I was talking to a fellow trader about increasing my lot sizes, but he said that you spread your risk by having multiple accounts. I don’t see the difference. I was hoping somebody in the forum can please tell me what the advantages of having multiple accounts will do.
Thanks,
Pimpinpips:)
2 accounts wont work, you will pay the spread twice for your positions.
if you buy 1 lot of X and pay a 2 pip spread thats your risk. if you buy 2 lots of X the spread is still 2 pips.
if you have 2 accounts and buy 1 lot on each account, your going to pay the 2 pip spread on each account. now your starting out 4 pips in the hole.
im new to this stuff myself so i might be wrong, but thats how i see it.
I believe you are correct, this is my assumption as well.
I am trying to grasp how you are spreading risk by having more than one account. Is it the idea that you get in a bad trade you won’t be in it on the other account? Is the idea to diversify your funds with different brokers?
Seems more of a pain in the ass to be worth it.
Hi I’m not certain but aren’t you paying the spread on the lots purchased not on accounts. So basically you buy two lots at a spread of 2 pips and you end up paying 4 pips anyways…2 pips on lot #1 and 2 pips on lot #2. Which would be no different than buying one lot from one account and one lot from another. 2 pips on a lot from account #1 and 2 pips on a lot from account #2. So either way you look at it you are paying the 4 pips cause you are buying 2 lots. That’s just how I see it. Let me know if I am wrong as I am new too. So my advice is the same as Swordofrue stick with one account and save yourself the confusion.
I think you are looking at it all wrong. Yes you would be paying 4 pips but each account would be down 2 pips. So if it moved 2 pips up you will break even.
But that is not the purpose of 2 accounts. Yes it is insane to have 2 accounts with the same trade. That is why each accout should have their own rules. One account would be where you make (safe) trades. The trades that you know won’t make much money but you are sure it will produce a win most of the time. The other account would be your hit or miss account. You can take more risk, your losses will be higher but the wins should be larger.
ok, like i said im new too, but heres my take on it.
you buy 1 lot and it costs you 2 pips. 10 min. later you buy another lot and pay 2 pips. total 4 pips.
if you buy 2 lots to begin with you pay 2 pips.
the pips you pay are on the trade not the number of lots per trade.
i think :o
i wish someone in the know would respond to this thread.
Ok,
Lets say you are only trading one account and your lot size is 2,000. But for some odd reason you decide to have two accounts and you also decide to half your lot size. In this case it doesn’t matter at all because you are paying the same spread anyways!
2 pips with a 2000 lot size is equal to 4 pips with a 1000 lot.
lets me try to illustrate better.
Account A:
Lot Size - 2,000
Currency - GBP/USD
Pip Value - $0.20
Spread - 2
Transaction Cost - $0.40
Account B1:
Lot Size - 1,000
Currency - GBP/USD
Pip Value - $0.10
Spread - 2
Transaction Cost - $0.20
Account B2:
Lot Size - 1,000
Currency - GBP/USD
Pip Value - $0.10
Spread - 2
Transaction Cost - $0.20
So you can see that if you have two accounts and you subsequently halve your lot size then your transaction costs will remain the same.
However, if you do not modify your lot size then your transaction costs will double, but I am not sure why someone would have two identical accounts so it really doesn’t make sense.
Bazooko is absolutely right! Having many accounts is useful in the case where you have a play it safe type of an account (perhaps your larger equity account) and a more risky account. Also, having two accounts could be useful if you want to position trade and do shorter term trades on the same currency pair.
I am going to make a quick note about the original topic.
“Increasing lot size vs. separate accounts”
This seems to me that it implies that you would decrease lot size per account. In which case I believe I have clearly outlined why that would be useless. However, that does not disregard the fact that there are useful ways to take advantage of multiple accounts. However, splitting your capital in multiple accounts does not seem to advantageous if the only purpose is to diversify who you have your money with.
Thanks for the very clear post swordofrue. That’s kind of what I was trying to say but after I read mine again it didn’t make much sense.
Anyways getting back to the multiple account thing for different purposes. If you can do multiple trades on one account and you can apply different strategies on each trade then is it necessary to have separate accounts?
I mean can’t you apply an aggressive strategy to one trade and a stable passive one to another in the same account at the same time?
Unless the different accounts offer different spreads, leverages or various other options.
I personally think that if you had different accounts for different purposes then it would be a lot clearer when you are trading, but if you can manage it well enough then is there a financial gain to having multiple accounts or is it just for clarity of use?
thanks for your responses so far.
I think that when you use multiple accounts you want to use a different broker on each account. The reason for this is because some brokers are geared for scapling with low spreads, but the also have a variable spread. So it is bad to scalp with them during the news breaks. Others do not pay intrest so you would not want to sick around for a few weeks if you wanted to collect the intrest. But I think the biggest reason for different accounts is just the size of your account. Check and see how much you broker is insured for. If for some reason they go belly up and lose all of thier money and you have an account with $1,000,000.00 and they are only insured for $100,000.00 Then Guess what?? However I am no where near having this problem so this is just spectualtion. If there is anyone out there with this problem or can confirm or deny my claim then please let us know.
Thanks everyone for clearing this up for me. I still would like for us to continue this discussion if anyone has more to contribute. 
I do think my “trader friend” just was not specific enough and so it confused me:confused: . He was probably implying to have multiple accounts to have multiple strategies. I was thinking that he was trying to buy the same pair over multiple accounts to do the same strategy. He also suggested spreading the risk. Bazooko, you are probably correct with the insurance of the money if a broker goes under.
I do hope that both of us do eventually have the problem of needing to spread the risk of having $1M in one account. 