In overseas forex trading, there is a trading method called “steady trading.” It offers many advantages, making it recommended for beginners in overseas forex. This time, we have summarized the advantages and disadvantages of steady trading, as well as trading methods that are compatible with it. To help beginners in overseas forex avoid confusion, we also explain specific profit and loss ranges, so please use this as a reference.
Advantages of Earning Steadily in Overseas Forex
The advantages of earning steadily in overseas forex trading include minimizing losses. Other benefits include being able to trade with a calm mindset and having the opportunity to experiment and learn through trial and error. Here, we will explain the details of these “advantages of earning steadily.”
Smaller Losses
The first advantage is “smaller losses.” In overseas forex trading, it is generally a rule of thumb to balance risk and return proportionally. Earning steadily means that losses also accumulate steadily and gradually. If you trade correctly, you are unlikely to incur significant losses in a single instance. This method of earning steadily is an ideal strategy for beginners in overseas forex trading.
Trading with a Calm Mindset
The second advantage is “being able to trade with a calm mindset.” When earning steadily, the amount of money you invest naturally becomes smaller. This allows you to analyze and trade more calmly. It is said that when people try to use more resources than they can handle, they lose the ability to make rational decisions.
If you lose the ability to make sound judgments, the likelihood of losing increases. For those who want to reduce their chances of losing, the steady earning approach is highly recommended.
Opportunity for Trial and Error
As mentioned earlier, the steady earning method minimizes losses. This comes with another advantage: “the opportunity for trial and error.” For example, imagine two traders, each with an investment fund of 10,000 yen.
Trader A decides to limit their loss per trade to 100 yen, while Trader B decides to limit their loss per trade to 1,000 yen. In this case, Trader A can trade 100 times, while Trader B can only trade 10 times. The more trades you can make, the more opportunities you have for trial and error, which leads to improvement.
The fourth advantage is “almost guaranteed experience.” By earning steadily, you generally avoid significant losses. This means you can stay in the trading world for a longer period. Naturally, the longer you remain in the market, the more experience you gain.
Experience is a valuable asset in any field. Even if you don’t win initially, you can use that experience to recover later. The steady earning method is an effective strategy to increase your win rate over time.
Disadvantages of Earning Steadily in Overseas Forex
The disadvantages of earning steadily in overseas forex trading include the inability to aim for a big windfall. Since it tends to involve modest trading, people who associate forex with a flashy image may find it boring. Here, we will explain the details of the “disadvantages of earning steadily.”
Unable to Aim for a Big Windfall
The first disadvantage is “unable to aim for a big windfall.” You may often see information on news sites or social media about people “earning hundreds of millions of yen through investments.” Achieving such results with the steady trading method is almost impossible. This is because steady trading involves low risk, which also means low returns.
However, getting accustomed to forex trading should come first. If you immediately chase large profits, you are highly likely to fail. Consider steady trading as a foundation for building knowledge and gaining experience. Once you acquire the right knowledge and sufficient experience, you can simply increase the amount of money you trade with to achieve larger profits.
Tends to Involve Modest Trading
The second disadvantage is that it “tends to involve modest trading.” Steady trading is essentially a style of accumulating small profits. These amounts are typically in the range of a few dozen to a few hundred yen. This can indeed make it less exciting.
However, seeking the thrill of gambling in overseas forex is dangerous. This is because the moment you introduce a gambling element, the likelihood of losing increases. Be sure to separate investment from gambling.
Specific Profit and Loss Ranges for Steady Trading
Even when hearing the term “steady trading,” many may find it abstract and difficult to grasp. To address this issue, here we will introduce specific profit and loss ranges to aim for in steady trading. However, what we present here is merely an example. Do not feel bound by this example, and adjust flexibly according to your trading style and market conditions.
How to Determine Using Pips
Pips is a “unit” used in overseas forex trading. Just as “yen” is used in Japan and “dollars” in the United States, “pips” is used in overseas forex. When determining profit and loss ranges in pips, it is generally recommended to aim for ±5 to 10 pips. If you are trading with 10,000 units, settle the trade when a profit or loss of 500 to 1,000 yen is reached.
How to Determine Using Percentages
When determining profit and loss ranges using percentages, it is generally recommended to aim for ±2 to 3% of your assets. For example, if you have an investment asset of 100,000 yen, settle the trade when a profit or loss of 2,000 to 3,000 yen is reached. It is commonly said that risks increase significantly when exceeding 5%, so be cautious. Exceeding 10% means you are taking on very high risks.
Trading Methods Compatible with Steady Investing
Currently, there are many trading methods available. Among them, some are well-suited for steady trading, while others are not. To help prevent beginners in forex trading from making poor choices, here are two trading methods that are compatible with steady trading. Both are recommended, so try the one that suits you best.
