Key number 2: Managing risk per account

Forex brokers will offer you 100:1 and even 200:1 leverage, promising that these offer opportunities to easy and quick riches.

Don’t believe it for one minute!

When you leverage your account, you are actually borrowing money from the broker with the hope that your trading will make you money on the borrowed funds. It’s the same as taking a loan from the bank and “gambling” it in your trading account. A little leverage is OK – it makes sense to make money using other peoples funds, but too much will lead you to disaster quicker than you can blink.

Here it is: As a rule of thumb, I recommend no more than 10:1 leverage on your trades.

That means for every $10,000 in your mini account, you should trade no more than 10 mini lots, or for every $100,000 in your full trading account, you should trade no more than 10 full (100k) lots.

But can you make money at this leverage?

Of course!

I will show you later how this modest leverage can be used to convert your account safely into many multiples of the initial balance, if traded wisely.

Key number 3: Compounding profits

The power of compounding is simply amazing.

Compounding means that you re-invest some or all of each months profits back into your trading account and you use the profits to generate more returns. The only way I can show you the power of this process is in real numbers, and I intend to do just that right now.

Trading plan for our signals to explode the profits in your account!

First of all, let’s look realistically at what you can expect to achieve each month, based on our current achievements at www.thetradersclub.com and our previous experience as well.

The average pips-per-month is roughly 300, with some months over 500. We need to know what to expect before we can make any projections going forward. Please remember though, that past performance is no guarantee of future returns, and the risk disclaimer on our site should be read and understood before proceeding.

Now we know the expected returns in pips, we know that the leverage should not be more than 10:1 on your account, and we know that the trading system works and should be followed as it generates signals (no moving stops or adding to losing trades!)

What will this generate on our account?  The spreadsheet attached gives us

Scenario 1 – Conservative returns of 200 pips per month and no draw down months, at only 5:1 leverage (instead of 10:1). Take a look…

MT1st spreadsheet