Is this the latest forex v7? So the forex v6 ended?

The Reality about Leverage

Leverage has become a scapegoat for poor risk management in trading. I feel as if leverage is being blamed more and more without anyone taking a moment to think what the real problem is. First, let's take a step back for those of you who don't know what I am talking about. For the purposes of this article, we will assume "leverage" refers to trading, specifically forex trading.

Leverage is the amount of currency one can control relative to the amount of capital one has. That's it. In forex, most traders have 100:1 leverage. That means for every one dollar of capital a trader has, they can control one hundred dollars. At first glance, it is not hard to see why that ratio could scare someone who hasn't had much experience with forex. I have seen and heard all sorts of theories that basically refer to leverage as the devil. Some go so far as to say that leverage should be abolished completely. Now let's look at the reality of the issue.

Let's say that a trader has $10,000 in their account, and they trade with a $10,000 lot size (or mini lots). Let's also say that their maximum leverage is reduced to only 10:1. Now let's say the trader wants to buy the GBP/USD. The highest number of mini lots they could buy at present prices would be 6. That means that each pip would be worth $6 if they traded the maximum amount of GBP/USD they could. Let's say that the trader's plan calls for a conservative risk of 3% per trade. In other words, the trader is willing to risk $300 (3% of their equity) on a given trade. This means that they would be unable to risk their full amount unless the trade called for their stop to be at least 50 pips from their entry.

Now, many readers will probably be ok with that. However, consider that the trader in the above example has maxed out their capital. In other words, they would not be able to enter another position until that trade (or at least part of the trade) is closed out. Furthermore, there are plenty of traders out there that have tighter stops than 50 pips in their strategy. If leverage was eliminated completely, keep in mind the trader above would have to have a distance of 500 pips from entry to stop to be able to max out their 3% risk. That would eliminate most strategies.

Therefore, it is easy to see that leverage is essential to most strategies in the forex market. If leverage did not exist, it would be very difficult to take advantage of every trading opportunity. I am not endorsing maximizing leverage and taking a ten full lot position in the USD/JPY with a $10,000 account. That would be unreasonable. But the issue isn't leverage, it is poor risk management. High leverage only reduces the amount of capital required to have a given position. I could trade with 100:1 leverage or 100,000:1 leverage and I would risk the same amount. The only difference is the amount of capital required to take the position. I would never need 100,000:1 leverage (no one would), but it wouldn't be any riskier than 100:1 if you used proper risk management.

In my mind, proper risk management means planning our entry and exits before placing any trade. Only after identifying the distance between the entry and the stop should a trader determine their position size. The position size should be adjusted so that the trader is able to risk the same amount on each trade. This process is discussed in further detail here .

The point is that leverage is not the enemy. If a trader plans their trades so they are risking a small amount of capital on each trade, very high leverage will not have a negative effect. However, low leverage (or no leverage) could severely limit a trader's potential of success because the trader may not have enough capital to enter a full position and/or multiple positions at the same time. Keep in mind I am not talking about huge positions, we are talking about the ability to risk 3% of one's account. In closing, remember that with proper risk management and trade planning, leverage is a tool that is there to help you.

Source: fx360.com

Why short GJ?

Is it not look like euro movement but usd.

What mean kauness?

Then what meaning is that? Sorry, i don't understand hokkien.

Oic, what is your view to long EU?

Are you begineer? If yes, then go to www.babypips.com/school study the course first, there might help you a lot. If you need sharing can always pm too.

ECN at least how much capital to open the account?

The EUR/USD rallied to reach session highs as news of Greek austerity plan began to trickle out to the market. According to Dow Jones newswires, the Greek government will increase the VAT tax to 21% from 19%, freeze all pension payments and reduce civil service wages by 12% in an effort to control its growing budget deficit this year. Greek bonds responded positively to the news as GGB/BUND spreads narrowed to 293bps from 300bps prior to the news .

Greek Prime Minister George Papandreou will travel to Germany and France in the next several days to consult with Eurozone’s two most important members and obtain their seal of approval on the deal so that Greece could once again access bond markets on favorable terms.

