Hello there – from the airport!
I am writing you from the transit area in between 2 flights… I am on my way to Vilnius to provide a presentation about Forex trading at a seminar. 🙂
That is why my usual office with extra screens has been temporarily replaced with a view on 2 massive planes. Quite impressive!
The entire flight and the journey has provided me inspiration for Forex trading as well. Maybe we can make comparisons between fliying and trading? Are there similarities? What do you think? Please write your thoughts down below!
In certain ways I do believe Forex trading and flying are similar.
1) When up in the sky the primary concern of a pilot is safety and mitigation of risk and enabling a smooth flight. Traders also want a safe trip (for their trading capital) and a smooth equity curve.
2) When flying, pilots see the horizon and think that the sky is the limit. Forex traders often think the same during trading. 🙂
Therefore, but also considering the fact that I have no internet access and can’t see the charts, this time around ana article not focused on charts but on how a trader could approach Forex trading. 🙂
THE FLYING APPROACH TO TRADING
Both jets fighter pilots and other pilots, who transport passengers, are faced with risk. But the first one tests those boundaries to a great extent than the latter.
The Forex trader can attempt the same approach to their trading. You might wonder how?
A Forex trader can split the accounts in 2 (or multiples). Obviously the Forex trader wants to mitigate risk in all cases, but trading more aggressively with 1 account could be perfectly justified.
Creating one account with the majority of the trading capital (80-99% of the total) and another trading capital with the minority of the trading capital (1-20% of the total) is one way of doing that. Remember, we should always be trading with risk capital anyhow.
a) The majority of the trading capital would be the equivalent of a flight with a stable journey.
b) The minority of the trading capital would be the equivalent of a jet fighter flight.
HOW TO SETUP
In case A, the Forex trader wants to minimize the drawdown, aim for a stable equity curve, and aim for more conservative goals. Risking 0.5% or 1%, with a maximum of 2%, and aiming for 5% monthly would be an example of standard approach.
In case B, the Forex traders wants to spice up the potential return with a designated account focused on taking more risk. Here too, the trader wants to have limits. But the limits can be juicier. A trader could think of risking 3-5% and aim for higher returns such as 20%. Don’t trader higher than 2-5%, otherwise the chances of the riskier account’s survival are too slim.
Both accounts could provide the same $ profit, albeit with different risk versus trading capital. Of course, the downside risk of the “riskier” approach has to be realized from the very beginning and not neglected. Obviously the drawdown can be sizeable. And the trader should check whether they have the matching psychology and are willing to take that risk with part of their trading capital. Also, set yourselves clear boundaries regarding how much risk capital you want to invest in the second account (versus the main conservative account) pear year and always stick to these parameters.
Do you think that this approach is too risky? Or are you already doing something similar? Does this approach make sense to you or would you prefer the safer one style approach? Let us know YOUR opinion down below!
Thanks for sharing this article and Good Trading!
I am sending you my regards from the sky!
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