I have taken a fascination with trading FOREX as I was a high stakes cash online poker player the last 7 years and it was shut down in the US. I already have a semi emotionless attitude towards money and I have been reading all I can for a while and trading since October 2nd where I started with a $1500 account balance.
I have been trying to day trade and make several small gains in a day instead of riding out positions due to the high volatility and I like knowing I am able to watch my positions.
I have managed to grow my account to $5800 in 10 trading days and I withdrew $2500 as a reward and Im starting again with $3300 today. I trade primarily the EUD/USD pairing.
My short term goals are to learn as much as I can and grow as a trader and learn to balance a healthy schedule of work and rest. I used to day trade stocks during the boom and the volatility in Forex is 10 fold…wow!
I would like to turn this into a full time job as I have a baby on the way, due on April 1st and I would like to be able to work from home as I am accustomed to.
I have been trading on FXCM.COM as I got $50 free from the CNBC portfolio challenge and [U]I would like to ask traders the following:[/U]
Is that the best platform to trade microlot forex with the best spreads?
For tax purposes, I have read that the site does not send you 1099’s nor do they report to the IRS, so what percentage % do I need to set aside for taxes?
Is my trial and error system of making a large amount of small trades a day, despite the spread commissions, a potential way to trade once I have a much larger account balance? (over $10,000)?
I know my beginners luck of 390% profit in 10 days cant last forever, so if I want to continue to day trade in my account…am I better off depositing a significantly larger sum so I can trade non-microlots for a smaller spread?
Welcome to the Babypips community. I’m FXCM’s online ambassador to the Babypips community so I wanted to help answer some of your questions.
You know my opinion but I can help you by giving you some direction about what’s important to most traders.
Some of the most important topics are safety of funds, quality of execution, customer service, ease of use, resources, and spreads. A thread that I think will help to explain how forex execution works is the No Dealing Desk - Q&A thread: 301 Moved Permanently.
If you want to talk about FXCM products, then you can post to the BabyPips threads located at 301 Moved Permanently
I have to give you the generic answer regarding taxes but if you want more information about specifics, then you can email me at <[email protected]> so I can help with your FXCM account.
[I]“FXCM is not required to produce a 1099 for profits or losses to the IRS or to its clients as indicated on the current Form 1099-B instructions.
However, under Section 61 of the Internal Revenue Code, it is the client’s obligation to report all profits to the IRS. You may use the “Report” feature of the FXCM trading platform to get a full report of the year’s profit/loss on your account.”[/I]
In my opinion, no one can tell you what trading style will work for you because they don’t know about your true risk tolerance and your trading methodology. You say that you can keep your emotions in check – this is great. With trading, I find you need to know when to stand by your convictions and understand there is a point where you have to pause and switch course.
I have had the opportunity to speak with thousands of traders in the past 6 years, and I know profitable traders who trade short-term positions and traders who hold trades indefinitely.
There are rudimentary rule of thumbs to keep in mind. For example:
ALWAYS trade with the long term trend. You can see the long term trend on any daily chart.
Have a risk:reward ratio, and stick to it – Many traders will have a required risk:reward ratio as a rule to enter trades. For example, a trader may have a 2:1 risk:reward ratio where they look to make 2 pips for every 1 pip they are willing to lose.
There are many more and the Babypips education is a good start! You can ask about FXCM’s resources on the FXCM thread if you have questions about the tools you are using.
Money management is arguably the most important topic in forex trading. Along with using a risk:reward, many forex traders will have a maximum position size they are willing to trade based on the size of their account. I think you are trying to ask “what is the maximum position size I can hold in my account?”
Here’s an answer: The position size that you can hold in your account using leverage depends on your account equity. To track how close you are to the maximum position size for your account, FXCM provides real-time information on usable margin (the account equity available to take on new positions) and used margin (the account equity needed to maintain open positions). Together used and usable margin equal account equity.
Your usable margin changes as open positions fluctuate in value. If your open positions are gaining value, your usable margin increases. Conversely, when floating losses increase, usable margin decreases.
As a general rule of thumb, you may want to limit total account leverage to a maximum of 10:1. For example, if you have an account balance of $10,000, you could trade a maximum position size 10 times larger than your account balance. In this example, 10 X $10,000 = 100,000 (100k total for all positions).
I hope that helps and glad to hear you are enjoying your new account!