How Buffet Does It?

24 Simple Investing Strategies From The World's Greatest Value Investor!

1. Choose Simplicity over Complexity
   
When investing, keep it simple. Do what's easy and obvious, advises Buffet; don't try to develop complicated answers to complicated questions.


2. Make your Own Investment Decisions
Don't listen to the brokers, the analysts, or the pundits. Figure it out for yourself.


3. Maintain Proper Temperament
>Let's other people overreact to the market, Buffet advises. Keep your head when others do not, and you will benefit.


4. Be Patient
Think 10 years, rather than 10 minutes, advises Buffet. If you aren't prepared to hold a given stock for a decade, don't buy it in the first place.


5. Buy Businesses, Not Stocks
Once you get into the right business, you can let everyone else worry about the stock market.


6. Look for a Company That is a Franchise
Some businesses are what Warren Buffet calls "franchises". They have high walls and deep moats around them. They are More or less unassailable. These are the businesses you want to find.


7. Buy Low-Tech, Not High-Tech
In Buffet's world, successful investing is rarely a gee-whiz activity. It's less often about rockets and lasers and more often about things such as brick, carpets, paint and insulation.


8. Concentrate Your Stock Investments
Avoid what Buffet calls the "Noah's Ark" style of investing - that is, a little of this, a little of that. Better to have a smaller number of investments with more of your money in each.


9. Practice inactivity, not Hyperactivity
There are times when doing nothing is a sign of investing brilliance.


10. Don't Look at the Ticker
Tickers are all about prices. Investing is about a lot more than prices.


11. View Market Downturns as Buying Opportunities
Market downturns aren't body blows; they are buying opportunities. If the herd start running away from a good stock, get ready to run toward it.


12. Don't Swing at Every Pitch
What if you had to predict how every stock in the Standard & Poor's (S&P) 500 would do over the next few years? In this scenario, Warren Buffet - one of the greatest investors of all time - doesn't like his chances. But what if your job was to find only one stock among those 500 that would do well? In this revised scenario, Buffer now likes his odds, which he figures at something like 9 in 10.


13. Ignore the Macro; Focus on the Micro
According to Warren Buffet, the big things - the large trends that are external to the business - don't matter. It's the little things, the things that are business-specific, that count.


14. Take a Close Look at Management
The analysis begins - and sometimes ends - with one key question: Who's in charge here?


15. Remember, The Emperor Wears No Clothes on Wall Street
Wall Street, says Warren Buffet, is the only place where people got to in Roll Royces to get advice from people who take the subway.


16. Practice Independent Thinking
When investing, you need to think independently.


17. Stay within Your Circle of Competence
Develop a zone of expertise, operate within that zone, and don't beat yourself up for missing opportunities that arise outside that zone.


18. Ignore Stock Market Forecasts
Short-term forecast of stock or bond prices are useless, says Warren Buffet. They tell you more about the forecaster that they tell you about the future.


19. Understand "Mr. Market" and the "Margin of Safety"
What makes for a good investor? According to Warren Buffet, a good investor is someone who combines good business judgment with an ability to ignore the wild swings of the marketplace. When the emotions start to swirl, says Buffet, remember Ben Graham's "Mr. Market" concept, and look for a "Margin of Safety".


20. Be Fearful When Others Are Greedy and Greedy When Others Are Fearful
You can safely predict that people will be greedy, fearful, or foolish, says Buffet. yous just can't predict when or in what order.


21. Read, Read Some More, and Then Think
How does Warren Buffet - the world's greatest investor spend his time? By his own reckoning, he spends something like six hours a day reading and an hour or two on the phone. The rest of the time, he thinks.


22. Use All Your Horsepower
How big is your engine, and how efficiently do you put it to work? Warren Buffet suggests that lots of people have "400-horsepower engines" but only 100 horsepower of output. Smart people, in other words, often allow themselves to get distracted from the task at hand and act in irrational ways. The person who gets full output from a 200 horsepower engine, says Buffet, is a lot better off.


23. Avoid the Costly Mistake of Others
Buffet's friend and associate Charlie Munger always emphasizes the study of mistakes so as not to go there.


