20 Feb Doubling An Account The Boring Way
Doubling An Account The Boring Way
Feb. 20, 2019
What’s more fun than talking about doubling a trading account?
Isn’t that why we got into trading?
Yes, we understand that trading is a business and it takes hard work and money management is the most important thing and trading psychology might actually be the most important thing.
But none of that is fun, and none of that changes financial lives.
Doubling an account is something that can make a difference.
There are all sorts of ways to double an account, and they’re in every range in the spectrum.
If we have a hypothetical $10k account and we want to make it $20k, there’s a thrilling way to do it.
We could go to Vegas and put all of it on black.
One second you have $10,000 and a few seconds later you have $20,000. That’s exciting!
But there’s also a 52.6% chance that, seconds later, you’d have nothing.
Another stimulating way to try to double our money would be to become an angel investor.
Who wouldn’t want to be the one who found the next Uber?
Exciting but not great.
Are there any less risky, more “boring” ways to double an account?
How about the best option in the universe? The stock market.
If we boringly put all our money in the stock market via an Index Fund or the like, is it possible to double our money?
Yes. Kind of.
If we put our $10k in the market on 1/1/95, we would have over $20k by 12/31/97. It took a boring three years, but it worked.
Or if we did the same from 1/1/96 to 12/31/98, we could’ve almost doubled our money.
Or we could’ve done the same from 1933-1935. That three year period would have gotten us to $20k.
But that’s it.
I could not find any other three-year period in stock market history that would do it (going back to 1932). In 86 years. there were only three three-year periods where our money could have doubled.
Those aren’t great odds.
If we’re not adrenaline junkies or stock market investors, is there any other way to try to double our money?
Let’s try Forex. Normally, Forex has the reputation for being exciting… and risky. But this is neither. Today, we’re not interested in excitement.
This system uses the popular EURUSD and a basic indicator, the CCI. It goes for a pretty big target and has an even bigger stop.
The trades take time to finish and we only get about 1 trade a month. Sometimes less.
If you were trading this by yourself and had set a goal of doubling an account, almost every day nothing would happen. Some months, literally nothing would happen.
No adrenaline. No real action. Just boring chart watching (or boring robot watching). Most traders would scoff at such a banal system.
Here are the details on the EURUSD CCI system (also called The Heron):
- System: The CCI System
- Philosophy Behind It: Use boring Daily charts and try to get good-sized wins by entering on pull-backs
- Need Special Indicator? No.
- Chart: Daily
- Instrument: EURUSD
- Long or Short? Both
- Long Entry: 1) Price must be above the 149 SMA; 2) Price must close below Oversold (length 30)
- Short Entry: 1) Price must be below the 149 SMA; 2) Price must close below Oversold (length 13)
- Hypothetical Portfolio Profit: $169,313
- Hypothetical Portfolio Max Drawdown Percent: -32.98%
- Stop Loss: 124 pips
- Take Profit: 77 pips
- Trade size: risk 13% on each trade (compounding as the account grows)
- Hypothetical account size: $10,000
- Test Period: 2005-2019
- Number of Trades: 173
Here is the MT4 Report:
So, how long would it take to double our money?
On 1/1/2005, we took our first trade with 1.03 lots, which is well within our margin available for the EURUSD. Using our new auto-sizing feature, we then compounded our gains automatically as the account grew.
And even though we’re trading in a most boring fashion, you can see our account hit $20,000 in December 2005:
It took 18 trades to get there.
Now, there are three major problems with this example.
One, it’s so boring that no one would do it.
Two, we had to initially take on a massive amount of risk. While it’s true that our account only dropped $198 below our initial $10k mark and the maximum drawdown was only about 33% of our account, we were fortunate that the worst losing streak didn’t happen right out of the gate.
It could have. And we would’ve had to withstand about a 70% drawdown if we were the unluckiest trader in the world and caught the worst drawdown at exactly the start of our journey. The chances are small that this could happen, but it could happen. And if we lower our risk, then it would obviously take longer to get to $20k.
Third, it’s so boring no one would trade it.
In our next email, we’ll examine if this is just blind luck. Could we have started at a different time and still doubled our money? And we’ll also look at other possible obstacles.
Talk to you soon.
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It should not be assumed that the methods, techniques, or indicators presented in these products will be profitable or that they will not result in losses. Past results are not necessarily indicative of future results. Examples presented on these sites are for educational purposes only. These set-ups are not solicitations of any order to buy or sell. The authors, the publisher, and all affiliates assume no responsibility for your trading results. There is a high degree of risk in trading.
HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN INHERENT LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING. ALSO, SINCE THE TRADES HAVE NOT ACTUALLY BEEN EXECUTED, THE RESULTS MAY HAVE UNDER- OR OVER-COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN.