Beginner's Disaster!

Beginner Questions
210

I can’t assume from just this information here, but I get the impression that you are risking large %'s of your account on each trade. If you are risking more than 2% of your account balance (which = $1.48 on $74 account) you are actually reinforcing VERY VERY dangerous habits for later in your career.

Believe me I understand that losing 10% is not a big deal if it’s only $7, but you yourself said that you are taking this account very seriously as a learning tool. If that you were true, you’d be working on keeping your money management in check, and that means trading 2% risk [B]or less [/B]on each trade.

211

Just thought I would stick this in quickly.

This morning I closed my GBP/USD trade.

Opened @ 1-64346
Closed @ 1-63815 = 53.1 pips profit. ( $5.31 )

My original target was 1-6310, and since I closed the trade this morning price has dropped to around 1-6287 ish. Trading around 1-6323 as I write this.

But it seems to be just the trading style I am developing that I don’t like to have a trade runnng while I’m not there to adjust it if necessary.

I fully appreciate anyone could argue that if you are confident enough in your analysis to put a trade on in the first place, you should be confident enough to let it run to the end.

BUT, I play golf from a very low handicap, yet I constantly fidget, adjust and tinker with my swing when I probably shouldn’t. It seems to be the same with my trading.
While I have to go to another job to make my living, and then try to do my trading in the evening with the time I have left, I am uncomfortable having a trade running while I am not in control. When I have a trade on and I am there, I like to be able to adjust it as I see fit.

This could be right, it could be wrong, like charts and news, I guess it’s open to each individuals personal view. But for the mean time it is what it is. If I ever get to the point where I can stay at home to do this AS my living, I may learn to change it. Or it might just be my personal style, whatever.

Anyway it takes this weeks figure to 192 pips profit, which isn’t bad since that raises my balance by roughly 25% this week. ( $89.14 ) I doubt I’ll trade again this week as Friday’s I am out the entire day and to try to find another trade tonight would just be trading for the sake of trading.

HoG

212

You are perfectly correct. I have been using a relatively large %'s for my trades. And I fully appreciate that from a money management point of view, it is very bad practice as you quite rightly pointed out. Percentage wise, my last trade
( GBP/USD ) risked roughly 10% of my balance, and the trade before that risked a staggering 25-30% of my balance. the only semblence of a reason I can offer for this is the following:

When I first started looking into opening a live forex account, I found several brokers who offer accounts for as little as $25 deposit.

However I also found several people who advised that you shouldn’t even be opening a micro account unless you have $1000. I couldn’t understand why they advised this at the time, but then at that time I didn’t understand full stop !!

As you say, good money management is NOT risking anymore than 2% of your balance on any one trade. But, again as you pointed out, 2% of a $74 balance is $1.48. But in a micro account, where each pip is worth 10 cents, that would mean, at most, you could only put your stop loss 14.8 pips above/below your entry point. And no-one is that accurate where they they could predict their trade would not go against them more than 14.8 pips at some point.

So unfortunately when you do have such a low account balance, you need to make diffrent choices. And this is probably the reason why people say that it is ridiculous to open an account with $25.

As you are more than aware, $25 in a micro account only gives you 250 pips to play with. Tell me what beginner is going to survive that ?

I believe this is nothing more than an excercise in revenue collecting for brokers who offer these accounts to beginners.

In my account, 2% only gives me 20 pips to play with for every $100 I have in the account. So, unfortunately, until I ever get back up to around the $300 / $400 balance again, ( where I can afford to stay within the 2% and STILL give my trades a decent stop distance to breathe ) I have no choice but to play with larger percentages. Not because I am looking to make money quicker, but because if I only give my trades 15 / 20 pips to be wrong, I’ll get stopped out and wiped out in no time.

So yep, totally agree with you that using the larger percentages is risky business, and maybe that in itself is a useful lesson to anyone reading this who is thinking of opening their first live account. You MUST give yourself enough funds so that you can trade sensibly and comfortably. In hindsight I am the first to admit I DIDN’T do that. But since I’m here now anyway, and since I am in the position I am in, I don’t feel as though I have a lot of choice.

Best Regards

HoG

213

I think the choice is very clear and simple. Re-fund the account to where you started (save up if you don’t have the cash now) and then continue on with good money management habits. If you exercise those habits religiously, I seriously doubt you will drawdown to $75 again, even if your analysis is absolutely terrible.

$400 Account
2% Risked = $8
$0.10 per pip = 80 pips to ‘play’ with

sounds perfect to me! :wink:

214

HoG, I would not refund this account. If you can make it back to the initital deposit and with a consistant success, then you obviously have something what works.

