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Is compounding necessary?

Nov 19 2012 at 09:47
235 Posts
As long as it's more than the previous amount, else it wouldn't be compounding. At least that is the way I see it 😁

I agree totally with James_Bond, it's all pointless if you aren't making a consistent profit though.

For every loss there should be at least an equal and opposite profit.
cfxsignals (cfxsignals)
Nov 23 2012 at 22:30
18 Posts
If you don't compound then you are missing out!

The only way to get smarter is by playing a smarter opponent
targetpointfx (targetpointfx)
Dec 04 2012 at 10:54
20 Posts
Compounding is necessary.I turned $25k to $700k before with compounding for a company...try it first on demo get used to it,make sure you learned the sticks around it.then do it live..

Dec 07 2012 at 09:38
29 Posts
I can't imagine doing it any other way.

The Fine Art of Investment
Gary Sharp myfxpt com
Dec 21 2012 at 02:50
345 Posts
NickMcDonald posted:
I would say that it is definitely not necessary.

Once an account gets to 200% return it can be hard to manage emotionally. Fear and greed start to come into play and it will effect your trading.

I've seen it dozens of times with the great traders that join our trading room. They go well for 3 months, then tank.

If you start with a decent bank, then just withdraw your winnings you might find that fits better with your emotional resolve.


Gary Sharp myfxpt com
Dec 21 2012 at 02:52
345 Posts
Ironman posted:
But to answer the question 'Is compounding necessary?' it really depends on your bank.
If you have $100 to trade with and are happy with $20 in winnings per month, the question is no.

But for the 'risk of ruin'-discussions and percentages and so on - If you are trading with amounts that gives you a risk of ruin, you have to much at stake. Someone said that 'you should only risk so little that it almost seems like a waste of time to trade'.
Then you put the stress out and can concentrate on your way of trading.

It is not the 'amount' that constitutes Risk of Ruin, it is the longest losing streak and the amount lost per losing trade.

AOyelahan (AOyelahan)
Jan 11 2013 at 08:50
1 Posts
If you're making consistent profits and you compound, you will enjoy compounding. If you're inconsistent and you compound, you will be shooting yourself in the foot. I have a weekly target on my account, and because my trading strategy allows me meet this 'realistic' target consistently, I compound and I am happy to do so, over and over again. Bottomline, work on your trading, remain consistent and compound.

vijayinvites (vijayinvites)
Jan 14 2013 at 05:42
106 Posts
If your R:R is 1:1 or better, its better to compound. Say if you are risking 100 pips for 20 pips profits, compounding will be disastrous. As you gain money, you will be risking more pips when you compound. Also AHPR, which myfxbook provides is a good indicator to know if you need to compound or not. But again, if you dont compound your profits/losses will be constant which is not in anybodys interest :) As a human you always want to grow :)

walloj (walloj)
Feb 16 2013 at 09:01
14 Posts
domgilberto1 posted:
incometrader posted:

That's right your risk stays the same if your compound rate stays the same. But, if you want to reduce your risk as you grow your account, you may want to compound at a rate of 50% for example. What you're saying is fine for something like a term deposit where there is no risk, but with FOREX (as risky as it can be) it's wise to reduce risk.

I completely disagree. There is no logical reason to decreasing your risk percentage of your closing balance? If you choose 2% risk profile of your closing balance then it is always 2% of your closing balance...

Why would you decrease your risk profile on winning trades, and what, keep it in the same on losses? Or decrease it then too.... If you knew what you were talking about you`d fully understand the implications through back-testing and vigorously understanding how MM effects your bottom line through messing around with your risk profile....

I am not sure why I am even bothering explaining this or getting involved lol.

Do what AO said above^.


Rules of Trading: 1. Make Pips 2. Keep Pips 3. Repeat
Michigander (Michigander)
Feb 16 2013 at 13:24
321 Posts

Your risk is not only a measure of the percent wagered on each trade, it also depends on the systems that you trade. For the normal buy, sell, risk 2% on one trade at a time, you are absolutely correct. For the many many grid/martingale systems out there, you couldn't be more wrong. There is always the risk of the account blowing out at any time and you must transfer your closed profits out religiously until you have recaptured your initial capital.

War is when your government tells you who the enemy is. Revolution is when you figure out, for yourself, who the enemy is.
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