Trading System 1 - Know the dangerous areas in your account
Now I am going to tell you the method to earn benefits without losing your money. You may remember the last simple way I described. I hope you might have trained it a bit. It’s ok as far as you do it with Demo accounts. But from here onwards Demo accounts will be of no use. In one aspect you will have difficulties to understand. In the other way it’s difficult for me to explain it. Now you can start a real account and there is no need to be afraid. If there is anybody who have learnt bits and pieces from somewhere else, its better if they will start from the beginning.
Then it will be easy for you. If you have any problems, please ask from me via Skype. I don’t want any of you to be lost.
Exclude the risks
You have got to know that we work according to these details in order to remote the risks involved.
Account Leverage - 200:1
Main Investment - $ 100
Buy Price - 1.5900
Volume - 0.01
I have told you about mountain system. Those were my experiences, not somebody’s ideas. You might have seen its success. I am talking in this article about the reduction of risks involved. This is very important. Those who worked with Demo accounts used 0.1 as the lowest measure. But in real accounts that we deal with more often have a lowest value of 0.01. Therefore those who do small trading get a good benefit out of this. If you don’t remember the way to do it, go to Basic Trading 3 and read that article again. It’s about taking a part of the amount you invested. Just like taking 1 lakh out of invested 10 lakhs. Also we have to see how much will be used out of our invested money with regards to USD. We withdraw using USD in Forex Market. Remember that for the rest of your carrier. Rupees will be used only when you use it from here. Let’s see how much will be there in the market if we use 1 lakh.
GBP is 1.5900 in the market as we assume now.
USD Lot 1 = 100,000 (Read it in last articles if you need).
100,000 x 1.5900 = $ 159,000 will be needed for a Lot. (Leverage is not done).
As leverage is 200:1 the real value will be,
$ 159,000 / 200 (200 : 1) = $ 795 (For a lot, we need 795$, But we buy only 0.01.)
In Demo accounts it will be 795/10= 79.5 (Lots are divided in to 10 units)
In real accounts it will be 795/100=7.95 (Lots are divided in to 100 units)
Divide the value in 100and get the price in USD.
Now you can calculate the amount required to open a new trade at 0.01 levels.
I hope that you can understand the calculations done to find the amount of money we need to open an account. You have to know about Lots before everything. Also Pips concept is very important.
You know what Pips is now. If you have problems read this article Basic Trading 2 . I have explained it clearly in the end of that article. Those who invest 100$ will find the number of Pips there in it. If you invest more, please calculate it. You need this value to know many parameters as it is the one which is used to show ups and downs of the market.
If we can find the value of a Pip or if we can find the number of Pips in our investment, we can easily calculate the other measures. See whether you can calculate it?
Normally if you open a trading using this Lot size using your Demo account, you will get a benefit or a loss of 0.1USD. Imagine that using GBP/USD, 0.01 Lot Size we have ordered a Buy at 1.5900. Then you will see the way profits and losses shown by the software. When market goes up to 1.5930 you get a profit of 30 Pips. It’s in the same way I described you early. If Pips will go up you’ll get a profit and if it goes down, you’ll get a loss. Now you have a profit of 30 Pips. That means you have got a 3$ profit from this trading.
$ 0.1(The profit or loss for Pip) x Pips 30 = $ 3
See it for yourself. Open a trading from your account for a 0.01 Lots and check whether you get the profits and losses for 1 or 0.1 Pips. If you get 30 Pips loss, which means you lost 3$. We are now proceeding to see the area we have to deal within. It’s called Trading area.
This is the real area that we can trade within in relation to the invested amount of money. We can deal within this area. New comers should be aware about that, more than others. We determined the Pips value for Lots as well as USD amount invested in market per a Pip. Let’s try to find the Pips area we get if we invest 100$. It’s our trading zone. Pips go up and down. So we have to see the value from Pips as it shows the changes.
If we get 0.1$ for a Pip at 0.01 level, how many Pips are needed for 100$.
100/0.1=1000 (The total no of Pips we get)
Now you know the area and you know that we have 1000 Pips in the trading account. Let’s think that you have opened a Buy order at 1.5900. You have 1000 Pips area to save this order. In other words, your account will remain only up to 1000 Pips change if the market prices will change drastically. So you have the chance to save it up to 1.4900. If it goes further down, your trade will be lost. If it doesn’t happen nothing will happen. But this is not relevant to the profits. Your area is limitless there. If you open 2 trades, your trade will have half of the previous area of trading. So it will be 500. Therefore at 1.5400 your account will be lost. Then you can see why people lose their money. This is an essential part that you should know.
Some people invest 50$ to see whether they can earn with Forex. So there safe area will be very low. As the investment goes down, so does the safe zone of trading.
I have shown you some examples here.
$ 50 = 500
$ 100 = 1000
$ 200 = 2000
$ 500 = 5000
$ 1000 = 10,000
That’s why I tell you to invest more money in the account in order to win in this field. You’ll have a high safe area and also in profit earning, you will have a very high profits as well. Ask me if you have any questions.