There's only one question you need to ask!
Trading Tips | 15 July, 2011
IN THIS WEEK'S ISSUE:
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- Are you gambling or trading?
- Buy shares at discounted prices
- China's golden desires
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Dear FSP Invest Reader,
You need to ask yourself one question! Do you feel lucky?
Well do you?
Well do you?
When I tell people I’m a professional Forex trader, they ask, so you gamble with foreign exchange?
I quickly correct them, No, I trade foreign exchange!
A lot of people think trading Forex is about luck, like a gambler places his fortune in the hands of chance. Hoping Lady Luck favours him and he’ll make some money.
That’s not what trading’s about. Experienced traders, trade with a strategy focusing on risk and money management. They know how much they are risking and what the potential reward is. Using a strategy helps them calculate this.
Gamblers often lose money and then start to risk even more to recover the lost money quicker. This can result in the loss of all their money, extremely quick.
The danger comes in when the gambler makes a ‘bad’ trade (not following a strategy and leaving the outcome to Lady Luck) and it makes them money - often a lot of money.
Why is this dangerous?
Because they believe they can continue to ‘trade’ without a strategy - that they're lucky. They'll sometimes be on a winning streak and start making trades that risk more money than they can afford to lose. At the end of the day, they end up losing all the money in their trading account.
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Right now you can snap up top JSE listed shares trading at a 50% discount…
As a shrewd investor, every cent counts. This is especially true when the market is looking top heavy.
Well, right now, we’re offering you a chance to discover a strategy that allows you to buy shares at about half of what they’re really worth.
But, be warned. This opportunity won’t last long... So don’t delay
Click here to read more...
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A trader without money can’t trade!
An experienced trader knows that to make money you need money to continue to trade with. That’s why experienced traders religiously follow their strategy and more importantly practise good risk and money management.
There's only one question you need to ask yourself when trading, "How much can I afford to lose?" Not "How much can I make?"
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The Chinese have gone raving MAD for gold!
Over the last decade, they’ve upped their deposits by over a thousand tons.
Now, one dare-devil miner has them right where it wants them – and it could be about to play their gold lust for every cent it’s potentially worth.
Quick moving investors have already positioned themselves in this incredible story – find out how YOU can too right here.
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Risk and money management is about protecting your money and growing it. It’s the most important part of a successful trading strategy
5 steps to good risk and money management
- Always use a stop-loss
- Never risk more than 2% of your trading capital on any one trade
- Don’t hold onto a losing trade, if it’s going against you, cut it early.
- Have a maximum of 5 trades open at any one time
- Make sure you know what news releases are coming out that could affect your trade.
I’ll refer to our latest trade alert for Forex Trader as an example.
On Tuesday this week the Euro had been significantly sold off, hitting a four-month low against the US dollar at $1.3838, where it hit a strong support level. It started to bounce and once an up trend was confirmed, I got a trade alert out to get long the EUR/USD at $1.3990. I set a wide stop-loss so any violent volatility wouldn't trigger it.
Yesterday Forex Tradersubscribers closed that position at 1.4200 for a 33.33% gain in 2 days. I closed the trade because, some crucial news and economic data were due to be released later that day and I didn’t want this position to be exposed to excessive risk.
Although the position could have gone further in my favour, with unknown news coming out, I decided that to hold the trade open would be a 'gamble'. Instead of risking my profits I decided to rather bank the gains we already had on the table.
Remember you can’t go broke banking profits!
Watch out for next week’s article. I’ll explain how to calculate where you should place your stop-loss, how much you should risk on any trade and how to calculate the correct trade sizes.
That’s it for this week
Here's to cashing in with currencies
Gavin Fourie,
Chief Investment Strategist for Forex Trader
About the author:
I’m Gavin Fourie, Chief Investment Strategist for Forex Trader. I hold a B.com degree in Economics and Econometrics and have studied international finance and the currency markets for years now.
Forex Trader is a service alerting you to the best, most explosive currency trades out there today. Designed for individual investors and finance aficionados alike who want to learn how to make money in the currency markets.