Hello, my name is Jeremy. I’m a total noob to Forex, I’ve gone through the school materials several times, and am in the process of taking detailed notes.
I apologize if this post is a bit on the long side…
I’ve created the following system, and rules for executing that system in terms of risk management.
I’ve played around with stock market simulators in the past, and have usually done well. I treat the money as if it were real money. I tried a scalping method at first. I executed the plan badly, and the plan itself was probably just as bad. I took a drawdown of 16% on a 1,000 USD demo account. Normally I use a swing trading style when I was using the stock market simulators, so I’m thinking of trying that out with Forex. But I can say for sure that trading Forex seems to be tougher. I’d like to ask for some feedback on this plan.
Thanks!
[B]Risk Management:[/B]
Risk no more than 2% of the account at any time.
Maximum Drawdown of 15 - 20 percent of the account balance.
Maximum leverage for the account: 50:1.
Usually effective leverage will be much smaller than this.
Decide where to place stop losses, then use this number to decide the position size. I’ll be using the handy position size calculator provided on this site.
Set a take profit order, as well as a trailing stop loss order. The trailing
stop loss order should be equal to the stop loss size.
Aim for a 3:1 reward:risk ratio, need to win ~25% of trades to be break even. I haven’t included the effect of the spread, but I expect that my stop loss/take profit numbers to be much larger than the spread.
Do not close trades early. Do not move stop loss orders away from the entry
point. The trailing stop loss will move stop losses towards the entry point to limit the maximum loss.
Avoid closing the trade before the take profit order has been executed. However this is not forbidden.
[B]Details:[/B]
Trade EUR/USD. Draw trendlines, use EMA, bollinger bands, and the slow stochastic. Look for long term trends on the daily chart, look at the hourly chart for signals, and use the 15 minute chart to find entry/exit points.
I’d like to use support/resistance lines to gauge where I should place my stop loss/take profit orders.
This is a swing trading strategy. I expect to be in a trade for a few days to a few weeks.
[B]Goals:[/B]
I’d like to gain 60+ pips per week.
I’d like to be filthy rich in 3 - 5 years. 
[B]Process:[/B]
I’ll start by testing the system on an Oanda demo account. I’d like to see 2 - 3 months of consistent gains (meeting the goal would be great, but breaking even or better would be satisfactory ). I’ll treat the money as if it were real money. The goals are to maintain consistent performance, and to eliminate emotional decisions in regards to trading, as most traders beat themselves mentally.
If I am just breaking even after 2 - 3 months, I may need to consider waiting until I can get closer to meeting my goal before going to a live account.
After 2 - 3 months of consistent gains, I’ll deposit a small amount, ~250 USD into a live account. I’ll look for another 2 - 3 months of consistent gains.
If I can prove to myself that I can handle trading the live account, I’ll deposit 1,000 USD.
After another 2 - 3 months, I’ll deposit a second 1,000 USD.
From there it is my hope that I’ll be able to meet my goal, and compound the account balance upwards.
– Edited to include drawdown information.