~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Why You Should Get Your Eager Little Hands on
the Biggest Self-taught FOREX Trading Course
Packages in Existence:
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Here's the TOP 10 reasons why our self-taught courses, at
http://www.RapidForex.com, consistently rank #1 as "the
absolute best low-cost, premium-quality FOREX education
courses in existence."
Reason #1 -- We meet all 5 guidelines, as discussed in
yesterdays lesson, for choosing an investment course.
Reason #2 -- Our course packages are modular. From our
smallest package to our largest package, we have a trading
method, technique, or combination of technical-trading
methodologies, that can meet anybody's budget, fit their
personality style, and sync-up with their tastes for either
trading with a pure indicator-based method or a more
subjective "chart patterns" method.
Reason #3 -- While they're stand-alone trading methods in
their own right, they compliment each other. We combine
indicators in the various RAPID FOREX investment strategies
in dynamic ways that are not used anywhere else online. For
example, the "Advanced Option Strategies" information allows
you to extract price movements predicted by option prices.
"Explosive Profits" allows you to trade based on news
announcements. "Forex Sailing" teaches some other indicators
as well, and all strategies used are mutually-inclusive of
each other.
Reason #4 -- Our courses work for all TIME FRAMES. You can
sit at a computer and daytrade with them or you can look at
the charts once a day and place trades that can last several
months. These methods are standalone trading systems, which
require no prior trading knowledge. If you already have a
trading method, these techniques can be combined with your
existing expertise for a powerful investment toolkit.
Reason #5 -- With the purchase of each manual / e-book you
will receive a system that gives you the EXACT PRICE to
enter and exit a trade! We have not seen many methods out
there that do that, and we have seen almost every system in
existence.
Reason #6 -- We have the best Satisfaction Guarantee on the
market. You also get the opportunity to trade in a demo
account, and you can get 200% of your money_back if you
can't turn a profit in your account (see details here:
http://www.rapidforex.com/guarantee.shtml)
Reason #7 -- our Power-packed Members-only FOREX Traders
Resource Site: suck up ALL our amazing resources to help YOU
make more profitable FOREX trades in a week than most people
make in a lifetime!
Reason #8 -- the same content & quality of information
others are offering for thousands of dollars. Our goal is to
provide you with EVERYTHING that you could learn if you
spent $20,000 taking courses from all the major FOREX
schools around. Our personal mission is to provide everyone
with the opportunity to participate in FOREX trading – most
people simply can't afford the $5,000+ courses other people
are offering, and thus they miss out (which is too bad
considering how FOREX could completely change their lives
for the better). Read about our "mission" at:
www.RapidForex.com/mission.shtml
Reason #9 -- No expensive software required. Many Forex
programs require that you spend thousands on expensive
software. We believe you should possess the knowledge
about how to trade, rather than depending on some
black-box system.
Reason #10 -- RapidForex is always on the cutting edge. Our
courses are constantly being added to, improved, tested, and
tweaked. We constantly offer new strategies so you can
benefit from everything the wonderful world of Forex trading
has to offer.
Sunday, September 10, 2006
Monday, September 04, 2006
forex #17
How To Get a Harvard FOREX Education on a
Community College Budget.
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
We're going to share something with you that is not a
popular topic in the FOREX trading education world. We have
gotten some nasty comments by other FOREX trading course
authors by implementing this philosophy.
This nasty little secret is the lifeblood of the FOREX
trading education industry. We legally cannot mention any
company names here, so we're just going to tell you what
this nasty little secret is (not the people/vendors who look
that other way and don't *come clean* and admit it). We
will also give you guidelines to avoid falling into any
traps.
Here it is: All the information you need to trade the FOREX
is available in free (like this e-course) or low cost
resources (like our low-cost e-book packages).
If you search for FOREX trading systems you will see an
unbelievable trend. You will notice that many FOREX
courses are charging thousands of dollars for trading
courses. Perhaps the information is good, perhaps it is
not. But, would you believe, this is not even the most
profitable part of the industry.
Other trading courses REQUIRE you to subscribe to a paid
service that forces you to depend on that service. These
paid services can be email notifications, software leasing,
& other types of services. Without these paid for
services you simply CAN'T trade using their methods!
So what is the problem with a paid service? These services
do not explain how the systems work. You are blindly paying
for someone else's recommendations. [note: The person
selling the recommendations could be using free resources
to make those recommendations].
Ok, let's suppose the paid service predicts FOREX movements
with the greatest accuracy. You begin to make hundreds of
thousands of dollars by using the service. But something
happens and the service becomes unavailable. What would you
do then? You have just allowed someone to retire your
trading career early and at will.
Maybe the paid service works really well at first, but then
the person running the service turns it over to someone
else. You could lose a lot of money before you realize that
someone new isn't running the system properly.
It is never a good idea to put your fate in someone else's
hands. If you could learn how to predict the FOREX for
yourself, you would be in total control. You would have
knowledge that nobody can take from you.
We have been cheated by expensive courses that didn't
deliver. For instance, Brian spent $3,000 on an investment
course that gave great information. But the information
they taught him was useless unless he subscribed to an $80
per month software package. It took him 3 months to lose
the $2,000 he had in his trading account. But he also lost
the $3,000 on the course, plus $240 for the software
subscription.
This really happened to him. The worst part was that he had
paper traded using his own methods and had paper profits!
If he would have stuck to his own "homemade" trading system
he probably would have turned that $5,240 into $6,000-$7,000
in the same 3 months!
This experience, along with a few others by me (Robert),
caused Brian and I to partner up and provide you with the
best-quality and most complete self-taught FOREX courses
available.
We charge an extremely low price for our FOREX trading
methods and investment strategies because we did not like
having to spend $3,240 to lose $2,000. One man who sells a
fairly expensive trading course bought one of our trading
strategies. He then emailed us telling us how much he
loved our trading philosophy. He then told us we should
charge far more for this course (that one eBook alone. We
thanked him for his input, but we told him that we wanted
our clients to have the greatest value at the lowest price.
He became very angry because he wanted to overcharge for his
course (By the way, his course is useless unless you
subscribe to his paid email service).
We told you this story because there are a lot of people out
there overcharging for good information. Anyone who puts
time into developing a system has a right to charge a fair
price for their efforts. But just because they charge a
high price does not mean that the information is premium
information.
=============================================
We Teach -- but, We Also DO.
Yes, not only do we write the easy-to-learn
"fast track to trading" self-taught courses
at RapidForex.com, we are also very active,
focused FOREX traders.
One of the even "nastier" secrets, or sad
realities, of the trading industry and FOREX
trading in particular is that there are far
more people making money selling systems and
"ways to make money trading" than there are
people actually making money by trading.
There are many "famous traders" who don't
make money as traders. They make money selling
new trading systems, seminars, home study
courses, etc. Many, if not all, of these so
called "experts" can't trade and don't trade
the systems that they sell.
==============================================
We have now ruled out paid subscription services - so you
are one step away from low-cost FOREX trading capabilities.
