forex trading blogspot
Because the larger your account, the harder it becomes to make high returns.
The big advantage of small traders is their agility. They can enter or exit their trades with low slippage and without moving the market. If they have a strategy with positive returns, they can trade fast day charts and turn their capital quickly. The funds exposed are modest, and the broker will offer high leverage. I’ve seen many audited examples of small traders returning well over 100% per year on a consistent basis.
But as your account grows you become far less agile. You are faced with greater slippage on entry, and have to trade slower charts. To trade very large, you need to trade over the weekend closure, and this involves a step-change from quick-fire day trading to longer-term position trading. So your capital turn will drop dramatically. The sums at risk are larger and the broker will offer lower leverage.
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Eventually, most traders will hit a ceiling. The rewards can be high, but not in the billionaire bracket. Achieving great wealth would involve abandoning the agile approaches that built your original account and developing strategies that will compete directly with the market makers, who have information about the market that you can’t see. You are risking millions, and only a handful of exceptional operators like Soros have the motivation and skill to break through to that level.
According to Warren Buffet, the drawbacks of size apply to all kinds of trading - this is why he closed his own fund to new investors. To prove his point, he made a charity bet challenging Hedge Fund managers to back their ability to out-perform an S&P stock tracker fund over 10 years. Only one manager had the guts to take him on, and he lost.
forex trading blogspot
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