With Admiral Markets, now we can perform trading and investing together through MetaTrader 5. This is the first profit recycling strategy that can allow our clients to change their trading income from Ophiuchus EA into Dividend Income.
Trading vs Investing
First, we must clarify the difference between trading and investing.
According to ChatGPT,
Trading and investing are two different approaches to participating in financial markets.
Trading refers to the buying and selling of securities with the primary goal of making short-term profits on the price movements. Traders usually look for opportunities to buy low and sell high, often holding onto a security for only a few minutes or hours. They focus on short-term price movements and make decisions based on technical analysis and market news.
Investing, on the other hand, is the act of allocating capital to assets with the expectation of generating long-term returns. Investors typically hold onto their securities for longer periods, sometimes for several years or even decades. They aim to achieve their financial goals by purchasing assets that they believe will appreciate in value over time. Investment decisions are often based on fundamental analysis, which involves evaluating a company’s financial health, management, and growth prospects.
In summary, trading is focused on short-term gains, while investing is focused on long-term growth. Traders are more concerned with market fluctuations and price movements, while investors are more concerned with the underlying value of an asset.
ChatGPT
As explained above, trading and investing are entirely different approaches. We also need to have realistic expectations in terms of return for both approaches. Trading tends to have higher returns. For instance, getting a monthly 15-20% return through our Ophiuchus EA is common for trading. For investing, getting around 10% per year is considered not bad. The S&P 500(the most commonly traded stock market) average return is 10.67% annualized since the inception of its modern structure in 1957.
Capital Growth and Income
Capital Growth and Income are two common ways of return for Investing. Capital growth refers to the increase in the value of an investment over time. It is a key factor that investors consider when making investment decisions. For example, if you purchase a stock for $100 and its price rises to $120 over time, your capital growth would be $20.
Income is the return generated by an investment in the form of dividends, interest payments, or rental income. While income can provide a steady stream of cash flow, capital growth has the potential to deliver higher returns over the long term.
In this profit recycling strategy, our focus is Income as we want to generate a new source of income using our trading income from our Expert Advisors. Getting additional capital growth is considered a bonus and we didn’t include the capital growth in our projection later.
The drawback of focusing on income rather than Capital Growth is taxation. Every time, you receive income or dividends, you will have to pay taxes to US Government. However, similar to our Ophiuchus EA trading strategy that focuses on taking a small profit on each trade, we believe receiving dividends is also a type of profit-taking in investing.
QYLD ETF
In this strategy, we will use our trading income from Ophiuchus EA to purchase QYLD ETF in US Stock Market. QYLD is also named Global X Nasdaq 100 Covered Call ETF (QYLD). It is an ETF issued by Global X, which it is focusing investing in Nasdaq 100 (the best 100 stock of Nasdaq) and uses a covered call option strategy to generate higher monthly dividends. Please note that we do not have any relationship with Global X and do not have any incentive to recommend it.
The key reason that we recommend QYLD are as follows;
- It is an ETF focused on Nasdaq 100, which provides great diversification in technology stocks such as MSFT, Google, Meta, and more. The Nasdaq 100 index has generated an average annual return between 15% – 17% over the past 38 years. This gives you higher chance to gain capital growth along the way too. The following is a monthly chart for Nasdaq since 1986. You can see in the long-term view, it is always on the uptrend.
- It is a monthly distribution and based on current data, the 12-month trailing Yield is 13.46%. This will ensure you have extra monthly passive income. Please take note that this has not included taxation for the dividend. The U.S. withholding tax rate charged to foreign investors on U.S. dividends is 30%. Hence, the actual dividend you might get is around 9.4%, which is still not bad.
- The expense ratio for this ETF is 0.6%. Not the lowest but is not too bad as it has covered call option strategy to increase the income and dividend paid.
Monthly Dividend Income Projections
The following are our projections for 3 years to use Ophiuchus EA Trading income to turn into new dividend monthly income. We will start with a capital of USD 2,000 only and assume each month will have a 15% return from Ophiuchus EA. All the trading profit will be used to purchase QYLD ETF.
