In this lesson we you will not learn to make money in forex trading. We will learn not to lose them, and if they lose, then not much. You and I will learn to manage capital.
Many of you may say that this topic is not relevant, because You have not yet learned how to make money. Then a question for you. Tell me whether you have a situation in the trade, when you're a few days (weeks, months) in a row successfully, with great difficulty, by 20-30 points earned money, and then one day it all lost? I'm sure it was. Every novice trader these cases were, and that the most offensive, not once. This is precisely the ability to not only earn money but to preserve earnings. What should be in order to not lose the money earned? As I have said, requires strict discipline and firm adherence to the rules of your trading system. Let's not look at you with a great example that will help you understand how important it is to follow the rules you.
Thus, the situation on the Forex market
At the 15 minute chart, flat, wide corridor of 50 points.
The trend on the hourly chart is up. Expect it to continue.
You place an order to buy a few points above the resistance line, and stop-loss, respectively, at several points below the support line.
In the case of triggering stop-loss, your loss will amount to 60 points, which is quite acceptable under the rules of your trading system.
We look forward to breaking the price line of resistance.
Standard situation. This situation happens almost every day, with a slight difference.
Further developments are as follows. Price breaks the resistance line, is 15 points, and abruptly comes down. You frantically begin to speculate as to why this is happening. After analyzing the market again, you realize that, apparently, came to a small correction to an older time frame, and in the near future, as should you. But to lose 60 points out of stupidity did not want to, and you take a willful decision to remove a stop - loss, or lower it a little lower.
Depending on your personality and passion, you can lose two to three times more than the triggering of stop-loss. And if you're after triggering stop-loss position opened up for sale, it would cover the stop-loss, and with a good trend would be even and a profit.
I do not know how you do, but I had a lot of these situations.
As you guessed it - money management is an integral part of your trading system. I try to describe a number of questions you should ask yourself when developing your trading system.
What percentage of your deposit, you can use when opening a business? For example, if your deposit is $ 1000, then use 10% of the deposit, ie, $ 100. If the deposit is $ 500 - $ 50, etc. But if you have $ 50,000, using 10% as you promise big profits and big losses. Maybe it makes sense to reduce the percentage to a reasonable aisles?
What amount of deposit you are willing to lose if the trigger stop-loss? I recommend you do not exceed 5% of the deposit. Ie If your deposit is $ 1,000, the maximum amount of loss should be $ 50. If you are running with leverage at which the price of one item is $ 1, therefore, the maximum stop-loss should be no more than 50 points.
How many currency pairs you trade? You know that the majority of currency pairs are highly correlated with each other. This makes it possible to increase profits by opening the position for several currency pairs simultaneously, but the wrong openings, and you will incur increased losses. Keep in mind these risks and limit losses. Alternatively, you can open trades in the opposite direction, compensating for losses on one trade, profit on the other.
Will you open the transaction, if the magnitude of the alleged stop-loss more than definitely rules of your trading system? For example, if you're working on breaking through the support line, you must put a stop loss a few pips below the support line (in an uptrend). And if the width of the band of 100 points, and your maximum stop loss of 50 points? There are several options:
- The simplest and most conservative option - to be out of the market.
Input manually into the market after breaking the resistance line, and stop - loss put a few points below the first reaction.
- Work on a retreat from the support line, with the expectation that the price will go up. In this case, you also put a stop loss below the support line, but its magnitude decreases
How many trades per day will you make? Incidentally, this is a good way to protect yourself from hasty decisions. If you restrict yourself, for example, three transactions per day on one currency pair, and will strictly adhere to these rules, then make a deal before a thousand times to weigh the "pros" and "against."
What is the total percentage of your deposit, you are willing to lose a day? For example, you made two losing trades with a maximum stop loss. Will you commit third transaction, or cease trading today?
I strongly advise you to put a stop loss, focusing only on the amount you are willing to lose. The Forex market does not depend on the amount, he lives by its laws. Set the stop-loss orders or below the level of support or kickbacks to the price.
Once you determine the rules of money management, you'll sell more peaceful, because will not make any rash actions, and will not succumb to passion and recklessness.
By using these simple rules to increase your deposit will be increased and the amount that you can use in every transaction. This, in turn, will lead to an increase in your profits