Page 142 - Ultimate Guide to Currency Trading

number of trades will work to alleviate any excessive pressure that might otherwise come about from
currency trading. You can work to lighten the load of FX trading and still make money. The money you
make might be smaller in percentage to a more aggressively managed Forex account: This is the price
that security charges.

It is a common misconception in the investing world that security should be free. Everyone
expects that if they put their money in a secure stock that they will earn a return. They also expect a
return on money that is considered safely tucked away in a FDIC-insured CD or savings account. The
opposite is actually true. In order for an investment to be truly safe, there must be a cost associated
with its safekeeping.

To extend this theory further, if you are trading your Forex account in a safer (safer than an
aggressive manner) then you should expect to bear a cost for this safety. The overall effect is that you
are willing to accept a lower daily and yearly yield on your Forex trading than you would if you were
trading aggressively. This lower yield is the cost associated with the safekeeping of your valuables.

Some business schools spend time going through the mathematics behind the
safekeeping of valuables. The mathematically based experiment involves the cost
associated with the safe keeping of gold coins in a bank sometime back in early history.
The experiment is worked through to show that there is actually a cost associated with

safekeeping of valuables.

With this in mind, if you are trading in a low risk/low reward manner, then you will naturally
be Forex trading in a tame, pleasant fashion. This might include gently moving into and out of long
AUD/USD positions after dinner to capture the upward trend in risk sentiment in the Asian markets.
The basic trading ideas for low-risk trading are the same as high-risk trading. The only difference is
there is a use of hedging and smaller proportion position sizes, etc., all coupled with a slower, more
casual pace. The over-all effect is low-yielding, more comfortable trading sessions. The secondary
effect is a higher chance of keeping your account profitable and therefore a higher chance of keeping
you in the currency trading game. Just the thought of having a higher chance of keeping your Forex
account 100 percent intact can be enough to help you decide what type of trading system you would
like to try for yourself.

Keep in mind it is possible to switch between an aggressive trading style and a tame trading
style in the manner of minutes. In order to do this you would get out your mental calculator and wall
off a section of your account, leaving you with a self-imposed limit as to how much of your margin you
can use on each trade, as well as change the type of risk management used in limiting risk. This
switching between trading styles is often done by professional traders in times of market upset. It is
also done at the end of the month, when the heaviest trading and most profit has already been made
for the trader's accounts. These traders feel that their money has been made for the month, and they
do not wish to take any unnecessary risks with their Forex accounts, choosing instead to trade in a
low-risk style.