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Trading Using 2 Accounts: The “Trading Plan” Account and the “Riskier Trades” Account

It could be said that perpetual trading just for the sake of trading is tantamount to gambling. No buts about it.  It’s just like throwing away your hard earned money at Marina Bay Sands. I am sure that is not what you intend to do with your trading account. You would want to grow your trading account to the size that one day will help you gain financial freedom from trading forex. What then differentiates gambling and trading?

In a nutshell, information is the key distinction between a trade and a gamble.

However, like everything else in life, success in trading requires not just hard work but homework as well.  The part which diverts away from what we normally experience is that in trading, even if you work hard, it doesn’t mean that you will win.

A fundamental trader who doesn’t understand the prior market expectations, the current price flow and countervailing information on the other currency in the pair and who rashly reacts to the latest economic release is just gambling.

Likewise, a technical trader who only looks at a five-minute chart to gauge his support and resistance points is just gambling. Looking through the hourly, daily, weekly and monthly support points, carefully calculating Fibonacci retracement positions and acting only when multiple time frames confirm his analysis is the right approach to take and will put him in better stead. Of course a trading system might incorporate more than the things that I have mentioned above.

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I have to admit that as a constant trader myself, the temporary euphoria of hitting the jackpot (pun intended) and the rush of being “ïn the game” can be very tempting. But with no edge or solid information, you’ll only leave yourself vulnerable to price fluctuations which could cut your account into pieces and in the end leaving you dry.  Trading is fundamentally a game of information so it’s imperative that you keep abreast of the latest developments in the market. There is no magic formula; no simple 7-minutes per day method to make you money. Just pure and simple gathering of available information and analysing it before you make a trading decision. The best thing about trading is that the information is there right in front of you. Where? There in the charts. Nothing more and nothing less. Whatever information that you need is in the charts. It has more or less internalize whatever information that has been released.

With this in mind, I decided not to let myself fall prey to the situation and I have created two separate accounts. Yes, you heard it right, two accounts to beat the devil in me that might interrupt the more disciplined part of me.

One account is for trades that would only follow my trading plans. Here, I traded only calendar risk on a reactive basis with very disciplined entries and exit rules. In other words, I strictly adhere to money management and would never allow anything to interfere with the money management part.

What about the other account?

The other account would be used for all riskier trades. It is where I take my scalp trades and where I test out new trading ideas. It is also used to trade lower time frames when the market is going sideways and is not in trending mode.

Surprisingly, my “Trading plan” account which I traded far rarely and more prudently incurred much lower drawdowns and gained higher profitability. Meanwhile, the equity in my “riskier trades” account tend to bounce up and down like a rubber ball, at times giving me high returns and at times experiencing drawdowns that can cause nausea to a non-seasoned trader. If this was my main account, you can bet that it will affect me psychologically and emotionally. But, since it is not my main account, it has little impact on my trading psychology.

For me, the thrill of “being in the game” has slowly disappeared. Although, I still trade using my “riskier trades” account, I am no longer drawn to making impulsive trades. I’ve realised that it’s just not worth the risk, and this has been the most valuable lesson I have learnt so far and the reason why I am still maintaining my two accounts.

You might want to adopt this approach if you have not beaten the urge to always take a trade and be in the market. It will help save your main account from falling prey to your impulses and need for adventure, so to speak. When the time comes and you don’t need to use the second account for the main purpose that you created it, you can then use it for other purposes, maybe to test a new trading strategy or two.

All the best to your trading!

~ Ardy

By | 2017-01-01T13:01:14+00:00 March 10th, 2014|Categories: Forex Trading Articles|Tags: |0 Comments

About the Author:

Ardy Ismail is Professional Forex Trader and Forex Coach specializing in the Forex and Futures markets. He trades using both Technical and Fundamental Analysis and has a deep understanding of risk and money management strategies. He has been trading the Forex market since 2008 and shares his analysis of the market on this site.

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