Forex plan outline for newcomer

Beginner Questions
1

hello baby pips members,

i am very new to forex trading, i am considering the option of adding it as a secondary income. i have started to go through baby pips school, which i feel will give me a good introduction to the subject. i have outlined a plan that i would like to receive your input on.

education:

  • complete baby pips school (read twice or thrice)
  • read 2-3 books on subject (ed ponsi perhaps? recommendations?)
  • practice on demo account for 3-6 months (until breaking even or slight profit)
  • open mini account try out strategy for 3-6 months at 1/10th the dollar value (observe profit over meaningful sample size)
  • switch to standard account :slight_smile:

money management: (figures are for standard account, principles apply for mini account as well)

  • start with 10k deposit on standard account
  • invest with 100:1 leverage (in essence use 1k for 100k)
  • use stop loss limits that are max 10 pips so that never more than 1% of total bankroll (100 dollars) is put at risk, even though a 10% margin is used on all trades.

strategy:

  • low variance scalping strategy
  • work 5 hours a day (optimal hours based on research and experience) / 5-6 days a week
  • try to complete 20 trades a day / around 500 a month (is this feasable when scalping in a 5 hour timespan on 1-3 currency pairs)
  • use 1:1, 2:1 or 3:2 type risk/reward ratios
  • use 5-10 pip stop-loss and take-profit figures
  • focus on technical analysis rather than fundamental analysis
  • initially focus on EUR/USB and in time add GBP/USD, and USD/CHF
  • use metatrader 4 (thoughts?) on a large and respectable website that openly allows scalping

winning projections:

  • aim for 1 pip (10 dollars) profit per trade on average, so after 500 scalping trades a month make 5000k profit :slight_smile:

well i sense that this is a naively optimistic plan outline based on only two days of research :slight_smile: please provide feedback on these topics.

kind regards,
beyazkus

2

Hi
first part of your plan is good. Complete BP school. Then reassess your plan.
Most seasoned Traders do not recommend scalp trading for begginers and your proposal may lead to overtrading

3

Scalping is hard. Depending on the pair, spread could very well mean you start with a -20-40% edge to overcome.

Trade frequency and money management can be interchanged. You don’t have to trade 800 times a day to make good money.

4

Hi i am new as well just like you. You seem to have though much further ahead than i have… :slight_smile:

I think 500 trades a month is probably too much to begin with. I have read in a lot of places that you should aim for 2 trades a day to start with. Should be interesting to get people’s view on this.

5

thanks for the feedback so far guys. what do you think about my bankroll policies, are they reliable in terms of risk of ruin? does using up a ten percent margin create any risks i am failing to notice, even though only 1 percent is risked at any time? thanks in advance.

beyazkus

6

I run two concurrent stragies, that intermingle. One is a scalp-ish type stragie and the other is a swing/range bound trading.

Even with my scalping (In and out of a trade generally in less then an hour) I usually don’t do more then 5-8 per day, about 3 days a week tops. Scalping is hard because it pushes a psychological border, not because it is particularly difficult, assuming you have a stragie that works on that time frame.

The other problem with this is your assuming to make X% return in Y time. Thats the wrong way to go about it IMO. You should trade, and see how much you made on average over a given set of time.

I also suggest that you don’t demo so long, and instead do back tests. There are a few programs that allow you to go backwards through time and then stop when you would make a trade, etc. Calculate your winnings/losses. If you hold up ok, and are consistant then go live, but go live with Oanda (just due to them being so unique in this) and set asside 1-10% of what you actually want to trade. This way if you blow your account its like loosing one trade, but you would have learned much about your psychology. If you do good after at least 6 months with 2-3 market shifts (eg: markets changing from ranging to breakout, back to ranging again) Then you can open an account with another broker, or fully fund your Oanda account. You would still be better off stepping into it, vs rushing it. What I mean by that is lets say you start off with 1% of your total available funds to trade with, bump it up to 10%, then 25%, then 75%… so on and so forth…

I personally think its cheaper in the long run to step into your trades as you get used to how you will handle trading psychologically.

Also keep a log of some sort, how detailed is up to you, but more detail will help you more down the road. I’m not comfortable logging everything so Instead I monitor my trades and then write down things I did that I shouldn’t have.

