I sent out two pdf’s recently to my mailing list. I just wanted to post them here to the site in-case you want to refer back to them and you no longer have the email.

Hope you enjoy- both subject matters are critical to establishing a strong and reliable Traders -mindset.

The Enemy Within

Habits Maketh The Man

Cheers, hope you enjoy,

Chris.

Note that Scenario 2 produces $95,000 in the 24 month period.

That’s a return of $85,000 on an initial investment of only $10,000.

And that’s allowing for three losing months of 350 pips each.

OK well, there you have it. How to transform a small trading account into a much larger one using sensible money management and a profitable trading system. I would very much like to help you achieve the same.
In fact, we have been using a leverage of 5:1 in these calculations, but when using 10:1 leverage, the same $80,000 is achieved in only 2 years from a starting balance of only $1000!

Consider these facts:
1. The scenario tables above, which show you can multiply your account over and over again, are simple maths – no gimmicks and no tricks – as long as you can stick to the trading methods and keep your head!

2. If you apply the 3 simple disciplines we have mentioned, and join the Live Charter Group of James’s, so that you have a reliable trading system as well to assist you, you have a good chance of converting your account into a genuine money spinner! Of course there are no guarantees, and there is always a risk, but we have shown it can and is being achieved.

3. On your own, you may struggle to produce profitable trades. With the Live Charter Group you will have the best possible chance of making money from the Forex. And it will only cost you a small fraction of your trading profits – that’s why we even took them off the profit examples on the Excel sheets above.
I really hope that this article clarifies the power of compounding for you, and helps you understand just how important this factor is in the long term picture.

Cheers for now,
Chris.
P.S. My business partner, James, applies this in a live environment to show traders exactly how it works in the real world. If you really want to learn how to apply this practically then check out his Live Charter Group .

This last scenario was based on 200 pips per month and no losing months, at a 5:1 leverage. We have already discussed leverage, but let me remind you that

this means 5 mini lots per trade position per $10,000 in your trade account, or 5 100k lots per trade position per $100,000 in your full account.

As you can see, I have even allowed for a deduction of $100 per month for subscription fees!

The account grows from a starting balance of $10,000 to a final balance of $88,200 after two years!

Yes, that’s eighty eight thousand two hundred dollars after two years!

This has been achieved at a conservative 200 pips a month with a very safe leverage of only 5:1, and you can see that most of the growth has come about

through sensible growth and re-investing profits at a safe rate of return.

That’s the power of compounding!

Note how the number of lots traded grows as the account balance grows, enabling you to make more money from the money you have already made. If you push the

projection out for just one more year, the profits are an amazing $274,200!!

Well, if only it were as simple as that. The problem is that not every month is a winner (although 100% are at this time) and we don’t make 200 pips every

other month. The good news is that we actually make over 300 pips per month most of the time, and the bad news is that we must allow for losing months.

Ok, so let’s look at scenario 2 – a more realistic picture of what might be achieved. I have changed the winning months to 300 pips each (compare this to the

actual results in the table on the first page) and have also allowed for three losing months of -350 pips each. Let’s look at the more realistic Scenario 2:

MT2nd spreadsheet

Key number 2: Managing risk per account

Forex brokers will offer you 100:1 and even 200:1 leverage, promising that these offer opportunities to easy and quick riches.

Don’t believe it for one minute!

When you leverage your account, you are actually borrowing money from the broker with the hope that your trading will make you money on the borrowed funds. It’s the same as taking a loan from the bank and “gambling” it in your trading account. A little leverage is OK – it makes sense to make money using other peoples funds, but too much will lead you to disaster quicker than you can blink.

Here it is: As a rule of thumb, I recommend no more than 10:1 leverage on your trades.

That means for every $10,000 in your mini account, you should trade no more than 10 mini lots, or for every $100,000 in your full trading account, you should trade no more than 10 full (100k) lots.

But can you make money at this leverage?

Of course!

I will show you later how this modest leverage can be used to convert your account safely into many multiples of the initial balance, if traded wisely.

Key number 3: Compounding profits

The power of compounding is simply amazing.