24. Become a Sound Investor
Buffet says that Ben Graham was about "sound investing". He wasn't about brilliant investing or fads and fashions, and the good thing about sound investing is that it can make you wealthy if you are in not too much of a hurry, and it never makes you poor , which is even better.

sources: James Pardoe, ISBN: 0-07-144912-4

7 Tips for Becoming a Successful Forex Trader

If you’re like most traders who have been at it with forex for at least a year, you’re losing money and beginning to wonder if it’s even possible to make money trading forex. I’m here to tell you that success IS achievable, but it’s going to require some mental conditioning to start thinking like a professional, successful forex trader.

1. Model after someone who’s already done it - You can avoid so much pain by just learning from someone who has been successful already. If you try to get creative and form your own strategy and you haven’t had the experience being successful, you may not trust your strategy or yourself. Don’t underestimate the roles of emotions and self trust in your trading.


2. Adopt a trading strategy that is based on how the market actually works (so you can trust it) - I’ve seen traders too many times who just buy a course/ebook/signals service that is just based on some moving average crossing over another on a chart and expect to make money from it. Other than statistics from the past, there’s nothing that says these strategies have any long term predictive value! If you want something you can trust in and be able to use even through the losing periods knowing that your money is safe, make sure that your strategy is based on the behaviors of the market, fundamentals, market sentiment, and not just some statistical pattern.


3. Learn to put price action into context - Many traders fail because they subscribe to simple rules of thumb that everyone else (i.e. the rest of the market, their competition) can see as well, and they call it an “edge.” For example, many traders think they can make money just by buying when price breaks above the highs of a sideways range. Yea, that might’ve worked 30 years ago in the futures market, but traders aren’t stupid. And neither are brokers- they’re aware of this habit of newbie traders as well as other patterns, and they push the market up just to sell to them at high prices and then price spikes back down giving them a profit. If you want to play breakouts (or other strategies for that matter) make sure that you put the price action into context. If price breaks above the highs, look for confirmation from some really surprising news such as retail sales or a Bernanke press conference that rocked the market.


4. Think like a contrarian - When the market makes a big move after a news event just because it is normally a big deal (e.g. Nonfarm Payrolls), ask yourself, “Is this move really warranted?” If there wasn’t really much of a surprise, or the economy is in terrible shape and this is the only positive news release, it may be a better decision to fade the move and trade in the opposite direction.


5. Think critically and adapt to the market - When the market is fixated on one concept, like the debt crisis in Europe, or if you’re a technical trader: like buying dips in a range, start to think, “what could change this paradigm?” and be ready to take advantage of that change. For example, if the market starts focusing on a recovery in Europe, be ready to start buying Euros heavily before the masses come in, and if price breaks strongly to the downside out of the range, start selling as all the slow turtles who are still stuck to the old paradigm of “buying dips in the range” are getting their stops hit. Remember, the most powerful and profitable thing you can take advantage of in the forex market is the element of surprise. During other times, the market is so big and has so many cunning players that the competition against you is impossible to deal with (which is the main reason why even the majority of traders who are even using good money management lose).


6. View each trade independently and trust your edge - There’s a psychological bias for us to feel more pain from a loss than a win even if they are the same size. This pain causes us to enter at the wrong time, not enter at all, or lose complete trust in the system and skip to another forex trading strategy in search for the “holy grail.” If you can stop yourself and realize that you will have losses no matter what, but your system has an edge that will be profitable over time, you will be able to execute every time a good opportunity comes up and you’ll win over time.


7. Detach yourself from your trades - Remember, YOU are not your trades; YOU are YOU. I remember losing trades in the morning and it would ruin my day and cause me to enter all sorts of bad trades. When I reminded myself that I’m trading forex to make money and not to be some grand master trader that knows everything about the market and is stuck in front of his computer all day and ignoring his friends and the outside world, I felt liberated and I was in the right emotional state to make good trading decisions and then walk away and enjoy life.
   

Source from Kris Matthews

How to Stop Following the Dumb Money in Forex

If you want to achieve forex success and profits you need to stop following the dumb money, which represents the majority of traders. You need to follow the patterns of the small percentage of traders who are dominating this market in terms of profits. These traders are cold, calculated killers who have studied the rest of the market (i.e. their prey) well and hard and no how to react when the market behaves in a certain way.

My intention of this article is to show you how to stop following the flow of dumb money, which is always on the wrong side of the market, and start recognizing valuable, juicy clues that the market leaves behind, in order to generate consistent profits.


