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Short Term Holding
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Misc.

Share Dealing - Compound Growth

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% Growth5% Growth6% GrowthTrades Count
£1,040.00£1,050.00£1,060.001
£1,081.60£1,102.50£1,123.602
£1,124.86£1,157.63£1,191.023
£1,169.86£1,215.51£1,262.484
£1,216.65£1,276.28£1,338.235
£1,265.32£1,340.10£1,418.526
£1,315.93£1,407.10£1,503.637
£1,368.57£1,477.46£1,593.858
£1,423.31£1,551.33£1,689.489
£1,480.24£1,628.89£1,790.8510
£1,539.45£1,710.34£1,898.3011
£1,601.03£1,795.86£2,012.2012
£1,665.07£1,885.65£2,132.9313
£1,731.68£1,979.93£2,260.9014
£1,800.94£2,078.93£2,396.5615
£1,872.98£2,182.87£2,540.3516
£1,947.90£2,292.02£2,692.7717
£2,025.82£2,406.62£2,854.3418
£2,106.85£2,526.95£3,025.6019
£2,191.12£2,653.30£3,207.1420
£2,278.77£2,785.96£3,399.5621
£2,369.92£2,925.26£3,603.5422


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.