Accumulation Trading
The first method is “accumulation trading.” Accumulation trading is a method where you continue to invest a fixed amount in the same position every month. For example, if you buy and hold USD/JPY (1,000 yen worth), you continue to buy 1,000 yen worth of USD/JPY every month. You simply repeat this process consistently.
The advantage of accumulation trading is that you can gradually increase your investment funds within a manageable range. Although the initial amount may be small, after five or ten years, the money you have invested will grow to a significant amount. At this point, the profits you can gain will also increase. Accumulation trading is ideal for those who want to engage in forex trading over the long term.
Dollar-Cost Averaging
The second method is “dollar-cost averaging.” Like accumulation trading, dollar-cost averaging involves buying a fixed amount every month. The difference with accumulation trading is that “when the currency value rises, you decrease the purchase amount, and when the currency value falls, you increase the purchase amount.” By doing this, you can gradually lower the average purchase price of the currency.
As a result, the chances of making a profit naturally increase. While this method is slightly more complex, it is a traditional trading method that has been around for a long time, so it is worth incorporating into your strategy. In fact, there are traders who have used this method to earn profits in the hundreds of millions of yen.
Points to Note When Earning Steady Profits in Overseas Forex Trading
When earning steadily with overseas FX, it is important not to set a target profit amount. Be mindful of not trading every day and creating your own trading rules. Here, I will explain the “cautions when earning steadily with overseas FX.”
Do Not Set a Target Profit Amount
When engaging in steady trading, you should “not set a target profit amount.” Specifically, it is advisable not to set a goal like “earning X amount per month.” This is because the amount you can earn is not something you can control.
The amount you can earn varies depending on how the charts move at that time. If there are significant movements, you can earn a lot, but if the market is stagnant, you will earn little. If you set a target of earning X amount per month, you might end up making unreasonable trades. If that happens, the premise of steadily earning will fall apart, so be cautious.
There Is No Need to Trade Every Day
Some people may think they need to trade every day while engaging in steady trading. However, please note that “there is no need to trade every day.” In overseas FX, it is more important to “only trade in high-probability situations” rather than increasing the number of trades.
If trading every day lowers your win rate, then it is perfectly fine to trade only once a month. Keep in mind to “avoid unnecessary trades” as you approach overseas FX.
Create Your Own Trading Rules
When engaging in steady trading, it is essential to “create your own trading rules.” This is because, without trading rules, your emotions can waver. People who lose in FX tend to make haphazard trades. In contrast, “successful traders” tend to make clean trades based on their own rules.
Creating your own trading rules can be seen as a step closer to becoming a successful trader. Even a simple rule like “limit losses to X amount” is fine, so try to establish at least one trading rule for yourself.
Be Cautious of “Kotsu Kotsu Dokan”
In addition to steady trading, there is also the term “Kotsu Kotsu Dokan” in overseas FX. If you want to make a profit in FX, it’s essential to understand this concept as well. Let’s explain the details of Kotsu Kotsu Dokan.
What is Kotsu Kotsu Dokan?
Kotsu Kotsu Dokan refers to “losing the small accumulated profits in an instant.” For example, suppose you earn a profit of 100 yen 100 times, totaling 10,000 yen. However, in the next trade, you incur a loss of 10,000 yen. This is referred to as “Kotsu Kotsu Dokan” in the overseas FX community.
It would be fine if you just returned to zero, but in the worst case, you might incur a loss greater than your profits. Even if your profits accumulate, stay grounded and trade calmly without getting carried away.
Psychologically Prone to Kotsu Kotsu Dokan
It is said that people are “psychologically prone to Kotsu Kotsu Dokan.” This is because as profits increase, a sense of “ease” arises. Have you ever thought, “I have X amount this month, so it’s okay to spend a little”? This is the same phenomenon. If you can control it well, that’s great, but if you can’t, it can lead to disaster.
Again, even if your profits accumulate, do not get carried away. There are traders who have incurred losses of several million yen due to Kotsu Kotsu Dokan, so be careful.
Methods to Earn Steady Profits Through Swap Points
In overseas FX, there is also a method to “earn steady profits through swap points.” Swap points refer to a system where you receive interest daily as long as you hold a specific position. If you aim for swap points, long-term investment is fundamental.
You can earn swap points by combining it with methods like accumulation trading or dollar cost averaging. However, the potential losses increase as the investment period becomes longer. Therefore, it is essential to clearly define your acceptable loss range.
Conclusion
In this discussion, we focused on the theme of “earning steadily with overseas FX.” The methods for steady earning have more advantages, such as keeping losses small and allowing for numerous trials and errors. Therefore, it is highly recommended for beginners in overseas FX.
In fact, there are individuals who started with steady trading and have now become traders earning millions. By accumulating knowledge through steady trading and gaining extensive experience, you too can aim to become a successful trader.