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Maximising Your Trading Capital

Capital allocation is an important part of trading and investing, it makes up a massive part of the decision making process. How much capital stays in cash and how much capital is invested per trade, which encompasses risk management otherwise known as capital allocation.

As a trader, capital allocation and utilisation is critical to your success. So what are some techniques you can use to enhance your capital allocation and increase your return on investment through smart allocation.

Capital Allocation to a Trading Strategy

For traders with multiple trading strategies, it is possible to consider different capital allocations towards each strategy type. Using this method, the trader can consider giving higher probability setups a higher capital allocation compared to other trading strategies. The strategies that are less probable for success may gain a lower capital allocation when traded, for example, if you have an account of $50,000, one strategy may trade to 1% of $50,000 ($500 risk) while another strategy in the same account may only receive capital allocation of $15,000 at 1% risk (or $150 risk) based on lower success of the particular strategy.

Capital Liquidity

Trading is a way to utilise capital with the aim of achieving higher returns. Depending on the style of trading, a short term trader will often be holding mostly cash with the broker the majority of the time. Cash often gives a level of safety and liquidity, giving a trader the ability to make decisions quickly and be nimble as an investor.

Capital Maximisation

Once you have capital to allocate to trading, how can you maximise the benefit of using that capital?

Using your capital on margin by using leverage with a broker is a great way to maximise the buying power of your capital. Please note that leverage magnifies losses as well as gains.

Other Ways to Maximise Your Capital?

An alternative way to maximise capital is to have the broker allocate capital to your account. This can be done with FXT via the Incubator program. By passing an evaluation, may deem you eligible to maximise your capital and enter into the incubation phase. During the incubation you must adhere to some rules, which you most likely will have in place on your own trading to some degree anyway. By increasing your allocation of capital to trade with, you will inherently by increasing your capability to earn additional profit for the same amount of effort. This is beneficial in a sense of both time and money.

The incubation program encompasses a way of using your capital, but gaining matched funds to trade with to amplify what you do. Comparative to prop firm challenges, this form of capital maximisation reduces the risk of spending money on a challenge that you may not pass in the time limit. Those challenges can often drive irresponsible or irrational trading in the interest of trying to pass in time. Remove that time challenge and drastically reduce the target, and you have the FXT incubation program.

Is Maximising Capital Better Than Not Using It?

Maximising your capital potential means gaining access to larger gains and losses. The leverage portion of trading that FXT provide means that traders with less capital in their account can still trade positions far bigger than their capital could normally access. Providing opportunity to trade larger positions comes with positives and negatives.

Take into consideration the access to funds from the Incubator program, maximising your capital in this format gives you the capability to add 20% more to your profit in phase 1 and an additional 100% on your original capital with a 5 times multiplier on your capital. This form of capital maximisation helps to maximise your potential profits without increasing the risk to your own capital.   

Are you ready to maximise your capital?