Forex for a trader
Money traded weekly in forex

Money traded weekly in forexWhy Do Many Forex Traders Lose Money? Here is the Number 1 Mistake. by David Rodriguez , Quantitative Strategist. Big data analysis, algorithmic trading, and retail trader sentiment. Your Forecast Is Headed to Your Inbox. But don't just read our analysis - put it to the rest. Your forecast comes with a free demo account from our provider, IG, so you can try out trading with zero risk. Your demo is preloaded with ?10,000 virtual funds , which you can use to trade over 10,000 live global markets. We'll email you login details shortly. You are subscribed to David Rodriguez. You can manage you subscriptions by following the link in the footer of each email you will receive. An error occurred submitting your form. Please try again later.

We look through 43 million real trades to measure trader performance Majority of trades are successful and yet traders are losing Here is what we believe to be the number one mistake FX traders make. W hy do major currency moves bring increased trader losses? To find out, the DailyFX research team has looked through over 40 million real trades placed via a major FX broker's trading platforms. In this article , we look at the biggest mistake that forex traders make, and a way to trade appropriately . Why Does the Average Forex Trader Lose Money? The average forex trader loses money, which is in itself a very discouraging fact. But why? Put simply, human psychology makes trading difficult. We looked at over 43 million real trades placed on a major FX broker's trading servers from Q2, 2014 – Q1, 2015 and came to some very interesting conclusions. The first is encouraging: traders make money most of the time as over 50% of trades are closed out at a gain. Percent of All Trades Closed Out at a Gain and Loss per Currency Pair. Data source: Derived from data from a major FX broker* across 15 most traded currency pairs from 312014 to 3312015.

The above chart shows results of over 43 million trades conducted by these traders worldwide from Q2, 2014 through Q1, 2015 across the 15 most popular currency pairs. The blue bar shows the percentage of trades that ended with a profit for the trader. Red shows the percentage of trades that ended in loss. For example, the Euro saw an impressive 61% of all trades closed out at a gain. And indeed every single one of these instruments saw the majority of traders turned a profit more than 50 percent of the time. If traders were right more than half of the time, why did most lose money? Average ProfitLoss per Winning and Losing Trades per Currency Pair. Data source: Derived from data from a major FX broker* across 15 most traded currency pairs from 312014 to 3312015. The above chart says it all. In blue, it shows the average number of pips traders earned on profitable trades. In red, it shows the average number of pips lost in losing trades. We can now clearly see why traders lose money despite being right more than half the time. They lose more money on their losing trades than they make on their winning trades . Let’s use EURUSD as an example. We see that EURUSD trades were closed out at a profit 61% of the time, but the average losing trade was worth 83 pips while the average winner was only 48 pips. Traders were correct more than half the time, but they lost over 70% more on their losing trades as they won on winning trades.

The track record for the volatile GBPUSD pair was even worse. Traders captured profits on 59% of all GBPUSD trades. Yet they overall lost money as they turned an average 43 pip profit on each winner and lost 83 pips on losing trades. What gives? Identifying that there is a problem is important in itself, but we’ll need to understand the reasons behind it in order to look for a solution. Cut Losses, Let Profits Run – Why is this So Difficult to Do? In our study we saw that traders were very good at identifying profitable trading opportunities--closing trades out at a profit over 50 percent of the time. They utlimately lost, however, as the average loss far outweighed the gain. Open nearly any book on trading and the advice is the same: cut your losses early and let your profits run. When your trade goes against you, close it out . Take the small loss and then try again later, if appropriate. It is better to take a small loss early than a big loss later. If a trade is in your favor, let it run . It is often tempting to close out at a small gain in order to protect profits, but oftentimes we see that patience can result in greater gains. But if the solution is so simple, why is the issue so common?

The simple answer: human nature. In fact this is not at all limited to trading. To further illustrate the point we draw on significant findings in psychology. A Simple Wager – Understanding Human Behavior Towards Winning and Losing. What if I offered you a simple wager on a coin flip? You have two choices. Choice A means you have a 50% chance of winning 1000 dollars and 50% chance of winning nothing. Choice B is a flat 450 point gain. Which would you choose? 50% chance to Win 1000. 50% chance to Win 0. Expect to win $500 over time. Over time it makes sense to take Choice A—the expected gain of $500 is greater than the fixed $450. Yet many studies have shown that most people will consistently choose Choice B. Let’s flip the wager and run it again. 50% chance to Lose 1000. 50% chance to Lose 0. Expect to lose $500 over time. In this case we can expect to lose less money via Choice B, but in fact studies have shown that the majority of people will pick choice A every single time.

Here we see the issue. Most people avoid risk when it comes to taking profits but then actively seek it if it means avoiding a loss. Why? Losses Hurt Psychologically far more than Gains Give Pleasure – Prospect Theory. Nobel prize-winning clinical psychologist Daniel Kahneman based on his research on decision making. His work wasn’t on trading per se but clear implications for trade management and is quite relevant to FX trading. His study on Prospect Theory attempted to model and predict choices people would make between scenarios involving known risks and rewards. The findings showed something remarkably simple yet profound: most people took more pain from losses than pleasure from gains . It feels “good enough” to make $450 versus $500 , but accepting a $500 loss hurts too much and many are willing to gamble that the trade turns around. This doesn’t make any sense from a trading perspective—50 0 dollars lost are equivalent to 50 0 dollars gained; one is not worth more than the other. Why should we then act so differently? Prospect Theory: Losses Typically Hurt Far More than Gains Give Pleasure. Taking a purely rational approach to markets means treating a 50 point gain as morally equivalent to a 50 point loss.

