The “Hidden” Forex Trading Account Management Trick That Simultaneously Boosts Profitability & Simplifies Your Trading Day
Forex trading can be a great way to put money to work to make more money. It can also be a frustrating, costly and time consuming endeavor most people don’t profit from.
And a lot of whether you are going to be profitable, or not, depends on your Forex trading account management.
- The “hidden” Forex trading account management trick I use is to trade only ONE currency pair per trading account and focusing on the “best” currency pairs for my strategy.
- This approach boosts profitability due to the power of compound interest and the account not being dragged down by lower performing currency pairs.
- And as an added bonus, I trade once a day for only minutes which means trading can fit into even the busiest lifestyles.
My approach to Forex trading account management seems to fly in the face of what most traders believe, or are told by “pro” traders. But if you are struggling to be profitable over the long term… don’t you think it is time to explore a different approach?
Trading A Portfolio And
Taking Multiple Trades Per Account
Most Forex trading advice I’ve seen focuses on trading a “portfolio” of currency pairs on your account. This means you’ll be trading multiple currency pairs, and therefore taking multiple trades on the account at the same time.
To be more specific, the idea is to trade a portfolio of “non-correlated” currency pairs. The theory is you don’t want to trade currency pairs that basically move in the same way, because all that is doing is adding risk to the same market move.
A variation of this theme is to search for trades on a wide variety of currency pairs, but only take the “strongest” setups. Again, the idea is to take multiple trades on the same account at the same time.
Why do I think this portfolio approach is attractive to at home Forex traders?
In my experience, most at home Forex traders are underfunded for their profit goals. They simply don’t have enough money invested to reach the usually unrealistic profit goals they have set for themselves.
They try to make up for this shortcoming by finding a trading strategy that “wins all the time” and placing a lot of trades. The thought is to place a large number of trades, the large majority of them being profitable, and therefore make a lot more money faster.
They find out the hard way that this approach to trading simply does not work over the long term. And the truth is, trading MORE is not necessarily better. And in my experience, placing a lot of trades on a lot of different currency pairs does not equal more money in my account.
Here is why…
By using this Forex trading account management approach a few things happen:
Your account performance is collective. Since you are going to be taking multiple trades on the account, you need to figure out the TOTAL RISK PER ACCOUNT you are willing to use. For example, if you are planning on taking 5 trades at a time on the account and your total risk per account is 5%, you can place trades with 1% of your account per trade.
Anyway, what ends up happening is the performance (profit and loss) of your account is determined by ALL the different trades you place.
Undesirable result: Since some currency pairs will perform better than others, by making your performance collective, the lower performing currency pairs will “drag down” the higher performing currency pairs. And this can dramatically lower your profit potential because the power of compound interest is reduced.
SIDEBAR: This is a hard concept for a lot of traders to wrap their head around. I mean, trading more and placing more trades obviously means you are going to be more profitable, right? Accepting this is not true is hard to accept… because how else are they going to make up for being underfunded?
OK, here is another thing that happens…
It is easy to overtrade your account. If you don’t keep your TOTAL RISK PER ACCOUNT low, you run the risk of putting your entire account at risk. For example, if you take each trade with 5% or your account, and place 5 trades… you’ll have 25% of your account at risk at any one given time.
Undesirable result: One bad run of multiple losing trades can seriously damage your account. And then you have to try to make up for these devastating losses with an even smaller account. This is a disastrous scenario.
The way I look at it, by trading a portfolio you either have to reduce your profit potential or put your account at high risk. Neither of these options appeal to me.
My “Single Focus” Approach To Forex Trading Account Management
The way I trade is simple. I treat each trading account as a separate and independent income stream for wealth accumulation. In short, each account has the single focus of trading ONE currency pair per account with a TOTAL RISK PER ACCOUNT of 5%.
And to make things even easier, I trade on the Daily time frame which means I only trade once a day for a few minutes. This means I don’t have missed or mismanaged trades and dramatically reduce the stress and time commitment… which helps me stick with the trading over the long term.
Instead of trading my strategy on a large number of currency pairs, I focus my trading on the “best” currency pairs for my strategy. And since I focus on high risk to reward trading opportunities, I focus on currency pairs that historically provide large swings in the market.
The result is this…
Let’s say we are trading my favorite currency pair, the GBPJPY. For this pair I use a risk to reward of 1:5. (Basically, the target is 5 TIMES greater than the stop loss value).
So, since I am using 5% of my account per trade, I have the potential of increasing my account by 25% on a full winning trade. And even if I don’t capture the full profit potential, winning trades can be extremely meaningful. Add the power of compound interest to this scenario, and I have the potential to grow my accounts very quickly.
Now, compare this to trading a portfolio.
Firstly, you would need to be trading 5 currency pairs with the potential for 1:5 risk to reward trades (and not all currency pairs fit this requirement).
Secondly, if you were using 1% per trade, you would need ALL 5 currency pairs to reach their profit targets at once to make the same profits as the GBPJPY reaching its target ONCE.
Thirdly, when multiple winning trades happen, the power of compounding kicks in and can dramatically launch the account to a new and higher profit level, which I call Profit Geysers.
In short, I can concentrate on the best performing pairs, use the total risk per account per trade (since I am only placing one trade), and dramatically increase my profit potential with meaningful profits and compound interest.
In my experience, this Forex trading account management strategy is the way to go.
Example Of My Single Focus Approach In Action
Placing one trade per account couldn’t possibly be profitable, right? I mean, to be a profitable trader, don’t you need to be wheeling and dealing and sitting in front of the charts for long hours jumping in and out of the market constantly with superhuman skill?
The truth is, Forex trading account management can simplify the entire process AND still be highly profitable.
I look at Forex trading as a way to accumulate wealth faster by beating other investment opportunities. So, in order to measure my performance, I need a benchmark.
The most commonly used benchmark for investors is the S&P 500. So, let’s compare the profit potential to the S&P 500.
OK, a few things you need to know about this comparison.
These results are taken from my Forex signals service: Forex Signals Blast Off.
At this time, we are providing signals for 2 currency pairs (GBPJPY and GBPUSD) and a third will be added soon. This means, if you follow my “single focus” approach, the service provides you the opportunity to run TWO independent income streams, both with the potential to beat the S&P 500 benchmark.
Depending on when you are reading this, you might be able to get in at the Flagship Subscription level, which is the lowest price the service will ever be offered.
And keep in mind, these results are even more impressive considering they are possible by trading only a few minutes a day. High profit potential trading you can ACTUALLY trade in real life is a win-win opportunity (if you ask me).
Following the “pro” trading advice of trading a portfolio of currency pairs on one account and placing multiple trades with very low risk per trade might seem like the thing to do. I mean, shouldn’t you do what the pros do?
But as an at home trader, you are most likely underfunded for your profit goals. This means you need to do things DIFFERENTLY. And luckily, there is a way to use Forex trading account management to boost your profit potential.
- Trade one currency pair per account
- Use the total risk per account per trade (I use 5%)
- Enjoy the power of compound interest to boost profitability
- Increase profit potential by opening separate accounts and trading them independently
Look, I get it. It is hard to abandon the belief that MORE trading = MORE profits. And I probably won’t be able to convince you with just one blog post. This is why I’ve made a lot of Free Forex Training available.
I truly believe my overall approach to trading is the reason I am profitable while others struggle. If you are struggling, maybe adopting my trading approach is what you are missing. And I would start with Forex trading account management.
To Your Wealth,