You need to defined
a methodical and
easy-to-follow plan
that will
help you, especially
if you are a novice,
maximize profits
and minimize
risk before risking
a single dollar on live trading.

It is very important to realise that, in the same way as a doctor or
lawyer, you will not become a Forex Expert overnight.So, you must move
away from this mindset as quickly as possible. You must learn to adopt
a more scientific and business-like approach to the Forex.

Here are the basics of our methodology or trading plan that will enable
you to do just that and its concepts will be further enhanced in the
following Hubs. This is a standard process used by many experienced traders.

Our methodology will show you how to evolve a low risk trading system to
a high one using a well-developed iterative process. First, you need to
define a trading system which will be used with specific operational
configurations. The main aim of the trading system is to identify trends,
as early as possible, in order to maximize profits whilst, at the same
time, avoiding false trends and blips. You will need to use the concepts
of Forex Analysis to help you select the functions that will be
incorporated into your trading system. This topic will be discussed
further in a later chapter.

We commence the plan by establishing a demo trading baseline that will
be used to compare all future trading systems. A trading system,
configured to low risk, will be used for this purposed and will have
the following settings:-

1 lot traded only, only 2% of your total margin will be traded,
only one currency pair will be traded at any time and only one trade
will be active at any one time.

 You need to realise quickly that there is big difference between
risking 2% and 10% of your total account per trade. Ten trades,
risking only 2% of the balance per trade, would lose only 17% of
the total account if all were losses. Under the same conditions,
10% risked would result in losses exceeding 60%. Clearly, the first
case provides much more account protection resulting in an improved
length of survival.

You must appreciate quickly that the most successful Forex traders
are first skillful survivors and second big earners.

You need then to proceed to calculate the expectancy value of the
your trading system by using a statistical batch of at least 50 trades.

The expectancy of a trading system is a statistical measure that becomes
more accurate as the number of trades, included in the calculation,
increases. How to calculate the Expectancy value will be shown in detail
in a later Hub.

This expectancy value will enable you to determine if their trading system
is profitable, to help devise the most effective money management
strategies and to evaluate the effectiveness of their tweaks and changes
to settings. The expectancy value determines the average amount of profit
that can be expected for every $1 risked over the long haul.

A negative value implies a loss whilst a positive one will predicts
a profit. Knowing the expectancy of more than one trading systems allows
you to make a quantitative comparison of historical performance between them.
In fact, this is the primary way to measure and then to tweak a system
for better performance.

Good Luck with your Forex Trading.

If you have any queries, please leave a comment and
I will do my best to answer it.

Regards,

Terry Allen
 

Please be advised that Foreign Currency trading involves
substantial risk of monetary loss.

All information contained on this website is provided as general
commentary and must not be constituted as investment advice.

I will not accept liability for any loss or damage, including
without limitation to, any loss of profit, which may arise directly
or indirectly from use of or reliance on this information.