compounding

[SanMiguel]

Does anyone here compound up their account while trading?
I have heard a few comments saying that most traders don;t do more than £10pp but I'm not sure why.
Trading at £10pp with a 10k account and an average of 20pts per day, you could be up at £100pp within a few months.
Many SB firms have maximums of £500pp and of course I suspect you may get into liquidity with anything above £100.

 

[Rhody Trader]

If you do not compound in some fashion or another you will see a persistent decline in your rate of return as your account grows. Some folks compound from trade to trade, risking some % of their account balance. Some do it in a stepped fashion, only upping their trade size when they reach the next threshold they've defined.

 

[SanMiguel]

If you do not compound in some fashion or another you will see a persistent decline in your rate of return as your account grows. Some folks compound from trade to trade, risking some % of their account balance. Some do it in a stepped fashion, only upping their trade size when they reach the next threshold they've defined.

Yes, RoR compared to the account but if you have a fixed rate, say £100pp and you get 5000pts per year then you might not even need to compound and just be happy with the profits. I don;t know if anyone on the forum trades at that amount.
At the moment, I compound and believe this is the thing to do at the beginning but as the account grows and say you compound week on week, a losing week could have you losing more than you gained the previous week just because you upped your trade size.

 

[Rhody Trader]

If you use a fixed ratio position sizing (always trade/risk x% or your) your drawdowns will be lower because you will lose increasingly smaller nominal amounts, but the reverse also applies. If you use a fixed position size (always trade/risk a certain nominal amount) your drawdowns will tend to be larger, but your recovery will be quicker. Which way you go will depend on your trading.

And yes, at a certain point you may just be thinking in terms of income and not capital appreciation, as which point you probably lock your trade sizes in.

 

[SanMiguel]

If you use a fixed ratio position sizing (always trade/risk x% or your) your drawdowns will be lower because you will lose increasingly smaller nominal amounts, but the reverse also applies. If you use a fixed position size (always trade/risk a certain nominal amount) your drawdowns will tend to be larger, but your recovery will be quicker. Which way you go will depend on your trading.

And yes, at a certain point you may just be thinking in terms of income and not capital appreciation, as which point you probably lock your trade sizes in.

There is a similar discussion on here about how far can you go with spreadbetting?
SB firms allow up to £500pp but it seems most don;t trade above £10-£20pp perhaps because SBing is mainly used by beginners.
So, the compounding is all theory until you get to higher levels where you may actually have to split the trades into smaller amounts anyway...

 

[oildaytrader]

http://www.fxfisherman.com/forums/f...mpounding-forex-trades-profits.html#post20573

http://www.fxfisherman.com/forums/f...mpounding-forex-trades-profits.html#post35175

 

[bangkoker]

I think it makes sense to compound. Personally I have gone from a very small account where I was risking too much per trade percentage wise. As my account has grown I have compounded and if not going well then decreased size again.

I think it is inevitable if successful that depending on an individuals hunger you may stop compounding at a certain figure. My view is I would continue to compound if I am only risking 1%-2% per trade but if I am fortunate to get a truly large account I can imagine being even happier with risking less than 1%.

I keep a record of my trades and have averaged 10% per week growth! I am not sure how and at the beginning I was risking too much.. but I will continue to compound as long as going in my favour. I have no illusions of making millions in the next few years. Although if next year I have a £5k account that essentially started from a couple of hundred I would be very happy.:whistling