Hello.
I'm still new to forex, so please bare with me.
1st Newbie Question:
When investing in stocks, a pretty standard money management practice is to divide your starting balance into equal units (for example, $10.000 : 5 = $2.500 per investment) and risk a desired percentage from each unit.
When trading with currencies, as far as I understand, it looks something like this:
Trade #|Core Equity|2% risk on each trade|Margin Debit (my investment)
1 | $20.000 | $400 | $1170,9 (EUR/USD)*
2 | $18.829 | $376 | $1097,7 (AUD/USD)*
3 | $17.732 | $354 | $1024,7 (NZD/USD)*
etc.
* I just took a basis of 1.4636 (EUR/USD) for each calculation, with a 2% risk and a 50 pip stop-loss. Each trade would be made right after another, without closing any previous positions.
Now, it may happen, than my first trade is going to be a looser, but my third trade turns out to be a winner. This means, that I would loose more with trade 1, because I had a bigger position and I would gain less with trade 3, because I had a smaller position.
Do I imagine this correctly?
2nd Newbie Question:
I plan to trade only 1 pair - EUR/USD. Let's say I go long @ 1.4500 and the pair shoots up by 50 pips in a few hours. I want to buy more of EUR/USD at 1.4550 because I'm "confident", that the price will continue to go up. The question is, how do I determine the size of my second position? Do I again calculate 2% of my core equity (the money which is left for making further investments), or do I take a smaller percentage this time? (because "pyramiding" or scaling in should be done with each position being smaller than the previous one)
I would be *very* grateful, if someone more experienced, and with more knowledge than me, could explain, how to handle the given situations correctly. Thank you in advance!
I'm still new to forex, so please bare with me.
1st Newbie Question:
When investing in stocks, a pretty standard money management practice is to divide your starting balance into equal units (for example, $10.000 : 5 = $2.500 per investment) and risk a desired percentage from each unit.
When trading with currencies, as far as I understand, it looks something like this:
Trade #|Core Equity|2% risk on each trade|Margin Debit (my investment)
1 | $20.000 | $400 | $1170,9 (EUR/USD)*
2 | $18.829 | $376 | $1097,7 (AUD/USD)*
3 | $17.732 | $354 | $1024,7 (NZD/USD)*
etc.
* I just took a basis of 1.4636 (EUR/USD) for each calculation, with a 2% risk and a 50 pip stop-loss. Each trade would be made right after another, without closing any previous positions.
Now, it may happen, than my first trade is going to be a looser, but my third trade turns out to be a winner. This means, that I would loose more with trade 1, because I had a bigger position and I would gain less with trade 3, because I had a smaller position.
Do I imagine this correctly?
2nd Newbie Question:
I plan to trade only 1 pair - EUR/USD. Let's say I go long @ 1.4500 and the pair shoots up by 50 pips in a few hours. I want to buy more of EUR/USD at 1.4550 because I'm "confident", that the price will continue to go up. The question is, how do I determine the size of my second position? Do I again calculate 2% of my core equity (the money which is left for making further investments), or do I take a smaller percentage this time? (because "pyramiding" or scaling in should be done with each position being smaller than the previous one)
I would be *very* grateful, if someone more experienced, and with more knowledge than me, could explain, how to handle the given situations correctly. Thank you in advance!
