Before start i apologie for my english, hope u can get the idea any way.
The problem that every body who start trading have, is the approach, some how the people get a little success for a little while and then the reality crash them down.
The question here is how you decide what to do, when to do and how much you will put on a given trade. (Because, there is no point stick a trade plan with out a good plan ;-) ).
There is my approach I really hope it will work for u, as good as have worked for me.
First, What to do, and here is where the approach of a weather man have all to do!!
Have u ever think about how the weather people do to say hmmmm I think today going to rain?, well they use the convergence of signals, for instance, if there are, clouds, strong wind, and thunders, the most probably thing is that it's going to rain, right?.
Well that's all, when we said that the most probably thing it's that's going to rain, means that we are allowing that even when the sky get clouds and wind and there are thunders, perhaps at the end don't drop a rain, because we are trying to predict some that in fact have not happened yet.
So for that reason there is the second thing: When you are going to trade? when the convergence of signals be so clear that trying all this occasions, the result be more at your favor that against you, even in a choppy market!!!
For this there is a simple rule, you will buy when the price in fact is going up (waving with high more high and low more high each time) and you'll sell when is going down (waving whit lows more low and high more low each time) and with this i mean, don't buy if the last low was almost as low as the previous or if in the last high the price almost was incapable to get really over the previous high.
And lastly on the when matter, only get in to a trade when you will be confident patient and mentally clear to stand until the price that you spectate to reach before quit the trade be profitable enough to reach a risk reward ratio of 1 to 1.5 at least and 1 to 2 if you are trading against the over all trend.
About how much are you going to put in a given trade, the best solution is always try to keep a percentage ratio in every trade, for example if you are trading a 10k account and you feel that you will have the guts to experience jumps of a 5% of your actual account if you lose, then 5% is good for u, if you feel that this is too much (for example if you do scalping or things in very short term) perhaps then you need a 1% trades to give you the chance , and here is the important, that you get a trade with your head cool, every thing with the hart bumping a lot (because after all what's the advantage of win money if you will give it back to your cardiologist, right?).
When you have decided the percent that suit to you, then use this simple formula
amount of lots or contracts = percent decided for your trade style divided by the cost of your trade
for example again, if you trade the 10k account, and you find a trade that have a cost of 250 dollars per lot, from the price where you are going to enter into the market until the price where you know that the trend that you were following are vended (almost all use for this the previous support if you are going to buy or the previous resistance if you are going to sell), then as you can see you will have a lose of 250 dollars if the market turn against you, so you will put only 2 contracts in this trade in order to get at this time your risk at top at the 5% of your account. If you do this you will have only two possible endings for this chance, or you get your account whit a $9500 if you lose, or you will get a $10,750 dollars if you win (lol).
Of course for your healthy you must use a stop loss and a take profit orders to get out of the market, this will help you especially if you are new to trade with real money because you won't feel attempted to quit the market before the time.
remember eye on the screen only to find a trade.
What? are you asking me what's if the price where you need to exit give you a risk reward smaller than the 1 to 1.5 or 2?, well here is a possible solution, you can program a limit order, to get in to the market only in the case that the price meet your criteria to be in there.
Hope you can find some useful at this words.
From mexico city, have a very profitable trades ¡¡¡y arriba esas cuentas jejeje!!!
