Sustainability is Key to Consistent
Profitability in Forex
If you don't read anything else on this
page, at least understand this one thing: sustainability is key.
One of the biggest mistakes that forex
retail traders make is having trading decisions that are
unsustainable. They use too much leverage, risk too much capital, and
trade too short of timeframes in order to be consistently profitable. How can you expect to be profitable when you risk 10%, 25%, or even
50% of your entire account one ONE trade?
All it takes is a few bad trades and
you're DONE. You've lost it all.
Sustainability is key.
So let's talk about what it means to be
sustainable in forex.
Consistently Profitable Forex
Traders Use Low Leverage
Basically all consistently profitable
forex traders use low leverage, with most using less than 10x
leverage and many using even less than 5x leverage. In business, a company is
considered to be OVER-leveraged when they use 1.3x leverage (not 13x,
but 1.3x – not even 2x), yet forex retail traders have access to at
least 50x leverage!
That's a recipe for disaster.
Leverage is a double-edge sword that
accelerates your gains, but also accelerates your losses. How can you
expect to be profitable if one bad trade can take out a huge piece of
your loss potential using 50x leverage:
pips reduces your account by 5%
pips reduces your account by 10%
pips reduces your account by 25%
pips reduces your account by 50%
happens if the market JUMPS -100 pips against you?
is a real risk in the forex market, where your stop-loss will be
triggered several pips further than what you wanted. Sometimes the
forex market makes large jumps in an INSTANT. If you had put your
stop-loss at -50 pips, but the forex market jumps -100 pips against you,
then you have lost HALF of your account in an INSTANT using 50x
if you had $100,000 and lost -$50,000 on one bad trade?
forex traders think: "I will be more conservative once I grow my
account large enough to live off..." But how are you ever going to
grow your account if you can lose it all on a few bad trades?
is key to consistent profitability in forex.