Most day traders suffer severe financial losses early on, and most never graduate into profit-making mode. Given these disappointing results, it is obvious: traders who take a risk on Forex trading must only invest money that they can afford to lose, or lose all. This is where day-trading strategy comes into play. There are many different strategies available to day traders, but the following will focus on the most effective and safest methods.
Day trading is very similar to the stock market in that you initially need a “down-load” or investment (usually a “down-payment”) and you need to either put this down as collateral or hold onto it. In day trading, the down-load is an item of value such as currency or a stock that you will sell at a later date. In order to make profits, you must purchase low and hold them until they rise in value.
One of the biggest factors in determining profit potential is your level of risk. Day traders must make sure they have a high enough level of risk so that their trading strategy will be profitable. Some traders have an unusually large amount of risk, while others are very low risk, but are unable to get out before the prices drop off. It is not unusual for traders with very high levels of risk to lose everything before making any profits.
Many traders who take a chance on Forex trading to do so by placing their down-load into an account with a “low risk” deposit. This way, they feel safe that their money is in a place to be invested and it does not require as much risk. However, the truth is that a “low risk” deposit will not always result in a high profit margin.
To maximize your profits and minimize your risk, you should start out small and add risk and leverage to your trading plan over time. The best way to do this is to use multiple accounts with smaller “dips” (deposits). As the trades begin to grow in size, your account size will increase so you will start to see a larger profit. While this strategy may not work for everyone, it is one of the simplest ways to make money with Forex trading.
Keep in mind that there is always room for risk, but also remember that your success depends on the low risk/low leverage accounts. with which you use. If you only use the larger accounts as leverage, you may miss out on some of the profits, if you have a poor trading history in your “low risk/low leverage” accounts.
Another factor in determining profit potential is how well you manage your accounts. If you are a beginner, start out with an account that allows you to deposit at any given time, but you must have more than the minimum required balance to be able to open an account. Be careful here – you should never have more than two or three accounts that require your full amount in order to open an account with them. It is not necessary to have all the funds on hand to open a trading account. By paying the smallest balance possible you limit your risk in terms of being caught by the broker at an unscrupulous trader or losing your money in the event of a trade gone wrong.
When you are ready to grow your business, you may want to start with a low leverage account and continue to build on your skills as you become more experienced. But once you have reached a certain level of success, you may choose to switch to more advanced accounts and move your account to one with a higher risk tolerance and a higher initial deposit. The goal is to make the largest amount of profit in the least amount of time. It is important to keep this in mind so that you can maximize your profit potential.