Designing your own Forex trading strategy think of how you will be controlling your risks. The risks control should be meeting your own needs depending on which currency pair you trade, how much you invest, how often you trade, whether you open long term or short term positions and surely what your income target is.
Once you decide how much you are going to invest in Forex, you should first fix the exact amount of money you will invest, the exact sums of money that you will be trading at once, and include the “unexpected risks” amount of money in it.
The best way to choose the most appropriate “unexpected risks” percent is to analyze your trade during some period of time and see how much you loose on average. In case if you do not foresee the “unexpected risks” or your “bump stop” will be not enough, you risk loosing everything in short terms. That’s exactly why all the talks about enough or not enough investment in forex are nonsense! You may not have a lot of money, but multiply them by simply right losses management. You may start with millions and end up being a broke.
In order to keep up with your emotions and do the trade the right way you may find the following advise useful:
- You should be trading not more than half of all your forex investments at once in order to have the “bump stop” and the ability to keep on trading,
- You should not concentrate more than 15% of all investments on one market,
- The stop loss you place in each case should constitute not more than 5% of the current position total investment.
The golden rule of investment is “invest as much money as you are not afraid to loose”. It will enable you make the right and clear decisions with cold head. Lack of money for the trading start is not the reason for loosing in most cases. Moreover, starting with little money to trade is great since it teaches you real trade and doesn’t low you to turn off and leave the market right after entering it. The most important thing is to stop delaying your trading start because of investment lack and start to gradually increase it.
