Forex trading education - Market Analysis
In the money market there are analysts, economists and forecasters. Everyone is trying to forecast which way the market will go, and whether or not it will rise or fall. If they can do it - I can forecast as well, if the Euro will rise or fall, and we already mentioned that it is much easier to forecast the Forex market, you too can learn how to do it and you can always seek their help.
Remember: In this market nobody has an advantage over you.
Lets go back to the transaction we were discussing, the 10,000 Euro transaction. The value of each pip is 1 USD. Assuming that I was right and the Euro rose by 100 pips in a day, I profited 100 USD in one day. I will place a stop-loss order at 50 pips and risk 50 USD. or i will place a stop-loss order at 100 pips and risk a maximum of 100 USD. Why do i have to risk 10,000 to 15,000 USD in the money market in order to make 100 USD, when in the Forex market i can risk a maximum of 100 USD?
Now we arrive at the interesting part of the lesson, We will see how we set the level of risk in the Forex market to commission payments alone, meaning 3 pips a transaction, and how we will be able to have a 50% annual return.
I have a young child, five yeas old, Jonathan, and I will make him a Forex investment manager. I have a portfolio with 10,000 USD in it, and every morning on the way to school i ask him: Jonathan my dear, what is daddy going to do today? Will he buy Euros or sell USD? Whatever the child says that is what i do. If he says buy, I buy 10,000 EUros. If he says sell I sell 10,000 USD. And so forth, for 100 days.
For every transaction i set a stop-loss order of 100 pips and a take-profit order of 100 pips. That means that if the child is right, I make 100 USD. and if he is wrong i lose 100 USD. how many times, do you think, out of 100 transactions, did my son make 100 USD and how many times did he lose 100 USD? The answer is 50-50. It's statistics. Ultimately, it comes out to fifty-fifty.
My son guesses, and the Euros can rise or fall, there is not other possibility. It's like flipping a coin.
What will my sons account balance be after 100 transactions? 50 profitable transactions and 50 non-profitable transactions. 10,000 USD is the original amount minus the commissions that will be paid. Assuming that commission is 3 pips, and every pip is 1 USD, then 3 times 100, or rather 300 USD. meaning, my account will come to 9,700 USD.
how do you explain it, a five yours old child is better than experienced Forex traders? How does he only risk commission? I will teach you now.
To arrive at a situation in which the maximum risk is the commission alone, one must abide by two rules.
Whats Next?
* The integration rule
Or go back to the education index
Remember: In this market nobody has an advantage over you.
Lets go back to the transaction we were discussing, the 10,000 Euro transaction. The value of each pip is 1 USD. Assuming that I was right and the Euro rose by 100 pips in a day, I profited 100 USD in one day. I will place a stop-loss order at 50 pips and risk 50 USD. or i will place a stop-loss order at 100 pips and risk a maximum of 100 USD. Why do i have to risk 10,000 to 15,000 USD in the money market in order to make 100 USD, when in the Forex market i can risk a maximum of 100 USD?
Now we arrive at the interesting part of the lesson, We will see how we set the level of risk in the Forex market to commission payments alone, meaning 3 pips a transaction, and how we will be able to have a 50% annual return.
I have a young child, five yeas old, Jonathan, and I will make him a Forex investment manager. I have a portfolio with 10,000 USD in it, and every morning on the way to school i ask him: Jonathan my dear, what is daddy going to do today? Will he buy Euros or sell USD? Whatever the child says that is what i do. If he says buy, I buy 10,000 EUros. If he says sell I sell 10,000 USD. And so forth, for 100 days.
For every transaction i set a stop-loss order of 100 pips and a take-profit order of 100 pips. That means that if the child is right, I make 100 USD. and if he is wrong i lose 100 USD. how many times, do you think, out of 100 transactions, did my son make 100 USD and how many times did he lose 100 USD? The answer is 50-50. It's statistics. Ultimately, it comes out to fifty-fifty.
My son guesses, and the Euros can rise or fall, there is not other possibility. It's like flipping a coin.
What will my sons account balance be after 100 transactions? 50 profitable transactions and 50 non-profitable transactions. 10,000 USD is the original amount minus the commissions that will be paid. Assuming that commission is 3 pips, and every pip is 1 USD, then 3 times 100, or rather 300 USD. meaning, my account will come to 9,700 USD.
how do you explain it, a five yours old child is better than experienced Forex traders? How does he only risk commission? I will teach you now.
To arrive at a situation in which the maximum risk is the commission alone, one must abide by two rules.
Whats Next?
* The integration rule
Or go back to the education index
