#4 Forex Basics: Don't Screw up Your Trading Strategy | Hana Stejskalová | Skillshare

#4 Forex Basics: Don't Screw up Your Trading Strategy

Hana Stejskalová, I always look for doing the things better way

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6 Lessons (22m)
    • 1. Why to Enroll

      3:04
    • 2. Stay in the Game

      3:56
    • 3. Placing SL

      7:14
    • 4. Risk Reward Ratio

      2:59
    • 5. Position Sizing

      3:27
    • 6. Bonus Tip

      1:02

About This Class

I started trading because I believe that times, when you went to school and found a good paid job, are long gone.

Don't get me wrong, it is not the only way how to make money today, but I was pretty good when working with numbers and trading appealed to me.

The aim for FX Basics series is to make you stop devastating your trading accounts and slowly increase your profits.

We will talk about, what I learned so far, 3 basic topics of trading:

PSYCHOLOGY

MONEY-MANAGEMENT

STRATEGY

I will share with you all my experience, what influenced me and what I find most valuable when heading for success.

Today, we're going to focus on money-management, where you'll find out:

  • how to stay in the game
  • how not to screw up your good trading strategy
  • how to use your full potential

Next stop you can have a look at are those courses from FX Basics series:

  1. Winning Mindset that Brings Profits
  2. How to Start on Forex
  3. Trading Diary
  4. Trading Tips for Beginners

I wish you good luck when working on your way to financial freedom.

Don't stop until you succeed - you can't lose if you don't give up! :)

