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Hey guys,
As a forex trader, I always enjoy chatting with other people about currency trading. These people could range from professional traders who can make thousands of dollar a day to young and excited 'fresh meat' who have just entered the vast world of forex trading.
The Old Traders
One common factor is very prevalent when I speak to forex traders who make good money day in and day out i.e. They all have either lost money OR had blown an account when they first started their journey in forex trading (someone I know told me he lost USD 250,000!).
The Bold Traders
On the other hand, some of my conversations with forex beginners, I deduced another fact i.e. If they had luckily (or unluckily?) made some money while trading a demo account or even a live account, this small form of 'victory' makes them feel on top of the world and that they were born to trade forex. After a period of time, these people would then somehow proceed to the category of "have lost money" and/or "have blown an account".
What can I deduce from the above?
The possibility of making very good money coupled with a lot of amazing marketing out there draws people into the forex markets day by day. Forex beginners are very prone to believe that forex trading is easy only to discover the water is deep once they are in the pool. Once they realize that forex trading is NOT as easy as it seems, some lucky ones will pull out of the market while the unlucky ones will continue to gamble away their money (I know someone who has kept trying for 10 years!). Those that do not give up and continue on learning will find that forex trading is just like any other business. You need to dedicate your time, money and effort to be able to reap the excellent rewards that your relationship with the market provides.
You will get your heart broken when you blow up that account. Grief if you must, then get up, get over it and continue on your journey to be a successful forex trader.
Happy Trading,
Leo
Showing posts with label money management. Show all posts
Showing posts with label money management. Show all posts
Jan 13, 2010
Jan 7, 2010
The Costly Badminton Game: An Excellent Forex Trade that Turned Average
Hi Guys,
Just wanna share with you my forex trade experience yesterday on the GBP/USD.
If you look at the chart, you will see for little triangles pointing down. Those indicate short entries that I made along the way. You can see that I was confidently building up positions shorting the GBP/USD for a total of four times. My average entry for the four trades were at 1.6040.
If you look further to the right you will see a little red dot which was where I was unfortunately stopped out of the trade at +20 pips.
So why am I complaining about a winning trade? Well, what happened was I expected this move to go to at least 1.5940 OR lower. You see, I had a badminton game to attend and what I thought was I will move my Stop Loss to cover at least +20 pips since there will be a news release during my badminton game and I wouldn't be able to watch the markets. This was when my trades were nicely hovering at 1.5970 area which was roughly about +70 pips. I refused to take a portion of my positions out as I really believed that prices would head to 1.5940 OR lower (at time of writing this now prices did touch 1.5900).
And as you can see, after the news release, prices went up all the way, hitting my stop loss at +20 pips and then slowly reversed to the 1.5900s which would have given me a profit of roughly +140 pips! Seven times what I ended up with!
So you can see how costly this badminton game was. In hindsight, I could have done a few things:
1. Not play badminton (which was not my top choice)
2. Taken out some profits first since I would not be there during news (ok choice but the momentum for the trade was really building up)
3. Adjust my Stop Loss to where price levels formed a Strong Resistance instead of my price level of +20 pips (which would have kept me in the trade).
Oh well, at least I had a good time exercising. As they all say, the market will always be there as long as we live to trade another day.
Happy Trading,
Leo
Just wanna share with you my forex trade experience yesterday on the GBP/USD.
If you look at the chart, you will see for little triangles pointing down. Those indicate short entries that I made along the way. You can see that I was confidently building up positions shorting the GBP/USD for a total of four times. My average entry for the four trades were at 1.6040.
If you look further to the right you will see a little red dot which was where I was unfortunately stopped out of the trade at +20 pips.
So why am I complaining about a winning trade? Well, what happened was I expected this move to go to at least 1.5940 OR lower. You see, I had a badminton game to attend and what I thought was I will move my Stop Loss to cover at least +20 pips since there will be a news release during my badminton game and I wouldn't be able to watch the markets. This was when my trades were nicely hovering at 1.5970 area which was roughly about +70 pips. I refused to take a portion of my positions out as I really believed that prices would head to 1.5940 OR lower (at time of writing this now prices did touch 1.5900).
And as you can see, after the news release, prices went up all the way, hitting my stop loss at +20 pips and then slowly reversed to the 1.5900s which would have given me a profit of roughly +140 pips! Seven times what I ended up with!
So you can see how costly this badminton game was. In hindsight, I could have done a few things:
1. Not play badminton (which was not my top choice)
2. Taken out some profits first since I would not be there during news (ok choice but the momentum for the trade was really building up)
3. Adjust my Stop Loss to where price levels formed a Strong Resistance instead of my price level of +20 pips (which would have kept me in the trade).
Oh well, at least I had a good time exercising. As they all say, the market will always be there as long as we live to trade another day.
Happy Trading,
Leo
Jan 6, 2010
Forex: Trade Management
Hey All,
One of the best part about forex trading is that the vast market liquidity allows for very accurate trade management strategies to be employed.
Forex traders would have probably heard of the saying "Keep your losers small and let you winners run". Here are some examples of what it means.
Example 1:
You entered a trade at 1 standard lot ($10 per pip) with a stop loss (I'm a firm believer that you should ALWAYS employ stop losses) of 100 pips (equivalent to $1,000). The trade moves in your favor 50 pips and now you have options to either:
1. Move your stop loss to breakeven, which means that you are totally risk free for this trade. At worst, if price reverses to your entry price, you would have made no profits and no losses.
2. Take partial profits i.e. Close out half (or any amount) of the position at 50 pips profit and let the others run.
The above are only two examples of how you can manage an active trade, there are probably as many variations out there as you can think of.
Example 2:
Here's how one of my trade buddies, @piptee does his trade management which he calls the "I Don't Care Entry". Click HERE for the article.
Mastering the art of trade management will greatly improve your trading. As Alan Farley puts it, "Experienced traders control risk, inexperienced traders chase gains".
I hope this will help you come out with some ideas of your own. And when you do, why not share them here as well?
Happy Trading,
Leo
One of the best part about forex trading is that the vast market liquidity allows for very accurate trade management strategies to be employed.
Forex traders would have probably heard of the saying "Keep your losers small and let you winners run". Here are some examples of what it means.
Example 1:
You entered a trade at 1 standard lot ($10 per pip) with a stop loss (I'm a firm believer that you should ALWAYS employ stop losses) of 100 pips (equivalent to $1,000). The trade moves in your favor 50 pips and now you have options to either:
1. Move your stop loss to breakeven, which means that you are totally risk free for this trade. At worst, if price reverses to your entry price, you would have made no profits and no losses.
2. Take partial profits i.e. Close out half (or any amount) of the position at 50 pips profit and let the others run.
The above are only two examples of how you can manage an active trade, there are probably as many variations out there as you can think of.
Example 2:
Here's how one of my trade buddies, @piptee does his trade management which he calls the "I Don't Care Entry". Click HERE for the article.
Mastering the art of trade management will greatly improve your trading. As Alan Farley puts it, "Experienced traders control risk, inexperienced traders chase gains".
I hope this will help you come out with some ideas of your own. And when you do, why not share them here as well?
Happy Trading,
Leo
