Best Stock Trading Advice | Free Forex Trading Tips



Best Stock Trading Advice | Free Forex Trading Tips

Understanding Forex - #5 - Compound Interest.



5 EMAs Forex Trading System.
An Incredibly Accurate Fx Trading System Developed And Personally Traded By... (more)
Broker - Nightmare.
Broker Nightmare - The Ultimate Forex Traders' Protection Against Broker Ma... (more)
Do U skaDoogle?
1. What is Forex

2. Technical analysis

3. Fundamental analysis

4. Money management

5. Compound interest

Compound Interest.

As an investor, time can be your best friend once you learn how to use compound interest to your advantage. This is an important aspect of any trading system. Compounding your profits can make you very wealthy and help you increase your investment profits exponentially.

The drawback of this technique is that you may also increase the risk. By reinvesting your gains you may multiply your profits but you can also suddenly lose everything.

I will explain here how compounding can make you wealthy. Also I will describe some of the risks involved. This strategy may be suitable for some investors, but not for all. It is more like a long term strategy. Most traders or investors do not have the patience to undergo these kinds of strategies, but they could be quiet profitable.

Remember this phrase: “Anything that can grow exponentially can explode.” By explosion I mean here fast multiplication, quick rate of growth. The important word is exponentially.

If you could double your money ten times in a row, and you start with one thousand dollars, the tenth time you would be a millionaire. This means that if you invest $1,000 and double, then you invest the $2,000 and double it, then you do it again and again, you will be a millionaire by the time you double your money the tenth time.

Can you realize the power of compound interest? We are not talking about a specific time frame above, but the average amount of time that takes to double your money is very important. For example, if you can double your money every month and you start with $1,000, it will take you less than a year to be a millionaire.

Some people try to do this at Forex, but it is very, VERY risky. There are other more conservative goals though. For example, if you could double your money ($1,000) every 6 months, you would be a millionaire in about 5 years. If you could double your money ($1,000) every year, it would take you about 10 years to be a millionaire.

Compound interest is one of the “secret paths” to wealth, but some people get greedy about it and lose their shirt. Also, there are some risks inherent on this technique that I will explain bellow. First let’s describe the rule of 72 which is very important to understanding how compounding your profits work.

The rule of 72 is good for computing when your money will double at a given interest rate. If you want to find out how much would it take for your money to double, just divide the annual interest into 72. For example, if you get 12% on an investment and that rate stays constant, your money will double in 72 / 12 = 6 years.

You can also compute the interest rate if you know how often your money will double. If you are told that your money will double every 5 years, the annual interest rate will be 72 / 5 = 14.4%. This is a rule of thumb. It gives approximate results.

Now, compounding your profits at Forex can be risky. You can use proper money management techniques, like those I explain on other article of this series, to control some of the risk, but not all. That’s why it is important to “never trade more than what you can afford to lose.”

The important question is to define whether this strategy is suitable for you or not. That’s up to you. Some traders and investors combine both, short term and long term strategies. They may also compound some of their profits.

Whether you compound your profits or not, that’s your choice. My purpose on this article was to show you how important compound interest is and how profitable it can be. You can learn other trading strategies and aspects about trading Forex from my other articles.



EasyWebRiches © 2006



Browse Our Information Mall
Business / Investing
Careers, Industries & Professions
Debt
Derivatives
Economics
Equities
Foreign Exchange
General
International Business
Management & Leadership
Marketing & Sales
Outsourcing
Personal Finance
Real Estate
Small Biz / Entrepreneurship
Equities & Stocks
Commodities
Do U skaDoogle?!

Best Stock Trading Advice | Free Forex Trading Tips

Other Interesting Articles

Key Benefits Of Online Forex Trading

Benefits of online forex trading... [Read more]

The Secret Behind Forex Robots

Forex robots are making waves. They are believed to have provided numerous benefits to traders who are taking advantage of their support capabilities. Why are Forex robots successful? Forex robots are also known as Expert Advisors or EA. They do live up to their name since they are said to have helped in the $3 trillion market turnover everyday in the Forex ma... [Read more]

More Than Just The Robot: Forex Trading 101

The benefits of using Forex robots have been determined and defined by experts. There are a lot of experts who have testified to the effectiveness of Forex robots in improving their trade and profits. But what is it about Forex and why do people would like to be involved i... [Read more]

Forex Trading - Should You Invest?

Forex trading is all about putting your money into other currencies, so you can gain the interest for the night, for time period or the difference in trading money all around. Forex trading does involve other assets along with money, but because you are investing in other countries and in other businesses that are dealing in other currencies the basis for the money you make or lose will be based on the trading of m... [Read more]

Forex Trading: How To Get Started

Forex, or foreign currency exchange, trading can be broken down into several key elements. These include a market, your broker, your broker's trading software, and yourself. In short, you will make decisions, enter them into trading software, and watch the results. It isn't necessary for you to know very much else about your broker at this p... [Read more]

 Watch Videos on "Stock"

Forex Tips - Google News


Moneycontrol.com
RBI may use forex reserves to stem currency loss: Karvy
Moneycontrol.com
According to the research firm, the RBI is expected to use its forex reserves to stem the currency loss. Ever since the yearly low hit in Feb we have been seeing the rupee continue its fall in one way direction. Despite a lot of efforts from RBI and ...

and more »

BigPond News
$A falls as European worries worsen
Ninemsn
Check out ninemsn Finance's Tax Time for tips and advice on how to make your 2011/12 tax return work for you. The Australian dollar has plunged to its lowest level in almost six months as concern deepens about the euro zone debt crisis.
European night sweatsBusiness Spectator

all 224 news articles »

Top 5 Spread Betting Tips for Trading Forex by The Spread Bettor
MarketWatch (press release)
The following guide offers an overview of the foreign exchange market, as well as our top five spread betting tips. Forex, also referred to as foreign exchange or simply FX, is one of the most traded financial products.

and more »

Best Stock Trading Advice | Free Forex Trading Tips