I’m starting demo trading (full time now) and I’m using MetaTrader 4.
I want to do it as realistic as possible but I do need some advice…
[U][B]How much should I start with and what leverage should I use?[/B][/U]
In real life I have about �10,000 or $13,000 which I’m NOT going to use entirely so I need a smart amount to start with.
In MT4 I can start with 3000/5000/10,000 <= what should I use??
And I want to use one of the following leverage 1:20 , 1:33 , 1:50 , 1:100 …there are more but I’m picking one of these <= which one is best??
BTW: about 2 weeks ago I practiced with demo trading on the EUR/USD and I’d chosen $3000 & 1:100 which resulted in $10 pipvalue, but that’s not a smart idea I think.
my dad told me a few months ago to start with the hightest ballance possible, check out different leverges by having more then 1 demo, then choose the leverage that best fits me and my trade style. this worked for me so i would like to pass it on to you.
Funny how different versions of this question always seem to come up on the forum. It is a completely normal question but one that i think too many traders dwell on the wrong way.
The answer is simple: Manage your trades on a percent risk of capital per trade and leverage takes care of itself.
The different leverages the brokers offer is irrelevant. The higher the leverage they offer, the greedier the traders they attract (and i am not suggesting you are greedy…just speaking in general). Don’t think about the leverage they post. That is the available leverage but it is not a reflection of your true or effective leverage. You must think in terms of percent risk on a per trade basis.
Here’s an example. You are trading a mini account, where each pip is worth 1.00. You want to take a trade with a 50 pip stop while not risking more than 1% of your account, which has a balance of, say, $10,000. When you think of each trade in this context the leverage itself no longer matters. So, what is the answer?
1% * $10K = $100 is what you are willing to lose on the trade.
$100/(1.00 per pip)*(50 pip stop) = 2 mini contracts.
This means you are controlling $20,000 worth of currency on a $10,000 account, essentially giving you a true leverage of 2:1, more than enough leverage for a beginning trader. So, what do you think of a broker that is pitching you a high leverage account? Nothing - it doesn’t matter what they offer you because most successful traders would never leverage their account to that extent - it is financial suicide. I think some of the most experienced traders would never use more than a 5 or 6:1 leverage anyway.
So, how do you use this to decide starting capital? Basically, if you are trading a mini account, you would probably need at least 10K to safely participate. Anything less than 10K, you should open a micro account.
As a friendly warning, please be very very careful with this perspective.
The only time you need high leverages to make significant profits is when you are trading smaller account balances. With larger account sizes, a small amount of leverage is just fine to carve out good dollar returns.
I am not sure what you mean by significant returns, but if you find yourself risking anything greater than 3% of your account balance on each trade because you have to make “significant profits”, then you are operating from a very dangerous mind-set.
The idea in trading if you want to be around for the long haul, is to risk very little on a per trade basis (1%, say) and build your way to your objectives one trade at a time. That may not be the sexy way to do it, but it is the smart way. When you are planning and taking trades always think about what you stand to lose BEFORE thinking about what you stand to gain.
No, no, not at all. But the answer you are looking for will only be clear when you know what type of trader you are, what your average win vs loss, accuracy, etc… You essentially need to know your system and what you can expect from it statistically.
In other words, if you plan on being a long-term trader, then the idea of making 100/day is a bit far-fetched i think. You may average that in the long run but not a day-to-day basis.
If you absolutely require an income on a daily basis, then day trading or swing trading may be what you should explore.
This thread opened some interesting points. I like the way pipbull approaches this. No matter what size lot you trade, you still have to be tight with your risk management.
As far as a daily income limit, it is possible to [U]average[/U] something like the $100/day you want. Trading is a funny business. I think Shadow reminded us that it’s more like “ten months of grind and two months of gravy.” Looking for a specific number each day can get you into trouble. How will you factor in the inevitable losing trades? Will your preset daily goal keep you from letting the occasional monster trade run? Will you have to “over-trade” your capital to meet your goal? I don’t know. Just thinking out loud…
For what it’s worth (and I know my ideas have not been very well received on this forum) but you can very easily make upwards of $100.00 USD per day by trading things like exotic currencies and commodities like Gold.