At first glance, the Greek plan appears to have made serious progress in addressing the fiscal budget deficit problems that have wreaked havoc on its capital markets since the start of the year and is likely to assuage the ratings agencies who have threatened to down grade Greek government debt below investment grade.

The bulk of the cost savings falls squarely on the public sector in Greece and it is unclear as of yet just how much resistance the government will meet from the civil service unions. Nevertheless, the austerity measures are likely to increase the credibility of the Greek government and make it easier for Greek fiscal authorities to receive support from the Germans and the French.

Overall, tonight’s developments should prove positive for the EUR/USD which has been held down by growing market concerns over the burgeoning fiscal deficit problems in Southern Europe and fears that these economic pressures could exacerbate the risk of fragmentation in the region. The pair traded to 1.3650 in the wake of the announcement and could try to test the 1.3700 barrier as the day progresses if markets become convinced of the credibility of the plan.

Source: FX360.com

TT money back maximum can cost up to USD70 if both broker & intermediary bank charge you.

Have you use the debit card before? Since ibfx told us charges only $2.45 per transaction but payoneer there told me they'll charge a 3% per transaction, i'm not sure this statement correct or not as i haven't try using this debit card to do withdrawal.

Waiting for up or down trend?

Just let him try, no experience no gain!

I'm agree as what bulkbiz said, better experience LIVE account in your trading before argue anything, you'll get the answer in LIVE account. Anyone think that they're earning consistent monthly income in forex trading, then just give out your guts to argue or advise something here, nobody will oppose your opinion one, because you already have stable income.

Maybe he is the next version of George Soros, who knows?

Thomas, i can see that your equity is $3122, margin used is $2700, so your margin level only left 115%. You're in a very risky trading strategy, if EU going down back to 1.3500, then you're clapping hand, if EU going up to 1.3600 or more, then you're facing margin call.

Your account still left 115% margin level, if you're using leverage 100:1, if margin level hit 50% then will margin call.

What Makes Prices Move?

Today I will go over what I think drives price movement in the markets, why I hold these beliefs, and why I think it is important to understand the forces in price movement. Keep in mind the following theories are my opinions, not absolute fact. I believe in technical analysis much more than fundamental analysis, which will be reflected in this feature. There are people out there that will probably disagree with some of my statements below, which is fine. However, it is my hope that this information will provide value for our readers and at least make people think.

People often ask "did fundamentals trump technicals on that trade?" or something along those lines. No offense to anyone out there, but that is a ridiculous question. There are not two boxers names "fundamental analysis" and "technical analysis" slugging it out for trading supremacy. Sometimes a major news announcement will shoot the price past a strong technical level, but that's why I don't enter trades right before a major news announcement. How do we measure "fundamentals" though? Does that mean an announcement today, the overall economic scope of a country over the past century, or something in between?

The reality is that the only force that moves prices in any market is the buying and selling of the financial instrument. For our purposes, we will use currency trading as an example, but this is true in all liquid, openly traded markets. Currency prices don't fluctuate on their own. They only move up when traders are willing to buy at a price higher than the current price, and the only move down when traders are willing to sell at a lower price. That sounds incredibly simple, but this is a very important fact to establish.

The reason it is important to determine that traders move the market, is that this means no one can predict exactly where the market will go. Only probabilities at certain ranges can be determined, and usually the probabilities aren't overwhelming (they don't need to be). So the next time you hear someone say "XYZ is going to hit (black price) today!", take those predictions with a massive grain of salt. They are saying that they know exactly what every trader is thinking, how much each of those traders will buy or sell, when they will buy or sell it, how the buying or selling of others will affect their own buying or selling, and how every trader will react to news announcements (both scheduled and unscheduled). Let's presume that some incredible genius figured out a way to create artificial intelligence that could solve each of those issues (and more I am leaving out). That model would assume that people are rational (like fundamental analysis does). Unfortunately, there is no limit to how irrational traders can act, individually and as a group. Therefore, it becomes obvious that no one person can ever know exactly where a price will go.

