Breaking Even
It may sound strange to hear that your overall goal is to break even. However,
especially for the new trader, that is exactly how it should be. We know most
It may sound strange to hear that your overall goal is to break even. However,
especially for the new trader, that is exactly how it should be. We know most
DEVELOPING A TRADING CODEX
new traders lose quickly and are shown the door long before they even have the
time to develop their trading style or learn to use their trading tools. The best
way to avoid this calamity—and be around to learn the markets and profit
thereby—is to think about risk first, reward second.
Breaking even does not mean closing a trade after only a few minutes, although
I have done that exact thing many times when I felt something was
wrong or the market environment changed rapidly. As long as you don’t overtrade,
the costs of doing business in FOREX are small enough that the trader
can afford such luxuries. If you start with the USD/EUR pair, you will pay only
two or three pips per trade.
Statistically, you have a higher overall winning expectation with ten 10-pip
loss trades than a single 100-pip loss. A 100-pip trade is a calamity to most
traders; 10 pips is very survivable.
Breaking even does require giving most of your pretrade consideration to
the risk involved in a trade. If a trade doesn’t fit into your profile parameters,
you had better make sure you have very substantial reasons for going off-board.
time to develop their trading style or learn to use their trading tools. The best
way to avoid this calamity—and be around to learn the markets and profit
thereby—is to think about risk first, reward second.
Breaking even does not mean closing a trade after only a few minutes, although
I have done that exact thing many times when I felt something was
wrong or the market environment changed rapidly. As long as you don’t overtrade,
the costs of doing business in FOREX are small enough that the trader
can afford such luxuries. If you start with the USD/EUR pair, you will pay only
two or three pips per trade.
Statistically, you have a higher overall winning expectation with ten 10-pip
loss trades than a single 100-pip loss. A 100-pip trade is a calamity to most
traders; 10 pips is very survivable.
Breaking even does require giving most of your pretrade consideration to
the risk involved in a trade. If a trade doesn’t fit into your profile parameters,
you had better make sure you have very substantial reasons for going off-board.
Trade Size
In Chapter 6, I discussed briefly setting a trade size and sticking with it. Each
time you double your money—should you be so fortunate—you may then
double your trade size.
If you’re on a beer budget of $2,000 or less, you’ll need to begin trading
with what is called a mini-account. Most broker/dealers now offer miniaccounts.
OANDA (www.oanda.com) and www.efxgroup.com are two you
might consider; there are many more. You can work backward from your trader
profile and money management parameters to determine a reasonable trade size
based on the 10 · 3 trading campaign concept I introduced in Chapter 6.
Again, I recommend that newbies use a fixed-loss amount for each trade.
The trade size calculation is:
In Chapter 6, I discussed briefly setting a trade size and sticking with it. Each
time you double your money—should you be so fortunate—you may then
double your trade size.
If you’re on a beer budget of $2,000 or less, you’ll need to begin trading
with what is called a mini-account. Most broker/dealers now offer miniaccounts.
OANDA (www.oanda.com) and www.efxgroup.com are two you
might consider; there are many more. You can work backward from your trader
profile and money management parameters to determine a reasonable trade size
based on the 10 · 3 trading campaign concept I introduced in Chapter 6.
Again, I recommend that newbies use a fixed-loss amount for each trade.
The trade size calculation is:
All other money management parameters can be derived from this formula
and your trading profile.
and your trading profile.
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