Page 158 - Ultimate Guide to Currency Trading

Using FX as an Income Enhancer

While most people plan on trading currencies for the express purpose of gaining as much as possible
in their accounts, there is an alternate trading goal that is more conservative in nature. With this

system you would focus on having the primary goal of your Forex account as being a savings account
earning interest. The secondary function would be capital gains, which would help in the overall gains

in the account. This combining of earned interest and capital gains is called investing for total return.
You can use your FX account as a total return account. In order to do this, you would allow

your currency account balance to sit in cash for 80 percent of the time and trade only 20 percent of
the time. The 10 percent of the time you were trading you would be looking for the best trades only.

You would trade to pick up as many capital gains as you could using the usual one-third of your total
margin and breaking up the trades into three tranches of buy ins into your favorite currency pairs.

With this method you would close out each and every trade at the bare minimum of gains.
When you trade in this type of total return investing you would exit out of the trade as soon as your

profit and loss chart would be in the green. Trades of this type can be closed out with only a few
tenths of a percent of gains. The logic behind getting out of the trades in a short time frame and as

soon as there is a profit is that your trading is actually acting as an income enhancer to the regular
interest that is accruing in the account.

The longer the length of time you are in a trade, the higher the risk. If you have a trade

that goes overnight, or worse, over a weekend, you are assuming much more risk than if
you are closing out the trade as soon as it makes even the smallest returns.

Since Forex accounts pay continuously compounding interest calculated every second, your

account will be earning a better rate of return than you would have if the money was in a regular
savings account. The gains from your trading, no matter how small, will go a long way in adding to the

returns in your account.
If you are looking for maximum safety and have returns as the secondary goal, then this total

return investing would work out well for you. If you keep your money in your Forex cash balance as
much as possible, and trade only to capture enough gains to add to the interest earned, you can easily

earn 5-10 percent combined interest and gains over the course of a year. In order to reach this 5-10