Forex Trading Tips - Top 3 Money Management Rules to Succeed in Forex Trading
Most of the people whom I have met are only interested in searching for a great forex trading system but neglected on the money management part. You could find yourself in dead end if there is a lack of discipline in following the money management rules even if you know how to trade forex successfully.
Money management is what full time and professional forex traders seen as one of the most important factor to succeed in forex trading. Below are the 3 proven techniques that forex trading experts ALWAYS practice:
1. Only Risk Maximum Of 5% of capital Per Trade
Capital Preservations are very important, it can determine whether you are able to survive in the long run in the forex market. The reason for risking only maximum of 5% is that you still have ample capital to trade even if you loose a few trades. I risk only 1% of my capital per trade.
Never put all the eggs in one basket. Although you might have forex trading signals which gives you good probability trades, but this #1 rule should form a general part of your trading system, so that you don't risk too much on a trade.
2. Have a Healthy Risk to Reward Ratio
A lot of forex traders only care about making profits in the market. Some don't mind making small profits although their risk for that particular trade is higher. This is a huge mistake. Never risk more than what you can potentially make. For example, you should have a reward of at least 60 pips when you risk 30 pips, this is a healthy risk to reward ratio of 1:2.
This rule ensures you to be profitable, winning more than you loose. So let's say out of 5 trades, if you loose 3, which is total of 90 pips (30 pips lost per trade), you win the other 2 trades (60 pips per trade), you will still make 30 pips net(120 pips - 90 pips).
3. Do Not Open Multiple Positions Until First Trade Is In Profits
You may be confident that the first forex trade that you opened will be profitable, but do not open a second position until you see the profits from the first trade. This helps you to keep calm if the first position is in loss, and you don't have another burden from the second trade.
Those above may seem simple but actually require much discipline in real fact. That is what makes the difference between professional traders and retail traders, you need the right forex education. But give yourself a chance by getting forex tips, forex tutorials and forex trading system from my FREE ebook, to learn how to trade forex successfully like the professionals.
แสดงบทความที่มีป้ายกำกับ Forex Trading Tips แสดงบทความทั้งหมด
แสดงบทความที่มีป้ายกำกับ Forex Trading Tips แสดงบทความทั้งหมด
วันอังคารที่ 23 ธันวาคม พ.ศ. 2551
วันเสาร์ที่ 18 ตุลาคม พ.ศ. 2551
Great Forex Trading Tips to help you Improve your Profits
Great Forex Trading Tips to help you Improve your Profits
Trading the Foreign Exchange Markets (Forex or FX) can certainly produce a very fashionable life style leading to self employment and financial independences. What I am going to focus on in this article are three essentials Forex trading tips every professional trader either learns the easy way or the hard way. To be honest with you, most of them have learned the hard way. Learning to trade the currency is not like learning to hit a 100 MPH fastball that only one in a million can accomplish. In fact, it is quite easy to learn to trade Forex profitably; it is the other aspects of the profession that sink most investors, which I am going to help you avoid.
IT IS NOT A GAME
I am sure you are wondering what I could possibly mean by that. If you have been doing this long enough you know that there are certain times they are just about depositing funds in your bank account. An example of this would be recently the strong correlation the US dollar has had to the Gold and Oil markets. There was a period of time all you had to do was determine which way the dollar was trending and you knew Gold and Oil where going in opposite directions.
Even trained monkeys where making huge profits when this was happening, but guess what those opportunities are not there all the time. This is the first tip, DO NOT CHACE THE ACTION! Let it come to you, it doesn't come to you all the time. What happens is people start making so much money they just can't wait to jump back in and do it all over again. So, at any little sign there is a buying opportunity they jump in just to get that adrenaline flowing again. Which is where the loses start occurring. You really must be patient and stick to what ever trading method you are utilizing and wait for the GREAT trades to come along and not the AVERAGE trades which you are getting into just to make things interesting.
MONEY MANAGEMENT
I have news for you, if you have a $1,000 in you account you are not going to make $1,000 a day off that money. You might do it one time, but then you will lose the next ten times chasing that one winning great trade you made. Each professional trader has a specific percentage of their funds they will risk on any one trade which is just a small portion of their overall balance. The biggest mistake the novice investor makes is they attempt to increase their available funds to trade with to quickly. It is difficult to stress patients and percentages enough, but then again even the professionals usually learn this on their own.
RISK MANAGEMENT
The corner stone to every professional trader's portfolio is managing risk on a daily basis. Some do it by day trading, thus entering and exiting the market daily eliminating any over night downfalls in their trade. Others manage risk through the use of Stop Losses. This also is another major mistake the novice trader makes by setting their stop loses to low verse the take profits.
