100 Roi Forex

Starting with 100 Updated August 16, 2016 One of the internet pitches selling advice to forex traders is directed at the would-be trader with little or no capital. It may claim that starting with 100 you can make 10,000 in a year or that you can double that 100 in a month. This raises several questions, the most basic being: is this even possible Possibility versus Probability Almost any pattern of gain or loss is theoretically possible on the forex, but that doesn39t make it likely. What would you have to do to start with 100 and have a trading account worth 10,000 a year later A return on investment (ROI) calculator allows you to break it down. Using the calculator shows you that to accomplish this, your annual rate of return on investment needs to be 9,900 percent Breaking this down another way, we can use the compound interest calculator provided by the SEC on Investor. gov to determine how much your daily rate of return would have to be to have a 9,900 profit at the end of one year. The compound interest calculator (which we39re using as a profit compounding calculator) shows that if we entered and closed out one trade every day of the year, the average profit on each trade would have to be at least 464 percent You39d have to more than quadruple your money every day to come even close to 10,000 at the end off a year. Does this sound like something that39s likely to happen in the real world All the Money in the World In case you39re still not convinced that this not only isn39t likely, but is beyond any reasonable possibility, look at this from one more perspective, beginning with the total amount of month that exists in the entire world. A 2016 MarketWatch article estimates this to be about 80.9 trillion. Now let39s assume that instead of 100, a few large investment banks make trades with the same 464 percent daily profits, reinvested daily. For argument39s sake, assume the initial trade commitments of 10 large investment banks each totals 80 million. These are huge investments, of course, but keep in mind that the daily trading volume on the forex is 4 trillion. Our 10 big banks39 huge investments only account for about 20 percent of the forex39s daily trading volume. If these big banks had the same 464 percent daily return needed to produce a 9,900 profit on an initial investment of 100, how much money would they have at the end of one year according to our calculator, about 80 trillion, which is all the money in the world. Conclusions There39s something so apparently and deceptively rational about starting with 100 and turning it into 10,000 that it takes breaking it down into return rates to show how absurd this really is. While it may be theoretically possible, in reality it39s no more likely than a pig sprouting wings and beginning to fly. Websites that propose this kind of return -- or that propose somewhat less extravagant ROIs that imply that you can somehow get rich quick on the forex starting with very little -- are, to put it plainly, con artists and frauds. And look at it this way: if anyone really had the key to this kind of preposterously elevated return on a 100 investment, would they sell it to others That39s about as unlikely as an entire year39s worth of 464 percent daily trading profitsROI on Forex Joined Jul 2006 Status: Im lovin it 425 Posts I realized that alot of people here are following the thinking that, a 20 increase on equity is fantastic. I do know that many investors and fund managers strive for around 20-30 return on their portfolios yearly and many posters in this forum always stress that return rate is good. But is it really so Sure, a 20-30 increase in portfolios of stocks would be outstanding, but in the forex market it really isnt so. Bear in mind that, we are trading with mostly 100:1 leverage with some even higher. Lets say that you start an account with 300, a 10 return would be 330. Thats 30 pips on a 1 lot ( mini account ). Lets say you compare yourself with a phenomenal investortrader, like George Soros, his best would be 129 but just to make things simple, well put it at 100. That would be increasing your equity to 600, which equates to 300 pips. Is that really hard to achieve I dont think so. Just my 2 cents, I was thinking long and hard about this before I went to bed and I just wanted to post this up for discussion. This is my opinion and I welcome constructive comments. It would be good if somebody comes to change my mind on this, maybe Im just too ambhitious. Joined Mar 2006 Status: Pip Samurai 975 Posts Make 100 is pretty simple to achieve. the issue, which I think youre missing, is doing this consistently over a long period of time and using a much larger accounts. The reason it sounds simple with 300 is because to most people, thats a SMALL risk. I would take a single 1-way bet. but tell me how easy it is when you have 1 million or worse, 1 billion in assets (like fund managers do). Tell me, how much risk would you take then Youre thinking is very relative. With those larger accounts, you dont get the same opportunities to leverage, and even so, there are limits to what banks would loan you. Think about that. what bank would offer you 100:1 leverage on a 1 million (0.1 of 1 billion) margined trade Until you start trading REAL size in this market, youll find out why youd be hard pressed to exceed 20 a year (in a phenom year, at that). I realized that alot of people here are following the thinking that, a 20 increase on equity is fantastic. I do know that many investors and fund managers strive for around 20-30 return on their portfolios yearly and many posters in this forum always stress that return rate is good. But is it really so Sure, a 20-30 increase in portfolios of stocks would be outstanding, but in the forex market it really isnt so. Bear in mind that, we are trading with mostly 100:1 leverage with some even higher. Lets say that you start an account with 300, a 10 return would be 330. Thats 30 pips on a 1 lot ( mini account ). Lets say you