Let’s start off with the most basic type of stop: the percentage-based stop loss. The percentage-based stop uses a predetermined portion of the trader’s account. For example, “2% of the account” is what a trader is willing to risk on a trade. The percentage risk can vary from trader to trader. More aggressive ones risk up to 10%… Continue reading How To Set A Stop Loss Based On A Percentage Of Your Account
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What is a Stop Loss?
Managing and preserving your trading capital is your most important job as a trader. If you lose all of your trading capital, there is no way you can make back the lost amount, you’re out of the trading game. If you make pips, you got to be able to keep those pips and not give them back to… Continue reading What is a Stop Loss?
Summary: Position Sizing
After journeying across the globe with Newbie Ned, and through some basic position sizing examples, you’re well on your way to becoming a competent risk manager. Now knowing how to set the correct position sizes is only a part of what it takes to become a pro at risk management. The other part is discipline. Stick… Continue reading Summary: Position Sizing
How to Calculate Your Position Size in Different Forex Pairs and Account Currencies
Let’s say you want to buy EUR/GBP and your broker account is denominated in USD. In this trade, you only want to risk USD $100. But you’re not trading US dollars, you are trading euros and pounds. How do you calculate your position size? In this lesson, we’ll teach you how to determine your position… Continue reading How to Calculate Your Position Size in Different Forex Pairs and Account Currencies
Calculating Position Sizes
To make things easier for you to understand, as usual, we’ll be explaining everything with an example. This is Newbie Ned. A long time ago, back when he was even more of a newbie than he is now, he blew out his account because he put on some enormous positions. It was as if he… Continue reading Calculating Position Sizes
Position Sizing
Now that we’ve learned the hard lesson of trading too big, let’s get into how to correctly use leverage using proper “position sizing.” Position sizing is setting the correct amount of units to buy or sell a currency pair. It is one of the most crucial skills in a forex trader’s skill set. Actually, we’ll go… Continue reading Position Sizing
Never Underestimate Leverage
Most beginners underestimate the potentially devastating damage leverage can wreak on their accounts. Understanding leverage enough to know when to use it and when NOT to use it is critical to your success! Leverage is a very powerful tool but both old and new traders use it to destroy their trading capital simply because they… Continue reading Never Underestimate Leverage
How Leverage Affects Transaction Costs
Besides amplifying your losses, leverage also has another way of killing you. It’s a much slower kind of death though, kinda like dying by a thousand cuts. Most forex traders don’t see it coming and by the time they notice it, they’re DEAD. This killer we’re talking about is the associated transaction costs of using high… Continue reading How Leverage Affects Transaction Costs
Low Leverage Allows New Forex Traders To Survive
As a trader, it is crucial that you understand both the benefits AND the pitfalls of trading with leverage. Using a ratio of 100:1 as an example means that it is possible to enter into a trade for up to $100 for every $1 in your account. With as little as $1,000 of margin available in your account, you can trade up to… Continue reading Low Leverage Allows New Forex Traders To Survive
See How Leverage Can Quickly Wipe Out Your Account
Hopefully, you now have a better understanding of what “margin” is. If you don’t know what margin is, or think it’s an alternative form of butter, please read our previous lessons. Now we want to take a harder look at “leverage” and show you how it regularly wipes out unsuspecting or overzealous traders. Before we… Continue reading See How Leverage Can Quickly Wipe Out Your Account