Some samples of things I would, have or did write:
Don’t worry about leaving some money on the table
Don’t scalp the 1 min, only use 1 min charts for precise entries. (You always forgot to watch hire timeframes because it moves so fast, its hypnotizing…)
Ignore RSI and BB on anything less then 15 mins. Be suspicious of them on 15 min and half hour.
Same as above with trend channels and S&R’s.
Keep an eye out on the daily and hourly. Daily needs to be checked 2-3 times a day to remember, hourly needs to be checked 2-3 times an hour during a trading session, otherwise you may forget what were looking for on the 15 minute (* This is a scalping note*)
If the market is dead/stagnant stay out, dont be an idiot again. (This lesson has gotten expensive $100 out of a $200 trading account, lead to a poor attitude which ate the other $100, I’m just now back after an almost 1.5 year break to calm down, and settle my nerves)

I dont know if what I call scalping is what you call scalping, but here are my general rules for scalping.
Larger time frame is stangnant (daily, or hourly) and lower timeframe is fairly consistant in a range, I will buy/sell the bounces. I will exit if it gets stagnate, or if it hits the other line. In theory I wont re enter a trade until after the setup is there again. My setup is difficult to articulate, but I look for signs of reversal near the S&R’s.

My long term trades are the same as my short term trades. Any trade can go long term. If A scalp goes long term I will leave money on the table, if a short term trade goes long term I am more likely to stay in it for awhile, but I will move my SL to break even or get a slight profit.

I also like active markets, my stragies don’t work very well with stagent timeframes, I want all the odds in my favor.

7

On your education,

I would say only open mini if you are making profit. Otherwise open up micro.

On money management,

Open up 5k for micro, 10k for mini

You don’t have to have lot size so that 1 pip = $10. You can use less. You should know where your stop is before placing the trade, so figure out how many pips it is, then figure out how many lots you need to make it however much risk you desire.

On strategy,

Somebody mentioned this and I agree. I would try different types of trading. Since you haven’t opened an account yet, you can try on demo. Maybe you won’t like scalping… Keep an open mind. That is what demo is there for. Scalping is actually the hardest forms of trading because spreads (the amount it costs to make a trade) are a larger portion of your profits.

On winning projections,

Even from a preliminary standpoint, you should realize that not all your trades are going to be winners, hence your 500 trades will not yield 5k. For every trade you lose, you have to win another just to break even.

Hope this gets you thinking.

8

thank you simy and viper for your detailed answers.

i will certainly think about and research the comments, suggestions and reservations you have put forward.

i am trying to figure out if forex is a good option for me. i have spent the last 3 and a half years studying and playing texas holdem poker professionally. althought i feel i am relatively compensated for my efforts (monthly winrate ~$1500), i have my doubts about the profitablity of the games in the next 3, 5 or 10 years to come. i would like to have a back up plan, or an exit strategy if one day i find that i cant or choose not to continue playing poker…

at first glance the mirage of making 10 or 20 calculations and trades a day to earn “on average” 10-20 pips (at 10 dollars) daily seems easier than playing 2250 hands of poker on ten tables simultaneously. but its common knowledge that the grass is greener on the other side.

i guess what it boils down to is how feasable is it to read 2 ed ponsi books (“Forex Patterns & Probabilities” and “Forex Playbook”) practice for a year on demo, micro and mini accounts and start to make an average of 100 -200 dollars a day (based on say trimonthly figures). i know it took me more than 70 books on poker to reach my current level :slight_smile:

my mind tells me that forex should not be easier than poker, but perhaps better paying (twice my winrate would be nice) and slightly less tiring once one becomes a competent trader…

9

Scalping is hard if you have Brokers with normal spread. But with professional borkers like Interactive Brokers you can have 0.5 spread.

@beyazkus seems to me you’d better open a small but real account (with oanda for example since you want to scalp and so need small spread) than demo trade for months.

10

[QUOTE=beyazkus;214796]hello baby pips members,

" aim for 1 pip (10 dollars) profit per trade on average, so after 500 scalping trades a month make 5000k profit"

it looks too good to me what you said. do you think all of your trades will be winning. as a new begineer i dont think you will be able to acheive that one for atleast a year, gud luck to you anyway.