Newbies Guide To Becoming A Forex Trader

Beginner Questions
52

Most traders win more often than they lose…FACT
The chart below, taken from the DailyFX Traits Of Successful Traders, shows that over 50% of trades are wins…


…which begs the question, why do the vast majority of new traders lose on their trades?

this next chart, from the same source, shows the average difference in the size of losses incurred in pips.


Now we’re beginning to get the picture! If you look at EurUsd, the most commonly traded pair, you’ll see that average loss value is almost double the average win value, and thats not even the worst performer!

This highlights why new traders need to Cut Losses, Let Profits Run, and one of the keys to this is knowing how and where to place your stops when you first enter the trade.

Fixed Stops

First, calculate the maximum amount of pips you would be prepared to lose before entering the trade. You can use the Babypips Pip Calculator for this to save you doing the maths. For example, say your trading 10,000 units of EurUsd. the calculator will show you that each pip movement has a value of $1. If you can only afford to risk $20, and your brokers spread is 1 pip, then you could place your stop at no more than 19 pips (20 minus 1 for the spread) from your entry point.

However, this doesn’t mean you should place it there. Consider the following;

  1. What is your Risk:Reward (R:R) level? If you’re looking to win 20 pips with a R:R of 1:2, your stop should be at around 10 pips.
  2. Where are the Support and Resistance (S&R) levels? As price frequently returns to these levels, its prudent to place your stop on the side of these that you dont expect price to reach - if you enter a buy trade at 1.1200 and Support is at 1.1185, its worth making sure your stop is below 1.1185, so long as you dont go outside your 19 pips acceptable risk.

Trailing Stops
These are stops which can follow your trade as it moves into profit. Say you set the Trailing Stop at 10 pips. As soon as your trade is 10 pips in profit, the Trailing Stop is activated, right on your breakeven point. This ensures that, even if price then reversed and fell, you would be stopped out without a loss. Its useful if you are away from your pc and want to protect your trade to a degree but I wouldnt recommend using it if you are able to watch live, for the reason that since price rarely moves in a straight line, a Trailing Stop is likely to stop you out of many trades before you can maximise your profit.

53

With the British EU Referendum vote taking place this Thursday, I would recommend all new traders NOT to trade ANY Gbp pairs nor any EUR pairs.
The vote is too tight to call. Yes, you could get it right and make some money, but equally you could blow your account.

Better to stay on the sidelines and observe.

54

On the topic of the DailyFX stats, which Jason Rogers of FXCM (DailyFX is the research arm of FXCM,

just in case someone reading this did not know) has previously posted, and which regularly features

on DailyFX videos, it seems clear that profitability is strongly tied to loss management…

There is an interesting video that I was watching at the end of last week, produced by Ilya Spivak

(also of DailyFX), where he shows not only the FXCM retail clients’ statistics that you were showing

but also how the retail crowds pile money on trading countertrend, and then when the trend finally

reverses in their favour, they take off their positions (perhaps closing them at breakeven, too afraid

to get stung again)…

Here is the video:

I recommend newbies watch it!

Thanks again, Eddie.

56

Thanks Eddie, I’m still taking my time to go through, selective initially then full after. Thank you for taking time to summarized this treasure for us newbie. :slight_smile:

57

You’re welcome. If you need any help or want anything explaining in more detail just ask.

58

Some general information on currency pairs that I’ve seen posts asking about elsewhere

Forex currencies are quoted in pairs, like the Euro/ U.S. Dollar, or “EUR/USD”.

Currency pairs have no “intrinsic value”, as with stocks. Their value is relative to each other and the economies of the respective countries that they represent.

The first currency listed in a pair is known as the “Base” currency, and the second one, the “Counter” currency., so in Eur/Usd the Euro is the base and dollar the counter.

A brokers quote of “1.15000” would mean that one Euro would buy 1.15 Dollars. If the rate goes up, the Euro is said to be strengthening.

You will never actually have to buy any currency, nor will your broker. When you “buy” EurUsd you are effectively betting that the value of the Euro will go up relative to the Dollar. When you close your order, you will have any gains/losses credited/debited from your account by your broker.

