Wednesday, March 12, 2008

Seriously

If you have been following my blog you know that I am a big proponent of setting up a compounding account as a wealth building strategy for those of you new to the Forex market. This compounding account is not to be touched until you can meet your financial need with only withdrawing 50% of your profit without changing your risk profile. You can have your “Mad Money” account to satisfy some of your more exotic Forex desires, but having a compounding account where you are depositing a consistent number pips is critical to your long term viability as a individual currency trader.

So why is this so critical? Now that you are a trained trader you have probably realized that your Forex Journey has only just begun. You have discovered that there are numerous strategies and approaches to trading this market. You have also noticed that in the end most of the strategies are viable and that the most volatile factor in any trade is the human interaction in the marketplace itself. I am sure, like me, you have discovered you are your own worst enemy! Having a compounding account ensures that you are trading from a centered base. Your pip goal is reserved and very attainable and your entry and exit strategies will reflect this conservative approach. Trading this account will also build discipline and allow you to avoid those huge draw downs. In this account you are not the gambler, but the casino. When was the last time you heard of a casino losing money on their gaming operations? You rely on a strategy to meet your daily pip goal (at least 3:1) and through money management you are keeping the long term odds in your favor like a casino operator. Your actions will then dictate your profitable results!

Do the math! See what your results would be if you started with a $3,000 mini account, risk no more that 5% on any given trade and made just 15 pips per day. How much will your balance be at the end of a year of trading? The results will astound you!!

Happy Trading!!

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