Use Forex To Eliminate Debt And Obtain Financial Wealth
December 25, 2009 by Forex Guide
Filed under Forex Strategies
This article will show you the steps that you can take to safely become a professional forex trader. It is not a get-rich-quick scheme or other such thing. This process requires you to apply yourself and be committed to succeeding. The steps are itemized below. It is assumed that you have no trading experience. However, seasoned traders can benefit from this article as well.
Step 1: Learn to trade.
There are lots of resources available for learning to trade Forex. Unfortunately, most of them are incomplete or created by people who are not themselves successful traders. Some, however, are wonderful and well worth the time and money. So how can you tell which ones are worthwhile and which are not? Well, there is really no easy way to tell. However, I personally know of a really good forex mentor whose students are seeing wonderful results. I highly suggest using such a service before trading live money in the forex markets.
Step 2: Practice on a simulated-money account.
Once you have a basic foundation of knowledge, it is time to open an demo account and learn to use the trading platform program. Practice placing market orders and closing them manually. Practice setting stop-loss and take-profit on open orders to lock in profit or prevent losses. Practice placing pending orders (orders that get opened at a future price). Make sure you are comfortable setting the correct trade size before committing your order. This is one of the most frequent mistakes that people make. They place an order of 5.0 lots, for example, rather than 0.5 lots and end up emptying their account quickly. Be sure to use the demo account strictly for mastering your strategy and platform, and not to simulate live trading.
Step 3: Try a real-money account with a small amount of money.
There is a big difference between watching an open order on a demo account and watching the same order on a live account. Your emotions play a big role in live trading with actual money. The only way to learn to manage those emotions and stay focused is by ACTUALLY TRADING WITH LIVE MONEY. Trading too much on a demo account may de-sensitize you and cause you to take unnecessary risks when you switch to a live account.
Many brokers will allow you to open an account with as little as $250, with trade sizes as small as 0.01 standard lots (micro lots). That means each pip will earn or lose you about $0.10, instead of $10 per pip for a standard lot. Even though it is a small amount of money, you will still experience the emotional bombardment that comes with watching your money increase and decrease during trading. It is very important that you get control of those emotions before you get to the next step.
When you can gain at least $10 per month for 3 consecutive months, trading ONLY micro lots (where 1 pip=$0.10), then it is time to move on to the next step.
Step 4: Bring your account up to $2000 with a second deposit.
With $2000 in your account and trading just mini lots (where 1 lot=$1.00), you should now be able to generate at least $100 per month profit trading forex.
Step 5: Grow your account to an amount that will let you live off the profits from trading.
Now you have enough experience trading the forex markets that you can live entirely off forex if only your account was big enough. So let’s figure out how much is needed to do that…
Suppose you need to earn $4000 per month to make ends meet. You already know that you need $2000 in your account to generate $100 per month. So that means you will need as much as $80000 in your account to generate $4000 monthly. I know it seems discouraging when you look at it that way, so you need to look at it differently.
Each time your account balance grows by $2000, your trade size needs to increase by 0.1 lots. It will take you no more than 20 months to earn your first $2000 profit. But once that occurs, your trade size increases to 0.2 lots and getting your second $2000 will only take 10 months. Now your trade size changes to 0.3 lots and reaching your third $2000 will take 7 months. At this rate it will take you about 8 years to grow your account to $80000. That’s by earning just $100 per month for every $2000 in your account. Approximately 5% of your initial deposit. Suppose you can gain $150 for every $2000, or 7.5%. You have just reduced your time down to 5 years! In fact, if you keep earning 7.5% until the 8th year, your account will reach over $467000! But that’s not the point for now.
What we have done is calculate the longest time it will take for your account to grow from $2000 to (as an example) $80000 so that you can quit working a job and withdraw $4000 per month from your forex account to live on. And in case you haven’t noticed, the quicker you can increase your trade size, the faster you will reach your goal. So let’s look at some ways to speed things up…
1. Earn more than $100 for every $2000 per month. Your account will increase quicker and your trade size will increase earlier. Don’t over-do it because the more you trade the more you put yourself at risk of losing. But it’s not unreasonable to be able to gain $200 monthly for every $2000 in your account. I know people who regularly earn between 30% and 100% per month trading forex. But the goal for you is regular reliable profits. So let’s stick to 5% as a minimum.
2. Deposit more money into your account each month as you can afford to do so. This will cause your account to increase faster, especially the first two years. For example, by depositing an extra $100 each month from the beginning, your account will double in 10 months instead of 20.
3. Use a bigger initial deposit. Let’s say you deposit $4000 instead of just $2000. You have just cut nearly 2 years off the time it takes to get to $80000. A $6000 deposit will cut nearly 3 years off. However, as the deposit amount increases beyond that, the time to reach your target is not impacted nearly as much as the smaller amounts. For example, it takes 21 months to get from $2000 to $4000, but only takes 7 months to get from $6000 to $8000.
The nice thing about this approach is that over time, your trading skills improve and eventually you will be so good at earning money in forex that you’ll be able to do 5% in the first week of the month.
Step 6: Free up your time by using a trading robot or signal service.
This step is optional but if done correctly can free up most of the time that you spend trading. A good forex trading system will tell you whenever it places a trade so that you can check it and see if the trade is worth keeping. Ideally, your robot will only place no more than 3 trades per day, which means you don’t need to spend alot of your time examining the trades it places.
The important thing when using a robot is to choose one that you have a good understanding of *why* it places the trades it does. You should be able to plot whatever indicators the robot uses and see immediately if a trade placed is a good one or not. Remember, you spent alot of time becoming an expert trader. The robot is simply a tool to make your life easier, not to replace you.
A signal service is alot like a robot but it does not trade for you. Instead, it notifies you when a trade should be placed and gives you the information you need to place that trade. Again, it should be used to free up your time so you are not sitting in front of the computer all day looking at charts. By this point, your trading should be good enough to tell if a particular signal service is worth using or not. It doesn’t have to perform as well as you, but if it can’t help you earn your 5% minimum, then it is not worth using.
Financial Independence
Ok, so you’ve retired from your job and you are a full-time forex trader. But you are not financially independent yet. What gives? Well, now I can explain that part to you…
Suppose you have reached your goal and your forex trading is earning you at least $4000 per month (as an example). Don’t quit your job just yet. Instead, withdraw $4000 from your forex account each month and pay it towards your mortgage, vehicles, credit cards and any other debt you might have. In a very short time you will be free from debt. Congratulations you have become financially independent! You can retire from your job, and you don’t have to earn near as much money each month due to the fact that all your debt is paid off! So now, instead of needing $4000 monthly to live on, you only need maybe $2000. This enables you to easily save money for recreation, savings, investments, or anything else you were unable to do in the past.
Summary
Well, now you have everything you need to be free from debt and become financially independent. I hope you take this seriously and use it to change your life for the better.
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