Unfortunately our data on real trader behavior suggests that the majority can’t do this. We need to think more systematically to improve our chances at success. Avoid the Common Pitfall. Avoiding the loss-making problem described above is very simple in theory: gain more in each winning trade than you give back in each losing trade. But how might we do it concretely? When trading, always follow one simple rule: always seek a bigger reward than the loss you are risking. This is a valuable piece of advice that can be found in almost every trading book. Typically, this is called a “ rewardrisk ratio ”. If you risk losing the same number of pips as you hope to gain, then your rewardrisk ratio is 1-to-1 (also written 1:1). If you target a profit of 80 pips with a risk of 40 pips, then you have a 2:1 rewardrisk ratio. If you follow this simple rule, you can be right on the direction of only half of your trades and still make money because you will earn more profits on your winning trades than losses on your losing trades. What ratio should you use? It depends on the type of trade you are making. We recommend to always use a minimum 1:1 ratio .

That way, if you are right only half the time, you will at least break even. Certain strategies and trading techniques tend to produce high winning percentages as we saw with real trader data. If this is the case, it is possible to use a lower rewardrisk ratio—such as between 1:1 and 2:1. For lower probability trading, a higher rewardrisk ratio is recommended, such as 2:1, 3:1, or even 4:1. Remember, the higher the rewardrisk ratio you choose, the less often you need to correctly predict market direction in order to make money trading. We will discuss different trading techniques in further detail in subsequent installments of this series. Stick to Your Plan: Use Stops and Limits. Once you have a trading plan that uses a proper rewardrisk ratio, the next challenge is to stick to the plan. Remember, it is natural for humans to want to hold on to losses and take profits early, but it makes for bad trading. We must overcome this natural tendency and remove our emotions from trading. The best way to do this is to set up your trade with Stop-Loss and Limit orders from the beginning . This will allow you to use the proper rewardrisk ratio (1:1 or higher) from the outset, and to stick to it. Once you set them, don’t touch them (One exception: you can move your stop in your favor to lock in profits as the market moves in your favor).

Managing your risk in this way is a part of what many traders call “money management” . Many of the most successful forex traders are right about the market’s direction less than half the time. Since they practice good money management, they cut their losses quickly and let their profits run, so they are still profitable in their overall trading. Does Using 1:1 Reward to Risk Really Work? Our data certainly suggest it does. We use our data on our top 15 currency pairs to determine which trader accounts closed their Average Gain at least as large as their Average Loss—or a minimum Reward:Risk of 1:1. Were traders ultimately profitable if they stuck to this rule? Past performance is not indicative of future results, but the results certainly support it. Our data shows that 53 percent of all accounts which operated on at least a 1:1 Reward to Risk ratio turned a net-profit in our 12-month sample period. Those under 1:1? A mere 17 percent. T raders who adhered to this rule were 3 times more likely to turn a profit over the course of these 12 months—a substantial difference. Data source: Derived from data from a major FX broker* across 15 most traded currency pairs from 312014 to 3312015.

Game Plan: What Strategy Can I Use? Trade forex with stops and limits set to a riskreward ratio of 1:1 or higher. Whenever you place a trade, make sure that you use a stop-loss order. Always make sure that your profit target is at least as far away from your entry price as your stop-loss is. You can certainly set your price target higher, and probably should aim for at least 1:1 regardless of strategy, potentially 2:1 or more in certain circumstances. Then you can choose the market direction correctly only half the time and still make money in your account. The actual distance you place your stops and limits will depend on the conditions in the market at the time, such as volatility, currency pair, and where you see support and resistance. You can apply the same rewardrisk ratio to any trade. If you have a stop level 40 pips away from entry, you should have a profit target 40 pips or more away. If you have a stop level 500 pips away, your profit target should be at least 500 pips away. We will use this as a basis for further study on real trader behavior as we look to uncover the traits of successful traders. *Data is drawn from FXCM Inc. accounts excluding Eligible Contract Participants, Clearing Accounts, Hong Kong, and Japan subsidiaries from 312014 to 3312015.

View the next articles in the Traits of Successful Series: The Traits of Successful Traders. This article is a part of our Traits of Successful Traders series. Over the past several months, The DailyFX Research team has been closely studying the trading trends of traders via a major FX broker. We have gone through an enormous number of statistics and anonymized trading records in order to answer one question: “What separates successful traders from unsuccessful traders?”. We have been using this unique resource to distill some of the “best practices” that successful traders follow, such as the best time of day, appropriate use of leverage, the best currency pairs, and more. Stay tuned for the next article in the Traits of Successful Traders Series. Analysis prepared and written by David Rodriguez, Quantitative Strategist for DailyFX. com. Sign up to David’s e-mail distribution list to receive future e-mail updates on the Traits of Successful Traders series and other reports. Contact and follow David via Twitter: twitter. comDRodriguezFX. DailyFX provides forex news and technical analysis on the trends that influence the global currency markets. How Much Money Do I Need to Trade Forex?