Know your prey
’m sorry to keep on with this “predator-prey” depiction of the market, but that’s what it really is. No one is leaving money on the table for you to pick up, so it’s up to you to take it from the market, otherwise you become the prey. A couple ways to spot when the market is about to make a move are what are commonly referred to as a “dead cat bounce” and a key rejection.

A dead cat bounce refers to when price falls violently and doesn’t bounce (no cats were harmed in the writing of this article), but rather maintains a tight sideways range, as the figure below illustrates. Let’s get into the psychology and the mechanics of what’s happening here: If some stimulus, such as bad news, entered the market and caused traders to rapidly sell off a currency, liquidity was probably low during the sell off. In that situation we would expect price to pull back to fill orders that were missed and for traders to “test” nearby support levels to see if there was indeed enough selling pressure. However, if we see no pullback upward in the ensuing session we can expect that selling pressure is indeed very strong and traders are still trying to unload positions.

The second strategy I want to share with you is called a key rejection. Often when you see price in a strong uptrend price will pull back or even change to a negative trajectory. The talent in taking a contrarily trade by selling at high levels is in recognizing and differentiating which signals are indeed turning points and which are just temporary down moves. The way to do this to look at a candlestick chart and see price try to breach a key resistance level but get rejected (as can be seen by price breaking through the level for a very short time period). If the rejection happens a couple of times, it could be an even stronger indicator of a reversal. A key resistance level is often a level that has defined the high or the low of price several times in the past, or is a “psychological” round number level, such as 1.50, 2.0, etc. What’s the underlying psychology/mechanics going on here? Well, a key level is a very important benchmark for traders. If they see price break through it successfully, they may be convinced enough to put more money on a long trade. If it tries to go through and backs down (i.e. gets rejected), it’s likely that some buyers tried aggressively to push the market higher, but the other buyers said, “No,” so sellers get more aggressive.

These two strategies are very effective for analyzing the markets but keep in mind, like in any strategy, the random generation of patterns can deceive you. In order to reduce the probability of that happening I usually combine my technical analysis with fundamental news event analysis. For example, if I hear that the market fell due to the worsening debt crisis in Europe, I’m more likely to sell Euros after the dead cat bounce. Furthermore, if I learn that the rejection of price at a key resistance level after a long uptrend occurs after a better than expected employment number, that’s a powerful indication that despite good news, the market doesn’t have enough pressure to maintain upward momentum.

It’s always important to zoom out and look at the big picture and put your trading indicators/strategies into context. By adopting this style of thinking and these types of behavioral strategies for adapting to and trading the forex market, rather than becoming the hunted, you become the hunter. Happy trading.

by Kris Matthews (http://tradeforexfundamentally.com)

5 Way For Non-Farm Payrolls Trading

The release of the American Non-Farm Payrolls is a circus in the forex market. Here are a 5 notes to watch out for in every Non-Farm Payrolls release during the financial crisis:

1. New traders – stay away: Trading during this volatile period is very risky. Take a break and enjoy the weekend.
2. Action before the release: Strange moves begin in the markets well before the release at 13:30 GMT. This usually reflects the expectations – expectations which aren’t necessarily met, and they can lead to a counter reaction afterwards. Jittery trading intensifies with the release of the Canadian employment figures, an hour and a half before the American ones.
3. Friday effect: Strong moves in a certain direction – either dollar strength or dollar weakness, can be seen hours after the release, usually in the last hour of the London session – between 16:00 to 17:00 GMT. This is the move that will determine the close of the week, and thus have a real long term effect. This is the full reaction.
4. Technical barriers can be broken – support and resistance lines, uptrend support or downtrend resistance lines can be breached around the release of the NFP. This is usually only temporary – the graph returns to normal after a while, and these lines are respected again.
5. Initial reaction is wrong: the initial reaction to the release is in the wrong direction: the knee jerk reaction is usually “normal”: good data yields dollar strength and bad data yields dollar weakness. This is very temporary! We are still in the global crisis, and the risk factor rules. So, minutes after the “normal” reaction, the risk factor kicks in and eventually the opposite happens: good data yields dollar weakness (risk appetite), while bad data yields dollar strength (risk aversion).

These are my tips. I’ll be happy to hear more.

