Graduating to become a fulltime forex trader is our ultimate goal. It requires sets of forex education, experience, and most of all BAM (= Brain and Motivation).
I compare forex graduation an equivalent of obtaining Ph.D. in an academic world.
In the academic world obtaining Ph.D. say in physics, requires "satisfactory completion" of B.Sc., M.Sc. and Ph.D. thesis besides countless hours of lab research at bare minimum.
In order to become fulltime forex trader, we will have to master buffer building, equity building, money management and finally be able to replace our current income from forex trading.
Personally for me, Ph.D. symbolizes expert status in a particular field of study, whatever else it might mean to the rest of the world.
For every beginner trader, obtaining Ph.D. in forex, i.e. becoming fulltime forex trader should be the guiding motto. Only this time one can obtain Ph.D. without having to enter any university. The best part is one can be making money while obtaining Ph.D.
So here are the basic Ph.D. requirements for fulltime forex traders...
Let's recap back to my equity building phase I where I started out with making $800 per month as an equity amount.
At this pace,
I will add $800 as an equity amount in 1 Month
I will make $1 .....................in (1/$800) Month
I will make $62,500.............in (1/$800) x $62,500 Months = 78.125 Months
Let's convert it to year.
12 Months make 1 Year
1 Month makes (1/12) Year
78.125 Months make (1/12) x 78.125 Years = 6.5 Years.
So, do you have the patience to build this equity amount ONLY in 78 months or 6 and half years?
Alternatively, you can start with much bigger principal investment.
In any circumstances, master these fundamental concepts on money management.
No wonder more than 95% of the trader fail to obtain fulltime forex trader status because of the following reasons...
I plan to build equity amount of $62,500 so I can become fulltime forex trader under 1 year. This way I can work out my plan to make about $10,000 per month and comfortably withdraw $5000 monthly.
How much initial principal investment do I need?
First loop back to buffer building phase II.
We need to build buffer amount of $62,500 from our unknown principal investment under 1 year (=12 Months).
In 1 Year (= 12 Months) I need to build buffer amount of $62,500
In 1 Month (=4 Weeks) ..............................$62,500/12 = $5,208.333
In 1 week (=5 trading days).........................($5208.333/4) = $1302.08
In 1 trading day ...................................($1302.08/5) = $260.42
Let's check back...
= $260.42 x 5
= $1302.1 x 4
= $5,208.4 x 12
= $62,500.8
(Note there is a discrepancy of 0.8 cents due to decimal point. Don't get confused).
So in order to become fulltime forex trader I need to make $260.42 per day as a buffer amount. How much do I need as a seed money?
Buffer Amount Goal: $62,500 in 1 Year
Buffer Amount Goal: $260.42 in 1 Trading day
Again, my daily, weekly and monthly PIPs goal is 20 PIPs, 100 (20 x 5) PIPs and 400 (20 x 5 x 4) PIPs respectively.
Since we are building buffer amount on initial principal investment, I will strictly enforce conservative 0.5% to 1% risk per trade per account or 50 PIPs at any given time.
For a regular 1 lot trade, I risk 50 PIPs or 1% of principal investment whichever is lesser.
So essentially, I risk 50 PIPs = 50 x $10 = $500
So essentially,
In trading 1 mini lot trade I risk 50 PIPs = 50 x $1 = $50
...........3 mini lot trades I risk 50 PIPs x 3 = 150 PIPs x $1 = $150
At the rate of 20 PIPs per trade per day, I need to trade 1 Regular lot and 3 mini lots at any given time.
For a regular 1 lot trade, 1 PIP pays me $10
...........................20 PIPs ......20 x $10 = $200
For a mini 1 lot trade, 1 PIP pays me $1
...........1 lot trade, 20 PIPs pays me 20 x $1 = $20
...........3 lots trade, 20 PIPs pays me 20 x 3 x $1 = $60
Therefore, Total Gain is...
= $200 + $60
= $260
If I add my total risks then Risk Measure I + Risk Measure II is...
= $500 + $150
= $650 at any trade at any give time.
Now,
So $650 is 1% of what principal investment?
Mathematically,
$650 = 1% x ???
or, $650 = 0.01 x ???
or, $650/0.01 = ???
or, ??? = $65,000
Let's check if we start with Principal investment of $65,000 can we build a buffer amount of $62,500?
Risk 1% of $65,000
= $650
At the most I can risk $650 that means I can take not more than 1 regular lots and 3 mini lots per trade on a risk of 1% of principal investment or 50 PIPs stop loss limit.
For 1 regular lot trade 50 PIPs loss = 50 x $10 = $500
For 3 mini lot trades 50 PIPs loss = 50 x 3 x $1 = $150
At 20 PIPs profit per trade,
For 1 regular lot trade 20 PIPs profit = 20 x $10 = $200
For 3 mini lot trades 20 PIPs profit = 20 x 3 x $1 = $60
So,
I will make $260 in 1 trading day
I will make $1 in...1/$260 trading day
I will make $62,500 (=as a buffer amount) in (1/$260) x $62,500 = 240.384 days
For our purpose,
5 trading days make 1 week
1 trading day make 1/5 week
240.384 trading days make (1/5) x 240.384 weeks = 48 weeks
Equivalently, we'll reach our goal in 48 weeks or 1 year.
Next, practice how much capital investment you will need if you want to become fulltime forex trader under 6 months.
Do not get confused with buffer building and equity building. Thery are not the same.
All brand newcomer traders must set aside at least 6 months of forex education and demo practice time to build the buffer and then the equity. This must be in must to do list in order to become a fulltime forex trader.
I know it seems a lot work and bit of a math but without proper forex education and training, there is one and only one thing that is certain about forex trading and about becoming a fulltime forex trader....sure to doom to failure.
In words of Benjamin Franklin...
By failing to prepare, you are preparing to fail.
So after at least of 6 months of exposure to forex world you should attempt to build your buffer and then equity and then take next step towards replacing your current income as a fulltime forex trader.
Until then practice demo account first. After you get comfortable with demo account next practice with real money.
Start out with real money account $500 - $1000 that you can risk to loose without you having to leave your dinner table and your stomach empty.
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