Two quick questions!

I have been reading a lot on basic forex trading, etc, however I still have two questions that I was hoping I could get answered:

1) Trading length - I want to trade over a period of a few days to a week, however the market moves in excess of 100 pips per day on average (or so it seems from charts). How do I set a stop loss effectively and not get kicked out in one day?

2) I still don't *really* understand how leverage works, and why less is more effective than more. Is it because less leverage means more ability to preserve capital and thus longer in the market, where as more leverage means higher chance to make profit but also easier to lose it all?


Thanks guys!

EDIT: For #2 I put margin instead of leverage. My bad!

Answer#1.... become familiar with this site. Also, this question can be answered by your broker.

Answer#2.... Your broker can answer this question. You pay them, so put their services to work for you. You can also use the forums search feature to answer question #2 my friend.

Good Luck

I've asked them actually, and they were very vague (beating around the bush, saying to just try stuff out).

How forex leverage works:

http://www.investopedia.com/ask/answ...exleverage.asp

You can google and find many answers to this question. Traders that do not know this answer are the ones that have not taken a forex course. I strongly suggest that you sign up for one.

When you say ForEx course you mean one that's marketed by brokerage companies, or seperate entities?

Just my opinion, but to keep things in beginner, layman's terms....

1. Many traders use ATR (avg true range) to set stops in a given timeframe. This indicator is available on some trading platform's charts. Each currency has a different amount of volatility, and it can change from time to time, days of the week, etc. So this is a good starting point. Using, say, 80% of ATR for a stop will keep you out of most market "noise". Think of your stop as a failsafe "emergency brake" which will keep things from going completely down the toilet, and set it at an appropriate level.

2. You pretty much understand leverage. High leverage lets you experience small changes in the market in an amplified manner - you win big, you lose big. Because of the possibility of losing big, its necessary to have tighter stops that in #1 above. So, you are more likely to reach your stop loss due to a normal market's "choppy" activity that really isn't a trend. Also, you need more capital to endure several losses in a row when trading high leverage.

If you use low leverage, you experience smoother changes in the market. It takes a larger market move to equal a large gain in profit or loss. Thus, you can set realistic stops that won't get triggered unless you are completely on the wrong side of the trend. You can trade with less capital, although you still want to use adequate capital so you are only risking a small percentage of it on each trade. But that is money management, another topic.

Most brokers will offer high leverage to you. 100:1, 200:1, 400:1. That doesn't mean you need to trade that way. You can instruct your broker as to what leverage you wish to trade with, and they will honor it. (Or if they don't find another broker.) Some brokers, such as Oanda, limit leverage to 50:1 max, which is probably a good idea.

Hope that makes some sense!

Answer to question 1 is find support and resistance lines.....

Clockwork

I find InterbankFX has a pretty good live chat service for getting answers to the questions you raise.

How is yr equity going as a newbie?

Pid...that's exactly the type of response I was looking for. Thank you!! Low Leverage and large stops is what I'm going to implement.

I havn't been live trading, only creating a system and doing some basic trades via demo. I'm in the green so far, but I've been in the red a bunch as well. We'll see what happens when it comes time for live!

I also checked out Baby Pips, helped a lot in other areas . Thanks guys