Compounding really is the 8th wonder

Happy Wednesday everyone! I know that it has been a long time since I have posted anything on here and I wanted to change that. It feels so overwhelming sometimes to try to keep up with everything, especially as someone who is still learning about the stock market, cryptocurrencies, foreign exchange, trading, finance in general. I feel like everything just moves so quickly, if I blink, I miss something. I’m still trying to navigate this world and hopefully, I am doing a better job than that ship in the canal…

Those memes though were too good! #worthit

Anyway, jokes aside, I have been feeling a little overwhelmed. Trying to develop the Wall Street mindset is not an easy task. I have been studying different charts, looking for patterns, and using different indicators when it comes to trading. The stock market has been bearish for a minute, which is fine for buying but I cannot wait for it to start going up again. Crypto has been steady, I own a little bit in Bitcoin, Ethereum, and Dogecoin. Trying to keep up with different ways to invest, save, and make money in my sleep has been a little bit challenging. DoorDash has been a fun way to driving around RI and listen to audible while bringing people their food for a couple of extra bucks but I don’t think you can build an empire with DoorDash. I am looking to level up. I know that in order to level up though one must take risks. So now we have to talk about risk management, stop loss, how much money am I actually okay with losing if that be the case. This is why I turned my focus to trading. High risk, high reward.

I have been studying different approaches to trading. I want to go in with as much knowledge as possible, and sometimes even then it doesn’t help. The market is predictable for the most part, and there are ways to find those confirmations and obviously the more confirmation points you have the more likely that trade will go the way that you want it to go. But, there is always a slight chance it won’t. When it comes to trading lots of people don’t even bother because they have that lack mindset or that fearful mindset. This is because many people view trading as gambling. I have learned not to treat it as gambling because that’s when it becomes high risk, low, or no reward. If you get into the habit of revenge trading or trading because you don’t know how to stop, thinking you’ll win it back in the next trade but not actually taking time to analyze them, then you have already lost. I learned this the hard way but thankfully I only funded my account with 100 bucks the first time. So, at least it wasn’t a huge loss, just a huge lesson.

The compound effect also plays a huge role when trading. I explained this to my cousin the other day because had heard about it but didn’t understand how to use it. Well, when trading, let’s say you risk 10 bucks for trade with 80% profit. If the trade goes thru you gain 8 bucks. The next trade, you just risk another 10 bucks. And this is how you trade. Well after 4 successful trades you have made a profit of 32 bucks (40 is the 10 4x plus the profit of 8 each time 8x4 is 32). But if you use the compounding effect and you continue to use the same 10 to risk plus the profit from the trade before, after 4 successful trades you will have profited $94.98. Looks like this :
Trade 1: $10 + 80% profit= 18 Trade 2: trade 1 plus 80%= 18 + 14.40= 32.4
Trade 3: trade 2 plus 80% = 32.4+ 25.92= 58.32
Trade 4: trade 3 plus 80%= 58.32+46.66= 104.98

So, you can make more with the compounding effect. Compounding can also be used in everyday life, starting with small habits. I think this is something that is really beneficial because if you use the compounding effect when it comes to the tiny habits you have then you can start to think about how those habits will affect your life later on. Sometimes it’s good and sometimes it’s not so good. For example, the habit of going to bed early and getting enough sleep. If every day we go to bed super late, that will take a toll on us. We will be tired unproductive, mean, and just not as effective as we could be when it comes to doing the things we want or meeting with people, etc. But if we understand the effect of this habit sooner rather than later, then we can make small adjustments that will ultimately have a huge result later on. Going to bed earlier means we will be getting more or better sleep, therefore we feel better when we wake up, we’re happier, and that shows up in other ways. Some habits and daily routines I am trying to incorporate into my life right now include reading every day, meditating, yoga, eating better (more whole foods obviously plant-based, less processed), drinking more water, and learning something every day. I am getting into this habit of sitting at my laptop and watching videos about trading, blockchain, interviews of successful people, etc. These types of practices will show up later on in life as success, wealth, health, knowledge, etc. I am trying to embody the type of person I want to be later on in life, now.

Another thing that I am learning because of trade, is patience. A lot of it has to do with timing. Finding those confirmation points is important, waiting for them is key. A confirmation point could be when it reaches the ceiling and starts to come down when you’ve noticed patterns when you can look at Stochastic and the RSI and they match up… there are so many different variables when it comes to looking at the charts. A good trade comes after at least 5 confirmations. More is better but any less than that means you need to be patient. Of course, I can’t 100% rely on this method and the tools that I am using but it does bring more success.

On that note, stay tuned because I will be challenging myself to read an article or watch a video every day and put out a post on it mostly to hold myself accountable but also to add value (hopefully). I am still new to trading, and this world in general, learning every day and I know that trading is not something I can rely on to pay my rent, so for now, remember to tip your DoorDashers well because the base pay per ride is 2 bucks!!!

😊

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