Never leverage is another key to profit from FOREX. No other market in the world allows the leverage that this incredible market offers. Normally, 100:1 leverage is the amount that most brokerages allow investors to trade with. For each $1000 that you put up in cash, the brokerage allows you to control $100,000 worth of currency.
The broker has loaned you $99,000 dollars secured only by your $ 1000. This huge leverage is what allows you the potential to make the kinds of returns that profiting from FOREX offers. However, it also enables you to lose some or all of your money if you trade foolishly.
FOREX Account Leveraging
Leverage is a wonderful moneymaking tool, but when it is abused, it can lead to financial destruction as well. Think about consumer credit cards, for example. The bank lets you borrow large sums of money on your word that you will pay it back, but when credit is abused, it can lead to bankruptcy for many. Therefore, just like managing your credit-card debt, you need to manage your trading leverage.
Most people would not go out and rack up huge debt that they knew they could not pay because it would not be responsible, right? Well, when trading the FOREX, if you started with a $ 10,000 account, should you start by trading 10 lots using all your cash? No, that also would be foolish.
FOREX Account Leveraging
A very conservative yet very effective method of trading is to never leverage more than 20 % of your account at any one time. Thus, with $10,000, you realistically should only trade two lots. Using good money management and discipline, you could quickly grow your account in a relatively short amount of time.
The compounding factor of money is a very powerful thing. Because many people have a desire to get rich quick, they take unnecessary risks and tend to focus more on the dollar signs than on proper trading principles.
If you truly want to make consistent profits and exceptional returns on your hard-earned money, take it from someone who has been there: Follow these simple but effective money management rules.
If you are starting with a FOREX mini-account, start by trading only one position of a tenth of a lot. You will not able to make huge money, because the position size is only one-tenth of a normal account, but the percentage of returns will quickly allow you to start trading larger sums of money and, in the end, will allow you the success you seek. |
