subject: Currencies Trading - Learn How To Make Bank [print this page] Getting involved in currencies trading is one of the many ways to make money through the foreign exchange market, or forex. There is only one way to lose money on a long-term basis and that is to let your small losses get out of control. 95% of traders face this issue and quickly give up in an effort to prevent losing more money. The reason why such a high percentage of traders lose is because they simply do not understand how to place stops or manage equity. The result of a lack of knowledge in these critical departments is the loss of money.
Understand, first of all, that placing a stop does not eliminate or even reduce risk. It is folly to risk 10 or even 20 ticks in this way because all that happens to most traders is that they get stopped out. Of course, in order to win in anything like currencies trading, you must be willing to make a risk. The key is making a calculated risk instead of being rash. When placing a stop, you should be looking to risk between 50 and 100 ticks in a trade that would make you three to five times more than that amount at the very least. Otherwise, you are simply throwing your money away.
If you have experienced currencies trading before, you have probably gathered that this technique of stop placement will not be desirable for day traders or scalpers. However, the better way to trade is by swing trading or long term trend trading anyway, in which case the profit potential is much higher if you use this stop placement method. The goal is to get the odds on your side, increasing your chances for a profit. Of course, a profit is always the goal with currencies trading or any other potential money-making opportunity online.
The question, then, is how much money should be risked in a single trade? Many experienced traders will tell you to try to stay around a 2% risk. These traders are dealing with huge accounts that have thousands of dollars, if not more, to trade. For this reason, they will tell beginners with small currencies trading accounts that in order to get started making real money sooner rather than next year risking only 2%, you need to be bold and risk between 5% and 10%. In cases where you risk this much, be very selective about the trades you get involved in. Hit the best trades hard to come away with a win.
As you trade and begin making wins, do not succumb to what makes casinos so rich. Players believe they are on a roll and want the winnings to keep coming in. If you see that your equity has risen 20%, stop, take your earnings, and take a break from trading for a while. Lucky streaks will always run out, so recall the old adage and quit while you are ahead. If you keep these tips in mind, you will maximize your potential for earning money in the currencies trading arena.
by: Troy Truman
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