Alright, so let's talk about trading
for growth vs
trading for income.
And I want to prepare a few notes
for you because I think it is very
important.
Let's actually start with trading
for income.
So what does it mean when you are
trading for income?
When you're trading for income, it
means that your account
is pretty big.
And let's say, for example, let's
just say $500,000, right?
So it is already a larger account
and all trading profits
are taken out of
the account to generate
income.
Hence the name trading
for income.
Let me give you an example.
Let's say that on the
$500,000 account, you would trade
the Wheel. One of the trading
strategies that I like to trade on
larger accounts here.
And the idea here with the Wheel
is that you are generating
approximately, let's say, 30%
per year.
So this would be
$150,000.
So just here, for the sake
of our discussion here and to use
a little bit round numbers, so this
would be approximately $12,000 per
month. I know it's a little bit more
because if you divide
$150,000 by 12
months, right? It would be a little
bit more than $12,000, but you get
the idea.
So at the end of the month,
and this is the idea here or at
the end of the quarter, doesn't
really matter depending on how
you want to do this, you transfer
any amount that is
larger than
$500,000 into your
checking account as your
income.
So this is the ultimate goal
as a trader because this
means that now you have brought your
account to a decent size
and now you're trading for income.
So you don't want to grow your
account anymore and any excess
profits that you're generating,
you're transferring out of your
account or you can leave it in there
depending on what your living
expenses are.
Now, again, if you want to make more
than $150,000 a year,
there's two ways how to do this.
So what determines
how much money you make?
Well, there's two deciding factors
here. The first one
is obviously your account
size. And the second is
the percentage, right?
The ROI, return
on investment of the trading
strategy.
Let me give you a few examples here.
For example, the trading strategy,
the Wheel that I recommend
you trade on larger accounts
generates around 30% to 40%
per year.
Now, you also know that I love
trading the PowerX Strategy and I'm
trading it every day.
And when you're trading the PoweX
Strategy, you're looking to generate
at least 60%
per year. That is the goal of the
strategy, right?
So this is where
choose the strategy that fits your
lifestyle and that also fits
your goals the best.
Now, before we talk more about
what trading for income and how to
get there is, for a moment let's
talk about trading
for growth.
Because if you don't have
a $500,000 account yet
or you don't have a million-dollar
account, you need to adapt
your trading style so that you can
grow your account.
You see, the idea here is
to really start growing your account
until you are at the level
where you can trade for income.
So trading for growth, here
is what you do.
No withdrawals.
All money stays
in the account.
So that is very important because
if you start with a small account
and this is the idea here, and let's
say you start with maybe
$10,000 or $20,000 right?
And now you have to trade
it for growth. So how exactly
do you do this?
Well, again, first of all, no
withdrawals. All the money needs to
remain in the account.
And this is where you would use
money management to
grow your account.
And the money management method
that I personally recommend, that I
used to grow my accounts
to a decent size, is
the fixed ratio money
management technique.
And I think it's very important that
you understand money management
therefore, I'll do a dedicated video
on this one on how to do this.
The important thing is that you use
trading strategies that
support money management.
Now, this is where you'd also use
trading strategies that generate
at least 50%
per year.
So when you're trading for growth,
I highly recommend, I mean, if
I would have to trade for growth,
I would definitely focus on
the PowerX Strategy and the PowerX
Optimizer.
And then, as you know, probably
also the Wheel strategy,
although, as you know, you have a
smaller percentage here.
So let's just summarize
this here of what it means
to trade for income and trade
for growth.
In the life of a trader, there's
two steps.
First, typically, most
traders trade for
growth.
You first want to make sure that you
take your account to a certain level
and then once your account
is at a certain level
this is when you start trading
for income.
At this moment, it makes
sense that you can start taking
money out of your account.
And again, the question is here
of how much money do you
actually need to have in your
account?
And again, the two deciding factors
here are your account
size and also
the ROI of its strategy.
Now I want to give you just two more
very specific examples so that
you know of how large
your trading account needs to be.
So your income goal to generate
with trading, let's say your income
goal is $100,000,
okay? There we go, and now let's
say
$100,000 per year.
We'll do some larger amount here
in just a moment.
So if you have $100,000 per
year and you're using a strategy
like the PowerX Strategy that has
an ROI of 60%.
Now, the question is, how large
does your account need to be so
that you can trade for income,
transfer the excess capital
out of your account, and to your
checking account?
Well, this is how it works.
All you need to do at this point
is take the $100,000
that you want to make and divide
it by the ROI
which is 0.6, right?
An ROI of 60%, you
know how I express percent, it's
0.6. So at that moment,
it means that you need to have
around
$166,666 in your account, you get
the idea. But let me just give you a
few other possible scenarios
so that you know exactly what
strategy to use and also
how much money you need in your
account.
So let's say that here
you want to make $100,000
per year, but the ROI
of the strategy is only
30%.
If this is the case again, you use
the formula, we'll use the
$100,000 divided by the
ROI, which now is
0.3 and you arrive at
$300,000. So if you have a strategy
that generates 30% per year,
you need to have more money in your
account, right?
This is why it is so important that
you have these two variables,
the account size and
the ROI of the
strategy. There we go.
Let me give you a third example.
How much would you like to make?
Maybe $200,000
per year? Why not, right?
So if you want to make
$200,000 per year and
you have a strategy that has an ROI
of 60% in this
case, again, you're taking the
$200,000 that you want
to make divided by
0.6, the ROI and you
arrive at around
$333,333. So now it's
up to you. You know how much money
you have in your account and if you
don't have enough money yet
to trade for income, this
means that you're in phase one,
that you're trading for growth.
Again, when trading for growth,
this is when you definitely
need to use money
management to grow your
account. When you're trading for
income, you're no longer,
no money management
needed to grow your account.
All you need to do here is proper
position sizing.
Anyhow, again, I know that it's a
little bit dark in the background
because I have traveling through
Europe right now so it is late at
night. But I hope that this helps
you to understand what are
the main differences between
trading for income versus trading
for growth.
And that you also now know exactly
how much money you need to
have in your account based on the
trading strategy that you use so
that eventually you can trade for
income. Because once you are there
and start trading for income,
this is when the fun starts.
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Okay. Hope this helps.
Hey, talking about other videos
there's probably a few other videos
popping up on the screen here right
now. Just click on any of these
that make the most sense to you, and
I'll see you in the next video.