Skalpz, 1. great fun reading 2. greater inspirations reading again Would you be so kind and go thru more of the basics in future lessons? Eg: leverage and who pays for that. This forex stuff is fascinating, sure I'll find my answers myself but it would be nice to come back and see your perspective. thanks so far, neuro
OK Here we go again Im long EUR/ USD 1.2836 I too only got 50 ticks on fridays run. the stop & reverse @ 1.29 did not work out. lost 25 ticks & gave it away. So I or we hope the euro buyers come in quick.. good luck.. Hope my oil shorts work out so i can call my chevy dealer..
Hey bro, I wouldn't know the exact backoffice forex procedures between banks and brokers, you know, because I trade forex, I'm not their accountant. But, from what I know about the general structure of leverage aka margin, if you put up one-dollar your broker puts up 50 dollars when you use 50:1 leverage enabling you to buy or sell 50-times the amount of foreign currency you would otherwise be able to with your one-dollar. Some brokers give you up to 100:1. Even 400:1. Therefore, for example, say you want to trade 100,000 units (apx $100,000) of EUR/USD, at 50:1 leverage, all you'd need to put up on your part is about $2550 to control that huge amount of currency. Price per point, in that case, is $10. A million units (10 lots) of EUR/USD is worth $100 per pip. 10 million units (100 lots) is $1,000 per point. 100 million units is $10,000 per point. One billion units is $100,000 per point. Some brokers work just the other way around, you can have 50:1 and trade as little as only 1 unit. In this case you're only exposing about .02 cents of your money in a trade even though you're commanding $1.00 worth of currency in trade. Price per pip (point or tic) in that case is 1/100th of a cent (penny). So that if the market went viciously against you even 100 points (1 "cent") you'd only be registering a whole one-penny down in your Unrealized P/L (profit/loss) indicator on your trading platform. Now, of course, if you had only $2550 in your account, I don't think you could actually engage 100,000 units aka a "stardard lot" - or maybe you could, this is something you'd need to talk to your broker about. Generally speaking though I think it is better to leave yourself some room in your capital in your account for a drawdown. Some guys say to never engage more than 1% of your capital (expose to margin, that is) to any one trade (position?). This is basically so you don't get wiped in a fast market or in a sudden 100-tic spike. They are seldom but do they do happen and there's no stopping it when then do occur. At least to me, the trickier part is what happens to your Unrealized P/L in your account when you go into a bad drawdown. Your account balance can get gobbled up quickly when using higher leverage. I suggest you use a good search engine and do a study on margin/leverage, or go to forex brokers' sites and read their definition. You'll get more of an indepth explanation than you'll get here. regards, Gamal Saham Ruach
Yeah, I think the market's gunna freak this week, especially with the trade numbers coming out, and this France deal in Europe. There could be a lot of speculation money in the market. It always gets crazy when speculators show up. Market may see in excess of 200 pips back and forth this week. We had 178 last week. We should get into some good tangles the rest of May. We'll see. gsr
Thanks skalpz, having a lot of fun on demos, this stuff is addictive, guess I'll pay your lessons in a few months via added liquidity. As for what I quoted from your reply: that was exactly the point. Your broker is giving you leverage, meaning (s)he's lending you HUGE money, but as far as I understand apart from pip spread (at trade time) and negative interest (if and when due) they're not charging you anything for that money, right? ... confused... Maybe I'm missing st, wouldn't want to look too dumb... just trying to get the inner mechanics of this FX stuff (does the broker benefit if I'm in a big... BIG... drawdown?). I'll definitely google around, the brokers' sites are not too kind when it's time to explain the rules of the game (just the pov of an uneducated newbee, oh, and no need to comment on this last one, don't want to get you into trouble). keep posting (and winning), neuro
Neuro, Not at all. In fact, if your broker cannot patiently explain ANY question you have, dump them. It is your business to know what you are doing, this comes to your understanding leverage, drawdowns, margin calls, etc. The points you bring up are good ones, and are at the heart of forex trading, winning and losing. Understanding leverage is a new concept for most just starting out in forex. I knew nothing about margin when I first began. It took me two months just to understand "pip value." I had convinced myself I was brain-damaged. And if I wasn't, trying to learn forex made me so. Once I learned, I was destined to write comedy ever since. You know, when you just start it all seems like rocket science. That is normal, forex definitely has its own language, terminology and slang. I'd suggest just post questions in the forex forum here on ET and also other trading forums. You can also search terms in forums too because sometimes their archived threads have knowledge on the exact subjects you're interested in. Some of this gets down to a hunt and peck for info. I know of one forex broker who has a message board right on their site! That'd be a good place to post questions regarding leverage. Though I cannot mention the site. Bottom line: You need to know your instruments, especially exactly how margin works so don't settle for less than complete education on it. It may make the difference between winning and losing. Main thing is, write down your questions, one at a time, then get the answers. But formulate the questions. Sometimes the difference between winning and losing is in asking the right questions! Stay on a demo until you know what you're doing. Trading live forex is very risky! Btw, no need to "pay" me for lessons - they're free! sKaLpZ
