Risk management is one of the most key concepts for surviving as a forex trader. He has to know the following:
$100.000 lot 8.00
$50.000 lot 4.00
$25.000 lot 2.00
$10.000 lot 1.00
$5000 lot 0.05
$3000 lot 0.03
$1000 lot 0.02
$100-$500 lot 0.01
$100 investment amount can control $10000 forex market. 1% margin will give you 100:1 leverage, so that a forex trader with a deposit of $ 10,000 can hold open positions of $ 1,000,000, which is 100 times more than its capital.
Trader can use a hard stop or a mental stop. A hard stop is when he is setting his stop loss at a certain level. A mental stop is when he is setting a limit to how much pressure or drawdown he will take for the trade. Once stop loss is setting in his head on his trading platform. If forex trader does this, he isn’t cutting his losses effectively and it will ruin him in the end.
100:1 Leverage = 1% Margin
50:1 Leverage = 2% Margin
40:1 Leverage = 2.5 % Margin
30:1 Leverage = 3.33 % Margin
25:1 Leverage = 4% Margin
20:1 Leverage = 5% Margin
10:1 Leverage = 10% Margin
The advantage of trading on margin is that you can make a high percentage of gain compared to your account balance. It has a $1000 account balance it isn’t traded on margin. It initiates a $1000 trade that nets you 100 pips. In a $1.000 trade, each pip is worth 10 cents. The profit from its trade would be $10 or a 1% gain. It was to use that same $1000 to make a 50 to 1 margin. Trade is giving it a trade value of $50.000 the same 100 pips would net you $500 or a 50% gain. Each forex trader will have their own tolerance level of risk. The best rule of thumb is to be as conservative as he can. It is important to understand the risk of using larger lots with a small account balance. Keeping a smaller lot size will allow to stay flexible and manage his trades with logic rather than emotions.
Each forex trader has to identify high probability trade and analyze all for entry criteria.
When I start to trade I do the following:
- He has to look Forex Calendar high impact news.
- He watch at charts on 30min, 1 hour and daily charts of assets
- Trader writes the trend channel in 4 hours and hourly charts
- Watching at all assets in 30 min charts for trend and ranging market
- Trader has to check momentum support and resistance on all correlate assets
- Trade SHORT/LONG strategy
Trader doesn’t chase trades and the price.
Trader doesn’t trade in the following conditions:
- Overbought/oversold conditions. He doesn’t trade when the trend first moves breaks support or resistance trend line. Forex trader doesn’t open trade when it moves at 120 pips or above.
- First early trend breakout of the morning or the day. In ranging markets, when the price breakout the trend line support/resistance he has to avoid entry position. It is false trading signal that can be reversed. In this situation he is watching the retracement of trend channel (two higher highs and two higher lows for up channel or lower highs and lower lows for down channel in 30 minutes bar to close.
He trades in these conditions:
If there are double bottom or double along the trend line it is confirmation for short or long. He is waiting for 15 minutes chart bounce, trend channel bounce (up/down). If the price overlap with rising trend or downtrend enter trades is based on over laps. They are visible sets up on charts where the prices are rejected from a move below support but they are retraced back above support with overlap. If price goes above resistance and retrace below resistance it will form an overlap with a move below.
Trading with currencies
Short strategy on EUR/GBP in case when EUR is trending lower against the USD and GBPUSD is trending higher. He has to compare strength or currencies against all. If USD/YEN, USD/CHF, USD/CAD – all USD pairs are rising and EUR/USD and GBP/USD are falling then dollar has been become stronger. EUR/YEN, DAX/FTSE, GBPUSD/EURUSD correlation also spreads are wider on NZD. He trades only when all currency pair are being sold off or bought against US dollar like EUR/USD, USD/YEN, AUD/USD USD/CAD Long strategy on GBP/USD, EUR/USD must be rising trend. Short strategy on the US dollar Long strategy on EUR/GBP in case when EURUSD is trending higher against the USD and GBPUSD is trending lower.
The currency pair EUR/USD rose sharply in yesterday. Speech Janet Yellen that shortly after the Federal Reserve had a much milder tone than the market expected. This had a negative impact on the dollar. According to her, it is not certain that interest rates will rise in mid – year and decreased sui forecasts of inflation and economic growth. In addition, it was emphasized that a strong dollar has a negative impact on the export of US goods. During this day we will have a publication Economic Bulletin, a report on applications for unemployment benefits in the US last week al ii index of factory production in the area of Philadelphia.
MACD (12,26,9) sell
RSI 14 is neutral
SMA 20 sell
Bollinger bands (20,2)
Upper Bollinger Bands the second level of resistance at 1.09150
Lower Bollinger bands the first support level at 1.06600
The pair has broken below its support and remains under pressure with targets 1.0700 and 1.06600 in extension.
Support and resistance levels
1.06700 last price
Entry points 1.08000
Exit points 1.06600
Take profit 140 pips
Full-Time Forex Trader Conclusion
The forex trader has to know basic knowledge level of forex trading in relate to make profit. He can trade on a daily basis. It is needed to watch daily chart on his trading platform. It is shown 30 minutes charts and bearish trend on EUR/USD. This opportunity can make 140 pips profit during the daily trade.