Source: Forex Crunch

Super Easy Engulfing Candle

An Engulfing candle is a candle whose length completely encompasses the previous candle with a close above the high or below the low candle. If the close is above the high of the previous candle then it is a bullish engulfing candle and that signals a buy, while if the close is below the low it is a bearish engulfing candle that’s signals a sell:

The arrow is pointing to a bullish engulfing candle that if bought would have produced a winning trade.

Engulfing candles are the result of a sharp turn in the direction of price as compared to the previous bar. So in the case of a bearish engulfing candle price was previously moving up, and at the open of the next bar price tries to continue its upward movement but cannot not sustain it and it quickly moves down and closes below the low of the previous bar signaling a trade.

Now to see this pattern in action let’s look at a hourly chart of Eur/Usd

EUR USD Hourly Chart

At each of the numbered points on the chart we see a bearish engulfing candle followed by a hard move down. This is a very reliable pattern that is central to my own trading. Incorporating this into your trading will only serve to increase your profits.




A special note about the third trade:

If you notice the first two bearish engulfing candles followed bullish candles, but the third one followed another bearish candle. This is common and is still a valid trading signal.

Well that’s all for today. I hope you all take this technique and increase your profits. Until next time.

Happy Trading

If you would like to learn about more patterns like these and how you can discover how you can learn the secrets to trading for a living then visit beatwallstreetnow.com


Quoted from Forex Crunch

How PAMM Services Operates?

Trader A opens a PAMM account and becomes its Manager. The Manager’s Capital is 10 000 USD. Then he makes a proposal to potential Investors to invest in his PAMM account. At the end of every Trading interval (a month or a quarter) Manager A proposes to share the profit between the Investors (including the Manager) and pay the profit to Manager A in accordance with the Manager’s Offer.

Let the Offer parameters be: 30/5/10 - 6/4 - 10 000/1 000/100, Selected Trading interval - 1 month. So, at the end of every Trading Interval, the Manager is paid 30% of the profit that exceeds the 10%.

So, the PAMM account deposit equals to 50 000 USD among the Manager and investors

At the end of the month as a result of the Manager's successful work the PAMM account profit amounted to 50% (25 000 USD) of the initial deposit (50 000 USD), and the total balance of the PAMM account amounted to 75 000 USD.

Thus Investor 1 got the profit equal to 50% (12 500 USD) of his own investments (25 000 USD). In accordance with the Offer Parameters the Minimum Performance constraint is 10% (2 500 USD), therefore Performance Fee is calculated from the following amount:-

• 12 500 USD (Profit) — 2 500 USD (Minimum Performance constraint) = 10 000 USD.
• Investor 1 paid the Performance Fee of 30% from 10 000 USD (3 000 USD).

Investor 2 got the profit equal to 50% (7 500 USD) of his own investments (15 000 USD). In accordance with the Offer Parameters the Minimum Performance constraint is 10% (1 500 USD), therefore Performance Fee are calculated from the following amount:

• 7 500 USD (Profit) — 1 500 USD (Minimum Performance constraint) = 6 000 USD.
• Investor 2 paid the Performance Fee of 30% from 6 000 USD (1 800 USD).

The Investor’s balance at the end of the Trading Interval is:-
Current Balance = Initial Balance + Profit – Performance Fee

So,
For Investor 1: Current Balance = 25 000 + 12 500 - 3 000 = 34 500 USD;
For Investor 2: Current Balance = 15 000 + 7 500 - 1 800 = 20 700 USD.

The Manager’s balance at the end of the Trading Interval is:
Current Balance = Manager’s Capital + Profit + Performance Fee 1 + Performance Fee 2.

So, for Manager A
Current Balance = 10 000 + 5 000 + 3 000 + 1 800 = 19 800 USD.
Manager A's work on the PAMM account during the first Trading interval resulted the net profit of 25 000 USD:
• Investor 1: 12 500 – 3 000 = 9,500 USD;
• Investor 2: 7 500 – 1 800 = 5 700 USD;
• Manager A: 5 000 + 3 000 + 1 800 = 9 800 USD (5 000 of profit, 4 800 of Performance Fee).



At the beginning of the second Trading interval Manager A withdrew the profit (9 800 USD), Investor 1 completely reinvested (reinvestment building-up of the earlier placed investments using the profit realized of these investments) all the funds (34 500 USD), Investor 2 withdrew 700 USD and reinvested the remaining funds (20 000 USD).

