Mathematically & Scientifically Proven Way To Grow A Small Account
ฝัง
- เผยแพร่เมื่อ 5 ก.ค. 2024
- Fixed Ratio Money Management - Is This The Best Money Management Strategy?
Intro/Viewer Question: 0:00
Money Management Basics: 0:34
Losses: 2:49
Fixed Ratio Money Management: 5:04
So I wanted to cover money management & how to grow a small account fast because I received a question on the topic from one of you. The question was,
"Hi Markus, my account size is only $6,000. Any strategy to grow this to 50K in a year?"
I replied,
"Hi, Jitesh, you would have to use very aggressive money management to grow an account that quickly. Be careful! Here's a simple truth about trading stocks: The quickest way to lose all your money is trying to double it."
However, it is possible to grow a small account with money management, & I'll show you a mathematically proven, and scientific way to make money with trading to grow a small account.
A FEW BASICS:
- You Must have SRC profits.
- Best strategy to use for SRC profits is the PowerX strategy, along with the PowerX Strategy.
- Risk Management Trading. On a $10,000 I want to risk no more than 2%, so $200. There are two ways to exit.
* Conservative way to exit: RISK: $200 to make $400.
* Optimized Exit with PX Strategy: Risk $200 to make $1,000.
What about losses? Here is an example.
- Let's say you're doing 10 Trades.
- Of these 10, 5 are losing trades. So we lose (5 x $200) $1,000.
- The other 5 are winning trades. We make
* On a conservative exit: (5 x $400) $2,000. The profit after 10 trades w/losses is $1,000. This is an average of $100 per trade.
Fixed ration money management works like this:
Is it realistic to make $100 per week w/ up to 5 open trades? It's very possible. If you start w/ 10K and start trading on the 1st of the month with the risk per trade of $200. Making $100 a week by risking $200 per trade (you would make more than $100/week but just as an example), then you have $10,400 at the end of the month.
This is where you break your 2% rule and you have to if you want to grow your account aggressively. After making $400 in the first month, Now you risk $400 instead of $200. Everything (profit/losses & position size) doubles.
So risking $400 per trade:
- You would now be risking $400 to make $800 w/ conservative exit.
- You would now be risking $400 to make 2K w/ Optimized exit.
So before if you were making $100/week, if you're risking twice as much, you'll now be making $200/week, $800/month. Your account would grow from $10,400 to $11,200
So the 1st 4 weeks, we made $400 and increased risk from $200 to $400. In the 2nd 4 weeks, we made $800, but we are not doubling the risk amount again, we are still just increasing the risk by $200, to $600. The 1st 4 week's goal was $100/week, the 2nd 4 week's goal was $200/week, and now the goal for the 3rd 4 weeks is $300 per week.
So in this 3rd 4 weeks, we make $1,200, w/ our new total at $12,400. Remember THIS IS ASSUMING HALF OF YOUR TRADES ARE LOSING TRADES.
You now increase the risk for the 4th 4 weeks by another $200, bringing it from $600 to $800, with a new weekly goal of a $400 profit.
I think you get the idea. After about 6 months, your account will have almost doubled, and in a year, it would be almost $50k! So you can make money with options trading fairly quickly, but just be patient and follow these money management tips.
Referenced Videos and links:
Generating SRC Profits
• How to Generate System...
PowerX Optimizer Software Site:
mytradingroutine.com/
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Remember, the quickest way to lose all your money is trying to double it. However, it is possible to grow a small account with proper money management. Did you find this video helpful? Let me know in the comments below.
Here are the links I referenced in the video:
Generating SRC Profits
th-cam.com/video/FP2x4JULzwU/w-d-xo.html
PowerX Optimizer Software Site:
mytradingroutine.com/
I dont think that mainstream traders understand this very well. Greed is a dangerous thing. Great video!
Hi Antonio Tellez-Jordan, thanks for watching. And thanks for your feedback. Much appreciated. "See you" in the next video 👍
This man actually goes out of his way to be this informative and helpful to us by sharing his success. May you live a very long and wonderful life, If there is a God may he reward you for your endeavors 🙏
Wow! Thank you for such kind comment, Silverhawk. 😊
10:34 What determines the amount we increase the risk by? Is it always 200
I like your approach!
Hi Ohbezy Gaming, thanks for watching. And thanks for your feedback. Much appreciated. "See you" in the next video 👍
Hello sir i have some questions
If i made money 100$ 4time a week i would have 400$ and next month if i lose my first trade with 400$ i should go on with a400$ per trade or something else thanks you 🙏
That's by far the clearer explanation of flexible ratio mm I've seen.
