The “trading peanuts to make peanuts” argument
This is why early on in my trading career I researched as much as I could about developing a system that would be able to consistently compound my capital exponentially, as with 10% monthly growth, after 18 months you have quite a good return on your original capital. For me I was able to start with $2500, and then in the second month I added $2000 more. That is how I started trading this current low risk Outside the Box strategy in Feb 2017.
I was doubling my account size on average every 6 weeks. I tripled my account size after 4 to 5 months. Then I was able to dial down risk and start learning how to set up trade copying, keep a verified track record online, and I learned everything I know about Forex online, in videos, and from other managers/trader I met in community forums.
The example outlined below shows what a small account earns on one trade at low-to-medium risk … and why strategy providers need allocations/investments of a certain minimum amount to generate fees interesting for professional traders, to live from trading.
It should be “traders first” here, to attract the best traders.
How many consistent traders do you find on ZuluTrade?
True traders are attracted by a true income.
I have been verbally attacked on my Social Feed on my profile because I have stated rather bluntly that I pay most attention to Equity Based Risk Management and those with account sizes larger than $2000 and ALSO those who select profit sharing method of performance fees.
If you offer peanuts you will gather peanut-traders, uneducated players, inconsistent traders that you can find anywhere, and those who probably will not last.
- $500 slave account
- I open 0.5 lot trade on master account $10,000 equity
- slave account opens 0.03
- Trade closes with 10 pips.
- Slave account makes $3 in profit
- Zulu pays me 0.5 pips / lot, so in this example on AUDUSD trade, I would get paid 0.15 or 15 cents.
what should our goal be in trading?
To multiply capital in a COMPOUNDING way as quickly as possible, and to manage larger allocations with low to medium risk, clients who are low maintenance, remain invested for at least 12 months, and who respect you by allowing you to do your work over a longer period instead of over-analyzing your day to day performance.
1. Commission based Clients
usually have lower equity, wants control over risk and managing their margin and trades, and usually do not remain invested for over 3 to 6 months. they interact with you much more frequently, need soothing and education.
2. Profit Sharing Investors (high water mark performance fees)
usually have larger equity in their trading accounts, allows the manager to control open trades, risk, and how their equity/margin is used, and they typically remain invested a much longer period, do not micromanage their FX accounts, and they check back with you over the long haul.
I learned early on, these are the types of accounts I needed to service, and the type of account I wanted to manage for myself.