The Secret Of Rich Traders
Trying to make a lot of money in a very short time is tempting. But is it smart?
This mindset mostly leads to failure instead of success. The real success is actually mostly created by using compound interest. And compound interest has a history…
The Rice & The Chessboard
Once upon a time, there was a man who invented the famous game called ‘Chess’. When the emperor of India discovered the game he was so impressed, that he said to the man:
“Name your reward!”
The man responded:
“Oh great emperor, I have only one wish. Give me one grain of rice for the first square of the chess board, two grains for the next square, four for the next, eight for the next and so on for all squares, with each square having double the number of grains as the square before.”
The emperor was confused and amazed that the man had asked for such a small reward. But of course, he agreed… After a week, the emperor his treasurer came back and informed him that the reward would add up to a total amount of 18 trillion rice grains. Far greater than all the rice that could be produced in many centuries!
What people can learn of this wise man is that a steady growth can lead to a great fortune (in a relative short time). But the wise inventor of Chess was not the only one who made a fortune using compound interest. You might know him: one of the most famous stocks trading legends, Warren Buffet. He learned the power of compound interest at a very young age and ended up as a wealthy man. Also another legend was impressed by compound interest and even called it ‘the eight world wonder’: Albert Einstein.
“Compound interest is the eighth wonder of the world. He who understands it, earns it … he who doesn’t … pays it.” – Albert Einstein –
How to become a millionaire with just €500,-
Compound interest is especially interesting for the trader with a low budget. Did you know that with a steady growth you can become a millionaire within 3,5 years? Try it yourself:
– Get your phone and open the calculator app.
– Start with 500 X 1,2 and press ‘=’. This will give you the growth based on 20% for the first month.
– Then, dont delete any data and press ‘=’ again. This should give you 720 which is your capital after 2 months having 20% profit.
– Press another 40 times on ‘=’ and you will reach over a million.
Of course, 42 months of steady profit is a long time. But it is definitely possible. The only elements which are needed is an initial investment, a good trading strategy or system, risk management (which adjusts your lot size to your capital), and the ability and patience to not touch your capital and keep on growing.
Your investment can grow fast by smart use of time and efficiency. With the use of compound interest there is no high risk or high start amount required to achieve your goal. Professional traders always risk just a small percentage of their investment. This is an important aspect to keep the compound interest effective. Amateurs or starters mostly do the opposite. They risk a too big part of their investments in order to try to make a lot of money in a short time. This ends the steady growth very fast which will stop the road to the goal which can be achieved with the right mindset.