It's Bad News for Savers and Good News for Forex Traders
In this video:
00:42 European Bank Drops Interest Rates
02:10 A really good feedback of 2.5% returns just on one trade
03:24 Forex trader’s advantage in saving and investing
Today, I’ve got a really bad news for you if you are a saver but exceptionally good news for you if you are a Forex trader like me.
So let’s talk about that right now.
Hi traders, it’s Andrew Mitchem here, The Forex Trading Coach. Today is Friday, the 5th of September and as I’ve mentioned I’ve got some bad news for you if you are a saver but some really good news for you if you are a good Forex trader.
The bad news first, yesterday, the European banks decided to drop their interest rate yet again and the Euro is now are at a level that’s lowest against the U.S. for over one year. I’ve done a little bit of research because here in New Zealand our interest rates are some of the highest in the world. But even so, around a 4% on a term deposit is about as high as you can realistically wish to get right now.
I’ve done a bit of research and I found that in Europe, most savings (banks savings) rates are now under 1% and that’s per year (1% return/year). The highest I could find on a 1 year fixed-rate in the U.K. was 1.4% and the highest that I could find in the U.S. for 1 year was 1.1%.
So some pretty misely depressing kinds of returns there if you have money in the bank or term deposit as a savings. And really when you think about the realistic day to day goings on there you add inflation into that and it means you’re actually going backwards by having your money in a bank.
For us as Forex traders, of course we have the potential to make substantially far greater returns than that.
And I’ll give you a few examples:
Just yesterday, I held a live 2-hour live trading room session with my clients and I had an email from one of the clients who’s just joined only a few weeks ago. He said, “Hey Andrew I really enjoyed the webinar, I needed to let you know that I’ve made 2.5%.” – On a trade that he mentioned he was taking while we were on the webinar yesterday.
2.5% return just on one trade, so really good feedback there.
I personally took 3 trades during that session, all on the 1-hour charts and 2 of them made profit and 1 lost. I was risking 0.5% of my account on each of the 3 trades. I had a trade on the Euro/U.S. Dollar (EUR/USD) that made a 2.4 reward to risk, a trade on the British Pound/Canadian Dollar (GBP/CAD) that made a 1.7 return to risk. Both of those two were profitable.
I also had a 1-hour chart trade which I took on Gold which lost. Put all that together, 2 profitable trades, 1 losing trade with only 0.5% risk on all 3 of them, on each of them, that gave me a +1.55% return on my account just while I was talking to my clients trading live in front of them on a webinar.
Now out of all the lists I’ve got here, I can’t find anybody in terms of a bank in the U.K., Europe or the U.S. that can make more than that 1.55% in an entire year on my savings. I’ve made that just in 3 trades whilst on a live session.
So it just shows the advantage that we have as Forex traders over the more traditional forms of investing or savings. So I just needed to let you know that in terms of what great returns can be made providing of course you have the usual things in your favor. You need to trade on the time frame that suits you or multiple time frames that suit you. You need to have a strategy that’s proven and a strategy that you understand and it works favorably for you. You need to have very low risk per trade which is why I have a maximum 0.5% of my account myself on any one trade, and you need to have a high return from your trades.
So those 2 trades that were profitable, one of them had a 2.4 reward to risk. The other had a 1.7 reward to risk. So in other words on the EUR/USD, if I was risking 1% of my account it meant that I made 2.4% return. I was risking half of 1% (0.5%) therefore I made a 1.2% return on that one trade.
So keep your risk very low, have high returns per trade, have a strategy that works for you, have a time frame that you like or a multiple group of time frames that works practically for you. Put that together and your Forex trading will way out do the traditional forms of investing. And don’t forget that to be a good Forex trader you do need to treat your trading as an investment. It’s not a gamble, it’s not a high risk; it’s an investment (a longer term investment).
Do that. You'll do extremely well.
Talk to you next week.
This is Andrew Mitchem from The Forex Trading Coach.