To simplify the projection, we also assume all trading profits will be able to be used to purchase QYLD fully. In reality, it will depend on the price and need to round up to the actual unit that you can purchase. We also use a 9.4% post-tax dividend yield from QYLD. For the first half year, our usual recommendation is to get back your capital of USD 2,000 and then you only start to purchase QYLD after half a year.
After 36 months, now every month you will have an extra USD68.93 of monthly income, which is equivalent to an extra USD827.16 a year. Assuming there is no growth in QYLD price and also no drop in value, you will also have USD 8,800 equivalent of QYLD ETF in your stock account.
The extra USD 68.93 per month might not look like a lot to you, but this is a dividend income. Your QYLD ETF will not hit margin call and lose over a night like a forex trading. You won’t need to do anything extra to gain this extra USD 68.93 per month ( other than just transferring your trading profit into QYLD) and you just use USD2,000 3 years ago to get this extra income.
Let’s just show you another few scenarios using the same projection but with some variable change.
| Starting Capital in Ophiuchus EA (USD) | Duration | QYLD Value (USD) | Monthly Dividend Income (USD) |
| 2,000 | 5 years | 16,000 | 125.33 |
| 4,000 | 3 years | 17,600 | 137.87 |
| 20,000 | 3 years | 88,000 | 689.33 |
| 20,000 | 5 years | 160,000 | 1253.33 |
With time and trading income together, you will see how fast the snowball effect can be materialized. With high-frequency trading, all these are possible now within 3-5 years of duration.
Of course, all these projections are based on historical data and nothing is guaranteed. In trading, everything is just about probabilities.
Historical Performance does not guaranteed future performance. All the projections are based on current data and assumptions that we are aware and no one can predict future.
Limitless trading.
How to do this?
With our third recommended Broker – Admiral Markets, you will be able to have trading and investing under the same broker. In this case, you can just transfer your trading profit from Ophiuchus into your investment account and then purchase QYLD for dividend investing ( You can also pick other dividend stocks that you are interested too).
We have also tested with 1 unit of QYLD to ensure we can receive dividends monthly from QYLD and the following is the screenshot.
Detailed steps to execute this plan:
- Register a Trade.MT4 account under Admiral Markets. Please perform your own due diligence and research on this broker yourself. Every broker has their own risk. It is also recommended to have multiple broker accounts to diversify single-broker risk. As far as we know, Admiral Markets is the only broker that can provide trading and investing using the Metatrader platform.
- Use this Trade.MT4 account to get Trading profit. For example, run Ophiuchus EA on this Trade.MT4 account.
- Open an Invest.MT5 account under Admiral Markets.
- After you get back your capital from the first 6 months of trading profit, every month’s end, transfer the trading profit from Trade.MT4 to Invest.MT5.
- Use this trading profit to purchase QYLD or any other dividend stock that you are interested in. You can also use some technical analysis to determine your entry point for QYLD. For example, only purchase QYLD when ti is lower than 50 days moving average.
- At the early stage, you can decide whether you want to re-invest the dividend income that you received to buy more QYLD or you can cash out if you want.
By doing this month by month, after some time, you should get a good, steady dividend from this approach. Happy Trading!
***This material does not contain and should not be construed as containing investment advice, investment recommendations, an offer of or solicitation for any transactions in financial instruments.
Trading financial instruments offered by Admirals (CFDs, ETFs) carries a high level of risk which is not suitable for all investors due to their complex nature. Before making any investment decisions, you should seek advice from independent financial advisors to ensure you understand the risks involved. Read more at www.admiralmarkets.com.
***Risk disclosure: Forex and CFD trading carries a high level of risk. This material does not contain, and should not be construed as containing, investment advice or an investment recommendation or, an offer of or solicitation for any transactions in financial instruments. Please note that the trading analyses which refer to past performance may change over time. No representation is given as to the accuracy or completeness of the information and any person acting upon it does so entirely at their own risk. Before making any investment decisions, you should seek advice from an independent financial advisor to ensure you understand the risks involved.
