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What should I do with my profits? – This is a question I have come across pretty often and I think it is an important aspect of trading that I’d like to discuss.
There are two ways to go about it: Compound your profits or withdraw it.
Compound your profits
According to Albert Einstein,
Compound interest is the eighth wonder of the world. He who understands it, earns it. He who doesn’t, pays it.
Compounding your profits is one of the best ways in which a trader can grow his or her account at an accelerated rate.
However, the true effect of compounding your money only becomes meaningful when you have a large amount of capital.
For example, a $1,000,000 account compounded at a monthly growth of 5% per month will yield $1,710,339.36 at the end of 12 months – a growth of $710,339.36.
Compare that with a $1000 account compounded with the same parameters, yielding $1,710.34 – a growth of $710.34.
You can take advantage of this useful tool to project your compounding: http://www.forex21.com/forex-compounding-calculator/
This is why some of the small-capital traders don’t see the need to compound their profits because it would take too long to grow it to an ideal size and hence, they turn to option two, withdrawing their profits on a regular basis.
Some traders, because of the above reasons, withdraw their profits to use as extra pocket money – perhaps to buy something material to reward themselves with, or to just treat their family and friends a nice dinner with.
It is healthy to withdraw your profits every once in awhile and spend them on something meaningful – like a meal for your family or a gift for loved ones or yourself.
It is a visual manifestation of your trading performance, which reminds yourself that your profits are real.
For example, you have made more than enough to get the computer you always wanted. From now onwards, whenever you use the computer, you will be reminded of how you traded your way with discipline to earn it. The feeling is definitely indescribable.
Don’t underestimate this experience as it is one of the biggest form of motivation for you to work harder in your trading endeavors and scale greater heights.
After all, we should all reward ourselves once in a while for a good job done.
The only drawback to this is that you will not be able to compound your profits and grow your account meaningfully. So it will be a growth-withdraw-starting balance cycle all the way.
In the end, there is nothing wrong with choosing one over the other. It comes down to the individual’s objective and what the money deposited in the trading account means to the trader.
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(Disclaimer: This is NOT a sponsored post.)
When it comes to productivity in trading, what comes to mind?
For me, it means trading seamlessly, fuss-free; trading with a clear mind, in a minimalist way.
Here are some tools that have helped me along the way, I’ll go through them one by one with you:
This is a must-have app for me. It mainly serves two functions for me – Progress and Planning.
It is able to sync directly with my MetaTrader 4 (MT4) account by extracting all my trade information and sorting them into a page with statistical information where I can keep track of my trading progress. This includes a plotted chart with my equity growth, drawdown, etc.
In terms of planning, it also has a widget function within the app to display the weekly economic calendar on the home screen of your phone, so I’m always aware of high impact news and their timings respective to my country’s timezone.
I use it mainly to have a quick overview of the current FX market situation, which lets me have a feel of whether the market is moving or just being extremely quiet.They also have a mobile app which also allows you to do the same, albeit it has an additional feature that I use on an on-off basis – the price alert function
You can set the price at which you want to be alerted at, for whichever FX pair you’re trading. But a word of caution, if you’re looking for alerts that are instant and immediate, this would not be my first choice recommendation as the alerts sometimes comes in at a delayed timing.
- MetaTrader 4
Every trader has definitely come across this program, surely you are all familiar with the platform. But its price alert function is something that is a must-use for me when I’m looking at specific price levels.
It is also a function that many traders have struggled to enable properly to allow them to receive notifications on their mobile devices.First, you need to ensure you have your MT4 installed on the PC/Mac and mobile device.
Then, go to Settings on your mobile device and scroll down.
There, you will see your personalized MetaQuotes ID.
Next, on your PC/Mac, go to Tools > Options > Notifications and key in the MetaQuotes ID from the previous step.
Hit ‘Test’ to make sure it works; you should receive a test message on your mobile device
Now, if let’s say you’ll like to set a price alert for EUR/USD, double click the bottom of the MT4 screen on your PC/Mac (the bar that shows your equity, balance, etc.)
This will bring up a panel with multiple tabs. There should be one named ‘Alerts’; click it.
Now, right click anywhere in the ‘Alerts’ empty space and click ‘Create’.
It should look something like this:
Now just make sure the Action tab is set to ‘Notification’.
As for the condition, if it says Bid < , it means that you will receive a notification when bid price goes below the value you specified in the ‘Value’ box.
The same goes for Bid >, vice versa.
You can even type in the title of the alert in the ‘Source’ bar.
And you’re good to go! Just take note, in order for this to work, your PC/Mac MUST be switched on at all times to receive the notifications.
Any time it is off, you will NOT receive any notifications.
I use it mainly to accompany me during my chart analysis and when I’m typing my blog posts for you guys, the readers!
If you’re also one that uses music to boost your productivity, then I strongly recommend listening over Spotify; they do have a wide library of songs to choose from. You could even create a playlist specifically for when you are at your trading desk.
What are some of the trading tools you use to streamline your trading process?
I’d love to hear from you.