Page 109 - Ultimate Guide to Currency Trading

bit of a money crunch and are looking for Forex trading to fill in some of the gaps in your income, you
are kind of going about it the wrong way. This is because with this sort of mindset you are looking at
the dollar amount of profit you need to make, and not considering the risk level you will have to
expose yourself and your FX account to in order to achieve this amount of profit.

To explain further, if you are a student, and you have very little money (like most students),
then you should first look at how much you can afford to put into an FX account to trade with. If you
are a mother of three and you would like to earn extra money setting up trades while the kids are in
school, then you need first to determine how much you can put into your FX account. The same goes
for high net-worth millionaires who have most of their wealth in a low-yielding and 100 percent safe
bond portfolio: First you need to ask, "How much to put into the account?"

In order to do this you must first determine your overall investable assets. It would not be
wise to take all of your life savings, put them into a currency-trading account and risk the entire
amount in order to get the big house on the hill. A smaller amount would be best, and if you are the
mother of three (and have responsibilities) or are just starting out with Forex trading, then the whole
learning curve will be a lot more pleasant if you just put in your extra money. In this case you are
allowed to really have fun with FX; you can learn to trade and make money at it while not going into a
panic attack every time something doesn't go exactly as planned!

One of the best ways to keep currency trading fun and stress free is to trade only
with money you are 100 percent willing to lose. If you have already written off your
trading money mentally—that is, it is already gone—then you can fully enjoy taking
Essential trading risks with your Forex account.

The next thing you need to do is to look at your list and ask yourself: "How risk averse am I?" If
you see that you wanted to earn enough money in your account to make the payments on a new car,
then you are conservative and risk averse. If you had the idea that you wanted to make the payments
on your mortgage, then you are risk tolerant. After determining what levels of risk you are willing to
assume, look at the size of your Forex account. If you decided that your online currency trading
account would be $500 or $1,000 and you are risk tolerant, then you are not going to be able to make
enough money to make the payments on the mortgage! Your predetermined account size simply can't
handle the dollar gains you would have to squeeze out of it in order to come up with a consistent
amount to pay a mortgage! With a $500 or $1,000 account and a risk-tolerant trading system, you
have a good chance of making the payments on a new car, though.

As you can see, it is not only your goals that determine how much you can earn in your
currency- trading endeavors. You must also factor in the overall size of your investable assets and the
size of your account. Then you can determine what is a realistic goal to expect from your type of
trading system: risk averse or risk tolerant.