The Prospects of Turning $100 on Forex Into $10,000
One of the internet pitches selling advice to forex traders is directed at the would-be trader with little or no capital. It may claim that starting with $100, you can make $10,000 in a year or that you can double that $100 in a month. This raises several questions, the most basic being: is this even possible?
Possibility Vs. Probability
Almost any pattern of gain or loss is theoretically possible on the forex, but that doesn't make it likely. What would you have to do to start with $100 and have a trading account worth $10,000 a year later? A return on investment (ROI) calculator allows you to break it down. Using the calculator shows you that to accomplish this, your annual rate of return on investment needs to be 9,900 percent!
Breaking this down another way, we can use the compound interest calculator provided by the SEC on Investor.gov to determine how much your daily rate of return would have to be to have a $9,900 profit at the end of one year.
The compound interest calculator (which we're using as a profit compounding calculator) shows that if we entered and closed out one trade every day of the year, the average profit on each trade would have to be at least 464 percent! You'd have to more than quadruple your money every day to come even close to $10,000 at the end of a year. Does this sound like something that's likely to happen in the real world?
All the Money in the World
In case you're still not convinced that this not only isn't likely but is beyond any reasonable possibility, look at this from one more perspective, beginning with the total amount of month that exists in the entire world. A 2016 MarketWatch article estimated this to be about $80.9 trillion. Now let's assume that instead of $100, a few large investment banks make trades with the same 464 percent daily profits, reinvested daily.
For argument's sake, assume the initial trade commitments of 10 large investment banks each totals $80 million. These are huge investments, of course, but keep in mind that the daily trading volume on the forex is $4 trillion. Our 10 big banks' huge investments only account for about 20 percent of the forex's daily trading volume.
If these big banks had the same 464 percent daily return needed to produce a $9,900 profit on an initial investment of $100, how much money would they have at the end of one year? according to our calculator, about $80 trillion, which is all the money in the world.
There's something so apparently and deceptively rational about starting with $100 and turning it into $10,000 that it takes breaking it down into return rates to show how absurd this really is. While it may be theoretically possible, in reality, it's no more likely than a pig sprouting wings and beginning to fly.
Websites that propose this kind of return -- or that propose somewhat less extravagant ROIs that imply that you can somehow get rich quick on the forex starting with very little -- are, to put it plainly, con artists and frauds.
And look at it this way: if anyone really had the key to this kind of preposterously elevated return on a $100 investment, would they sell it to others? That's about as unlikely as an entire year's worth of 464 percent daily trading profits!