So please guys read through the information on the chart. It is long but it is very valuable!
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You should be able to make at least a few profitable trades after say 3 - 5 losing ones, max.
It is true that people use way too much leverage on too small accounts. IMO if you wish to see above average salary level monthly returns (i.e. being able to make at least a basic net income of about €4K - €5K), with a max risk of 5% and with the possibility to take swings of 100 - 150 pips you need at least 40K - 50K.
After each successive losing trade, your trading balance reduces, so your 5% risk on each subsequent trade also reduces.
You think 40K-50K with a 5% risk per trade will make you an income of 4-5K a month, or 120% return on capital per annum.
I would love to see the trading plan behind this, care to elaborate?
Sorry but that just sounds like a wild, madcap statement and is the reason why 95% plus of forex retail traders fail.
Leverage is the way that brokers make money, it encourages GREED and a get-rich-quick mentality.
"Lousy-Trader A" decided to deposit just only $1000 into his trading account (because he/she does not feel confident yet to deposit more) ... But "Lousy-Trader B" decided to deposit all $10,000 into his trading account (which is definitely 10 times more cool yeah!)... So they both started to trade the same currency pair (using the exact same leverage & exact same amount to risk);
"Lousy-Trader A" risked $500 per-trade; but his prediction went wrong & he lost it... (SL hit)
"Lousy-Trader B" also risked $500 per-trade; & he also got it wrong & lost it... (SL hit)
On the second trade attempt; the exact same thing happened; both traders got it wrong & lost another $500 once again... (SL hit)
Right now "Lousy-Trader B" still has $9000 left inside his trading account (still looking very strong yeah!)
But "Lousy-Trader A" already has nothing left so he has to go & make deposit once again; he decided to deposit another $1000 again...
Once again both of them risked $500 for another new trade, but they both got it wrong & lost another $500 once again... (SL hit)
They went on to try another different trade, risked $500 for that trade again, but both traders got it wrong & lost $500 yet again... (SL hit)
So "Lousy-Trader A" (as usual) has to go to top-up (another $1000) into his trading account yet again (because there's nothing left in it), but "Lousy-Trader B" is still boasting that he still has alot ($8000 left inside his trading account right now)!
Well, as both traders continued to trade; the same s**t kept on happening & they both still kept on losing $500 (yet again & again per-trade) for every new trade attempts made...
So what happened in the end...? Well it really doesn't matter; whether you have $1000 or (10-times more than that) inside your trading account; because at the end of the day; nothing can really stop a "lousy-trader" from ultimately losing everything at the end of the day anyway; (so no point in talking about having big $50,000 or $100,000 amount inside one's trading account as well; because it will just make "a lousy trader" die much slower actually...; with more reasons to continue losing even more $$$$ in the long run...?)...
Have a good day.
Finally, nothing's really gonna stop both traders from risking more (say like $150 per-trade) as well (including the small $1000 account holder; simply because if he loses this round, then he can still go on for a few more rounds; until he needs to top-up his account with more $$$ if he has been losing in the trades)...
I understand the advice to adhere strictly to the 1% - 5% rule though...
But there is always the temptation for the bigger account holder to play bigger/risk more, & end up losing even more (compared to the smaller account holder) as a result... So if a trader is comfortable say in making/losing just $10 per-trade, then he/she doesn't really need to deposit anything bigger than a small $1000 account I reckon (depositing anything bigger would be redundant with more temptation to go out of control I guess)... E.g., some heros with big-fat accounts thinks that they are macho enough to hold losing positions in FX (e.g. letting losses go astray)..., guess what, they ended up losing way much more than smaller accounts that has already been stopped out long ago by margin-calls (basically they just took a much longer period of time to be opted out of the market, at the much greater lost at the end)...
Have a nice day.
Anyway, just some observations of mine...; I've witness many traders who are seriously good... (E.g. have you participated in Forex contest/competitions before?) Well, I see those traders starting out with $10,000 (with 1: 50 leverage); & within just a day, they are able to double up that capital more or less...; I've seen it happening countless times (& wondering how did they performed it that rapidly)... I frankly find it impossible to catch up with those guys (on equal-level playing field)...
Additionally there are also "normal traders" who are easily making $100+ in just 2 - 4 trades only (in $1000 account)... (In other words; they didn't need to have a really big $10,000 account in order to be able to accomplish that...)
I also know another guy (he was trading GBPUSD when it was on the downtrend at the beginning of this year); he only had $1000+ inside his trading account...; but guess what, his unrealized floating net profit was at a staggering $5000+...! (Looks like very big lot positions opened & in profit for few hundred pips...)
I've also seen some Gold (XAUUSD) scalpers who made few-hundred-thousands of profit just scalping Gold alone (very tight positions of few pips only)...; they are playing seriously darn big...
There are others...
I am just seeing so much potential in Forex/commodity trading...
All the best.
One strategy I can suggest is to immediately withdraw the new-profits as one makes it. (In other words, it is a better idea not to leave the profits inside the trading account...) The reason is, to prevent one (who could potentially get out of control) & attempt to make bigger trades just because the account-capital is now bigger...
This way, (for example) if a trader is feeling comfortable in making $50 a day trading 0.1 lot sizes (with $1000) account, then he/she really doesn't need anything more than that; (so if he/she has successfully doubled the trading-account at the end of the month to $2000, then he/she can withdraw the profits & just leave the initial $1000 inside the trading-account to continue trading with the same methods & 0.1 lot sizes as before...)
So in the (unforeseen) event if this trader (above) should lose the $1000 inside the trading-account (maybe because of taking a crazy big-risk & failed badly); then at-least he/she would still be having the other $1000 (+ with more common sense to learn & improve & stick to the rules perhaps)...
So it is wise to quickly withdraw the profits (in my opinion)...
Give a "lousy-trader" $100,000 to trade (& he will lose hell lots of $$$$ at the end of the day)...
Give a "expert-trader" $1000 to trade (& he/she will double that at the end of the day)...
If both traders adheres strictly to a 5% rule, then the "lousy-trader" will still be losing (in much bigger amounts), but the "expert-trader" will be profiting consistently (even with $1000)...
A Lousy-Trader, is a Lousy-Trader.
Problem with People & Leverage is, they open up to many positions. When your account is Small and your Using Leverage, Trade smart, Hold One Position. (In Forex, They isn't a single position that can Kill your Account, if they is, your doing something really Wrong. (seriously). .
& Also Hedge your position when you fell a loss, (If you went LONG and its Going Against you, go SHORT, to recover and Minimize Your Loss).
Here is my Advise:
If your Account is $5 to $100
- Trade 0.01 lot (Single position at a time). tight SL & TP
then $100 to $200
- Trade 0.02 lot (Single position at a time). tight SL & TP
then $200 to $500
- Trade 0.05 lot (Single position at a time). tight SL & TP
& don't develop trigger fingers of try to trade everyday, trade when the market is in your favor.
& Lastly.... Respect Support & Resistance, all TPs & SLs should be taken there.
[ And FOREX is meant for everybody, Big or Small Accounts, I Know alot of Big Account Traders who blow their accounts, FOREX has no friend, Big or Small Account, Forex Doesn't Really Care, Big Account GOOD FOR YOU, Small Account use Leverage.