Low-risk, high-return forex trading.
The Basics
On the left navigation section, you'll see "Forex Pro > Short Term Trend
Trading". This is an essential read for you – even if it seems technical in nature, you
should read it anyway, just to get the information in your head one time. I suggest
you read everything on this link, start to finish. Getting a background in the market
takes about a week (at most), but it's very important for you to understand how the
system works. The knowledge you gain early will pay off later. I didn't read this stuff
BEFORE trading, and it actually kind of helps to read through the material while
you’re entering and watching your first trades – because there’s nothing quite like
trading while you learn. Read the sections in "Forex Essentials". This is as clear an
explanation as exists.
Pips
Okay, now back to our program. To start, you have to understand what a
"pip" is. A pip is the last number to the right in a currency. For example:
If the EUR/USD traded at 1.1335 this morning. The "5" is the pip. If it moved to
1.1535, which it did today, that would be a 200-pip move.
The next concept that you need to understand is the concept of leverage.
It’s a lot like margin in stock trading, only on steroids. It’s a simple concept.
If you have $10,000 to trade with, your forex broker will let you borrow money
from him so that you can trade in larger quantities. They will let you borrow
Strategy:10 – PAGE 5
as much as 400 times (400:1) what you put up in a trade. Most brokers allow
between 50:1 and 100:1 margin. So, if you put up $1,000, and your broker
allows 100:1 margin, then you’ll be trading $100,000 worth of currency (instead
of $1,000).
That’s important, because every pip equals a certain dollar amount. When you
trade $10,000, each pip movement equals $1. The chart below shows how it
goes from there.
If you trade 1,000,000 worth of currency, each movement would be equal to
$100. So if you bought at 1.1445 and sold at 1.1545, you would make 100 x $100,
or $10,000. Now, I don't know about you, but I could live off of that much.
That's not saying, however, that you can make $10,000 per day. Of course
it's possible, but there are a lot of factors that make it very difficult. Like, how
do I know that it's going up or down?
When should I get in a trade?
Even more importantly, can you deal with the emotions of forex trading?
Alan Farley, a trading expert, rightly observes that mastering the emotions of
trading is more difficult than mastering the technical skills. You’ll soon find
out what he means by that.
Greed
Most traders in the forex market try to make a zillion dollars on every trade.
They're greedy. This leads them to stay in a good trade, hoping to get
more money out of it. This can lead to disaster -- the trade can move against
them and they get creamed. This happens all the time, and it still happens to
me from time to time. It's the single greatest threat in trading. But you can
already understand why that's probably true. But how do you overcome greed
when trading?
Revenge
This is the other big one. A lot of traders get creamed in the market and
then want to strike back. So they double their last order and go for broke.
This is natural, and I still deal with this emotion every day. The problem
is, how does one combat this?
Do not underestimate this emotion. It will drive you to ruin if you let it.
The market is not your friend. The market is so much more powerful than
you are. You cannot get “back at” the market. Trading when angry or
vengeful will be a total disaster. If you get rocked on the market, then back
up, take a deep breath, and talk to a mentor. Re-read the charts. Take a
break. Even if you think you see the best opportunity in the world after you
get blasted – just take a break. There will be trades tomorrow.
A Different Strategy.
It’s as simple as this: I don't try to make a ton of money on each trade, and I
never try to get revenge. I’m not a scalper (someone who sits and makes 20-second
trades for a few pips at a time).
Instead, I set up good trades, that have a lot of potential, and then I shoot for 10
pips. Just 10 pips. That’s it. I don’t let myself lose a lot of money. I only try to get
10 pips, and if that’s all I get, then I’m out for the day. It's easy enough to get 10 pips
that once that threshold is met, it's okay to get out. When you know that you can
turn turn $10,000 into $130,000 in one year on 10 pips a day, it's no longer important
to strike back at the market or get greedy on one day of trading.
And you can learn to turn $10,000 into $130,000 in one year on just 10 pips a day.
Why is this innovative, different, or revolutionary? Because you are going to not
only take money from novices with this strategy, you’re going to take money from
other advanced traders. Advanced traders want big money. They didn’t spend years
learning to trade so that they could make $200 a day. They want big, big returns.
