Ignore "Pro" Trading Advice And Exploit At Home Forex Trader Advantages To Boost Profitability, Beat Other Investment Returns & Reach Your Financial Goals In The Shortest Time Possible
In a previous post, I talked about how the fastest way to Forex success is by eliminating or avoiding the pitfalls that lead to failure. I looked at what is keeping other traders from being successful… and then came up with solutions to strategically design a way of trading with the highest probability of success.
I was able to create a way of trading that is profitable over the long-term. But that did not specifically address how to make higher profits than other investment opportunities. To solve that problem, I needed another epiphany.
I truly believe this is the missing piece of the puzzle for at-home traders to reach the extraordinary profits they seek.
My first epiphany involved looking at other traders who were failing to become successful traders… and NOT doing what they were doing.
My second epiphany involves looking at professional trader advice (especially on money management) and NOT doing what they say to do.
I fully understand, my second epiphany might seem counterintuitive at first glance. After all, isn’t following professional advice the best way to learn ANYTHING?
Normally I would agree. But after giving this some deep thought, I came to realize following pro trader advice on money management was what was keeping me from making significant profits… or what I call “money that matters”.
The truth is, we are not trading huge quantities of other people’s money as a profession to fulfill rich client’s expectations. We are trading our own money (which is a significantly lower amount of money), for meaningful profits to ourselves.
Therefore, being a professional trader and being an at-home trader are two very different animals.
Think of it this way…
You wouldn’t learn how to train a house cat by becoming a lion tamer, would you?
I read an article in the Wall Street Journal recently that talked about how Wall Street Traders often miss out on investing in small companies that eventually become huge because they cannot buy and hold through the wide swings of price.
Since the rise of small companies is often accompanied by large swings up and down in price, Wall Street traders cannot just stick with the investment over the long term (even though it would be EXTREMELY profitable over time to do so).
In short, because of the nature of Wall Street trading with other people's money, there are restrictions and limitations placed on the trader that often keep them from massive profits.
As at-home traders we do not have these same restrictions and limitations… so we should not trade as if we do.
Here is some of the advice pro Forex traders give that keep at-home traders from meaningful profits…
- Strive for a very smooth equity curve
- Trade multiple non-correlated currency pairs
- Trade extremely low risk per trade
Let’s go through these one by one and identify the solutions…
> Pro Traders Strive For A Very Smooth Equity Curve
OK, so what is an Equity Curve?
Here is a definition from Investopedia.com:
An equity curve is a graphical representation of the change in the value of a trading account over a time period. An equity curve with a consistently positive slope typically indicates that the trading strategies of the account are profitable, while a negative slope shows that they are generating a negative return.
For pro traders, a smooth equity curve is a MUST because they want to attract a lot of other people’s money. And wealthy people don’t want to put large quantities of their money at risk and suffer through large drawdowns and profit swings.
Wealthy people ALREADY have a lot of money… so the focus is more on conservation first and growth second. They want to conserve the wealth they already have, and watch it grow nice and steady.
In short, they are willing to sacrifice profit potential in favor of low risk, steady gains.
Here is an example of a smooth equity curve:
The smoother the line up, without large dips and jumps, the better.
So, this is what pro traders are looking for. And the next two pro trader recommendations are what help them achieve a smooth equity curve.
Let’s take a look at those tactics...
> Pro Traders Trade Multiple, Non-Correlated Currency Pairs On The Same Account
One of the ways pro traders try to keep their equity curve smooth is by trading a lot of non-correlated currency pairs on the same account.
Since correlated pairs tend to move similarly, they want to trade non-correlated pairs to keep from suffering multiple losses at the same time on similar currency pairs.
The thought is two fold:
- They won’t suffer multiple losses on similar currency pairs at the same time, resulting in a big drawdown.
- Placing multiple trades on non-correlated pairs means some should be winners and some losers… smoothing out the overall equity curve on the account.
As long as the winners earn more than the losers over the long term, the account will be profitable. But more importantly for the professional trader, the equity curve is smoother.
Having a smooth equity curve is very important if you want to attract high investment clients.
As an at-home trader with a smaller account, I can accept emotionally and financially wider swings in equity… which means I am not bound to trading a large amount of currency pairs on the same account.
My Solution:
Instead of looking for groups of non-correlated currency pairs to trade on the same account, I focus on specific currency pairs that perform the best and trade ONLY that ONE currency pair on the account.
I look at each trading account as a separate and independent trading business and focus on trading ONE currency pair per account with the goal of being profitable over time.
OK, now let’s look at the next part of the equation...
> Pro Traders Trade Extremely Low Risk Per Trade
Pro traders often say you should not trade more than 1% or .05% of your account on any given trade, or even lower. This makes sense if you are trading a HUGE account with millions of dollars, as 1% or ½% of such a large account is still a significant amount of money.
