Often times, forex traders think about their trading accounts in terms of ROI (return on investment), ROE (return on equity), and similar terms. However, there is a particular estimation parameter that is more widely understood among traders and this is the length of time it takes the trader to double his or her account. Nevertheless, the amount of time it could take a forex trader to double his or her account would differ and would be based on varieties of factors, like the trader’s risk profile, reward-to-risk ratios, and how the trader manage open and lucrative positions.
The Standard Way
Traditional traders who traded the market many decades ago did not have access to leverage, trading on margin, minute-charts, and real-time Forex news. They traded the normal way and in the end, saw their accounts doubled. However, you need to be aware that doubling your investment this way will take a while. However, the better part of it is that it reduces your risks and limits your loses.
The concepts of risk per trade and reward-to-risk ratios
You may already know that taking greater risk will boost your chances of making a greater profit if the market moves in your favor. This is one factor that determines the time it takes you to double your account or make a 100 percent winning trade. However, you don’t have to be a great risk taker to double your account. You can still double your account even if you are not a great a great risk-taker. The difference is that it will take you a long time to get there.
The reward-to-risk ratio as well determines the number of trades required to double your account. In theory, taking trades with an R/R of 2, and a risk per trade of one percent will take you 50 trades to double your account. When you place this side by side, an R/R of 4 and a risk per trade of 2 percent, which takes you only 10 trades to double your fair play! Despite the fact that taking higher risks boosts your profit, you still have to concentrate on your overall risk exposure to stay away from wiping off your account rather than double it.
How you manage your open trade positions also boosts your likelihood of making greater profits. Do you feel comfortable scaling in and making additional gain after your winning positions? These factors we have mentioned and other few ones can be grouped into two methods of doubling your account.
These are the safe way and the speculative way.
The safe way
This approach is best suited for traders who can’t take significant risks. It is focused on taking a minimal amount of risk in each trade and the reward-to-risk ratio that assists to determine the maximum risk the trader can take comfortably while at the same time increases the chances of the trader growing his or her account. Nevertheless, this approach will take time before you can double your investment.
The speculative way
Doubling your account the speculative way is the riskiest part of it all. Unlike the safe way, this method of doubling the trader’s account is when the trader takes a higher risk per trade and reward-to-risk ratio. This method of trading is more suitable for risk takers. However, while engaging in these trading methods they still need to ensure they follow all the principles of money and risk management to be able to witness a 100 percent increase in investment.
For the speculative trading method, supposing that a trader has 2 percent risk per trade and an R/R ratio of 4 and above, a trader would require just roughly 10 successful trades in a row to double their account. Nevertheless, if the trader, on the contrary, loses the same amount of trades consecutively, he or she could lose roughly 18 percent on equity.
Also, when a trader trades with an R/R ratio of 4, he or she would find it hard to sustain in the intraday market situation since stop-losses ought to be very tight compared to the anticipated take-profit level. Bearing in mind that lots of currency pairs trade in a 100-150 pips intraday range, the traders stop-loss ought to be situated roughly between 25 to 40 pips.
Which approach is the best way to double your account?
It all depends on which one you find most suitable after accounting for both the advantages and disadvantages of each strategy. The standard way of trading the market, without leverage and holding trade positions for long periods of time consumes less amount of time. On the other hand, it also doesn’t come with the number of trading opportunities you will get when you trade short term with leverage.
If you belong to the group of traders who want to double their accounts quickly, you’re a better off with the use leverage and trading the market over a short time frame. This comes with the greatest profit potential. It can also boost your loss significantly if the trade goes against you. You can still double your account the safe way although it may take time. Traders who love to take huge risk are better off with the speculative approach.