How much money you’ll need to trade forex is one of the first issues you have to address if you want to become a forex trader. Which broker you choose, trading platform or strategy you employ are all important as well, but how much money you start with will be a colossal determinant in your ultimate success. Not all traders are alike though, and not everyone trades the same way. A day trader may not need the same amount of money to start forex trading as a swing trader does. The amount of money you need to trade forex will also be determined by your goals. Are you looking to simply grow your account, or do you seek regular income from your forex trading? Below, we will look at the recommend capital required for various forex trading styles. How Much Money Do I Need to Trade Forex? – Why It Matters. Before going into how much money you’ll need to trade forex effectively, we need to look at why this issue is even important. Does it really matter if you start an account with $100 or $3000? Yes! One of the most significant issues new traders face is being under-capitalized. Forex brokers are guilty of fostering such an environment by offering to open accounts for at little as $5 in some cases…although the minimum opening balance is usually about $100. (See: How to Pick a Forex Broker That is Right For You) Let’s face it, if you want to start trading, it’s likely because you want an income stream. Well, you aren’t going to have much of an income stream if you start with $100. Since very few people are patient enough to let their account grow, they will risk way too much of their capital on each trade trying to make an income, and in the process lose everything. I am a firm believer in only risking 1% of capital (max 3%) on a single trade.

If your account is $100, that means you can only risk $1 per trade. In the forex market that means you can take a one micro lot position (see Calculating Pip Value for information on various lot sizes), where each pip movement is worth about 10 cents, and you need to keep the risk to less than 10 pips. Trading in this way, if you have a good strategy, you’ll average a couple dollars profit a day. While this will build your account slowly, most traders don’t want to make a couple dollars a day, they want to build their account much faster and therefore will risk $10 or $20 per trade–sometimes more–in an attempt to turn that $100 into thousands as quickly as possible. This may work for a time, but usually results in an account balance of $0. The other problem with forex trading with such a small amount of money is that it offers almost no flexibility in the style of trading you undertake. If you deposit $100, and follow proper risk management protocols, you can only risk 10 pips if you take a 1 micro lot position. This forces you to be an active day trader, whether you want to day trade or not. With a 10 pip stop loss you won’t be able to swing trade or invest, since the price can easily move 10 pips against you, resulting in a losing trade, if you try to hold out for long-term gains. New traders are better off saving up more money before opening a forex account, thus adequately funding their account so they can trade properly. How Much Money Do I Need to Day Tr ade Forex? If you want to day trade forex, I recommend opening an account with at least $2000, preferably $5000 if you want a decent income stream.

With a $3000 account, and risking no more than 1% of your account on each trade ($30 or less), you can make $60+ per day. With a $5000 account, you can risk up to $50 per trade, and therefore you can reasonably make an average profit of $100+ per day. This is possible because let’s say you risk about 10 pips per trade, so you can take a position size of about 5 mini lots ($1 per pip movement), which will lose you $50 or make you about $75 if your average gain is 15 pips. Of course you won’t win every trade, but if you win 3 out of 5, you’ve made yourself $125 for the day. Some days you make more, and some days you make less. So with a $5000 account you can start to create a decent stream of daily income. If you allow the account to grow to $10,000 you can make roughly $250 per day. These are just estimates of course; a better estimate of your personal income potential will come from practicing in a demo account, and monitoring your results before even risking a single real dollar. It is possible to start an account with a smaller amount, such as $500, but if doing so make a commitment to grow the account for at least a year before withdrawing any money. If you do this, and don’t risk more than 1% of your account on each trade, you can make about $10 per day to begin with, which over the course of a year will bring your account up to a few thousand dollars. For more information on how much money you can make as a day trader, see: How Much Money Can I Make as a Day Trader. You may also be interested in How to Become a Day Trader. How Much Money Do I Need to Swing Trade Forex? Swing trading is when you hold positions for a couple days to a couple weeks. This style of forex trading is suited to people who don’t like looking at their charts constantly andor who can only trade in their spare time. With swing trading you’re trying to capture longer term moves and therefore may need to hold positions through some gyrations (ups and downs) before the market actually gets to your profit target area. A profit target is a determined exit point for taking profits.

For swing trading you’ll often need to risk between 20 and 100 pips on a trade, depending on your strategy and the forex pair you are trading (some are more volatile than others). Your expected profit should larger than the risk. If want to take a trade that has 50 pips of risk, the absolute minimum you can open an account with is $500. This is because you can risk $5 per trade, which is 1% of $500. If you take a one micro lot position ($0.10 per pip movement, and the smallest position size possible) and lose 50 pips you’ll be down $5. Since trades occur every couple days, you’re likely to only make about $10 or $12 per week. At this rate it could take a number of years to get the account up to several thousand dollars. If you start with $5000, you can make about $100 to $120 per week, which is more of an income stream. With a $10,000 account you can likely snag a $200+ per week. Depending on where you live, this may serve as an adequate side income. Again, this is an estimate. Practice in a demo account for a couple months before trading with real money, as that will give you a bit better idea of your income potential. Demo trading is easier than real trading though, because you have nothing to lose. Only have a $1000 (or less) to swing trade or day trade: read Forex Day Trading with $1000 (or less).

How Much Capital For Longer-Term Forex TradesInvesting? The same risk management concepts apply to longer-term trades, which means risk should be kept to 2% or less of the account. With swing trading and day trading risking 1% is good, but with longer-term trades I don’t mind risking 2%. In my Forex Strategies Course for Weekly Charts, which discusses strategies for taking trades that typically last for a month to several months (or sometimes longer), I recommend starting with at least $4,000 in capital. This is because when we try to capture larger price moves we often need to place our stop loss further away from the entry point. With this style of trading we may have stop losses that are 300 or 500 pips from our entry…but over the course of a couple months we expect to make 1500 pips (for example). Even trading one micro lot (approximately $0.10 per pip of movement), with a 300 pip stop loss we are risking $30 if we lose. In order to risk $30 on a trade we need an account balance of at least $3000, if risking 1% per trade (because 1% of $3000 is $30). If you are willing to risk 2% per trade, then $1500 in capital is needed (because 2% of $1500 is $30). When trading different pairs with different trade setups, we may end up with trades that require a larger (or smaller) stop loss. This is why it is good to deposit more capital than less.