When you think about getting involved in FOREX trading you
have 3 options.
Option #1 - Pay a lot of money for a course & software
you can't afford and hope you can recover the cost of the
course with the little amount of money you have left for
trading.
Option #2 - Figure out how much money you have to start
trading the FOREX. Then find some low cost information to
save you time and get you trading faster, while still
allowing you to have most of your money available to trade.
Option #3 - Spend several years learning everything there is
to know about the FOREX, and testing trading methods until
you discover the secret on your own.
Out of the 3 options above, the only one we think is
ridiculous is option #1. Option #'s 2 & 3 are the sensible
options. Option #2 is the category most people fall into.
Most people do not want to spend more money than they have
to start trading, but they do not want to wait the length of
time that option #3 demands.
At this point you have to decide which category you are in.
Please think to yourself and say "I, akin, am in
category number ________" Did you put yourself in a
category?
Ok, we'll give you another chance to do it now.
Now you should have done it. What category are you in?
We have to assume that you consider yourself in option #2 or
#3. This e-course is actually perfect for any of the
options listed above. The focus of this mini-series fits in
somewhere between options 2 & 3. The information in
this 20-part e-course is designed to give you the
information over time so you can get closer and closer to
knowing everything about the FOREX. Actually knowing
everything is impossible.
So if you fell into option #'s 2 or 3 you have to decide
right now when you want to start placing trades in the
FOREX.
If you want to start placing real trades in the FOREX market
within 3 months, you will probably need to purchase a FOREX
trading course. The only way that you will be able to learn
enough details about trading the FOREX will be to learn from
someone who has already researched and tested FOREX trading
methods.
There is nothing wrong with purchasing a FOREX trading
course in order to learn. The person who prepared the
course first had to learn how to trade the FOREX. They then
had to spend time writing their techniques into an
understandable format. They also had to pay for advertising
to get the message about their course out there.
Once you purchase a course, you will need to test it for
yourself. You should always verify that the trading system
works for you by testing it out on paper before putting real
money at risk.
Guidelines to purchasing a FOREX course.
Step 1: Figure out how much money you have to invest. This
should be money that you can afford to lose. Most people
cannot afford to lose any money. Make sure that losing
this money won't devestate you financially.
Step 2: Make sure the course costs less than 50% of the
money you have to invest. The cost of the course will not
be invested directly in the market. You want to put most of
the money you want to trade with into your trading account.
Step 3: Make sure that the course does not have any hidden
costs. You do not want to be locked into having to pay for
a signal subscription without which the trading techniques
are useless. You should also find out if the company that
sells the course has any subscription type services. If
they have these type of services, chances are that their
system will eventually require that you use them. We at
Rapid Forex do have an OPTIONAL subscription service to our
Resources Section, which is to provide you with additional
tools & resources that are helpful but not "required" to
make use of what you learn from our training materials.
Step 4: Make sure you can practice trading in a demo account
and still get a refund. There are courses out there that
require you to place trades with real money before you get a
refund. In this case, you would only need a refund if you
lost all of your m.oney! We at Rapid Forex are SOOOO
confident about what we teach that we offer a 200%
guarantee.
Step 5: Make sure the information in the course teaches you
how to trade independently. You need to be able to take the
information you learn with you if you discover a better
trading platform in the future.
You should follow the above 5 steps any time you look for an
investment course. If the courses do not meet the
guidelines listed above, you should move on to the next
course.
Now let's suppose that you want to take your time learning
about the FOREX. You are not in a hurry. You want to learn
as much as you can before investing any money in the FOREX.
You may want to purchase a course in the future (or maybe
not). You need to be ready when that time comes. You would
like to learn a lot about the FOREX without risking any
money. You even want to experiment with some trading on
paper before you spend any money on FOREX courses.
If the above paragraph desribes you akin, then you
are in luck. We have just desribed the person we created
this e-course, and ongoing ezine, for. The main benefit
that we get from publishing this fr.ee e-course and ongoing
industry/trade updates is that we stay connected to the hot
topics of the currency market. Teaching other people always
helps you to learn better. It is easy to get into our own
little "comfort-zoned" world and stop expanding our
knowledge base.
Community College Budget.
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
We're going to share something with you that is not a
popular topic in the FOREX trading education world. We have
gotten some nasty comments by other FOREX trading course
authors by implementing this philosophy.
This nasty little secret is the lifeblood of the FOREX
trading education industry. We legally cannot mention any
company names here, so we're just going to tell you what
this nasty little secret is (not the people/vendors who look
that other way and don't *come clean* and admit it). We
will also give you guidelines to avoid falling into any
traps.
Here it is: All the information you need to trade the FOREX
is available in free (like this e-course) or low cost
resources (like our low-cost e-book packages).
If you search for FOREX trading systems you will see an
unbelievable trend. You will notice that many FOREX
courses are charging thousands of dollars for trading
courses. Perhaps the information is good, perhaps it is
not. But, would you believe, this is not even the most
profitable part of the industry.
Other trading courses REQUIRE you to subscribe to a paid
service that forces you to depend on that service. These
paid services can be email notifications, software leasing,
& other types of services. Without these paid for
services you simply CAN'T trade using their methods!
So what is the problem with a paid service? These services
do not explain how the systems work. You are blindly paying
for someone else's recommendations. [note: The person
selling the recommendations could be using free resources
to make those recommendations].
Ok, let's suppose the paid service predicts FOREX movements
with the greatest accuracy. You begin to make hundreds of
thousands of dollars by using the service. But something
happens and the service becomes unavailable. What would you
do then? You have just allowed someone to retire your
trading career early and at will.
Maybe the paid service works really well at first, but then
the person running the service turns it over to someone
else. You could lose a lot of money before you realize that
someone new isn't running the system properly.
It is never a good idea to put your fate in someone else's
hands. If you could learn how to predict the FOREX for
yourself, you would be in total control. You would have
knowledge that nobody can take from you.
We have been cheated by expensive courses that didn't
deliver. For instance, Brian spent $3,000 on an investment
course that gave great information. But the information
they taught him was useless unless he subscribed to an $80
per month software package. It took him 3 months to lose
the $2,000 he had in his trading account. But he also lost
the $3,000 on the course, plus $240 for the software
subscription.
This really happened to him. The worst part was that he had
paper traded using his own methods and had paper profits!
If he would have stuck to his own "homemade" trading system
he probably would have turned that $5,240 into $6,000-$7,000
in the same 3 months!
This experience, along with a few others by me (Robert),
caused Brian and I to partner up and provide you with the
best-quality and most complete self-taught FOREX courses
available.
We charge an extremely low price for our FOREX trading
methods and investment strategies because we did not like
having to spend $3,240 to lose $2,000. One man who sells a
fairly expensive trading course bought one of our trading
strategies. He then emailed us telling us how much he
loved our trading philosophy. He then told us we should
charge far more for this course (that one eBook alone. We
thanked him for his input, but we told him that we wanted
our clients to have the greatest value at the lowest price.
