How to (More) Safely Develop Your Capital
Every entrepreneur certainly has a desire to develop his business. The goal is of course so that he can get a bigger profit than what is currently obtained. Likewise with forex traders. Naturally, if a trader wants to develop his capital, to be able to trade more freely.
The problem that arises then is that most of them are racing to develop capital by conducting transactions “blindly”. Instead of being able to develop capital, they are actually caught in the trap of overtrade , which is to do too many transactions without considering the strength of capital so that it erodes the capital itself.
Then how can we develop capital in a (more) safe way?
Prepare a Mature Strategy
Certainly. Without a mature strategy, it is very unlikely that you will succeed. I often say that a good trading strategy is not a strategy that can promise bombastic profit, but is consistent.
Profit is a bit of a problem, as long as it’s consistent. Occasional loss is normal. The most important thing is that the strategy can accumulate consistent benefits for you. Consistent, that’s the key word.
Slightly Long-Being Hill
In forex trading, there is no harm in adhering to the principle of “little by little becoming a hill”. Do not be glued to the target, for example having to profit a percentage per day or the like. The target is necessary, but the focus on the process is far more important.
Establish a progressive capital management strategy. Examples are as follows.
Suppose you have a capital of $ 10,000. How do you make your capital become (for example) $ 20,000? This means increasing 100%.
The fastest way of course is to add a deposit. But I’m sure you certainly already know that method. Needless to say. What we will discuss next is how to strive to increase capital through trading.
Patience and perseverance
One thing you need to realize is that forex trading requires patience. You must be patient and diligent in collecting pip by pip until your capital grows and develops. In the example above it says you want capital to grow by 100%, but this does not mean that you have to reach it in a matter of days.
For ordinary traders (I assume if you are not a beginner, you are an ordinary trader like me), the profit target does not need to be too large.Suppose you set a profit target per transaction is 5% of capital. That is, if your capital is $ 10,000, then your profit per transaction is only $ 500. In forex, this target is quite realistic even for day trades .
If the profit target has been reached, immediately close your position. If necessary, apply the target by installing the Take Profit (TP) level . So, once the target is reached, your position will be automatically closed.
The biggest temptation is that you want to “get more.” There is nothing wrong indeed, but still must be realistic. Indeed, we are allowed to let profit flow ( let profits run ), but you should still pay attention to market conditions and conditions. If for example the price is stuck in support or resistance, consider closing your position even if for example the target has not been reached.
If your capital increases, that means (with good money management ) your capital will get stronger. Well, there is no harm in increasing the trading lot if possible.
Example: with an initial capital of $ 10,000, in your trading plan you set the risk per transaction to only 5%. When new capital is $ 10,000, each of your risk transactions is $ 500.
At that time, suppose your analysis sees a risk limit ( Stop Loss / SL) technically is 500 pips (5 decimal places). If 1 pip = $ 1, then 500 pips is equivalent to $ 500. Under these conditions, you can enter a position of 1 lot.
Now, when your capital has become $ 12,000 and the risk per transaction is still 5%, it means that your risk tolerance per transaction becomes $ 600. If at that time you also see the technical SL limit is 500 pips, then you can enter a position of 1.2 lots. So on.
This is called position sizing . With this technique you can increase your profit potential without increasing risk. If the profit potential gradually becomes bigger, then your capital has the potential to grow faster.
Please crave capital growth, but don’t do it blindly. Do it gradually and – of course – be patient.