A major problem with most aspiring traders is that they lack an understanding of how to grow their trading account. They have an end goal of owning either a large account or simply a small one. However, whatever their goal is, growing an account is possible and an efficient way of earning a living. There is no specific way of growing your trading account, nevertheless, there are different points that one can consider.
Let’s explore some of these points and learn how to boost your forex account in an efficient way and quicker.
Account Funding
Keep in mind that in forex trading you should consider the percentage of capital you are prepared to chance. The amount of capital you invest is relative to your profit. Hence, if you invest large capital you generate more capital. Let’s give an example of an account which is worth $1,000 and you have a return of 5% per trade. In this case, you will generate up to $50 every time you win and lose the same. With such percentage of what you are okay to risk, you do not have to overleverage your account. In fact, I would recommend a leverage not more than 100 if you want to be in the industry for a long time. Newbies think having 1000 leverage is your way to make money. Let me explain what leverage is in a simple terms. Leverage is the money your broker lends you. That is it allows you to either place a big trade or multiple of them that your original capital could not allow. Do not take leverage as a way of making millions. It works well to experienced traders because they can raise just a small account from like $100 to $1000 within a month.
In this case, you need to invest more money into your account for it to grow quickly and effectively. Nevertheless, one may encounter issues. Therefore, if you are a beginner it is important to start small when trading lives.
When you start trading one should add capital to the account every month. As it is better to start small and reap great benefits later rather than to invest all your savings and suffer psychological issues in case anything goes wrong.
Overtrading
Overtrading can either be steering off from your trading plan or lack of a plan. At times trading can be compulsive as one seeks to make profits while ignoring the losses. One can also be overconfident thus opening more trades than they can handle thus causing more harm than good. In most cases, traders who end up not making money in trading are overtrading. As a trader, it is important to be conscious at all times and avoid taking every potential trade. Overtrading can have a grave impact on the growth of your account. One thing that every beginner should keep in mind is that even though our goal is to grow an account, we also need it to be efficient. Overtrading tends to affect the account’s efficiency if not taken care off.
Apart from over-confidence, overtrading is caused by one’s behavior. As a trader seeking to grow your account, it is important to understand psychology and ways to suppress some behaviors. For instance, one should avoid disposition effect, whereby, one holds on to losing positions for a long time while cashing winners at a fast rate.
A trader should avoid over-analyzing to be able to grow a trading account quickly and efficiently. Some traders tend to overanalyze positions and regularly monitor positions. It may lead to one making bad choices such as overtrading.
Risk-to-Reward Ratio
Risk-to-Reward Ratio is the calculation of the amount that one is able to risk in a trade versus the profit target. Every trader needs to understand RR as it is significant in growing the trading account quickly and efficiently. Its approach involves looking for opportunities where the rewards are more compared to the risks. If you have more possible rewards you have a minimal chance of having more failed trades than your account can handle. A trader seeking to grow their accounts needs to use a good risk-reward-ratio by putting the odds in their favor. One should have a minimum RR of 1.5. In case you have a potential setup that gives you a 1.3RR, it cannot qualify for a trade entry. Therefore, it is important to make sure that you do not go below 1.5RR. One reason that you should ensure your RR is 1.5 is that you just need a win rate of more than 40% to be profitable. However, with the 1RR minimum, you may need to have a win rate of more than 50% to be profitable. With a 1.5RR minimum, one requires to win 2 trades in every 3 losses to cover their loss. A trader will have less pressure to win all their trades. Thus, you will have the opportunity to trade at a higher level.
As a trader, you need to understand that it is important to protect your capital as it will allow you to grow your account fast and efficiently.
Trade Multiple Time Frames
Every trader has their trading approach that they feel comfortable with. Despite this, flexibility plays a major role in trading. Nonetheless, a trader should focus on trading on multiple time frames especially when one is focusing on growing their account fast. The approach allows a trader to learn more about trade setups. It will open up various opportunities that will allow you to separate great trades from good trades.
With this approach, you will have an opportunity to grow your account quickly and efficiently.
Consistency
Being consistent with your account is a good approach to growing your trading forex account quickly. In most instances traders loose hope and rarely take time to check their charts. It is important to constantly check your charts and do not let losses deter you from trying. Every day small decisions allow a trader to develop a constant level of development and minimal chances of huge setbacks. You do not need to spend the whole day in front of your computer trading, instead, you can take small steps such as checking your charts once per day. It will allow you to keep updated with major pairs. Also, it is important to have rules that will enable you to be consistent. You need to consider setting rules that match your personality. It will help in ensuring that you are not affected emotionally while trading. For instance, you will not have to spend more time thinking instead, you will spend time making the right decisions. You will understand the mistakes that you have made in the past and focus on avoiding them.
Hence, consistency involves having a working plan, which will help in growing your account quickly and effectively.