General Recommendation
General recommendations
Before making a start in trading, any trader always faces the same problems: what part of the trade capital one should open the position, when to enter onto the market, where to limit the losses and when to get the profit.
The size of a lot
The answer to the 1st questions is quiet simple. Percentage of the trader’s capital one can afford to that put at risk has been figured out by generations of stock brokers due to their experience. Let’s try and make out the typical example. Let us say that you open an account (in dealing centre or in a bank) for $ 10,000 by having a credit arm 1:100. Then one shouldn’t open the position with more than 5% of the deposit. In this case, it is $500 (with such an arm $50,000 are introduced to the market) or 0.5 of the lot (for MT-4). If your deposit is larger, say %20,000, then, accordingly, the maximal size of the deal becomes twice as much ($1,000 or 1 lot with the credit arm $100,000). If you can’t afford the account of more than $2,000, it isn’t advisable to open it at all, because the minimal sum to enter the market will exceed the maximal risk of a single deal. In case you are eager to trade for real (available) sums, the welcome to Microforex or Lightforex.
The moment for getting involved and put the stops
So, we have made our mind on the sum of a deal. Opening the deal is the next point. Here is a chart to demonstrate an example.
As can be seen in the given chart – intraday support of the EURUSD pair is at level 1.4620, resistance – 1.4700. It is sensible to buy at support, while to sell at resistance. We don’t think it’s advisable to deal in the middle of the range. The probability of moving in either way is 50%. In the given example would be reasonable to put the stops that curb losses a bit lower (higher) than minimal (maximal) level (s) drawn and marked in the chart. For the sales from 1.4700 put your stop above1.4730, and for the purchases from 1.4620 put your stop under 1.4605. One should close the deals when approaching the opposite level. For purchases it’s towards a resistance level, for sales it’s towards a supported level. In this case, losses are the least possible even though a rate ranges over the support or resistance.
Threshold figures of currency pairs and cross-courses
If a deal is closed at a stop-loss order (to minimize losses) then you should not open a next one in the same direction earlier than the pair passes the threshold mark. Under no circumstances give way to your emotions or try to compensate your losses right away. All currencies have so called threshold figures of movement, e.g. 200 points for GBP and cross-courses and 100 points for the rest currencies to daily charts.
Some other moments for starting
Supporting and resisting are not the only possible moments for starting. There are ways of opening deals on account of trend lines, Fibonacci’s levels, indicators’ or oscillators’ signs. But one should never open the position at random and put the stop in range of 20-30 points from opening mark. 90 chances out of 100 that such a positioning will grant you a loss, not a profit.
Majors for newcoming traders
If you are a beginner, it’s sensible to exclude GBP and “crosses” at the very start. Such currency pairs (majors) EURUSD, USDCHF and USDJPY are just for beginners in the business. With EURUSD you can open purchases as well as sales. But, it’s desirable to operate with USDCHF and USDJPY only in purchases because of the large negative SWAP (just as long as there is large range in rates among the national banks). We recommend that all the beginners operate with one only currency pair. It’s risky to deal in several pair simultaneously (except for hedging).
About the moments to hit the market
It isn’t a good idea to open position towards night. One had better sleep at night, not watch the market. One more observation from personal experience. Don’t enter while there is some dramatic changes to either side. It’s highly probable that in such a situation your stop, which could curb your losses, will be swept away. Also, it isn’t worth starting the deal just before news announcing which usually causes rather sharp fluctuations to currencies rates. In the conclusion we would like you to enjoy the quotation from Larry Williams. “Genuinely wealthy and smart people do not venture for high states. The winners made their fortunes by doing right things in succession. If you enter the market to make a killing, you more likely will be killed than stay alive”.
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