oh and making enough money to sustain a simple life which is month to month.
How did I do this? The answer, I say loudly, is to get to the point where you make small consistent gains, forecast future profitability based on your outcomes, and manage every single penny of all of your cash resources very, very wisely. Remember, everything “costs” something and this goal of building your trading business is no different. You can’t live a champagne based lifestyle on a beer income.
This is what you need to do. Open a standard account where you can trade any lot size (I mentioned this the previous article in this series). Put 250-1000 dollars into it (no more). Start trading using a charting package ( I use FxPM) and all that you know about analysis of pure price action on a chart. Start out by trading only one micro lot in the one currency pair you chose (I previously suggested and stand by the EUR/USD). This means that you will be making or losing $.10 cents per pip. Become consistently profitable trading this very small size until the business plan calculator tells you to increase. Once you have achieved that goal increase your size to a mini lot of the same currency pair (EUR/USD). That means you will be making or losing $1.00 per pip. Become consistently profitable trading this size. If you start being inconsistent then drop back to the previous smaller size from where you are currently at (in this case back to a micro lot). When you achieve consistency trading a mini lot then you can prepare to trade a standard lot of the same currency pair (EUR/USD).
Before, I go into trading a standard lot of your currency pair you will likely have to make some sort of deposit into your account in order to be able to have enough capital to safely trade a standard lot. Remember I said manage all your cash well? This is where that concept can pay off. Take a portion of what you have saved or can afford and add funds to your account. I must say that if you are a very patient person, you don’t have to go this route. You can completely build your account by trading it over time and increasing your size when you are able to. Building a small account into one that you can trade a standard lot is possible. I have done it more than once!
Now let’s wrap this up. Money talks so here is what it would look like in dollars. The following predictions are based on a trading account with the ability to trade any lot size. The initial deposit is 1000.00 USD making a minimum of 75 pips per week (I am able to collect 60 pips at minimum consistently also note for simplicity I am not going to factor in spreads, commissions etc. The purpose here is a simple example, in numbers, of what I have discussed here).
For this example it will be helpful for you Download the Free Forex Business Plan Provided by FxST.
And Input these settings (As Pictured Below)
Account size: $1000
Account Type: Micro
Pips Per Day: 15
Trading 5 days per week
- First 11 weeks trading micro lots in the EUR/USD. 75 pips per week is $37.50 dollars a week. Continue increasing your size in small increments as the business plan suggests, after 4 months your account has now grown to $2012.50 and you are ready to move up to Mini Lots!
- Second 4 months trading a mini lot of EUR/USD. 75 pips per week you will continue to slowly increase the amount of mini lots you are trading and at the end of the next 4 month period your account will have grown to $5560.00
- Before I get into a standard lot, in reality, you need at least $10,000.00 in your account (To maintain a 5:1 Leverage). Your account should hit the 10k mark around week 42.
- The final months trading a standard lot is where your account really starts to grow. Ending the year at $20,042.50 following a very simple plan of 15 pips per day.
Now my trading friend you have an account that you built from 1000.00 to 20,000 dollars in 1 year. Make sure you read the next article that will show you how to build profits by managing size and managing trades to build increased profits one trade at a time.
Profitable trading to all!
FxST Education Specialist
Dr. Debbie Badawi’s formal education, training, and career is in the field of education. Ten years ago, upon an early retirement, she entered the world of trading equities and then found her passion in day trading and swing trading the Forex Market. Although she trades various currency pairs, she spends much of her trading focus on the EUR/USD. In addition to trading, Debbie mentors other traders, works with the team at FXST, and runs her educational consulting business where parents find educational solutions for their children. When asked what’s next or what’s Debbie’s future? Debbie smiles and precisely says, “ a simple life comforted by a six figure income and a financially free retirement.”