Transcripts

1. Why to Enroll: several months ago, I was playing with an idea how to make passive in gun on forex. My idea. Waas to buy one currency pair sold another one with high correlation. So it will basically hedge and I would do positive swept every day, which would be my passive income. I analyzed markets for a few days until I found the Bears, which will be the best for my strategy. I entered the trade and all I had to do what's right. I knew that I would make several dollars a month when I suppose that I would have maker or many positions and there will be no change in interest rates. When I looked later that day on my position, I will shock because it's perfect as high as I expected to make in a month. I closed that position immediately because why would I wait for a month when I can take the same profit? Right now? I found that I was able to profit because the correlation between two bears is changing, spread can widen and lower. So I created a new strategy based on this new knowledge. When spreads widen, I speculate that it's a little over again. I made some beautiful profits, but since the beginning, I knew there is a problem. The strategy did not told me when to close any loss. In another word, I had no specific stuff loss. It took only two trade to evaporate 30% off my trading account. When I entered the position, the spread gets wider and wider to the point where I was not able to take it anymore. So I closed it and thank God, because I would devastate my account much more if I didn't. And it's why you should always scared about money management. It will help you stay in the game. Make sure that you don't screw up good trading strategy and make sure you use your full potential. If you care. At least about one of those things click in a row. But now I wish you good luck and see you inside. And by the way, my faith before you, if you are interested in strategy I have spoken about. I tried to Google carry hedge 2. Stay in the Game: Now when you understand my money management, it's so important. Let's have a look at some basic rules. When working with Stupples one off the most known rule is never risk more than 2% off her trading account for want right Following this simple rule will help you stay alive when your drawdown comes. Also, you will stay on the ground because you won't be able to open big positions, which would devastate your account. See this example? You have $5000 on your trading account and you would like to trade two positions. Now 2% off trading account represents $100. Andi, if you want to great full lots right away. This would mean that your stop loss on every trade cannot be bigger than five tapes. And now I'm not speaking about slippage commissions or spreads because one pape went raiding lots equals to $10. You have two positions, which equals to $20 per pip, and if you can risk only 100 dollars so simply by dividing, you get to five pips. This can be done, but there is really small probability you can do it as a beginner if you drink many lots. On the other hand, you can risk 10 times more tapes in case you are day with Trader 50 perhaps would be enough for whatever system you choose. So don't risk more than 2% off your trading account on one trait and you will stay in the game much longer. You can risk hope 2% off your trading account, but wrong. Right. But you probably won't be able to do that. So he is the second thing. Place your stop loss so you can take it mentally when position moves. 10 tapes against you and you are very emotional. Distracted. It is definitely not a good idea for you to place 50 per tape Stop blows Now don't get me wrong again. You cannot find system with 50 pips. Stop close lower. Stop close to 20 papers and expect it will work the same like system with 50 pape stop blows. And here comes the for true. Stop close has to be on the right place. Otherwise you'll be kicked out off profitable traits and you will cut your profits If you wish to trait the system with 50 peeps, stop Close. Lower your position size, you will risk smaller amount off money and you'll be able to sustain 50 bibs. Stop loss. No, What you are probably asking is how to play stop loss so it is on the right place. It's good question. See the next video to find the answer. 3. Placing SL: there is this big dilemma. When placing stop losses and profit targets. The first recommendation you'll find ISS cut your losses, and the 2nd 1 is let profits grow well. But those things are the entire opposite off each other. You cannot go. We're profit if you cut your position too soon and vice versa. So what do you do now? You have to find your optimum and how you can do it. Whether by back testing or in your trading diary, you should definitely always record your greats. If you are not doing this, have a look at our trading diary course back testing and trading Dieterich an off for you basic data for your decisions. But before you can start with back testing, you have to decide and write down specific rules over trading strategy. Since now we are talking about money management, I'm not going toe woke you through the WHO trading strategy system point by point, but we will focus on placing stop losses and profit targets. The most used type off stop laws is the fixed one. If you use fixed applause, it means that you decide according to the trading, diarrhea or back testing or voted every day that you have, that you will risk exactly the same amount off tapes on every trade. For example, I used the fixed up close. So it means that on every position my stop loss will be, for example, 15. Perhaps no matter what bear worked motility, whatever, every single position will have. 15 Pape stop loss. This type of stop close is very easy to specify with your trading diarrhea, and it is also easy for realizing because you can set stop loss right divide to your limit order. The second type of stop loss is time bounded one. Maybe your strategy is based on momentum, which means that it has to work now. It wouldn't be wise toe close position if your trade didn't work, for example for further minutes, because momentum will be probably long gone. Used time about it. Stop loss. In this case, let's say if my trade won't work in the 1st 10 minutes, I will close it. It is easy to back test, but you cannot play set to your limit order. You have to be present. When did rate triggers the next type ISS volatility stop blows if you believe that every stop close should be placed according to market conditions. Use volatilities s your stop loss trigger. Let's say you take a d r which is averaged the range a stop loss. It is total specific rule but your stop loss will be different every day. Flexible according toa volatilities on the market, the fourth type off stop loss is trailing Stop loss. I used this type of stop loss when I won't profits to grow But I am still a little bit off