Getting a high rate of return in today’s day trading environment means getting in and out of the market as quickly as possible to avoid exposure to holding period risk. Many day traders take use leverage to maximize returns for the brief risks they do choose to take in the market.
Look For Small Gains and Ramp Them Up to Higher Rates
Whenever I want to get a high rate of return (read:always) with a minimum amount of risk I inevitably look for a small, but 99% sure thing gain in the market, then I borrow as much money as I possibly can to increase the amount of purchasing power I have (I use leverage) to buy as many units of that small gain transaction as possible. Perhaps an example will help.
Sample Leverage Trade Computation
Jane has $10000 invests in currency A, which gains 1%, producing $100 profit.
Kim with $10000 buys $2000000 of currency A (on margin) which gains 1% producing a $20000 profit (200% return on Kim’s initial $10000). This would be considered a 200:1 leverage ratio. Kim has bought 99.5% of her investment on margin (with borrowed funds).
Long Term Investors Suffer Holding Period Risk
I would hope it is easy to see why long term investors like Jane get nowhere investing in the market while other more savvy investors like Kim leverage the small gains to be had from short term returns into high rate of return trades. There really is no other way to get a high rate of return by investing long term. In today’s market the risk of financial fraud, economic upheaval, and general executive incompetence makes investing in 2009 a trader’s endeavor only. Understanding and then applying leverage to small inequalities in the market is the way the best traders are making money today.
Taking the House with Leverage Is Key to Day Trading
Suggested Reading for More Info on High Rate of Return Investments
High rate of return investments either use margin to amplify small gains by increasing buying power in the market. Another way to make a high rate of return day trading is to trade binary options, where investors can make up to 75% return hourly on the most liquid securities.
Twitter
Facebook
Myspace
Youtube
Identica