Page 117 - Ultimate Guide to Currency Trading

Higher Pressure Tolerance

High risk/high reward trading not only ads to your profit, but it also ads to your pressure. You must
have a high pressure tolerance in order to trade aggressively. In order to get the maximum out of your
FX account you will need to buckle up and really be in your seat during each trading session.

If you are scalping and using a system of getting into and out of trades many times during the
trading day, the tension and pressure can build quite dramatically and very quickly. If you have a large
account, this creates an added mental burden: You have more to lose and more to gain by your efforts
in currency trading. Also, if you are trading aggressively for hours at a time (even just half a day at a
time) day after day, you amplify the chances of putting your money into a bad trade mistakenly.
Remember, every time you are in a trade, that money (and your cash margin) is at risk.

If you are trading three scalping positions an hour for a six- to eight-hour trading
day, you are risking a quarter to a third of your account eighteen to twenty-four

times a day! That can generate quite a bit of pressure, but it can also generate
Essential quite a bit of excitement!

If your Forex trading account is 20 percent of your total assets and you are putting a third of
that account into each scalping trade, then you are really risking upward near 7 percent of your total
investable assets in each trade. If you had a $50,000 overall portfolio, and you invested 20 percent in
FX, your FX account would be $10,000. If you took a third of this account in each trade and traded
three scalps per hour, for eight hours a day, you would be trading nearly $4 million in currency a day!
This can be shown by:

$10,000 x .333 = $3,333 account used,

$3,333 x 50 = $166,650 margin used,

$166,500 x 3 = $499,950 amount of margin used per hour,

$499,950 x 8 = $3,999,600 amount of margin used per eight-hour day.

Another way to look at it is by asking yourself "How much money am I used to handling?" If
you have built up a $50,000 account with investable assets, then you most likely know how to handle
calling up your broker to place stock, bond, and mutual fund trades that fit in a $50,000 account. You
might even have an online brokerage account and are very used to trading on margin. Even if this is
the case, in this example you would have been placing trades of $5,000 or even $10,000 at a time with
each individual order. Even if you day traded in your inexpensive online broker account you would
have to wait for each trade to settle (usually three days) before the money could be used again for
another trade.