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  1. #1
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    Thumbs up Useful advice for beginners

    These are some advice for the beginners at Forex market, given by the active and experienced traders, working at our service. Every trader mentioned some rules, which he considers to be main for the beginners of Forex market. So, we'd like to post such advice there in order to help all newbies on Forex market. Today only advice by only 2 traders have been posted, but we'll certainly add some posts in the nearest future. Here's a piece of advice by the trading system provider "Jolly11":

    "Of course, one of the main things is learning to do money management, which will help you to avoid losing your deposit and keep you in a good mood for continuation of trading. The next thing you need to do is working out your own trading system based on positive mathematical expectation. It is said: "If you can't predict, how the market is going to move, your prediction is completely wrong". The trading system should be accurate and consistent. Always use stop-loss and take-profit in order not to lose big money and to exit the market with profit. Notice, that it's useless to put stop-loss smaller than 50 pips, because it will be eaten by the trend's movement very soon and you'll be quite disappointed (you see, I use higher stop-loss in my Forex signals).You are also to use all you analyst's skills to find out, when this or that tendency gonna begin. But never open a position in passed wave with the hope of earning some pips. You'd better analyze the market and find out the beginning of a new wave. And don't forget to follow the rules of your trading system, which is very important. Good luck!"

    And there you see some tips by one of the traders, who's passing testing period at our service at the moment:

    "Firstly, find out, what currency pair "suits" you. Don't try to trade with big amount of pairs - 2 or 3 is enough. Otherwise you'll be lost among different news, parameters and so on. Secondly, don't lose your temper in case of loss. Sometimes you need to close a position with a loss in order not to lose the whole deposit. Thirdly, never take important decisions in a hurry! Fluctuation of the market will always take place, but being hurried can really damage your capital. Also don't forget to take a rest. If you had a loss, it's better to relax for a while and improve your trading system than start trading in a bad mood. And never retreat from your strategy rules. Try not to use more than 5% of your deposit for trading. Remember, that trading with big part of your deposit can easily lead to complete loss of your funds (such mistake is very often done by beginners.). So, keep trading and good luck!"

    You are also welcome to post some common advice for the Forex beginners there. That will be quite convenient and useful for all forum-users.

  2. #2
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    Re: Thumbs up Useful advice for beginners

    Lot size and risk

    I thought I would outline how lot sizing works in Forex as you need to consider this when assessing your trade risk when using the robot if you are turning off money management.

    Lot sizes are shown as a percentage of a full lot. 1 full lot in forex is equal to $100,000.00 of the underlying currency so 1.0 lot of USDCAD equals $100,000.00 USD. If the USD appreciates versus the CAD you will have more than $100,000.00 (profit) if you went long (bought the USDCAD contract) and less than $100,000.00 (loss) if you went short (sold the USDCAD contract).
    If the USD depreciates versus the CAD you will have less than $100,000.00 (loss) if you went long (bought the USDCAD contract) and more
    than $100,000.00 (profit) if you went short (sold the USDCAD contract).

    The amount of the profit or loss from a contract purchase are related to the lot size and the number of pips the underlying moved. Here is
    how it works:

    1.0 lot = $10.00 per pip, you are trading a full lot, or $100,000.00 of the underlying currency
    0.9 lot = $9.00 per pip, you are trading a .9 lot, or $90,000.00 of the underlying currency
    0.8 lot = $8.00 per pip, you are trading a .8 lot, or $80,000.00 of the underlying currency
    etc....
    0.1 lot = $1.00 per pip, you are trading a .1 lot, or $10,000.00 of the underlying currency
    0.09 lot = 0.90 cents per pip, you are trading a .09 lot, or $9,000.00 of the underlying currency
    0.08 lot = 0.80 cents per pip, you are trading a .09 lot, or $8,000.00 of the underlying currency
    etc....
    0.01 lot = 0.10 cents per pip, you are trading a .01 lot, or $1,000.00 of the underlying currency

    **note: some currencies are not exactly $10.00 per pip or a fraction thereof but for our needs assuming so is fine.

    Remember, recommended risk levels are no more than 1-2% of your account balance per trade.

    So if you trade 0.1 lots, you are risking $1.00 per pip. If the underlying moves against you, and your stop loss is at 60 pips, you are risking $60.00. If your account is $500.00 you are risking 60/500 = 12% of your account on this one trade.

