hello from cape town, south africa

[raa]

Thanks for the words of wisdom! Of course, this technique also should have a maximum bearable loss and could no go forever. But it cannot be a super-strict "no matter what" level, as it actually depends on how price is going, not really only how far. But anyways, there should be a limit to everything.

I do it this way, I set up max loss, like 3 or 5 per cents. When I have a signal, I do not enter with a full lot according to the risk I have set. It should be 30-50 per cent of max lot. I place 2 more orders in case price will be going against me before turning to the right directions. Lot sizes are calculated accordingly to how far the stop loss is. I have put everything into the excel sheet, and calculations are very easy and fast now. I have 2 patters: when working let say LMT I use fibo levels, i.e. fist lot at point of entry, second at 61.8%, third at 38.2% and stop loss behind 23%. Excel calculates lot sizes and entry points accordingly, I only enter the first entry, stop loss, available margin and max risk. Another technique actually allow to set all entries manually (SR levels, EMAs) and only calculate proper lot sizes. It really makes life very easy and making positions fast.

[capsmart]

In that case I agree 100% with your approach.

[shafiek]

hi capsmart

you said that you cant live off forex trading in your previous message. im planning on being a full time trader soon, i feel i am learning everyday and i just dont see myself working for someone else for very much longer. i always hear there is so much money to be made in forex, do you think that is all just talk seeing that you have been trading for quite a while? what lot sizes do you normally trade with? do you know of any traders that use the 100:1 leverage? hope the trading has been good!!!!!!!!

thanks
shafiek

[raa]

if money management means anything sensible for a trader than any leverage above 1:20 is not much of use anyway for him/her. Some brokers allow up to 1:500 leverage.

[capsmart]

Shafiek,
I agree with Raa concerning 1:20. I usually trade in half lots. Like today that I was waiting for a retrace I put 0,50 (in mt4) at 1.4943 (GBP/USD) and then another 0,50 at 1,4975. The first one was the 50% retracement, the second one was a little bit higher because the 61,8 would have been too close to the first one. Now price is at 1.4877 and I moved both stop losses to break even. Now I do not risk to loose any money. In this case I could even add to my initial position at a new retracement.
So if you have let's say 5000 dollars in your account and enter 1 lot you would be using 1000 dollars of your account. In that case you are using a 1:20 leverage.
Now if you loose 50 pips with this trade that means that you lost 500 dollars which 10% of your account so this is too much.
You always have to see how much you are going to loose if things are not going your way in comparison to your account.
So in our example if your stop loss is at 50 pips your risk too much. If you move your stop loss to 20 pips then you risk only 200 dollars which is a 4% of your account. This is again too high.
Now if you want to avoid this and use a stop loss of 10% you will risk to loose only a 2% but the 10 pip stop loss is too close to the price and you risk to have your trade closed because of market noise.
So the solution would be to either trade with a smaller lot size or increase your capital.

[raa]

Shafiek,
I agree with Raa concerning 1:20. I usually trade in half lots. Like today that I was waiting for a retrace I put 0,50 (in mt4) at 1.4943 (GBP/USD) and then another 0,50 at 1,4975. The first one was the 50% retracement, the second one was a little bit higher because the 61,8 would have been too close to the first one. Now price is at 1.4877 and I moved both stop losses to break even. Now I do not risk to loose any money. In this case I could even add to my initial position at a new retracement.
So if you have let's say 5000 dollars in your account and enter 1 lot you would be using 1000 dollars of your account. In that case you are using a 1:20 leverage.
Now if you loose 50 pips with this trade that means that you lost 500 dollars which 10% of your account so this is too much.
You always have to see how much you are going to loose if things are not going your way in comparison to your account.
So in our example if your stop loss is at 50 pips your risk too much. If you move your stop loss to 20 pips then you risk only 200 dollars which is a 4% of your account. This is again too high.
Now if you want to avoid this and use a stop loss of 10% you will risk to loose only a 2% but the 10 pip stop loss is too close to the price and you risk to have your trade closed because of market noise.
So the solution would be to either trade with a smaller lot size or increase your capital.

i think if trader uses leverage higher than 50 then its pretty safe for a brocker not to send trades to interbank in any way but simply bet against the trader internally. chances are very high this trader will blow a deposit sooner or later, most likely sooner.