how is making money in forex
- Thread starter forexse
- Start date
Patience is a big part of it, but knowing what direction to focus on is a big part as well. trading with the trend increases you probabilities and potential reward
Forex is a very volatile market and leverage can be deadly. One solution goes by this:
(1) Reduce leverage
(2) Trade long term
IMO, this is the only way to make money in forex. I trade forex with leverage 2:1, no more. I use just two indicators and a few patterns to add to positions. I don't trade frequently but I have never lost money in forex.
(1) Reduce leverage
(2) Trade long term
IMO, this is the only way to make money in forex. I trade forex with leverage 2:1, no more. I use just two indicators and a few patterns to add to positions. I don't trade frequently but I have never lost money in forex.
That would apply only to centralized exchange trading. Since forex is a highly segmented market it does not apply. Retail forex is pooled operations and any operator can influence the market any way he likes intraday. The only way of dealing with this reality is low risk long term trading which limits potential profits dramatically and you end up competing with stock index returns.
My sixpenneth worth:
1. Don't open an account with a bucket shop that uses Metatrader. All bucket shops trade against you and they wouldn't do that without a significant edge. Their edge is Metatrader which is designed with brokers in mind. You'll do well with a demo account and then they'll kill you (legally or illegally) when you go live.
2. Only trade through an ECN such as MB Trading
3. Don't use high leverage. High leverage will make you great profits when you're right but will also blow your account when you're wrong.
4. Try to keep away from TA that uses lagging indicators, in fact most TA will simply not work with FX, so don't bother trying to learn it.
5. Use COT data to see where the balance of open interest is and ideally trade in the direction dictated by that.
6. If you're interested in short term gains, trade news events. It still works well if you pick the right events (not always the big, important ones).
7. Read everything you can about the subject and take an interest in whats going on in the world.
8. Plenty of people are making money in fx every day and if I can, I'm sure others can too.
1. Don't open an account with a bucket shop that uses Metatrader. All bucket shops trade against you and they wouldn't do that without a significant edge. Their edge is Metatrader which is designed with brokers in mind. You'll do well with a demo account and then they'll kill you (legally or illegally) when you go live.
2. Only trade through an ECN such as MB Trading
3. Don't use high leverage. High leverage will make you great profits when you're right but will also blow your account when you're wrong.
4. Try to keep away from TA that uses lagging indicators, in fact most TA will simply not work with FX, so don't bother trying to learn it.
5. Use COT data to see where the balance of open interest is and ideally trade in the direction dictated by that.
6. If you're interested in short term gains, trade news events. It still works well if you pick the right events (not always the big, important ones).
7. Read everything you can about the subject and take an interest in whats going on in the world.
8. Plenty of people are making money in fx every day and if I can, I'm sure others can too.
FYI: Leverage alone is a meaningless number.
Risk per trade is what you want to be aware of.
For example:
To risk 1% with a 5 pip stop loss - you need 20:1 leverage.
To risk 1% with a 10 pip stop loss - you need 10:1 leverage.
To risk 1% with a 20 pip stop loss - you need 5:1 leverage.
To risk 1% with a 50 pip stop loss - you need 2:1 leverage.
Assumptions:
The stop loss includes the spread.
That this old spreadsheet is correct.
Short term traders require much higher leverage to take the SAME risk per trade that long term traders take.
Risk per trade is what you want to be aware of.
For example:
To risk 1% with a 5 pip stop loss - you need 20:1 leverage.
To risk 1% with a 10 pip stop loss - you need 10:1 leverage.
To risk 1% with a 20 pip stop loss - you need 5:1 leverage.
To risk 1% with a 50 pip stop loss - you need 2:1 leverage.
Assumptions:
The stop loss includes the spread.
That this old spreadsheet is correct.
Short term traders require much higher leverage to take the SAME risk per trade that long term traders take.