It’s said that 85% of Forex traders are losing their money in the first three months of their trading, I think in some market cases it exceeds this ratio and may hits 95%, most of people say this loss is a result of trading while having no strong knowledge about Forex market, I don’t agree this all the way.
For me I think the most important reason is trading style including strategy, money management and risk management, another important reason is crowding up your mind with a lot of technical and fundamental tools and trying to apply all of them at once.
Theoretically all analysis methods “wither it’s technical or fundamental” are correct ways because they are only measuring tools, they differs in the accuracy of their results and this varies from time to time, they just give you inputs and you are responsible of applying these inputs that’s why I don’t mind which indicator you are using, just try not to crowd your mind with a lot of them.
To move yourself into the successful 15% you don’t need to know a lot in analysis field, you don’t need to have a big capital too. I wouldn’t encourage you to be calm, concentrate, look at your charts and go the way they tell you and such advices. We’ll be instead discussing the actual steps that you can take in order to get yourself out of loss and list your name in the 15% successful traders list. The best resource for FOREX trading is Active Traders Community Forum, Chat. MoneyTec is an online trading community that promotes mature, intelligent & respectful discussion in a positive & safe environment for everyone.
My strategy depends on simplicity as it just includes 2 indicators for the technical part of it. Let’s see how would it work:
a)Money Management:
1.First of all count your capital well and I mean by this the money you can afford to lose “this is rule no. 1 in investment as this will remove stress from you”.
2.Decide your monthly return average expectation from this money : This will make you able to count the average weekly and daily return “Weekly and Daily Target”.
3.Decide what will you do with your profits in case you achieve your targets, how much will you get out from it and how much will you re-invest : This will be enough to have a steady and stable trading strategy.
4.Most important point, limit your trade size, this shouldn’t exceed 5% of your balance if you want to survive in this market.
These are all what we need from money management right now, it’s a huge subject to be involved in.
b)Risk Management :
1Limit your loss : The whole money you can afford to loss from your investment budget.
2.According to your daily and weekly target, you could limit your daily and weekly loss, so if it touch that limit you stop trading till the other period of time, risking of $1 per $3 expected profit is good while 1: 2 still accepted.
3.Keep in mind that “If you lost a day, it means you lost that day’s profit of the total month’s profit” don’t try and squeeze yourself the day after to get a double profit, otherwise you will be spoiling your trading system.
c)Technical Trading System :
This trading system is a common old system traders were used to use it randomly, we will be using it in a more modern way, it contains of :
1.2 Exponential Moving Average (EMA) of values 7 – 15 .
2.Relative Strength Index (RSI) as a confirmation tool.
Well, now as we have everything setup, it isn’t so hard to understand that system, the usual way was used by traders is : “once EMA-7 cross EMA-15 you go with it, so if it cross to up, you buy, otherwise you are selling”, this is completely true but you need to confirm this signal by another tool like “RSI”, once you get Moving Averages signal you check your RSI line direction and value, if it’s positive you can start trading, if not you should ignore till you get a positive signal that everything is fine, your stop loss would be if the EMA-15 returns to cross EMA-7 and your stop loss would be 20% of your daily affordable loss that you decided before, so you have a chance to trade for 5 times per day if you lost all trades.
Keep in mind that you shouldn’t put all trade size limit “which you decide before while setting up your money management section” in just one trade, you may need to support your trade later or add more fund to it.
Last thing to be said is the classical advice “Don’t be greedy and don’t feel panic”, this is the best feature we have in Forex, take profit and stop loss points.