Sometimes things are better said as a video. I picked up this video yesterday and thought I'd share it. Its a really helpful way to understand how currency trading are bought and sold on the largest financial market in the world as well as how it influences other asset markets too!.
Most of the time my forex accounts operate with minimal interference from me. I get on with my day and the accounts busily work away in the background 24 hours a day, five days a week.
But that does not mean I don't get involved with them at all. It’s important that you keep an eye on the accounts and see how they are doing and be able to make decisions about them, if you have too. I will share with you how I operate my trading, so you have some guidance and how margin % helps you keep an eye on your account too.
What is margin level %? This is calculated by your equity/used margin x 100%. . The closer you get to using 100% of your margin the closer you get to being stopped out. You always want a healthy margin. At least 500, over 1000 is better, when we are running large lot sized trades.
My daily strategy.
So, 80% of the time I let the automation do all the work. iX focuses are helping us earn more money and we pay for their knowledge, insight and experiences to trade on our behalf. For busy professionals looking to see their money work harder for them, then why not! Daily, I check my drawdown and my margin % to see how the account looks. A couple of minutes of my time. I'm happy when my with a drawdown of 30-50%, I’m comfortable with that now. As you can appreciate, we need to have active trades to make money. I also watch my margin % which anything over 2000% I do not even think or worry about. I get on with my day!
When the margin % is getting close to 1500% I will start to pay a bit more attention and see for myself what is going on with the currency pairs. Not in a stressful way, just more of an awareness. What are the expectations from currency movers, what macro-economic activities are going on and coming up that could impact our trades. Again, I will not do anything, I'll just put myself in a 'more observation and tracking' mode. I am just being cautious.
When I'm just below 1000% and economics indicators are not clear then I'll think about options open to me to start thinking about. When you are here you are making more rational, unemotional decisions and will make a clearer judgement. A plan to have just helps you keep calm. Options like a) add capital, b) close trades, c) reduce lot size to reduce risk. They are all viable options and I choose the one that feels most comfortable.
As the margin % starts to fall its then up to you when you want to take precautionary action. 300% is for some, others it is too low. When margin % is getting close to 100%, your MT4 app will start to flash. It an indicator to you to do something to save your account. If you do not your broker will take control and close trades. You have lost your decision making on the account. It’s too stressful to be there and you don’t make great decisions.
I'm sure you are asking if I have been close to a 100% and what did I do? Yes, once. I got to 250% and felt I needed to start managing the account and making decisions. I chose to close a large sell trade which meant a loss, but I increased my margin % back to 400%. That move left me room for the currency pair to recover and replenish my account. The currency pair turned around, trades began to recover, some trades closed in profit and some in loss but we were back into healthy margin % again. Beside that that closed trade, I did make a tiny profit on the eventual closing on all the other trades involved. So, a small loss overall but I was happy with the eventual outcome.
In all my time with using an automated service this was the first time I had taken action and I felt I made the right decisions at the time. With hindsight, I wish I had not closed that trade but when we are trading, we have to remain in 'reactive mode'. We cannot predict the future. The loss happened and I quickly recovered that loss through new trades set in the following weeks. Your mindset for trading is important. Have a read of my blog on my first year of trading and my learnings.
It’s now March 2020, and next week marks the end of the month, so I’ll be sharing my march results.
To understand your MT4 app please see read this blog post.
The commentary I write is not financial advice, it is meant to help others with their self knowledge and growth.
I serve people who want their money to work harder for them instead of it sitting in the bank.