How to Build your Forex Trading Account
For most people who are just new to trading or for old traders trading amounts that is not enough to make them live their dream off Forex trading alone, one question they keep asking themselves is how they can build that $1000 account into a $100,000 account. In the process of trying to solve this problem, they only end up losing the initial $1000! 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, 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, the 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 opportunity
There are times when a trade will hit your set profit targets and then surpass it and run into more hundreds of points. 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 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.
Staying away from Forex Broker Problems
Anyone looking to start trading Forex must first of all choose a broker. They are the ones in charge of your funds and allowing you get into the multi trillion dollar market from your home or office. In fact it is safe to say that they are as important as your trading strategy when it comes to trading the Forex market.
When you are looking for a broker to work with, there are a couple of ways you can go about it, first is by using a broker you know is being used by a friend or relative, the second is reading through reviews online and seeing what people think about a particular Forex Broker.
Sadly with the amount of money that changes hand in the Forex market, it is only natural for scam and deception to be present. This is why you can find scam brokers that are only out to gather client’s money and vanish into thin air coming out with a campaign whereby they pay certain people to fill the internet with positive reviews about them. Unsuspecting victims read these ‘good reviews’ and sign up with these brokers only to find out that they have been scammed. On the other hand, image of good brokers are also tarnished by fake ‘bad reviews’. This leaves people hunting for new brokers in a dilemma.
To avoid this, only use brokers that are located in your country so you can walk down to their office if anything happens. If there are no brokers in your country then only use those that are certified by their host country. The certification must be verifiable otherwise, it holds no meaning.
Here are a few factors you can keep in mind when trading with a particular broker. If you witness any of these more than once in a month then you should consider changing your broker.
This is a scenario whereby your trades do not get filled immediately. Instead of getting filled, you will get a notification asking you to enter at a different price. If this happens when the market is moving fast, then it is not out of place but if it is rather frequent, it is a huge red flag.
This is another bad scenario where trades get filled at prices far away from where the trader made entry. It usually happens during fundamental releases or other high volatility periods. A slippage of 5-10pips after spread could be ignored but slippage of 50pips is criminal. Some genuine brokers will refund the trader if he or she gets affected by such huge slippage but most scam brokers will not.
This is a scenario where your stop loss level gets triggered even though the market is yet to get to that point. This happens when a trader is in a trade with huge big funds and market price is getting near to his or her stop level. These scam brokers immediately manipulate a price spike that will trigger the closure of the position at a loss. On checking other broker platforms, the trader would confirm that price never touched his stop level. If this happens even once to you, change broker the next morning and if possible, press charges against them with a captured screen shot of what happened.
With this understanding of how to maintain your forex trading account and how to avoid broker problems, you are one step closer to having a successful trading career.