Professional Documents
Culture Documents
Table of Contents
Risk Disclaimer..................................................................................................................................................................................................3 Introduction ........................................................................................................................................................................................................4 1. Shop around before choosing your broker ....................................................................................................................5 2. Match your risk with your account size ...........................................................................................................................7 3. Dont get married with your losses ....................................................................................................................................8 4. Treat your losses as a price of learning how to trade ................................................................................................9 5. Always use hard stops and honor them when touched ......................................................................................... 10 6. Have a Trading Plan ............................................................................................................................................................... 12 7. Perfection through repetition ........................................................................................................................................... 13 8. Dont get emotional ................................................................................................................................................................ 14 Conclusion ........................................................................................................................................................................................................ 15 About AtlasCapital ........................................................................................................................................................................................ 16 Whats Next? .................................................................................................................................................................................................... 17
Risk Disclaimer
Users of ACFX.COM website and BLOG and any affiliated website note the content of the above analysis or any other information within the website do not at any time provide financial advice. The information is based on historical analysis and for educational purposes only. We recommend readers not to make any investment decision of any sort on the basis of the information above unless prior professional consultation is sought. Trading may not be suitable for all users of this website. Trading CFDs and Forex (foreign exchange) on margin carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Investors should ensure they fully understand the risks associated with leveraged CFD and FX trading before deciding to trade. Investors should carefully evaluate whether their financial situation is appropriate for such transactions.
Introduction
For many, the financial markets are a complete mystery and trying to understand how they function is made even more confusing by the plethora of different opinions and in the majority of cases made by so called misinformed experts that one will find in the financial media and internet. This e-book has been written for those who are interested in participating in the financial markets but do not know how to go about it. We are not going to sugar coat it for you. Trading is not easy and even experienced trader has bad days. Beginners through a combination of lack of discipline, inexperience and insufficient knowledge of the product they are trading get beaten up by the markets to the point where they are spent financially and psychologically. The newbie will blame the market, for their woes and become a statistic of another failed trader. With patience and by applying lots of discipline and through practice, trading can be a rewarding and enjoyable experience. This e-book will not tell you how to make millions but we hope will help you stay in the game long enough to make trading a success for you.
Fortunately, ACFX offers our clients some of the most competitive fixed spreads on the market and our clients take advantage of this by being able to profit much easier and quicker when compared to investors who use Forex Brokers who offer much wider spreads. ACFX offers tight and competitive fixed spreads. There are three account types designed to suit every kind of investor or trader. In order to make it simple and easy, ACFX provides 5 decimal places fixed spreads on the Classic and VIP accounts. In order to cater for professional and institutional investors, ACFX also provides an STP account with variable 5 decimal places spread. The table below illustrates the spreads on each account type:
Spreads
Variable from 0.7 pip Variable from 5 cents Variable from 60 cents Variable from 3 cents
The competitive pricing has not only forced down the spreads but has also forced down the level of overnight financing. Intraday traders who do not hold positions overnight need not worry about overnight financing. However, for those traders who hold positions overnight, the cost of financing has to be considered. What exactly is overnight financing? To put it simply, it is a minor interest payment charged to your account when for instance you decide not to close a position opened today. So why are you charged for holding a position overnight? It is to do with something called Currency Swaps and the time value of money. The borrowing of money has a cost which is called interest. You also probably know the rates of interest for each currency can vary. For instance the cost at the moment for borrowing Euros is more expensive then borrowing US$. So how does all this I hear you say affect me? To put it simply the cost of holding position in certain currencies could benefit you while holding others could mean you incur a cost. For this reason, Forex Brokers can charge you for holding positions overnight. So what is the mechanics of all this? How does it work? For example, you are an intraday trader who is holding a position where you have sold USD and bought JPY. Your position is going well and you decide to hold it overnight. You hold account in Euros and for this reason your Forex Broker has to borrow the JPY from somewhere. The swap is the difference the interest you receive for holding JPY and being short USD. Sometimes the swap is in your favor and sometimes it is not.
These goals should be both financial and educational. These being not only enough funds for you to survive losses that you will suffer which are referred to as drawdowns but also enough funds for you to stay in the game during the steep learning curve. Back to the question, the account size should reflect the risk you take on when you take a trade. The accepted level of risk is between 1 to 2% per trade. This may sound very low to many new to trading but if you marry the low levels of risk with a risk to reward ratio of at least 1 to 2, a disciplined trader can quickly grow an account. With a small account size of say euro 1,000.00 your stop level and leverage used may simple mean it is difficult to trade due to the level of risk. For example A 50 pip stop on a EUR 1,000.00 account where 1 lot is traded you will risk you around EUR 385.00 or 39% of your account. The same position taken on a EUR 20,000.00 account risk will drop to less than 2%. This does not mean you need to wait until you have EUR 20,000 to trade as ACFX offers our clients the ability to trade micro lots. Traders who fail to be sufficiently capitalized risk ruin by trading with excessive risk. ACFX understands this and is proud to announce our new micro lot campaign specifically launched for both newbies and small account size traders. We will explain the campaign at the end of the educational section of this webinar.