right off losing money. This is basically so called fixed, moving stop loss. Let's say you said trailing to 10 peeps when you enter position you're trailing is at minus stand tapes. When your position moves to five tapes per afraid, then you're trailing is at minus five trips. It moves only in one way. So you always cut your losses and protect profits. What this weakness of this stop loss is. If you have tied trailing, you will be offered kicked out of good positions during corrections. The last type ofs applause is Hailo close the PLO's, which I am testing right now again, this type of applause is for letting profits grow you wait until bring high or low is created, and if we are in a long position and the market closes below serving low, you close your position. If you are in a short, it's vice versa. Usually you will start with fixed applause, and after you have the first professor, you will change your second position. Toe this type off trailing because there won't be any law when you just entered position, so we are lost would be endless. Oh, so when you enter your position, it often creates the new law where you can put your stop loss. But my advice is, don't do it because very large amount off traders who place topples right on the great date swing high or low. And because there are very large amount off orders, market can try toe Pestillo kick out all the surpluses and rivers to profit. Be careful and avoid those types off pointless losses. And now Rich Ron is the best. You have to wake up guys. You don't really think money will jump right into your pocket, don't you? You have to find out, tried back, tested until you find what is the best solution for you and for your trading strategy. There is no magic how toe tell what is best for everyone. And if someone is telling you the opposite, he's lying to. What I use is the fixed applause on my first position and the basic trailing on the 2nd 1 In the next video, I will talk about risk reward ratio or also called pain to gain ratio. You have to apply does knowledge, and I wish you good luck. 4. Risk Reward Ratio: Where is this thing? Large amount off traders have in common. They always want to be right. I remember this thing. When speaking about being right on the market, you decide whether you want to be right or whether you want to make money. You cannot do both. You can always set your stop close at 40 pips and take profits at five. There is high probability you will be right most of the time, but it doesn't mean it is enough indeed that you will make money at this time. According to a lot of sources. Brisker precio or also called pain to gain ratio comes to the game. It basically tells you how Maney bidding crates You need to cover one loss in the example. Very risk for the tapes to make five tapes. I wouldn't risk reward ratio is age to one, so it means we need a twinning trays to cover run loss, and I don't count commission slip page spread. And so one. Now here I can differ from another sources because, according to someone else, this would be 1 to 8 prescribed ratio. But because it is called risk forever ratio, I will always place risk on the first place and revert on the second on. Here is the thing. Even if you are right, very often it is maybe not enough. Make sure your risk rod ratio makes sense according to your success, right? If you wish to find out what success rate you need in order to be profitable, they have special figures. Grabbed ratio. Use this simple formula. Success right needs to be higher than risk, divided by risk, plus rewards. If I use our example, your success rate needs to be higher than eight, divided by eight plus one. So it is a divided by nine and the success rate you need is about 89%. Now we remember being right doesn't always mean you will make money. I wish you good luck. They finding your best profitability. 5. Position Sizing: the last thing I would like to speak about disposition sizing. I already told you how valuable can position sizing be. We feel psychology, and it is no different. With money management, there will be positions with more favorable circumstances. Let it be trend, will you? Part of a day, whatever. Well, there is a high probability your strategy will work. Your aim is to find those circumstances and to use it as have been set in market results do more off what works and less one off dozens. For example. In my confluence refugee, there are great, which offer as much as five times higher. We're afraid. Then the other traits. I found out that during the straits several conditions are different. It is as simple as that. Nothing more needs to be said so find what works best for you, whether by back testing or in your trading diary and use it. If you, for example, know that your potential for ever straight is two units wouldn't be wise to double your position if the potential for next rate is six units with the same risk. The next thing, when speaking about position sizing, is you want to use your full potential. Now, this park can be a little bit opposite off. Place your stop loss so you can take it, man. Do it. But the truth is, this is just a continuation. First of all, you need to make sure you can take this topless mentally, and you have to believe 100% in your trading strategy and then you can use your full potential. You can decide whether you wish to ribs Kool 2% off trading account so you will take bigger positions after when or small positions after loss right away. And you will come size off their positions after every trade. Or you can in Greece positions after you meet some specific amount off money on your trading account. If you wish to trade 2% right away, I recommend you using Excel so you don't have to calculate positions every time by hand. In the second guys, it is up to you. What is your amount off Money needed for increasing positions. I increase my positions right after I have enough money so I can double position size and I will still risk only 2% off my trading account. So let's say for position sizing, I wish you good luck with finding best faith and increasing your profit potentials and thank you for watching. 6. Bonus Tip: I can see there are a lot of students which enrolled to more than one off. My course is first of all, I would laugh to thank all of them. But it is not right. I decided to great this special video. I would like to say just a few words. It is not enough to read through as much material as you can or listen to every podcast you can. You have to start to apply all your knowledge and start to make your own experience. Oh, you can never get better. You can be the best fear article trader off the world. But it is still just fearing not reality. So make sure you do not only read and listen, but also act according to what you learn. Thank you One more time and I wish you good luck with your trading and with your life.