Page 59 - Ultimate Guide to Currency Trading

You divide the yearly interest rate into a daily rate and you consider this daily rate an expense
to be deducted from the free-cash flow. This is one form of funding and expensing of a Forex account.
You can use your own expenses to determine the free-cash flow that your Forex trading delivers on a
weekly and biweekly basis.

Keeping Your Cash in Perspective

Once you understand that your currency trading goal should be to produce free-cash flow, you then
see that cash flow can only be made from being in cash. With that said, the more you are returning to
cash after a trade with your gains intact, the more safe your account will be and the more you will be
reassuring yourself that your trading account is acting as a cash account.

You must remember, Forex trading can be a source of income for you, and you can produce a
steady stream of paychecks coming out of your account. In order to send yourself a paycheck you will
have to think of your trading as a source of income primarily and as entertainment secondarily.

With this in mind, you would do well to consider your account as a cash account first and a
trading account second. A cash account's main goal is to be in 100 percent liquid cash. The cash is
ready to be used for any purpose needed, including buying into a trade when the time is right. After
trading for a few weeks and months, you will most likely find yourself in positions where you would
love to have more cash and more margins available to buy into that day's best trade.

Keep your Forex trading objectives in mind when you are thinking of your cash
account. Whether you are trading for some extra cash, for enough profit to buy a
new car, or for enough profit to live off of, keep these trading goals in mind when you
Essential consider that your account is a cash account first.

Keep Your Money in Perspective

You will go a long way in keeping your trading account intact if you con-sider that the money in your
account is just that, real money. All too often it seems that traders get away from the fact that they
are trading with actual money, and that this is the same money that can also be used for needs that
are more basic than trading (such as paying rent, etc.). You will have to realize this when you have a
big balance in your account. It often seems that a $1,000, $1,500 or $2,500 balance in some form of
trading account is not really that much. The fact is, if someone handed you an envelope stuffed with
$2,500 worth of $20 bills, you would most likely think you had a lot of money. It is sometimes hard to
grasp the same feeling for the same amount of money when the money is in an electronic format.

With this in mind, you should work to keep a good perspective on what the balance in your
trading account actually is (money) and what you can do with it in the world outside of currency
trading. A well-rooted idea of cash/money/margin/Forex can keep your account and your currency