Page 140 - Ultimate Guide to Currency Trading

Smaller FX/Traditional Asset Ratio

Another requirement of a lower-risk, currency-trading system is to invest money in your FX-trading
account at a smaller ratio to traditional assets than an aggressive account. For example, while an
aggressive currency account will be 20 percent or even 25 percent of your overall investment portfolio,
you would deposit 5 percent or less of your overall investable assets into an actively managed low
risk/low reward FX account.

Depending upon the size of your stock, bond, and mutual fund assets, you might be investing
a very tiny percentage of your money in an FX-trading account. Smaller amounts will enable you to
take advantage of currency pair swings and earn you a high percentage gain in proportion to your
more mainstream investments. A 2.5 percent investment of $25,000 can still earn you a return of
$3,000 per year, which equates to an increase of 12 per-cent of your overall investment portfolio. This
number can be achieved with an average of ten trading days a month, and four to six trades a day or
night. Again, this is a conservative number, and would be obtained from some of the most basic trades,
including overnight carry trades and well-diversified, short-length position trading.

A proportionally smaller amount also means that your overall portfolio can remain invested in
safer assets. Smaller proportions will enable you to rest easy at night, knowing that your money is not
going through wild swings in the currency market with excessively large chance of misfortune and the
possibility of economic pain. You can use the small percentage you have chosen to invest in FX as a
form of "vent." It just might be that your overall portfolio is invested very conservatively, and you
have an itch and craving to experiment at a new form of investing. Perhaps you are exchanging having
some money to play with in the currency markets for having your money tied up in something that is
well structured to deliver solid, but boring returns.

Most part-time FX traders only trade when the time is right. If you have time one
night and the market is making good setups, then spend a few hours trading. If on

the other hand, if you can't trade for a while, then by all means put your trading
Essential computer away and wait for a better time to come along.

You can trade very conservatively in currencies and still earn much more than you would
trading stock. You might also decide that currency trading is more exciting than trading other forms of
high-return financial products such as options. In order to trade options, you need a larger account
balance and a more involved knowledge of how to set up trades that are profitable. The acceptance of
smaller account size and the knowledge of a few different trading scenarios can get you up and
running very quickly into the world of fun and profitable currency trading.