Based on the example above, a trader may assume that $1500 is enough for longer-term trading in forex. It might be, but what if volatility increases and most of the trades you see require a 500 or 600 pip stop loss? With $1500, you are going to have to risk too much of your account on each trade, even when taking only one micro lot (the smallest position size). You could opt not to trade, but then you may miss out on some great opportunities. Start with more money in your account than you expect you will need, that way you can trade with greater confidence knowing that your risk is properly controlled. The starting balance also affects our income potential. With a $4000 balance, taking trades that last a couple months, a reasonable income estimate is $80 to $200 per month if risking 1% of the account per trade (over time we will accumulate multiple positions, with some likely being opened and closed each month). If risking 2% per trade that income estimate doubles (assuming a profitable strategy is being used). Double the starting balance, to $8000, and the income in dollars doubles again. How Much Money Do I Need to Trade Forex – Final Thoughts. It is important to be realistic about what you expect from your forex trading.

How much money you deposit plays a crucial role in how much you will likely make if you follow proper risk management. If you’re willing to grow your account slowly, then you can likely begin with as little as $500, but starting with at least a $1000 is recommended no matter what style of trading you do. If you want to make an income from your forex trading then I recommend opening an account with at least $3000 for day trading, or $4000 for swing trading or investing. Play with the scenarios to find an income level and deposit level that is acceptable. Most unsuccessful traders risk much more than 2% of their account on a single trade; this isn’t recommended. It is possible for even great traders and great strategies to witness a series of losses. If you risk 10% of your account and lose 6 trades in a row (which can happen) you have significantly depleted your capital and now you have to trade flawlessly just to get back to even. If you risk only 1% or 2% of your account on each trade, 6 losses is nothing. Almost all you capital is intact, you are able to recoup your losses easily, and are back to making a profit in no time. The above scenarios assume that your average profit will be about 1.5 times your risk (or greater), and that you’ll win about 60 percent of your trades. This is not always easy to accomplish consistently.

Your personal trading style will largely determine your profitability or lack of it. Though, how much money you trade forex with will play a significant role in your ability to meet your trading goals. By: Cory Mitchell, CMT. Over 300 pages of Forex basics and 20+ Forex strategies for profiting in the 24-hours-a-day Forex market. This isn’t just an eBook, it’s a course to build your skill step by step. 35 thoughts on “ How Much Money Do I Need to Trade Forex? ” This is Henri. I have been reading your blog for more than 3 years and you responded to many of my questions before. Thanks for your time and help. I have been trading now for 2 years. I am struggling with the right time to take a profit. Let me explain. Lets say I buy 1 Facebook at $100, I set my stop loss at $90 and limit at $110. Sometimes the price goes go $108 and then it starts to come down to $91. My question is do you always wait for the stock to hit your price target to take profit or you secure your profit once the stock starts to move in your favor? otherwise if you wait it would come down close to your stop price or even hit your stop and therefore you would have lost an opportunity to make profit. Some people say do not move your stop price but what do you do when the stock goes up and then starts to come down close to your stop loss? I appreciate your feedback and advice. I determine BEFORE I take a trade the method that I will use to exit the trade.

If the trend is really good, and I have no real concerns about the trade, then usually I just let the price hit my stop loss or target. I would estimate this about 75% of my trades. I view it as mathematical, and don’t get too concerned with the odd stock that almost reaches my target and then turns into a loss. Because, I have found that taking profits early can be a slippery slope. All of sudden most winners become quite small, yet losses stay the same size. That said, I do also use a trailing stop loss approach which I discuss in the Stock Swing Trading Course and also briefly discuss this article: vantagepointtrading. comexit-forex-trades-properly I typically use the trailing stop loss in VERY strong trends, where it is possible that the price could move significantly in my favor and likely to produce a bigger gain than the profit target approach likely would (how I set profit target is also discussed in the course and briefly in that article). I will also get out of a trade early if the stock stops acting how it should, but I usually won’t consider an exit unless the price has moved at least 50% of the way to the target. But if the price moved in my expected direction, and then maybe forms a little double top and then drops below a prior swing low, I may just get out. If I am taking a long trade, it is because the trend is strongly up, and if all of a sudden the price is making lower highs and lower lows, that is a not a good sign…so I MAY get out. But it all really depends on what I determined I would do before the trade. As indicated, since I mostly only try to focus on really strong trends, for the most part I just use the profit target and I stick with it. I want to give that trade room to work out. If something is really flying, I will use a trailing stop loss. If I have a couple concerns about a trade, then I may allow myself to exit early, but this is pretty rare (because if I have concerns with the trade, then there are probably better trade candidates out there that I should be putting my money in instead.

