Help for Newbies (Discussion Thread)

I think Google will be your best friend in this regard but if you have particular difficulty with anything I guess you can ask away in this thread - it's newbie help discussion after all
It is a great community. I am sure somebody will help.

Have you had a look at www.babypips.com ? It's an excellent site for basic forex.

No, you can trade any pair you want that your broker supports... but it is recommended you stay with the major crosses.

As far as transaction costs... maybe in terms of the spread width and the per pip value may be more on some pairs.

You only pay double or more spread if you close your trade during a time in which the broker has widened it like during news time or some other ill-liquid time.

If you have a normal roll-over /swap account you may get charged interest or paid interest depending on which pairs you are holding at the daily roll-over time.

Transaction costs in terms of leverage is entirely different kind of cost... it's not an actual cost. The only time it truly costs you is if you suffer a margin call.

Say you go to the store and apples cost $10,000 an apple but the prices of the apples fluctuate with demand and how many there are on the shelf.

The store gives you leverage so you can buy some apples. Because you bought them you think the price will go up. The leverage they give you also has "Margin" attached to it. Because they give you credit to buy the apples without putting up the full $10,000 per apple.

Lets say you bought 5 apples for $5,000, but the apples are worth $50,000 or $10,000 a piece.

The next day a supplier comes to the store and delivers more apples than what anyone expected and the price of the apples fall to $9,200 per apple for $4,000 loss to you.

You only put up $5,000 and all you got left in "Margin" is $1,000 and a $4,000 floating loss. Depending on what leverage the store gave you decides whether they just closed your apple trades out or not and left you with a loss.

On the flip side if the delivery truck came and didn't have no apples and the price jumped to $10,800 per apple or whatever you could then sell your apples back for $4,000 profit minus the spread and swap charges.

Some people think of margin cost as a fixed amount and the cost only applies to what you are charged against your account so that you can't buy more apples to take on more risk. Once you close out an apple order or whatever the cost is alleviated and margin is replenished to allow you to open another trade without the risk of a margin call.

Another term for this is also "Margining Out" or "Over-Leveraged" this happens when you don't have enough in your account to cover the margin "costs" of the transactions you have open. But it is not a "true" cost like going to the store and physically buying something.

You have to think of it as in terms of credit. Hopefully this is clear enough for you.

A demo account should show you all of this clearly. Open up a new dummy demo and play around with it opening trades and watch the effects opening each trade has in regards to margin, free margin, margin level etc.

Demo will (should) also display swap charges and commissions although commissions are rare, most brokers are compensated by the spread and in some cases trading against you.

There's alot to take in so take your time... and measure it in terms of 1,000's of hours. You won't learn it in an afternoon or even 1 year. Some people don't even learn it in a year. It took me about 3-4 years to get a good grasp on it.

Good luck.

Thanks Peter for this thread. As I get my feet wet in Forex I can see this is going to be a great resource for my learning.

Thanks for that Pipiness. Much appreciated.

Hello

I trade on various markets since 2006. Long story short as every investor I started with stocks without any knowledge and with strong believe that I am next Warren Buffet. 70% drawdown on my account proof me wrong. Since this I am reading a lot and trying to improve my knowledge. Few years ago I became interested in forex and this time I decided not to get in till I develop reasonable profits on demo account. Since this I've been playing on and off for year but never invested a penny. Recently (about year ago) I realize how important MM is and I stopped reading nonsense about indicators and systems and started reading more on more about this subject. However I have few questions:

