A-BEGINNERS-GUIDE-TO-FOREIGN-EXCHANGE-TRADING
Guide to Foreign Exchanges: What is forex trading and how does it work? Learn how to get started in currency trading. The Forex exchanges allow for 24/7 trading in currency pairs, making it the world's largest and most liquid asset market.
Guide to Foreign Exchanges: What is forex trading and how does it work? Learn how to get started in currency trading. The Forex exchanges allow for 24/7 trading in currency pairs, making it the world's largest and most liquid asset market.
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With this in mind, we can divide the amount of
equity risked by the stop-loss distance in pips:
$200/25 = $8 per pip. The trader then must locate
the pip value of the EUR/USD to size the position,
which we know from above.
Using a 1 standard lot places the trader at a higher
risk bracket of $250 ($10 per pip * 25 pip stop loss =
$250). Given this, we can simply size the position
using 8 mini lots since they equate to a $1 pip
movement ($1 per pip [1 mini lot] * 8 = $8 per pip *
25 pips = $200). There are additional steps involved
when your account currency is different from the
quote currency, but this may be best suited for
another article.
Risk parameters. Keep risk parameters to within a
1-2% risk bracket. While it may be tempting to risk
more, this is a dangerous play.
Don’t overtrade. Focus on only a few pairs to begin
with.