Many traders wrong in understanding important concepts in forex trading. They are trading with its own interpretasinya against some concepts that they read or hear without examining further, and make it as a habit in the daily trading. These concepts relate to effectiveness in order to quickly succeed in forex trading, however, because misunderstood then happens is just the opposite, a way of trading so ineffective and often suffered losses. From the survey results of the novice trader, they get these concepts from various websites, seminars or from more senior trader, and assume that everything is correct and must be strictly followed.
Here are some concepts in forex trading are often subjected to interpret:
- Trading ontime frameof highriskandneeda long time towait for thetrading signal
It is generally assumed that a novice trader trading on higher time frame (the most common daily) the risks are greater because of the distance of the stop loss will be wider from the lower time frame. In addition, on a low time frame more opportunities for entry because it often gives trading signals.
In terms of greater risk, you need to understand position sizing. If you need to specify a stop loss that is wider with a bigger pip, then you must set up the appropriate lot size so that the magnitude of the risk in the value of money is equal to that you have to plan when you are trading on a lower time frame.
For example if you're trading the EUR/USD at a 30-minute time frame and magnitude of the risks You US $ 100 per trade for 25 pip stop loss, now you're trading on the daily time frame with a 50-pip stop loss. You don't have to risk greater than US $ 100, but the trading lot size smaller. If you go on a 4 mini lot 25 pip stop loss (per pip is US $ 4, a risk 25 pip = US $ 100), now you're trading with 2 mini lot stop loss 50 points (u.s. $ 2 per pip, the risk 50 pip = US $ 100). To reward level, with a wider stop loss, take profit level certainly is also greater if the risk/reward ratio that you use does not change.
For the trading signal that rarely appears on the time frame height is relative and depends on the method and your trading experience. It is generally not the case, trading signals on a daily chart is more weighted than chart 30 minutes or 15 minutes. Please note that the signals on the chart with a lesser time frame (for example, 30 minutes, 15 minutes, etc) less reliable than daily because there are a lot of ' noise ' inside. The daily chart of eliminating noise-the noise and image signal is displayed more accurately. Perhaps you'll be more extravagant with out entering the market at a low time frame. Trading on the daily chart preventing you from over-the-counter trading, over-analyzing and trading addiction could be fatal. Trading signal gesturing to entry, and of course You want a high probability of profit. Trading signals on the daily chart are more rare, but the probability of a larger profit.
- You should always let profit increases continue
You often read or hear the phrase ' cut your losers short and let your winners run ' which often appear on websites and forex seminar. What is the actual intent and how do you do it? With the idea of the phrase, as in many beginning traders who do not do anything in their trading positions that were already in a State of profit. They thought that by trading positions are correct, the price movement of the market will remain in the direction and usually last a long time before there is a sure sign of the reversal. They believe in the experience of the senior rush exit though the market still moves according to the expectation of profit obtained the maximum No.
Market price movements could not be predicted with precision and accuracy. That way the chances are 50-50 and is gambling. The phrase is common, but logical and objective. For menyikapinya, at least you have to apply money management by determining the risk/reward ratio is reasonable. In addition, you should not let well enough alone already profit trading position. You can shift the stop loss level to lock in the profit you've earned, or using a trailing stop. To be safe, at least you move the stop loss to breakeven level. Securing profit is crucial especially if reward level is not reached
- You should determine the risk per trade is no more 2% of your account balance
The rules ' risk 2% ' was well known and used by forex traders. If applied with rigid, this rule actually restrict the trader in memange trading account balance. Experienced traders who have advocated the beginner should not be bound by the percentage of the risk numbers. In terms of the magnitude of the risk, a trader should feel comfortable with the numbers assigned. Percentage figures are very relative to funding your account, and the quantity in units of money is more real and apparent (visible). For example a trader forex profit ' 10% ' of balance accounts and it is US $ 100, while other traders also profit ' 10% ' but the magnitude of US $ 10,000. For the novice trader will more easily see the great profit and loss in units of money than the number percentage.
Many professional traders who recommends that in determining the risk per trade using real money unit, because only you yourself knows the magnitude of the risk in the most logical unit of money in accordance with the plan, trading capabilities and your financial situation. There is a tip from the professionals: your funds should be sufficient to overcome the 10 to 20 times the losses in a row as the worst scenario. If the unfamiliar and experienced, should avoid compounding techniques or tuck lot size per trade as good as any market conditions that You expect.
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