If you refund, then you can lose again and just feed the broker.

Follow a consistent approach and you will get back what you lost. If that works for some months and with measurable success, then sure you could think about building a little more with more deposit.

I started small and I gain not much*, but consistently. I could throw in more, but I won’t. If I can make it there, why throw more money in? This is high risk business.

And if I couldn’t make it, why throw good money after the bad money?

  • That means 50-100% roi a year. So, for me it is much, but for most gamblers out there it seems not to be much, lol. :smiley:
215

Well, this is where I get to invoke MY ‘no offense’ clause. But taking the advice to Re-Fund my account, from some-one who’s opening addition to this thread was to tell everyone that they were 15k down to forex, was never a starter in reality.

Why would I?

I’ll make ths account work. Making it back to my initial deposit level from where I have been, and where I am now, will teach me far more than simply throwing good money after bad ever could. But if I can’t, then maybe it was never meant to be. And I can live with that. But if I CAN’T make it work, it’ll only cost me $400 to find that out.

Does make me wonder though, if you were only using your 2% risk, as you were so eager to advise me on, did you go on the longest losing streak in the history of currency Trading to crash your way through $15,000 ? There has to be some sort of world record involved there. You should check ! You could be famous without even knowing it.

Anyway, no re-funding. Make a success of what i’ve got. Sounds perfect to me !

Oh, No Offense.

HoG

216

Re-funding ain’t gonna happen Buckscoder. I’d rather learn success as buy more failure. Since this is not my primary source of income then right now I treat this adventure as no more than an experiment to see if I can, or can’t make it work. And I’m more than willing to give it the time it requires. There’s an old golf addage that says “A tournament is a marathon, not a sprint!” And it’s the same thing with Forex. It’s a never ending marathon. Challenge is how long can you stay in it ?

$400 was the amount I decided to use to answer that question. As I said before, in hindsight it probably was never enough in the first place. But that is my situation and that is what I now need to work with.

Since hitting my low point of my balance, which was around 10% of my initial deposit, I have built it back up to around 22%. If I can get back up to 100% of initial deposit, then therein lies an education all by itself.

Sure I’m having to take slightly bigger risks just now than I would like, but again, that’s the situation I’m in. I’ve never been one to dwell too long on why something went wrong because no matter how much you complain about it, you can’t change the fact. Better to spend your energy on fixing it. Which is what I’m trying to do.

Take Care

HoG

217

Hello HoG, there would definitely more winners out there if all those who reached for the quick rich would read that one posting from you!

That’s exactly the point. The first real obstacle is not to [U][U][U]make[/U][/U][/U] money. Making money is easy. To [U][U]keep[/U][/U] it is the real issue.

Regarding that 2% or not, it is a matter of a strategy. If you have more winners than losers, say you had 80% winners, then you could increase that, because the probability in this case for a string of losses shrinks. However, it needs a good lot of sample trades to have an idea what the expectancy of a system is.

One last tip for you: Look at every trade as a loser. Before you open a trade, think what would be if it would went wrong. Because that can always happen. Nobody has control over any singular trade than the market.

Well, I guess you have a good chance to make it back with that attitude. I once at ff read postings from one who deposited 2k or so, lost all until 20 bucks and made it back and afterwards has 10k in his account. Not an easy walk, though.

Akeamai, if you want make it, you must change something. Definitely not meant as bad advice or offense. To think to myself I can make it and the reality if I am really making it are two different things. Nobody is helped to talk about just confidence and let him in denial. Denial is something what has every addict and keeps him in the hole. What you want to do is extracting money out of it and not throwing more in, right? But if that extracting is not possible, why would I throw more money in? That is the exact opposite of what everybody wants in the first place.

Look at HoG. He has not blown an account yet. He struggles, but his account is still alive. And he learns. Impressive attitude! The longer his account survives, the higher the probablity that he will make it.

218

Eerr, jus so I post something after quite long: one could consider not refunding a dying account so it’ll go down in books that “I started pretty low and look where I am… I never crashed my account…”. I think one should also consider that by working on a less than $1k account for two years on hitting plateau after another somewhat kills moral and delays the real fruits of forex. If it were stricktly 2% or less risk on account per trade, the same effort should apply in ensuring it doesn’t get lost, 400 or 10K, still 2% given same trading method and atleast ‘minimum’ experience? Gradually funding account (doesnt matter mistakes along the way as long as one learns from them) may be calmer for the nerves than abruptly deciding one has had it with trading 75$, its time for 10k…?

