by Caden James
As a foreign currency trader, you’re gonna lose when you take these trades. You’re gonna to lose often, too. You’re going to get tired of losing. You’re going to start thinking maybe you know nothing about trading. You’re going to question your ability all together and consider giving up. Don’t. If you know you’re going to lose often in advance, why on earth would I tell you these are no-brainer trades you must take to skyrocket the equity in your Forex account? Its simple: reward-to-risk.
Small, strategically-placed stop losses are the single most important key to your Forex trading success. Why? Because your success is always tied to the stop loss. How much you can make on a trade is directly tied to that stop loss. I love to show a little math with my writing so lets get into this.
The basics you need to know are as follows: account base equity is $2000, you’re going to place a trade with a 100-pip stop loss and a take profit of 120 pips, and finally, you’re going to risk 2% on this trade or $40. That means that each pip is worth $0.40. Your potential gain from this trade is $48. Cool enough. Lets say you win this one. Awesome. You’re now rockin’ with a $2048 Forex account. Life is good.
Now, lets look at a series of trades with nice, tight stops. You’ve got four trades here well look at. These all have 12-pip stops with, say, 60-pip potential. These trades are not out-of-the-ordinary nor are they impossible to find. Keep following me. The juicy stuff is coming up right now.
The first three trades stop out. Lets look at the math. By the way, Im starting this one out with a $2000 account just to compare the two sets of trades equally.
The first trade has a 12-pip stop at 2%. That means each pip is worth $3.30. You always, always, always round down to the nearest dime anytime you’ve got under $100,000 in your Forex account. You stopped out so you multiply that by your 12-pip stop loss and you’re out $39.60. The next trade is worth 2% again, and since these trades could all be happening simultaneously, were going to make things easy and stick with the $2000 equity for all of them. These pips are worth $3.30 like before.
Again, you’ve taken a no-brainer trade that just bit the dust. Grrr Stupid market. Don’t go there. Don’t start over-thinking or getting emotions involved. Keep it mechanical, non-emotional, and completely financial. Youre out another $39.60. So what.
Now your account is at $1920.80 and you’re feeling uneasy about taking the next no-brainer, small-stop trade. But, you do it anyway because some chic named Caden told you to. Here we go.
You’re risking 2% yet again and you’re still at $3.30 per pip. Well, crap, this one stopped out, too. You’re down $39.60 for a total of $118.80. That’s about 6% of your account gone in a short while. Ugh, do you really have to take all of these no-brainer, small-stop trades? Haven’t you suffered enough?
Yes, you do and no, you haven’t. They are no-brainers. That means you do it. Period. Its a rule all foreign currency traders should follow yet so few do. Perhaps that’s why only about 3% of Forex traders ever make any real cash in the foreign currency market. Hmm food for thought.
Lets trade.
The final trade of the day is the same as the others: 12-pip stop with a 60-pip take profit. This one wins! Now, lets do the math and figure this bad boy out.
You’re risking 2% again so your pips are $3.30 each. You hit your take profit at +60 pips. I don’t know about your math skills but mine tell me that’s a win of $198 on that stupid, no-brainer, small-stop Forex trade. Lets look a little deeper.
You won a 100-pip stop loss trade for 120 pips. You got $48 and were happy with that. Awesome or is it?
You just took a royal bath with three losing trades in a row. You were down $118.80 and feeling like a loser until you won that final trade. After calculating your returns on those 4 trades which were a whopping 75% loss-rate, you’re up $79.20″far more than you made on that 120-pip gain earlier. Remember, that one was only worth $48.
You know whats really cool? You could even lose two more trades of the same type as above, win the 6th trade, and be at $2000″exactly what you started with! That’s an 83.3% loss rate to come out at break even. Are you kidding me?
This is just a small but vital secret you must always remember as a foreign currency trader. The power of the small stop loss is huge, my friend. Trade it like a machine and its easy to watch your account grow”and grow”and grow”and grow.
You get my point. Trade it.
If you have a small Forex account you want to grow into an equity-exploding MONSTER, I invite you to come see me at Simply Signals and let’s turn that dinky account into something really spectacular. My goal is 400% equity growth in 12 months for all of my clients. Try and find a stock broker or other investment vehicle that can do that for you! Come see me and let’s trade!
About the Author:
If you have a small Forex account you want to grow into an equity-exploding MONSTER, I invite you to come see me at
Simply Signals and let’s turn that dinky account into something really great. My objective is 400% equity growth in 12 months for all of my clients. Try and find a stock broker or other investment vehicle that can do that for you! Come see me and let’s trade!