Compounding means that you re-invest some or all of each months profits back into your trading account and you use the profits to generate more returns. The only way I can show you the power of this process is in real numbers, and I intend to do just that right now.

Trading plan for our signals to explode the profits in your account!

First of all, let’s look realistically at what you can expect to achieve each month, based on our current achievements at www.thetradersclub.com and our previous experience as well.

The average pips-per-month is roughly 300, with some months over 500. We need to know what to expect before we can make any projections going forward. Please remember though, that past performance is no guarantee of future returns, and the risk disclaimer on our site should be read and understood before proceeding.

Now we know the expected returns in pips, we know that the leverage should not be more than 10:1 on your account, and we know that the trading system works and should be followed as it generates signals (no moving stops or adding to losing trades!)

What will this generate on our account?  The spreadsheet attached gives us

Scenario 1 – Conservative returns of 200 pips per month and no draw down months, at only 5:1 leverage (instead of 10:1). Take a look…

MT1st spreadsheet

The sad fact is that most traders fail to make money, or even survive the first few months of trading due to two factors:

1.    A poor trading system.
2.    Poor money management

We can provide the first one for you – that’s the easy part! However, the second part is even more important and I want to show you what you can achieve if you do things the right way and if you follow a systematic money management approach.

I have prepared some Excel spreadsheets to show you how you can convert your small trading account into a substantial sum of money if you have a profitable trading system or profitable signals and if you know the three Keys to making money in Forex trading. But before we go through the spreadsheets, let’s briefly cover the three Keys to making money in trading Forex.

Key number 1: Managing risk per trade

Key number 2: Managing risk per account

Key number 3: Compounding profits

Ok, so let’s go through these keys one at a time. Let’s say you were able to get your hands on a profitable trading system or someone was willing to send you profitable trade alerts.

Would this mean that you would automatically make money trading your account?

No way!

The problem is that, as hard as it is to learn how to trade the market, it is even harder for most people to manage their account. This is mainly due to
inexperience and wrong, emotional decisions. I can’t help with the emotional side (although there are some excellent books on the psychology of trading at available, but what I can help you with is gaining experience in converting a winning trade system or signals into money in the bank.

It’s all about money management.

Key number 1: Managing risk per trade

Trading involves risk. Every trade we take has a chance of being a winner and a chance of being a loser. There is simply nothing that will ever change that…

No-one knows where the market will go next with certainty.

What we can do is to develop systems which give us an edge of better than 50:50, and the systems we use win about 65-70% of the time. The other 30-35% of the time the trades are losers. This does not make the losing trades bad trades, but it simply means that the trades fell into the “good, but losing” group.

When a trade goes against us, the best thing to do is to close the trade for a relatively small loss and to wait for the next opportunity.

Many novice traders tend to hold onto losing trades, or even add to losing positions. This has a terrible effect on your account equity, risk of losing more and your emotional well being. Anyway, I don’t want to dwell on this subject, but I must stress that if you follow a trading system or signal, follow it precisely. Do not risk more than the 30-50 pip stop loss employed and do not add to losing trades.

More about that later…

Part Two will be posted here on Tuesday next week…

This is part 1 of a 3 part series. If you would like this e-book sent to you directly, simply opt in on this site and you will receive this,

along with another report or two and a complete video series.

Cheers for now,
Chris.

I managed to get this article and videos from Brian at Inside Out Trading and I think they make a lot of sense…

Brian here with 2 extremely critical “Best Practices” for traders that you really
must not neglect, or your trading will suffer.

In my Quality Engineering days, we always sought to establish Best Practices wherever possible because it had a measurable effect on the bottom line, plus numerous other aspects of the business.

Now in trading there are Best Practices which will definitely benefit you and if you neglect them, your performance and your results are almost certain to suffer.

The First Best Practice

Highly successful businesses don’t just ‘happen’ by accident or by themselves.

…and you do want a highly successful trading business, right?

I mean you’re not in this for mediocrity or just something to do, are you?

No, you want a trading business that is consistent and most of all RELIABLE.

You want the security of knowing that your trading business can be counted on to provide both right now and for the future.