There is no perfect solution. Ultimately, the best thing to do is look through all trades, and compare the results you would have had using different approaches. This is the only true way to determine what is best for the trades YOU end up taking. As always thank you for the response. I like your approach. I have been trading stocks and futures and thought of trailing stop as an option to capture my profits instead of a stop loss or profit target. Hi, I am new to forex and want to risk $100 to learn more. However I have $100, and trade only 1 market, please how do I set my margin to like 5or $10 per trade on forex trader MetaTrader 4. Making $250 per day on a $10,000 account is unrealistic, over the long-term. Using a cautious 2:1 leverage per trade—so you’re only risking 1% – 2% of the account for a given day’s move—you might make $50 – $100 per day. To realistically day trade FOREX for a living, you need at least $50,000 in the account. Then, $250 per day is a reasonable expectation. $100 per day on $10k is a reasonable expectation…and still a very good result.

That translates to about 20% per month, as discussed here: vantagepointtrading. comhow-much-money-can-i-make-as-a-day-trader $250 per day on $10k is on the high end, but possible. Good point though. Will provide ranges of what to expect (what’s good, great, or could be improved) as opposed to single numbers. Also, totally based on how an individual trades and risk toleranceleverage….results vary drastically from person to person, as discussed. I don’t understand how these numbers work. What if I make $100 per day off of $10k? That means I can put that $100 back in and make $101 the next day on average, right? So now we have 1% compound interest, which is 37.8 times my investment at the end of a year, assuming I reinvest _all_ my earnings each day. So I have $380k after one year? And $14.3M after two years? And $20.4B after 4 years?! What am I missing here? Assuming 2% of all traders can make this kind of money, we would expect so many billionaires that the USD would be worth about ? ruble by now, no? Not that easy. Can’t infinitely compound.

Most good traders hit a limit quite quickly, whether self-imposed or market imposed. Discussed here… vantagepointtrading. comwhy-day-traders-can-make-big-returns-but-arent-millionaires Hello there, do you offer trading classes? Can I hire you to teach me? I don’t offer personal mentoring or classes. But I have compiled what you need to know into this eBook: vantagepointtrading. comforex-day-trading-and-swing-trading-strategy-guide. I LIVE IN USA RECENTLY I HEARD ABOUT FOREX WHICH MAKES EASY MONEY IS THIS RIGHT OR JUST SUCKING SOME IDIOTS POCKET ? IF I AM WRONG PLEASE WRITE BACK AND ADVICE ME SOUNDS TO ME IT IS INTERESTING. It is NOT easy. It takes a lot of work.

Most people lose money at it: vantagepointtrading. comarchives13922 That said, if you work your ass off it is possible to make an income from it, but expect to put in about at least 6 months to a year before you see any pay off. What is the difference between trading forex and currencies futures? i know that in forex currencies trade in pairs, like EuroUSDollars, etc but I am learning about how to trade futures and in the demo account on the Futures Institute(CME Group), it is possible to go long or short on a single currency like the Yen, Peso(Mexico), the Canadian dollar, etc. My question is how come these currencies trade “alone”? is there a difference between futures trading and forex trading? As always, thanks for your time and help! Futures are essentially a currency pair. When you trade EUR futures, you are trading the EURUSD. Futures contracts just force you trade in 125,000 blocks of currency (or 62,500 for the mini contract), where in the actual forex market you can trade in blocks of 1000, 10,0000 or 100,000. SO whatever futures contract you are trading, it is that currency vs the USD, so XXXUSD. The most the same, except with futures you have less flexibility on exact position size…that may or may not be a problem, depending on account size. Thank you for the quick response. Now I understand! I am thinking of opening an account with $1000 so given your response, it would be better to trade forex in the beginning since i can start small. I am not sure if i can trade mini contract with $1000 or $1500.

I am opening an account with TD Ameritrade. As a follow up to my email about opening an account with $1000 or $1500 to trade futures (mini contract) if possible. Let me use an example and get your answersuggestion. If I want to short the peso, with futures, i can do it without having to “know” that i have to go longbuy another currency but if i were trading forex, i would have to sell peso and buy the euro, us dollars, etc, correct? my question is, futures allow me just to focus on shorting the peso without me thinking to buy either euro, yen, etc. Because when i sell peso futures, i do not know or see the other currency that i am long but if i were to do it with forex trading then i would decide if i short peso then what is the other currency to buy(long) correct? Please help to clarify! Henri. They are same thing. When you sell a peso future, you selling pesos (MXN) and buying the USD. You’re selling MXNUSD.

You could do the same in the forex market, by selling MXNUSD. Unless otherwise stipulated, when you trade a futures contract, you are buyingselling (depending on whether you buy or short) the named currency on the futures contract…but by extension you are doing the opposite to the US dollar. For any currency transaction, whether dealing with physical currency when at a bank, trading a futures contract or trading a forex pair, you are always dealing with 2 currencies. In other words, the futures contract moves based on the underlying forex pair. In the forex market, you pick what pair you want to trade, for example, MXNUSD, and then place your trade based on the direction you expect it to go. You are better off opening a forex account, with 1000-1500, NOT a futures account. A forex account provides much more flexibility than a futures account…and you with 1500 you can’t afford to swing trade in the futures market. Also, there is very little volume in the e-mini and e-micro Euro FX futures contracts (and even less many other currency futures contracts), so it is not an ideal way to trade currencies with a small account. Spend a few months in a demo account making sure you understand the market, the risks and your own profit potential (making sure you can make a profit each month consistently) before trading any real capital. Many thanks. you are great. I appreciate your time and help. I am still paper trading both futures and forex and will likely open an account in December to start trading forex. thnks for the infor, Hello, I have a question about the people who want to trade for an extra income but they don’t have the time to do that.

