Page 60 - Ultimate Guide to Currency Trading

trading viewed in a positive light within yourself. It can also help you when it comes time to review
your trades. It is common to think of your profit as never enough, and to think that you are not
earning enough with the money you have invested.

All Gains Add to Your Cash Account

If you are thinking of the money in your account as cash that can be used in the outside world to pay
bills and enjoy, then you will view your trading gains as tiny little gifts that add to your cash balance. In
this way your cash account will be growing little by little, and the primary focus will be to create just
that: a cash account that has very good returns. If you do keep this perspective, you will view a night
of trading that earns you $25 (or some other number that is otherwise unacceptable) as a profitable
night. There are times that you will feel lucky to earn only $25 dollars that trading session. Perhaps it is
a night of really bad news that has caught you off guard and on the wrong side of the trade. Perhaps
the markets went south during the overnight session and you had most of your account in short U.S.
dollar and Swiss franc trades. Either way, there are many times when you will feel lucky to walk away
from a trading session $25 (or sometimes less!) richer.

If you do not have the perspective that your FX account is basically a cash account and that
you are trying to enhance your returns, then you will be losing the perspective that your account is
cash first and gains second. Further, you will begin to think of your FX account as a cash account that
will have buying power. Buying power is related to what utility can be had from the money in the
account, whether it is used to pay bills, buy a new car, or buy loads of a carry trade for a well-run and
tightly managed investment portfolio. With this in mind, you should always be thinking of the value of
your FX account as a cash account: This perspective will go a long way in keeping your account safe
and profitable.

Look for all of your returns when considering how much you have made with Forex.
Sometimes you are making very little cash, but you are gaining in other ways. You might
ALERT be gaining by working the risk bug out of your system; this can then get you to the point
that your main portfolio is invested in super-safe securities!

How to Think about Margin

When you put money in your account and you are leveraged up 10:1, 20:1, or 50:1, you are
multiplying the amount of money you put into the account by the gearing of the margin number. If
you put in $1,000, and your margin ratio is set at 50:1, you are actually able to purchase $1,000 x 50 =
$50,000 worth of currencies in that account. The margin acts as kind of a loan against your balance.
Much like when you put money down on the purchase of a home, you will be putting money down on
the purchase of the currencies.

Most home purchases require 5 to 20 percent down, and the remaining 80 to 95 percent of
the balance is financed. The banks that are in the business of giving home loans are not in the business