As with other trading markets, the thing you have to keep in mind when Forex trading is to minimize your losses. While you can still profit even if you're not doubling your investments, the smaller your losses are, the most profit you can make in the long run.
What can you do to make your losses as small as possible?
It's simple.
Find out how your trade can go wrong by determining the level that the market has to get to to give you a worst case scenario. My usual strategy is to swing low wen I buy stocks, and swing high when I sell them; also, make sure you're not knocked out by noise by using pip padding. Though you're still doing well even if your win rate isn't 60% or higher, with our new TopGun Forex software, you can get your win rate up to 80% in some cases. If your win rate system is high enough, you'll be able to have tinier stops, up to 12 pip stops.
Next, determine what you want your maximum risk for each trade will be.
Use a 2% trade risk as a base point.
With a 2% trade risk, you'll be protected effectively from a worst case scenario like having 5 consecutive losses in your portfolio.
ADVANCED FOREX TRADING TIPS
You probably have a few tricks up your sleeve already if you've been Forex trading for a whole. Several of your strategies probably work half the time, while others have greater win rates, but fewer occurrences. If you consider yourself an advanced trader, you can probably get away with increasing your risk in order to make more money in the long run.
If you have a 50% winning system ususally, and you occasionally find a few trades every week that will give you an 80% win rate, it'll be well worth it to make your trading size bigger to make your earnings increase dramatically. You can try making a 30% to 100% increase on your trades. Your AVG WIN size will be changed drastically; you can learn more about how your net profits will increase later on.
You'll then be able to figure out what number of Forex lots you want to trade. You can sell lots in sizes from $10,000 to $100,000, and in terms of price movement, the pips can cost $1 to $10 each; take some time to figure out what you want to do.
Trade lot quantity ( Size of Account X Risk percentage)/(Pip Stop * Pip Value)
If your account is worth $5,000 with a 2% risk and a 10 pip stop with $1 spent per pip in a mini lot, your trading outcome will look like this.
$5,000 x .02 = 100. Your maximum loss amount is $100, since that's 2% of the toal amount.
If you take that number and divide it by the stop of your pips ($1), you'll get 10. Therefore, 10 mini lots are available to trade, as much as a full lot of pips.
However, if you trade full lots, do the math and you end up with 1 lot!
Easy!
There's a lot more to it than this. Make sure that your wins are one and a half times more than your losses! If you lose $100 usually, make sure that you make $150 with your winning trades in order to make up for it.
Only about 10% of the Forex traders out there typically make the consistently big wins, with 30 or more pips gained, so don't feel bad about not making the big bucks. You can consider having even 5 or 10 pip wins to be very lucky. However, if you can get those 30 pip wins, that's even better!
Here's a simple formula for profitablility that you can use to help you: {Winning trades % average amount won) - (Losing trades % average amount lost).
As you can see, there are many ways to make your Forex trading even more profitable. Make your winning percentage bigger, while taking steps to minimize the losses you can incur. As soon as the market starts to move in your general direction, strike while the iron's hot and at least break even. Your winning % might go down, but so will your losses, so consider it! No other guide to Forex trading will give you that tip, but its a strategy that many traders who win 40% or more implement, because their losses are drastically reduced and they can at least break even on unfortunate trades they have made!
By no means should you invest in a trade unless you're pretty sure you can make at least 50% in wins. If your trade has more than 2 resistance points that are 5 pips more than the price, it wouldn't be smart to take it, especially if you have a 10 pip stop. If you risk 10 and you can only make 5 pips at maximum, you're just shooting yourself in the foot. Avoid this at all costs!
However, if you have a trade that is 30 pips away from another resistance point, with a 10 pip stop and a 50% trade, you would be crazy not to take that trade, because your average wins will go up dramatically if you invest in it. This is a perfect example of what you can gain if you make your trade size bigger if you have a great chance of making gains on that particular trade.
If you want to have the most effective Forex trading career possible, you have to keep these tips in mind.
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