Compound Growth
If you invest a £1k and make £40 many people will feel that it is not worth it.

If you can't get past this and are looking to double your money then the short term strategy is not going to be for you.

Summary
If you have £1,000 and you take 4% profit, how many trades does it take to double your money?

The answer is obviously not 25 (100/4) but it is easy to forget how significant compound growth is.

The table below shows the growth of this pot if each trade yields one of a 4%, a 5% or a 6% profit.


£1,000 Pot Growth
4% Growth 5% Growth 6% Growth Trades Count
£1,040.00 £1,050.00 £1,060.00 1
£1,081.60 £1,102.50 £1,123.60 2
£1,124.86 £1,157.63 £1,191.02 3
£1,169.86 £1,215.51 £1,262.48 4
£1,216.65 £1,276.28 £1,338.23 5
£1,265.32 £1,340.10 £1,418.52 6
£1,315.93 £1,407.10 £1,503.63 7
£1,368.57 £1,477.46 £1,593.85 8
£1,423.31 £1,551.33 £1,689.48 9
£1,480.24 £1,628.89 £1,790.85 10
£1,539.45 £1,710.34 £1,898.30 11
£1,601.03 £1,795.86 £2,012.20 12
£1,665.07 £1,885.65 £2,132.93 13
£1,731.68 £1,979.93 £2,260.90 14
£1,800.94 £2,078.93 £2,396.56 15
£1,872.98 £2,182.87 £2,540.35 16
£1,947.90 £2,292.02 £2,692.77 17
£2,025.82 £2,406.62 £2,854.34 18
£2,106.85 £2,526.95 £3,025.60 19
£2,191.12 £2,653.30 £3,207.14 20
£2,278.77 £2,785.96 £3,399.56 21
£2,369.92 £2,925.26 £3,603.54 22

As you can see it takes 18 trades to double your money with 4% profit and only 12 at 6% profits.

If you could trade at 4% per week after 52 trades your pot would have grown to £7,686.59.

Although this is the sort of wishful thinking that led to people taking out Endowment Mortgages it does illustrate why even being very cautious and taking a 4% profit is worthwhile and also the cost of wasting a week or two waiting for just a bit more profit that never comes.

What we can also see from this table is why £1,000 is not really enough to start with, as the numbers don't include dealing fees.

Typically you will be paying £10 to buy and £10 to sell as well as stamp duty of 0.5%, so half of the profit will go in fees in the early days.


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