REINVESTMENT OR DISPERSAL OF THE DEPOSIT. HOW TO DO EVERYTHING RIGHT?
Overclocking a deposit and proper reinvestment in the foreign exchange market is not an easy task. You need to think through everything to the smallest detail so that the desire for quick money does not turn into a loss-making strategy. We discuss this.
Nowadays, trading in the foreign exchange market has evolved from a kind of “elite club” into what anyone can do. With only a few dollars in your pocket, you can open a trading account and proudly declare: “I am a currency trader!”
Nevertheless, after trading for some time on mini-, micro-, nano- and other cent accounts, the trader gives up the idea of earning a million from an initial deposit of $ 100 and begins to realize that a big profit is possible only if you have a large trading account.
REINVESTMENT – THE WAY TO HIDDEN LOSSES
Not every trader can (and wants to) invest a large amount of his own money in trading on the foreign exchange market. Of course, you can make money in trust, but we won’t talk about it today, especially since other people’s money is foreign money.
Many traders follow the path of dispersing their own deposits. To do this, they leave on the account all the profit received, that is, reinvest it. However, leaving 100% of the profit on deposit, the average trader, without seeing it, incurs unplanned losses.
It cannot be – you say! Let’s count together.
For example, a trader’s deposit is $ 1,000. The profitability of his trading strategy is 50%, and the ratio of taking profit to stop loss looks like 1: 1 with an acceptable risk level of 10% of the deposit.
Let’s say the first deal was closed with a profit. This gave a 10% increase in the deposit, which now amounts to 1,100 (1000 + 100) dollars. The next deal was closed at stop loss, the deposit decreased by 10%. But if in the first transaction 10% was $ 100, then already in the second 10% is 110 dollars. That is, the trading account is now equal to 990 dollars against the initial 1000.
“Ok,” you say, but you can use strategies with higher returns and reduce risk. But we do not just trade but disperse the deposit, which implies a high level of risk – without this, we are not talking about any dispersal.
As you already understood from the example described above, one hundred percent reinvestment of profit leads to hidden losses, which, often, can reduce the initial deposit. But since we no longer invest personal funds in the deposit, there can be no acceleration without reinvestment. So, you need to reinvest your profits correctly. How to do it?
We offer to follow the path of cost compensation by capitalizing your deposit only in the positive zone. This is achieved as follows.
- It is necessary to analyze the results of your trading and determine the initial level of risk. Suppose you define it as 5% of the deposit. That is, with an initial deposit of $ 1,000, a stop-loss closed transaction will bring you a loss of $ 50.
- After your profit increases the deposit by 50% to $ 1,500, we increase the risk level to 7.5% and subsequently increase it further:
- 100% increase in initial deposit – 10% risk level;
- 300% increase – risk level of 20%, etc.
Moreover, this proportion only works in the direction of growth – if the size of the deposit starts to decrease, then the level of risk does not decrease.
- As you yourself know from our articles on the psychology of trading, greed, and fear are the main reasons for the loss of funds in the foreign exchange market. Therefore, if you suddenly started a series of losses, then you do not need to engage in a struggle with the market – you still lose.
It is necessary to stop trading, withdraw the profit, bringing the deposit to its original state. Take a little rest, come to your senses – and you can start all over again. Believe me, you will not lose anything, and rest, almost always, is beneficial to the trader.
HOW LONG CAN A DEPOSIT BE DISPERSED?
Theoretically, the process of accelerating a deposit can be continued indefinitely. In practice, a trader has one of these problems:
- Lack of liquidity
The essence of the problem is that when the deposit is increased to a certain level, the strategy that worked earlier ceases to be such. In simple words, doubling a deposit of $ 1,000 is not very difficult, but doubling a trading account of $ 100 thousand is quite problematic. Therefore, with the growth of your deposit, it will be necessary to adjust the trading strategy.
- Human factor
A million dollars is a very, very serious amount, and only someone who is ready for it can earn it. Are you ready to risk the sum of 300 thousand dollars to earn a million?
- Unscrupulous broker
Your profit is most often the losses of the broker. Therefore, it is likely that after some time the broker will begin to put you “sticks in the wheel.” Unbelievable? Just look at the topic “Blacklist on Forex and claims to forex brokers” on the forum of traders.
In general, overclocking a deposit is a rather delicate matter. Trading in the foreign exchange market can improve your financial situation, but if you want to turn from an engineer into a millionaire, then it is hardly worth feeding such illusions. Legends about traders who made millions in the market, having $ 100 in their pockets, are, of course, motivating, but nobody knows anything about such real people.
When embarking on an overclocking of a deposit, one should know about a very important thing, without which this whole undertaking would be absolutely meaningless. We are talking about overclocking a deposit by reinvesting profits. The keyword here is “profit.” That is, your trading in the foreign exchange market must be successful. None of the techniques described above will work if your trading is unprofitable. Therefore, for starters, you need to choose the right trading strategy, achieve stable positive results, and only after that take on the acceleration of your trading deposit.