To survive in our favorite in the forex market, you should limit your losses to barely noticeable levels. And then you have to take more money than they lost in the statement. Quite simply, yes? But why do most traders is not able to comprehend this truth, the cornerstone of trading? Because of psychology?
Now let's move on to the title of this article - Set a goal to take the net twenty pips every day trading. I know it sounds boring. It is not so attractive as the deal of 100 pips. But you're trading to make money, not for fun, right? Otherwise you are likely to go broke, and pretty soon. So let's fix that in mind, it's - Business with a capital letter, which should eventually make a profit. Beginners should trade a mini account, where one unit has a size of 10 thousand dollars.
Quickly go through the math. First, let's discuss the margin and how honestly to determine your actual leverage. Brokers often tout the size of the margin account of 400:1. This does not mean anything else but if you think that trading with 400:1 leverage - a good idea, then you - fool. What does this mean in reality - the required security deposit for open positions will be extremely low. It's actually not bad, right? Well, I think so too. But not always. Remember, leverage the same increases and profits and losses. If you open a position with the actual leverage more than 5:1, this is a way to ruin. Actual leverage can be calculated if your net open to correlate the size of trading positions with the balance of your account. For example, if the total size of your open position is equal to 250 thousand dollars, and the account you have $ 10 000, your actual leverage - 25:1. 25:1 shoulder - a dangerous level, of course, if you do not want to end up trading a career for a couple of months. Once you find your way and you can win more than lose, you can go back to the issue of leverage. But until then you should play more conservatively.
We recommend that you trade with leverage of 4:1 maximum for a single deal. But try to add the transaction. Thus, we can at half a dozen open positions, with margin of 4:1 each, combined to bring leverage to 24:1. We know how to do it and try to tell you. So let's limit the maximum amount of leverage on one trade ratio of 4:1. Let's also assume that the Friday - not a very good day for a beginner in trading. Believe me, this is so. And let us aim to capture 20 pips profit every day with the margin of 4:1. This may be one-off 20 pips or 2 times for 10 pips or 4 times for 5 - output will still be 20.
Next we are led by a mathematician. Trading 4 days a week, capturing 20 pips profit per day with a shoulder 4:1, your actual income per week was 3.2%. You laugh at paltry 3.2%? What a waste of time and effort, you say ... You could not make mistakes more! Even if you have a whole year will not increase the lot size in the deal, but keeping the original settings, and stay true to its goal of 20 pips for the day, this tiny weekly earnings by 3.2% per year pays off to 166.4%. You still funny? I think not.
Now many of you take over payments, checking to see if there errors. That's understandable. Let's say you have a trading account at Forex in the amount of $ 10 000. If the above scenario, the initial size of the transaction will be 40 000 (10 000 $ x 4 - four minilota). When target 20 pips per day for a week you get a profit of 80 pips on four lots of 10 000. Thus, your 80 pips multiplied by the four lots in the deal, turn to 320 pips per week on one lot. Pip on a mini account for most couples is $ 1 per lot. So, within a week you get a profit of $ 320. Big deal, you say. Yes, I alone accounts for more than a week pay the ...
Exactly! You can not survive on income from trading in the account size of $ 10 000, hoping to stay in the market longer than a few months. You will always try to catch the big moves, so your feet will be very broad. You in an instant lose your shirt, and housing. If you want to live on income from trading, you should find out how much money do you need a week to make enough to live, and do not forget to add a little for unforeseen expenses. Now go back and calculate the size of the account from which you will need to begin to quietly sell and be able to pay the bills. Now imagine that you are not every day you will be able to do my goal is 20 pips, no matter how hard.
In the meantime, without giving up their essential work, trade in your spare time, make target pips and save up for these paltry 3.2% return per week, increasing his own expense until such time when you can afford to trade full time. By the time you obviously already mastered the art of trading for a purpose and a shift to trading, as the main lesson, you will be much easier.
If you are dissatisfied with the annual return 166.4% on invested capital, you - an idiot and you should stay away from the business of currency trading.
Marcus Locke aka "MakoML" - a fund manager at Mako Fund Management Group, specializing in forex
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