I have some questions about the risk, the goal and the expectation:
I want to start my first DEMO account, with $1000, using 50:1 leverage ratio.
It could be also my real account in the future ( maybe in 2043! )
So, my questions are :
Do you think that the leverage ratio, considering my poor account, should be less?
I want to risk only 2% on each trade, could be ok if the total risk will be 10%?(5 trades in the same time)
My goal is to keep a 5% per month (so for the 1Ā° month earning $50,for the 2Ā° month earning $52,5 ā¦) but I still donāt know if for a noob is too high, please take me down from the sky and tell me a reasonable Goal (also ādonāt loose all your moneyā could be ok!)
Considering my goal (hypothetically 5%), should I stop trading during the middle of the month if i reach it ? (Example : Iām lucky and Iāll reach it on 15 March, should I stop till next month, or should I go and try to gain/loose more?)
Thank you very much, and sorry for my bad English!
Great post. First thing you need to know, that in forex, opinions are like rear ends. . .everyone has one. What you need to do, is find out how your questions pertain to you and what you are trying to achieve. Not some trader you donāt know tell you that for you to make money, invest 1% of your account based on daily time frames. Itās personal and depends on you. Thatās one of the purposes of starting with a demo. To find out personally what suits you and your situation. Risk, leverage, expectations are all personal to you. There is not only one way to approach just about anything in forex.
So besides learning from your demo account. This link will help you with risk, what happens with the different leverages, etc. Play with it, put your balance in then try the different risk % same with leverage, same with position size just follow it down. Position Size Calculator, Forex Position Size Calculator
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[li]Youād first want to establish a trading plan to follow.
[/li][li]If it calls for the allowance of 5 positions open @ the same time, maybe during the same single day, why not split that risk and expose yourself a little bit less?
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[li]As far as the 5% goal - itās good to set goals in order to gauge your trading. But, to be able to pull down 5% (or x% each week, month, year) youāll need to have a solid process which is profitable. Why not focus your energy on the process, rather than the 5% figure. What if you take a few bad losses and your risk of ruin table starts to look really ugly. Are you going to over-leverage yourself to try and āwinā that money back so you can make your 5%?
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first of all thank you for your precious advice.
I think that maybe Iām looking for someone who can tell me what to do, but as you say, the best thing I can do is helping by my self.
You can imagine how much excited I can be, I just āfinishā the pipschool and I want to start trading as fast as possible.
But, first of all, I want to create a good trading plan, and I believe Iām still confuse about itā¦
Are there some āmain pointā I should take care of concerning trading plan?
For example, choosing the right risk per trade, wich type of frame I want(can) look on, and so onā¦
So Iām asking again for your help, how can I write down a good trading plan?
Thank you again.
P.S.
Iām going to look again the ātrading planā section!
I would agree with all that has been said by the other postersā¦
One thing, though: fifty-to-one leverage is far too highā¦ Seriouslyā¦ that means commanding 50,000USD with just 1,000USDā¦
This means that for every pip you will gain/lose about five dollars (with variations according to pairs and, potentially, carry/rollover)ā¦ Here is a scenario:
you lose thirty pips on one trade = you lose 150 USD;
you lose thirty pips on two trades = you lose 300 USD;
you lose thirty pips on three trades = you lose 450 USD;
you lose thirty pips on four trades = you lose 600 USD.
If you got to number 4, you would have (1000 - 600 = ) 400 USD left from your accountā¦
What I mean is that you should not over-leverage yourself and aim for a maximum leverage of ten-to-one, which is a sensible propositionā¦
Just my very humble opinion, of course! As gp00053 says, āopinions are like rear endsā¦everyone has oneā!
Thatās the kind of hint Iām looking for.
I also thought that 50:1 leverage could be too much, but Iāve also considered my account.
With only $1000 I can open a position (with micro-lots) with just $20, that is my risk%.
With that low leverage (10:1), I should use nano-lots.
Now I think the problem is the balance of my account.
Do you think $1000 is too poor using micro-lots?
Who in their right mind would enter a trade with a $1000 account balance at $5 a pip trade? The leverage is largely academic if using the correct MM. Lets say as the OP has stated, we open a trade with a 2% stop loss of 30 pips (in your example). 2% of $1000 = $20. ) Actually $ 0.66 a pip.
EDIT: Ahumā¦ before sum (forgive the pun) bright spark corrects me! 0.66 (recurring) So rounding, 0.67.
Consider first what type of trader you are. If your intending holding positions for a relatively short time and using (lets keep this simple), lets say a 10-40 pip stop then Micro should be fine. If however your considering holding positions for days or weeks (perhaps 100 plus pip stop), then youāll be better off using a nano. Whichever type of trading you opt for, the important thing is to keep your risk to 2% or LESS.
Letās say that Iām more oriented to short therm trades.
Well, at least, Iām trying, but considering the time I can spend on the chart (4-5 hours/day) and just because Iāve strated a DEMO account yesterday, I think it could change in the future.
My idea/strategy of trading is based on ālittleā range between SL and TP, mainly because of the account, secondly because I want to reduce my hypothetical losses.
The 2% risk (as you say $20 on $1000) will be maximum % Iāll use, at least for the first period, and trust me, I want to follow it even during bad moments!
I want to put a limit also on the global ammount of open trades, I want it to be less or equal to 10%, so 5 trades open in the same time.
I could also split the risk on as many trade as I want to open, so for example, if I want to open 4 trades, Iāll split the risk in 0,5% on each trade, but I think I have to find out, as gp00053 said, my own strategy.
Having 5 trades open @ the same time, exposing each position to a minimum of 2% of your equity is a bit aggressive for someone who just started demo trading in my opinion. Iāve had days where Iāve lost 4 straight trades in a row. Would you be comfortable blowing almost 10% of your account in a single day? What if that losing streak extends out a day or so (as we know, our wins/losses are going to be randomly distributed) - would you be comfortable taking a 15-20% hit to your equity in one week?
Think about what that will do to your drawdown, risk of ruin, and above all- your mindset.
Why not split that risk, and cap your daily exposure to < 3% / day?
If youāre taking 5 trades in a day, why not risk .05% on each position?
If you can consistently pull down 5-10% a month trading for a year straight, then youāve got something really good going.
Why expose your account to a 10% loss in a single trading session?
And obviously- these are just my opinions and Iām not trying to tell you or anyone what to do.
I just wanted to share some insight.
Focusing your energy and efforts on the process rather than the results (i.e. monetary gain) will pay dividends over time.
Think about a golfer - do you think they get up to the tee box thinking solely about birdie-ing every single hole? Yes, itās in the back of their mind, but, the mechanics of the swing, breathing, environment etc etc are all primary.
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