This is a guest post by Ahmad Hassam
Please read the first part in order to understand this part of the article. Let’s suppose, that the forex signals are consistently profitable each and every month making you 1000 pips per month. Let’s do the maths and see if we double the number of lots every month, how much your account can grow.
In the third month, double the lots to 0.16. Your risk keeping the average stop loss size to be 30 pips will be 3.1%. So you can see your risk level is going down. 1000 pips by the end of the month will mean a profit of $1600 and your equity will be at the end of the month $3130.
In the fourth month, again double the lot size to 0.32 lot. Your risk with an average stop loss of 30 pips will be 3.06%. So the risk is continuously going down. If you again make 1000 pips, your profit will be $3200 and your equity will become $6330. In the fifth month once again double the lot size to 0.64. Your risk per trade will now be 3%. Your equity at the end of the month will be $12,730.
Keep on doubling the lot size every month as long as the forex signal service keeps on making more than 1000 pips per month. In the sixth month you will trade with 1.28 lot, your equity will become $25,530.
In the seventh month, you will trade with 2.56 lot. Your risk per trade will be 3% and your equity at the end of the month will be if you made 1000 pips $51,330. In the eight month, you will trade with 5.12 lot. If you calculate the risk, it will be 2.9% now. Your account equity at the end of the eight month will be $102,530. In the ninth month, double the lot size once again to 10.24. Your risk with an average 30 pips trade would be 2.9% and your equity at the end of ninth month would become $204,930.
In the tenth month, once again double the lot size to 20.48. Your equity in case you again make 1000 pips will be $409,730. In the eleventh month, you trade with 41 lots. Your account equity will become $819,730. Your risks per trade during this month was assuming an average stop loss of 30 pips per trade: 3%. So, you can see the risk per trade will stay around 3%.
In the twelfth month, you will trade with a lot size of 82, your risk per trade will be 3% and equity grows to $1,639,730. Suppose instead of making 1000 pips in this month, you suffered a drawdown of 500 pips. How much did you lose during the month? $410,000. Your equity will become in case of a loss: $409,730. So trading a few more months will again take you near your goal with this fixed fractional money management system.
This was the ideal case of making 1000 pips per month. It might happen like this practically that you make between 500-1000 pips per month. So, it might take you more months to reach your goal of $1M. Even the best forex trading team can suffer drawdowns. But if you accept the losses and just double the number of lots after every 1000 pips that are made, you will see an explosive growth in your account equity.
And in case you are comfortable, you can trade two currency pairs and reach your target much earlier. For example, trading with two currency pairs that make on average 500 pips each per month with a stop loss of 30 pips per trade, your risk with this system will be around if you trade each pair with 0.02 lot in the first month:4.8%! Do the maths and you will see, overtime this risk level will decrease to 3%. And if you want to trade with three currency pairs, you will trade with 0.01 lot per pair and your risk will be 3.6%. But don’t trade more than 3 currency pairs.
One interesting development that has taken place is the provision of the trade copier software that can automatically copy the forex signals onto your account without your presence. There are many forex signals providers that offer this trade copier software along with their forex signals. Use of the trade copier software makes your trading almost automated. You don’t need to do anything once you have set the system correctly.
The most important thing is to find forex signals that work and then having the trading discipline to follow the above system every month! You can also use a trade copier software if you happen to find a good one with the forex signals service. Using a trade copier software will almost automate the whole system. Always remember to thoroughly test the forex signals and the trade copier software on your broker account first!