Another Investor 3 joined the PAMM account and invested 5 500 USD.


Thus at the beginning of the second Trading interval the balance of the PAMM account is equal to 70 000 USD.

At the end of the second Trading interval as a result of the successful work of Manager A, the PAMM account profit amounted to 100% (70 000 USD) of the initial balance and the total PAMM account balance amounted to 140 000 USD.

Thus Investor 1 got the profit equal to 100% (34 500 USD) of his own investments (34 500 USD). In accordance with Offer Parameters the Minimum Performance constraint is 10% (3 450 USD), therefore the Performance Fee is calculated from the following amount:

• 34 500 USD (Profit) — 3 450 USD (Minimum Performance constraint) = 31 050 USD.
• Investor 1 paid the Performance Fee of 30% from 31 050 USD (9 315 USD)

Investor 2 got the profit equal to 100% (20 000 USD) of his own investments (20 000 USD). In accordance with the Offer Parameters the Minimum Performance constraint is 10% (2 000 USD), therefore the Performance Fee is calculated from the following amount:

• 20 000 USD (Profit) — 2 000 USD (Minimum Performance constraint) = 18 000 USD.
• Investor 2 paid the Performance Fee of 30% from 18 000 USD (5 400 USD)

Investor 3 got the profit equal to 100% (5 500 USD) of his own investments (5 500 USD). In accordance with the Offer Parameters the Minimum Performance constraint is 10% (550 USD), therefore the Performance Fee is calculated from the following amount:

• 5 500 USD (Profit) — 550 USD (Minimum Performance constraint) = 4 950 USD.
• Investor 3 paid the Performance Fee of 30% from 4 950 USD (1 485 USD)

The Investors’ balances at the end of Trading Interval are:

1. For Investor 1: Current Balance = 34 500 +34 500 – 9 315 = 59 685 USD,
   Performance Fee = 9 315 USD (30% from 34 500 USD).
2. For Investor 2: Current Balance = 20 000 + 20 000 – 5 400 = 34 600 USD, Performance Fee = 5 400 USD USD (30% from 18 000 USD).
3. For Investor 3: Current Balance = 5 500 + 5 500 – 1 480 = 9 515 USD, Performance Fee = 1 485 USD (30% from 4950 USD).
4. The Manager’s balance at the end of Trading Interval is: Current Balance = 10 000 + 10 000 + 9 315 + 5 400 + 1 485 = 36 200 USD.

Manager A’s work on the PAMM account during the second Trading interval resulted the net profit of 70 000 USD:

• Investor 1 — 25 185 USD;
• Investor 2 — 14 600 USD;
• Investor 3 — 4 015 USD;
• Manager A — 26 200 USD (10 000 — net profit, 16 200 — Performance Fee).

Source quoted from FXOpen

What's Forex Managed PAMM Services?

PAMM Accounts (Percentage Allocation Management Module) is a trading account that consists of one or several accounts of investors which form one whole trading structure where the trading is carried out by the Manager.

The principal of PAMM functioning is sharing the profits and losses in proportion. PAMM account is a convenient financial instrument for the Investor as it maximally simplifies the procedure of investing, minimizing the risks as well as for the Manager as it provides convenient ways of managing Investors' accounts.

PAMM accounts are a convenient financial instrument: -

• For the Investor as it maximally simplifies the procedure of investing, minimizing the risks;
• For the Manager as it provides convenient ways of managing Investors' accounts regardless of their number.

The benefits of PAMM account for the Manager and for the Investor: -

• Receiving a profit from both his own investments and from those of the clients;
• A single trading account for any number of investors;
• Security system giving the Manager a possibility to trade with the account but not giving him a chance to withdraw funds from there;
• Absolute freedom of action: the possibility for Investor to put in or to withdraw funds at any time.

At the moment PAMM accounts are an almost perfect instrument of investing the money. The convenience is maximal while chances of fraud are minimized. That's why more and more companies advise to invest money by the PAMM scheme.

Automated Basket Forex Trading

This service allow me to send over the trade signal for open & close the trade for the subcriber. This is best services for those who do not have much time for trading but still want to get some baits in this forex market. For the services, please refer to my blog site at the top right " Forex Trading Signal Services" for more information.