Furthermore, since they are trading MULTIPLE pairs on one account (like we talked about previously), they need to consider the overall risk on the entire account. For example, if they were placing 15 trades per account at 1% per trade, that would be 15% risk on the entire account.
As an at-home trader trading only ONE currency pair per account, I only have to focus on the maximum risk per account I am willing to accept. And since I am not taking lots of trades on the account, this is very easy.
My Solution:
Trade with a maximum account risk of 5%. And since I am only trading one currency pair per account, this means the maximum amount of risk I have on my accounts at any one given time is 5%.
Instead of splitting up my risk between trades and using ridiculously low risk per trade, or running the risk of overtrading my account, I keep things simple.
- If I’m only placing one trade, I use the full 5% per trade.
- If I’m planning on taking partial profits, like I do in Forex Signals Blast Off, I use 2.5% for each of the two portions of the trade.
I think you can see where I am going here.
Pro traders are bound by certain limitations and restrictions because they are trading large amounts of other people’s money. They need an extremely smooth equity curve to attract wealth investors. Therefore, they employ tactics like trading large amounts of non-correlated currency pairs on the same account with extremely low risk per trade.
On the other hand, as at-home traders, we are not bound by these same restrictions and limitations. Therefore, we can trade one currency pair with the maximum account risk we are willing to accept.
But just because we are not as concerned with an extremely smooth equity curve, we still want an equity curve with a consistently positive slope.
What Type Of Equity Curve Am I Looking For?
Just because I’m not employing the methods of placing lots to trades on the same account with extremely small risk per trade does not mean I’m not looking for a nice looking equity curve. I don’t want to see HUGE drawdowns and extreme up and down movements.
Here is an example of the kind of equity curve I’m looking for…
As you can see, there are some jagged edges on this chart. But the overall TREND of the line is up… which is what you want.
Basically, as an at home trader trading my own money on a smaller account (compared to pros), I can focus more on overall profitability and an account with the profits TRENDING in the right direction without stressing over obtaining an extremely smooth equity curve.
As long as the trend of the account is on the rise, I’m on the right track. And in my experience, trading this way can be MORE profitable than trading a portfolio with low risk per trade.
How My Single Focus Approach Leads To Potentially Way Higher Profits
To recap, pro traders tend to place a lot of trades on the same account with extremely low risk per trade in the effort to have a very smooth equity curve which helps attract wealthy investors.
By doing things this way, the profits are COLLECTIVE… profits are the product of ALL the trades together rising steadily in small increments.
As an at home trader, I can do things differently.
I focus on the best currency pairs to trade, and trade each currency pair as a separate and independent trading business by trading that ONE currency pair on ONE account with the MAXIMUM account risk per trade.
So, why do I think this is a better way to trade (and potentially way more profitable)?
- I can focus on the currency pairs that produce bigger swings in the market which makes higher risk to reward trades possible.
- The entire maximum risk per account is used, meaning winning trades can generate significant profits.
- By focusing on one currency pair, the overall profitability of that pair is independent of other pairs, meaning higher performing pairs are not dragged down by lower performing pairs.
- When a pair is performing well, the profit potential rises exponentially due to the power of compounding.
- I can run multiple accounts, each responsible for their own profitability, to add income streams to my overall wealth accumulation efforts.
I believe, and my experience has shown, this to be a more profitable way of trading. Plus, I believe this to be an approach to trading that makes success more accessible to the at home trader.
Just think about it...
Pro traders have to figure out how to piece together a PORTFOLIO of multiple currency pairs where the COLLECTIVE performance of ALL pairs needs to end up profitable. This is no small feat.
On the other hand, at home traders can simply focus on finding ONE currency pair to trade, and trading it in a way that is profitable. This is a much easier challenge. And in the end, by focusing on the best performing pairs and compound interest… the profits can be exponentially higher.
I know this concept is hard for some traders to understand. But in the world of profitable Forex trading, MORE is not necessarily BETTER.
In Conclusion
Avoiding the mistakes other traders are making exposes the path to successful trading. But increasing profitability to the point I can beat the pros and outperform other investment opportunities required a further shift from common practices.
By avoiding what the pro does to obtain an extremely smooth equity curve I can embrace the advantages of being an at home trader controlling my own money.
I’m not forced to trade multiple currency pairs on the same account with very low risk per trade. I can trade one currency pair on each account with the maximum risk per account per trade.
I can compartmentalize my trading and treat each currency pair as a separate and independent Forex business. And I can increase my overall wealth accumulation potential by adding accounts and trading the same currency pair in a different manner (different profit targets) or trading other currency pairs.
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And this, my friends, has been one of the reasons I’ve been able to trade profitably and beat other investment opportunities. Furthermore, increasing each account's profitability and using the power of compounding is what allows me to pursue making the money I need in the time I have.
If you take one thing away from this post it should be this… trading MORE is not necessarily better. So, embrace the at home trader advantage and FOCUS your trading for the highest profit potential.
Edward Lomax
