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The methodology presented during this course will allow you to experiment in small increments of risk rather than jumping into a new system before knowing exactly what you are doing. If you intend to use a Forex Robot in scalping mode, this plan can also assist you in improving its performance by carefully adjusting its settings.
Fundamental Events occur when a Country releases key monthly data that will be used by the rest of the world to assess the well-being and current performance of its economy. This information is released at pre-defined times during the month and can have a high, medium or low impact on the value of that Country’s currency in relation to others.
This effect is usually caused by the Market grasping a snapshot understanding of the headlines associated with the release only to reverse its opinion shortly afterwards following a more detailed study of the small print. As such, movements, of hundreds of pips, can occur in both directions within minutes of the release. Unless you have insider information, you are well advised to stay well clear of such events, especially the high impact ones, as they can desecrate your budget very quickly.
You will need to trade your Forex system consistently over long periods of time if you want to achieve significant profits. To do this, you first need a well-constructed set of rules that you can follow with confidence and that can be applied using a good Money Management Strategy together with an expert psychology.
Trading psychology is highly important to ensure that all trading decisions are made with discipline and consistency. Sticking to your system for any length of time is nearly impossible without having sufficient faith in your trading ability. For instance, after experiencing their first bouts of consecutive losses, many traders suffer serious drops in their confidence causing them to deviate from trading with the necessary discipline required for success.
One of the most recommended methods, used to defend against :
The very debilitating experience of failure, is to develop a system that can be trade consistently as well as being able to cope with severe problems such as the following. If you were to lose 50% of your account on a single trade, dropping from $10,000 to just $5,000, as a result of an unexpected market move, you would then need to gain 100% just to recoup your initial position. This is known as a drawdown and it can have an insidious effect on your account balance. For example, assume your initial balance was $10,000 and your results over 10 trades were alternatively 20% loss and 20% win.
Under stable market conditions, placing a 2 lot position, whilst seeking a profit of 50 pips, may be an acceptable action should the size of your account support it. However, during more volatile times when potential losses could be as large as 100-200 pips or more, this strategy ceases to be so attractive as its begins to offer deteriorating risk to reward ratios. Under such circumstances, you need to take corrective actions in order to reduce your potential loss exposure such as reducing the lot size of your trading positions
Traders should always follow their predetermined trading strategy
regardless of the market conditions. During volatile times, you should enforce this principle even more as well as understanding the importance of using increased levels of restraint. As the pressure on you intensifies with increasing volatility, you must attempt to adhere to the key features of your Forex trading strategy such as its activated stops, contingency plans and risk management benchmarks without hesitation. This will help you to define your levels of risk should price action become more unpredictable. Without strict discipline and self-control, losses can be very significant during volatile times to the point that your entire budget could come under threat.