ZipSignals Services

Basket Trading System Autotrades

Although there are many reasons to trade with zipsignals, auto-executing trades in your MetaTrader (MT4) Account is by far the most desired feature. Our state-of-the-art Expert Advisor (EA) or "robot" program interprets trading signals and executes the signals' instructions in your account without your intervention. This means you do NOT have to wake up or be near a computer 24 hours a day to trade along with a professional. Better still, the automated Forex trading signals are executed in around 5 seconds so you get the best fill possible.

Using the zipsignals automated Forex trading platform, you don't have to give your money to a fund manager or open an account with a broker that is less than reputable. You choose your broker and you keep control of your money.

Many people find that EAs or robots offer the best solution to trading Forex due to their hands-off approach, but have found that most if not all commercial EAs come up short in actual performance. This is due to the inherent limitation in all trading programs - lack of fundamental data when entering and exiting trades. EAs traditionally work by analyzing technical data to trade and do not know about the underlying fundamentals governing these movements. We solve this problem by putting an actual human at the helm. So, in essence, you get an experienced professional Forex trader, trading your account for you, 24 hours a day!

Determining Order Size
Every order in zipsignals contains an Order Size Percent (%) from 1% to 10%. This allows the trader to weigh certain trades over others. This value is interpreted by our Expert Advisor (EA) to determine the lot size.

For example, if you have a standard account balance of $5,000 with 1:100 margin, a 2% order would open 0.1 lot or 2% of your account balance times margin.

5000 * 100 * 0.02 = $10,000 or 10% of a standard $100,000 lot

There are three ways you can customize the EA to interpret the order size percentage into a lot size your comfortable with:

• Actual Balance - will use your actual account balance to determine lot size. This is the setting to use if you wish to compound. As your account balance raises so does the lot size on new orders.


• Fixed Balance - will use a fixed balance of your choosing to determine lot size every time.


• Fixed Lot Size - you can select a fixed lot size that the EA will use to open all orders. If you select a fixed lot size of 1.0, a 2% order will issue a 1.0 lot size and a 10% order will still issue a 1.0 lot size.

Research Forex Trading Systems and Signal Providers
zipsignals gives you the tools you need to research Forex systems and Signal Providers to determine which are right for you based on your risk tolerance. All trades are documented and reported, not just the winners. You will find for each system: trading weeks, total return, max drawdown and monthly average.

Open trades are included in all profit and drawdown calculations so you can see the ACTUAL risks involved. This point is very important as most other sites offering Forex trading systems do not include actual open trade drawdown. Without this data you CANNOT make an informed decision about how much to trade or whether you should trade the system at all.

For instance if "Trader A" enters a trade that goes 1000 pips negative before climbing back to negative 50 pips and closes the order, most other sites will report the 50 pip drawdown. This is not the REAL drawdown as you will experience a REAL margin call (trade liquidation) if you traded this trade with too many lots.

The only data needed to determine if and how much to trade a trading system is REAL drawdown and average monthly return. Of course, length of time is important as this validates the historical drawdown and return data.

For example, "Trading System 1" has a 5% average monthly return with a historical drawdown of 10%. If you have an account valued at $10,000 you could expect $500 a month return on average with the potential to see your account equity reduced by $1,000. This is not exactly true as the system may experience a new historical low while you are trading with it. This is why length of time is important as it validates the historical data.

You won't find the TMI (Too Much Information) here that tends to conceal the risks involved. It may be hard to believe, but you don't need all the junk metrics you see on other sites. All of this data is only useful in distracting and misleading you away from the REAL drawdown.

Collective2

Price Action Monster (45963723)

1. How to use Collective2


2. C2 Compatible Software and Services


3. Frequently Asked Questions (FAQ)


4. Collective2 Prices


5. About Collective2

Holy Grail - Money Mangement

Money Management. Trade safe building stable gains

Money management is a way traders control their money flow: in or out of pockets... Yes, it's simply the knowledge and skills on managing a personal Forex account.

There are several rules of good money management:

1. Risk only small percentage of total account

Why is it so important? The main idea of the whole trading process is to survive! Survival first, and only then making money on top.

One should clearly understand, that Big traders first of all are skillful survivors. In addition, they usually have deep pockets, which means that under unfavorable conditions they are financially able to sustain big losses and continue trading. For the ordinary traders, the majority of us, the skills of surviving become a vital "must know" platform to keep trading accounts alive and, of course, to make good stable profits.

