Mastering the Currency Market in Visual Studio .NET

Printer Denso QR Bar Code in Visual Studio .NET Mastering the Currency Market

Figure 11-1

you have to be able to let a pro t run One of the hardest things to do in trading is to allow a pro t to run, particularly after a trader has had several losers in a row Many traders have exited a winning trade too soon or even failed to take the trade that led to the big winner, particularly after sustaining several losses in a row Being a position trader often means going through periods in which you have more losers than winners; this highlights how important it is to get those longrunning winners When you do get a winner and learn to let the trades run, you will nd that on average your winners are much larger than your losers; this accounts for the favorable

risk-reward ratio that position traders enjoy compared with traders who work the lower time frames If you are in a position trade and nd yourself constantly checking the price to see where your position is, you probably have too much at risk on the trade In other words, you have too large a position on; this also is known as overtrading If you nd you are getting up in the middle of the night to check your position, you de nitely have too much at risk In a position trade or any trade you should be risking only a small percentage of your overall risk capital For professionals this may be as little as 05 to 1 percent For beginners, who are often undercapitalized by de nition, it should never be over 5 percent and preferably should be closer to 2 percent The biggest advantage of position trading is that you do not have to spend eight or more hours in front of a computer screen and have to check in only once a day The fact that you are trading on the higher time frames also means that you will catch larger price movements The disadvantage of position trading is the other side of the risk-reward coin: Your losses will tend to be larger than they would be if you were trading a smaller time frame We recommend always starting out with just one contract per position trade and keeping your stop far enough away from price so that you will not be knocked out prematurely by the larger intraday price swings in markets that are due to fundamental news releases and other day-to-day happenings in the world and in nancial markets Your stop generally should be placed just beyond the last swing high or low on the chart If you are not comfortable with the idea of losing that much money the distance from where you entered the trade to where your stop is you should not take the trade

We often hear from beginners that it is not realistic to keep the risk per trade at such low levels We disagree wholeheartedly With the advent of micro contracts $1,000 face value and a margin rate of just $20 per contract at 50 to 1 there should be no problem staying within reasonable risk parameters

Swing trading involves shorter time frames than the daily charts; this generally means trading from the 240-, 60-, and 15-minute charts The time you could be in a swing trade can range from hours to days, and the trade can be a trend trade or a countertrend trade Often swing trades are countertrend trades as they take advantage of the secondary moves that often follow extended impulsive (trend) moves The term swing trade comes from the trader s action of swinging long or short Swing traders in general are less concerned with long-term trends than with waiting for setups or patterns on the chart that they recognize Some swing traders are in the market all the time as they take every buy and sell signal in their trading plan They know that although they will have losers (drawdowns), by being properly capitalized and using sound money management, they will be in a position to catch the biggest moves Swing traders, like all technical traders, always should have stops placed that are based on a percentage of the account size or risk capital and structure on the chart Like position traders, swing traders need to keep their stops far enough away from price to avoid being knocked out of positions prematurely by day-to-day volatility and must be willing to hold their trades through scheduled fundamental news releases