Trade Based on Price Action. The pair yesterday print as a Pin Bar at 1.5025 are which is a Resistance and of course 1.5025 is a Fib 61.8 extension (I don’t know how to say the extension) The Fibo, the Pin bar and resistance showing at green line is confirming the pair want to go south. Moreover the daily Chart showing a HL, LH, LH pattern clearly.
Looks like a good setup and it was obviously a good trade. How many lots are you trading? I’m new to the Forex market and have only been day trading stocks (purely scalping) for a couple of years now. I have avoided Forex and Futures for a long time, but have some risk capital that I’d like to start experimenting with. From my understand from the Pipsology school on this website, if you are trading one lot (100k) then you should be making anywhere between $7 and $11 per pip based on the current exchange rate. So if this was a one lot trade, am I right in assuming that this would have made a profit of around $1,000? Does it make sense to trade multiple lots on a setup like this one? Just learning and need to know more before I “go live.” Thanks.
My FXCM account is a MINI account. I never traded more than 0.10 lots(10K). My risk per trade is between 2-5%.
You are correct with your assumption about the $1000. But you need to have a large account to trade standard lots (100K). In my opinion it doesn’t make sense to trade multiple lots in a given setup. Because any trade will go against us.You should have a fixed risk rate per trade.
Real traders only risk 2% of their account balance per trade. Some risk 5%. So if your risk is more than that and you blindly trading on any setups then you are gambling.
Forex trading is a probability game. It never move in a fixed direction. The GBP/CHF was a good trade. This trade works for this time. I trade based on Pin bar. Look at GBP/CHF daily chart on December 4 & 5’s, there are two pin bars resisting 1.4940 and 1.4980 areas. That was a good setup, but it failed.
In a nutshell, There is no sure winning setups (holy grail). We will have losing trades on the go. All setups have 50% chance to win. So, you need a trading plan and a Money Management rule.
Continue your learning at School of Pipsology. Graduate from the school. For a better idea about Risk/riward, lot size and other aspects of forex trading, Check ICT’s threads. They so helpful.
Thanks for the clarification. If I understand you right you are only risking 5% of your account balance. I’m assuming you are using the full account balance to get in the trade, but then placing a stop at a point where you lose 2% of that balance. Or are you saying that with an account balance of $10,000, you would only get into a trade with $200-$500, leaving the other $9,500 just sitting there not involved in any other trade? If you wanted to practice good money managment and wanted to be in two currency pairs at the same time, would you risk 2-5% on each pair or only have a “total” risk of 2-5% across all your current open trades?
Again. I’m new and still learning, so I appreciate any feedback on this question.
I usually take risk between 2% to 5% for each pair. I never risk more than 5% risk same time. My trades need big stops which is around 100 pips per trade. I didn’t open more than one trade same time but I did open second trade when first trade is in a reasonable area and the stop at Break even. Because the first trade is risk free.
Again for your clarification I will trade multiple pairs same time if my risk is below 2-5% for all pairs.
hey rowen, im not sure if you’ve realized forex is very unlike stocks
in stocks the max you can buy is 2x your account that’s the max margin
but in forex you can buy 25-250 the size of your account
1 standard lot = 100k
1 micro lot = 1k
if you have a 1000 dollar balance you can buy 10 micro lots (10,000) of eur/usd, and put a stop loss of 20 pips which equals to about 20$ which is about 2% of your account
this is the power of leverage in the forex
it can make you or break you
also at the same time you can take open alot more positions, but it depends on your margin rate and if you open too much positions that have too big of a size, you risk getting margin called, go learn more about margin calls and your margin rates from your broker
O.k. I think I understand. If I have an account with $10,000 in it, you are saying I shouldn’t use the whole $10,000 to buy 5 standard lots (500k) using leverage and margin and set my stop limit when the total account value drops to $9,800 (which would be a 2% loss of the $10,000). I think you are saying that if my account has a $10,000 value, then I should ONLY use $200 of it to enter a position which would let me purchase 1 mini lot of 10,000. If this is right, do I set my stop at 2% of the $200, which is only $4 or 2% of the position which is $200 (10,000*2%)?
If your leverage is 1:100 and your account balance is $10,000 then you can trade $1,000,000.
Margin means you need to have a minimum amount in your account to open a position. If a broker’s margin level is 2% then you should maintain 2% of your opening position.
Let’s do a math: If you are trading a $10,000 (10K ot 1 mini lot) then you need to have $200 in your account(2% of the position) With $200 you can trade $10,000 unit.
How to calculate risk on a given trade? Again you open a position in EUR/USD as $10,000 and your risk tolerance is 2% that means you are ready to risk $200 for this trade. So you can put a stop loss of 200 pips. (1 mini lot = 1$ pip value per pips)
With these risk percentage (2%) you can adjust your lot size based on your Stop Loss. IF you consider a 100 pip stop loss then you can trade 2 mini lot or 20,000 (20K), if your stop is 50 pips then you can trade 4 min (40K) and so on. But if you open 40K then you need to have $800 as a margin.
Hope it helps. Do some search in baby pips school.
Thank you. I have read the pips school information on leverage and margin. I have signed up with TradeStation for my Forex account. They only have a 50:1 leverage, not 100:1.
I see now that you are referring to risking 2% of my total account balance, not 2% of the amount required to be in the trade. This makes more sense to me. I wasn’t figuring on that. If I had a $10,000 account balance but only used $200 to open a mini lot, I was calculating 2% loss on the $200 investment, not the full account balance of $10,000. Thank you for clearing it up. I’m new at this and just want to make sure that I get it right.
I’ve opened the account and am about to fund it. I’ll share with you my very first Forex trade and let you know how it goes!
You are welcome Rowen. But please don’t rush to trade Forex on a live account. Before you going to trade with real money, make sure you understand how the platform, entries, lot size, stops and TP’s work.
Before trading live you should have Trading system, trading plan and a Money Management rule. I recommend you to trade demo for at least 6 months to develop a system and confidence.
I have a 301 Moved Permanently thread for trading setups. But the thread is not for making noise. There is rule to post trade ideas and charts. It deals with daily charts. If you want to know what is my strategy and how I trade then check it.
First find a system that suits you and plan your trade and trade your plan. The market will always be here. You can trade tomorrow. So learn today.