Time for a deep breath.
It's so easy to get caught up in the rat race of trading-for-a-living.
We need to grow our accounts quickly! We need to make trades! We need to win all the time! We need our money and we need it now!
To that end, last week we talked about an insane way to trade, a way that no one in his/her right mind would ever do. It won a lot, though, and it won quickly. It cranked out profits and it had two 100-trade winning streaks. If we want action, that delivered the action!
But let's slow down and take a step back. What are we trying to accomplish?
We're trying to pay our bills through trading, right? We're trying to make enough money to handle expenses on a consistent basis and free up our lives to do other things.
So what exactly do we need?
Let's say we have a decent-sized trading account, and we need that account to pay one of our bills. Hypothetically the amount we need for that bill is $600 per month.
Furthermore, let's say we like the Fair Value 100% system the best because we love winning and hate stoplosses (and are comfortable with the infrequent big drawdowns). And we don't like trading it like a crazy person--at least, not yet!
If we traded a calmer Fair Value portfolio made up of 5 currency pairs (that carries a max drawdown threat we can handle), according to the data in the Fair Value Course, we could hypothetically expect that that portfolio would produce an average of $7,559 per year, or $629 per month.
Hold up, though. What if we looked at it another way?
Because I've gotten a bunch of emails about trading the Fair Value system on Futures, I decided to look at a Futures chart. For fun, I picked the Australian Dollar (@AD) because I generally hate the AUDUSD in spot Forex.
Also on a lark, I decided to work backwards. Instead of thinking about how much it can make for me each trade, each week, and each month, I looked at it from an annual perspective.
If I need $600 per month for my bills, then I need $7,200 a year (12 x $600).
What if I moved to the Daily chart, didn't care how often I traded, and just tried to make my yearly goal? What happens then?
What happens is: my brain melts and oozes out my ears onto the office floor.
Keep in mind I used the exact principles of the Fair Value System, (waiting until price gets far away from fair value), except I increased my profit target so that one trade could produce everything I needed for an entire year.
Let me say that again: one trade can pay the bills for an entire year.
And if we get two trades in a year? That's icing on the cinnamon roll.
But that can't possibly work, right? That's ridiculous.
Here's what the data said. By taking an average of 3.4 trades per year, the @AD averaged $19,000 annually. That's an average of $1,580 per month (for nearly the same drawdown as the calm portfolio of 5). That's more than enough to meet our $600 goal.
That's really hard to comprehend. All of our hypothetical bills can be paid while taking only 3.4 trades a year?
Yet it's the dream we all dream: making money trading while hardly doing any work.
- The average trade takes about 6 days, so we'd be working about 19 days a year.
- Nineteen days is 323 hours (when you take out 7 hours of sleep per night).
- Considering there are 52 weeks in a year, that's a 6-hour work week. With literally months of free time!
Isn't that what we say we're looking for? Then why is it so hard to fathom?
One financial instrument, with barely any work, can provide everything we need to trade for a living? Inconceivable!
I'm going to clean my brain matter off the floor and look into this a little more. If everything continues to look good, I'll be making a new video about it and putting it into the Fair Value course.
More updates to come.