Here is a scenario for you, at the NFP release today I went short EURUSD @ 1.0959 and at +20 Pips I set my Stop Loss (SL) to Break Even (BE) and my Take Profit (TP) to a previous low of 1.0820.
What is my Risk?
That's right. ZERO. Absolutely no risk, at this point. I'm already in the plus and my SL is set to BE so worst case I walk away with nothing. Best case with 139 Pips. Or I might change my TP or exit manually.
Sometimes trading isn't so much about the right entry as it is about letting your profits run and managing your risk with a BE SL.
Have a nice long weekend!
Showing posts with label Risk Management. Show all posts
Showing posts with label Risk Management. Show all posts
Friday, 7 August 2015
Monday, 1 June 2015
Forex is Gambling
Many times when I tell people what I do for money, they respond saying "Isn't that like gambling?" And I laugh and tell them
Forex is Gambling
IF you don't know what you're doing!
You know what else is a gamble?
- Driving a motorbike if you don't know how to drive... without a helmet... in Rush Hour Traffic...
- Taking out a Mortgage when your company is downsizing
- Bench Pressing twice your body weight without a spotter
The thing is, anything in life can be a gamble. It all boils down to "Risk", understanding the Risk, the Reward, and making educated decisions based on experience and probabilities.
Driving a motorbike for the first time without a helmet in rush hour is a bad idea. The risk is quite high. What happens when you take motorcycle lessons, ride in the parking lot with a helmet? Your Risk goes down. Add hours of riding experience, days and weeks of practice, and now you can ride the main roads, and soon the express way, in rush hour.
Trading Forex comes with its risks like anything else in life. You're obviously not going to take your entire pay cheque and put it in one trade. You're going to get lessons from a Pro. Get some coaching. Practice, Practice, Practice. And start out small, just like riding side streets, you make small trades. Slowly graduating to the big boys club. Perhaps you'll upgrade your motorbike and get a bigger bike, perhaps you'll get more lessons, or you'll be happy driving a middle of the class bike for the rest of your life, as you are content making small profitable trades consistently.
Anything in life is a gamble, if you let it be a gamble. So don't let it be a gamble. Education pays. Many times over. So do yourself a favor and get a Forex Pro to teach you. If it's not me, then someone that you can relate with.
Wednesday, 15 October 2014
Skin In The Game
I recently met someone that was struggling to make ends meet. He wanted to start a business yet wasn't well grounded and worse he was unwilling to put any skin in the game. In other words he wanted to have no risk and all the reward. No plan, just results. No negative (his words, my words "realistic") feedback, and just positive thoughts. While I agree that positive thinking brings positive outcomes, there is a time to be realistic and consider the worst case scenarios. Or just bad scenarios. He didn't want to hear it. In his mind he had it all figured out. Yet he changed his mind so many times it showed he had a lack of commitment. Why? Because he had no skin in the game. To him it was just a free ride, let an investor pay for his business (good luck on that one) and have him run it. No commitment on this part. There is a reason why some people struggle while others make success look easy. Remember, the professionals always make it look easy!
The risks you take should be directly proportional with the rewards you are looking to attain. No risk, no reward. Foolish risk. Foolish reward.
Putting "skin in the game" changes the game entirely. Using your own hard earned money to start a business is some serious skin for example. Your mind set changes and you are (hopefully) more careful making decisions that impact your bottom line.
Trading is no different. You need to put some skin in the game. I'm not talking about money either. Sure you need money to get started. A lot less than most people think or will tell you. I'm talking about serious commitment. Time. Effort. A willingness to learn. A willingness to make mistakes. A willingness to learn from you mistakes. And the ability to persevere.
Some people believe in throwing money at a problem. You know "money fixes everything". Well to an extent perhaps. But to an extent it's like the drugs you take to mask the root cause of the problem you're having. For example if you have a headache your body tells you have a dis-ease. Something is wrong and your body is saying fix it. Your body isn't telling you to pop aspirins... Unfortunately most people want the quick fix and just start swallowing pill after pill. The better approach is to look at the root cause. Why do you have a headache? Is it from something you ate? Stress? Perhaps your spine is off balance (think nervous system)? Are you getting enough sleep? Exercising enough? Relaxing enough? Sure you can pop that aspirin, in the short term it will help mask the symptom but in the long term ignoring (masking) those symptoms will do nothing but make the problem worse. So does throwing money at problems. You need to understand what's going on. Why are you making bad trades? Why aren't you profitable from your trades? Why do you constantly blow your account (and hard earned money) after successfully trading for months?
