So the main reason for the traders’ failure when trading in the Forex market is the violation of these rules. The work is carried out with too big lots; too much money in relation to the deposit is thrown in trading in anticipation of big and fast money; the trader risks too large part of the deposit in each transaction, what is not acceptable not only in the Forex market of course, but in any other Financial market too..
Warned means armed. If you know the main reason for the possible failure, you can prevent it. But excuse me, how can we know with what forces, with which lot we can enter the transaction, how we can earn money on Forex and not lose it? The science of how to manage with money correctly is Money Management, abbreviated MM. I have prepared the greatest material on Money Management, this is the best material of those I know. I use the rules set out exactly in this book in my trade. So, gentlemen, let me introduce it:
Ryan Jones “Playing by the Numbers to Make Millions”.
From this book you can learn what the better way to trade is: to trade with a permanent lot or to increase the lot with the growth of the deposit; when you can increase the lot and in what proportions. Pay attention to the concept of “Delta”, I consider it the main point in the book.
If to speak about the accepted standards, the common risk, which I also uphold in my trading, is generally considered the risk of 2.5 percent of the total deposit. Thus we risk only 2.5 percent in each transaction. If a trader is working with several currency pairs simultaneously or if multiple orders will be opened on one currency pair; for example it’s assumed that 5 orders can be opened simultaneously, well then 2.5 divided by 5 orders, we get 0.5% risk of the deposit for each transaction. Thus the total risk of all the transactions must not exceed 2.5%.
For the simple and fast calculation, not to waste time when trading I’ve prepared the table in the program Microsoft Excel. If someone doesn’t have Excel, the table will also work successfully in the free program OpenOffice. There is nothing to explain about the table, actually, everything is written there. The result in red color and big figures will be given in the table, this is the size of a lot which you are to trade with for a given risk. You can download this program in the section named “Indicators”.
The issue of Money Management should also include the ratio of the profitable trades to the unprofitable ones. It’s clear that if a trader makes 6 transactions in loss and 4 in profit, you should expect gradual decrease of funds on the deposit in result. This statement is true only partly. It’s true only in the occasion if in each trading deal the potential ratio profit/loss is equal to one or less than one. So in each deal we make either profit
10 - ten
100 - one hundred
1.000 - one thousand
1.000.000 - a million
1.000.000.000 - a billion
1.000.000.000.000 - a trillion
1.000.000.000.000.000 - a quadrillion
1.000.000.000.000.000.000 - a quintillion
1.000.000.000.000.000.000.000 - a sextillion
1.000.000.000.000.000.000.000.000 - a septillion
1.000.000.000.000.000.000.000.000.000 - an octillion
1.000.000.000.000.000.000.000.000.000.000 - a nonillion
1.000.000.000.000.000.000.000.000.000.000.000 - a decallion
1.000.000.000.000.000.000.000.000.000.000.000.000 - an endecallion
1.000.000.000.000.000.000.000.000.000.000.000.000.000 - a dodecallion
or loss equal to the projected profit. It can be different. I gave one of the examples of how you can earn money on Forex with an apparently smaller number of the positive transactions than the unprofitable ones, on this page:
Modifications of Forex “Revenge” strategy,
where in particular is shown the example that you can make 15 transactions, only 3 of which are profitable and 12 are not, but still remain in profit. How can it be possible? Very simple. The ratio profit/loss more than one. In each transaction we plan to have a profit of 6 times more than the potential loss in the same transaction. So 12 transactions which end in tears give us 12*2.5= -30%. 3 transactions closed on Take Profit bring us the planned six fold profit. 3*(2.5*6)= +45%. 45 – 30= 15% profit to the deposit.
Is it possible to earn on Forex constantly and stable?
Is a constant steady income possible on Forex?
Yes, if the trading strategy is considered
46.84% of votes (185)
Yes, if the monthly income is comparatively small
7.34% of votes (29)
Yes, if the broker doesn’t prevent
9.87% of votes (39)
With a large share of luck
4.81% or votes (19)
Only if the strategy is of medium or long term
3.29% of votes (13)
Unlikely, because of the market changeability
2.53% of votes (10)
It’s impossible, profit is followed by loss
6.84% of votes (27)
I do not know…
18.48% of votes (73)
Total votes: 395
1. You know now that the main reason for failure in the financial markets is overwork of the deposit. Never, never, never allow it.
2. Choose the strategies in which the ratio of the profitable transactions to the unprofitable ones would be in favor of the profitable transactions. Ten transactions should in the worst case account for 6 profitable and only 4 unprofitable. It’s better to have seven cakes and one candle. It’s better to have 8-9 profitable and 1-2 unprofitable ones. There are several of the satisfying similar strategies posted on this site.
3. The ratio profit/loss must be in favor of profit again. 1.5 to 1, 2 to 1, 3 to 1, etc., the more favor of the profit is – the more reliable your trade is.
If you haven’t started trading with the real money yet, you surely must learn this data at first. Place Money Management at the top of your trade. Playing with numbers can really perform miracles in Forex market, if you play these numbers correctly. The issue of Money Management is paramount. The first commandment of a trader says: “SAVE the deposit and after that multiply it”.