compare yourself with a phenomenal investortrader, like George Soros, his best would be 129 but just to make things simple, well put it at 100. That would be increasing your equity to 600, which equates to 300 pips. Is that really hard to achieve I dont think so. Just my 2 cents, I was thinking long and hard about this before I went to bed and I just wanted to post this up for discussion. This is my opinion and I welcome constructive comments. It would be good if somebody comes to change my mind on this, maybe Im just too ambhitious. Joined Mar 2006 Status: Pip Samurai 975 Posts Well, not to make a huge deal out of this, but whos to say that 300 isnt a lot of money for someone I know people, albeit none participating in this forum, let alone FX, where 300 could last them easily a few months. because to them 300 is a lot of money. Im not sure its our place to judge in that regards. Secondly whether or not you CAN trade 6 lots at 200:1 leverage doesnt mean that its sound trading. First of all, you couldnt really trade 6 mini-lots of even the USDJPY because youd immediately be margin-called because of the spread. Furthermore, trading with 300 SHOULD teach you to trade with larger amounts. If youre just gambling the money away, then your reasonable expectation of YoY ROI is probably still less than 10 regardless of whether or not you take a 1-way bet with even 5 mini-lots, or whatever. because youre assuming that taking that 1-way bet will ALWAYS result in profit. If it doesnt, how much expectancy can you have The point of your post, while invalid, doesnt necessarily promote sound trading principles, which is probably what your post SHOULD have been trying to explain. Obviously, it were easy to make 100 all the time in forex, it would be easy enough to turn a 300 into a 30,000 account in a few years. While Im sure there are exceptions to this rule, I very much doubt there are many people that have accomplished this feat without funding their accounts during the process (maybe not all the way, but I dont believe I know anyone that has a 10,000 increase in less than 8 years). I know plenty that have doubled, but that percentage is definitely less than 10 of the people that I know. The point of my post is exactly that turbo. What Im saying is that, because of the high leverage most of us are using, can we really expect 20-30 returns on the money we place to be good I know where youre coming from and I agree. But the reason why I posted this is because I came upon a post replying to another poster regarding his 300 account. The reply was that, getting a 300 account by 10 is already good enough. So I was thinking, is that so With the leverage we use, 10 is puny. Can we even use percentage to compare because of our leverage In fact, when we trade with 300 on a mini account with leverage of 200:1, we can effectively put on 6 lots, so if we want to get 10, shouldnt we use 60,000 instead of using 300 The 300 is in fact just the margin we place. Joined Mar 2006 Status: Pip Samurai 975 Posts OK. let me clarify ROI means return on quotinvestmentquot. Now, for me, that means my account balance. Why because if I put 100K into a forex account, it means that 100K ISNT being invested somewhere else. So, when I say investment, I mean how much I have sitting in an account. With that said, lets take your example. 30 of 5000 is a 1500 gain, or about 13 pips a month. Of course this sounds simple. Now, lets take the 300K example. 30 is 90K. If you want to make 90K in 150 pips, you need to trade at lot sizes of 600 a pip or 60 standard lots at a time. Think how big a risk that is relative your 5K example. While technically, its the same financial risk, pyschologically, its a completely different story, especially if the 300K isnt the same percentage of your total wealth as it would be at 5K. Think about this carefully. if you want relative risk, you have to be 60 times wealthier to trade with the same risk to your overall portfolio. otherwise, those larger numbers represent a larger risk to your overall portfolio. see what I mean Of course, its easy for us to say, sure, make 150 pips, and make 30, but youre talking about risk relative to your overall wealth. Look, theres no doubt that if you have a small account, then you may be prone to over-betting. but that doesnt translate as the size of the forex account increases in percentage of your overall portfolio, so you have to be willing to conceded that the risk is different at those points. Yes, because of the leverage we utilize, we should be able to reach results much better than 20 on our margin. I agree that money management is essential. I do not mean to take it point blank that one should trade with 6 lots. Perhaps the essence of the post should be, are we taking the ROI based on margin or on the total amount we place. As all of you know, even in futures, when we place a margin, that is not considered our capital. It is just a margin. Same as forex, lets say you are trading an account with 300,000. That is still your margin nevertheless. I have always been doubtful of getting an ROI off the margin we place. For larger amounts, I totally agree. 