He became very angry because he wanted to overcharge for his
course (By the way, his course is useless unless you
subscribe to his paid email service).
We told you this story because there are a lot of people out
there overcharging for good information. Anyone who puts
time into developing a system has a right to charge a fair
price for their efforts. But just because they charge a
high price does not mean that the information is premium
information.
=============================================
We Teach -- but, We Also DO.
Yes, not only do we write the easy-to-learn
"fast track to trading" self-taught courses
at RapidForex.com, we are also very active,
focused FOREX traders.
One of the even "nastier" secrets, or sad
realities, of the trading industry and FOREX
trading in particular is that there are far
more people making money selling systems and
"ways to make money trading" than there are
people actually making money by trading.
There are many "famous traders" who don't
make money as traders. They make money selling
new trading systems, seminars, home study
courses, etc. Many, if not all, of these so
called "experts" can't trade and don't trade
the systems that they sell.
==============================================
We have now ruled out paid subscription services - so you
are one step away from low-cost FOREX trading capabilities.
When you think about getting involved in FOREX trading you
have 3 options.
Option #1 - Pay a lot of money for a course & software
you can't afford and hope you can recover the cost of the
course with the little amount of money you have left for
trading.
Option #2 - Figure out how much money you have to start
trading the FOREX. Then find some low cost information to
save you time and get you trading faster, while still
allowing you to have most of your money available to trade.
Option #3 - Spend several years learning everything there is
to know about the FOREX, and testing trading methods until
you discover the secret on your own.
Out of the 3 options above, the only one we think is
ridiculous is option #1. Option #'s 2 & 3 are the sensible
options. Option #2 is the category most people fall into.
Most people do not want to spend more money than they have
to start trading, but they do not want to wait the length of
time that option #3 demands.
At this point you have to decide which category you are in.
Please think to yourself and say "I, akin, am in
category number ________" Did you put yourself in a
category?
Ok, we'll give you another chance to do it now.
Now you should have done it. What category are you in?
We have to assume that you consider yourself in option #2 or
#3. This e-course is actually perfect for any of the
options listed above. The focus of this mini-series fits in
somewhere between options 2 & 3. The information in
this 20-part e-course is designed to give you the
information over time so you can get closer and closer to
knowing everything about the FOREX. Actually knowing
everything is impossible.
So if you fell into option #'s 2 or 3 you have to decide
right now when you want to start placing trades in the
FOREX.
If you want to start placing real trades in the FOREX market
within 3 months, you will probably need to purchase a FOREX
trading course. The only way that you will be able to learn
enough details about trading the FOREX will be to learn from
someone who has already researched and tested FOREX trading
methods.
There is nothing wrong with purchasing a FOREX trading
course in order to learn. The person who prepared the
course first had to learn how to trade the FOREX. They then
had to spend time writing their techniques into an
understandable format. They also had to pay for advertising
to get the message about their course out there.
Once you purchase a course, you will need to test it for
yourself. You should always verify that the trading system
works for you by testing it out on paper before putting real
money at risk.
Guidelines to purchasing a FOREX course.
Step 1: Figure out how much money you have to invest. This
should be money that you can afford to lose. Most people
cannot afford to lose any money. Make sure that losing
this money won't devestate you financially.
Step 2: Make sure the course costs less than 50% of the
money you have to invest. The cost of the course will not
be invested directly in the market. You want to put most of
the money you want to trade with into your trading account.
Step 3: Make sure that the course does not have any hidden
costs. You do not want to be locked into having to pay for
a signal subscription without which the trading techniques
are useless. You should also find out if the company that
sells the course has any subscription type services. If
they have these type of services, chances are that their
system will eventually require that you use them. We at
Rapid Forex do have an OPTIONAL subscription service to our
Resources Section, which is to provide you with additional
tools & resources that are helpful but not "required" to
make use of what you learn from our training materials.
Step 4: Make sure you can practice trading in a demo account
and still get a refund. There are courses out there that
require you to place trades with real money before you get a
refund. In this case, you would only need a refund if you
lost all of your m.oney! We at Rapid Forex are SOOOO
confident about what we teach that we offer a 200%
guarantee.
Step 5: Make sure the information in the course teaches you
how to trade independently. You need to be able to take the
information you learn with you if you discover a better
trading platform in the future.
You should follow the above 5 steps any time you look for an
investment course. If the courses do not meet the
guidelines listed above, you should move on to the next
course.
Now let's suppose that you want to take your time learning
about the FOREX. You are not in a hurry. You want to learn
as much as you can before investing any money in the FOREX.
You may want to purchase a course in the future (or maybe
not). You need to be ready when that time comes. You would
like to learn a lot about the FOREX without risking any
money. You even want to experiment with some trading on
paper before you spend any money on FOREX courses.
If the above paragraph desribes you akin, then you
are in luck. We have just desribed the person we created
this e-course, and ongoing ezine, for. The main benefit
that we get from publishing this fr.ee e-course and ongoing
industry/trade updates is that we stay connected to the hot
topics of the currency market. Teaching other people always
helps you to learn better. It is easy to get into our own
little "comfort-zoned" world and stop expanding our
knowledge base.
forex #16
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Risk-to-Reward Ratios: How to Trade Like an
Insurance Company
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Trading in the FOREX market is a challenging opportunity
where above average returns are available to educated and
experienced investors who are willing to take above average
risk. However, before deciding to participate in FOREX
trading, you should carefully consider your investment
objectives, level of experience and risk appetite. Most
importantly, do not invest money you cannot afford to lose.
In Lesson #13, we spoke extensively about Equity Management
and Margin Control. In today's lesson, we want to cover some
basics about how you can you effectively put the odds (of
continuing to keep your account equity in the positive and
make nice returns) in your favor even if you're "right" only
50% of the time.
Why do insurance companies consistently win? Insurance
companies are consistently profitable because they use the
laws of mathematics, probability and "special circumstances"
to their advantage. They can pick and choose whom they want
to insure and the price they want to charge for insurance.
Therefore, they "own" the game by being able to call the
shots and rates that we must pay to enter into their playing
field.
Research shows that older smokers tend to have high
mortality rates. Therefore, the insurance companies charge
excessive premiums for these types of people; while young
healthy people tend to be the best risks, so lower rates are
charged as the probability of paying a premium to this
person's family is relatively small. This is not a level
playing field, as the insurance company makes the rules and
requires the charges to be paid.
Do the same with your trading. Here's how:
First, look at the following table. It shows possible risk-
to-reward ratios and the win ratios (the percentage of time
you need to be "right") required to BREAK EVEN with a
trading system, method or strategy.