Managing your stop loses verse your take profits is a real art form that not only takes knowledge, but is also developed through experience. If you set your SL to tight, even the slightest turn in the market and you're out, never giving yourself a chance to make the huge profit we are all hunting. Doing this you would have managed your risk superbly and your profits miserable. Not a real good combination for long term prosperity. You really need to pick out a percentage somewhere between 20% and 35% of your expected profits to use as your stop lose. Following this method you only need to be correct somewhere between 1/3 to 1/5 to break even. Since somebody throwing darts at a board is automatically correct 50% of the time when selecting a currency your chances of becoming a profitable trader are greatly enhanced. The next and only final step is to insure the accuracy of your profits estimates. When your actual profits are finally correlating with your initial estimate your well on you way to a new career.
By following the above Forex trading tips you will finally realize what is all about. It is not about the game, it is not about the excitement, it is not about the adrenaline, it is about only one thing, the MONEY. Making the money as opposed to losing the money is the only thing that matters. The first step is to cut back on the number of questionable trades you make to NONE. Only trade when you are sure. Next, don't invest too much into any one trade. And finally, don't let any one trade of series of trades wipe you out. If you follow these three simple principles that are easy to understand but difficult to execute you will be rolling in the dough just like the big time traders.
Trading the Foreign Exchange Markets (Forex or FX) can certainly produce a very fashionable life style leading to self employment and financial independences. What I am going to focus on in this article are three essentials Forex trading tips every professional trader either learns the easy way or the hard way. To be honest with you, most of them have learned the hard way. Learning to trade the currency is not like learning to hit a 100 MPH fastball that only one in a million can accomplish. In fact, it is quite easy to learn to trade Forex profitably; it is the other aspects of the profession that sink most investors, which I am going to help you avoid.
IT IS NOT A GAME
I am sure you are wondering what I could possibly mean by that. If you have been doing this long enough you know that there are certain times they are just about depositing funds in your bank account. An example of this would be recently the strong correlation the US dollar has had to the Gold and Oil markets. There was a period of time all you had to do was determine which way the dollar was trending and you knew Gold and Oil where going in opposite directions.
Even trained monkeys where making huge profits when this was happening, but guess what those opportunities are not there all the time. This is the first tip, DO NOT CHACE THE ACTION! Let it come to you, it doesn't come to you all the time. What happens is people start making so much money they just can't wait to jump back in and do it all over again. So, at any little sign there is a buying opportunity they jump in just to get that adrenaline flowing again. Which is where the loses start occurring. You really must be patient and stick to what ever trading method you are utilizing and wait for the GREAT trades to come along and not the AVERAGE trades which you are getting into just to make things interesting.
MONEY MANAGEMENT
I have news for you, if you have a $1,000 in you account you are not going to make $1,000 a day off that money. You might do it one time, but then you will lose the next ten times chasing that one winning great trade you made. Each professional trader has a specific percentage of their funds they will risk on any one trade which is just a small portion of their overall balance. The biggest mistake the novice investor makes is they attempt to increase their available funds to trade with to quickly. It is difficult to stress patients and percentages enough, but then again even the professionals usually learn this on their own.
RISK MANAGEMENT
The corner stone to every professional trader's portfolio is managing risk on a daily basis. Some do it by day trading, thus entering and exiting the market daily eliminating any over night downfalls in their trade. Others manage risk through the use of Stop Losses. This also is another major mistake the novice trader makes by setting their stop loses to low verse the take profits.
Managing your stop loses verse your take profits is a real art form that not only takes knowledge, but is also developed through experience. If you set your SL to tight, even the slightest turn in the market and you're out, never giving yourself a chance to make the huge profit we are all hunting. Doing this you would have managed your risk superbly and your profits miserable. Not a real good combination for long term prosperity. You really need to pick out a percentage somewhere between 20% and 35% of your expected profits to use as your stop lose. Following this method you only need to be correct somewhere between 1/3 to 1/5 to break even. Since somebody throwing darts at a board is automatically correct 50% of the time when selecting a currency your chances of becoming a profitable trader are greatly enhanced. The next and only final step is to insure the accuracy of your profits estimates. When your actual profits are finally correlating with your initial estimate your well on you way to a new career.
By following the above Forex trading tips you will finally realize what is all about. It is not about the game, it is not about the excitement, it is not about the adrenaline, it is about only one thing, the MONEY. Making the money as opposed to losing the money is the only thing that matters. The first step is to cut back on the number of questionable trades you make to NONE. Only trade when you are sure. Next, don't invest too much into any one trade. And finally, don't let any one trade of series of trades wipe you out. If you follow these three simple principles that are easy to understand but difficult to execute you will be rolling in the dough just like the big time traders.
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