Could you please give any suggestions and recommendations for such a problem? Most of the information on this site is about learning to trade to for one’s self. I don’t like handing my money over to someone else, so I don’t have recommendations on that. Thanks for your fast response. Could you please tell me what is the best company, which gives support, tips, and recommendations for starters, to start trading? Based on what I read it seems like ure using leverage on your trade. Can I use the same stratgy if Im trding without leverage. If not, could you suggest something for me. Thanks. Without leverage you will need more capital, and your income will be less. Everything else stays pretty much the same.

You can only trade the capital you have, and when you trade it, I don’t recommend losing more than 1% of it on a trade. So set your stop loss level accordingly. Without leverage though you may find that you have to risk much less than 1% of your capital. For example, a day trader with a bit more than $1000 can buy a micro lot, and is allowed to lose $10 (1% of 1000). But to lose $10 the trader would need to lose 100 pips on a micro lot, which is utterly ridiculous on a day trade. More likely the trade will place a stop loss at 10 pips, because that is better for a day trade (only risking $1, or 0.1% of 1000). But that means wealth accumulation is going to be very slow. You may be able to 0.2% a day…pared to 2% a day with 10:1 leverage. For day trading leverage is preferred.

For swing trading it isn’t required as much…since you can risk about 1% of your capital on a trade (the 100 pip risk trade discussed above, which takes a few days to complete), which means you should be making 2%+ on your winners (trying to make 200+ pips on the winners). These are just examples; you need to work out the math for how much capital you have. You don’t need leverage, nor am I saying you should get it. For many new traders leverage will result in a rapid depletion of their capital, and not big gains. If you have a solid method though, leverage can be beneficial. hi thank you the article was useful. but still i’ve one question i’ve heard that if a trader would be making 04% return monthly that would be great and you sad that you can make 2% daily so what do you think about it ? Thanks again ?? Good question. Typically when you hear numbers such as 1% or 4% a month is good, or 15% per year is good, the person saying that isn’t using leverage, and they also aren’t using stop losses and profit targets. They aren’t getting in and out of the market as it fluctuates. I use leverage and I get in and out, and that is what I try to teach people how to do on this site. I outline how the big returns are possible with a few scenarios here: vantagepointtrading. comarchives9928. The problem is that most people don’t research and practice a sound method. So while it is very possible to make great returns, most people aren’t able to do it because they don’t put in the work required. Hello any answers…

I asked a question about the forex robot… So basically if i put up $10,000 and have the robot control my trading for a year what kind of profit would i be looking at (a quote)? That’s a rather hard question to answer. I have no idea what the robot is doing…how much it risks per trade, how often it trades, how much leverage it utilizes, what the riskreward ratio of the trades is like. If you can provide more details on how the robot functions then it would be possible to give a better answer. But everyoneeverything trades different, so who knows. What are the parameters of the robot? that’s a stressful article. You just want rich to get richer and people with $300 deposit to stay at that point. Why not encourge people to do so even if they make $10 a day im fine with it thats $300 a month not considering loses.

im just sayin. Thanks. That isn’t much different than what I said “It is possible to start an account with a smaller amount, such as $500, but if doing so make a commitment to grow the account for at least a year before withdrawing any money. If you do this, and don’t risk more than 1% of your account on each trade, you can make about $12 per day to begin with, which over the course of a year will bring your account up to several thousand dollars.” So that’s fine. But if people want an income I recommend a higher balance. Also provided links to articles for smaller account holders: “Only have a $1000 (or less) to swing trade or day trade: read Forex Day Trading with $1000 (or less) vantagepointtrading. comarchives10737 andor Forex Swing Trading with $1000 or Less vantagepointtrading. comarchives11391. Nothing to do with “rich get richer” … this site (the forex section) is almost entirely dedicated to helping traders with smaller balances build their account and create an income…I’m just sayin. And losses can’t not be considered. That’s why I recommend a bit higher balance…

because new traders aren’t going to be making 100% a month. Thanks, Cory, for the valuable insights. I still wonder about a couple of things, though. Let me list them below. “As a short-term trader, even in forex, with a big account you start face liquidity issues, and you just can’t find enough trades to utilize all the capital.” As I understand it, the forex market is a 4-trillion-dollars-a-day market, so how can if face liquidity issues with a $1million trade or thereabouts? For example, if I have a $50,000 account and limit the risk of each trade at a 25 pips stop loss, risking only 1% of my account per trade or $500, since each pip would be wroth $20, I would be making each trade using a leveraged amount equal to $200,000, would I not? How can a mere $200,000 trade affect the liquidity in a market where over $4 trillion change hands a day – which is over $46 million per SECOND? I can understand liquidity being a problem trading STOCKS, where the market is nowhere near as big as in forex … ? Also, if liquidity IS an issue due to the sheer size of each trade, could I not make two or three trades at a time, using only 0.5% or 0.33%, respectively, of my account for each trade? “Brokers reduce leverage the larger the account gets. So a $10,000 account may be able to make 20% a month, but that’s because they have 50:1 leverage. Once the account grows to $100,000 (50,000 in many cases) the brokers start cutting leverage, usually down to about 10:1 or less.” I live in Canada, and the Canadian regulatory authorities have set limits on the margin requirements – and thus the leverage – available to Canadian traders.