Risk-to-Reward Ratio Win Ratio
(in pips) Required to Break Even
------------------------------------------------------
40/20 (2:1) 67%
40/40 (1:1) 50%
40/60 (1:1.5) 40%
40/80 (1:2) 33.5%
60/20 (3:1) 75%
60/60 (1:1) 50%
20/30 (1:1.5) 40%
20/40 (1:2) 33.5%
------------------------------------------------------
If you were to toss a coin (heads you go long, tails you go
short) you'd have a 50/50 chance of winning or losing (your
trade can only be profitable or unprofitable. The market can
only go with you or against you). If you were to trade with
a 1:1 risk-to-reward ratio, then after a hundred trades you
should theoretically have around the same amount of money
left in your account (break even as shown above).
To manage risk effectively, it is necessary to find high-
probability trades that have a 1:1.5 or greater risk-to-
reward ratio. But this depends largely on the timeframe you
are looking to trade.
For instance, in our book "Rapid Forex Surfing", one of our
trading techniques teaches you how to go after 20 to 40 pip
trades and use a 1:2 risk-to-reward ratio. So, for instance,
you would set your reward for 40 pips and your stop-loss
order for 20 pips (20 pips below the entry order). While
statistically the odds start working against you for winning
this trade, you can shift the odds in your favor by using
"high probability" strategies. Let's say you try out the 1:2
ratio on all your trades for a while. And lets say you're
only right 50% of the time (though you should be able to do
better than that). Meaning half of the trades you win and
half you loose (they hit your 20 pip stop). So, if you made
4 trades, and assuming 2 of them won and 2 of them lost,
then look at what happened. You made 80 pips (2 x 40 pips)
and lost 40 pips (2 x 20) for a net of 40 pips.
In Lessons #7 & #8, we talked about the need to identify
potential trades based on chart patterns. The idea is that
you collect a set of candidate charts, charts that have
positive prospects for immediate trading. It is with these
candidate charts that one can dig deeper into the possible
trading of a particular currency pair. The identification of
a probable trade centers around the proper identification of
realistic entry and exit positions based primarily on
support and resistance. Once you have properly identified
the support and resistance points you can take those
numbers, plug them into a simple spreadsheet and calculate
the risk / reward. The simplest form of calculation involves
nothing more than the following:
- Entry Price
- Stop Loss Target
- Stop Profit Target
- The resulting Risk-to-Reward Ratio
Here's an example of a trade that we were looking at
recently. For clarity, let's follow the logic of the
simplest risk/reward calculation one can make:
Currency Pair: EUR/USD
Type: Buy
# of Lots: 5
Entry Price: 1.3320
Stop: 1.3300
Target: 1.3360
Loss Risk: $1,000
Profit Potential: $2,000
To see if the potential play is worth wagering money on, one
must determine what the potential losses are if your
analysis is wrong and what the potential gains are if the
analysis is correct. You should usually shoot for a 2:1
ratio - that is your potential profit should be roughly 2
times your potential loss. This is a rule of thumb that many
traders use ... especially the good ones. In the example
above, if one enters a trade at the price of $1.3320 with a
defined stop loss exit of $1.3300 and a potential target
exit for profits at 1.3360, then the ratio is roughly 2:1 (a
bit less in this case, when you take into consideration the
small broker pip spread). That's it. It's really that
simple.
Recognize that once one has entered such a formula into a
spreadsheet and begins using it, one can easily play with
the numbers to make them work. For example, let's say that
EUR/USD looks like a great BUY right now, but that the exit
is really $1.3370 not $1.3360. Now, one could stretch the
target to $1.3390, even though the resistance lies at
1.3380, in order to justify the trade, but the trader inside
you knows this is not the case. When setting support and
resistance points, one has to realize that if the numbers
are fudged, the person fudging the numbers is the one hurt.
It's their money that's on the line.
An easy way around the temptation of making the numbers
work, is to always look at the support and resistance points
first and allow as much slack in the numbers as makes sense.
Now, plug in the entry price. Does the risk/reward make
sense? If it doesn't, change the entry price, not the stop
or target prices. Jiggle the entry price to the point where
it makes sense and then simply wait until you get that entry
point or pass the trade up. There are always more fish in
the pond.
Ending Thoughts on this Lesson:
Always calculate your risk to reward ratio prior to making a
trade. Refuse potential trades unless the risk-to-reward
ratio is at least 1:1.5 or greater (preferably 1:2): that is
for every dollar risk, there is a potential for 1.5 dollars
in return. By calculating your risk to reward for every
trade you will ignore marginal trades and you will identify
your exit points before taking a trade. Recognize that you
want to understand your exit criteria ... at the beginning
of the trade, not sometime later. Once you are comfortable
with simple risk to reward measurements and are identifying
support and resistance zones reasonably accurately (see our
book "Rapid Forex Surfing"), you can consider increasing the
complexity of your formula to consider other variables such
as time and confidence.
Risk-to-Reward Ratios: How to Trade Like an
Insurance Company
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Trading in the FOREX market is a challenging opportunity
where above average returns are available to educated and
experienced investors who are willing to take above average
risk. However, before deciding to participate in FOREX
trading, you should carefully consider your investment
objectives, level of experience and risk appetite. Most
importantly, do not invest money you cannot afford to lose.
In Lesson #13, we spoke extensively about Equity Management
and Margin Control. In today's lesson, we want to cover some
basics about how you can you effectively put the odds (of
continuing to keep your account equity in the positive and
make nice returns) in your favor even if you're "right" only
50% of the time.
Why do insurance companies consistently win? Insurance
companies are consistently profitable because they use the
laws of mathematics, probability and "special circumstances"
to their advantage. They can pick and choose whom they want
to insure and the price they want to charge for insurance.
Therefore, they "own" the game by being able to call the
shots and rates that we must pay to enter into their playing
field.
Research shows that older smokers tend to have high
mortality rates. Therefore, the insurance companies charge
excessive premiums for these types of people; while young
healthy people tend to be the best risks, so lower rates are
charged as the probability of paying a premium to this
person's family is relatively small. This is not a level
playing field, as the insurance company makes the rules and
requires the charges to be paid.
Do the same with your trading. Here's how:
First, look at the following table. It shows possible risk-
to-reward ratios and the win ratios (the percentage of time
you need to be "right") required to BREAK EVEN with a
trading system, method or strategy.
Risk-to-Reward Ratio Win Ratio
(in pips) Required to Break Even
------------------------------------------------------
40/20 (2:1) 67%
40/40 (1:1) 50%
40/60 (1:1.5) 40%
40/80 (1:2) 33.5%
60/20 (3:1) 75%
60/60 (1:1) 50%
20/30 (1:1.5) 40%
20/40 (1:2) 33.5%
------------------------------------------------------
If you were to toss a coin (heads you go long, tails you go
short) you'd have a 50/50 chance of winning or losing (your
trade can only be profitable or unprofitable. The market can
only go with you or against you). If you were to trade with
a 1:1 risk-to-reward ratio, then after a hundred trades you
should theoretically have around the same amount of money
left in your account (break even as shown above).
To manage risk effectively, it is necessary to find high-
probability trades that have a 1:1.5 or greater risk-to-
reward ratio. But this depends largely on the timeframe you
are looking to trade.