Beware though - you need margin, margin, margin, and more margin and you also need to be prepared to leave any losses incurred until they turn to profits if you are going to go this route (they invariably always turn to profit - some just take longer than others). And did I mention that you need margin?
Don’t get me wrong - I have lost thousands and am still down - but slowly climbing back - because - I now have margin! Basically - at the moment - I have around $7 000.00 USD in my account - and I am only trading 1 lot of $50.00 at a time. Get the picture? It’s the ‘sledgehammer to crack a walnut’ approach - but it does work.
When I lost all the money that I lost I was starting with $500.00 USD and buying one or two lots at $50.00 USD per lot. Things don’t have to go too far pear shaped before your capital is gone and then you start again with another $500.00 and the whole process repeats itself until you are really down.
Somewhere else on this forum someone gave good advice (which is the best to follow if you have the resources) - do not start with anything less than $50 000.00 USD - that way you are pretty much assured of making real money in the long term. Unfortuanately - I do not have that kind of cash available so I have a Mini Forex Account with what I believe to be high capital balance compared to the small amounts I am trading and this is working for me.
Just something else that I have discovered (and that cost me dearly) but take heed:
NEVER buy more than one lot of something on the same order. Rather buy (for example) 10 individual lots on seperate orders (easy enough to do quickly with one click trading). The reason: if you do ever get margin called any system will close that single position of 10 lots before it starts closing the individual positions of one lot each and assuming that your single position of 10 lots is now losing you will lose big time (ask me - before I started calming down - at one point I had about 23 lots on one order and things started to go pear shaped. I was only margin called for about $5.00 or $6.00 USD but of course - the first position that was automatically closed was the 23 lot position - lost about $4 000.00 USD in the twinkling of an eye). It was one of those ‘What the f**k was that’ moments which was quickly followed by an uncontrollable ‘shuddering’ of the extremeties! Get the picture. Had I not had this situation only one single position would have been closed and, as things have it, this 23 lot position would have made a huge profit by the next day.
Also - watch TV, listen to Radio, read the Newspapers, read the daily commentaries on this site, and understand how this whole beautiful thing hangs together - then you’re cooking with gas!
All: I followed Dale’s first adventure through his thread back in March. I do not know Dale personally. I am sure he is a fine man. He has a right to pursue trading as he see fit and to present his ideas on how to trade. [U]With all due respect[/U], I strongly suggest that the techniques he has suggested here are a recipe for certain disaster. Do not let losing trades get away from you. Please spare yourself the emotional and psychological agony of such a experience - not to mention the monetary expense.
Dale: I wish you the best in your trading and peace in your life.
I just cannot help myself - I have to post a response.
The result of what happened at that time would have been totally different HAD I HAD MORE MARGIN! That’s the point I have been trying to make.
If you look at it now - where is the JPY? Had I not run out of margin - I would have made an absolute (relative) fortune by now.
One thing I have stopped doing is hedging positions to cover margin. No - that does not work.
I’m also not saying the way that I approach things is for everybody - but the thread starter wanted to know if it was possible to make $100.00 USD per day and the point that I was trying to make is yes - you can - IF YOU HAVE ENOUGH MARGIN.
And once again - demo trading - is not the same as live trading - don’t be fooled. For one - your mindset is not the same. For two - I can guarantee you that you will ALWAYS make money on demo accounts.
Once again - for what it is worth - if you want to learn - open a Mini or Micro Account with $500.00 and learn that way. Think of the $500.00 as tuition fees if you lose it. It is the only way you are going to see what happens in the real world. And yes - you will probably lose it first time round because this in NOT ENOUGH MARGIN to make real money. Put it another way - if you cannot afford to lose the $500.00 then you should not be looking at this anyway.
On the other hand - I suppose that given the amount of money that I am down right now - I should not be giving anybody advice - I think the only reason that I do it is because I really do believe that I have learned some valuable lessons in a very short space of time albeit very expensive lessons.
