All right, so let's talk about money
management. How to grow a small
account fast, because I received
a question from one of you.
And the question is, "Hi, Mark.
By the way, my name is Markus, but
you get the idea.
My account size is only $6,000,
any strategy to grow
this to $50,000
in a year?" OK, $6,000 to $50,000
here is my answer, "Hi Jitesh, you
would have to use very aggressive
money management to grow an
account that quickly and be careful
because always keep in mind the
quickest way to lose all your money
is trying to double it."
However, it is possible
to grow a small account with
money management.
And today I'll show you
a mathematically proven
and scientific way
to grow your account.
But let's talk about a
few basics.
So first of all, super
important, you must
have SRC profits
and SRC stands for systematic,
repeatable and consistent.
And again, if you would like to know
more about this, I'll link to a
video in the description.
Now, one of the examples to
generate, or one of the strategies
to generate SRC profits
is the PowerX Strategy.
As you know, this is my bread and
butter strategy.
Recently we have been talking a lot
about The Wheel, so I thought I'd
talk a little bit more about The
PowerX strategy because many of you
have the strategy and are really
interested in trading it.
So PowerX Optimizer
is a software that, based on
the PowerX Strategy, finds
the very best stocks to trade.
So there were probably 10 to
12 picks today.
The three that we decided to trade
with our Mastermind this morning,
because this week we are trading
live with our Mastermind, was
AQST, PRPL and
URI. But you know what?
Let's just stick with AQST
for now. So AQST,
first of all, we are risking on a
$10,000 account. So, first of all,
risk management before we go to
money management, on a $10,000
we want to risk no more than
2% of the account.
So that would be
$200. When you use The PowerX
Strategy there is two ways
to actually exit.
And the first is a conservative
way to exit. What does this mean?
The conservative way to trade
the strategy would be you're risking
$200, and the goal is
to make $400.
So this is the conservative exit
with the PowerX Strategy.
If you have the PowerX Optimizer,
then you know that we like to have a
mix here between conservative and
optimized, because if you look at
the optimized level, so the
optimized exit with the PowerX
Strategy would be that we
risk $200
trying to make $1,000.
So these are a few basics.
So now you might say, "OK, wait,
wait, wait." Before we move any
further here, what about losses,
right?
Absolutely.
So let's talk about losses because
they are super important.
So here's what I want you to
understand. When we are talking
about trading, there's always
losses. And here is what I
always like to show as an example.
Let's say that you're doing 10
trades, and out of these 10 trades,
five trades are
losing trades.
So in this case, this means
that we lose 5 times
$200, so we lose
$1,000. Now, we also have 5
winning trades.
And if we only look at the
conservative exit,
so this means that we would make 5
times $400, which
is $2,000.
So let's take a look at this, how
much money would you still have
after 10 trades?
After you had five losing trades,
half of your trades are losing
trades and the other half are
winning trades.
So you get the idea.
So the profit after 10
trades would be
$1,000.
Now, again, this is where I like
to use averages and because I told
you, today, yes, it is a
mathematical way to show you
how to grow your account.
You'll see, we'll get to this in a
moment. I just want to make sure
that we, that we are in agreement
on the basics here.
So if the profit after 10 trades is
$100, so it means that the average
trade yields you
$100 after winning
trades and losing trades.
Now, you know that there's others
out there who say, "Oh, my gosh,
never have a losing trade again and
make much more blah, blah, blah."
Doesn't really matter.
So here's what I want to ask you,
knowing this math right now,
do you think it's realistic
to make $100
per week? If you know this math
here. And again, we are also
assuming our assumption here is
because with the PowerX Strategy, I
recommend that you have up
to 5 open
positions.
This means that you have 5 trades
going on at any given time.
So what do you think?
Is it realistic to say on a
$10,000 account that you can make
$100 a week?
Most of the time when I ask traders
on a $10,000 account, do you think
it's realistic to make $100 per
week? They say, "No, I can make much
more." But I want to be really
conservative here.
But let me ask you thus far, is this
makes sense?
Is this helpful?
Because now with all of this
in mind, let's actually jump
over to an Excel spreadsheet that I
have here where I could show you
money management.
So I call it Your Long Term Plan
and in a moment you will see why
that is. So there's a few fields
that I can fill out.
For example, your starting equity
and for now, let's just assume you
have $1,000.
Now, I know that the
commenter here asked, "if I can turn
$6,000 into $50,000,"
but let's just say you have $10,000.
Now, right now, as I'm recording
this video, it is September 14th
today and so let's say we start
trading on October 1st.
So let's say that we can make $100
a week on average after winning
trades and losing trades.
And again, keep in mind, we just did
the math, I do believe that it
is very realistic.
Some of you might say, "Oh, my gosh.
It's absolutely possible.
It is even possible to make much
more." But bear with me, okay?
So the risk per trade we already
established this, the risk per trade
is $200.
So $200 and since we
have winning trades and losing
trades, we believe that we can make
$100 per week.
