The Proper Use Of Leverage

How To Trade Without Blowing Out Your Account

A proper understanding of leverage is essential to your survival as a forex trader. Leverage is a wonderful thing, but it cuts both ways. You can make big money quickly and lose big money quickly.

Our goal is to have a positive return monthly, so that we can be independent. Archimedes, the Greek philosopher and mathematician said:



'Give me a place to stand and I will move the earth.'
On the lever in Pappus Synagoge

A Lever allows you to exert great strength on one side with a seemingly little effort from the other side.

When you trade forex, you are using very little money from your pocket to control thousands of dollars in the market.

If you win, you win big, often making 100% on your money and if you lose, you stand to lose a big chunk, if not all of your account.

So here is how I use leverage. Use a small amount of the leverage available to you when you trade. Just because it is there to use does not mean you should use it all.

Recently, I sent this email to one of my customers seeking advice on making the system work. I think it applies to everyone.

Let's look at two scenarios of a guy with a trading account of just $500.

Trader A buys 3 mini- contracts of the pound @ 1.9000 with a margin of $150 Trader B buys 3 micro lots at .25 costing him $37.50 in Margin.

Price moves against them both for 100 pips.

Trader Trader A is in the hole for $300
Trader B is in the hole for $75

Trader A is in serious panic because he is $200 from blowing up his account.
Trader B still has $425 left and can afford to hold on.

Price then moves down a further 50 pips.

Trader A loses an additional $150.
Trader B loses just $37.50.

By now, Trader A has blown up his account and trader B still has $387.50 left in his account even though the market has moved down 150 points from his entry.

I'd rather be Trader B. If Trader A were wise, he would have used a stop loss. His account would still be down even if he had lost $150.

Trader B can ride this out because by now the market is ready to reverse big time.

So watch leverage and how you use it.

When you enter a trade on metatrader4, it shows you your margin level. I never let my margin level go below 1500%.Here is what you should look for:






In this example, you can see that there is a balance of about $600 in the account. There were two trades on of .25 each and a resultant margin level of 2537%.

Whatever the market does here, this trade will make at least $30. If you do the calculation, that's about 5% return on this trade alone. Do 10 of these and you have returned 50% on $600 within the month.

You can really grow rich steadily.

Please pay attention to what your margin level says. Try to keep it at 1500% or more.
This is how I turned leverage on its head and how I am able to get away without using a stop loss.

When trades go against me for a day or two, my account is never in danger because I can ride it out and reap the benefits later when it does go my way which doesn't take long because I enter at very good prices.

best-
Olumuyiwa

TSFT Review: A Word About Day Trading

Hello Traders,

As I mentioned in my last post, some of you wanted a day trading technique that you can use to make money consistently. The keyword here is consistency.

To gain this consistency, you have to dis-abuse yourself of commonly held notions about day trading- at least they have not held true in my experience.

My favorite is that day trading has to be fast. Get in , get out in 10 minutes flat.
Nothing can be far from the truth.

This kind of thinking eventually leads to a blown out account due to too many stop loss hits.

I am going to make my first confession here, I do not use stop losses. They are a waste and they will erode your account surely and fast.

I trade another way and i will share that with you in due time during this review.

A day trade in my opinion should take as long as you win the trade for how many pips that you are comfortable with and is realistic.

This may take between 30 minutes to 20 hrs. Are you surprised? Just because you are making a day trade does not mean that the market knows that you are day trading.

So you have to be patient. The keyword here is patience- the ability to wait unperturbed for a desired outcome. You need to exercise patience for entries, pip gain and pip harvesting. In other words, before, during and at the close of the trade.

Many of us, including me, got into trading because we want to make a lot of money, in a seemingly painless way. This might be true, but we are immediately faced with the twin emotions of fear and greed, once we start to trade.

Greed, in the sense that we translate the American fast food culture to trading. Big money fast. I say, big money steadily.

Using stop losses, especially unrealistic ones, is a manifestation of fear. Otherwise why would you set a 30-pip stop loss for an instrument that has a daily trading range of 126? You know, we have met the enemy and they are us!

Doesn't make sense. Does it?

You are surely going to lose the trade because you have boxed yourself in. Never do this unless you want to keep making your brokers richer and yourself poorer.

We will learn another way.

When i was a youth, I use to trap rodents. They are as smart as a whip when it comes to evading capture. I learned something from them. And this is it.

A rodent never resides in a hole with only one entrance or exit. They construct multiple outlets, sometimes 5 or 6. If you came to the front door, they would escape through the side, back or the roof door.

So to trap them, you have to discover all these doors before you make your move.

As a day trader, never box yourself in with a stop loss because that is a hole with only one exit.

Be the rodent and develop several exits. Before you enter the trade, visualise how the trade might play out so that when they do, you are not surprised and make a panic exit.

My next post will be how to use the genius of Archimedes to win in day trading. Before my next post, please read up on Archimedes. You can just Google him.

best-
Olumuyiwa

The Successful Forex Trader Day Trading Guide

Hello SFTDs,

I have been getting emails from traders who have bought the ebook that want to day trade the spot market to make money daily, instead of positioning in the options market.

Since I do both, I will post here a day trading guide the way I do it, piece by piece. I am constantly researching techniques that work but these new findings do not invalidate the earlier technique taught in the ebook you purchased.

I like to have a quiver full of arrows to throw at the market or more appropriately, a full set of clubs in my golf bag for different and all occasions.

