Lesson 2

A quick recap of Lesson 1: Every trader should have Discipline when trading FOREX.

With that in mind, Lesson 2 goes over the basics. People achieve success  when they have a goal in mind and work towards that goal. In practice this means that if you would like to double your investment or portfolio you should research what you are getting into first. It is very important to determine at an early stage what kind of trader you are.

• Are you a trader who follows the market updates in the morning, lunch and afternoon?
• Or are you the kind of trader who likes to minimize your involvement when its time to make a decision, therefore resourcing to advice from family, friends, financial consultants, Jim Cramer or other TV outlets?

For those who don't have the time (or patience) to devote to FOREX or those who will be getting into FOREX for the first time, I personally recommend that you don't get involved in the actual trading right off the bat. I think it is worthwhile to first practice your trading strategy on a Demo Account to make sure you don't have a Losing Strategy. The time-frame for this initial "research" should be 3-6 months to ensure you reach a comfortable maturity level regarding the evolving market conditions and also that you gain sufficient experience to recognize different chart patterns. Anything short to that will hinder your chances of success. Since this site provides you with valuable information concerning Forex Robots that actually work, my advice would be to throw a Forex Robot to do the dirty work for you while you gain experience in FOREX trading and once you feel comfortable enough handling your account and risk, then jump on the train.

The FOREX market can be used as a channel to make quick money. But because of the leverage that it provides traders, you can also lose all your money. Usually, if you have a really bad trade that is sucking up all your resources the broker will automatically close the trade (and with that, your account) before you owe the broker any money. 

Now that you have an idea of how much effort you should be willing to allocate to your FOREX venture we can start talking about more practical terms before we talk about the FOREX Trader Psychology and different Winning Strategies. I've heard people ask me: "Will USD$500.00 be enough for me to start trading FOREX?" The answer is: Yes, but it depends on the risk you are willing to take. For a conservative individual a 1-2.5% risk means that for any given time you are willing to lose 1-2.5% of your capital invested when the price hits a Stop/Loss (S/L). This would be sufficient had you deposited a big chunk of money in this investment. In my opinion, any amount under USD$10,000.00 that you put into FOREX should be handled as if you had already lost your money. That is why with a USD$500.00 investment I would choose for more risk, in the range of 10-20% which corresponds to a loss of USD$50-$100. Each person will have a different risk settings depending on personal situation and values, however one thing is for sure: The bigger the risk, the bigger the reward.

When picking an appropriate Stop/Loss you directly factor in your risk factor which is usually normalized (goes from 0 to 1, where 1 is 100% risk). It is ultimately important that no trades are open without a S/L. This is what safegards your account in the event that the price sinks to a point where it drains your whole account. Keep in mind that although similar strategies used in the Stock Market can be applied to FOREX, because FOREX is open 24hr/5days per week you should ALWAYS be monitoring your trades. On that note, it is unadvisable to keep trades overnight.

So, how much should you fund a FOREX account? It depends on your investment goals and risk. A FOREX Robot will work on as little as USD$50.00, however I would strongly recommend the range USD$250.00-1000.00 to prove to yourself that you can trust a FOREX Robot before depositing additonal funds. Some people have the mentality that Expert Advisors out in the market are just a scam and any "proof" that it actually works has got to have some level of manipulation. I used to think that until I got to trust on the Robots little by little. That is why it takes time, effort and resources to build a solid base for the trust, so USD$250.00-500.00 is more than appropriate for the first timer. For people with experience in the Stock Market, I would suggest the same thing before allocating additional resources into FOREX.

I hope that you will gain valuable insight upon completion of this brief lesson and that you stay tuned for next Lessons on Trader Psychology and Winning Strategies.

Mateus

Villanova BSEE

U.S. Government Required Disclaimer - Commodity Futures Trading Commission Futures and Options trading has large potential rewards, but also large potential risks. You must be aware of the risks and be willing to accept them in order to invest in the futures and options markets. Don't trade with money you can't afford to lose. This is neither a solicitation nor an offer to Buy/Sell futures or options. No representation is being made that any account will or is likely to achieve profits or losses similar to those discussed on this web site. The past performance of any trading system or methodology is not necessarily indicative of future results.