Again, reliable businesses don’t just happen, but the reason the so many traders never get anywhere, let alone taking it to that level where it IS reliable is this:

- they make the mistake of thinking that if they can just get making some money, then somehow everything will fall into place.

Where things go wrong

So many traders wind up too busy doing the thing of the business to ever take it to that next level, and just stay in kind of that ’scrambling to make money this month’ mode.

This is how businesses that ‘just survive’ get built and the owners usually do NOT enjoy the lifestyle that they want.

They find that they are working more hours than they’d like, and

They are not making nearly as much money as they’d like, and

They do NOT have the security in their business that they want.

The other (and more common) result is that the business struggles and dies, usually in a matter of months, simply because of the resources that get wasted instead of contributing to the bottom line.

So the solution is to implement the first Best Practice:  taking time to work “on the business”, not just “in it”….click here to see remaining article and two great videos on this

Your Trading Plan

Your trading plan should be based around your investment objectives, your personality

and your starting capital. Trading is different for everyone and it is important to have

a plan that is realistic and reflects your unique personality and circumstances.

Constructing & Implementing – Your Trading Plan:

Do Your Homework

It is firstly essential to learn the basics, how and why markets move and research

a method that you are comfortable with to trade: ie one that is based on sound

methodology, and one you can trade with confidence, and discipline. So before you

start to trade make sure you have good background knowledge on all aspects of

trading. You would not try and drive a car without lessons, and the same is true of trading

currencies. If you trade and “shoot from the hip”, or on tips from friends, and stories

in the financial press, you are almost certainly going to end up a loser over time.

Match Your Method To Your Personality

It should be one you have decided you have confidence in and can implement with discipline.

This may sound obvious, but many traders trade in a way that is totally opposed to their

personality. For example, if you are impatient and hate giving back any profits then a long-term

trend following system is not for you; you would probably be better suited to a shorter-term

swing trading method.

Begin With A Simple Method

One fact that remains true is that simple systems work best for most traders. There is no link

between the complexity of a method and how successful it is. Another advantage of simple

systems is they are easy to understand and implement and this helps you stay disciplined in

the face of the inevitable run of losing trades.

Begin With Sufficient Capital, Trade Small Positions And Diversify

The utopian dream is to start trading with a small amount of money and make it into

a fortune in a few months. The reality is this is unlikely to happen to the majority

who trade. The first thing to do when trading is start with enough capital to take a

string of losses. The simple fact is: the less you start with the lower your odds of

success. It’s a matter of logic. If you are hoping to get on board one big move, it

may take ten consecutive losses before the winner comes. By then your capital could

easily be depleted and the move you were hoping for comes without you being able to

participate. Always start with enough capital to allow you to take a few losses. If you

can you should hold a few trades in different areas to diversify your positions ie “don’t

put all your eggs in one basket” and blow your money in one trade. To start with keep your position size small and spread the risk.

Make Objectives Realistic

What is realistic amount of profit to aim for annually on your starting capital? Many investors when asked this question simply say as much as possible. They have not sat down and thought about it, they simply have read stories of the minority who have made it big and want to do the same. The fact is that most traders’ start with unrealistic expectations and this leads them in to a false sense of security. They ignore the risks of trading; they concentrate too much in one trade and risk too much and end up losing.

So what is realistic?

Any trader who can achieve growth rates compounded of 30% + per annum is doing very well. Generally, a compound growth of 30 – 50% per annum would place you in the top 10% of traders

that make money and this is a realistic goal if you do your homework.

Be Independent and Isolate Yourself

Emotions are your enemy when trading so it is important to be independent and follow

your own path. It may sound lonely relying on yourself and is in fact uncomfortable to

many but as time goes on your own opinion is just as valuable, perhaps more so than

any others, experts or novice traders.

Don’t Lose Sight Of Your Ultimate Goal:

The ultimate goal of trading is to make money. There is no goal greater than this in

trading. Though there are other benefits to trading self-satisfaction, competitiveness

and the actual thrill, these are all secondary. If you seek revenge against the markets,

other traders or merely want to compete for the sake of it, then the primary goal of

speculating will be lost and so will your money.