    So with a $500.00 account what lot size should I be trading to only risk 1-2% of my account?
    $500.00 X .01 = $5.00 risk per trade at 1%, $10.00 risk per trade at 2%

    Now lets say our stop loss is 50 pips, so with $5.00 at risk (we have determined our comfort level is risking 1% of our account per trade), we need to be trading a lot size that only risks 0.10 cents per pip ($5.00/50=0.10) so to manage our risk we should set our lot size to 0.01 lots per trade. If your comfort level is 2% risk per trade, then 500.00 x .02 = $10.00 per trade. So $10.00/50=0.20 cents per pip risk which means we should set our lot size to 0.02. When you manually set the lot size, each trade would be opened with the same lot size, even if your account balance is lower due to some losses.
    If you are manually setting your lot sizes you need to revisit them regularly, they are not a set and forget item

  3. #3
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    Re: Thumbs up Useful advice for beginners

    don't be caught out by leverage when setting your account up, if you are using an EA refer to support to find the optimum leverage they recomend for their (now your) EA:

    Leverage

    Leverage in forex is like margin in stock and option trading. You are using the houses money to trade larger positions than you otherwise could.
    Leverage in Forex comes in 1:25, 1:50, 1:100, 1:200, 1:300, 1:400, and 1:500. Leverage determines what amount of margin is needed to open a given lot size.
    For example, to determine the margin needed to open a 0.1 lot on a $1000.00 account you divide the lot size in dollars by the leverage amount (see lot size and risk section for lot size to dollar conversion). So for a $10,000.00 lot size (0.1) with an account at 1:100
    leverage and a balance in your account of $1000.00 you need $100.00 of available margin (10,000 / 100 = $100) (lotsize / margin = required
    account margin).
    If we change the margin from 1:100 to 1:200 then ($10,000 / 200 = $50.00) so you need $50.00 of available margin to buy 0.1 lots.
    So leverage allows you to use less of your money, depending on the level your broker gives you, to buy the same amount of underlying currency.

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    Re: Thumbs up Useful advice for beginners

    good money management is often refered to as being one of key elements of success when trading forex, I hope the following helps and gives some insight:

    Money management

    Margin required has absolutely ZERO to do with risk. Here is why:

    Same trader, same size account, same money management technique, two brokers, different margin requirement:

    Say broker A's margin requirement is 1% (1:100), Broker B's margin requirement = 0.5% (1:200), account value is $5,000.00.

    Trader decides to do a maximum trade (for him, following his MM) (10% of margin) at both brokers.

    Broker A = buy $5,000 X 10% = $500 = at 1% of 10K (0.1 lot size) = 5 x 0.1 lots (or .5 lots). Notional transactional value = EUR 50,000 and value per pip $5.00.

    Broker B = buy $5,000 X 10% = $500 = at 0.5% of 10K (0.1 lot size) = 10 x 0.1 lots (or 1.0 lots). Notional transactional value = EUR 100,000 and value per pip $10.00.

    Let's say the trade was not such a good idea. The eurusd moves 100 points in the wrong direction. With broker A he loses $500, with broker
    B, $1000.

    The solution is that you must calculate your risk not by using your margin required percentage but by looking at your leverage ratio:

    Say broker A's margin requirement is 1% (1:100), Broker B's margin requirement = 0.5% (1:200)., account value is $5,000.00

    Broker A = EUR50,000 (5 x 10K lots (5 x 0.1 lots or 1 x 0.5 lots))/ $5,000 (total capital) = leverage of 10:1. I.e. you take your capital, wish it is EUR50,000 (for which you give the broker some measily security of 1%) and off you go. Risking not 10% of what you have but risking what you have 10 times.

    Broker B = EUR100,000 (10 x 10K lots (10 x 0.1 lots or 1 x 1.0 lots))/ $5,000 (total capital) = leverage of 20:1. I.e. you take your capital, wish it is EUR100,000 (for which you give the broker some measily security of 0.5%) and off you go. Risking not 10% of what you have but risking what you have 20 times.

    Basically, higher leverage ratio = higher risk.

    Because margin required is a variable it can not be used to judge the risk where the other properties of the transaction are all fixed (non-variable): Margin = $5000, lot size = EUR10,000 and pip value = $1.00/ per 10K. That is why you should look at the transaction from the notional value angle and not the variable margin requirement angle like most do.

    Many traders say as part of "money management" that they will risk only say, 10% of their capital at any given time. What they mean is that they will do transactions to the value of 10% of their margin based on the margin requirement. This is WRONG. When assessing risk, you need to look at how much of your account balance (read as YOUR MONEY) you are risking with each trade.

    Here is my approach - I keep my leverage down at 1:100, then I determine what lot size I am comfortable with based on the Stop Loss in use.

  5. #5
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    Re: Thumbs up Useful advice for beginners

    Hi, interesting thread, I think you will find below article written by Starting is interesting for beginner in forex.