For instance, in our book "Rapid Forex Surfing", one of our
trading techniques teaches you how to go after 20 to 40 pip
trades and use a 1:2 risk-to-reward ratio. So, for instance,
you would set your reward for 40 pips and your stop-loss
order for 20 pips (20 pips below the entry order). While
statistically the odds start working against you for winning
this trade, you can shift the odds in your favor by using
"high probability" strategies. Let's say you try out the 1:2
ratio on all your trades for a while. And lets say you're
only right 50% of the time (though you should be able to do
better than that). Meaning half of the trades you win and
half you loose (they hit your 20 pip stop). So, if you made
4 trades, and assuming 2 of them won and 2 of them lost,
then look at what happened. You made 80 pips (2 x 40 pips)
and lost 40 pips (2 x 20) for a net of 40 pips.
In Lessons #7 & #8, we talked about the need to identify
potential trades based on chart patterns. The idea is that
you collect a set of candidate charts, charts that have
positive prospects for immediate trading. It is with these
candidate charts that one can dig deeper into the possible
trading of a particular currency pair. The identification of
a probable trade centers around the proper identification of
realistic entry and exit positions based primarily on
support and resistance. Once you have properly identified
the support and resistance points you can take those
numbers, plug them into a simple spreadsheet and calculate
the risk / reward. The simplest form of calculation involves
nothing more than the following:
- Entry Price
- Stop Loss Target
- Stop Profit Target
- The resulting Risk-to-Reward Ratio
Here's an example of a trade that we were looking at
recently. For clarity, let's follow the logic of the
simplest risk/reward calculation one can make:
Currency Pair: EUR/USD
Type: Buy
# of Lots: 5
Entry Price: 1.3320
Stop: 1.3300
Target: 1.3360
Loss Risk: $1,000
Profit Potential: $2,000
To see if the potential play is worth wagering money on, one
must determine what the potential losses are if your
analysis is wrong and what the potential gains are if the
analysis is correct. You should usually shoot for a 2:1
ratio - that is your potential profit should be roughly 2
times your potential loss. This is a rule of thumb that many
traders use ... especially the good ones. In the example
above, if one enters a trade at the price of $1.3320 with a
defined stop loss exit of $1.3300 and a potential target
exit for profits at 1.3360, then the ratio is roughly 2:1 (a
bit less in this case, when you take into consideration the
small broker pip spread). That's it. It's really that
simple.
Recognize that once one has entered such a formula into a
spreadsheet and begins using it, one can easily play with
the numbers to make them work. For example, let's say that
EUR/USD looks like a great BUY right now, but that the exit
is really $1.3370 not $1.3360. Now, one could stretch the
target to $1.3390, even though the resistance lies at
1.3380, in order to justify the trade, but the trader inside
you knows this is not the case. When setting support and
resistance points, one has to realize that if the numbers
are fudged, the person fudging the numbers is the one hurt.
It's their money that's on the line.
An easy way around the temptation of making the numbers
work, is to always look at the support and resistance points
first and allow as much slack in the numbers as makes sense.
Now, plug in the entry price. Does the risk/reward make
sense? If it doesn't, change the entry price, not the stop
or target prices. Jiggle the entry price to the point where
it makes sense and then simply wait until you get that entry
point or pass the trade up. There are always more fish in
the pond.
Ending Thoughts on this Lesson:
Always calculate your risk to reward ratio prior to making a
trade. Refuse potential trades unless the risk-to-reward
ratio is at least 1:1.5 or greater (preferably 1:2): that is
for every dollar risk, there is a potential for 1.5 dollars
in return. By calculating your risk to reward for every
trade you will ignore marginal trades and you will identify
your exit points before taking a trade. Recognize that you
want to understand your exit criteria ... at the beginning
of the trade, not sometime later. Once you are comfortable
with simple risk to reward measurements and are identifying
support and resistance zones reasonably accurately (see our
book "Rapid Forex Surfing"), you can consider increasing the
complexity of your formula to consider other variables such
as time and confidence.
forex #14
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
20 pips to 200 pips: Small Trades to Big Trades
and Somewhere in Between.
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
There are FOUR different classifications of FOREX traders in
the market. Each one employing one of three different pip-
trading (profit-taking) styles.
=======================================
Sidenote: remember what a "pip" is?
We talked about this in Lesson #3,
but for a refresher: A pip is the last
number to the right in a currency
quote For example: If the EUR/USD
traded at 1.3335 this morning. The
"5" is the pip. If it moves to
1.3435, that would be a 100-pip move.
========================================
There are the novice traders – the rookies, the ones who
don't learn from the "donkey" (see yesterday's lesson;
Lesson #13).
In addition to the novice traders, there are three other
levels of participation in the FOREX market: the dealers,
the institutional traders, and the advanced traders.
The DEALERS are the most powerful and they make the market,
setting prices and putting together deals.
The INSTITUTIONAL traders work in banks, wire firms, or
government agencies. They trade huge amounts of money at a
time, and the size of their trades gives them enormous
power.
Next, there are the ADVANCED traders. This group is
comprised of people from all across the world, sitting in
smaller investment firms, offices, or even their homes. You
can be a part of this group. In some cases, the ADVANCED
traders are the smartest group – trade for trade – than any
other group. Because they don't move a lot of money on each
trade, they don't have as much power as the institutional
players. Because their trades are brokered by the dealers,
they'll never have absolute trading power. But, because
there are so many novice traders – the advanced traders have
plenty of people that they can outrun. Your goal as a FOREX
investor is to aggressively take money out of the pockets of
the novice traders (those that don't educate themselves with
cutting-edge knowledge -- like the self-taught ebooks you
can instantly download at http://www.RapidForex.com
==========================
Each of these different traders have different philosophies
about how many pips to go after.
(1) Some traders go after large pip targets -- from 50 to
500 (or more). They are often position traders, leaving
trades overnight - often for days. Usually they trade one
or two lots and use stops of around 50 to 100 pips.
(2) You have other traders that focus on daytrading (getting
in and out of a trade within one day, usually though within
hours) to get 10 to 20 pips trading one to a few lots.
(3) You also have another breed of trader that will trade
multiple lots to catch just 5 to 10 pips, usually within
minutes. For instance, trading 10 lots for 10 pips is an
equal profit to someone trading 1 lot for 100 pips. Both
would equal $1,000 profit, depending on which currency pair
was traded and assuming they were on a standard 100K account
(i.e., using 100:1 margin or putting up $1,000 to trade
$100,000 worth of currency). Traders who attempt to trim off
profits, within minutes, are usually called "Scalpers."
There is nothing wrong with trading with any of these
objectives in mind. In fact, it is good to be versatile in
your trading. They each have their pros and cons but, if
somebody gets consistent profits (more winners than losers)
with one or the other, then that one strategy should be
considered GOOD.
As you progress from ROOKIE to ADVANCED trader you will
figure out your personal preference and tolerance for risk.