This seemingly endless list of variables, along with the irrational behavior of traders, is why I believe in technical analysis. Technical analysis uses various ratios and drawings that, in my opinion, are designed to measure the behavior of traders. We aren't trying to explain why they are doing what they do. As we discussed above, it is impossible to know what is going through every trader's brain. Instead, we are trying to determine certain levels where traders are more likely to act one way then another. With technical analysis, you can do basically the same thing every time. If you watch the patterns we post, they are basically the same patterns on different pairs every day. We try to eliminate as many random variables as we can. It is important to have a robust strategy, as we do, that works over all markets and all time frames. If a strategy only works on one financial instrument with one time frame, chances are that strategy won't work for long. After doing this, we can measure if we have an "edge" over a very large sample of trades. This isn't a guarantee that what once made money will always make money, but it is a lot better than nothing.

I am sure you can guess where this is going regarding fundamentals. Now there are different type of fundamental trading. If you trade based off of an announcement that came out today, that is very different from a trader who looks at long term macroeconomics. If you trade strictly off of new announcements, that is a steep uphill battle. First of all, there are a lot of people out there that think the markets move ahead of the news. I am one of them. Second, markets can gap immediately after news announcements and can really hurt your execution with every broker. Third, markets often don't react according the exact numbers released in these news announcements. This goes back to the fact that traders are irrational and you have no idea how they will perceive news announcements. This can lead to wild swings, moves opposite of what makes sense, and other crazy events.

So how can someone consistently profit over a long period of time (at least 100 trades) by looking at individual news announcements? You've got me. Even if a trader won at times, how can you be consistent when every reaction is so different? A trader who looks at the big picture over a longer period of time faces a similar problem. Sure, a currency may be "supposed" to move one way based on the economic measures a trader uses, but that only matters if traders buy or sell in that direction. How does this trader know that other traders will rationally interpret this information like he did? On top of that, one of my favorite trading quotations is "the markets can stay irrational much longer than your account can remain solvent." This means that the market could finally come around your way to the rational economic price, but you could already be knocked out by that point.

I could talk forever about this topic, but I will cut myself off for now. The point is that we don't know exactly why prices will move, where they will move, or why they moved where they did. That is why we take the approach of applying a consistent, technical method that has been tested over a long period of time. I will probably write a follow up at some point, because I have a lot more to say on this topic. Hopefully you enjoyed this article and it makes you think about the markets in a slightly different light.

Source: fx360.com

This post has been edited by rstusa: Mar 23 2010, 12:32 PM

I got a smell of my failure experience same like Thomas last 3 years. I started with $1k, but then I challenge my account open trades with size 1.00 or 2.00 lots, I keep deposit my capital when near margin call, so ended up I lost $7k total of my capital, this is a lesson for me, I hope Thomas don't repeat my failure step.

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Added on March 24, 2010, 8:59 amThis example is for Thomas & all traders.

Let's say that two traders have the exact same profitability over the course of 2009. However, Trader A has won his last 3 trades, and Trader B has lost his last 3 trades. Even though they have made the same amount of money over the year, who do you think feels more positive? Trader A, of course. In fact, Trader A probably feels like he can run through a wall and will never lose again after winning 3 consecutive trades.

Trader A will ignore possible warning signs and enter a trade that typically does not fit his criteria. This increases the odds of a loss. Shaking his head, Trader A cannot believe he ignored those signs and gave back some of the profits from his recent win streak. Even if he is able to right the ship and go back to a neutral mindset, he still lost a trade due to a mental error. Of course, every trader will lose plenty of trades, but emotional errors are the reason most traders that would otherwise be successful don't live up to their potential. If Trader A does not become emotionally neutral, the damage to his account can be even greater.

Trader B probably feels as if he will never win a trade again after losing 3 straight trades. Sure, he has won plenty of trades and is very profitable on the year. However, those 3 trades have him thinking very negatively. In this circumstances, If Trader B become emotionally neutral, he could pass up on a perfect trade set up that fits his criteria because he is scared of losing again. Both scenarios can be disastrous to a trader's mindset.

This post has been edited by rstusa: Mar 24 2010, 08:59 AM

Thomas, where is our MCD lunch set? Perhaps, you should prepare the MCD dinner set for us tonight.

This post has been edited by rstusa: Mar 24 2010, 05:29 PM