When you have skin in the game, the game changes, and you change. If you are new to trading you should have someone teach you and coach you about the "game" you are about to play. If you have been trading for a while and want to make the most out of your trading you should consider doing the same to protect your skin and maximize the profits.
If you are not willing to put skin in the game then do yourself a favor and do not trade the Forex market.
And you have to be sure you can afford to walk away from the money you are about to invest. Especially new traders. I see it far to often. New trader thinks he has found the holy grail. Puts a few thousand dollars into an account. Loses it. Business man trades for a little bit and then puts big money into an account, loses it. Managed accounts in my opinion are the worst. Seriously if anyone is so good that they can make you profit trading with your money, why are they doing it? Why don't they just retire on an island? Why they don't put a risk free guarantee on it? Simple. Managed accounts don't work either. If it's too good to be true, it seldom is.
The risks you take should be directly proportional with the rewards you are looking to attain. No risk, no reward. Foolish risk. Foolish reward.
Putting "skin in the game" changes the game entirely. Using your own hard earned money to start a business is some serious skin for example. Your mind set changes and you are (hopefully) more careful making decisions that impact your bottom line.
Trading is no different. You need to put some skin in the game. I'm not talking about money either. Sure you need money to get started. A lot less than most people think or will tell you. I'm talking about serious commitment. Time. Effort. A willingness to learn. A willingness to make mistakes. A willingness to learn from you mistakes. And the ability to persevere.
Some people believe in throwing money at a problem. You know "money fixes everything". Well to an extent perhaps. But to an extent it's like the drugs you take to mask the root cause of the problem you're having. For example if you have a headache your body tells you have a dis-ease. Something is wrong and your body is saying fix it. Your body isn't telling you to pop aspirins... Unfortunately most people want the quick fix and just start swallowing pill after pill. The better approach is to look at the root cause. Why do you have a headache? Is it from something you ate? Stress? Perhaps your spine is off balance (think nervous system)? Are you getting enough sleep? Exercising enough? Relaxing enough? Sure you can pop that aspirin, in the short term it will help mask the symptom but in the long term ignoring (masking) those symptoms will do nothing but make the problem worse. So does throwing money at problems. You need to understand what's going on. Why are you making bad trades? Why aren't you profitable from your trades? Why do you constantly blow your account (and hard earned money) after successfully trading for months?
When you have skin in the game, the game changes, and you change. If you are new to trading you should have someone teach you and coach you about the "game" you are about to play. If you have been trading for a while and want to make the most out of your trading you should consider doing the same to protect your skin and maximize the profits.
If you are not willing to put skin in the game then do yourself a favor and do not trade the Forex market.
And you have to be sure you can afford to walk away from the money you are about to invest. Especially new traders. I see it far to often. New trader thinks he has found the holy grail. Puts a few thousand dollars into an account. Loses it. Business man trades for a little bit and then puts big money into an account, loses it. Managed accounts in my opinion are the worst. Seriously if anyone is so good that they can make you profit trading with your money, why are they doing it? Why don't they just retire on an island? Why they don't put a risk free guarantee on it? Simple. Managed accounts don't work either. If it's too good to be true, it seldom is.
Monday, 13 October 2014
Counting Pips or Dollars?
Don't count your dollars before you have made pips. Measuring your goal and success in dollars can be a serious mistake for traders. Sure you are in it to make money. You are also in it to make profit. That profit you should count in pips. Just like you don't count your chickens before they hatch. You don't count your dollars before you can make pips.
Pips are scalable (to an extent, more on that later). Money is not. If you are thinking constantly about money then you are developing a bad habit. It's the wrong mindset to have. It can be very damaging. Not everything is about money. Sure money helps a lot but it isn't everything. You need to focus on profit, in pips. Then and only then can you truly analyze your performance. In Pips. Over the month. Over the quarter. Over the year. And then and only then can you put some dollar figures to it BUT you need to also keep your risk reward ratio in check and know your emotional threshold. You don't want to overextend yourself.
Pips are scalable (to an extent, more on that later). Money is not. If you are thinking constantly about money then you are developing a bad habit. It's the wrong mindset to have. It can be very damaging. Not everything is about money. Sure money helps a lot but it isn't everything. You need to focus on profit, in pips. Then and only then can you truly analyze your performance. In Pips. Over the month. Over the quarter. Over the year. And then and only then can you put some dollar figures to it BUT you need to also keep your risk reward ratio in check and know your emotional threshold. You don't want to overextend yourself.
Tuesday, 7 October 2014
Rotten Fruit
Arriving home from Thai Language class I went to grab a banana and had ants and fruit flies everywhere due to the bananas' ripening. Don't you hate it when you have to throw out food? All the best intentions in the world justify your decision to buy fruits, vegetables, and other food with expiry dates. And for whatever reason you then are faced with having to throw out rotten food.
