Slow and steady wins the race in Forex.
“3% a month? That’s too small?”
3% consistent monthly returns for a year is 36% at simple interest but at compound interest that same consistent returns is 42.58%. 36% compounded yearly for 5 years is 365.26%. 3% compounded monthly for 5 years is 489.16%. I am not here to talk about the power of compound interest.
I just want you to realize the power of slow consistent gain and its effect on being the winner at the end of the day.
Some people get rich quickly and unexpectedly. Some win the lottery, some get inheritance from rich relatives, some surprisingly enter a trade and hit the jackpot with huge returns in the next moment. All these are unexpected-rich-events. Professional Forex trading deals with none of these. It requires planning, training, education, sound principles and control.
I remember getting involved in the Forex markets because I read from online that I could “turn $1000 into $1,000,000 in a month”. That is the single most deceitful lie you can often see in Forex. From my interview, I explained how this lie broke me to pieces and how it taught me the single most important lesson in Forex, “Treat it like your only and last business”.
In trading, one has to understand that the Forex game is not a sprint, it is a marathon. Because, you will need a strong heart to sail through the losing streaks, frustrations, pain, stress among numerous other things that beginner Forex traders face.
A sprint trader, is one who is not in the game to stay, but in the game to make abnormal profits for the short term and enjoy. I am not saying it is impossible to make a million from the Forex business, neither am I disputing the fact that you can make huge consistent gains. I am just iterating the reality of the game for the average professional trader. A sprint trader has his or her eyes only on the potential gains and never sees the market as a master of its own or a place where losses are a part of the game. A Sprint trader trades with no stoploss because s/he believes that the market will always respect his/her trade and bow to hit the expected profit target. A sprint trader cares little about the power of proper money management and trades like s/he pleases risking more than he would under normal circumstances.
Treating Forex like a marathon means, you start off slowly, a step at a time, not worrying about how energetic you are or how fast others are moving. In Forex, I always say that, Forex is a game that requires you to shut off the outside noise and listen to your inner voice. Being a marathon trader means, analyzing your trades yourself, researching to be sure of what the market is about, being patient with formation of trades, not closing your trades before your targets are hit, not moving your stops further away from initial placement, among numerous other things that professional traders have consistently mentioned. Reading “The New Market Wizards” by Jack Schwager, I was awed by the performance of Howard Seidler who averaged 34% per annum in his trading career. 34% to some is not much, but that surely got him a place in the legendary “Market Wizards”. This moves on to show that huge gains do not make you a trader, it is the consistent movements that do.
Beginner traders are much more concerned with finishing the journey of gains fast. Some hate to develop the patience to carefully trade the Forex markets with a realistic goal in mind.
Taking Forex like a business in a marathon means having a realistic goal, a drawdown below 15% by not risking more than 5% on a single trade and always having a risk to reward of at least 1:1 (You may disagree though). That will save you the stress of lifting yourself from a pit you have dug for yourself. It will also prevent you from experiencing the stress of losing more than you can afford to lose.
In the long term, remember that Forex is not about the “Huge Now Gains”, it is about conserving your capital to be able to finish the marathon. You might not finish first, but you will definitely finish the race with a worthy place in the market.