A friend of mine has made an interesting observation lately: most novice traders prefer to think, and to talk, in dollars rather than in percent when it comes to their losses or profits. I think he is right, I have notices times and times again how neophytes really struggle to think in present. They talk about how they lost $6,000 or made $7,000, but so what? $6,000 on one million dollar account is a chop change. What is interesting, many so-called trading gurus (but essentially charlatans) are taking full advantage of this inability of beginners to think in percent when trying to sell them their advisory services and trading systems.

Here is what you can typically hear at some trading seminar or read on some futures trading web site: "Open 5K account, start trading S&P 500 eminis futures". Yes indeed, to buy or sell one contract it only requires $3,600 margin or so. Thus 5K freely allows trading one contract. Commission on trading S&P emini is small, literally couple of bucks, so you can be in and out of that market many times a day. S&P 500 eminis on a typical day can move 10 to 15 point up or down. Each point move is equal to $50 dollars. So, a charlatan would say: "If you capture only 4 points out of these 15 you would be making $200 a day, and I will teach you how".

Precisely because this sales pitch is done in dollars not in percent people get easily seduced by this kind of talk: anybody can put up 5K account, and $200 a day is a lot of money for many people, yet it does not look astronomical, it does not appear to be "too good to be true". And so people believe it: catching just four point move out of daily 15 sounds doable to them.

However, let's put this $200 in percent term. On $5,000 account 200 bucks a day mean 4% per day or 80% per month or 1155% per year. If you keep making $200 per month and if you do not withdraw in one month you will make enough money to be able to trade 2 contracts simultaneously, in 3 months you have enough to trade 4 contracts simultaneously and so forth. In less than a year your account will be worth 1 million dollars! Again in percent term, 80% per month mean 1155% per year on compounding basis.

Now, if you express it in percent, it does look astronomical. Now it does smell like too-good-to-be-true proposition: nobody makes that much profit, not even Warren Buffet! Such percent return means that starting with 5K you can become richer than Bill Gates just in a few years!!

So, why people do not catch that lie? People hate thinking in percent. They avoid thinking in percent! You smack them with this 1155% a year right into face, but they would ignore and keep thinking: "$200 a day is doable and it is cool". Don't be one of these fools: love percents - hate dollars!!

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