This is an exercise in compounding brought to you by Stealth Forex Trading Systems

The following is for information purposes only and must not be considered as investment advice

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Part of the art of successful trading is to never trade with more than 2% of your trading account, but if you compound your winnings (*that means leaving them in your trading account) you can gradually trade bigger lot sizes whilst staying at the same risk factor of 2%.

In fact as your account crosses the $200,000 barrier, you should reduce your risk level to 1%.

For the purpose of this exercise we will assume that you opened a mini account with $5000

Let’s now very conservatively assume that you make an overall average of just 10 pips profit per day. That’s just $10 on day one.

It is important to understand that for the purpose of demonstration, we are looking at things from a daily viewpoint, but in reality this would not necessarily be so. It could be that you reach the point to increase (or decrease) your lot size on a daily, weekly, or monthly period, or indeed any other time period. The real point of increase will always be determined by the current state of your trading account at any given time.

When compounding to turn a modest investment into a veritable fortune, you  should always increase (or decrease if necessary) your lot size according to the 2% maximum risk rule.

Should a couple of bad trades set you back, do not be afraid to reduce your lot size in line with the 2% money management rule. NEVER just carry on, hoping that all will be well, because that is the surest route to disaster. 

If trading more than one lot and using the system recommended stop loss would cause you to commit more than 2% of you trading account if the trade ran against you, DO NOT take that trade! Make sure that you fully understand this point.

You also need to be prepared for the fact that this method of accrual is slow to start, but accelerates quite rapidly.

On day one, trading just one mini lot, the maximum stop loss that you could commit to is 100 pips

1                               5010

2                               5020

3                               5030

4                               5040

5                               5050

6                               5060

7                               5070

8                               5080

9                               5090

10                           5100

NOW YOU INCREASE YOUR LOT SIZE TO TWO MINI LOTS

The maximum stop loss that you could now commit to is now 51 pips caution is needed.

11                           5120

12                           5140

13                           5160

14                           5180

15                           5200

16                           5220

17                           5240

18                           5260

19                           5280

20                           5300

SO FAR AFTER JUST ONE MONTH (there are approximately 20 trading days in a month) THE COMPOUND INTEREST ON YOUR INVESTMENT IS RUNNING AT 6% PER MONTH WHICH COMPOUNDED ANNUALLY WOULD BE A LITTLE OVER 100% .

BUT WE ARE FAR FROM FINISHED INCREASING OUR INVESTMENT

21-40         5700

41-60         6100

61-80         6500

81-100              6900

101-120     7200

121-140        7600

AS YOU CAN SEE, AFTER 7 MONTHS OF CONSERVATIVE TRADING, YOUR ACCOUNT HAS GROWN BY MORE THAN 50%

YOU NOW INCREASE LOT SIZE TO THREE LOTS REMEMBERING THAT YOUR WIDEST STOP LOSS MUST NOT EXCEED 51 PIPS

141-160     8200

161-180     8800

181-200     9400

201-220     10,000

AFTER JUST 11 MONTHS OF TRADING, YOU HAVE DOUBLED YOUR TRADING ACCOUNT.

YOUR LOT SIZE WILL NOW BE 4 MINI LOTS REMEMBERING THAT YOUR WIDEST STOP LOSS MUST NOT EXCEED 51 PIPS

221-240      10,800

241-260      11,600

261-280      12,400

281-300      13,200

THE ACCELERATION NOW REALLY KICKS IN AS YOU INCREASE TO 5 MINI LOTS AFTER JUST 300 TRADING DAYS.

