Forex Trading - Your Hard Work Will Pay Off Beautifully In Profit

If you're just getting started with figuring out how the game works

, it makes sense to start small. You won't make your fortune with a $25 starting account either, however, so consider how important your trading will be to you. You need to consider a few things before you know for sure just how much you should invest in your Forex trading account.

Examples of these factors are: Intended profit amounts - If your method of trading can net you a 100% return each year, then you have to spend $100,000 in order to get $100,000 a year.

Equity Dips - Keep in mind your maximum drawdown when formulating a strategy. The more dramatic change in equity your system has seen in the past is know as maximum drawdown. It goes like this:

If your maximum drawdown is $25,000, don't open a Forex trading account less than that amount of money, as it would be risky. There's absolutely no margin for error with this option. You won't be able to trade anymore if that drawdown occurs again, if you only have that level of money in the account. If you reach your drawdown level, you cannot trade at all - that is the simple facts of it.

Formulate a plan for trading - No matter what business you're in, you should have a business plan before starting to operate. Forex trading is exactly the same way. If you plan effectively enough, you can stay on your goals, and you won't be as unsure of what you're doing. It can be a simple trading plan, and you can still profitably trade Forex.

Plan your Forex trading carefully - don't fall into the trap that many people do by trading Forex without thinking about it first. Intuition only carries you so far in this type of trading, so you have to educate yourself. Don't stray far from the beaten path in terms of trading strategies; choose what works, and follow along with it - you won't be sorry.

Use a Micro Account to Evaluate your Trading System - Start small when you're trying your strategy out, so you don't lose as much if it ends up failing. Forex demo accounts are perfect for honing your trading skills. You'll be able to see if your strategy fails or not. If it doesn't work out, there's no harm done - just move on with a different strategy and try again to see if that works before moving forward.

Do this with each strategy your formulate to find out which ones work and which ones don't. Your hard work will pay off beautifully in profit.

by: John Eather

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