So how long does it take to double your trading capital? The sensible answer would be “it depends”.
In our case, we are tick trading binary options here, with a payout rate of around 100%. You could obviously double your capital in one trade in seconds if you win. But we are trading, not gambling here. We need to preserve our trading capital and we want good odds of winning and consistency we can count on.
Here’s a trading plan that is sound in principle that can double your trading capital very quickly, with due regard to the preservation of trading capital, something you have a good chance of pulling off successfully if you know what you are doing!
How to double your trading capital in 4 sessions
The plan in a nutshell:
Trading capital: X
Trading goal: 20% return on X per trading session
Stake: 2% of X
As you can see, with a payout rate of approximately 100% (same as stake), it takes 10 wins to achieve your session trading goal of 20% return on X.
I will walk you through the plan details.
Start with trading capital X
This could be any number you are comfortable with – it should not ruin you if you lose it although we are not planning on doing that. It could be $100, $1,000, $10,000 or more, or any number in between. The plan works equally well for all account sizes as it is based on risking a certain portion of your capital for each trade.
For the purpose of illustration in our example, let’s say our trading capital is $500.
Trading goal: 20% return
We are aiming to make $100 profit (20% of $500) in our first trading session. The profit will be plowed back to grow our trading account. So we are aiming for a 20% return on your cumulative trading capital for each trading session.
How long does it take to double your trading capital?
|Session||Trading capital at start of session||Session Profit 20%||Trading capital at end of session|
You can see that at the end of the 4th trading session, you trading account would have a balance of slightly more than double the amount at the start, in this case $1,037.
How big should your stake be?
The stake is 2% of X. 2% of $500 is $10. Your stake for each trade should be $10 for the first session. Thereafter, you should increment your stake as your account grows, keeping it at the same 2% level of your account balance.
|Session||Trading capital at start of session||Session Profit 20%||Trading capital at end of session||Stake per trade 2%|
As you can see, by the 4th session, if you manage to achieve your profit goal, your stake per trade should have incremented to $17.28 in our example, if you start with $500.
How do you make 20% in a session?
It takes 10 wins to make 20% if each stake is 2% and the payout rate is about 100%.
How do you get 10 wins in a trading session?
Remember, every time you lose, it more or less wipes out the profit you make from a win, at 100% payout. So each loss cancels out a win. We need 10 clear wins to reach our profit goal.
To get 10 ‘net’ wins clear or all losses:
trades – 2 x losses = 10
Put in the number of losses you expect and you can see the number of trades you need for 10 clear wins:
|Wins||Losses||Clear Wins||No. of Trades||Implied win rate|
As you can see, you really need to be winning 3 trades out of 4 or better to get 10 clear wins.
The higher the win rate, the fewer trades you need to clear 10 wins.
Is this even doable?
Does this sound like a tall order? Believe me, getting 10 clear wins is quite doable. I occasionally have winning streaks on either side of this number.
If the numbers above sound too daunting and unattainable, don’t fret, you can always tweak the numbers in the plan to make it more doable. How about having a session trading goal of 10% of your trading capital instead of 20%? It’s just a numbers game.
See, it still only takes about 4 sessions to double your account!
|Session||Trading capital at start of session||Session Profit 10%||Trading capital at end of session||Stake per trade 2%|
Or better still, make the session trading goal your daily trading goal. You could split the 10 clear wins into 2 sessions for the day.
Either way, you will need a strategy that gives you a 75% win rate to make the plan workable. Otherwise, you’d be overtrading and not getting ahead.
What you really need is a consistent strategy that will give you 3 wins out of 4 or better. The best way to do that is to milk a trend. Stay tuned! Coming up in the next post.
In the mean time, download the BonusTrade app. You get a $10,000 virtual money demo account to play around right off the bat, no sign up necessary.