I trade EURUSD, and for this currency pair, the margin requirement is 4.3%, which means my effective leverage is capped at a tad over 23:1. However, I use OANDA as my broker, and they assure me that regardless of my account size (up to, I believe, a maximum of $10 million) my leverage can stay at a tad over 23:1 … until and unless the relevant Canadian regulatory body alters the margin requirements for the pair EURUSD. So I can use the same leverage of about 23:1 no matter what my account size. Wouldn’t that mean I can keep the same percentage of daily profits – or weekly, or monthly, or yearly profits – even with a relatively large account size? And even with a leverage of only 20:1, I would need to use only $10,000 of my $50,000 account to make a $200,000 trade, would I not? “Once the account reaches a point where the trader makes what they want, usually their earnings will plateau.” True, but does the plateau have to be $50,000 a year, or can it be higher? See below for more details about what I mean. “Psychology is huge: risking 1% of a 5,000 account is way easier than risking 1% of a 300,000 account. No matter how much money I’m making there is no way I am risking $3000 a single day trade.” I agree that I would be very hesitant to risk $3,000 on a single trade; but if I were to risk, say, just $500 on any given trade, which is only 1% of a $50,000 account (and which is an amount I could afford, given my relatively fortunate financial situation), I could conceivably stand to win at least $550 on that trade on the average, using a 55% win rate (overall), which is what you advocate above: right? And just 2 such winning trades per day – which presumably means I would have to set a total of 3 or 4 trades a day – would give me an income of over $1,100 a day on an average, or (given that there are 250+ trading days in a year) an annual income of $275,000+, would it not? Admittedly I haven’t been trading forex – or anything else, for that matter – for a long time, but I did buy a $450,000 house to rent out, using – effectively – some leverage from the bank (I got a home equity loan of $330,000 and put in the rest, $120,000, from my own pocket; I only pay the interest on the loan, about $1,000 a month or $12,000 a year), and have been comfortable doing that for the last three and a half years. I earn a net profit, after all expenses, of around $1,500 a month, or $18,000 a year, from the house in rents (I rent it out to students exclusively, and my son manages the house, for which trouble I let him stay for free in one of its two basement apartments). I judge this venture to be no less risky than a well-controlled forex account in which I never risk more than 1% of my capital per trade. The house could go down in value, it could burn down, a student could hurt himself and sue me, all sorts of nasty things could happen.

So I am not a stranger to risk; I am just not familiar with the risk in FOREX. But as you have said over and over, one should limit one’s risk to no more than 1% of one’s account; and that seems to me a VERY safe way to trade … or indeed, to do any kind of investment. In fact it seems much safer than owning a $450,000 house and renting it out to students! And yet I could be earning over ten times as much as I earn with the rental of the house, using a total amount of capital much smaller than I needed to buy the house. Or am I wrong? Thanks for the questions, I will try to keep this response brief and to the point, pardon the grammar: –Liquidity: based on your circumstances you shouldn’t have much of a problem with this, using a 25 pip stop and if you mostly trade the EURUSD. The smaller the stop though, the bigger the potential trade, and not all pairs have the volume the EURUSD. Also, while the forex market may be 5 trillion a day, that is spread out across many many forex pairs, and across thousands of brokers. Unlike the stock market the forex market is not centralized. Globally there may be millions of dollars sitting at the bid and ask prices around the globe, but with Oanada there may only 100,000 or 500,000. Most brokers only get quotes from several banks, not all of them. IF your orders is bigger than that, which is very possible with leverage and very short-term trades, all of a sudden slippage starts occurring…

that’s a big deal when trading with a 5 or 6 pip stop. Again, this doesn’t really affect you, but something to be aware of. Liquidity isn’t usually a concern in the sense that you won’t get filled, the concern is whether you end up with the price you expect. THe bigger the trade, the the great the potential for deviation. –Yes, you can adjust your position and risk to less than 1% of your account. Usually I risk way less than 1% of my account on a trade. As long as the math works for you then you can trade any position size you want (less than 1% of the account). –if your broker won’t reduce your leverage that is a great. That’s one thing you don’t have to concern yourself with. –Where a trader plateau is different for everyone. 50,000 was just an example. –There is one major problem with what you propose above. In order to win 2 trades (possible) at a 55% win (possible) you need to make at least 4 or 5 trades (possible) per day, but you indicated using a 25 pip stop. In my opinion there is a no way to find 4 or 5 high quality trades a day (most days) using a 25 pip stop. To make the trade worthwhile you need to make at 35 pips+ on those trades (we always try to make more on winners than on losers). To make 35 pips usually takes at least an hour or two, if not more most days.

And that type of volatility only occurs about 4-5 hours of the day. so you may find 1 trade. So with that in mind, with a 25 pip stop you’re more of a short-term swing trader, not a day trader. You’re looking at about 5 trades a week, instead of a 3 or 4 a day. Adjust expectations accordingly. To get about 3 or 4 a day, you’d probably need a trading system where the stop is about 10 pips and you are aiming to make 15-20 pips. Taking a step back though, much of this discussion is about factors which won’t be relevant for a long time. While the returns discussed here are possible, it will likely take a year of more of constant practice and trading (preferably in a demo account, until consistent) before making anything close to an income is possible. What you write above seems to me extremely optimistic. Can one COUNT on making the kinds of returns you speak of on a regular basis? Does your experience indicate that it can be done REGULARLY? Remember, to make an AVERAGE income of $250 a day from a $10,000 account – as you say above is possible – means that one would make 2.5% per (trading) day: which is equivalent, with compounding, to over 60,000% per annum (given a tad over 250 trading days in a year). That’s a MAD rate of return. Heck, even Warren Buffett has been satisfied with only a 20% per-annum rate of growth! I myself have about $50,000 to invest in forex (not that I have it all in forex right now: I only have $1,040 in forex right now, and aim to put in more and more money as time goes on and I get better and better at it) – but then, if what you say is correct, I could be making $1,250 a day on the average!

