range trading with 5 pip stop.
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USDCAD Long
- Thread starter Masterchanger
- Start date
Quote from Masterchanger:
Thanks for your input, i'm looking for that.
I made a mistake in the the entry and stop placement.
expecting a resistance level to hold. I didn't need to risk 50-100
pips
to test that hypothesis. I was too early in that entry and i'm still getting a feeling for forex. If my approach to trading these scenarios is not gonna work, I'll know without loosing thousands of dollars IMHO.
BTW, I'm only using 40:1 leverage.
Leveraging 40:1 is extremely risky especially in forex.
With all the correlation and news in forex, just wait for news to hit when the price level is in range of your stop. You will get slipped enough so that 40:1 is a significant loss. Hell, 20 pips at your rate is $1000... on a $5000 account you don't consider that risky?
And I can guarantee that if you dont watch the news like a hawk you will get slipped eventually because your stops need to be so tight with 40:1 leverage it's not funny.
40:1 leverage leaves you a little over 200 pips of downdrawn or losses before your account is wiped out. A news slip can easily slip you for 15 - 60 pips when a huge order is placed. The reason for this is because stop and limit orders are last in line behind manually placed orders.
And besides all that, occasionally a market maker or central bank may decide to drop and order into the market at any given moment... the market will instantly jump 50 - 150 points and there is nothing you can do to stop it.
Honestly, stop trading with that type of leverage. I'm just trying to warn you. You will regret it when your account is wiped out.
There is no way to trade 40:1 leverage for an extended period of time without eventually losing everything, I don't care who it is.
A bit of uncalled for advice.
Don't know if I have any business in giving some unsolicited advice, but can't resist myself giving you a few pointers, since its obvious that you are a newbie. I will tell you the approach which will increase your probability of success in fx space.
1. Use leverage of 1:2 or 1:3 for first 6 months.
2. Record all the trades you do, all in an excel sheet.
3. In 6 months, I agree with this low leverage, you wont make any money, but idea here is to make money over next 20 years and not in just 6 months.
4. After every month, sit down on a weekend, and do basic descriptive analysis on your trades: win/loss ratio, win %, time in trades, commission paid etc. etc.
5. After doing above analysis, apply increasing leverage to your trade history on the excel sheet (Do not increase leverage in real life please till 6 months are over), and see how much money you would have made (or lost) by using higher leverage.
6. You will see that at some leverage factor, your profitability curve dips! You know that this is the MAX leverage you should be using historically.
7. After 6 months of such practice, your chances of success in FX will be much much higher.
At this point, you may wonder: why should I listen to this anonymous poster on ET and do all the above things, when I can go from day 1 and use a leverage of 20 or 40 and start making big money. Well, Paul Tudor Jones blew up his account 3 times in 1970s, before he *understood* money management. I am just trying to help you not to blow your account. You don't perform brain surgery in 1st year of your medical school. If you look at trading as a *serious* business and want to be successful in it, you don't use leverage of more than 3 in fx till the time you have some data on your performance and a better understanding of fx market.
Now, having explained to you what you should and should not do (when you never asked my advice in the first place), I will bet that chances are 80% that you will not listen to the advice above, but will realize it after having lost serious amount of money in the fx markets. Unfortunately, human beings are over-confident in their ability, and some words of advice from me are not sufficient to change that behavioral trait. Anyways, good luck! I have done my work!
Don't know if I have any business in giving some unsolicited advice, but can't resist myself giving you a few pointers, since its obvious that you are a newbie. I will tell you the approach which will increase your probability of success in fx space.
1. Use leverage of 1:2 or 1:3 for first 6 months.
2. Record all the trades you do, all in an excel sheet.
3. In 6 months, I agree with this low leverage, you wont make any money, but idea here is to make money over next 20 years and not in just 6 months.
4. After every month, sit down on a weekend, and do basic descriptive analysis on your trades: win/loss ratio, win %, time in trades, commission paid etc. etc.
5. After doing above analysis, apply increasing leverage to your trade history on the excel sheet (Do not increase leverage in real life please till 6 months are over), and see how much money you would have made (or lost) by using higher leverage.
6. You will see that at some leverage factor, your profitability curve dips! You know that this is the MAX leverage you should be using historically.
