Forex high leverage pitfalls: how to avoid them

The higher the leverage the less is going to be the margin percent.
Margin percent will determine the amount of capital trader needs to have on the account available in order to open and later hold a trading position. You never want your margin be lower than your floating account balance, otherwise you will receive a margin call — running trading positions will be closed automatically.

High leverage can be traded successfully if trader doesn’t attempt to trade very large positions or open too many trading positions at once.
In order to determine how large your position can be, you need to know how much you have invested and then simply calculate pip value for a position (lot size) you want to trade with.

For example, investment = $2000.
Leverage = 20:1

The size of 1 lot traded = 100 000 units.
Pip value for this lot size is $10.

Now, will it hurt losing -100 pips?
-100 * $10 = -$1000. Yes it definitely will.
Conclusion, the $100 000 lot size is too much for such small investment of $2000.

One may try lowering position size to 10 000 units.
The cost of one pip then will be $1.
Now, will it hurt losing -100 pips?
-100 * $1 = -$100. It will, because it is still a loss, but this loss is well sustainable.

Still, if you have an option to trade even smaller lot sizes, for your case it would be good to start with a lot of 5000 units (1 pip = 50 cents) and then get a feel of whether you are prepared to risk more money, or at this stage you’ll be comfortable with smaller losses to keep your beginner spirit high.

Would you like to add your own comment or ask another question?
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Online Forex Trading Strategy — Automated Forex Trading Systems

Another Forex Trading Strategy that has become popular recently is the use of its Robots — Automated Forex Trading software that trades on your behalf 24 hours a day, 7 days a week, 365 days a year. While it might sound like a soft option, its robots shouldn’t be dismissed. These systems operate according to the parameters set by the user, so the Robot’s strategy matches your own, but it trades without hesitation and does not deviate from the set rules.
There a number of advantages to using an automated it system: they never sleep, don’t get nervous and are constantly alert to all the relevant factors that influence their trading decisions. Trades are executed automatically, and they never miss an opportunity. Think of a Forex Robot as an obsessive compulsive forex trader that never sleeps. It can’t think for itself though, or make «judgement calls» -it operates solely according to the parameters set out.
At times this can mean that opportunities for greater gains are not taken or potential opportunities that fall outside the scope of the systems mandate will be overlooked, but on balance a complex forex trading robot can be an excellent its strategy all its own.
Do they work?
The simple answer is «YES» but the more complex answer is that in some cases a human trader could do a better job. There is no doubting that Forex Robot’s can deliver results, there are plenty of published «back tests» showing live trading performance of various automated trading systems, but which systems perform the best is open to debate.
The thing to remember with Automated Forex Trading is that it isn’t a mutually exclusive strategy — you can have a forex robot trade along side your live trading platform and track it’s performance against your own. Initial cost outlays vary between systems, but rarely exceed $100 or so, a pretty small investment given the complexity of the software and earning potential it creates.
Even from a learning perspective a Forex Robot can be a good investment. They often come with in depth guides to how you can set up the system to perform best and these guides are written by experienced and successful forex traders. They often contain tried and tested forex trading strategies and you can gain some real insight into how not only to improve the performance of the Robot, but also how to improve your own performance. Read the rest of this entry »

Forex Trading Strategy — Simple Ways to Learn Forex Trading

Not so long ago, trading foreign currency for an income (also called Forex Trading, or FX trading) was the sole province of a select few individuals and trading houses. Trading currency required in-depth knowledge of the industry, constantly updated information and a large amount of liquid cash as an initial investment before you could even look at breaking into this highly lucrative industry. A close knit fraternity controlled most of the trading markets, and restricted access combined with excessive transaction or management fees effectively shut out most people from it as a legitimate investment model — but not anymore! A few years ago something major happened in the forex industry that completely changed the game and re-wrote the rules of it for money — online trading systems started to show up and suddenly the world of it was thrown wide open.
Online Forex Trading is the future of FX trading!
One of the great advances brought about by the internet has been the rise of them. No longer do you need a broker to trade for you — you can now quickly and easily trade yourself, anywhere in the world, any time you like — and with greatly reduced fees! Read the rest of this entry »

What moves EUR/USD?

US economic indicators by Rank:
1. US Non Farm Payroll — measures new jobs created in States.
2. Interest rates — FOMC rate decisions.
3. US Trade Balance, European Trade Balance — a proportion between exports and imports in US economy.

4. U.S. Current Account
5. US Treasury Inflow Capital (TIC) Data — a measure of how much foreign buying of country’s securities takes place.
6. US Gross domestic product (GDP) — a measurement of growth in economy.

7. Federal Open Market Committee (FOMC) Rate Decisions — data about changes in currency rates.
8. US Retail Sales — a measure of strength of consumer expenditure.
9. Consumer price index (CPI) — a measure of inflation in Europe.

Note, that because the US dollar is involved in over 80% of all currency trades, US economic data tends to be the most important in the Forex market. Read the rest of this entry »

What time frame to trade in Forex?

What time frame to trade in Forex?

What is the best time frame in Forex? What is the most profitable time frame in Forex?
Those and similar questions are rising day after day in minds of novice Forex traders.

Let’s drop out the philosophy and focus on facts.

We know that each time frame displays same data, but in different intervals.
The choice of time frames is wide.

Let’s take the most preferred Forex time frames: 1 day, 1 hour and 5 minute.
These time frames are also perfect for beginners to test their feel about the Forex market.

On daily charts each price bar represents one day, thus a change on the chart will be observed once a day.
On hourly time frame new price bars will appear every hour, putting more data on the chart for analysis.
5 minute chart will produce a new price bar every 5 minutes, showing market changes fast and in greater details. Read the rest of this entry »

What currency pairs to trade in Forex?

What currency pairs to trade in Forex?

Although there is lots of currency pairs offered to Forex traders, if you are a beginner it is easier to start with major  currency pairs:


There are several good reasons for that:

1. These currency crosses are widely traded, thus providing liquidity which is needed in order to benefit from price  changes.
2. They have tight spreads, except may be for GBP/USD, which most of the time receives higher spread quotation from  Forex brokers as it is more volatile (e.g. has wider price ranges than other pairs).
3. They all are traded against US dollar, which automatically suggest that the most active trading hours would be during   New York trading session – the session with the highest volume of trades.
4. And finally, there are many Forex trading systems that are developed for trading those pairs and can be found online.

Read the rest of this entry »

Being a Forex beginner

Being a Forex beginner

We all were beginners one day…
This site is for everyone who decides to step on a path of Forex trading career.

An overwhelming amount of information about Forex can leave an average newbie quite discouraged: What to do first? Where to start? Will I ever be able to comprehend everything about Forex trading?

Those and many other questions will be answered here in our tutorials and lessons.
A step-by-step solution offered should leave no questions about successful starting of a Forex journey. But if you do have questions left, just any questions about Forex trading, you are very welcome to ask it here: Newbie questions and Answers board. No stones will be leaved unturned! Read the rest of this entry »

Forex Trading platforms: Questions and Answers for beginners

FOREX TRADING PLATFORMS: Questions and Answers for beginners

As experience shows, MT4 platform continues to hold the lead in the retail Forex. The biggest advantage of the MT4 platform is that it allows customising tools and creating virtually any indicator you want to. In addition, there is an enormous amount of custom indicators and trading Experts that are available for free over the net, which makes the demand for MT4 platform on the highest levels. Read the rest of this entry »