Once in a while we need "rotten fruit" as reminders. Growing up in a world where there is a surplus of food, we take it for granted and don't realize how good we have it. Others are starving. My parents often told me about their experience growing up in Post World War 2 where they counted how many peas one could have for dinner. And that was the only dinner. Potatoes and other vegetables were traded on the black market. Not only do we not appreciate today's abundance of food, but it hinders our creative thought process and drive. Arnold Schwarzenegger when asked what made him successful said "Stay Hungry". Overfed hunters lose their ability to hunt. The well fed are not hungry enough to strive for more. When you are constantly hungry you strive to do better, to do more with less. So in a way when it comes to shopping and cooking, today's meals aren't as creative as they used to be. In the post world war 2 days one had to come up with creative way to make do with what they had. Don't be fooled by so called "peasant foods". They are nutritious, delicious, and filling. Here in Thailand I get more satisfaction from cheap food rich in herbs and taste, say Pad Kaprao, than from a meal that costs me 10 times as much, perhaps Thai but mostly Western.
Shopping only for the next dinner is far more rewarding. It eliminates waste. Your ingredients are fresh. And if you are in a bind because your fridge is somewhat bare, suddenly that one vegetable, fruit, or food item, that would have been overlooked in a full fridge, becomes inspiration for creativity. You tend to think more about what you are going to cook and how, rather than think about eating, and perhaps eat more because you just have to have the pudding, crepes, and yogurt because it's there looking at you. And after you are full and over nourished. Intoxicated by overstimulation. If you had to go hunting again, you'd have not will or interest. Worse yet you are going to get fat and your body and mind will be stressed.
Trading is not dissimilar. There are plenty of trade opportunities. Plenty of pairs. The market is open 24 hours a day, 5 days week. You can go long on EURUSD, short on USDJPY, heck you can hedge your trades if you feel the market will swing either way. Is that a good thing? Or are you juggling too many balls? Too many moving parts. Too many eggs in the basket. Bitten off too much to chew. You might get lucky and all your trades go well. Or you could choke on that big bite and with more at risk, you lose more.
Stay hungry. Go for low hanging fruit and only pick what you need to eat today. There will be low hanging fruit again. Don't over trade. Trade only when the market conditions are strongly in your favor and you have minimized your risk.
Once in a while we need "rotten fruit" as reminders. Growing up in a world where there is a surplus of food, we take it for granted and don't realize how good we have it. Others are starving. My parents often told me about their experience growing up in Post World War 2 where they counted how many peas one could have for dinner. And that was the only dinner. Potatoes and other vegetables were traded on the black market. Not only do we not appreciate today's abundance of food, but it hinders our creative thought process and drive. Arnold Schwarzenegger when asked what made him successful said "Stay Hungry". Overfed hunters lose their ability to hunt. The well fed are not hungry enough to strive for more. When you are constantly hungry you strive to do better, to do more with less. So in a way when it comes to shopping and cooking, today's meals aren't as creative as they used to be. In the post world war 2 days one had to come up with creative way to make do with what they had. Don't be fooled by so called "peasant foods". They are nutritious, delicious, and filling. Here in Thailand I get more satisfaction from cheap food rich in herbs and taste, say Pad Kaprao, than from a meal that costs me 10 times as much, perhaps Thai but mostly Western.
Shopping only for the next dinner is far more rewarding. It eliminates waste. Your ingredients are fresh. And if you are in a bind because your fridge is somewhat bare, suddenly that one vegetable, fruit, or food item, that would have been overlooked in a full fridge, becomes inspiration for creativity. You tend to think more about what you are going to cook and how, rather than think about eating, and perhaps eat more because you just have to have the pudding, crepes, and yogurt because it's there looking at you. And after you are full and over nourished. Intoxicated by overstimulation. If you had to go hunting again, you'd have not will or interest. Worse yet you are going to get fat and your body and mind will be stressed.
Trading is not dissimilar. There are plenty of trade opportunities. Plenty of pairs. The market is open 24 hours a day, 5 days week. You can go long on EURUSD, short on USDJPY, heck you can hedge your trades if you feel the market will swing either way. Is that a good thing? Or are you juggling too many balls? Too many moving parts. Too many eggs in the basket. Bitten off too much to chew. You might get lucky and all your trades go well. Or you could choke on that big bite and with more at risk, you lose more.
Stay hungry. Go for low hanging fruit and only pick what you need to eat today. There will be low hanging fruit again. Don't over trade. Trade only when the market conditions are strongly in your favor and you have minimized your risk.
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