Page 99 - Ultimate Guide to Currency Trading

Currency Trading with Buckets of Money

When trading in with a Forex account it is most likely that you will have your margin broken up into
different buckets. The first bucket would be the main part of your cash account. Since you will most
likely be trading with relatively huge margins compared to a regular stock or mutual fund account
(50:1 as opposed to 1.5:1) you will absolutely have to keep around 60 percent to 70 percent of your
account in cash at all times. This is for safety purposes: you should keep this amount in cash to
prevent the chance that a position goes against you quickly.

Careful Trading with Your Cash Account

It is still possible to earn a good living or make a good profit from an account where you are actually
trading only a 25 percent of your available cash at any time. If you have a smaller account of $2,000,
you will still be able to trade $500 at one time; at 50:1 margin you will be trading $25,000 worth of
currency at any one time. You can easily earn $500—$1,000 per week with this amount by trading a
very conservative trading style.

Set a goal for how much you would like to make out of your currency trading on a
weekly basis. If you set yourself a goal that is easy to reach, you will feel very happy
with yourself when that amount of profit is reached. Conservative profit goals are a
Essential good way to keep you from overtrading your FX account.

Ultrashort-Term Scalping Trades

The second bucket would consist of a large portion of that one-quarter of your account to be
committed to trading in ultrashort-term scalping trades of fewer than ten minutes. These types of
trades can earn you big money. The problem with these trades is that most currency pairs move very
little in a ten-minute window. In order to earn a decent amount with this type of trading you need to
commit upwards of 25 percent of your account to each and every trade. With this large amount of
capital committed to each trade, you will amplify the small percentage of the FX pair movement to
yield a larger return from each trade.

Overnight Trades

The third bucket of money should be committed to trades that are over-night in length. Overnight
trades require no more than 10 percent of your total margin available; in fact a more conservative
amount would be around 9-10 percent of your total margin. The reason a smaller amount is needed is
because with overnight trades, a wider take-profit stop should be programmed into your trading
software. With this longer time frame of over-night, you can ask a higher percentage in your FX pair