Beginner Risk Management
Pip is an acronym for “price interest point” or “percentage in point”, which is a price change of 1/100 of 1% or one basis point. This represents the smallest possible change in an exchange rate.
The majority of Forex pairs are quoted up to 4 decimal places i.e. a pip is the last of those 4 decimal places.
When I started Forex trading, I genuinely thought I had to be trading for 24 hours, 5 days a week, and 240 days in a calendar year! Genuinely! I kid you not. I thought that was the only way you made money in the Forex Market.
Until I learned that it all depended on your strategy and the kind of lifestyle you sought to live.
If this week has taught me anything, it’s that you can never be too sure because you never know what’s coming or when it is coming. This past week we witnessed the US elections, and with that came volatility.
As traders, we love volatility. We love movement in a bearish or bullish direction.
Over the years, I’ve had many questions about signal providers. Do they work? Are they for everyone? How do you really measure their accuracy? And even, WHY you would provide signals?
The only reason I asked that last question over the years was because I genuinely believed that providing signals would somewhat take the trader’s focus off their own trading.
Early on in my Forex journey, I would look for setups on every single pair, from the most common to the most exotic. The pairs very few traders even knew existed or cared to look at. This, of course, has a few benefits such as:
– Always finding a setup.
– Trading frequently.
– You feel more productive.
Cut your losses short, let your winners run. While this piece of advice is well known, you will find that the majority of retail traders do not put this into practice.
Instead, they hope that losses will turn into profits and cut winning trades because they fear that the market will turn against them. This type of behavior is often because of a traders psychological pitfalls.
I mean that literally. To every trader out there that thinks you place your trades for free, allow me to disabuse you of that notion immediately! IT COSTS MONEY TO TRADE. And no, I’m not talking about your losses.
When you place a trade, ANY TRADE, whether it was a mistake, a bad trade, or a good trade, your broker will either charge you a COMMISSION and/or a SPREAD. There is no avoiding this. You have to pay to play.