If you are ready for a change of path and life, forex is the way. Forex market now trades as of vicinity of 3 trillion dollars daily. Three trillion is a lot of money more than any other market, including the stock market. With this kind of liquidity comes a lot of volatility and that's where the profit is made. To make money with FOREX we need the price to move rapidly and in trends. Forex provides plenty of opportunities to do that.
Like any good Forex trading strategy your strategy should be based on sound money management.
The first real lesson I learned about Forex is that money management is the most important part of a successful forex trading system. You need to really understand that. Tell yourself that every day if you have to manage your money properly and you will be a successful Forex trader.
5 Simple Rules to Successful Forex Trading
Rule 1: Never enter a single position larger than 1% of your account size. I calculate 1% as the total amount of my open position at 100 pips. So for instance, assuming I'm using 100:1 leverage and I have an account balance of $10,000.
$10,000 / 1% = $100. I can open one 10K position. At 100 pips, this position will equal 1% of my total account balance.
Rule 2: Only close losing positions when your total drawdown is over 12%
So if you have an account balance of $10,000 you would not close any losing positions unless your total drawdown is $1200 or greater.
I enter all my trades without setting a stop loss. That's where the next rule comes in.
Rule 3: Buy low, Sell high
This is where long term analysis comes in. Look at your charts on a daily, weekly and monthly time frame. Look for major levels of resistance and support.
NEVER go long (BUY) near a daily, weekly or monthly high.
NEVER go short (SELL) near a daily, weekly, or monthly low.
SELL if price approaches a daily, weekly or monthly high.
BUY if price approaches a daily, weekly or monthly low.
I'm not talking about only trading on daily or weekly charts. I just want you to be clear that when dealing with really major levels of support and resistance you never want to trade against them.
That is one of the key elements of this forex trading strategy.
Rule 4: Hedge when necessary using high correlation pairs.
Hedging is simply a way of managing your risk. By opening a trade on a different currency pair that moves in a similar (or opposite) fashion to the pair you're currently trading you can manage your risk.
Rule 5: Take Profit When YOU Want
Remember, we are not using any stop losses. We can however use limits (take profits). I generally set my limit at around 50 pips.
I aim for 50 pips each and every day!
If I make 100 pips in a day, I will close the trading account for the remainder of the day and take a break. Remember, 100 pips is equal to 1% of your TOTAL account balance assuming you're risking 1% of your account for each position.
If you can make even 50 pips a day that's over 20% a month!
On a $10,000 account that's $2000/month consistent profits, only risking 1% in each single trade. And that's without compounding!
Patience is key
I've had positions against me over 2000 pips! While those positions were losing, I was hedging and making profits.
Sure enough, weeks or months later those same positions that were over 2000 pips against me came back. Because I had patience I was able to close those trades for a profit.
So don't panic if a position goes against you. See if there is a possibility to hedge. If there is, great. If there isn't, wait it out.
You can still make other trades while you're waiting. That's the beauty of only risking 1% per trade.
Nicu Lucanu is a finance researcher in forex trading and he made a lot of investigation about this topic. Discover much more information in his review site regarding forex market. Providing quality reviews, articles and writings on forex online.
No comments:
Post a Comment