Thank you! I am glad that you find this helpful. ;)
So what trade are you recommending risking only $200 to make $400? Debit spread? You have to be right on direction, duration, volatility, underlying asset. Does PXO accomplish this? Thanks for all your excellent content!
Yes, I am using the PowerX Strategy and the PowerX Optimizer to find these trades that have a 2:1 reward to risk ratio. 👍
Thanks
😊 You are welcome! I am glad that this helps!
Markus is an amazing educator and trader, I personally did not pay for the signals as I do my own option trading style that works for me. However, his TH-cam content is the best I have seen in my years of trading and watching videos. He explains everything clearly and teaches the best strategies and how to execute them. I knew about these strategies through another network but Markus taught it better. I am an option trader myself and love to use strategies like ratio, vertical spreads, condors, poor man covered calls, (I trade naked options when doing the wheel strategy). Thank you for your videos, I will keep referring people to this channel and keep posting my stuff Canadian tailored.
Hi InvestorTFSA, thanks for your feedback. Much appreciated. I checked out your channel: Good stuff! Keep up the good work 👍
Thank you!!
This is great. My goal is grow my Robinhood account to 10k by end of year then I would apply this strategy for continued growth. My biggest challenge will be to find 5 winning trades weekly.
🤗💕
Happy Thanksgiving Markus. 🦃
Hi Ron, the quickest way to lose all your money is desperately trying to double it. That's why I did this video: Take your time, focus on "SRC Profits" , and then add Money Management to achieve your goals! 😀👍
Thanks, Marcy! Happy Thanksgiving to you, too!
Perhaps I over simplify but I am trying to make a practical example. Assuming I am holding 5 positions of $2000 each on day 1. Also my best due diligence and tools are giving my trades a better than 50/50 chance of moving favorably for me. If the ADR (average daily range) is say 3% of the entry price then in a day or two I could stop out on a trade with a loss of $60 or I could be in the trade 5 to 20 days and profit 6% making $120. An advantage I have is that if a stock is moving against me I can exit before the 3% occurs but if moving favorably I can hold out for my 6% profit target. Since many stocks have ADR of 5% to 10% it is very realistic to see as much as $200 profit on a single trade. Given that my choice of stocks favors the profit side of a trade (tools and strategy help provide this), I need to execute enough trades in a 20 day month to achieve a net of 4% gain. 4% of $10,000 = $400 = $100 per week. The ADR seem key to the velocity of the equation. QED ???
Hi Tom, that is correct.
Here's the math:
When you're trading a $10,000 account, your goal is to make $100 per week = 1%.
You would risk 2% of your capital on any given trade, i.e. $200 per trade. And you try to make at least $400 per trade = 2:1 risk/reward ratio.
Since a trade could take up to 20 days, and you would be in max 5 trades at the time, you should assume to make 5 trades.
Let's make the math easier and say 5 trades per month = 10 trades in 2 months.
Out of these 10 trades, you should expect 5 winning trades = 5* $400 = $2,000. And you would have 5 losing trades = 5* 200 = $1,000.
So you would make $1,000 in 2 months = $500 per month.
And that's $125 per week.
So the math checks out. 👍
Making sense?
Your not taking probabilities into account. If you risk 100 to make 200 you will only succeed 33% of the time not 50%.
Well, that would be correct if you assumed a risk/reward ratio of 1:1. But that's not what I'm doing. I'm assuming a risk/reward ratio of 1:2, which is VERY realistic. The math is correct. 👍
That's not yet scientifically proven...
Marcus, risk/reward and probability of the reward are two different things. You hope for risk/reward to be 1:2 and while your risk is given your reward is not. Nobody knows what the stock or option will do in the future, therefore there is only 33% chance that you get reward of 2.
That being said, there is a high probability that you will have only 3 winning trades out of 10 and 7 losing trades and that changes all your calcs of doubling the money.
In theory, that would be possible. That's why it is important to know the KPIs of your trading strategy. I have been trading for 20 years, and I know that my winning percentage is ~60% (depending on the month). I know that my profit factor is ~3, and I know that I will never enter any trades that don't have a risk/reward ration of 1:2.
So that's my trading strategy. And as I said: A solid trading strategy is the cornerstone of your trading. Money Management is useless if you don't have a trading strategy with a positive expectancy.
No Money Management approach can turn a losing strategy into a winning one. But when you have a solid strategy and you know your numbers, then Money Management is the fuel to the fire.
Do you agree? 😀