The popularity of forex trading has significantly increased in the past few years. People are more aware of the profitable opportunities that are there in the forex market, and they also have easier access to the market. Beginners should spare some time for learning and preparation before stepping into the fast-paced forex market as traders. The initial phase can be a bit challenging for a newbie, but once you get past that level and mark a successful beginning, you can start thinking about growing your trading account to a bigger scale. This is a critical time for a trader, and being consistent and disciplined is important to do this in a safer way.
Today, I will be sharing the top 5 tips that you can follow for growing your forex trading account in a practical way.
- Evaluate Your Performance and Profitability in Percentage – Growing your trading account has a lot to do with your performance and profitability. When you grow your account, you will be risking more; hence, your performance should also improve to bring the desired results. Typical traders tend to talk about their profits and losses in monetary terms or as the number of pips gained or lost in a trade, which can be easily calculated with the help of a pip calculator. The profitability of your trading system or strategy can be assessed with these numbers, but when you plan to grow your account, you need to think beyond the profit figures because the numbers alone cannot tell much about your performance until you compare your returns with your investment.
When you run a business, you need to look beyond the turnover as the costs that you incurred for running the business, as well as the capital that is invested for establishing and operating the business, are also crucial determinants in assessing the success of your business. The same rule applies to forex trading, and you need to consider the capital you have risked in the trading process to evaluate your performance and profitability. You need to see your profits as a percentage of the total trading capital that you have in your account. This can be better explained with an example.
Imagine there are two traders, the first trader made a profit of $100 in 1 month, while the 2nd trader made $ 10,000 within the same duration. If you look at the numbers, the 2nd trader is performing better and making double the profits compared to the first trader. But the first trader started with a small capital of $500 while the 2nd trader had a million-dollar balance in their trading account. So, the 2nd trader’s profitability in percentage is just 1%. In contrast, the first trader made a 20% return with a smaller amount of capital.
Percentages are considered to be the best metrics for estimating growth, and you can apply this in forex trading, too. So, when you plan to grow your account, calculate your profitability in percentage and consider the percentage of capital being risked for a trade. As per the golden rule of trading, you should limit your risk per trade to 2% and trade with a higher risk/reward ratio so that you can get enough profits even with a lower win rate.
- Be Patient and Don’t Chase Profit Targets – One major mistake many traders make while trying to grow their accounts is rushing the process. They often set unrealistic daily or weekly profit targets for quickly growing their accounts, but chasing them is impractical in most situations. Some days, you might get more profits than you targeted, while on the other day, you may end up making losses. Hence, setting such targets for profits will only make you desperate and disappointed in the end.
You don’t need to get stressed about how much profit you are making in a day or week as the market keeps changing, and you will get different results in each trading session based on the number of trading opportunities you get. Being slow is fine as long as your performance is stable. Discipline and patience are powerful tools, and those who trade with a professional approach can surely attain greater success in the long run.
You also need to avoid overtrading and stick to your strategy by focusing on risk management. Overtrading and emotional trading will stop your account from growing and can also quickly wipe out your profits and capital. So, following a disciplined approach and paying the most attention to risk management is essential for taking your trading to the next level.
- Use Your Profits for Trading – Another practical tip to grow your trading account is to use your profits for trading by not making frequent withdrawals. Traders often have this habit of withdrawing all of their profits after a trade. But those who don’t have any necessities can simply add these profits to their trading capital and use it for trading. Especially traders who don’t have much funds to add to their trading capital can surely rely on this technique.
You need to stop yourself from making excess withdrawals as it limits the growth of your account. You can calculate the profits using a profit calculator and then decide how much you need to withdraw so your trading account can grow. If you are trading on a small account, you need to save the little profits you earn, which is the only way to grow your account over time. You need to increase your trade size little by little and also make use of leverage to a certain extent. Leverage can be a great tool for growing your account, but you also need to refrain from using excess leverage.
The maximum amount of leverage you can avail for trading will depend on the broker you choose. But you should not be using all the available leverage for your trades. You need to consider your account balance and risk tolerance while trading with leverage. Leverage increases your profit potential, but it also makes trading riskier because the potential losses will be bigger.
- Trade Your Small Account Like a Big Account – This tip is not about trading with a bigger trade size or using excess leverage in your trades. This tip is more about the mindset that a trader should have while managing trading activities. A trader who has a big account will be more careful and responsible about risk management than someone running a small account. Technically, the chances of blowing up an account are higher for the trader, who has a smaller capital, to begin with. But those who trade on a small account tend to take it easy, and sometimes, they don’t take their trades seriously because only a small amount is at risk.
But when you want to grow your account, you need to remove this bias from your mind and start trading like a professional. On a small account, the profits and losses will also be smaller, but you don’t need to be obsessed about the outcome all the time. The traders who transform smaller accounts into big accounts always have this growth mindset. You can appreciate yourself for the small wins instead of being disappointed with the smaller profits.
You need to work on your skills as well as the performance of your trading system or strategy. A strategy that generates a good amount of profits on a small account can also do the same on a bigger account. The only thing that changes would be the trade size and amount being risked. However, the trading process remains the same for all accounts, irrespective of their size. So, just focus on making the process better, and you will be able to get the desired results while growing your account.
- Wait Till You Can Trade for a Living – The last tip I want to give here is to wait till you can trade for a living. Many traders who take their trading to a higher level start relying on their profits alone to make a living. They think they are making more than enough profits and don’t need to go outside and work on traditional jobs. Many traders even go to the extent of quitting their jobs for the sake of trading. This is a personal decision; you can do that if you can afford to take the risk.
But the safer way to trade is to have multiple income sources, which will save you from getting too stressed about your trading results. Removing this unwanted pressure will boost your performance as a trader, and then you will be able to grow your account professionally.
Finally, growing your trading account is not just about adding more funds or increasing the trade size. It is about optimising your strategy and refining it to perfection. And once you accomplish your goal of trading a bigger account, you need to keep working harder to retain the success later on.