79.56%
Everybody knows what that number represents, or at least should know. It is the return you would make if you were able to grow your FX account by 5% a month, compounded weekly. That is by no means impossible, infact its very possible. It equates to 25 pips a day. That's right, an average of 25 net pips per day, would grow an account from $100,000.00 to $179,560.00 in 12 months, and that's while using a margin level of zero. Thats right, read it agian, no margin, cash in other words, you would only need your margin if you chose to be in more than one trade at a time. That's 125 net pips per week, which after months of demo trading and studying, should be accomplished with as little as one or two correctly researched and prepared for trades while risking very little because you're not using margin So why do so many traders lose money? The number one reason is lack of discipline. That stems from looking at trading the FX as something other than what it is, a job. Part time or full time, successfull trading is simply a job, a way to earn a living. It is no different from waking up in the morning and going to work driving a bus or working in an office its just a job. You're not suddenly going to become an international man (or woman) of intrigue, you're simply going to go to work. Your trading style should have a very simple foundation, to make net positive pips each time you trade, that's it really it, its all about patience. Waiting for the right setup, on the right pair at the right time. Patience and discipline mean looking and waiting for signals that have a very high percentages of being real, not "ghosts", and sticking to those signals, no matter how long or short a time frame your chat is. I personally find that I do better trading off of the hourlies, most of the time. That doesn't neccessarily mean I'm in trades for hours and hours, but I will use signals generated from my hourly studies to make a lot of my entry desicisions. I know a very successful trader that swears by the 15 minute chart and some off of the 5 min chart. Thats too high pressure for me. Remember, this isn't entertainment, don't due this to amuse yourself, you'll lose your money. Be picky, people think there are only 2 positions you can have in any market, long or short. But there is a third........the sidelines, that a position also, and it gives you time to prepare for the next trading opportunity you can find. Preparation.............the Subject of maney articles to come.
By Francesco Bocca
Figure out if FX is for you OK, so let's see if you should even be in the FX market. First, are you in a "debt squeeze", are things tight? Well, if you have any money in savings you should first pay off your debts before you think of investing in anything. So let's say, you have more than enough monthly income to pay all your bills and still have money left over. Now, let's say you have some money set aside for investing, that's over and above your regular savings. You now might be ready for the FX market. Second, do you have a full time job? If you do, then, in my opinion, you are better off investing in a Managed Fund and letting pro traders make you money. Quite frankly you can't trade for yourself and juggle a full time job. Look for funds that have been around for at least 5 years, look at their performance, and see who runs the fund. But most important, if you can, is go visit their offices or branches to make sure you are dealing with a real operation, not a couple of guys in sweat shirts and sneakers trading in a 12 X 10 room with 20 year old commercial carpet on the floor. You'd be surprised, but this is what a so called "Managed Fund" I visited on Long Island, NY looked like. Now these guys might be the best traders in the world but if I'm going to entrust them with my money then I'd prefer the "Fund" have a letterhead and maybe even a receptionist. Also, if their minimum investment is less than $5,000.00 forget it, they're too small. CitiGroup, recently started a retail FX operation. This is significant because Citi is now the first "established" bank or investment bank offering retail FX accounts. All the other ones are only regulated, loosely, by the CFTC, not the SEC or Treasury like Citigroup is. I'm not sure they have a managed product yet but I have spoken to one of the VPs and he did say they would be offering a managed fund. You can also ask your broker, Merrill Lynch, TDAmeritrade, etc. if they offer any FX related products. www.citifxpro.com/default.aspx AMP Trading is also a reputable outfit offering both self directed and managed funds. http://www.ampfutures.com/services.html?PHPSESSID=2fe4ba8c9bc8ffe9ac1bd83035dfb986 Here is a good list from The Chicago Board of Trade(CBOT). http://www.cbot.com/cbot/pub/page1/1,3248,1055+2+10,00.html By Francesco Bocca
So You Want to be a Forex TraderTrading for a Living So,
for those who have the time and the financial where with all, full time
trading of the FX market can be both a goldmine and a nightmare. You
need to ask yourself is do you have the discipline to trade? A lot of
traders find, after losing thousands of dollars that they simply do not
have the personality to trade. They look at it as a form of
entertainment or gambling, and they end up blowing out their accounts
to $0.00 in no time.Money Management is the most important and first thing to consider. Actually it is much more important than a good trading "system." A prudent Money Management plan will force you to use much less margin than an amateur would. My personal advice is to never open a position grater than two times your account balance and that's a lot to me. You want to keep your losses low, both in number and dollar amount. A lot of sites/gurus talk about risking anywhere from 2%-5% of you trading capital in any one trade.I SAY THAT IS INSANITY. I say keep your individual losses on each trade between 0.5% and 1% and never be exposed to a greater than 3% loss over multiple trades. That means trades that are usually no bigger than 1X your account balance, and usually less. But what about the 400:1 margin?....you don't need anywhere near that much, infact 10:1 is probably enough. The brokers give endless credit(margin) to entice people to trade irresponsibly because they make money on volume, they don't care if you make or lose money, either way they are earning. The next thing you need to do is figure out if you have enough capital to trade with. The way you do that is by figuring out what you monthly expenses are. Let's say you need $5,000.00 a month to pay you bills and have some money in your pocket. The fact is that the very best traders usually average between a 5% and 10% return each month. I'll be generous and give you a return of 10%. Using $5000.00 a month, net after taxes, which roughly translates to $8,000.00 gross, you'll need at least $80,000.00 to achieve your monthly financial goal. Note this will not grow your account. You'll need more capital or less than $8,000.00 in withdrawals each month to achieve both income and growth and that is what all traders are looking for, income AND growth. I know this might be disappointing to many but the fact of the matter is margin your enemy not your friend. Now, if you haven't already, start reading and reading and then reread and read again........I think I'm getting my point across you have to read and learn technical analysis techniques as well as understand the fundamental economic issues that move the FX market. Open a demo account and practice, practice, practice, for at least 6 months if not a year. Yes a year, do you want to make or lose money? Both can be very easy to do in the FX market. You might as well lose fake money than real. Make a Plan and Then Trade The Plan Once you've familiarized yourself with the various Technical Analysis tools and techniques and once you understand the effect of such things as CPI numbers, Home Sales numbers, Employment numbers, etc on different currencies, you'll eventually settle on a technique or plan that you are comfortable with. It could be Elliot Wave Theory, Fibonacci levels, or indicators like RSI, Stochastics and Moving Averages or a combination of all the above and others. My point is to create your own trading "system" that you are comfortable with and not to buy the "super get rich trading systems" that will lose you money. So you have a plan or system, well stick to it. Do not deviate from it, ever, no matter what the market is doing, sometimes the best position to hold is none at all, to be on the sidelines. You must have patience to trade the FX market. Don't jump the gun, wait for your "system" to give you a buy or sell short signal. Remember with so many pairs to trade and the fact that the market is open 24 hours a day, 5 days a week, means that there is always a good trade out there; you just need to wait for it. Don't Trade A Lot. Remember that every time you enter the market with either a long or short position you are putting your capital at risk, and the name of the game is "capital preservation". Limit your losses and don't take profits too soon. A good system not only gives you a good entry price but also a good exit price. Always use a stop loss and a limit (take profit price) By Francesco Bocca
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