Putting All Odds On Your Side.

Successful forex trading is all about putting all odds on your side before entering the market. In other words, for you to become a successful trader who consistently make profit out of the forex market, you need to have all odds on your side otherwise you will only end up gambling all your money away.

Today you are going to learn four winning principles you must know and practice to be able to bank those pips month after month.

(1). You must have a system that wins at least 60% of the time.
Just as you may already have heard, there is no holy grail in trading. You don’t need to win every trade to be a successful trader. So having a winning rate of just 60% is enough which means out of every 10 trades you take, you will only need to win 6 of them to make profits at the end of the month.

(2). You must have a good risk/reward ratio of at least 1:1.5
This is another point I’m going to emphasize on as it is one of the factors responsible for your winning or loosing in forex trading. You often find some traders setting a stop loss of maybe 100 pips and maybe take profit of just 50 pips. If you ask them, they will most likely tell you that they are giving the pair enough room to move around, but what they are doing actually is short changing themselves. Let’s look at an example: Trader A took 5 trades with a stoploss of 200 pips and take profit of 100, now assuming he won his first two trades and lost his last 3. What will be his p/l
Total trade = 5
Wins = 200
Loss = 600
p/l = – (600 – 200) = –400 pips

We are just trying to look at the worst case scenario here because in forex trading, you have to be prepared for anything which is what makes the market even more interesting. So don’t get scared ok? Smile.

Now let’s take a look at trader B who also places five trades out of which the first 2 were winners but the last 3 loosers. The only difference there is: He is risking 100 pips to make 200 pips in other words, the sl = 100 TP = 200. let’s look at the p/l
Wins = 400 pips
Looses = 300 pips
Profit = (400 – 100) = 100 pips

As you can see from our calculation above, Trader B still ended up with profit at the end of the month despite the three losses he made. Personally, I would not go for anything less than 1:1.5 risk/reward this is very important.

(3) Adhere to strict management rules.
If there was ever a holy grail in forex trading, it will be adhering to strict money management As this factor will determine how long you are going to remain in the game.
Give two traders the same trading systems for a month, 1 could double his account while the other depicts his, If you carefully investigate what happened, you are most likely to find out that strict money management made all the difference for the guy who succeeded.

Never risk more than 3% of your account on a single trade. Some people say 2% but I believe stretching 2 3% is ok as long as you have a system that wins 60% of the time.

(4). Adhere firmly to the three rules above and be consistent.
I believe this point is self explanatory. Try not to break any of the rules above and be consistent with them,don't be greedy and I promise, you will always end up with profit every month. Try not to break the rules because if you do, the market will punish you. That will be all for my post today.

Thanks for reading and keep banking those pips.