Going live

Beginner Questions
1

Hi everyone, I have been lurking on these forums for about 6 months now just reading, learning and getting my strategy together for my assault on the forex markets! Thought it was about time I joined in.

I’ve been through the stage of thinking I can just put an EA on my account and in a few months go boat shopping (nope, that didn’t work!:rolleyes:).

Then I started testing strategies, some were my own but most were stuff I picked up from this forum. Wiped out a good few demo accounts (at least 20) but am now starting to think I may have found a profitable system that I can make work for me.

My main issue at this stage is that I haven’t fully comprehended money management - those equations to determine lot size and stop loss etc are all a bit hazy. e.g. I calculate a 20 pip stop loss but I am already down 27 pips due to the spread (are these pipettes, so it it really 2.7 pips? in which case how do you apply the stop loss/lot size calculation?).

My other question is this: how much of an impact does the broker really have? i.e. if I go with any mainstream broker FXCM/Alpari/IBFX/GFT et al, does the choice really make that much difference or would I be better spending time on my strategy rather than broker research?

I’m hoping to go live in about 2-3 months with $2000 and trade 0.1 lot sizes initially, gradually increasing lot size in line with account size. Anyone else at this stage right now?

Thanks! All comments/advice/warnings etc welcome.

2

Go with a large broker, take a small portion of your $2000 open up a micro account preferably with the broker you plan on using. Trade your plan see how it and [U]you[/U] perform with some cash on the line. When you get the micro account working the way you want for a few months put in some more money.

3

if its a spread on a major, im pretty sure it’s 2.7 pips, unless you’re trading like some obscure currency like martian/jpy.

there will be people who’d say that 6 months isnt enough, some others will say demo accounts wont help you at all, but i find that you’re ready when you know you are.

just make sure you’re consistently profitable, and whatever you put into your account is spare cash (money you won’t mind losing, because nobody ever has ‘spare’ cash)

for broker choice, it depends on your strategy. i love metatrader, very versatile and since i’m a programmer i can program my signals and lines all over the place to help me visualise my method. plus you can find very nifty tools for metatrader (and im sure for the rest of the programmable trading programs too), like those that indicate to you which markets are trading, etc.

2nd thing you should look out for is the spread. when i signed up, alpari was one of the few that had metatrader support, so i dumped my load on them, but they had quite a big spread, and they still do (comparatively), even though they just reduced it.

3rd thing is response time of the server. depending on the method you trade, it is vitally important if you trade news releases, to get a good response time (it also may mean finding a broker in the same continent as you are). there’s no real way to find out if it’s good other than checking customer reviews (there are a few sites that collect reviews, but i’ll let you do your research). and while you’re at this, you’d find plenty of reviews on other aspects as well

so there, find out what you really need, whether you’re happy with the broker you have your demo with, and map out pros and cons for each broker in your ‘to consider’ list. try to stick with the big names though (because its likely someone else has read the terms and conditions thorougly and screened it for dodgy stuff)

4

That isn’t 27 pips, it’s 2.7. The problem is that most brokers are using pipettes these days, but MT4 and other platforms were never designed to use them, so it calls them pips.

Money management confuses the heck out of a lot of people, so don’t feel bad.

Step 1: Figure out how much you want to risk. If you want to risk 2% per trade and your account has $1000, then you want to risk $20 per trade (1000 times .02 = $20).

Step 2: Determine your stoploss and figure your value per pip. If your trade needs a 50 pip stoploss then take the amount you want to risk ($20 in our example) and divide it by 50 pips. 20 divided by 50 is 0.4, so we want this trade to be worth $0.40 per pip.

Step 3: Figure out what lot size gives you 40 cents per pip. If you have a micro account each lot is worth 10 cents per pip, so you need to trade 4 lots to get 40 cents per pip.

As for brokers, as long as you go with a major regulated broker (like the ones you mentioned) you’ll be fine. I wouldn’t worry too much about it. :slight_smile:

One more piece of advice (since you asked for it)… Don’t start with $2000. Start with $100, then add the rest of your money in stages after a few weeks/months. This will help you ease into the psychological aspects of trading real money. Lots of people do fine on demo, and then lose big time on their live account because of the psychological shock risking real money brings. :slight_smile:

5

What I’ve found personally is that I require more than for instance 100$ in my account to be able to treat it seriously. I guess that’s a lack of discipline, but I’ve found that what was right for me, was to start with an account big enough to make me take it seriously and at the same time small enough to not matter if I blew it completely.

What amount of money that corresponds to will be different for each and everyone. Try to figure out what that amount is for you, stui.

6

Thanks guys - some good snippets there to think about. I like the idea of just using $100 to start with but on the other hand if I’m following a profitable system then it won’t matter how much is in my account. I have read quite a bit about the psychological side of things and I am prepared to stick rigidly to my system…

Phil838, thanks for the step by step guide - I now have a spreadsheet set up with risk and lot size calculated for me which I can see is going to get a lot of use! This has also helped me discover that with my system I need to make a net gain of 3 trades per day (e.g. 6 winning trades and 3 losing ones) to make my initial target of 3% per day.

This might seem high but for every trade I split the total lots into 5 and have take profits of 25, 50, 75 and 100 pips (the 5th trade I let run, just adding a break even stop loss).

So, at 3% risk and $2000 my risk is $60. I want a 200 pip stop loss which means my total lot size is 0.3 of a standard lot (60 / 200). Split that into 5 and I have 0.08 to use for each of my take profit stages.

I think that makes sense…hope you agree!

7

fast learner :wink: you’ll do great.

phil838, i take the same side as the complicated-number-letter guy, everyone has amounts they are willing to lose; someone earning a decent salary would be willing to start with a higher account.

8

I don’t mean to be hard on you or anything, but just like other things its easier said than done. Take me for example, even after a month of research, scared to open a demo, I finally did and decided my way of trading would be a set of things; set from what others had posted and what I’d put together from readings. Once you’re in a trade, unless its just me, you’re glued to watching it. It takes some training to look away/not let your emotions grab you.

My plan for getting into things was this:

First get to know the platform I’d be trading with. Nothing like losing a few pips here and there JUST because I didn’t know how to place my order, fumbled an indicator, jumbled a S/R Line… so on and so forth. Hence, using a demo account EVEN for a week I’d say is a good way to dive in.

Once familar, I planned to make an initial deposit of $50 - $100 and trade with it on mini/micro accounts. I have a job so it’s not too much to risk at the moment (comparing to saving a good 1000 or 2000 to see it dwindle).

Finally, when successful, I would deposit more.

Note here you have to be confident that you WILL be successful. It takes time, lost trades, and learning. Sometimes it takes the tolerance of losing real money to get a feel for what’s going on. Even though it’s only been a few months I’ve been doing thing, I can say I’ve come along way and saved myself some hardship.

P.S-> Hint: Make sure your lot sizes are in check before you enter a trade. Meaning to enter 0.01 lots and entering 1 full lot can be a hard hit, whether it be just a demo account or your ego :P.

Happy Trading!

9

LOL! Complicated-number-letter guy… That’s hilarious.

We just call him MacGyver. :slight_smile:

Whatever you call him, he’s right. The exact numbers will be different for everyone, but I stand by the spirit of my advice. If $100 is peanuts to you, then start with $500, or $1000, or whatever… Just don’t start with the entire amount you’re going to be trading with. :slight_smile:

Start with enough that you wouldn’t want to lose it, but not with everything you’ve got, just in case you do lose it! :slight_smile:

10

Agree 100%