freshman2009's Blog

There is one secret that will allow you to make big money in forex. There is one thing, just one thing, that if you fall to do it, you've guaranteed yourself failure.

That secret is to stay in the game. If you can get your capital to last long enough, you will be able to turn a profit. Most traders lose their account, and then start a new one. This is madness.

You must stay in the game. You see, picking winners isn't so hard. You've done it. So have I. The real key is being able to outlast the losing trades. If you can, then you are using the secret to forex profits.

So how do you outlast the bad trades?

It's all about controlling your leverage. The broker may offer you 100:1 leverage. How much of it do you use?

For example let's say you have a mini-account, and you've deposited $1000 dollars. You trade one mini lot of EUR/USD. That mini lot is worth $10,000. You only have $1000 in your account. Sure you've only used 10% of your margin. However, you're trading at 10 to 1 leverage. You're controlling $10,000 worth of currency, and you're doing it with $1000. $10,000 / $1000 = 10.

Professional traders won't ever trade over 3 to 1. Rarely are they ever over 1 to 1.

Why?

The smaller your leverage, the less you'll lose per bad trade. The less you lose per bad trade, the more of them you can absorb.

The more you can absorb, the more likely you are to outlast them, and that leads to forex profits. See?

So, if you have a small account, ask several brokers if they offer micro lots (or fractional pips). That will allow you to trade like professional traders. Eventually, it will allow you to profit like one too.