REMEMBER THAT YOUR WIDEST STOP LOSS MUST NOT EXCEED 52 PIPS

301-320      14,200

321-340      15,200

INCREASE TO 6 MINI LOTS MAXIMUM STOP LOSS 50 PIPS

341-360      16,400

361-380   17,600

INCREASE TO 7 MINI LOTS MAXIMUM STOP LOSS 50 PIPS

381-400      19,000

401-420      20.400

INCREASE TO 8 MINI LOTS MAXIMUM STOP LOSS 51 PIPS

421-440      22,000

441-460      23,600

INCREASE TO 9 MINI LOTS MAXIMUM STOP LOSS 52 PIPS

461-480      25,400

INCREASE TO 10 MINI LOTS (EQUIVALENT OF 1 STANDARD LOT) MAXIMUM STOP LOSS 50 PIPS

481-500      27,400

INCREASE TO 11 MINI LOTS MAXIMUM STOP LOSS 50 PIPS

501-520      29,600

521-540      31,800

INCREASE TO 12 MINI LOTS MAXIMUM STOP LOSS 53 PIPS

541-560      34,200

INCREASE TO 13 MINI LOTS MAXIMUM STOP LOSS 52 PIPS

561-580      36,800

INCREASE TO 14 MINI LOTS MAXIMUM STOP LOSS 52 PIPS

581-600      39,600

INCREASE TO 15 MINI LOTS MAXIMUM STOP LOSS 52 PIPS

601-620      42,600

INCREASE TO 16 MINI LOTS MAXIMUM STOP LOSS 53 PIPS

621-640      45,800

INCREASE TO 17 MINI LOTS MAXIMUM STOP LOSS 53 PIPS

641-660      49,200

INCREASE TO 18 MINI LOTS MAXIMUM STOP LOSS 54 PIPS

661-680      52,800

INCREASE TO 19 MINI LOTS MAXIMUM STOP LOSS 55 PIPS

681-700      56,600

INCREASE TO 20 MINI LOTS (EQUIVALENT OF 2 STANDARD LOTS) MAXIMUM STOP LOSS 56 PIPS

701-720      60,600

Congratulations, you have just completed 3 years of profitable trading. From a humble start with just $5000 you have increased your investment to a substantial $60,600. If you had started with a regular account of $50,000, using the same modest formula you would now have over $600,000.

Don’t worry, you can get there because the real acceleration now begins.

YOU WILL NOW BE TRADING 21 MINI LOTS YOUR MAXIMUM STOP LOSS WILL BE 57 PIPS

721-740      64,800

INCREASE TO 22 MINI LOTS MAXIMUM STOP LOSS 58 PIPS

741-760      69,200

INCREASE TO 23 MINI LOTS MAXIMUM STOP LOSS 60 PIPS

761-780      73,800

INCREASE TO 24 MINI LOTS MAXIMUM STOP LOSS 61 PIPS

781-800      78,600

INCREASE TO 25 MINI LOTS MAXIMUM STOP LOSS 62 PIPS

801-820      83,600

INCREASE TO 26 MINI LOTS MAXIMUM STOP LOSS 66 PIPS

821-840      88,800

INCREASE TO 27 MINI LOTS MAXIMUM STOP LOSS 65 PIPS

841-860      94,200

      INCREASE TO 28 MINI LOTS MAXIMUM STOP LOSS 67 PIPS

861-880      99,800

INCREASE TO 29 MINI LOTS MAXIMUM STOP LOSS 68 PIPS

881-900      105,600

INCREASE TO 30 MINI LOTS (3 STANDARD LOTS)  MAXIMUM STOP LOSS 70 PIPS

901-920      111,600

INCREASE TO 31 MINI LOTS MAXIMUM STOP LOSS 72 PIPS

921-940      117,800

INCREASE TO 32 MINI LOTS MAXIMUM STOP LOSS 73 PIPS

941-960      124,200

In the past 960 days using a modest return and the benefit of compounding you have turned an initial investment of $5000 into a quite staggering sum of $124,200.

In the past 12 months you have more than doubled your trading account.

If you continued to compound your account at this rate, in less than a further 3 years you would have turned your original investment of $5000 into more than $1,000,000.

* We should point out that when we refer to a trading account, we do not necessarily mean that you keep all of your trading money in your margin account with your broker. You may consider having  a separate account at your own bank and keep sufficient money in your margin account to trade with on a day to day basis. So long as you do not remove money from your overall trading reserve (margin account & separate bank trading account) you may still consider the overall as your trading fund for the purpose of compounding and money management.