Most of the courses we have for sale at RapidForex.com
(especially the "Forex Surfing" and the "Forex Scalping"
courses) teach you to shoot for 10 to 20 pips PER TRADE.
It's as simple as this: We don't try to make a ton of money
on each trade (excessive GREED), and we never try to get
revenge (a lot of traders get creamed in the market and then
want to strike back. So they double their last order and go
for broke).
======================================
Yes, You can Replace Your Full-time
Income and Make Over 5-figures a
Month On Just 10 to 20 pips Per Trade
======================================
Generally, the larger the pip target you are shooting for
the greater will be the chance that the market will turn
around on you before it reaches your target. Conversely, the
smaller the pip target you are shooting for the greater will
be the chance of the market reaching your target.
All things considered equal, there is a greater chance that
you'll successfully pull 10-20 pips out of the market than
50 pips, or even 30 pips. The further out you go the more
likely it becomes that the market will change its mind.
In our "Forex Surfing" course we give you many ideas and
trading techniques to consistently capture 10 to 20 pips per
trade, per day. And, once you get good at doing that, then
the sky's the limit. We teach you how to compound your
gains, scale in and out of trades and a lot of other ways to
trade like the Traders who shoot for 40 pips per trade, but
without all the risk.
20 pips to 200 pips: Small Trades to Big Trades
and Somewhere in Between.
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
There are FOUR different classifications of FOREX traders in
the market. Each one employing one of three different pip-
trading (profit-taking) styles.
=======================================
Sidenote: remember what a "pip" is?
We talked about this in Lesson #3,
but for a refresher: A pip is the last
number to the right in a currency
quote For example: If the EUR/USD
traded at 1.3335 this morning. The
"5" is the pip. If it moves to
1.3435, that would be a 100-pip move.
========================================
There are the novice traders – the rookies, the ones who
don't learn from the "donkey" (see yesterday's lesson;
Lesson #13).
In addition to the novice traders, there are three other
levels of participation in the FOREX market: the dealers,
the institutional traders, and the advanced traders.
The DEALERS are the most powerful and they make the market,
setting prices and putting together deals.
The INSTITUTIONAL traders work in banks, wire firms, or
government agencies. They trade huge amounts of money at a
time, and the size of their trades gives them enormous
power.
Next, there are the ADVANCED traders. This group is
comprised of people from all across the world, sitting in
smaller investment firms, offices, or even their homes. You
can be a part of this group. In some cases, the ADVANCED
traders are the smartest group – trade for trade – than any
other group. Because they don't move a lot of money on each
trade, they don't have as much power as the institutional
players. Because their trades are brokered by the dealers,
they'll never have absolute trading power. But, because
there are so many novice traders – the advanced traders have
plenty of people that they can outrun. Your goal as a FOREX
investor is to aggressively take money out of the pockets of
the novice traders (those that don't educate themselves with
cutting-edge knowledge -- like the self-taught ebooks you
can instantly download at http://www.RapidForex.com
==========================
Each of these different traders have different philosophies
about how many pips to go after.
(1) Some traders go after large pip targets -- from 50 to
500 (or more). They are often position traders, leaving
trades overnight - often for days. Usually they trade one
or two lots and use stops of around 50 to 100 pips.
(2) You have other traders that focus on daytrading (getting
in and out of a trade within one day, usually though within
hours) to get 10 to 20 pips trading one to a few lots.
(3) You also have another breed of trader that will trade
multiple lots to catch just 5 to 10 pips, usually within
minutes. For instance, trading 10 lots for 10 pips is an
equal profit to someone trading 1 lot for 100 pips. Both
would equal $1,000 profit, depending on which currency pair
was traded and assuming they were on a standard 100K account
(i.e., using 100:1 margin or putting up $1,000 to trade
$100,000 worth of currency). Traders who attempt to trim off
profits, within minutes, are usually called "Scalpers."
There is nothing wrong with trading with any of these
objectives in mind. In fact, it is good to be versatile in
your trading. They each have their pros and cons but, if
somebody gets consistent profits (more winners than losers)
with one or the other, then that one strategy should be
considered GOOD.
As you progress from ROOKIE to ADVANCED trader you will
figure out your personal preference and tolerance for risk.
Most of the courses we have for sale at RapidForex.com
(especially the "Forex Surfing" and the "Forex Scalping"
courses) teach you to shoot for 10 to 20 pips PER TRADE.
It's as simple as this: We don't try to make a ton of money
on each trade (excessive GREED), and we never try to get
revenge (a lot of traders get creamed in the market and then
want to strike back. So they double their last order and go
for broke).
======================================
Yes, You can Replace Your Full-time
Income and Make Over 5-figures a
Month On Just 10 to 20 pips Per Trade
======================================
Generally, the larger the pip target you are shooting for
the greater will be the chance that the market will turn
around on you before it reaches your target. Conversely, the
smaller the pip target you are shooting for the greater will
be the chance of the market reaching your target.
All things considered equal, there is a greater chance that
you'll successfully pull 10-20 pips out of the market than
50 pips, or even 30 pips. The further out you go the more
likely it becomes that the market will change its mind.
In our "Forex Surfing" course we give you many ideas and
trading techniques to consistently capture 10 to 20 pips per
trade, per day. And, once you get good at doing that, then
the sky's the limit. We teach you how to compound your
gains, scale in and out of trades and a lot of other ways to
trade like the Traders who shoot for 40 pips per trade, but
without all the risk.
forex #13
Because we're readily admitting that YOU will pre-judge this
Lesson, based off its title above, as boring and quickly
dismiss it as "something I've heard before" (hey, didn't we
tell you we KNOW human nature), we're going to go ahead and
make a....
A VERY BLUNT IN-YOUR-FACE KINDA STATEMENT (not to offend
you, just to keep you paying attention) and then TELL YOU A
GRUESOME STORY. First the straightforward comment:
>>> 95% of the successful (full-time, well-paid) FOREX
Traders we know feel that money-management is more important
than the trading. And, it's so, so important to us that we
believe if you don't grasp, and follow, the basic rules
below, YOU WILL FAIL! (Hey, don't take this personally. It
is what it is).
Okay, on to the story.
===================================
Bloody Tale of Vicious, Senseless
Animal Slayings Guides FOREX
Traders to True Wisdom.
==================================
A donkey, a lion, and a fox decide to go out hunting for
rabbits. After a pretty good day of hunting, they had
collected a large pile of rabbits. The lion says to Mr.
Donkey, "I'd like for you to divide the rabbits fairly among
the three of us."
So, the donkey took the rabbits and made them into three
equal piles and said, "How's that?" The lion immediately
pounced on the donkey and killed him.
Then the lion threw all the rabbits on top of the donkey and
made one big pile. The lion turned to Mr. Fox and said, "I'd
like for you to divide the rabbits evenly between the two of
us." The fox walked over to the pile of rabbits and took one
little scrawny rabbit for himself and put it in his pile. He
left the rest of the rabbits in the large pile and said,
"That pile of rabbits if for you, Mr. Lion."
