SCOTT WELSH TRADING BLOG

The New Heron Does Something Amazing

The Heron Goes From $10k To $2 Million

Feb. 6, 2019

Here we go.

Not only is this one of my favorite things to talk about, but it’s also the most precarious.

This is the topic that gets brutally abused by shady marketers. This is the topic that can lead traders astray.

Or worse.

So we’re going to try to take it nice and slow and get some real answers.

If this conversation is accurate and honest, we can maybe make a lot of money.

But, make no mistake, we have to understand the perils that exist all along the way.

Okay?

First, the fun part.

In the hypothetical data we’re talking about this week, we’re going to see how a sample $10,000 turns into over $2 million in a fifteen year period.

That’s life-changing–and pretty darn exciting.

How great would it be if it’s true? Let’s look into it.

If we’re going to go from a little money to a lot of money, one thing’s for sure. We have to compound our gains.

If we’re buying real estate, the journey would begin by buying a duplex, renting out the other half, charging enough rent to cover your rent, then buying another one, using the rent profits to then buy another one, and so on. By compounding all our properties, we eventually get passive income flowing in and we become rich. The compounding is how we do it.

Same thing with trading.

If we start with a system and never compound our gains, we might make some money but we’ll stay put. Once our system makes money, we have to compound it.

Then, when those profits compound, we keep compounding.

And eventually our 5-figure account turns into a 6-figure account, and so on.

See? We just became rich twice. How easy was that?

Well, it’s not easy.

But let’s not talk about that just yet.

For our discussion this week, we’re going to use the Heron daytrading system. As you know, I like to use systems I actually trade. I don’t know what other traders’ systems actually do, but I know what mine does. I watch it every day.

As background, the Heron trades the GBPUSD on a 15M chart and looks to go with the short-term trend by getting in on pull-backs. It goes for small wins and high win percentages. I’ve spent years researching it and consider it viable enough to trade with my own money.

My 99% MT4 data goes back to 2003, so that’s where we start our analysis.

In the United States, the maximum amount of leverage we can use on a hypothetical $10k account with the GBPUSD is 1.4 lots.

Using the brand new Auto-Sizing version of the Heron, I initially selected a risk level of 10% per trade.

That’s a lot, I realize. But choosing 10% per trade got me to an initial trade size of about 1.4 lots.

So I’m at maximum leverage.

And, overall, that gets me a maximum drawdown of “only” $4,000. Even though I’m risking 10% per trade, my worst drawdown was potentially only 40% of my total account. When I ran the test, thought, the max drawdown turned out to be around 26%, so this trade size seemed reasonable.

Of course, you could decide not to risk that much. We’re just talking about what’s possible.

If we did all that (start in 2003, risk 10% per trade, and compounded the whole time), our $10,000 account turns into $2.4 million in that time period.

Here’s the MT4 Report (notice the data again has a modeling quality of 99.9%; that’s as high as we can get):

 

There it is. Over $2.4 million in profits. Notice toward the bottom how much the trade size increases. And notice how the very first trade in the test had a trade size of under 1.4 lots.

Our modest account is now all grown up.

So what’s the problem? What’s holding us back from taking any system and doing something like this right now?

A lot of things, actually.

And we’ll talk about those obstacles in our next email.

 

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Disclaimer:
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.