In my humble opinion, the reason you lost so heavily was the high leverage. 400:1 is crazy! I advise using a maximum leverage of 30:1 … and for newbies, 10:1. Professional trader Cory Mitchell of[I] VantagePoint Trading[/I] says: “I recommend 10:1 to 50:1 [leverage]. We aren’t really going to use more than than about 20:1, but having 30 or 50:1 is fine as well. We have stops on all positions, never get re-quoted (we may get a bit of slippage though) and our stops are usually a ways away from the current price so taking a massive hit isn’t likely. During volatile times our stop will be bigger, and if the stop is going to be so big it causes us to risk more than 1%, we don’t take the trade.”
Also you don’t mention whether you were following a trading system, or just trading “by the seat of your pants”. The latter “method” is likely to lose you money, unless you have instincts as good as George Soros, who gets - literally - a tingle in his spine just before the market is going to make a move in his favour (or so I once read in an article about him), at which point he bets heavily (as he did with regard to the British Pound in 1992, when he brought the Bank of England to its knees, metaphorically), and nearly always wins big. Most people, however, including myself, don’t have such good instincts, and are better off using a trading system, and sticking to it consistently. What were [I]you[/I] doing?
In this respect, Cory Mitchell says, with regard to swing trading:
[QUOTE]
[B]Forex Swing Trading with $1000 -It’s Just Math[/B]
Let’s get down to mechanics. I have a specific strategy I follow, which I won’t fully outline here (will make a video [later]) but I will give you the math and how I set my orders so my account grows.
If I am taking a long trade I place a stop 5 pips below a major swing low in price. The stop on a short position is placed 5 pips above a major high, plus the typical spread.
If trading a $1000 account that means your stop can’t be more than 100 pips away from your entry price. Therefore, you are looking for entry points with less than 100 pips of risk. If trading a $600 account, you need to find trades with less than 60 pips of risk. This is because we are only risking 1% of our account on a trade.
(Note: pips values will vary when the USD isn’t the second currency listed in the pair. If you are unsure of pip values, you can always check the amount you have at risk on a trade in MetaTrader4. Go to Tools>Options>and select “Show trade levels.” Put out an order away from the current price where you want to enter, place your stop and target. Hover your mouse over the stop level on the screen to show the dollar amount at risk. If it is more than 1% of your account, cancel the trade or reduce the position size.)
So with a $1000 account let’s say you find a trade where the risk is 30 pips. This means you can trade 3 micro lots (your risk will be $9, and you are allowed to risk $10, GOOD!). Take three separate positions at the same price, each for 1 micro lot (the level II plugin makes this easy). Place the same 30 pip stop for all of them, but each position will have different target.
Take profit on the first position at 1.6x the risk. You are risking 30 pips, so put a target of 48 pips for one of the micro lots. For another micro lot put the target at 2.0 x risk, or 60 pips. For the third lot put a target at 2.6 or 3.6 x risk, so 78 or 108 pips.
If the stop is a bit bigger, say 70 pips, then you can only take 1 lot. When this happens I recommend taking profit at the 1.6 x risk, which is 112 pips in this case. The reason is that you get your profit and you can always look for another entry. There are loads of forex pairs and other opportunities. If you have a trade were you took 2 lots, get one out at 1.6 x risk and the second lot at 2.6 x risk.
By risking about 1% per trade, and getting filled on 3 to 5 trades a night (which is about how many I am filled on each night) even if you lose 60% of the trades you will be profitable. Your gains are bigger than your losses, by a margin of 60% of more, and when you can take multiple micro lots with different targets your wins will be more than double of your losses. It’s is just math. Making 1% to 5% per day isn’t uncommon with this approach, and those sorts of returns add up quickly. There is no reason to risk more than 1% per trade. On losing days you may lose 1% to 3%, but average it out and you are making money.
There is no emotion here (or shouldn’t be). You set your orders and that is it. You do need a decent system to win 50%+ of your trades (ideally), but beyond that it is just math. You will have losing days, but the winning days will be bigger and more frequent.
[END QUOTE]