7. After 6 months of such practice, your chances of success in FX will be much much higher.
At this point, you may wonder: why should I listen to this anonymous poster on ET and do all the above things, when I can go from day 1 and use a leverage of 20 or 40 and start making big money. Well, Paul Tudor Jones blew up his account 3 times in 1970s, before he *understood* money management. I am just trying to help you not to blow your account. You don't perform brain surgery in 1st year of your medical school. If you look at trading as a *serious* business and want to be successful in it, you don't use leverage of more than 3 in fx till the time you have some data on your performance and a better understanding of fx market.
Now, having explained to you what you should and should not do (when you never asked my advice in the first place), I will bet that chances are 80% that you will not listen to the advice above, but will realize it after having lost serious amount of money in the fx markets. Unfortunately, human beings are over-confident in their ability, and some words of advice from me are not sufficient to change that behavioral trait. Anyways, good luck! I have done my work!
Quote from Insurinator:
Leveraging 40:1 is extremely risky especially in forex.
With all the correlation and news in forex, just wait for news to hit when the price level is in range of your stop. You will get slipped enough so that 40:1 is a significant loss. Hell, 20 pips at your rate is $1000... on a $5000 account you don't consider that risky?
And I can guarantee that if you dont watch the news like a hawk you will get slipped eventually because your stops need to be so tight with 40:1 leverage it's not funny.
40:1 leverage leaves you a little over 200 pips of downdrawn or losses before your account is wiped out. A news slip can easily slip you for 15 - 60 pips when a huge order is placed. The reason for this is because stop and limit orders are last in line behind manually placed orders.
And besides all that, occasionally a market maker or central bank may decide to drop and order into the market at any given moment... the market will instantly jump 50 - 150 points and there is nothing you can do to stop it.
Honestly, stop trading with that type of leverage. I'm just trying to warn you. You will regret it when your account is wiped out.
There is no way to trade 40:1 leverage for an extended period of time without eventually losing everything, I don't care who it is.
I appreciate the warnings and I'm trying to get an understanding of what your saying, remember this is 40:1 NOT 400:1 leverage.
If 40:1 is seriously risky then what amount of leverage is safest other than 1:1 or not trading?
in the USDCAD trades at trading 200,000 each pip is $20.00 and 20 pips is $400 so I don't get your example of 20 pips being $1,000???
Quote from traderhf:
A bit of uncalled for advice.
Don't know if I have any business in giving some unsolicited advice, but can't resist myself giving you a few pointers, since its obvious that you are a newbie. I will tell you the approach which will increase your probability of success in fx space.
1. Use leverage of 1:2 or 1:3 for first 6 months.
2. Record all the trades you do, all in an excel sheet.
3. In 6 months, I agree with this low leverage, you wont make any money, but idea here is to make money over next 20 years and not in just 6 months.
4. After every month, sit down on a weekend, and do basic descriptive analysis on your trades: win/loss ratio, win %, time in trades, commission paid etc. etc.
5. After doing above analysis, apply increasing leverage to your trade history on the excel sheet (Do not increase leverage in real life please till 6 months are over), and see how much money you would have made (or lost) by using higher leverage.
6. You will see that at some leverage factor, your profitability curve dips! You know that this is the MAX leverage you should be using historically.
7. After 6 months of such practice, your chances of success in FX will be much much higher.
At this point, you may wonder: why should I listen to this anonymous poster on ET and do all the above things, when I can go from day 1 and use a leverage of 20 or 40 and start making big money. Well, Paul Tudor Jones blew up his account 3 times in 1970s, before he *understood* money management. I am just trying to help you not to blow your account. You don't perform brain surgery in 1st year of your medical school. If you look at trading as a *serious* business and want to be successful in it, you don't use leverage of more than 3 in fx till the time you have some data on your performance and a better understanding of fx market.
Now, having explained to you what you should and should not do (when you never asked my advice in the first place), I will bet that chances are 80% that you will not listen to the advice above, but will realize it after having lost serious amount of money in the fx markets. Unfortunately, human beings are over-confident in their ability, and some words of advice from me are not sufficient to change that behavioral trait. Anyways, good luck! I have done my work!
thank you I was needing clarification on the leverage issue. I thought that because I wasn't using even 100:1 I was saferer LOL, I guess there's no such thing as safe!
I'm not new to trading just new to forex. I have an approach that I'm working on that honestly I don't need to use the leverage I'm using. I can use alot less and still figure out what I need to figure out. I think I'll consider that. I do want to be still doing this in 6 months.