I’d like to make some money!
Ahhh. Of course, anybody who is interested in forex trading hopes to make a lot of money.
Trading entails risk, and we expect to be compensated for it.
Without a question, every currency trader hopes to make a profit.
However, you should ask yourself the following questions:
What kind of returns can I expect? And how much risk am I willing to accept in order to achieve these returns?
Your answers to these questions will have a significant impact on the trading style you will use, the currency pairs and times you will trade, and, most significantly, the risks involved in reaching your goals.
Let’s look at an example to better understand.
Mario and Luigi
Assume Mario and Luigi are two forex traders.
Luigi hopes to earn 10% per year, although Mario is a little more ambitious…
He wants to DOUBLE his account and achieve a total of 100% profit! And marry a stunning princess.
As you may expect, a trader like Mario who wants to double his account is in a totally different situation.
Mario will almost certainly have to make a lot more transactions and/or risk a lot more than Luigi.
If he ever wants to accomplish his aim of 100% returns, he will have to expose himself to further possible losses.
Drawdowns will also have to be considered by traders.
A drawdown is often calculated as the distance between your account’s peak and lowest value. (We’ll explain this a little bit further in a later lesson. For the time being, pay attention in class!)
Each forex trader must decide how much of a loss he or she is willing to take in order to meet their profit targets. On the one side, there are forex traders that prefer small drawdowns over large ones. The disadvantage is that this will limit prospective profits.
On the other hand, some forex traders are fine with high drawdowns as long as their strategy also produces huge gains. You must also evaluate how much time you dedicate to trading.
If you are unable to devote a considerable amount of time to working on your trading system, reading up on financial markets and learning new trading tactics, and recording/reviewing your trade log, we can promise that you will struggle to meet your objectives.
If you are unable to make this time commitment, you may need to revise your expectations about how much your account can grow.
Finally, remember that your success is entirely dependent on YOU.
Do you have the discipline to GRIND it out on a daily basis in order to fine-tune your talents and get the expertise required to navigate the markets?
If you don’t, you can expect erratic, if any, long-term results.