They go for 40 pips at a minimum. They are conservative with their trading capital
because the market can take BIG swings against them when they’re waiting for 40
pips. Advanced traders think I’m nuts for getting out of a trade at 10 pips. What if it
goes to 40 pips? Won’t I be upset that I missed out?
Strategy:10 – PAGE 8
Not at all. I’ll show you later how I can still make those 40 pips. But I’m never
displeased with 10. First, though, I’ll explain stops and limits.
Stops and Limits
A STOP is placed so that you don't lose too much money. For example, if I
bought EUR/USD at 1.1445, I would start losing money if it started moving down.
So, I might set a STOP at 1.1425 -- meaning, if the currency drops to that level, the
system AUTOMATICALLY exits the trade. I'm out 20 pips, but that's a lot better
than being out 40 pips if it starts tanking really fast (and this happens all the time, as
you have seen).
A LIMIT works the same way, only for gains. If I set my limit to 1.1535 on that
same trade, then later in the day (or the hour), when the currency moves up to 1.1535,
the system AUTOMATICALLY exits the trade, and I make money. This happens
whether I'm still at the computer, or down the street, or dead. THIS IS THE ONLY
WAY TO TRADE IF YOU’RE NOT GOING TO BE PRESENT TO WATCH
THE TRADE.
My system for trading relies heavily on three things:
1. Technical analysis - a ½ hour, 3 hour, daily, weekly, and monthly chart.
2. STOPS and LIMITS.
3. 10-pip goal every day. This requires DISCIPLINE.
If you started with $10,000 on January 1st, and earned 10 pips per day, and only
traded 17 days of the month, then you would end the year 2,000 pips UP, and with
about $130,000. For a spreadsheet that details this system, write me at
rob@robbooker.com.
If you continued the next year with 10-pips per day, the next year you would be
making between $10,000 and $17,000 per month trading (depending on your risk
tolerance). Can you do this? Absolutely. Can you do this today? Maybe, maybe
not. You have to dedicate yourself 100% to learning how to trade intelligently.
The 7:10 Principles.
1. Buy and sell on breakouts. I teach this in the 1 on 1 training, and I
do it myself.
2. Stop trying to make $8 million on every trade.
3. Set a 10-pip limit only. Exit the trade at 10. Exit the trade at 10.
Stops are set based on market conditions, but are always set.
4. Goal: + 10 pips every day.
5. If I earn more than 10 pips on a trade because the trade moves so
fast in my direction, I can set my stop to protect the 10 and then go
for more. I like to teach traders to just start going for 10. There are
advanced strategies that go for more than 10, but we just start here.
6. There is no ‘makeup’ strategy. If I take a loss, then I’m just trying
to end up with a 10 pip gain for the day. If I can’t get it, then I
don’t try for 20 the next day, or whatever. I can keep trying for the
10 pips gain as long as I haven’t lost more than 5% of my capital.
7. Time: I can trade for 5 hours per day, meaning I can have the
trading platforms open and sit at my computer for a max of 5 hours
per day. If I can’t earn my 10 pips during that time, then I can set
my stops and limits and walk away, but I can’t actively watch the
market any longer.
The Daily Routine.
Here’s a daily routine that I’ve used in the Strategy:10 system. Some of the most
successful months of my trading career happened when I followed this plan.
Up at 3:00 am EST. Check the charts.
Ask the following questions:
1. Where did the USD close (5pm EST) yesterday against the majors?
2. What effect will today’s economic reports have, if any, on the forex market?
a. FED interest rate movements
b. ECB decisions
c. Unemployment – Weekly Moving Average above or below 400k?
d. Greenspan speaking?
3. Are we at an all time high or low on the EUR or GBP or CHF? Or:
a. Are they way oversold or overbought? Is it better to not trade today?
4. If I make a trade now, what might go wrong? What’s the most I’ll lose? Gain?
Is the market just dead quiet right now? Moving fast?
5. Is the EUR or GBP moving right now? How far are the pairs from support and
resistance?