219

For sure it is better to stay with a $ 400 account for a while, while learning, than to bust one account after another. It is not about nerves, but making money in the long run and not losing an account after another in quick steps.

And regarding that 2% rule, this is a general rule, but it doesn’t say you can turn a losing system without edge into a profitable one. If you have no edge, then it takes just longer to bust the account, but it is inevitable to do it if you have no edge.

Regarding killing moral: I never lost an account, am up more than 50% and definitely it not killed my moral, lol. If I look at all the quick rich losers, I am very confident that I do it the right way. :slight_smile:

220

Just to add, this 2% rule can in fact destroy a good expectancy of a system and increase drawdowns. It could even turn a profitable system in a losing one. A drawdown of a system is way more important than the risk or expectancy of a single trade. I do not say to risk too much on a single trade. But if you have on a big sample data statistically proven less drawdown with say 5% risk of a trade than 2% risk, I’d definitely use the risk of 5% a trade and go with that to avoid higher drawdowns. This is not any academic rhetoric, but based on my experience.

Below is a detailed report of a system what uses a higher than 2% risk per trade. That means higher roi and the same time less losers. It is all a question of the system at whole. No one part of any system can be taken as particular rule for another system. Every system has it’s on characteristics. To analyze and know those specifics of a system is the key to every success.

Screenshot-14.jpg700×365 41.4 KB

At least it is all a question of compounding. If you can have a 100% roi a year on average (like the report shows), that means you can double your account every year. If you double an 1k account for 10 years, that means 1x2^10 ~1 million dollars.

If you start with $ 400, it just needs a little longer than a year more. If you start with $ 50, it just needs around 5 years more. 5 years most losers need to feed their blown accounts and give up after all (if they don’t change their attitude and are still clever).

That’s just a little academic, I know. Because I would start extracting money out of it as soon as there are higher equities involved. But it shows where the profit comes from: From compounding and NOT from throwing money to the brokers, take every general “wisdom” as reality and use a system without any edge.

221

To be fair there is a point here. If you bust out because you are risking too much per trade (I.e. You can only sustain a small losing run) then you haven’t really learned if you have a successful trading technique…the only conclusive thing you can say is the money management was wrong as a winning streak could have been around the corner if you bank could sustain the losing run…

222

what is a drawdown? ie is it taking your money out of account and into pocket or just a loss?

223

I do absolutely agree. However, I would not go without a backtest over minimum approx. 2 years anyways. And that backtest shows what “animal” I have to deal with. I do also not suggest for a newbie to go with a risk beyond 2%. I have a little experience and I know what I am doing. So, I have a feel for how a system behaves while trading. If somebody has no feeling for that and no big picture, he should in my opinion start with less than 2% on a trade as risk. And I even think $400 is a very tight account. However, we all have to live with the reality and as far as it went, HoG is on a better path than before. That’s what I think. Another thing is that I think it is better he has a [U]little[/U] more risk on any one trade than to be too fearful and ask for stop hunting. So, if it’s say 3% risk, that doesn’t change the whole picture much, but could avoid some losses. However, I suggested to look down on every trade before filing the order. So, then he will know what he has to deal with.

Well, I can just write regarding what I know and regarding [U]my[/U] experience. Everybody must for himself know what to do.

224

The amount your account goes down to, normally described as a percentage of the amount your account has fallen

225

A drawdown is the difference between a high or top of your equity in an account and a low after some losses or even a mixture of profits or losses, where the losses are higher. Like say the difference from the top to the through.

Drawdown and Maximum Drawdown | Risk Management | Learn Forex Trading

The drawdown of that particular system with trades of higher than 2% risk is below 15%. So, that says in around two years the roi/y was ~100% and the maximum dd was less than 15%, which gives this system a 15:100 rrr, based on an exact empirical data sample. Or put another way: If you start with such a system and you would from the start have the highest dd of that backtest, you would go 15% down in equity after it would start recovering.

The biggest advantage from knowing your max, dd is that you can objectively see if your system doesn’t work anymore as expected.

226

today i put my 1st indicator…
very happy coz my position is right and got +30 pips… but onlyin 30 minutes, all that happiness become dissaster…
my + gone and turn to - until hit my stop loss… then… the chart back to my tp… sad sad…
am i too newbe or i’m too stupid… =="

227

Hi Rhine

Nice to have you with us. I think it is easier to go through your reply one point at a time. They’re only my opinions but I hope they help. And I also hope I have understood you correctly.

