I have been into trading since 2005, started with investment trading in Indian Stocks, slowly moved on to trade daily markets in 2006 and then towards Index and Stock Options with futures. From the interactions I had with my colleagues and people who are into trading , I realized that most of the people are
1. Unaware of the positive value of earning potential hidden in trading.
2. Scared of putting money since the daytrading market is highly speculative.
I could not stop laughing at that time since I was continuously at winning streak for 2 years without consecutive failures.I realize now that it was mainly due to the fact that I was trading inside the bubble which broke in 2007 .
But my approach towards markets do not change whether its Forex or Stocks and Options. One advantage we get while playing in Forex is Leverage and Hedging.Using these tools without a proper knowledge is like giving a sharp knife in the hands of a Monkey.
There are multiple factors that account for recklessness.
1. Having lot of Money in hand and no knowledge about forex.
2. In a hurry to cover the losses
3. Want to become a millionaire in a month.
4. Love failure in life.
5. Having no proper idea about the market and where its headed towards.
6. Depression due to job environment.
But its very simple and easy to trade in forex markets utilizing the LH tool provided by most brokers.
Every advisor out says do not invest more than 2% of your account value in a trade, and I really dont deny that its true for a one sided trader, but the law doesnt hold good using the LH tool.
One difference LH tool makes is fixing your trade to a hanger making both of your trade profit and loss to a constant.
Say I have $500 in my account with Leverage of 1:200. (Avafx)
To Open a EURUSD position of 0.1 Lot I need $50.
To Open a EURUSD position of 0.5 Lot I need $250.
So what does the LHTool tip ?
Say If I open 5 Minilots and if EUR goes down by 100 Pips, my whole account will be wiped out in a day.
But What I do as a Beginner is Open the same EURUSD 5 Lots and imediately hedge it.
(Avafx does provide hedging option while trading).
So I have 2 Positions on EURUSD with 1 Sell Position with Spread charges of $15 and 1 Buy position with Spread charges of $15 (assuming the EURUSD spread is 3 Pips).
By hedging my trade I have fixed my account loss to $30 now. Now I will wait until the market moves.
Once it starts moving 50+ pips positive or negative, I close the opposite trade which is in huge loss and continue with the profitting trade further to make profit.
Although the profit in pips is less in this case say after I close my loss trade, the market may move only 10 pips, thus making me $50 profit.Total profit on that day would be $50-$30 which is just $20.
But its a very optimistic trade that I never lost.
Well although I dont do this as I have my trading plans properly setup. This will be the best trade one who is new to the market should do to minimize or trade with no loss.
This is actually a safety device for hasty traders.
Note: Normally all beginners who jump into forex trading, will be thinking that they can make hefty money in trading , and are actually without direction. This tip will save those type of traders from wiping out their account even before they realize their mistakes.