Author: misamaliraza94
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Be Careful Trading On Margin
Margin can be thought of as a good faith deposit or collateral that’s needed to open a position and keep it open. Margin trading gives you the ability to enter into positions LARGER than your account balance. Although buying and selling on margin does not provide leverage in and of itself, it can be used as a form of…
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Margin Call Explained
Assume you are a successful retired British spy who now spends his time trading currencies. You open a mini account and deposit $10,000. When you first log in, you will see the $10,000 in the “Equity” column of your “Account Information” window. Usable Margin You will also see that the “Used Margin” is $0.00 and…
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Leverage and Margin Explained
Let’s discuss leverage and margin and the difference between the two. What is leverage? We know we’ve tackled this before, but this topic is so important, we felt the need to discuss it again. The textbook definition of “leverage” is having the ability to control a large amount of money using none or very little of your…
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Ignoring Leverage: Why Most New Forex Traders Fail
Most professional forex traders and money managers trade one standard lot for every $50,000 in their account. If they traded a mini account, this means they trade one mini lot for every $5,000 in their account. Let that sink into your head for a couple seconds. If pros trade like this, why do less experienced forex traders…
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Summary: Risk Management
Be the casino, not the gambler! Remember, casinos are just very rich statisticians! It takes money to make money. Everyone knows that, but how much does one need to get started in trading? The answer largely depends on how you are going to approach your new trading business. It varies from person to person. Drawdowns are…
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Reward-to-Risk Ratio
To increase your chances of profitability, you want to trade when you have the potential to make 3 times more than you are risking. If you give yourself a 3:1 reward-to-risk ratio, you have a significantly greater chance of ending up profitable in the long run. Take a look at the chart below as an example: 10…
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Never Risk More Than 2% Per Trade
How much should you risk per trade? Great question. Try to limit your risk to 2% per trade. But that might even be a little high. Especially if you’re a newbie forex trader. Here is an important illustration that will show you the difference between risking a small percentage of your capital per trade compared to…
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Drawdown and Maximum Drawdown Explained
So we know that risk management will make us money in the long run, but now we’d like to show you the other side of things. What would happen if you didn’t use risk management rules? Consider this example: Let’s say you have $100,000 and you lose $50,000. What percentage of your account have you lost? The answer is…
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How Much Trading Capital Do You Need For Forex Trading?
It takes money to make money. You need trading capital. Everyone knows that, but how much does one need to get started in forex trading? The answer largely depends on how you are going to approach your new start-up business. First, consider how you are going to be educated. There are many different approaches to learning…
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What Is Risk Management?
What is risk management? Risk management is one of the most important topics you will ever read about trading. Why is it important? Well, we are in the business of making money, and in order to make money, we have to learn how to manage risk (potential losses). Ironically, this is one of the most overlooked areas in…