레이블이 Baby Pips인 게시물을 표시합니다. 모든 게시물 표시
레이블이 Baby Pips인 게시물을 표시합니다. 모든 게시물 표시

2013년 11월 24일 일요일

About 'forex for beginners'|Forex Trading For Beginners | What all Traders Should Know







About 'forex for beginners'|Forex Trading For Beginners | What all Traders Should Know








               The               foreign               exchange               market               is               a               universe               of               possibility               for               traders.

There               are               so               many               approaches               to               trading               in               this               market;               it               is               bewildering               to               most               beginners.

For               this               reason,               many               people               who               are               new               to               trading               forex               get               lost               in               the               details.

They               start               trading               before               they               are               ready.

These               people               enter               a               trade               before               they               really               know               why               and               they               aren't               prepared               for               the               disastrous               results               that               usually               follow.

For               these               new               traders               (and               perhaps               for               the               more               experienced               ones               too),               I               have               included               a               list               of               points               that               are               essential               to               every               trading               plan.
               1.

Know               your               risk               tolerance               
               Your               personal               risk               tolerance               is               one               thing               you               need               to               establish               first.

This               is               very               important               because               it               can               affect               your               ability               to               trade               wisely.

If               you               think               you               can               handle               risking               5               percent               on               each               trade,               then               you               better               have               a               strong               stomach.

Every               trader               and               every               system               undergoes               what               is               called               "drawdown."               This               is               the               period               that               every               trading               strategy               hits               when               it               continually               loses               trades.

If               your               system               hits               four               losing               trades               in               a               row,               which               is               statistically               very               likely               in               forex               trading,               and               you               are               risking               5               percent               of               your               capital               on               each               trade,               you               will               have               a               drawdown               of               20               percent.

This               is               a               lot               of               money               for               some               people.

If               you               can't               handle               a               drawdown               of               over               10               percent               of               your               account,               you               may               not               want               to               ever               risk               over               1               percent               of               your               capital               on               each               trade.

We               will               cover               how               you               can               take               control               of               your               own               risk               on               each               trade               in               a               later               point.
               2.

Know               your               risk/return               ratio               
               After               determining               how               much               you               are               willing               to               risk               on               a               trade,               you               need               to               make               sure               that               each               trade               has               the               potential               of               giving               you               more               than               you               risk.

The               reason               is               obvious.

If               you               have               a               losing               trade               that               takes               out               1               percent               of               your               capital               and               then               a               winning               trade               that               gives               you               .5               percent               of               your               capital,               you               are               still               behind.

Whatever               your               strategy               is,               it               needs               to               have               at               the               very               least               a               1-2               risk/return               ratio.

This               means               that               you               can               lose               more               trades               than               you               win               and               still               end               up               profiting.

Most               trading               systems               have               fewer               winning               trades               than               losing               trades.

These               systems               can               still               make               money               though,               because               they               have               a               good               risk/return               ratio.
               Something               to               keep               in               mind               on               this               point               is               that               there               are               different               market               environments               that               will               greatly               affect               your               trading               plan               and               your               returns.

There               are               two               basic               kinds               of               market               environments:               trending               and               consolidating.

You               need               to               have               different               trading               strategies               for               these               different               market               conditions.

A               consolidating               market               probably               won't               give               the               kinds               of               returns               that               a               trending               market               will               give               you.

Keep               this               in               mind.

The               next               very               important               point               is               knowing               your               entry.
               3.

Know               your               entry               
               The               point               at               which               you               enter               a               trade               really               is               the               definition               of               your               trading               plan.

What               conditions               need               to               be               met               before               you               enter               the               market?

There               are               endless               options               for               traders               on               when               and               how               to               enter               the               market.

Traders               rely               on               a               library               of               different               indicators               to               tell               them               where               to               enter.

Things               like               MACD,               Stochasitics,               Average               True               Range,               Bollinger               Bands,               Exponential               Moving               Average,               Standard               Moving               Average,               Fibonacci               Retracements,               Gann               Fanns,               and               Elliot               Wave               theory               are               only               a               few               of               the               types               of               helps               that               traders               rely               on               for               entering               the               market.

The               list               of               indicators               can               be               exasperating               for               new               traders.

Many               new               traders               will               make               their               charts               look               like               a               game               of               pick-up-sticks               with               all               the               indicators               all               over               their               screen.

This               is               not               the               way               to               trade.
               Each               trader               needs               to               determine               his               own               strategy               and               style.

Once               that               strategy               for               entry               is               picked,               you               should               stick               with               it               and               see               if               it               makes               money.

Backtesting               the               strategy               with               historical               data               is               a               time-intensive               process               but               is               absolutely               essential               for               knowing               if               your               strategy               will               make               money               in               the               long               term.

Find               one               strategy               for               each               market               environment               and               trade               it               consistently.