1. I developed already one successful long term system with reasonable expectancy and good position sizing, however my desire to be right is still high (I'm working on it) and this system is wrong 9 out of 10 times almost (however when it is right it is 15-1 and more so expectancy is ok). I am afraid that when it comes to real money I might blow it up because of trying to be right which obviously I can handle on demo but stocks showed me that not always on real account. Obviously system gave me more then 15% of my account in less then 6 months testing, so system is good, however as I mention I don't feel that it suits me psychology, should I force myself to trade it with real money hoping that I can survive it or should I leave it and try to develop different system?
2. I already started about week ago testing my first idea of short term trading system, seems like it might be actualy less profitable then previous one but I feel so much safer playing it (emotionally), as signals are 1-3 times a day and I know result of each trade pretty quick (not months later)and it seems to be right much more often ( 40-60% approximately, still during testing I need at least 30 trades to tell, so I'm talking about emotions here mostly). My question here is... with that kind of system ( 20-60 pips stop loss, trailing stop twice wider both based on volatility ) should I leave open positions for weekend? I've done that on previous system as stop loss there was usually on 300-800 pips, however here we talking about totally different situation. Will my stop loss or trailing stop loss trigger at weekend if the price will suddenly went wrong way? ( I trade at Oanda)
3. Will it be reasonable to play both systems on one account? Obviously short term system suppose to attract my attention of long term system so I won't be so stressed by results of the first one. What do you think about it? Can I still use 1% risking capital on each trade or should I change it to using 0.5% for each system then, when I play both?
4. Is 1% necessary? I mean if I will test system for few years and solve my psychological issues (mostly desire to be right, I'm not so much terrified of drawdowns I know they are part of every system) so to be sure that my system is well tested, that I know what can I expect, and that I don't do to many mistakes trading it can I possibly increase my risk? Because it is always strongly recommended on this forum to use only 1% risk per transaction but in various literature I've seen position sizing ideas with up to 5% risk. Obviously this is quite high, but on well tested system used on real account for few years I think I should be able to get to 1.5-2.9% risk per trade without blowing an account, obviously drawdowns will be significantly higher but well that doesn't scare me and if I will decide to change it I will expect that. What do you think of it?

I will appreciate any help.

Thanks for your help.

What is relative drawdown?

try this link

If you loose say 20% of you account on one trade, you have just expirienced a drawdown of 20%

Hello everyone...
And thanks for your work and your concern about rookies and ignorant traders like me.
First at all, i don´t know where to start but I think I can express myself here (we newbies cant start threads) I hope to find some help of the experimented traders.
I have begun trading 5 months ago, i started with fibos, sup. and res. and a little intuiton, but this last 5 weeks i´m a disaster, i dont know when to stop winning and sometimes ends bad and I dont know when to stop lossing so I try to lost the minimun I can. Any kind of help, comment or tutorship it´s welcome, mostly because i´m doing this activity my way of living. Thank you so much... and nice trading !

Can anyone help me? I already contact Oanda and they told me that yes, my TS and SL will trigger at weekend, so that problem is solved but I'm still looking for answers with rest.

This thread, which also lead me to information for beginners thread, which again lead me to an article called "the path to succesful trading": Blows my mind.

Thank you and all the other people who help and share knowledge on this forum. Studying everything just in the rookie discussion forum will take me months and i couldnt be happier about it.

Thank you !

Becareful what you read from a demo statement or even a real live statement.

Relative Drawdown and Absolute Drawdown are often wrong with in account statements. The reason for this is that they measure a static figure for a fluctuating market at any given time.

So often times the Drawdown amounts are often less than what they actually are and even more so when the account is flat or no open trades.

This has 2 effects... make you think everything is ok and up your lot size thus giving the more liklihood of blowing the account.

To get a more accurate idea you need to record the info yourself you can do this a couple of ways by incorporating it within an EA using globalvariables or by writing the info to disk.

explain / give an example

i think he is referring to equity drawdowns... which don't get counted until they are actual account drawdowns? or maybe they do get counted and i haven't looked at a statement for too long.

just think of all the elite market warriors battling the big bad forex market without a stoploss, praying to their 'art of war' bibles, and holding onto massive floating losses. yet the statement shows little or no drawdowns and all wins etc.

haha, I love the second part of your post. In that context it makes perfect sense.

It's very easy common sense. The market moves... a static number does not.

Open up a dummy demo and open some trades wait take pictures, wait take pictures, wait take pictures and then compare them to the statement. Hopefully you're not too lazy for that.

If you trade with 100 pip stop, 50 pip stop doesn't matter you still won't escape this problem, because your stop will not always get hit. If you have a 99 pip floating loss and the trade turns and wins the DD numbers will not be right.

Static Number never equals Random Number... it will always be off.

okay, you talk about floating losses vs. closed losses, right?

Well you got to remember you always have floating losses. You have them as soon as you open the trade.

It gets somewhat complex when you talk about floating losses vs closed losses.

All I am saying is that you shouldn't make any lot size decisions or take any additional trades based off absolute or relative DD due to the discrepancy.

In some cases you might find the numbers to be right which is why I suggested to take pictures multiple times go as far as you want to go with it if you want to close some trades out as well doesn't matter that much, once the errors are there closing trades will not magically erase the errors.

The main reason I know of the discrepancy is that I've tracked DD within my EA's for YEARS. This shouldn't be any big secret, it's common sense IMHO.

anyone have good article to read? i want to know about bond