Random Lesson sKaLpZ, On The Nature of Drawdowns Neuro brought up a good point, that is, learning to trade forex and make money is only part of becoming a success. Another part is learning the components of the instrument you trade, in this case, forex. Due to the high liquidity and 24-hour market, currency flucuation is high. When I trade there are two things I love: One. When the market (or, currency pair I'm trading) goes into my favor because then I make money when I close the trade. *cheap trumpets sound in the background* Two. When the trade goes against me. This is bliss. WHAT?? Yes, because, you see, a drawdown represents movement in the pair... flucuation, volatility. Why are these things an important aspect of your trading in the forex environment? Because when a currency flucuates and moves even 100 points (i.e. "one-cent") it means it can also move INTO your favor (the direction [long or short] of your trade) as many or more points as well. It means the pair you are trading has traders interested in it, flooding it with liquidity. That's what can cause volatility and a "fast market." Great volatility and fast markets can make you rich in the currency market. Once you hit more advanced trading methods and attain a deeper knowledge of trading skills, you may be able to learn how to structure your trades through better money management techniques so that you may take advantage of these flucuations, even if they are against you! Most traders lose - that goes without saying. But if you think about it, most people lose. Be it in a business, a profession or any number of endeavors. They say 90% of businesses fail within the first 5 years. There are businesses that have failed after 100 years. For example that old, well-known N.Y. retail company that went up in smoke a few years back. Even nations go broke. The ones that succeed typically out-work and out-apply those who fail, no matter what the undertaking. Study Sam Walton, founder of Walmart. Now, Sam was fortunate to have a brother, Bud Walton, who, as I understand it, was by Sam's side all during his efforts and inroads into establishing Walmart. Bud was one tough cookie. Think Jed Clampett of The Beverly Hillbillies. That was Bud. Be that as it may, Sam and Bud worked and applied themselves countless hours. Their diligence in business dwarfed even the highest paid executives of competitor companies. The reason this is mentioned is because if you study the system structures of losing traders most of them dread thus avoid the Feared Drawdown so much so that they will kill their trade and LOSE significant amounts of money based on a core component of most commonly-used trading systems called a "Stop Loss." In other words, they cut their loss on a "bad trade." A question arises. If they are supposed to be traders, why are they constantly making "bad trades?" Isn't that what beginners are supposed to do? So, see, if you combine the Walton principle of hard work and study and application beyond that of their peers and competitors, together with the common reasons why most lose in trading forex, you get a scenario that begs further investigating. That is what? To not trade the way most losing traders do who apparently may not work hard enough, study hard enough, educate themselves long enough and apply themselves more than their fellow traders. If you're going to advance in trading, a good question to ask yourself may be, "Are there any other ways to deal with and successfully negotiate a drawdown other than taking the most commonly-used choice of losers?" The answer to this may enable you to reach greaters levels in forex trading than the majority who lose outright. Gamal Saham Ruach
Random Lesson Whoa, guys! I just got an email from a reader who said s/he plans on having less than $10,000 in his/er account, yet is planning on making $5,000 a month to live on! WTF? Boys and girls, let's get on the same page here.... Number one, in my mind, there are (at least) 3 levels of account funding. A micro-account size: Bare minimum is $10,000. Less than that can be done but don't intend to consistently make more than coffee money. Medium-account size: Up to one-million dollars. Large account: Over one million. Do you want to KEEP the money in your account while trading forex, or lose it? Then you BETTER adjust your trade size in the right proportion to your account balance and take your eyes OFF all the money you're going to make and put them ON having better money management techniques and skills. If you don't, the next margin call has your name on it. gsr
Very good, Neuro! In fact, so good it warrants a lesson because what you hit on is an important issue when it comes to advancing in trading. And becoming a successful trader! At a later time I will try to write a good post on what you brought up. Thank you. Coinz