If you mean this is the first trade you have placed using ANY indicators whatsoever (I never used any when i first started.) you will find that one (ANY one alone) is not enough to base a trade on. I wrote in a previous post that I use 10,20,50,100,200 period moving averages - MACD -Slow Stochastics and I also draw trend lines on my charts and I use these indicators all at the same time. My charts are in candlestick displays. Of all the indicators available the ones I use are probably amongst the most basic and easy to learn. School of pipsology will help you or just do a search on the web for any of them, there are loads of free sites out there. It is only when several of these indicators are telling me the same thing that I enter a trade now. I won’t base a trade on any one alone.

When I first started, I never let my profit get as big as +30 pips. I would snatch at profits even if it was only 2 or 3 pips. I am now slowly learning to let my trades go a little longer, but even now I would probably have just taken the +30 and been quite happy. After all, +30 pips equates to 3% of my total balance right now and that’s not a bad profit for any business in any one trade. At the very least if my trade had got to +30, I would have moved my STOP up to my entry point, or even +5 just to give myself the satisfaction of knowing that at worse I didn’t lose anything. Once you place your STOP and your TP, there is NO rule out there that says you MUST wait until one of them is hit. If you are a newbie and your trade gets to +30 again, think about tightening your STOP, or even just closing your trade cmpletely. +30 is a good profit on a trade for us newbies you know ! Once you gather more education, you can always change that strategy the more confident you become.

The trouble is, when it is real money, a little bit of greed creeps in and you think, “It might go higher, I might make more!” But you also need to know when to just take a profit and just be happy. Sometimes you’ll close a trade and the price will indeed go further in the direction you wanted. But so what, you made a profit. have no emotion about what price does AFTER you have closed your trade because it doesn’t matter. You made a trade, you made a profit, keep a record if you want of what your analysis was and how after you closed price DID move on. But never feel bad about what you COULD HAVE had. Work with what you’ve got.

You will read lots of things from different people saying you need to let your trade “run until the end” or you must do this, or you must do that. YOU DON’T ! What you need to do is survive. And you’ll never go bust if you keep taking profits instead of losses. You need to find YOUR trading style and methods. It’s easy to find other peoples, because there are plenty of people out there only too willing to tell you them. Finding your own is a bit harder. I’ve been very lucky in this thread so far that I have been joined by some very genuine people. So if you need to ask a question, no matter how stupid you may think it is, ask it ! Someone will have an answer. Just remember that what people say to you is how THEY would handle the situation. Ultimately YOU must decide how YOU handle it.

I’ll tell you how I’ve lived my life since as long as I can remember. I’ve always been one of those people who learns by charging in (mostly completely unprepared) and falling on my backside a few times. I’m not saying you, or anyone else should follow that advice, that’s just the way I am. I’ve NEVER been very good at learning things by sitting reading ( which probably explains my less than spectacular academic career !) And I’m the first to admit that this is what I did when I opened my live trading account, charged in unprepared. I wasn’t learning anything about Forex by READING about Forex. But boy, I soon sat up and started to pay attention when I saw my real money going down the toilet !! That’s learning !!

So never EVER let anyone tell you that you’re too new, that you can’t do this or you can’t learn this. You can learn ANYTHING that anyone else can. You also have the capability to DO anything that anyone else can. You just need to learn it first, that’s all.

As for asking if you are too stupid. Well I think you can guess how I’m going to answer that. You’re not stupid at all Rhine. And the simple fact that you have found an education site and got involved shows that you have the intelligence to learn. Wether you learn anything from this thread, or any other thread, it doesn’t matter, as long as you continue to seek to learn.

Stupid people don’t ask questions. Stupid people sit and stare and wonder. Clever people ask questions, constantly!

So stay involved, ask questions, don’t be scared to give your opinions. It was said in an earlier reply that our biggest asset in this forum is each other, and I still believe that to be the best bit of advice so far.

PS. let me know what indicator it was you used, just as a matter of interest.

HoG

228

Nice to see you are finding your feet Hog! Nothing in life of note comes easily… dogged determination is 50% the other half, good money management. Since you already have your preferred indi’s mapped out, I’ll not suggest others. But you might try looking at a suedo indi… HA. Try putting it up on the 4h and 8h and see how it might influence your existing strat? Might I further suggest you put up a 2 regression line off the HA open if your platform allows. Anyways just trying to help you along a little.

229

R Carter

Nice to hear from you again and always nice to get suggestions. Unfortunately however, being the newbie that I am, I don’t know what a HA or a 2 regression line is. Would be very grateful for an explanation though.

Regards as always

HoG