Honest truth about forex.....

The leverage chosen when signing up for a live account is of concern especially for new traders. kierans suggestion on 1:100 is a good start. This will prevent taking too high of a risk on the trading account itself. However to be able to have good money management on every position higher leverage then 1:100 might be needed, if the funded account is under $1000.

kmartyn suggestion of 1% total risk of the account at any given time is highly recommended. This means that if the trader have several positions in place at the same time the risk per positions has to be lowered. A good strategy is to have a low risk like 0.33% per position and max 3 positions in the market opened at the same time, which will amount to 1% total risk of the account. Trading with this kind of strategy of course requires discipline to not place more then 3 positions max. Most often the trader will only have one position used up and risking 0.33% before exiting. The average on the whole when it comes to the account risk might end up around 0.50-0.60%. Sure, it will not give a lot of profit but the draw down will be in control as well.

Trading news is as many have pointed out not a good idea for new traders. The slippage and spread can be high and the total risk can then go way beyond the 1%.

In regards of leverage, isn't it the case that it is completly the same if you trade on 1:100, 1:400 or something else if you use a predefined % max. Risk per trade (the only thing that changes is the used margin).

mlawson71 posted:
Try to avoid trading during high-impact news, learn from your mistakes and don't open new positions because you're bored or you don't have the patience to wait for a good entry point. It took me a while to learn these simple truths.

Yeah news have a very initial impact on the market and if you make any mistake in predicting the influence of news on the market, then it could be a very big loss.

Tell me about it. My personal rule is that if I'm not sure what the effect of the news will be, I don't trade them. And more often than not I'm not sure what the effect of the news will be.

No one really knows what the news will be until its released apart from a few people,you can prepare for it though.Trade up to the news or 10-15 mins after,of course there is another option of a straddle trade,but you need to be experienced at doing this,I have done this many times successfully,you can get caught though if your not careful,it depends on what your trading and the Data type.
I had a straddle on NFP on Friday past,which went well,you can check my post.

janettte,
the problem is when it comes to too high of leverage, like 1:500, is if an inexperienced trader do not have position protection or account protection the whole account can be wiped out very quickly if he's caught up on the wrong side of the market.
That is why it's so important to have a stop loss on every position and also on the whole account it self. I don't actually see high leverage as negative in trading but new traders do not grasp this until they have experience how important it is to be fully protected.
Also there is a concern with gaps, overnight positions and weekend positions for new traders. Just one mistake can actually wipe out the whole account if the leverage is too high. Low leverage is like a stop loss from the broker and better start with low leverage to prevent mistakes like forgetting stop losses and account protection.

kricka posted:
Low leverage is like a stop loss from the broker and better start with low leverage to prevent mistakes like forgetting stop losses and account protection.

Interesting point. Totally agree with you (so far i never thought about this).

Makes no odds with using 1:50 or 1:500 leverage providing you use proper risk and money management.

2% is still 2%, whether it's yours or not.

kricka posted:
janettte,
the problem is when it comes to too high of leverage, like 1:500, is if an inexperienced trader do not have position protection or account protection the whole account can be wiped out very quickly if he's caught up on the wrong side of the market.
That is why it's so important to have a stop loss on every position and also on the whole account it self. I don't actually see high leverage as negative in trading but new traders do not grasp this until they have experience how important it is to be fully protected.
Also there is a concern with gaps, overnight positions and weekend positions for new traders. Just one mistake can actually wipe out the whole account if the leverage is too high. Low leverage is like a stop loss from the broker and better start with low leverage to prevent mistakes like forgetting stop losses and account protection.

There is the option of a guaranteed stop loss.

Good post - I would make a few suggested edits though (in my opinion)

1. Over leveraged. I know the appeal of trading 1:500 or even 1:1000, but DON'T do it. You will blow you account. My max now is 1:100 and that carries a significant amount of risk. - GOOD :) Leverage = Bad

2. Money management. Do not risk more than 1% of your account. Some say 2% is fine, but 1% is better. set your stop losses at 2% of capital. - Its more about risking what you don't mind losing.

3. Worry about entries less and focus on how you're going to exit the trade that makes the most sense. Once you're in the market manage that position. Worry more about the REASON for entry - what has caused price to be where it is - is there a fundamental reason for it - is that reason likely to change.

I disagree on the leverage. Guns don't kill people. People kill people. The same with leverage.

With financial instability and incidents like Alpari I say bring on 2000:1 leverage and thin capitalisation - purely because then more money can stay where it needs to be. In my account. I would rather owe my broker than have my broker owe me.

Also, after many years looking at this I reckon one of the biggest issues for new retail traders is watching too many things. Its like learning to fly a plane blindfolded. Rather learn to fly first - then try figure out how to deal with the blindfold.

Consistently on myfxbook competitions, the average losing trader has 65% winning trades but average loss is double the average gain. I am no statistician, but the coin flip analogy is often used, and coin flips are a 50:50 thing. So fine. Forget everything else, conceptually, flip a coin and you will be right half the time which is less than the 65% wins from trading competitions.