This               is               crucial               for               consistent               profit.
               4.

Know               your               exits               
               This               step               is               probably               more               important               than               knowing               your               entry.

Every               trade               must               have               two               exits               planned:               a               stop               order               and               a               limit               order.

You               need               to               decide               where               to               cut               your               losses               (stop               order)               and               where               to               take               your               profits               (limit               order).

These               exits               should               be               planned               before               the               trade               is               ever               executed.

These               exits               also               must               reflect               your               risk/return               ratio.

If               your               stop               loss               is               10               pips               beyond               your               entry,               your               limit               order               should               be               about               20               pips               in               the               other               direction.

Some               of               the               details               depend               on               the               currency               pair               and               the               market               environment               but               the               basic               point               is               simple:               Know               your               exits               before               you               place               an               entry               order.

One               quote               to               remember               here               is,               "It's               not               about               how               much               you               make;               it's               about               how               much               you               don't               lose."
               Knowing               your               exits               is               not               enough,               however.

You               need               to               make               sure               that               you               let               your               exits               do               the               work.

There               are               many               sad               stories               of               traders               moving               their               stops               because               they               refuse               to               admit               their               analysis               was               wrong.

When               you               place               a               stop               and               a               limit               you               need               to               leave               it               there.

The               goal               is               to               see               if               your               trading               system               works               in               the               long               run.

If               you               trade               the               exact               same               way               time               and               time               again,               will               you               make               money               consistently?

This               is               what               you               are               trying               to               figure               out.

If               you               intervene               and               move               your               stops,               you'll               never               know               how               your               trading               system               is               performing.
               Once               you               identify               the               place               where               you               want               to               put               your               stop               you               can               calculate               how               many               lots               to               trade               consistent               with               your               risk               tolerance.

Many               people               trade               a               default               10               lot               without               considering               the               risk.

Someone               with               a               $1000               account               may               want               to               buy               10               lots               and               have               a               50               pip               stop               loss.

This               trade               is               risking               5               percent               of               his               capital!

The               lot               size               needs               to               be               adjusted               based               on               how               much               risk               can               be               tolerated.

In               order               to               find               out               how               many               lots               to               buy               or               sell               there               are               lot               size               calculators               for               free               to               download               all               over               the               web.

These               calculators               need               to               know               the               kind               of               lots               you               trade               (standard,               micro,               or               mini),               the               amount               of               pips               until               the               stop               loss,               your               account               capital,               and               the               percentage               of               risk               you               can               handle.

This               calculator               then               tells               you               how               many               lots               to               trade.

This               is               a               helpful               tool               for               smart               money               management               on               each               trade.
               5.

Follow               your               "If-then"               syntax"               
               The               "If-then"               syntax               is               really               just               a               complicated               way               of               describing               your               rules               for               entry               and               exit.

You               need               to               have               "if"               criteria               that               must               be               met               before               you               enter               the               market.

For               example,               you               could               say               something               like,               "If               the               60               minute               candle               closes               below               this               particular               moving               average               in               a               trending               market......then               I               will               sell               a               1-4               risk/return               profile."               The               "if"               defines               the               conditions               that               must               be               met               before               you               will               trust               the               market               with               your               money.

This               is               a               business               transaction.

With               any               other               business               you               require               a               certain               number               of               details               so               that               you               know               your               money               is               wisely               invested.

The               same               is               true               in               forex               trading.

The               market               must               obey               your               conditions               before               you               ever               give               any               of               your               hard-earned               money               away.

This               objective               and               business-like               mentality               will               save               you               from               a               lot               of               foolish               trades.
               6.

Trade               your               plan               
               This               final               point               seems               redundant               and               obvious,               but               it               is               absolutely               essential.

Once               you               have               defined               your               plan               you               must               trade               that               plan.

The               main               reason               why               most               people               lose               at               forex               trading               is               because               of               the               psychological               element.

People               want               to               be               right               in               their               analysis               of               the               market.

If               you               were               wrong               about               the               market,               okay,               let               your               stop               take               you               out.

There               are               good               trades               that               lose               money               and               bad               trades               that               make               money.

You               shouldn't               feel               good               if               you               made               money               but               violated               your               own               plan.

Why?

Because               you               have               a               plan               so               you               can               repetitively               and               predictably               make               consistent               profit.

If               you               violate               your               own               rules,               you               are               not               a               good               trader,               even               if               your               account               is               growing.

Ultimately,               you               will               lose.
               Don't               fall               into               the               trap               of               so               many               traders               who               try               and               trade               without               a               plan.

Form               a               plan,               follow               it               and               watch               your               account               grow.

Want               to               make               your               1st               $1000               in               forex               trading?

Spend               the               time               and               effort               on               finding               a               good               plan               and               getting               in               tune               with               the               market.

Make               sure               the               market               plays               by               your               rules               before               you               give               it               any               of               your               money.






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