Topics to be covered include the proper use of leverage, trend determination, optimal entries and exits, as well as the business of forex trading.

So stay tuned.........

Where Are You Today?

So What Now?

So you bought the ebook. What have you done with the information in there. I know it works because I am able to trade full time using these techniques.

If its not working for you or you have put my ebook in your graveyard of ebooks in your garage, please make a commitment to stick with it.

Practice the techniques in a demo account until you can recognise the signals in your sleep.

Email me if you need clarification. I am readily available to help you out. Trading forex has freed me from the rat-race. It can do the same for you.

I will be posting new updates to the ebook here and my new discoveries that have been working for me.

I might even post some trades here that I am taking. So check, infact, bookmark this site for ready access.

Let's all make money together.

best-

The Pipraker

Building Moving Average Envelopes That Work

The Moving Average has often been maligned as a lagging or look-back indicator. The knock on the MA is that by the time it signals a trade, the move might well be over or the trade far gone.

However, like most problems, there is a solution that can make the MA a prized asset in your trading arsenal once again.

The solution is to use the MA as an over/under indicator instead as a cross-over. The traditional way of using the MA is to plot two MAs of different lengths and take a signal when one crosses over the other - for example when the 5MA crosses over the 10MA.

A better way is to plot a single MA and use price as the signal to take a trade or not. For example if you plot a 5MA, you will only take a trade when price crosses the MA to the downside to go short and to the upside to go long.

This solution is not as simple to implement as it sounds because sometimes after a protracted move to one side away from the MA, it is actually time to reverse.
The way to avoid being whipsawed on these moves is to use a Moving Average Envelope.

The MA envelope keeps you away from whip-saws by making sure that a sort of trend has developed before you join the trade. With an envelope, what you do is you set an upper and lower price threshold before you can trade. Your patience is rewarded by more winning trades using the MA Envelope.

This trading technique requires that you exhibit a lot of patience.

To build a MA Envelope, you are faced with making your first decision, and it is a crucial one. What MA setting do you use? Once you have made this decision, it is time to build the envelope.

Let's build one that has proven to be very effective. To answer the first question, we will use the 8 period Moving Average or MA8, plotted on the 30-minute chart.

To build the MA8 Envelope, do the following:

+ Plot MA 8, Smoothed, Apply to High, color yellow
+ Plot MA 8, Smoothed, Apply to Low, color yellow
+ Plot MA 8, Linear Weighted, Apply to Close, color red

There is your MA 8 Envelope.

As you look at your chart now, certain things start to become clearer to you as far as how the price interacts with the envelope.
You will start to notice why some trades that you had taken in the past fizzled and lost you money.

You make money when there is a north/south movement in price. Horizontal or east/west movement is called 'churning'. It is 'one yard and a cloud of dust' as they describe in football, a play with little gain.

These then are the buy and sell rules:

+ Buy when the candle closes above the MA 8 High.
+ Sell when the candle closes below the MA 8 Low.

The red linear-weighted MA8 plays a very important role in the envelope. It signals price exhaustion. When price is about to reverse or pull back, it moves closer to the left upper or lower corners of the two yellow smoothed Mas that make up the envelope.

In an uptrend, it glues itself to the upper left hand corner of the MA8 High, and in a downtrend, it glues itself to the lower left hand corner of the MA 8 Low.

When you see this phenomenon, prepare for either a pull back or a complete price reversal!

In the forex market or in any market that you trade, never trade without a stop loss! I can not over-emphasize this. You can not be 100% right so when you are wrong, save your account from being blown up.

with this envelope, there is a natural stop loss point provided to you. When you are long, use the MA8 Low as your stop and when short, use the MA8 High as your stop. A stop will qualify as a close under or over these averages.

To see a picture of this envelope with more annotations, please visit learnforexoption.com

Trading With The Trend

The Trend Is Really Your Friend

Everyone who has really traded has heard the dictum 'the trend is your friend'.
You have always been advised to trade with the trend and it is sound advice.

In this blog,I have shown how you can make money with an overextended market. When you look at it, this is what the 144 MA technique is.

You really have to be careful when you trade against the trend. If the trade stalls, get out and re-assess the market.

The last trade posted here was such a trade. I cut my losses after seeing that what should have happened had not in a healthy time frame.

So how do you trade with the trend? You need an indicator that shows you that. You also need a timing indicator to get in at the right time.

If you have been reading this blog, you would have seen that I am partial to the 30 minute chart. I trade the 30 minute chart because I feel that it is a long enough time frame to weed out market twitches.

When I see a trade setup in this time frame, I can fell that I will not be whipsawed.
This leads to confidence and I can stay with the trade when it is in a lull or my profit target has not been met.

So again,how do you determine the trend? As has been said, you need an indicator that can reliably show you the trend. This in my opinion should be a moving average.

You also need a timing indicator, which in this case should be an oscillator.

To then make the trend your friend, you need to determing what settings will work for both the moving average and the oscillator.

If you have bought the my ebook, you will know these settings. I will begin to post trades here that follow the trend.

Stay tuned..........

To learn these powerful settings, go to HERE

Update On Another 144 Trade

Clunker

This is an update on the last trade. This trade failed to make money. Welcome to the realities of trading. I lost 40 pips on this trade. I cut my losses after seeing that a downtrend had established itself.

Good thing I cut my losses quickly because the market went into a tailspin after that with the dollar strenghtening very considerably. I have since made the 40 pips back on other trades.

Stay tuned for other trades and trade ideas.