    "I think what every beginner trader must know before he clicks the button on buying or selling, is the following:
    - what is his trading style, i.e. which timeframe suits him best for trading.
    Majority of beginners start from M1, however this is not advisable if you just started and want at least not to lose your money. Start from M15 at least and thereafter you'll realize that more pips can only be gained while trading on a higher timeframes, like H1, H4 and D1.
    - create set of entry, exit trade rules, takeprofit and stoploss, lot size rules and adhere to it under all circumstances. Decide which days and session times are better for trading and which are closed for you (also with news, you can learn how to trade them or you can opt to avoid them at all).

    This is a privilege of real trader to have such set of rules, so called "trading system", with which trader generates consistent profits.
    - let the trade run and no check it every single moment when price retraces. Be patient and if you trade on H1 so let your trade last at least 1-2-3 hours, unless your stoploss is hit or price is ranging and it is better to close the trade and wait until you get next signal to enter.

    - be desciplined, be disciplend, be disciplined.
    Don't try to enter the market soon again after your stoploss was hit. Calm down, check what went wrong and how to prevent bad entries in the future.
    Don't remember, even ideal entries sometimes become losses, just because you must know one thing about the market movement - it's completely unpredictable. We can just make our assumption and count probability of its move either direction. So if you adhered to your system, but trade was a loss, thank yourself for your disciple, you made a good trade under your system, it is just market that went to other direction.
    If your system show at leas 40% winning rate, then with TP/SL ratio 1:3 your account will be growing.

    Don't overestimate yourself and the depth of your deposit. Always trade with one position and don't add to losing position. Avoid martingaile and grid Expert Advisor systems. First let you get to know to the market with manual trade. Unless you see you can succeed with manual trade, don't start searching Holy grail EA or make your own EA. First prove your trading strategy is successful in real market conditions.

    - select right broker. Funds security, no requotes, low spread, no hidden costs. Select best broker for your first small deposit. Make your real deposit from only 1/10 of your available for trading funds. I suggest you start from cent accounts, but remember, I don't know any single fair broker providing cent accounts. They all're cheating or providing bad service in the end. Don't consider them to be more, than testing poligone for your study.

    - improve your knowledge every day from every trade. Prior to enter a trade make your notes in a diary, what are particular reasons of this trade, why you decided to go this direction, when you plan to enter, close your trade. After trade was closed, write what was its result and naalyse, what was right and what was wrong in it for further trades.

    - select only 1-2 major currency pair for study and starting trading. Learn how they move, make your own observations. Plot trend and support and resistance lines on the chart of different timeframes. Understand price action mechanizm and daily ranges (pivot point, S1, S2, R1, R2 etc).

    - don't get into all available strategies, books, videos etc. Just stand in front of empty wall behind your back and start your observations and studying market from the very basics.
    Visit babypics and simialar sites for e-learning of the basics of forex trading.

    And many-many more... just constant improvement, patience and discipline and help you to survive at first, stay at break even at second, and start earning money at third phase.

    Good luck."

  6. #6
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    Re: Thumbs up Useful advice for beginners

    A book that has really helped me is Trading Chaos by Bill Williams. There are a few different editions and I would recommend reading the first one and the most recent ones. The first one gives you the basic understanding of what it takes to be a successful trader and the most recent one outlines the changes he's made to his system and strategy. Very useful reading for any trader and I wish I had read it before I started trading my live account. I'd also recommend Markus Heitkotter's stuff. Different from Bill Williams, but it's always good to get a variety of views. When it comes down to it, it's up to you and only you to make decisions about how you will trade.

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    Re: Thumbs up Useful advice for beginners

    @vannnnnn, do you have ebook of Trading Chaos by Bill Williams
    Plz upload it

    Thanks & Regards,

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    Re: Thumbs up Useful advice for beginners

    The books contains the technical indicators. where almost all indicators is late. Does anyone has a recommendation a good book for Price movement ?
    Detecting Price movement should be an advantage too.

  9. #9
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    Re: Thumbs up Useful advice for beginners

    Quote Originally Posted by marvellin
    The books contains the technical indicators. where almost all indicators is late. Does anyone has a recommendation a good book for Price movement ?
    Detecting Price movement should be an advantage too.
    Maybe Suri Dudela ebook can answer you (find at ebook Palace)

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    Re: Thumbs up Useful advice for beginners

    Althou I do not consider myselfe as a newcomer in forex world, I have been in forex for 5 years already, I still have a question I have not found any answere from anywhere. So maybe someone can answere it here, and here it goes:
    I have heared many times that high leverage is dangerous for new traders and here is the question: Why??

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