This trading plan was designed for a real client who wanted to withdraw a profit of $1,600 every month. To limit and manage risk at an acceptable level the amount of money placed on an each trade should never be more than 5% percent of current trading account balance. The following calculations are based on a binary options trading account with a balance of $2,000. Therefore each trade at 5% of $2,000 = $100
The plan is based on achieving a 60% win% rate. In other words you need to win only 6 out of 10 trades. And that means you will plan to lose 4 out of 10 trades. This figure is the only variable in the plan and it can be achieved by keeping to the four steps below, you should get to this level (or beyond) on average in about two weeks or so. If you cannot get up to a 60% win rate by then, maybe trading is not for you.
- Trade one asset, the same asset every trade. Make life as easy for yourself as you can. Spend all your research time learning this asset inside out. Try and trade a stock as it is easier to spot factors that will affect the price movement than with a currency pair.
- Make 10 trades a day, not 9 or 11. Most traders overtrade. Be patient. Apply discipline. The only time to ever vary this is if you win your first six trades – then stop, you have made your profit with no loss and the odds of winning 10 consecutive trades are greater than an asteroid wiping out all human life!. You will need at least an hour every day.
- Never, ever vary your stake. It will be 5% of your trading account adjusted weekly as you will see below. This is the most common mistake traders make. Furthermore if you go down this route you will lose. These traders use all kind of systems, doubling up etc. These systems are designed for random events. Trading, understanding and being able to predict the price movements of assets is not random. Real world factors cause buying or selling which then affects the price.
- Your win rate = 60%. As we have seen earlier a 58% win rate, all other factors being equal, will break even, It is surprising the extra return the 2% will generate and as you improve so will your profits, exponentially.
Here is the Plan:
Every day place ten carefully chosen trades, these should be executed by applying your chosen technical indicator to determine your desired entry/strike price. Assumption is that platform pays an average 80% profit per winning trade. As soon as asset hits desired price execute trade.
- Each day stake $1,000 = 10 trades x $100
- Win 6 trades (6 x $80 [$100 x 80%]) = $480 Gross Profit
- Lose 4 trades (4 x $100 stake) = $400
- Nett Profit per day = $80 ($480 – $400)
- X5 Days = Weekly Profit = $400
- X4 Weeks = Monthly Profit = $1,600
This plan is a realistic and simple way to balance risk and maximise profit. It is important to understand that in order to make big returns traders should not perform a withdrawal for the first three months. This will allow your account to grow and enable you to stake more on each trade. You must be patient and be in it for the longer term. If you are looking for instant huge profits look elsewhere.
In the above example at the end of week one your account will have grown from $2,000 to $2,400 this means that for week two you can now safely stake $2,400 x 5% = $120 per trade instead of $100 in week one. This means each trade will produce a profit of $120 x 80% = $96 in week two instead of $80.
Leaving your profit in your account allows the same mechanism that produces high compound interest on bank deposits to come into play. Most traders find they have made enough profit after three months to withdraw their original deposit. After repeating this process for another three months’ traders will then be able to withdraw target amount – in this case $1,600 per month every month.