The trader does not need to worry about which forex broker or trading platform to chose. It means smaller trading accounts can grow in size without any greater risk when there’s an increase in market volatility. The example given above shows how simple compounding is. It might not sound very dramatic in these early stages, but the magic of compounding is how growth accelerates over time. Make another 5% profit on that $5,250 and they will then have an extra $262.50 to add the next month. Make no change in position size, then that trader would then have just an extra $250 a month in their forex account to trade.Īpply that sum to the trading account and their $5250 allows them to set stop losses at $105 and profit targets at, say, $210 or $315. Taking a 5% monthly profit as an example. A suitable profit target might then be $200, $300, or more, depending on the trading strategy. And the potential profit on each trade naturally rises in proportion.Ī forex trader who wants to risk no more than 2% of a $5,000 account will need to place a stop loss at no more than $100. The dollar amount staked on each trade can be increased without any change in the percentage risk to the account. When currency trading, the reinvestment means retaining profits in their trading account. How to Grow Your Profits with No Extra Risk It’s the consistent reinvestment over time that creates the explosive growth that can bring wealth to retail forex traders. Its precise application may vary according to the instrument but the essence of compounding is always the reinvestment of earnings and profits. From property investors to option writers selling options for income and from commodities traders to margin stock traders, compounding benefits all investors and traders. Whatever the experience level of the trader, whether they’re new to the forex market or have been trading forex for years, the simple principle of compounding must be understood.Ĭompounding works in all markets, not just foreign-exchange.
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