The lion said, "Mr. Fox, where did you learn to divide so
evenly?"
And the fox replied, "The donkey taught me."
===========================
The Moral of the Story ?
Well .... it seems quite clear it is this: if you can
learn from your own mistakes, you are smart. However, if you
can learn from others' mistakes, then you are wise.
Yup, we agree with this. And, by reading the listed rules we
have below to share with you, you will accelerate your
profit-making potential in your own FOREX trading business.
You're about to read the combined wisdom of various traders
who have "been there, done that." Traders who have
experienced setbacks, challenges, and turned those temporary
failures into successes. We've paraphrased these timeless
rules (do's and don'ts) into our own words.
WELCOME ABOARD akin .... you're about to
experience the thrill of hunting rabbits with a FOREX Lion.
However, in this case, you won't get killed :-)
======================================
Equity management and properly handling leveraged margin
accounts is the most significant part of any trading system.
Again, most traders just don't understand how important this
aspect of running a FOREX business is. The ones who DO know
understand that it is the critical point that separates the
winners from the losers.
It was proven that if 100 traders start trading using a
system with 60% winning odds, only 5 traders would be in
profit at the end of the year. In spite of the 60% winning
odds 95% of traders will lose because of their poor
management of account equity.
But, the good news is, you don't have to be a mathematician
or understand portfolio theory to manage risk. This can be
as easy as following these rules.
>>> RapidForex.com RULE #1: Thou shalt not risk more money
than thou can afford to lose (Also known as "if you can't
afford to lose, you can't afford to win.")
Let's face it - this isn't bean ball. You will lose money.
ALL traders loose money. Stop right here, delete this email,
forget about trading currencies, do something else with the
rest of your life if losing a portion of whatever money you
might trade with would take food off your table, keep your
kids from going to college or change your lifestyle. Repeat:
there is no system or approach available that doesn't
sustain losses sometimes. The trick is containing those
losses.
>>> RapidForex.com RULE #2: Thou shalt never risk more than
2% of your margin account on any SINGLE trade (if you have a
Mini Account, you may bend this to 5%).
For example, if you have $300 in your account, 2% is $6,
equal to a 6 pip move. 5% is $15 or a 15 pip move. With a
Mini-account, realistically your risk-per-trade has to be a
bit higher than those who trade a 100K (regular) account.
Once you get your account equity to $1000 or more then
definitely limit your risk to only 2% of your margin account
on any SINGLE trade.
>>> RapidForex.com RULE #3: Thou shalt always, Always,
Always Use a STOP-loss order.
When you place a STOP order, right along with your ENTRY
order, via your online trade station, you've just
automatically prevented a potential loss from "running" too
far.
Before initiating any trade, if you haven't already figured
out at what point you would be wrong and would want to cut
your loses or, at the very least, reevaluate your position
from the sidelines, then you shouldn't be putting on the
trade in the first place.
Show us a FOREX trader who doesn't use stop loss orders and
we'll show you someone who loses a lot of m.oney.
>>> RapidForex.com RULE #4: Thou shalt predetermine your
exit point BEFORE you get into a trade.
To use a football analogy, if you don't know where the End
Zone is what's the point in walking up to the scrimmage line
to make a play? In other words, when you place a LIMIT
order (or, at least mentally place it), you're telling
yourself, and the rest of the market, that you understand
the game plan, the big picture, the reason for being on the
trade (the football field) in the first place. It is prudent
to let profits run and follow a market with stop orders in
a trending market. It's the wisest of traders who put
such a limit on their trading (profit-taking). Because of
Greed, it is always more difficult to make a decision to
take profits than to enter a trade. We don't want you to be
the one who says, "If only I had sold when...." Know your
exit strategy / game plan and this won't be you.
>>> RapidForex.com RULE #5: Thou shalt paper-trade first.
First open a DEMO account and get to learn how to place
orders with it (we cover this in detail in Lesson #11). You
shouldn't invest real money until you have shown a profit in
a DEMO account. Many people have losing DEMO accounts and
still believe that it will be different with real money.
Wrong! As mentioned in Lesson #11, the only thing different
between a DEMO account and a LIVE account is, with a DEMO
account, you'll tend to be less conservative and
lackadaisical with the rules. If you lose paper trading,
what makes you think you'll win with real money?
>>> RapidForex.com RULE #6: Thou shalt take a Breather when
your Core Equity is significantly down.
First of all, you should understand the following term "Core
equity." Core equity = Starting balance - Amount in open
positions. If you have a balance of $10,000 and you enter a
trade with $1,000 then your core equity is $9,000. If you
enter another $1,000 trade, your core equity will be $8,000.
Assuming you lost money on each trade, your core equity
certainly won't be where you started it with. If you lose a
certain predetermined amount of your starting capital (e.g.,
10 percent to 20 percent), take a breather, analyze what
went wrong, and wait until you feel confident you have a
high probability trading idea/method/system before entering
the market again. Remember, the goal is to MAKE money, not
lose it.
>>> RapidForex.com RULE #7: Thou shalt not let thy emotions
rule.
This is probably the hardest rule to keep. Yet, we have
never seen a successful trader over the long haul that
didn't follow it. Most people want to be winners. Most
people want to make the big score and have the accompanying
bragging rights. We all tend to get greedy, traders usually
more so. But trading is a business. It's hard work. You must
be cool, calm and always ready for the next opportunity.
You can't have emotionally high highs or emotionally low
lows because you'll make too many mistakes, and mistakes
mean losses. If you start winning and get "too high," the
tendency is to over-trade. By that, I mean starting to make
marginal trades or "seat-of-the-pants" trades just for the
sake of making trades, instead of waiting patiently for the
right opportunity. If you get too low (this is usually after
some losses), you are liable to skip the trades you should
be making, or you might try to "cherry-pick" a system or an
advisor's recommendations for fear of more losses,
inevitably making the wrong choices. To win this game you
must remain patient and clear-headed.
=========================
Finally, to finish this lesson up, we have TWO basic rules
about winning in the FOREX as well as in life: (1) If you
don't bet (trade), you can't win. (2) If you lose all your
chips, you can't bet (trade).
Think about it. Hard once. Then softly twice if you have
too.
Lesson, based off its title above, as boring and quickly
dismiss it as "something I've heard before" (hey, didn't we
tell you we KNOW human nature), we're going to go ahead and
make a....
A VERY BLUNT IN-YOUR-FACE KINDA STATEMENT (not to offend
you, just to keep you paying attention) and then TELL YOU A
GRUESOME STORY. First the straightforward comment:
>>> 95% of the successful (full-time, well-paid) FOREX
Traders we know feel that money-management is more important
than the trading. And, it's so, so important to us that we
believe if you don't grasp, and follow, the basic rules
below, YOU WILL FAIL! (Hey, don't take this personally. It
is what it is).
Okay, on to the story.
===================================
Bloody Tale of Vicious, Senseless
Animal Slayings Guides FOREX
Traders to True Wisdom.