59

UBS WARNS U.K. LEAVE VOTE MAY IMPEDE FOREX TRADING – BREXIT MARKET TALK
22 June 2016, 11:52
0852 GMT A U.K. vote to leave the EU Thursday could see extreme volatility in the foreign exchange markets, UBS warns clients, meaning trading may temporarily be impeded. “In the event that extreme market moves occur in an environment of limited liquidity, our principal spreads may widen for both electronic and voice trading, liquidity may reduce and prices may turn indicative (i.e., non-tradable) for periods of time,” says UBS, in a statement to clients. During “periods of indicative pricing,” UBS says algorithmic client execution orders and auto orders–which trigger off UBS Electronic principal liquidity, not external market liquidity–“will not trigger or execute.” [B]It adds it “may not be able to fill limit orders or take profit orders at the levels, or using the methodologies, expected in normally-functioning markets.[/B]” UBS may have to “adopt other approaches” which it would do “in a commercially reasonable manner”. ([email protected])

Contact us in London. +44-20-7842-9464
<[email protected]>

(END) Dow Jones Newswires

60

Useful thread for newbies

61

I’m going for Britain remains in EU, got some long EUR/USD positions from 1.125, and I believe the euro will go up after the vote ends (i.e. USD will go down in most major pairs)…

62

I’m so wrong then, I taught us/Eu will drop back if Britain stay, which I think they’d stay. I was thinking that the market is building up the buffer for it to drop back as its only logical that Brit stay and they knew it would. My bad… … :). No, I’m not trading as I’m still learning on demo. :slight_smile:

63

Hi.
Can you confirm what your trade is?
This pair is listed as Eur/Usd, so when you say you thought us/Eu will drop back this should actually mean you think Eur/Usd will rise.
If this is correct, you’re in the same position as Forex Verified after all

64

I am fail already start on mnday, on previous week gbpjpy move on bearish pattern, but since monday morning this pair move rapidly and strong bullish until now maybe because brexit also on gbpusd

65

Doesn’t mean I’m right and you are wrong, it’s just what I think will happen. Tomorrow might end up me being wrong and you being right. :slight_smile: If your system tells you to stay EUR/USD short then go for it. My system said EUR/USD long and I’m sticking to it (but keeping an eye on it in case I need to react :slight_smile: )

Besides, I think USD has already been overpriced as everyone expected a rate hike this month. It didn’t happen.

66

Sorry, yes. It’s eu/us not the other way round.

67

As 10pm struck in UK, GbpNzd gapped 200 pips down. Within 5 minutes it gad climbed back up again.
A perfect example of why NOT to trade big news events

68

Guys I would recommend you simply trade what you see…you can’t outguess the market …today on my scalping thread I shared a lot of action…the volatility of the g8 today was breathtaking so I will be up,early tomorrow

If you have a robust trading system then follow it tomorrow…you should be rewarded with much bigger momentum swings than normal trading days

I made about 10 times more than an average trading day today…although I actually also,traded a lot more than usual,as I figured it was going to be good

Trade what you see…

N

69

Hi.
Not sure if you’ve posted here in error, this thread is really aimed at newbies and im only discussing Brexit and recent moves to highlight why new traders should not try trading news

70

…

The shame of it is that the eu for me is a really average pair to scalp…both usd and euro,to me can be pretty sluggish and generally i,am chasing yen and or gpb in a pair to spice up my gains

Cut you losses and run your gains is a sensible piece of advice but harder to do in the real world…with proper training I can ensure that a trader keeps losses to a minimum…but running gains is the problem…especially in scalp,conditions …but again experience is all and having the ability to be objective and stepping back from any trade is vital if you want to add a few pips,overall to,each good run

You also need to be knowledgable of the personality of the currencies involved and how to play that re exits…for example scalping the GU is miles different from scalping the EA…

Why ?..well if you don’t know then you are not yet proficient in scalping those pairs …right ?

Expertise experience practice research and focus …all will eventually get you there…but it’s not an overnight thing

N

71

Wouldn’t disagree, the problem for most new traders is surviving long enough to gain experience and expertise.
Thanks for sharing, I’m not a big scalper myself so its good to hear from someone who can comment better on this style of trading

72

Okay, so the referendum is done with. Some massive swings, no doubt some big winners and losers.
Time to move on and start thinking about our next move, whether thats another trade or some more learning. See what comes out over the weekend and prepare for next weeks trades