A Simple (But Not Easy) Way to Double You Money in FX

Hosting an FX street webinar this week I made an off the cuff remark that when trading Flow I aim to make 20 pips for every 3 trades I take. I was instantly greeted with derision in the chat room.“So little! Why even bother?” Which of course sent me into a state of paroxysm as I went on five minute tirade trying to explain to the novice traders in the room that 20 pips every three trades was actually a very generous return and they should be grateful if they can achieve that target over a sustained period of time.

One of the things I despise about our business is the amount of nonsense and sheer outright lies that are constantly peddled to new traders. The most odious con in FX is “My system made 1000 points in the last week. Try it now!” First of all, realize that most currencies move less than 1000 points in a year much less a week. Secondly, if you are actually naive enough to fall for that lie then you will almost certainly lose all your money.

Understand that on a cash on cash basis most professional FX money managers earn less than 5% annual returns. I know this because at BK we get the Barclay’s Currency Index every month and the returns are measly. We have been fortunate enough to beat the index every year since 2008, but our own returns are nowhere near the 1000’s of pips per year that you see shamelessly advertised on the Net.

So, given these real life constraints how can you double your money in FX in a year? Well here is one possible, though by no means certain scenario that you want to consider. Let’s assume a standard $5000 FX Trading account (this is an average account of most retail traders). Let’s further assume that your trading strategy generates 20 pips of profit for every three trades, or approximately 50 pips per every 10 trades. If you trade 10 times per week using 4:1 leverage ($20,000 notional amount per trade) you would expect to make $100 per week. At 50 weeks per year that adds up to $5000 or a doubling of your account.

Note that this is hardly an example of a glamorous turn-$5000-into-a-million trading strategy that is commonly used in FX. I applied leverage sparingly and targeted very modest weekly returns and yet if you can achieve these limited goals on a consistent basis you stand a good chance of doubling your account. That’s why 20 pips every three trades is nothing to scoff at.

Boris Schlossberg

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