Albert Einstein once said that compoundinterest was the eighth wonder of the worldthose are understand it earn it and those that don't pay it let's discuss okay today we're going to talk to youabout compound interest and how if it's used correctly you can have a majorpositive effect on your trading and indeed your equity growth now some ofyou will already be familiar with what compound interest is some of you not butI'm pretty sure that most of you have experienced the effects of compoundinterest in one shape form or another and usually to the most detrimental ofoutcomes consider this if you've ever had a credit card and fail to indeedforgotten to pay the balance at the end of the month your credit card company isgoing to charge you interest on the balance now this interest payment isadded to your outstanding balance if you forget or indeed fail to pay the newbalance the following month you're going to be charged interest on the newbalance now this goes on month after month until of course you settle yourbalance your debt is going to increase every month as the bank is going tocharge you interest on the interest and this is basically known as compoundinterest you know Einstein called it the eighth wonder of the world well indeedit is the eighth wonder of the world for the banks in this case but notnecessarily for you and I now in the forex market we can make this 8th wonderof the world work for us as opposed to against us and I'm going to show youexactly how to do that now it is quite frankly the most efficient way to growthe account over sustained periods of time so do make sure you listen up inthis example we're going to look at a betting account ok our betting accountstarts with $1000 float there's two approaches we can either use the fixedlot approach or we can use the compound aperture we'll discuss the different twotypes now so this is the fixed lot approach each bet we're going to makewe're gonna bet $100 okay now as luck would have it we're gonna have fivewinning trades on the bounce we're very lucky todayso our first bet bet $100 we win our count is now at$1, 100 second bet $100 bet we win up to $1, 200 fair bet again 100 up to 13 for14 and our fifth bet we have five winning bets we're up to now $1, 500 as Isaid we've been very very lucky that is a gain of 50%okay nothing to be sniffed out of it now let's look at the compound interestapproach okay so for the sake of this example we're gonna use the same numbersfor the starting bet which in this case will be 8 10% bet now I wouldn'trecommend any of you start trading the forex market putting 10% on each tradeit is indeed the short fast way to the poorhouse but in this example it makessense for clarity so our first bet is 10% of the account it's $100 okay we winour count is now at $1, 100 our second bit takes 10% of the New Balancewe're now betting a hundred and ten dollars we win again our count has nowgrown to one thousand two hundred and ten bucks again ten percent of this forour third bet takes us bet size of 121 bucksyou see our betting or sides of the bets is increasing as we are making moreprofitable trades that wins were up to 1331 10% of that means about 133 on thisfourth bet goes to one four six four and on our fifth betting the sequence offive winning bets our last bed is 146 dollars and we are winner our accountnow is up to 1610 which is a gain of 61% so you can see by using the compoundapproach we've magnified our gains by an extra 11% so we're making more money byusing the compound approach and this is basically what we do in our forextrading we're making our money work for so profitable periods we're increasingour betting size and going with the profitable periods that's great inprofitable of times but what about the losing times we all go through losingperiod in the forex market and indeed any trading as you know what happens toour count in the drawdown or the losing times well again it works first again tothe positive effect we start off with $1, 000 this is our fixed lot approachfirst bet we lose $100 our count falls to 900 second bet risk a hundred down to800 third down a seven fourth down to 600 and our fifth bet five losing on thebounce we're down 50% of the account maybe shecame up if you're losing 50% in the account after five trades that's thefixed lot approach now let's look at the compound approach okay same examplewe're gonna use a 10% bet on our starting balance so the first bet isgoing to be a $100.
00 10% of $1100 we lose our count force to 900 our secondbit now is 10% of our standing balance so we're betting just 90 bucks on thesecond bet our count falls to 810 okay our third bet now is 10% of 81 810 is 81we lose again down to 729 our fourth bet 10% of that is basically rounded to $73we lose six five six and our fifth bet in this cycle of fire of losing betswe're betting 66 we lose to that our account is now down to five 490 which isa drop of 41% so you can see in a losing period which as I say is inevitable yourcount is going to be protected by using the compound approach as opposed tousing the fixed lot approach we're losing less by losing the compoundapproach most people when they come into the forex markets they don't even lookat this compound approach they just go straight in betting alot size and slowly but surely they'll bleed their account away but theexperienced trainers people that know how to grow an account over sustainedperiods of time will always be looking at the compound effect because they knowyou have your winning periods you know you're gonna have you're losing periodsyou want your money to work better for you in the winning periods and protectyou in the losing periods let me know if this makes sense to you send me acomments below let me know if you've been trading with a fixed lot of perksyou've bled away accounts let me know you've used the compound approach andit's actually helped you in your trading I get back to all your commentspersonally as well so I do want to hear from you give me a thumbs up if youliked the video give me a thumbs down if you don't like the video pleasesubscribe to the to the channel here as well so make sure you don't miss thenext video in my series best of luck with the trading see you soon.
