How to Build your Forex trading account
For most people who are just new to trading, or for old timers in the industry, trading investment capital that is not sufficient to enable them to live their dreams off forex trading alone, one question they keep asking themselves is how they can build that $1,000 account into a $100,000 account. In the process of trying to solve this problem, they only end up losing the initial $1,000!
A quick look around online on how to achieve this will only throw up cliché-filled solutions, with most of them regurgitating the “take your losses and allow the winning trade to run” line. Here, we will look at practical reasons why you haven’t been able to build your Forex trading account balance:
- Do not try too hard to grow the account balance
This is usually the case when the individual is relying heavily on the trading profits to make ends meet. In this condition, the trader begins to force himself into trades against his trading strategy and, in so doing, incurring avoidable losses. To avoid this scenario, it is advised that you never rely on trading while still struggling to build your capital. Keep your day Job and, if you do not have any, keep searching for one. This is because a trader with $2,000 in his account won’t be able to pay off living expenses based on proceeds from forex alone without disregarding money management principles. On the other hand, a trader with $20,000 in his account will be able to apply strict money management rules and still make enough money to sustain him each month. Not relying on your $2,000 capital to meet the month’s needs will help you maintain the same trading discipline as the other trader with bigger funds and, in so doing, you will be better prepared to manage a bigger account.
- Do not treat any single trade differently in forex trading
Most traders are fond of reading economy-related news from around the world and watching a lot of business news channels; and so, when they hear experts on these platform make comments regarding certain currency pairs or trading instruments, they go ahead and treat their next trade based on what they just read or heard. In doing so, they either increase their position size exponentially or ignore setting profit targets. Sometimes this works out beautifully but other times, it doesn’t work out well and the trader ends up with really heavy losses. So, avoid treating any trade differently. Once you get a trading opportunity, enter the trade with a position size that fits your risk management rules and fix your profit and stop loss levels; then allow the trade to run its course.
- Do not brood over missed opportunities
There are times when a trade will hit your set profit targets and then surpass it and run into hundreds of points more. Some traders still trading smaller account size immediately start regretting why they got out of the move too early and, in the next trade, they widen their profit targets. Of course, the next trade will now get to the level where the profit target should have been set initially, and then reverse! Do not forget that huge moves happen once in a long while; therefore, it is wrong to change your trading style after seeing a major move.
So, it all boils down to sticking with your already-laid-down rules and not expecting too much from your trading account just yet. If you build your account through discipline and commitment to your trading plan, then your trading account will only keep growing, but if you risk your capital indiscriminately, you will lose whatever huge gains you make later on.