==================================
A donkey, a lion, and a fox decide to go out hunting for
rabbits. After a pretty good day of hunting, they had
collected a large pile of rabbits. The lion says to Mr.
Donkey, "I'd like for you to divide the rabbits fairly among
the three of us."
So, the donkey took the rabbits and made them into three
equal piles and said, "How's that?" The lion immediately
pounced on the donkey and killed him.
Then the lion threw all the rabbits on top of the donkey and
made one big pile. The lion turned to Mr. Fox and said, "I'd
like for you to divide the rabbits evenly between the two of
us." The fox walked over to the pile of rabbits and took one
little scrawny rabbit for himself and put it in his pile. He
left the rest of the rabbits in the large pile and said,
"That pile of rabbits if for you, Mr. Lion."
The lion said, "Mr. Fox, where did you learn to divide so
evenly?"
And the fox replied, "The donkey taught me."
===========================
The Moral of the Story ?
Well .... it seems quite clear it is this: if you can
learn from your own mistakes, you are smart. However, if you
can learn from others' mistakes, then you are wise.
Yup, we agree with this. And, by reading the listed rules we
have below to share with you, you will accelerate your
profit-making potential in your own FOREX trading business.
You're about to read the combined wisdom of various traders
who have "been there, done that." Traders who have
experienced setbacks, challenges, and turned those temporary
failures into successes. We've paraphrased these timeless
rules (do's and don'ts) into our own words.
WELCOME ABOARD akin .... you're about to
experience the thrill of hunting rabbits with a FOREX Lion.
However, in this case, you won't get killed :-)
======================================
Equity management and properly handling leveraged margin
accounts is the most significant part of any trading system.
Again, most traders just don't understand how important this
aspect of running a FOREX business is. The ones who DO know
understand that it is the critical point that separates the
winners from the losers.
It was proven that if 100 traders start trading using a
system with 60% winning odds, only 5 traders would be in
profit at the end of the year. In spite of the 60% winning
odds 95% of traders will lose because of their poor
management of account equity.
But, the good news is, you don't have to be a mathematician
or understand portfolio theory to manage risk. This can be
as easy as following these rules.
>>> RapidForex.com RULE #1: Thou shalt not risk more money
than thou can afford to lose (Also known as "if you can't
afford to lose, you can't afford to win.")
Let's face it - this isn't bean ball. You will lose money.
ALL traders loose money. Stop right here, delete this email,
forget about trading currencies, do something else with the
rest of your life if losing a portion of whatever money you
might trade with would take food off your table, keep your
kids from going to college or change your lifestyle. Repeat:
there is no system or approach available that doesn't
sustain losses sometimes. The trick is containing those
losses.
>>> RapidForex.com RULE #2: Thou shalt never risk more than
2% of your margin account on any SINGLE trade (if you have a
Mini Account, you may bend this to 5%).
For example, if you have $300 in your account, 2% is $6,
equal to a 6 pip move. 5% is $15 or a 15 pip move. With a
Mini-account, realistically your risk-per-trade has to be a
bit higher than those who trade a 100K (regular) account.
Once you get your account equity to $1000 or more then
definitely limit your risk to only 2% of your margin account
on any SINGLE trade.
>>> RapidForex.com RULE #3: Thou shalt always, Always,
Always Use a STOP-loss order.
When you place a STOP order, right along with your ENTRY
order, via your online trade station, you've just
automatically prevented a potential loss from "running" too
far.
Before initiating any trade, if you haven't already figured
out at what point you would be wrong and would want to cut
your loses or, at the very least, reevaluate your position
from the sidelines, then you shouldn't be putting on the
trade in the first place.
Show us a FOREX trader who doesn't use stop loss orders and
we'll show you someone who loses a lot of m.oney.
>>> RapidForex.com RULE #4: Thou shalt predetermine your
exit point BEFORE you get into a trade.
To use a football analogy, if you don't know where the End
Zone is what's the point in walking up to the scrimmage line
to make a play? In other words, when you place a LIMIT
order (or, at least mentally place it), you're telling
yourself, and the rest of the market, that you understand
the game plan, the big picture, the reason for being on the
trade (the football field) in the first place. It is prudent
to let profits run and follow a market with stop orders in
a trending market. It's the wisest of traders who put
such a limit on their trading (profit-taking). Because of
Greed, it is always more difficult to make a decision to
take profits than to enter a trade. We don't want you to be
the one who says, "If only I had sold when...." Know your
exit strategy / game plan and this won't be you.
>>> RapidForex.com RULE #5: Thou shalt paper-trade first.
First open a DEMO account and get to learn how to place
orders with it (we cover this in detail in Lesson #11). You
shouldn't invest real money until you have shown a profit in
a DEMO account. Many people have losing DEMO accounts and
still believe that it will be different with real money.
Wrong! As mentioned in Lesson #11, the only thing different
between a DEMO account and a LIVE account is, with a DEMO
account, you'll tend to be less conservative and
lackadaisical with the rules. If you lose paper trading,
what makes you think you'll win with real money?
>>> RapidForex.com RULE #6: Thou shalt take a Breather when
your Core Equity is significantly down.
First of all, you should understand the following term "Core
equity." Core equity = Starting balance - Amount in open
positions. If you have a balance of $10,000 and you enter a
trade with $1,000 then your core equity is $9,000. If you
enter another $1,000 trade, your core equity will be $8,000.
Assuming you lost money on each trade, your core equity
certainly won't be where you started it with. If you lose a
certain predetermined amount of your starting capital (e.g.,
10 percent to 20 percent), take a breather, analyze what
went wrong, and wait until you feel confident you have a
high probability trading idea/method/system before entering
the market again. Remember, the goal is to MAKE money, not
lose it.
>>> RapidForex.com RULE #7: Thou shalt not let thy emotions
rule.
This is probably the hardest rule to keep. Yet, we have
never seen a successful trader over the long haul that
didn't follow it. Most people want to be winners. Most
people want to make the big score and have the accompanying
bragging rights. We all tend to get greedy, traders usually
more so. But trading is a business. It's hard work. You must
be cool, calm and always ready for the next opportunity.
You can't have emotionally high highs or emotionally low
lows because you'll make too many mistakes, and mistakes
mean losses. If you start winning and get "too high," the
tendency is to over-trade. By that, I mean starting to make
marginal trades or "seat-of-the-pants" trades just for the
sake of making trades, instead of waiting patiently for the
right opportunity. If you get too low (this is usually after
some losses), you are liable to skip the trades you should
be making, or you might try to "cherry-pick" a system or an
advisor's recommendations for fear of more losses,
inevitably making the wrong choices. To win this game you
must remain patient and clear-headed.
=========================
Finally, to finish this lesson up, we have TWO basic rules
about winning in the FOREX as well as in life: (1) If you
don't bet (trade), you can't win. (2) If you lose all your
chips, you can't bet (trade).
Think about it. Hard once. Then softly twice if you have
too.