1.) Create new broker account
2.) Trend line
3.) Key level
5.) Risk management RR
Forex involves risk. To reduce risk for your account balance, you need to use proper risk management whic most of the people do not have or do not understand properly.
You need to risk the amount you can afford to lose. My suggestion is always 1% per account balance.
You wont risk 5€ to profit 10€, thats bad risk/reward ratio.
In swing trading type, you’ll risk 5€ to profit 20€ or more, so that your risk/reward ratio is bigger and above 2.5.
I usually use 50pip stop losses and profit is always 100pips +
But the question is, where do i need to put my stop loss ? You’ll learn in further lessons.
Lot size : I saw that some people are using big lot sizes acording to their account balance. To calculate your lot size, you need to know how much pips of stop loss you have and account balance.
If your 1% of account balance is 10€
You can either use 100pips stop loss with 0.01 lot size and that would be 1% of your balance. You can also use 0.10 lot size but then your stop loss needs to be 10pips, whic is too low, because of price moving.
Your first rule is to use proper risk management, before every trade you will set, you need to know where you’ll set your stop loss and take profit and also where your entry would be into forex market.
Forex is not sprint, is marathon. And always remember : less is more – quality over quantity.
To obtain yourself on market for a long time and actually profit from, don’t gamble but take that as an additional income to your paycheek every month. You can’t live from forex in the beginning but in the future, you can. You’ll learn a lot thro the proccess, make sure you’ll consume quality knowledge from people that actually have experiences and that can guide and teach you the proper way how to trade forex and profit on a long run.
6.) Stop Hunts
Stop hunts are caused by banks and institutions to catch stop losses of retail traders. Stop hunts usually occurs at significant historical levels such as 2-year resistance level or support, or other critical levels between. DXY, for instance, have a lot of stop hunts near 97.0 strong historical level. Also at 95.0 and 96.0.
When does stop hunts occurs and how they look:
Stop hunts will happen on the top or the bottom of the so-called trend or market structure. If we have 10months downtrend in some particular pair, and price moved all the way down to our historical support level, when price will reach it, most of the novice traders would buy the pair because they think like ” Look how price is low, it must go up” Yes that’s actually true, but not so fast. First, its gonna consolidate for some time before the breakout of the consolidation will occur and after that, will be trend “change” if that so. In so-called “consolidation box” you’ll be able to see stop hunts.
How they look:
Big spikes in both direction to trap both buyers and sellers before going in the favored direction.
Why they’re doing this?
As I mentioned to trap sellers and buyers, so when spike occurs, most of the traders will begin to think that they need to buy/sell currency pair right now!! because they believe they are going to miss the opportunity, YES it can go maybe 20pips in that direction BUT it is going to fall back into the consolidation box. How long can consolidation last, no one knows. When particular pair comes to the end of the trend, you have to be very patient I mean VERY patient, so all that mess goes by and then, you hop into.
Trend contain few characteristics :
– Accumulation ( before uptrend )
– Distribution (before downtrend )
Stop hunts will most likely be in the Accumulation and Distribution zone. But also have in mind, that they can also occur during the trend. If you had your key levels, you would know where is the possibility for stop hunt. Be the hunter, don’t be hunted.