It is probably fairly obvious that cutting profits early and running your losses will have a bad effect on your account but unfortunately ones ego gets in the way of too many newbies who think they know more than the market does. In the previous chapter we talked about the level of risk one should take on when trading and the risk to reward ratio. Applying a 1 to 2% risk profile with at least a 1 to 2 risk to reward ratio will ensure that bad psychology does not take over your trading. Trading is not about being right all the time but managing your risk in a way that you lose small and win larger.
They say we learn from our mistakes. Thats why Im deliberately making as many as possible. Soon I will be a genius.
All professional traders must consider four factors before placing a position. 1. Through a logical and detailed market analysis gauge a market bias where a trader will wish to participate. 2. Identify a point of entry where a position will be placed. 3. Have an exit strategy where profits will be taken and ideally when markets trend strongly in your favor. 4. Identify a price level where when breached or touched the trader must close a losing position. Losses do and will occur. A traders analysis will never be 100% correct all the time. Therefore the ability to cut losses at appropriate levels is essential if any strategy is to have an edge. However, more often than not, the very act of taking a position will put you in a loss before the market turns in your direction. A trader needs to allow for this noise around the entry. Stops placed too close to the entry or at price level that is likely to be breached will most likely take a trader out of the position before it has time to turn profitable. As a guide a trader should risk no more than 2% of their account on any one trade. This percentage must of course have some relevance to the product they are trading and volatility at the time you place the order. If for instance you are a swing trader, your strategy may be that you are a buyer of weakness during periods of strong uptrends. The rule of thumb when swing trading is that you place your stop beneath the previous support level. Therefore a 2% stop strategy needs to allow for this as part of a traders overall strategy. Alternatively, during times of market news, increased volatility may mean that a 2% stop is impractical. A trader has to take a decision of decreasing their lot size or decide not to trade during these periods.
www.ACFX.com AtlasCapital Financial Services
10
Placing stops does not only relate to protecting a traders capital base but can be used as part of an exit strategy which allows a trader to protect their profits. Planning ones exit prior to trading is always easier than trying to decide if you should hold on for more profits or close now. We have emphasized that placing stops is an important part of trading. Therefore understanding the mechanics of how they are actually placed on the platform is a must. The MetaTrader4 platform is simple to use and stop placement is relatively easy. The ACFX Dealing Department is available to walk through this with clients if they so require.
11
A trading plan can be based on technical and fundamental analysis or a combination of both. Although some traders are successful when trading with gut feelings, it is still important to try to quantify how one comes to that decision. In my view, the best trading plans should lend themselves to mechanical back testing with a goal to turn them into a simple step by step strategy or a well tested and robust grey or black box. Trading does require discipline but that this does not mean that you do not test out new ideas or lose your creative edge. ACFX encourages traders to try out their new ideas on the demo platform where positions can be taken with no risk.
12
13
Furthermore, although trading on a demo account and trading with real funds should mechanically be no different, however actually making the transition emotionally can be a huge barrier for a newbie trader. This again is down to the emotions. The very action of clicking the button on a live account and watching your balance rise and fall can play havoc with your emotions. Only by mastering your emotions do you stand a chance of sticking to your trading plan.
14
In conclusion
So you have read the e-book but you are probably not ready to take the market by the scruff of the neck just yet. However, what you have read should have given you a different view of how to tackle the exciting space that is trading. The e-book has covered areas such as being a disciplined and professional, what approach you need to have to be profitable and the best ways to reduce risk. Furthermore, we have discussed the benefits of low spreads, sufficient account capitalization, good practice in risk management and the use of stops and trade management. What is probably one of the key points to take away from this is that trading is a personal challenge. You too can be successful but this will only be from your own efforts. One should not rely on punts and tip sheets from other commentators. This e-book is a toe in the water for a newbie trader. ACFX is happy to announce that it will launch a comprehensive education offering to all our clients. We want our clients to be successful and will therefore offer them the tools to do this such as MetaTrader 4 platform and a too the point education Knowledge Base. Furthermore, our inexperienced clients can practice their technique and strategies by registering for a demo account and down loading our free to use MetaTrader 4 software. Our clients can also take advantage of our generous cash bonuses and opt to trade with micro lots as trading with real funds will give you an edge simulated trading cannot give you.
15
16
2. 3. 4. 5.
Fill in the Live Registration form. Carefully read the terms and conditions and click on the tabs agreeing your acceptance. Finally press the Submit Details tab. You will be contacted promptly by one of our dedicated Sales Managers.
17