How to turn $10,000 into 1.5 million in 2 yearsSan Keul
No, no, we haven’t lost our marbles. And no, we haven’t become snake oil salesmen trying to flog off our system to the gullible. I agree that the statement sounds perhaps too good to be true.
And at face value it looks like it might be. However, I am going to show you why it is not as far fetched as it sounds.
“Compound interest is the eighth wonder of the world. He who understands it, earns it…he who doesn’t, pays it.”
– Albert Einstein
Albert Einstein was the greatest mind of the 20th Century and his conclusion on this topic is the answer to the $10,000 to $1.5 million question.
I am sure you have all heard of the ‘miracle of compound interest’. The problem is not much attention is payed to it because the people who introduced the concept were associated with musty smelling brown suits, monotonous droning voices and those promoting you take out a low interest paying savings account at their bank.
Let’s face it, the thought of money compounding at 5% per year isn’t very exciting. Doubling your money every 15 years or so will not make you rick, unless you already have several million stashed away and have low inflation!
Now how about making a 5% return every week? Think about that for a moment. You might be thinking “What’s the big deal about 5% every week?” Now, remember banks only pay 1-2% and that’s for an entire year, and that’s actually a rather high estimate at this time of writing, unless you live in Australia.
Before I sat down and did the figures when I started trading, a return of 5% a week didn’t seem hugely impressive to me either. It seemed wimpy. I wanted to make “monster trades” which would DOUBLE or TRIPLE my account in a relatively short time. All I wanted to do was trade -way- over leveraged, pick the very bottom of a good trend and ride it to the top. Every trade, every week. I quickly learnt that not only was that unrealistic, but also experienced over leveraging was guaranteed to wipe-out my account as well. Every time.
But more importantly, I learnt that the only way to make money, and good money at that in the forex market is to aim for consistency and trade as safely as possible. Trust me, I’ve blown accounts. I’ve tried to go for the monster trades. Take it from me: they don’t work. Not long term.
OK, back to the my main story. Let me show you some numbers.
The results are based on only two premises:
- We start with $10,000
- We earn 5% every week
Premise number two is a bit unrealistic. Earning 5% per week, week in and week out with no hick-ups is no mean feat. Let’s suspend that thought for now for the sake of demonstrating my point – which is:
HOW TO TURN $10,000 into $1.5 Million in 2 YEARS!
The table below is the calculation based on the $10,000 starting balance with 5% return a week. Each week the starting balance and the 5% profits are reinvested for the 52 weeks of the year.
Not too bad right? My math is not wrong. That is a 1200% return in one year. All from a “wimpy” 5% a week profit. Now let’s carry the calculations on for another 52 weeks (1 year).
OK, let’s recap what we’ve done. At the end of 52 weeks our initial $10,000 investment turned into a very nice $120,418. By continuing this on for just another year the final total is: $1,522,422 or a 15,000% return in two years!
In case you were wondering what would happen if you stuck with this 5% weekly compounding return for another year: You would end up with a mind boggling $19,247,708!
So where’s the catch?
Now before we all get too carried away with the staggering profits of compounding returns – there is a catch. This only works if you have the investment or strategy that can produce consistent 5% gains or more on a regular basis.
Forget about the huge number I have mentioned, because the point I am trying to emphasise here is you don’t have to make the “Monster Trades” to make big profits. You just need a system that is consistent and keeps locking in small profits. Over time the power of compounding can achieve some eye-opening results.
What will stop you achieving these results?
- Big Losing trades: Unfortunately losses are part of the game and unavoidable. The only time they become a problem is when a trader lets a small loser turn into a big one. Or use an Expert Advsior that does this for you. Watch out for systems that have small TPs and large SLs.
- Greed: Traders who are greedy and only looking for “Monster Trades” will not even be interested in our systems. Maybe they will give it a quick try, but the thought of making really big bucks will force them to lose their focus and abandon this simple strategy.
- Losing Focus: A trader will be most vulnerable to losing focus and abandoning a consistent strategy after they have a few losing trades. Any time this happens, just go over the compound interest tables and this will help with seeing the “Big Picture”.
- Taxes: Yes, that dirty five letter word. If you are trading accounts are subject to the usual taxes. But, obviously this is a problem with any type of trading strategies you use. Taxes will definitely slow you down, but… If you keep swinging away and “Hitting Singles” then you will eventually bring in some serious profits!
So the bottom line: look for systems that deliver constant and small profits…and have some patience and perseverance.
And remember, as Einstein pointed out: Time can be a powerful thing.