30 of a million dollar account would be 300k and achieving that would be phenomenal, but for retail traders, we all start small. So lets use a 5000 account as an example. A 30 return of this would be 1500. On a standard account thatll be 150 pips. Over 12 months, thats around a rough 15 pips a month. So is 30 really good enoughFYI On ROI: A Guide To Calculating Return On Investment An investor cannot evaluate any investment, whether its a stock, bond, rental property, collectible or option, without first understanding how to calculate return on investment (ROI). This calculation serves as the base from which all informed investment decisions are made, and although the calculation remains constant, there are unique variables that different types of investment bring to the equation. In this article, well cover the basics of ROI and some of the factors to consider when using it in your investment decisions. On paper, ROI could not be simpler. To calculate it, you simply take the gain of an investment, subtract the cost of the investment, and divide the total by the cost of the investment. Or: ROI (Gains Cost)Cost Investing in Joes Pizza For example, if you buy 20 shares of Joes Pizza for 10 a share, your investment cost is 200. If you sell those shares for 250, then your ROI is (250-200)200 for a total of 0.25 or 25. This can be confirmed by taking the cost of 200 and multiplying by 1.25, yielding 250. There are a couple different ways to think about this. The popular one is to picture each dollar invested in this stock paying 25 cents to you. Putting more money in the stock will result in a larger total payout. but it wont increase the ROI. The ROI will be 25 whether 200 grows to 250, 2 grows to 2.50, or 200,000 grows to 250,000. (For more examples of the ROI calculation, take a look at the How To Calculate ROI Video .) I Just Want the Truth Because it is a percentage, ROI can clear up some of the confusion caused by just looking at dollar value returns. Imagine two of your friends, Diane and Sean are telling you about their investments. Diane made 100 investing in options and Sean made 5,000 investing in real estate. Both these numbers will be their return their profits after costs have been subtracted. With only that information, most people would assume that Seans investment is the better one. However, without understanding the costs of the investment, we cant make any accurate conclusions about the return. What if Seans costs were 400,000 and Dianes were only 50 This would mean Seans ROI is 1.25 while Dianes is 200, a clear win for Diane. The dollar value of the return is meaningless without considering the cost of the investment. For this reason, the costs of an investment, both initial and ongoing, are an essential piece of information for any investor. (Learn more about ROI and other ways to value investments read our Financial Ratio Tutorial .) ROI and the Investment Rainbow The ROI calculation remains the same for every type of investment. The variation, and the danger for investors, comes in how costs and returns are accounted for. Here are some commonly mishandled investments. Real estate can create returns in two ways, rental income and appreciation. Rental income simply has to be added to the gains as it is realized. Costs, however, come from many different sources. There is the initial purchase cost, taxes, insurance and upkeep. When people talk about making a 200 return selling their home, they are often making the error of simply using the purchase price and sale price of their while ignoring all the costs in the middle. Or, if it is an investment property. they may be accounting for the rental income and appreciation properly, but neglecting insurance costs, taxes and that new water heater, etc. Real estate can be an excellent and profitable investment, but the projected ROI on these investments is frequently exaggerated. Stocks are prey to the same type of omission as real estate. More often than not, investors fail to keep track of their transaction costs. If you make a 100 gain but forget the 20 you paid buying the stock and another 20 selling, then your ROI is grossly inflated. As with rental income, dividend payouts should be added back into the gain column when you want to calculate the ROI. Collectibles like the Honus Wagner card, Action Comics 1 and the 1933 Double Eagle can sell for millions, making for astronomical ROIs when compared to their original prices. However, collectibles are rarely purchased at their original prices and, depending on the type, have high insurance and maintenance costs that cut the true ROI down to size. Leveraged Investments Leveraged investments pose an interesting problem for ROI. Because they allow the initial investment to be multiplied many times over, they can also generate multiple returns. However, in this case, the incredible ROI that some traders make must be tempered by the risks they take. Leveraging an investment dollar to equal two or three dollars works well when the returns are positive, but losses are similarly leveraged in some of these investments. With plain vanilla options and basic forex accounts, the most a beginning investor will lose is the price of the option or the balance of the forex account if it stops out. However, it is useful and sobering to think of it in terms of the capital controlled. If you lose 1,000 on a forex trade leveraged 10 times, thats a 10,000 mistake even though it thankfully only cost you 10 of that. ROI cant tell the whole story of leveraged investments. The risk-reward tradeoff is the place to start for that lesson. Moving Beyond ROI ROI is a simple calculation that tells you the bottom line return of any investment. The operative word, however, is simple. One major factor that doesnt appear in an ROI calculation is time. Imagine investment A with an ROI of 1,000 and investment B with an ROI of 50. Easy call put your money in the 1,000 one. But, what if investment A takes 30 years to pay off and investment B pays off in a month This is when time periods come into play and investors must look to CAGR . The Bottom Line ROI is a useful starting point for sizing up any investment. Remember that ROI is a historical measure, meaning it calculates all the past returns. An investment can do very well in the past and still falter in the future. For example, many stocks can yield ROIs of 200-500 during their growth stage and then fall down to the single digits as they mature. If you invested late based on the historical ROI, you will be disappointed. Projected or expected ROIs on an unproven (new) investment are even more uncertain with no data to back it up. For this reason, Investors must learn about other metrics like CAGR, debt to equity, ROE. and many others to dig into the numbers making up ROI. (For related reading, take a look at Analyze Investments Quickly With Ratios .)