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Forex Signals Success Course 7

Forex Signals Deadly Secret 7: Too Much Risk On One Account

So, you decide you want to use a Forex signals service as a shortcut to Forex profits.  All you need is a Forex trading account and the ability to place and manage trades on the account.  Oh, wait, you already have a trading account… so you are ready to go!

Well, hold on.  It might not be that simple.  In this lesson of the Forex Signals Success Course, I want to go over why you should not commit the Deadly Sin of using too much risk on one account.

Opening And Funding A Forex Broker Account

Opening a real, live trading account is an important milestone for any trader.  Most brokers offer Demo accounts, so downloading the platform to your computer and playing around is not all that difficult.  But when you open a LIVE account, that is when things start to get serious.

Funding the live account you just opened is another milestone, because it means you are prepared to put real money at risk under live market conditions.  Obviously, this is a necessary step if you want to make real money trading the currency market.  But you would be surprised how FEW people who download DEMO accounts actually take the steps to open and fund a live account.

In the beginning, there is a hesitation about taking this step.  But if you want to be a successful trader, you need to open a live, funded account.  And, as you will see later in this lesson, it is probably going to be necessary to open MULTIPLE live accounts.

Too Much Risk On One Account

Let’s say you are one of the people who have actually opened and funded a live trading account.  And, you might even be taking trades on this account based on a strategy you have learned.  Then you decide to join a Forex signals service to follow the advice of an already successful Forex trader.

If you just start placing the signals trades on the same account as you are placing your own trades, you risk over-trading the account.  By that I mean, you are probably going to be risking too much money at any one given time by placing all the trades.  And using too much risk on one account is a sure way to get yourself in trouble.

As I mentioned in the Deadly Sin #6 Lesson, there will be losing trades regardless of whether you are placing the trades yourself based on a strategy you have learned, or if you are following a Forex signals service.  When you place a trade on your account, you need to decide the money management strategy you are going to use for each trade.  The trick is to find a risk level that safely allows you grow your account over time AND survive through losing trades or losing streaks.

Concentrate On The OVERALL Risk Of Each Account

A lot of traders know about money management and how important it is to long term success.  When placing a trade, you must decide how much money you will put at risk.  In other words, if the trade is  a loser, how much money will you lose.  (And as you should know by now, there will be losing trades).

One of the important, but often overlooked, aspects of money management is deciding how much overall risk you will accept on your account.  Since you will most likely have multiple trades open at any one given time, you need to manage how much risk you have on your account at any one given time.  If you don’t take this into consideration, it is easy to place too many trades at too high risk and put a large portion of your trading account at risk.

At that point, all it takes is one bad patch of losing trades, or a losing streak, to do serious damage to your trading account.

The Solution: Use One Account Per Forex Strategy / Forex Signals

The simple solution is to open multiple trading accounts.  Use one account per trading strategy or Forex signals you are using.  This way the number of trades you will be placing on one account will be limited, and you can predetermine your money management and risk per account.

In my opinion, every trading strategy  or signals package should be treated separately and traded on a dedicated account.  Not only does this help keep you from using too much risk on any one account, but it makes it easier to access the performance of the strategy or signals.  Don’t be afraid to open multiple accounts with your broker or diversify your accounts by using different brokers.

If the Forex signals are worth trading, they are worth having their own, dedicated trading account.  This will help keep you from committing the Deadly Sin of using too much risk on one account.

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About the Author

Edward Lomax

Edward Lomax

Edward Lomax is a Forex blogger and educator. Originally from the East Coast of the United States, he currently lives in Chile with his wife.
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