So here is how fixed ratio
money management works, because this
is the money management approach
that I've been using for many years
that I used to grow my accounts and
this I'm recommending here to our
Mastermind students and therefore
I'm also recommending it to you.
So here's the idea.
The idea is that
you trade for one month.
And if you would trade for one month
and you make $100 per week, how
much money do you make in a month?
$400.
And here's the idea, if you look at
the, at the last column here,
there's a reason why I'm not moving
it higher yet, I'll do this in a
moment. So the idea is,
as if you start with $10,000 and
after four weeks again,
having winning trades and losing
trades, you're going up to
$10,400. Now you're increasing
your risk and you increase your risk
from $200
to $400.
Woah, okay, let's take a look at
this. What does this mean?
So if we increase
our risk from $200
to $400, so we are basically
trading twice
as big of a position, right?
Let's take a look at PowerX
Optimizer here for a moment, because
the cool thing about PowerX
Optimizer is it tells us exactly
how many shares to trade.
So here we would trade around
230 shares.
So now we would trade
460 shares as our account is
growing.
So this means that now
instead of $400, we
would make $800.
So everything here
would also double.
So instead of losing $1,000
on 5 trades, you would lose
$2,000 on 5 trades.
And instead of making $2,000 on
5 trades, you would make
$4,000. Is this making sense?
Okay, are you following me here?
Good. So once you get
to $10,400,
you would risk $400
on any given trade trying to make
$800. So yes, right now
you are violating the 2%
rule and you have to if you want
to grow your account more
aggressively.
OK. So now instead of making
$100 per week, if you're risking
twice as much, you're making twice
as much. So you would make $200
a week. So how much do you make in
four weeks?
4 times $200, you're making $800,
right? So your account in the next
four weeks should grow from
$10,400 to
$11,200. You see it here at the very
bottom of this screen.
So you already get the idea, in the
first few weeks between October 1st
and October 29th we would make $400.
And you would say, "Oh my gosh, I
can make $400 on one trade."
Good for you.
The important thing here is, is
really SRC
profits systematic, repeatable
and consistent. I don't care if
every now and then you have a
winning trade, we talked about it in
the previous video.
Anyhow. So during the next two weeks
we are trying to make $800.
And now we are not, we are not
doubling our risk from $400 to
$800 we're only increasing it
by another $200.
So if your account goes
up to $11,200 now
instead of $400, you would now
risk $600.
So if you're risking $600,
you are trying to make what?
$1,200, right?
You get the idea. So now we're
increasing our risk again by another
$200. And yes, we are absolutely
violating the 2% rule,
but that is what money management
does. The more you risk, the more
you can make.
And this particular trading
strategy, or this particular money
management strategy, that I'm giving
you right now adjusts
for it that you only increase your
risk as you're winning and as you're
losing, it decreases the
risk. So let's just keep going.
So now we increased it to
$600, so this means that now
we are not trying to make
$100 per week, we are not trying to
make $200 per week.
You see it right here.
Now the weekly profit we're trying
to make $300 per week
after three months of trading.
So this means that in four weeks,
how much money do you make in four
weeks? You get the idea, 4
times $300 is
$1,200.
So your account should grow from
$11,200 to $12,400.
Keep in mind, this is
assuming that half of your trades
are losing trades.
Yes, you will have losing trades and
you will have winning trades.
The key is you make more money
on the winning trades than you do on
the losing trade.
And now you increase the risk by
another $200.
I think you get the idea, right?
I don't want to bore you in this
video because here's the important
thing. I want to show you what
happens if you apply
this very mathematically
proven scientific way
to money management to your account.
If you do this
and you grow your account
aggressively with money management,
see, by December 24th,
by the end of three months,
your account should be at $12,400.
So now you keep increasing your
risk. And look at this.
So pretty much by April,
within six months, your account
will have doubled.
And all you do is you're
risking $200, $400, $600, $800.
You always increase it by
2%. All right, take a look at this.
Now, here's where the fun starts.
The more you risk, the more
money you can make.
And this is where look at this,
after one year, your
account can grow
into $50,000.
The important thing is to make
SRC profits systematic,
repeatable and consistent.
And the idea is, if you
can make $100 per week
on a $10,000 account,
right? Then you can also, as you
increase your risk, make
$200, $300 and $400. Because this
here is just a function.
You see, the reward is just
a function of the risk.
If you try to make twice
as much money as you're risking,
you see the example here with the 10
trades. This is where it's
mathematically proven.
OK, so the cool
thing is when you apply
this consistently, you
can actually double,
triple and even quadruple your
account.
So this is what money management
does for you.
This is why money management is
so important.
Now, why do most traders
struggle with this?
Most traders struggle with this
because they don't have the patience
in the beginning.
See in the beginning, your account
is growing really, really slowly.
And this is where the commenter here
that asked me about
turning $6,000 into
$50,000.
If I would tell him, I want you to
focus on making
$100 per week, but I want you to do
this consistently.
Do you think that he would listen?
Most probably not.
Most people try to double
their account in a short time,
and the quickest way to lose all
your money is trying to double it.
I hope that this helped you
to see how you can do
it, how you can grow your account.
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