Is that even POSSIBLE? Don’t get me wrong: I’d LOVE to be able to do what you say one can do. But after almost two years of forex (of which, over one year was spent just learning forex and practising with a practice account, and then over half a year with a live account), the BEST I can make is 0.5% a day. And most days I don’t even make that. That’s just a FIFTH of what you say one can make. Of course I realize that I am just a newbie compared to you, but I’d be VERY happy to be able to make what you say can be made. Could you let me know of strategies which allow this to be possible? By the way: I do not NEED forex as an income stream – I am retired, and have a modest pension which is sufficient for my modest life style. In forex I would simply let my money compound until it reaches an amount which would allow me to take out some of it every year to get extra money to do the things I’d like to do in my last few years on earth (hopefully I have another 30-odd years, but more realistically only 20-odd years), and also leave something for my heirs. My strategy has been to start live trading by just putting $100 into forex every month, and letting it grow via compounding, at whatever rate of compounding I could achieve, for up to five years, until I have sufficient skill to be confident of earning about 0.2% per trading day. That was my modest target when I started. But what you write seems so MUCH more ambitious compared to my much-more modest goal that I am kind of blown away!

So again, could you let me know what strategies I can use to make the kinds of returns you say one CAN make in forex? By the way, when is your new ebook coming out? Thanks taking the time to write. I am sure many people had your same sentiments, but didn’t take the time to write them down. Making 1% to 2% is possible, and can be done. I know many traders who do this, or make more than that per day consistently…but I also know even more traders who lose money everyday. So it’s possible, but it takes a lot of work. To make 1% or per day, we risk 1% of our account on each trade, and make about 4+ trades per day. Overtime, assuming a decent strategy where our wins are our bigger than our losses, and say a 55% win rate on trades, 1%+ a day is very feasible. Forex is about strategies, but that accounts for about 10% of the success. The other 90% is hard internal work. Trading isn’t easy…it take constant, relentless and never ending attention to detail and unwavering discipline. Developing these traits takes months of work, implementing a strategy in a demo account for months, and never wavering even when times get tough or the trade looks like it won’t work.

You gotta take the trade anyway. Psychology, that’s the key. The new book will be out Dec 1. I had to push back the release date a couple weeks so everything in there is explained step by step. It takes the trader through the learning process and builds a skill base by introducing elements one at a time. Here are some things to consider about the article. Short-term trading requires time, and because of that most traders withdraw their earnings. For example, when I was a stock day trader, trading with more than $500,000 in buying power (that’s, only $125,000 in actually deposited capital due to 4:1 leverage) was useless. As a short-term trader, even in forex, with a big account you start face liquidity issues, and you just can’t find enough trades to utilize all the capital. So money doesn’t compound in the way you state. A $10,000 doesn’t usually become a $1,000,000 even though theoretically it could. More likely it may grow to $50,000 and then the trader realizes they need to start withdrawing their profits because more than $50,000 in capital for a short-term forex trader isn’t really needed. Also, the great returns are possible because of leverage. Brokers reduce leverage the larger the account gets.

So a $10,000 account may be able to make 20% a month, but that’s because they have 50:1 leverage. Once the account grows to $100,000 (50,00 in many cases) the brokers start cutting leverage, usually down to about 10:1 or less. So your leverage is cut by 15, which means your profit is also going to be. You made 20% on a $10,000 account, but you only make 5% on a 100,000 account trading the exact same way….just as an example. So there is a law of diminishing return. There is a also the psychological factor. Most people come to trading for a good life and to have more time to do other things. Once the account reaches a point where the trader makes what they want, usually their earnings will plateau. As indicated, when trading stocks, I made a steady income when my account balance was $300,000 to $400,000. When it moved to a million my income didn’t move up (it didn’t double like it should have). I couldn’t find places to deploy all that capital, and there was very little motivation to make more money, so my mind was very comfortable with the living I was making off the smaller amount of capital. Growing the account wasn’t a viable goal anymore…in fact it had to be reduced. Now i trade forex, and with leverage a 10,000 account is fine. More than 50,000 feels like overkill.

At 50:1 leverage a 10,000 account is equivalent to 500,000 in buying power. So that is how the returns are possible. We are actually only making about 5% to 10% a year, but we’re making it on the 500,000 (the leveraged amount). That equals a 25,000 to 50,000 dollar return, but since we only invested 10,000 we end up an massive percentage return on invested capital. So we are no better than Warren Buffett, we are just using a lot more leverage. But doing so in a risk controlled way (Position sizing: vantagepointtrading. comarchives2031) So there are a few things to consider: - law of diminishing return: the more you make and keep in the account, the less you will likely make in percentage terms going forward. - a larger account hinders you. It’s hard to find short-term opportunities where you can deploy large amounts of a capital. And I am short-term trader, so I don’t know about things that may last longer than a week.

- Psychology is huge: risking 1% of a 5,000 account is way easier than risking 1% of a 300,000 account. No matter how much money I’m making there is no way I am risking $3000 a single day trade. Call it humble-upbringing-sensibilities. Some guys may be able to do it, but we all have our thresholds were we become comfortable with the amount we’re trading. We can push beyond those comfort zones, but that too is a lot of a work too.



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