Indicators

How do you get rich trading forex? What’s the secret?

90% of retail forex traders don’t know understand this concept! Most retail traders are just out there gunning for the next big trade chasing the dopamine rush. This is the secret behind Warren Buffets wealth. COMPOUNDINGWarren Buffet famously called it the 7th Wonder of the World. Compounding is how you get rich and wealthy off trading. Once you have perfected your process, the process of taking 50 trades and verifying your edge based off your win rate and risk to reward ratio, your trading becomes a legitimate business that can be scaled. Just like any other business, for a business to be feasible you need your gross loss to be lower than your gross profit and then you minus your expenses and get to a net profit. Once you reinvest that net profit back into the process you are able to scale your operations and with that your net profit too. For example, you take 50 trades over the course of 3months and over these 50 trades your risk to reward ratio is 1:2 and your win rate is 50% and you risk 100$ per trade, your gross profit is 5000$ ( 25 trades with 200$ profit ) and your gross loss is half of that 2500$ ( 1:2 Risk to Reward ). Once you minus your gross loss from your gross profit you get to 2500$ net profit. Now, when you reinvest this 2500$ profit back into your account, you can increase your net risk per trade from 100$ to 150$ and with this next cycle of 50 trades you would make 50% more and then the next cycle 50% more.How you choose to compound or how fast you compound depends upon your psychology, what you’re comfortable with but this is the beauty of trading. Once your process is perfected, there is no easier way of scaling any other business than trading! See how easy it is? Focus only on process. Build your process. There is no need to overtrade, size big or search for some holy grail.EDWARD THORPE:Mathematician, author, hedge fund manager, and former blackjack player. Considered the “Father of the Quants,” Thorp revolutionised the fields of gambling and trading with his application of quantitative finance principles. Thorpe founded Princeton/Newport Partners, one of the first quant hedge funds, in 1969.Thorpe also wrote his first book Beat the Dealer in 1962 which revolutionised blackjack strategy and became a bestseller. 5 years later he wrote another book but this time it was called  Beat the Market (1967) which delved into quantitative strategies for stock trading.The principles remained the same even though he pivoted from gambling to the stock markets but the real reason behind Thorps earlier and later success was his background within gambling which taught him the importance of having and maintaining adequate bankroll to survive losing streaks and understanding probabilities so by the time he entered the markets he knew he would lose money on some of his trades. It’s a mathematical certainty and he built his system around that. Keep repeating the process of wins and losses and compound his way to billions ..