Thursday, April 16, 2015

Do you like this Forex Trading Strategy?

I know plenty of you guys out there are still looking for the right forex trading strategy and have not found it yet. I hope that my free trading signals here are helping you guys out a bit and that you are able to earn a few pips with me. When I am asked about what I think the best trading strategy is I always give the same answer: My trading strategy is the best for me which is why I am using it! Don't worry, I will not share my approach here, what you do get is free signals based on it and I assure you I trade all my signals which I post here (plus many more).

Today I want to share a post I read over at PaxForex with the title: Warren Buffet Investing Strategy. I know some of you start to wonder why I am sharing anything which has Buffet in it as it is no secret that I don't exactly have kind words for him. On top of that he is clueless about forex trading (and a range of other instruments since we are at this topic). With that in mind, the reason why I am sharing this is very simple: There are some great points in the above mentioned post which I 100% agree with and have been implementing for countless years.

Here is a short summary of the key points new and seasoned forex traders should take away:

  1. Think Long-Term: Many forex traders rush to the market thinking about earning a few pips really fast and repeating the process. This exposes them to so much risk which needs to be the topic for another day. Think long-term is where you can earn your money on a consistent base. Stop looking at the M1, M5, M15 for trade set-ups. That's all noise. Look at the longer time frames to get a much better idea about the trend and chart patterns. 
  2. Be Realisitc: The author of the above post states that the annualized return of Buffet's company (also known as his investment strategy) yields 21.6%. Guess what? That is respectable. Stop looking for those 100% returns per week crap and don't fall for idiotic advertising. Be realistic! 21.6% may not sound much, but it is harder than you think. Now add that return to the long-term view and it is a great strategy to increase your wealth. It may take five years to double your account, but hey that is how it works. Doubling your account every five years or twice per decade is an amazing performance.
  3. Add-Ons: Yes, you read that right! You download add-ons for your browers to customize them, you purchase add-ons for your car to increase performance and you basically seek to add-on this and that here and there to make 'it' better. Do the same with your forex trading account. Start with a small deposit of $2,000, this will be your base. Now add 10% of that every month to your trading account or $200. Trade according to your trading strategy and be patient for your profits to materialize. 

Here is an oversimplified version of the math with the above parameters:

Year One
$2,000 Initial deposit (Month 1, Year 1) + 11 x $200 deposits = $4,200 x 20% (annualized gain) = $5,040 (again, oversimplified math!)
Year Two
$5,040 + 12 x $200 = $7,440 x 20% = $8,928
Year Three
$8,928 + 12 x $200 = $11,328 x 20% = $13,594
Year Four
$13,594 + 12 x $200 = $15,994 x 20% = $19,193
Year Five
$19,193 + 12 x $200 = $21,593 x 20% = $25,912
Year Six
$25,912 + 12 x $200 = $28,312 x 20% = $33,974
Year Seven
$33,974 + 12 x $200 = $36,374 x 20% = $43,649
Year Eight
$43,649 + 12 x $200 = $46,049 x 20% = $55,259
Year Nine
$55,259 + 12 x $200 = $57,659 x 20% = $69,191
Year Ten
$69,191 + 12 x $200 = $75,591 x 20% = $85,909
After ten years you will have $85,909. I recommend you keep adding your $200 per month and don't stop, but even if you do stop now your 20% per year will result in $17,182 per year in gross income. Keep at this with the above approach and in five more years you may be able to quit your job and retire. You see, all it took was $2,000 to start with, $200 per month, a trading strategy which yields 20% per year and 15 years of patience!

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