Infatuated with Trading? Never Lose Sight of and Adherence to These Two Principles
Every trader has a goal in mind when they join the forex market, and these goals might range from pure amusement to professional success. Starting off, I had aspirations of being a full-time forex trader who would be financially free.
It wasn’t enough for me to have discovered a technique that seemed “honourable”; I needed something distinct. Backtesting revealed that I could generate $30,000 to $40,000 a year from a $20,000 account after putting it through its paces.
I traded Forex for a living as part of my long-term goal of becoming wealthy so that I would never have to consider working again. In addition, I was devoted to the strategy and gave my all to make it work.
In a nutshell, my idea did not work out as planned. Trading excessive lots on a $20,000 account turned out to be a stressful proposition. 20% of my savings just got wiped out in barely three weeks! I had no idea what had befallen until it occurred to me again. Something didn’t seem quite right at first.
So, I quit trading and got a job with a forex broker. Working with traders from all around the globe throughout the period enabled me to further my knowledge of the foreign exchange market. It was pivotal in my growth as a trader.
I’ve had a great experience spending time with Funded Trader over the last several months and I’ve learnt a lot that I previously thought was beyond my intellect. I’ve sworn an oath to assist other traders in becoming more lucrative or dominating through my knowledge and experience.
As a professional trader, I can identify with the frustration of other newbie traders about not getting the desired profits and being baffled as to why this is happening.
The following is a list of 2 things I wish I had known about Forex before indulging in this currency market.
Forex Is Not a Get Rich Quick Scheme
As you may have heard on several pages over the internet, forex trading will not magically transform your $10,000 account into a $40,000 overnight. How bold our approach is doesn’t matter as much as how much money we are willing to put on the line. Since it takes notes to make notes, it holds true in Forex trading as much as in every other kind of investment.
This does not rule out the possibility of making a career as a Forex trader; in fact, many successful traders make their livelihood from the market. It is only after years of thoughtful preparation that they have reached a point where they can generate a sustainable income from their investments.
Trading strategies that aim for some proportion of profit every year (or even monthly) are usual; nevertheless, traders should be aware that the risk they are incurring will be somewhat comparable to the profit they are attempting to achieve. To put it another way, when striving to achieve a 70% profit in a year, you should be willing to risk a reasonable percentage of your account.
It’s reasonable to argue that since you are trading with an edge, you are not exposed to risk as you would otherwise. Unless you have a trading technique with a competitive advantage, this is invalid. If you don’t use Leverage, your projected return is going to be very minute indeed.
Moreover, we might have losing streaks even despite awful luck. Traders use Leverage to pursue such exorbitant profits. At least that’s how traders might end up losing an abundance of money, and to a degree, Leverage remains in your favour, but not when it could wreck a winning strategy.
Using Leverage to Make Money Can Be a Good Strategy.
What I regret is not having learnt this lesson sooner. Your lucrative plan may get destroyed by using too much Leverage. For the sake of argument, let’s pretend I possessed a coin that, when tossed up heads, would net you $10, or otherwise $5. Would you be willing to take a chance on that coin flip? You’d almost certainly flip that coin, in my opinion.
Flip it over and over until you’re thrilled. It’s a no-brainer to take a chance to make $10 or lose $5 if the odds are 50/50.
Consider being handed a second pair of coins with the same face value as the previous ones but this time if the heads are flipped, you will either treble your net worth or be left with nothing. That’s compound interest. Now, would you be willing to put your money on the line? I’m guessing you wouldn’t since one unpredictable coin flip would devastate your existence.
Everyone with a rational mind would not flip the coin in this scenario, even if you had precisely the same percentage advantage as you did in the previous situation.
Secondly, consider how many Forex traders monitor their trading account on a daily basis. Why do I bring this up? Because they are so engrossed in making money that they often neglect to check their account balances. They put their whole account at risk on one or two deals and end up losing everything.
A few unfortunate trades may wipe them out totally, even if their sales had a slight edge. The application of Leverage might result in the devaluation of an otherwise profitable approach.
If I could turn back time and tell my higher self these two things that I wish I knew before I started trading Forex, here is the list I would provide. After everything is said and done, I suggest you kindly begin with the fundamentals and study as much as you can about the currency market before moving on.
My Thoughts for Those Individuals Frequently Asking How Much Money Can You Expect to make?
A single Forex deal may provide a return that is multiples of the margin necessary to initiate the trade, thanks to the availability of Leverage for traders. Nonetheless, Leverage may be a double-edged sword in that it can result in both significant profits and losses.
Now, this means that relying on excessive Leverage as a long-term approach often results in the loss of your account capital. A single negative change in market sentiment is all it takes to send the stock price plummeting significantly.
One of the most important considerations is your assumptions for a return on investment. Too high expectations lead to excessive indebtedness, which leads to long-term losses.
Day traders, swing traders, and part-time traders are all attracted to Forex because of its 24-hour nature and the flexibility to trade whenever and wherever you are. Leverage should be employed sparingly, if at all, despite your playing style.