So if you can be right 50% of the time, the key to having edge (or total gains exceeding total losses) is to be able to consistently identify R:R greater than 1:1 because with say average performance of $1.7 of gain for every $1 lost, then 50% win rate or 65% win rate, a trader will be profitable - and no need to follow 1% rules or 3% rules or anything else. Just trade consistent lot size regardless of profits or losses

Edge is edge and a methodology with edge recovers from drawdowns be they 10% or 70%

Would you let someone drive your porsche that has no driving licence,something my boss used to say for fun.True beginners should stick to one pair.My trades are 60~65% correct,I could even get away with 40% it's all about how much you make on those winning trades to wipe out the tiny losses,most of my trades are 6:1 or 5:1,4:1 minimum,stupid to trade anything less,my entry is more important than exit,I get maximum gain this way.There are many ways but this is mine.

Thanks for your notes. I shall say that entry is also of high importance, especially with news. If you can determine strong signal to entry over time, than you can afford higher leverage and lot size and thus get more profit per trade

FradeauX posted:
Thanks for your notes. I shall say that entry is also of high importance, especially with news. If you can determine strong signal to entry over time, than you can afford higher leverage and lot size and thus get more profit per trade

entry DOES NOT matter. It has been proven MANY times quantified over and over that you can have a random entry and still be profitable in the long run. It just isn't as sexy as entered on a supply demand level or that moving average crossover.

Everyone has their own way of trading, Buy the time Moving average cross over kicks in half the trade is over or reversing,signals are only useful some of the time,mostly false or too slow because their depending on past data.

focusedfinance posted:
I disagree on the leverage. Guns don't kill people. People kill people. The same with leverage.

With financial instability and incidents like Alpari I say bring on 2000:1 leverage and thin capitalisation - purely because then more money can stay where it needs to be. In my account. I would rather owe my broker than have my broker owe me.

Also, after many years looking at this I reckon one of the biggest issues for new retail traders is watching too many things. Its like learning to fly a plane blindfolded. Rather learn to fly first - then try figure out how to deal with the blindfold.

Consistently on myfxbook competitions, the average losing trader has 65% winning trades but average loss is double the average gain. I am no statistician, but the coin flip analogy is often used, and coin flips are a 50:50 thing. So fine. Forget everything else, conceptually, flip a coin and you will be right half the time which is less than the 65% wins from trading competitions.

So if you can be right 50% of the time, the key to having edge (or total gains exceeding total losses) is to be able to consistently identify R:R greater than 1:1 because with say average performance of $1.7 of gain for every $1 lost, then 50% win rate or 65% win
rate, a trader will be profitable - and no need to follow 1% rules or 3% rules or anything else. Just trade consistent lot size regardless of profits or losses

Edge is edge and a methodology with edge recovers from drawdowns be they 10% or 70%

I like your moto,here's my version. If you like it sell it,if you hate it buy it!

focusedfinance posted:
I disagree on the leverage. Guns don't kill people. People kill people. The same with leverage.

With financial instability and incidents like Alpari I say bring on 2000:1 leverage and thin capitalisation - purely because then more money can stay where it needs to be. In my account. I would rather owe my broker than have my broker owe me.

Also, after many years looking at this I reckon one of the biggest issues for new retail traders is watching too many things. Its like learning to fly a plane blindfolded. Rather learn to fly first - then try figure out how to deal with the blindfold.

Consistently on myfxbook competitions, the average losing trader has 65% winning trades but average loss is double the average gain. I am no statistician, but the coin flip analogy is often used, and coin flips are a 50:50 thing. So fine. Forget everything else, conceptually, flip a coin and you will be right half the time which is less than the 65% wins from trading competitions.

So if you can be right 50% of the time, the key to having edge (or total gains exceeding total losses) is to be able to consistently identify R:R greater than 1:1 because with say average performance of $1.7 of gain for every $1 lost, then 50% win rate or 65% win rate, a trader will be profitable - and no need to follow 1% rules or 3% rules or anything else. Just trade consistent lot size regardless of profits or losses

Edge is edge and a methodology with edge recovers from drawdowns be they 10% or 70%

I agree with your comments, but would like to add one more key element which most of succesful traders have in common: Increasing positive positions and only trail the SL... When to enter a positions is for me completly overated. BTW:

FXtrader2010 posted:

FradeauX posted:
Thanks for your notes. I shall say that entry is also of high importance, especially with news. If you can determine strong signal to entry over time, than you can afford higher leverage and lot size and thus get more profit per trade

entry DOES NOT matter. It has been proven MANY times quantified over and over that you can have a random entry and still be profitable in the long run. It just isn't as sexy as entered on a supply demand level or that moving average crossover.

Does or does not, it also depends on strategy, isn't it? For example, two same trades with different entries of lets just say 40 p. It can be noticeable depending on volume. My example was not concretized, you mentioned about long run and I meant some single trade. Thank you and sorry if I m not right after all.

Do you want to hear honest truth about trading in general?? Its addictive and it gets worse if you make a little bit of money...all of sudden you feel invincible