Powerup Capital Review #42

       People tend to blow the risks of margin accounts way out of proportion. Because of fear and insufficient knowledge, the margin risks seem bigger than they need to be, and many investors have either experienced or heard someone else's horror stories about getting a margin call. 

       I have heard many people talk about how much money they lost because they overbought a position, or tell sob stories about getting broker calls at the worst times. These stories made me scared too, until I realized that I was missing some important facts in assessing whether I was likely to have a similar experience.

1. What experience or knowledge did that person have before they used margin?
2. What were their investment objectives?
3. What was their investment plan to achieve those objectives?
4. What controls did they use to limit risk of loss?

       I think the important things to keep in mind are to use strict entry and exit criteria, use sound investment practices for getting into trades, and quickly cut losses short if a trade starts to go the wrong way! Also keep your investment capital intact so that you can take advantage of the opportunities that present themselves tomorrow- there will always be more opportunities! That is what's so magical about the forex market.

I could not thank Kishore enough for stressing the importance of money management in class.

Warmest regards,

Robert Niedermeyr

CPA (Aussie Class of 2007)

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