Often I hear from traders that they want to disperse the deposit and then, at a more or less acceptable amount for them, start trading calmly, without excessive risks. Why do traders think that by applying such a practice of overclocking they will increase their deposit and switch to quiet trading? Let's figure it out.
On the Internet, on forums or videos on YouTube very often flash strategies for dispersal of the deposit. Who are these calls for increasing your trading account? First of all, to those who are not capitalized and his trading account is very small to get at least some significant result in trading. Having learned about the possibility to simply increase his account by way of overclocking, the trader figuratively lets himself into himself a thought virus that affects logical thinking and risk control goes to a secondary plan. Each such trader thinks that as soon as he increases his deposit according to a certain strategy to the size necessary for him, he will immediately begin to control risks and will trade moderately. But this thought is very deceiving. In 95% of cases, traders do not stop there and continue to disperse the deposit even more eagerly. Why are they doing this?
The first reason is, oddly enough, in positive experience. By increasing the deposit, say from $ 100 to $ 500 in just a month, the trader thinks that if he repeats this again, then in a month he will have $ 2500. Suppose he did it again. Now ask the question: “Would I stop if I received such a profit for 2 consecutive months?”. Maybe someone would stop, but as statistics show, most decide to repeat it again. And as a rule, a cycle change takes place in the foreign exchange market in 3-4 months and the trading system fails. But all would be fine, but due to the large volume of positions that the trader is used to, he very quickly loses his deposit.
The second reason is the time taken to disperse. Imagine yourself in the place of a trader who spent 2 months in a row, every day wasting time, nerves, resources on increasing his trading account, and here, in just a few transactions, you lose a tangible part of your deposit. That's just at that moment another thought virus arises. You can tell yourself: “I had to stop” or “I already lost 30% of my deposit in a couple of days.” The time is coming for radical trade decisions that were not planned at the beginning of the trade. When you begin to compare losses in a couple of days with the profit that was made during the month, in this state a decision is made that will further aggravate the state of the account. This decision is to increase the position volume by 2-3-4-5 times in order to cover losses incurred in the last days for a couple of transactions. But since a series of unprofitable transactions began in the strategy, new transactions bring even greater losses, which ends with a return to the original account or a complete loss of the deposit.
The third reason lies in the wrong choice of market and trading strategy. I explained this in detail at my free webinar.
The result of this overclocking method in the vast majority of cases ends with a merchant account drain. Traders may repeatedly try to disperse their account, but each time the result is the same. Having completely disappointed in overclocking, many simply leave the market without analyzing how professionals make figuratively speaking “overclocking”.
The essence of the correct increase in the deposit lies on the surface itself, and the acceleration of account growth is hidden in a complex percentage. When opening transactions with the same risk (in points or% of the price) and without changing the trading system, professionals use a percentage of capital instead of a fixed volume. For example, if you open a position equal to SL = 50 and TP = 150 regularly, which in turn does not change the algorithm of the strategy, then always use a fixed percentage of the deposit to open a transaction.
If you make a profit, then the lot will automatically increase, but at the same time it is static in percentage terms. And if you get a loss, then the lot decreases and the loss will also decrease with each loss. I think the principle is simple and anyone can make such a miscalculation using a calculator, or rather an Excel table.
And now about the overclocking itself. I want to ask you, what did you hear about compound interest? A complex percentage is also called the eighth wonder of the world. Why? Let's see.
Let's imagine that you get on a regular basis 10% per month. How much do you get in a year if you take this profit? The answer is clear as a white day - 120% per annum. And for 2 years or 3 years? The result is the same - 120% per annum. And now how much will you get in a year if you recapitalize profits every month?
Even at a distance of one year, an increase of 185% with recapitalization, in contrast to 120% with a withdrawal. For 2 years you get not 240%, but already 795%. For the third year, when you cashed out profits, you could take only 360% of the profit, while recapitalization would give you 2710% of the profit. Well, then I’ll just give the net figures for 10 years with recapitalization and pay attention only to the data for recent years, namely the eighth, ninth and tenth year
With $ 1000 invested, taking into account reinvestment, you initially get:
1 year - $ 2,853
2 year - $ 8,954
3 year- $ 28,102
4 year - $ 88,197
5 year - $ 276,801
6 year- $ 868,722
7 year - $ 2,726,421
8 year - $ 8,556,676
9 year - $ 26,854,515
10 year- $ 84,280,972
After the 10 year cycle of monthly reinvestment, you would have made more than $ 84 million with $ 1,000!
Now ask yourself a question. Am I doing everything right to improve my trading? Do I not have the look of an intraday trader with a monthly salary of $ 100 and $ 1000 invested? Maybe I should change my thinking and enter a truly professional approach in trading? What market do I trade? How to learn the right investment?