Maverick FX Trading. Forex 101 Session #4 Preparation for Demo Trading

Transcription

1 Maverick FX Trading Forex 101 Session #4 Preparation for Demo Trading

2 Session #3 Review Time frames Relative Strength/Weakness Determine Strong/Weak News Events Correlations

3 Session #4 Schedule Demo Account Trading Position Sizing Order Entry Journaling

4 Using Your Demo Account We encourage you to start demo trading as soon as possible Feel free to continue or start demo trading on your own outside of the firm Once you complete the next class (FX Foundations), you can request a demo account from us with Interactive Brokers Getting started trading is the most important thing right now Use demo trading to test new strategies, practice order entry and get comfortable with trading FX in general

5 Opening an Live Trading Account FCMs or brokers act as a bridge between you and their liquidity partner (sometimes larger global banks) that you would otherwise not have sufficient capital to do business with. The large majority of off-exchange retail foreign currency brokers act as market makers, meaning that by keeping many trades in house they create their own liquidity. Some retail brokers clear trades directly through to the larger banks that provide their liquidity.

6 Major Currencies of the World Currency Name ISO abbreviation Nickname Euro dollar EUR euro Great British Pound GBP cable, sterling US dollar USD green back Swiss franc CHF swissy Japanese yen JPY --- Canadian dollar CAD loonie, caddie New Zealand dollar NZD kiwi Australian dollar AUD aussie

7 Group currencies together (in dominant pairs) Group all currencies against the JPY Group EUR with USD GBP AUD CAD CHF Group GBP with CAD AUD USD CHF Group USD with CHF CAD Group AUD with NZD CAD Arranging your screen

8 Position Sizing One of the biggest mistakes new traders make is not implementing position sizing into their trading plan Consistent trading depends on taking the same size/risk on each trade, regardless of market or personal conditions The goal is to control and manage risk on every trade

9 Position Sizing Method You must first decide the percentage of your account to be at risk on any one trade. We recommend you do not risk more than 5% of your account. Start lower and move you % higher as you generate positive monthly PIPs Step #1- Calculate how much of your capital you are willing to put at risk for the next trade. Examples Account Value: $5,500 $5,000 X 5% (.05%) = $250 Account Value: $8,400 $8400 X 5% (.05%) = $420

10 Step #2 You must next look at the chart and determine where your stop loss point will be on the trade. Calculate how many pips you will lose if you are stopped out Step #2 Take the amount you are willing to risk and divide by the pips you will lose. This will give you your correct position size. Example: Account size $5000 Amount risked: $250 Pips risked: 25 (.0025) Position size: 100,000 or 1 lot

11 Position Sizing Scenario You are looking at buying the USDCAD at Each PIP is worth $10 per 100,000. Your target on the trade is and your initial stop is set at You are trading with a $5,000 account and have decided to risk no more than 5% on any one trade. What is the correct position size?

12 Position Sizing Scenario You are looking at shorting the AUDJPY at Each PIP is worth $11 per 100,000. Your target on the trade is and your initial stop is set at You are trading with a $3,000 account and have decided to risk no more than 5% on any one trade. What is the correct position size?

13 Position Sizing Calculator

14 Types of Orders Market Order Limit Order (Take Profit Order) Stop-Loss Order Entry Order Limit Entry s Stop Entry s One Cancels Other (O.C.O.) Trailing Stop

15 Order Types Market Order- This is an order to buy or sell a currency pair at the current market price. Limit Order (Take Profit Order) This is an order that allows the client to specify the rate at which they will take profits and exit the market. Stop Order This is simply a market order with an attached contingency (trigger) that will become an active order once the trigger is met. Can (and should be) used to enter and exit positions. This will be the most common order you use Stop Limit Order This is stop order with a limit attached. This will create a window where your trade can be filled. This order should be used to enter trades when volatility is extreme. This will be the most common order you use to play news events Trailing Stop- This order lets you trail a stop on your order on a fixed pip amount. Bracket Order- Simultaneously places a Stop-Loss order and a Limit order at the same time

16 Order Entry Live Examples

17 Analyzing your results Trade for PIP s Follow your position sizing Analyze every 20 trades

18 Trade Journal Win/Loss % Reward/Risk Ratio Capital at risk Total Pips gained/lost

19 Maverick FX Trade Journal Download your copy in the Member s Area in the website. Handouts/Forex 101/Session #4. Begin to log your trades into the journal Live walkthrough video in the Forex 101/videos/advanced concepts section

20 Traps of Forex Trading Over-trading Over-leveraging Improper or Inconsistent Risk Controls

21 Preparation for Live Trading Complete Maverick Qualification Program Take Classes Pass Tests Develop Trading Plan Get Firm Approval Submit Trading Plan Submit Trading Statements Submit Paperwork and Risk Deposit Begin Trading for the Firm

22 Long Term Results Remember this is for the rest of your life Start small! Stay disciplined Don t try to trade every day Trade for PIP s

23 Conclusion Watch Advanced Concepts Videos Position Sizing Calculator Trading Journal Pass the Forex 101 Tests Continue to develop your trading plan Learn order entry, entries, exits, etc. so you are not making mistakes with real money Track all of your trades for results. Adjust plan Win/loss % Reward/risk Total Pips