The power of compound interest

To qualify as an expert trader, we run our trade account as we would a business. Any founder of a new company will need sufficient capital to get started, they will take as little as possible from the industry and will put all their energy into growing the capital of that business. We do the same with our trading account.

A consistently profitable trader can utilise the massive advantage of compound interest.

Consider that we are a consistently profitable trader that does not calculate the compounded amount per pip on a regular basis.  We start with equity of £15,000 and have a consistent daily profit of £75. After 232 days our capital will be £32,400.

If we consider that we are the same consistently profitable trader but this time we adjust our amount per pip regularly by the ‘risk level of each market‘ calculation then after the same period of 232 days our equity will be £75,443.

A somewhat simplified proposition, but the principle is clear: we must apply a regularly adjusted calculated and, therefore, compounded amount per pip.

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