Is Forex Risky and What is the Recommended Leverage?
Forex trading involves risks, if you are trading real money. However, there are many ways that you can minimize this by using strategies such as working out your trade size, so you know exactly how much you are prepared to lose, and then always using a stop loss. Most people do not understand this and overtrade!
With regards to Leverage, you can go for any leverage that you wish to. People say large leverage is too risky, which is not true. Just because a trader may have 500:1 leverage does not mean they have more risk than someone using only 25:1.
However, if the trader with 500:1 is using every spare dollar in their account with that leverage in order to make a trade as big as possible, then of course, this is a lot more risk! But the leverage shouldn’t matter because both traders should be both working out their trade sizes exactly the same way, and the leverage should not be affecting the outcome of the trade.
The more trades you open, the less your equity will be (i.e. money power to trade). Therefore, if you keep your trades to minimum of 5 per week, you should be just fine. But of course you will need to have a strict control on your lot sizing.
What Equipment or Charts Do I Need?
As stated in the heading, the number one key bit of kit for a price action trader is New York ‘close 5-day charts’. The important thing here is that their charts only have 5 daily candles instead of 6, and the days start in Asia where the market opens, works through Europe and the UK, and then closes in the US. This way, your daily candles are getting the most accurate reflection for price action. IC Markets do have it in their MT4 platform.
You should also seek for a solid Broker. As a trader, we need to be able to know that we can rely on our broker, and also know that our stops and targets will get executed. The other thing is that one of the biggest expenses a trader is going to have over their career is commissions and spreads.
There can be a huge discrepancy between a good and a dodgy broker when it comes to spreads. Whilst you may think it is only a few pips, soon you will start making bigger and bigger trades, and over time, those pips quickly add into thousands. That’s how the brokers make their profits!
Can I Trade Price Action on Just the Daily Charts or Can I Trade Smaller Frames as Well?
You can trade Price action in any time frames. Your main basic reference chart shall always be the Daily chart. With price action, we are reading the behaviour of the traders who are moving the markets, and their order flow.
This is the same therefore, whether it is a daily or a 15 minute chart. Just simply trading on smaller time frames, you will encounter many false breaks and many more minor support and resistance levels to contend with.
Basically, the smaller time frames are much busy and noisier.
I Have a Full-time Job. Can I Still Trade Price Action?
Yes, of course you can. Each country and time zone works differently for everyone. In comparison to Australia, who are perfectly based in terms of time zones, having a job and trading the Forex markets works almost perfectly for a lot of the year because they are able to wake up, check the New York close candle as it closes for any potential setups, and go off to work.
When you wake up in the morning, the Asian session would be coming to an end and the London session beginning. This is the perfect time for people in the UK to hunt for Intra day setups. You would have an idea of the set up at NY close and the consolidations during the Asian Session.
You will have a good idea when the market has been doing and what it will do next. You then simply take your A+ trades, go to work and come back later in the evening and check its progress. Place and forget.
A different approach will have to be taken for different time zones. I have known members in South Africa and Australia who have full-time jobs. They main trade Swing trades, lasting between two to five days, sometimes even for weeks by concentrating on the 4 hour charts with their trading. This is the way it suits them best with the time zones, so it is really just how it suits you and your situations best.
How Much Money Do I Need to Start Trading Live?
This is a super tricky question because there is no right or wrong answer. The best way to put it is this: you should NEVER EVER risk money that you cannot afford to lose. If you need the money for food, rent, or bills, etc., you should not be making trades with it.
The smallest amount you can open an account with is $200 and if that is all you have to start with, then that is fine. Start from there, skip your daily coffee, and start building – and then use the power of compounding. If you can put aside any further money, without affecting your daily life, you can add it to increase your equity in your trading account.
As long as you do not overly risk or overtrade, this compounding method will become a perfect foundation or base for your trading. You will have a much better chance to weathering the Forex storm, should it happen.
I am a Beginner at Forex and Don’t Know Much. Will Price Action Suit me?
This will depend on the route you want to go down. You can trade on the Daily time frames and only spend approx. 30 mins to an hour a day.
However, if you have more time during the day, you may choose the daily charts plus adding the intraday charts such as the 4 hour, 1 hour, and potentially even smaller, during the UK and US trading sessions. This could then take anywhere from 1-3 hours per day, depending on how narrow a time frame you wish to go.
Being a beginner is actually a very lucky thing because you don’t have a mind full of bad habits and incorrect teachings. If you are very careful in what you learn from here, what you practice and where you go in your next steps, being a beginner could be very beneficial for you.
I recommend you first get a grasp of the basics of Forex, which are necessary for you to understand how the market works and operates. You can do this by visiting www.forexschoolonline.com. Then open up a demo account and start learning how to trade price action the correct way.
Can I Trade as Many Forex Pairs and Markets All at the Same Time? What is Correlation?
The basic rule of thumb is that you never want to double up on any zone/area on country.
If you normally risk 3% per trade, then you would not want to risk 3% on the GBPUSD and GBPNZD each at the same time. BUT if you could really not pick between them and really loved them both, what you could do with the NZD pairs for example is if one forms something, they all form it, then instead of just picking one, you could play both trades but split your risk. For example, you could play both the GBP trades above but instead of doubling your risk, we could risk 1.5% on one trade and 1.5% on another, so we are still risking 3% overall.
This avoids you from risking and losing 6% of our account to the GBP if something happens in that region.
How NOT to blow an account?
Never ever over-risk or over-trade.
Never ever Add to Losing trades.
Avoid BIG losses (Market is telling you that you are wrong. Get out while you can!)