Now I may be a newbie but I must respectfully disagree with the idea that you should open a $500 micro account and learn by loseing it all.
Many here have said to first learn the mindset of a sucessfull trader by cementing the 1% risk money management and the pateince needed to win long term.
I personally plan to demo trade until I find a system that works, and then demo trade that consistently for at least a year before I open a real account.
That account will be a very small one with Oanda, so I will be able to do 3-4:1 margin with very small amounts, and by trading mechanically as I have for over a year by then hope to make annual after tax returns of 25%.
After a year if I have succeeded in making profit with the small account I will add more and then again after 6 months until I am up to $20-30,000 and trading $10 pips succesfully.
$500 as tuition fees seems silly considering the quality of the education on this site is equal to any book I have read on Forex and believe me I have checked out plenty.
I think that everybody here has some vary good input. But to start with a $5000 balance and trade $10 a lot I think is far too risky. At that point if you trade the eur/usd you will be risking 0.4% of your capital. Doesnt sound like much but if your trade goes down just 10 pips you are out 4% of your capitol. That means that if you lose just 25 trades in a row (I know not likely to happen, but could) you have lost your whole account. I read somewhere that said not to trade $10 a pip until you have $50,000 in your account.
My big question is “How long have you been demo trading?” If I read it right you just started. My friend that got me into the fx market did the same thing after 3 months he put in $1000 turned it into $300 put in another $1000 and lost it. He has not even looked at the market for over 6 months now. I think adamgalas has it right by demo trading for a year first.
Since I started last year I have spent almost 4 to 5 hours a night at least 4 days a week and sometimes more, just to learn the market. I am just now feeling that I am ready for this.
Don’t get in too fast. This is just like real estate. You don’t need to jump in on the deal of the century because there is a new deal of the century every week. If you jump in you will most likely get burned because you, don’t know what kind of trader you are, don’t know your system, have not figured out your risk to reward or money management. If you get burned and lose your whole $5000 then there is a chance that you will just give up and never come back thinking that this was just a waste of time and money.
Firstly, have an amount of capital in your head that;
You can afford
You can lose
I would then say to demo trade the system that you are going to use in live trading, and keep demo trading it until you make CONSISTANT profits for three months…using the amount of capital in your demo account that you have in mind for your live account…this way you will be able to more accurately guage how much to use per trade…and…crucially how much profit you can expect to be making using that start-up capital.
This is important, i know for a fact that some potential traders have opened a 50K Demo, made some good profit, then go live with 10K…and wonder why they don’t make the same profit as on their Demo…this then forces them to overtrade and BINGO!!!..bye-bye 10K!!
The reason i don’t say a year for Demo, is because with demo accounts you can become undisciplined, over-confident and try trades and systems which you would NEVER try on a live account…and then the actual transition to a live account will come as a big fat scary shock.
Don’t use any other systems during this time either, use the system you will Live-trade with…to Demo-trade with.
Get to know your tradestation so you are as fluid using it as driving your car get to know the system, it’s pitfalls (every system has pitfalls) it’s strong points and the timeframes the system works best on.
Once you have done all this, look at your account, how much you have lost/won and the ratio of profitable trades to non-profitable trades…the result of this self-analysis should THEN be used as an indication of how much capital you should start with.
Get the system up and running first…know you can do it before you start thinking about how much to do it with…you’ve all heard of the 7 P’s right?
Propper Planning and Preparation Prevents Piss-Poor Performance !
Well i just opened a live account last week…and before that i was demo trading for 2-3 weeks…i opened a mini account and funded it with $300…yes only $300…but i kind of find that sufficient when you are doing only 1 trade at a time with one lot…which gives you a margin of 250pips. now if you choose your pair and your entry exit points with confidence isnt that enough?
Since last week my equity has gone up to $352 dollars…i do day trading and i only wish to carve out 10 pips a day…
So my question is i donot understand why do you need to have a $10000 in you “mini” account to trade!
I’m quite new to all of this and was also going to open up a mini account to start.
I was wondering if you would be willing to tell me which borker you are with? Im having a hard time deciding. I started a demo account with MBT but am having a tough time placing stops and such.