Let's take a look at the example that shows a difference between risking a small percentage of capital and risking a bigger one. In the worst case scenario of ten losing trades in a row the balance of trader's account will suffer this much:

Trades	Account balance	Risking 2% of total account per trade
1	Start — 5000	100
2	4900	98
3	4802	96
4	4706	94
5	4612	92
6	4520	90
7	4430	89
8	4341	87
9	4254	85
10	4169 — 17% of the account has been lost

Trades	Account balance	Risking 10% of total account per trade
1	Start — 5000	500
2	4500	450
3	4050	405
4	3645	364
5	3281	328
6	2953	295
7	2658	265
8	2392	239
9	2153	215
10	1938 — over 60% of the account has been lost

Apparently, there is a big difference between risking 2% and 10% of the total account per trade. A trader who has made 10 trades risking only 2% of balance per trade, under the worst conditions would lose only 17% of the total account. The same trader who had been exposing 10% of balance.

2. Rebuilding of a shrinking account is harder that it may seem to be

Let's take a look at calculations where a trader has lost some part of his account. How much effort will it take to recover the original account balance?

Account	% of account lost	New balance	Need to make
$ 5000	25%	$ 3750	35% of the new balance ($ 1250) to cover losses
$ 5000	50%	$ 2500	100% of the new balance ($ 2500) to cover losses
$ 5000	75%	$ 1250	300% of the new balance ($ 3750) to cover losses
Note that it's only to cover losses: Who is going to make money then..? And when?

Now, there is a challenge: try on your demo account to rise up 300% or at least 100% of your original account trading as it would be real money. Will that be easy? I don't think so. Can you prove me wrong?

3. Calculate risk / reward ratio before entering a trade

When chances to win in a trade are smaller than potential losses, don't trade! Remember — staying aside is a position.
For example: 40 pips to lose versus 30 pips to win, 20 pips to lose versus 20 pips to win — all that is a clear sign of bad risk management.
Before entering each trade, reassure that risk / reward ratio is at least 1:3, which means that chances to lose are tree times less than promises to win. For example: 30 pips of possible loss versus 100 pips of potential win is a good trade to consider entering.
Adopting this money management rule as a must, in the long run will dramatically increase trader's chances to succeed in making stable gains.
Next chart shows the "risk / reward" rule in practice. Ten trades based on 1:3 risk / reward ratio were conducted. A trader was losing only $ 100 in each trade when he was wrong, but won $ 300 in each profitable trade.

Trades	Losing trades	Winning trades
1		+300
2	-100
3	-100
4		+300
5		+300
6	-100
7		+300
8		+300
9	-100
10	-100
Total	- $500	+ $1500
Grand Total	+ $1000 in profit

As we can see, constantly using 1:3 risk / reward ratio and being successful only 50% of the time, trader will still make a profit. The higher the reward ratio ( compared to risk ratio ) the better are chances to end up in profit.

4. Learn to use protective stops

About protective stops and their importance for good money management continue reading: Learn to use Stop Loss effectively.

5. And now let's study the example of applying money management rules:

So, risking no more than 2-3% of the total account per trade... How does it work in practice? Let's use an example to understand this idea completely.

We have opened a trading account of 1000 dollars with a broker and got 20:1 leverage. So, now we have 20 000 dollars to trade with.

More "money" — more trading opportunities. Correct. But, more trading opportunities also means more risks, and when we talk about risks we talk about real account value which will shrink with each losing trade. So, when we say risking no more than 2-3% of total account value we mean real account value — which is 1000 dollars in our case.

Well, let's start trading and do the math. For our example, we have decided to always risk 2% of the account in each trade. 1000 x 2% = 20 dollars. So, when the price goes against us, we will be out of the trade once we are -20 dollars.

One note before we move on. To make our next calculations simple we will use simple values which can be different in the case with your broker.

Ok, time to trade and our trading potential measures 20 000 dollars ( thanks to our leverage ) .

Let's try to trade them all at once: for one 20 000 dollar order our broker gives us a pip value of 2 dollars. This means that with each pip gained we will have +2 dollars in our pockets.

Source: Forex-money-management.com

Corelation Between Forex, Stock & Commodity

Currency Corelation Check : http://www.mataf.net/en/tools/correlation

Basket Spreadsheet

This is the basket Spreadsheet analysis for each hedge pairs and corelation between pairs.