Want to Increase Profit? Use the Right Money Mangement

Want to Increase Profit? Use the Right Money Mangement

Need to know, although your trading system provides a percentage of profit opportunities above 50% in every trade, but it can not guarantee you can be successful in this forex trading. Many say that 95% of traders have failed, I do not know if the numbers are true or not. However, I once met a trader who had suffered huge losses and losses in forex trading, but if he saw the trading system he used was very good.

Then what made him fail? Bad Money Management. Yes, managing inadvertent funds by using large lots makes many traders fail.

Money Management or margin fund management is the most important part of any trading system. Most traders take this very seriously and do not understand how important money management is.

It is important for you to understand the concepts in managing the funds and the decision to use the correct lot. Managing the right funds is by calculating the appropriate lot size in a single transaction. Also calculate the risk of loss that you will receive if the order is losing is the key of this Money Management.

I was very surprised when I met a trader who used the lot just by using a benchmark of how much $$ he will receive when profit and ignore the risk of losing a lot of $$ when he loses. This is very surprising. How he can have confidence that any open positions will definitely get a profit. No matter how great the trading system you have, if you do not manage the funds would someday suffer huge losses in just one open position.

There are many strategies in managing Money Management, but the point is how to minimize the risk of each open position. That's what counts.

To set up and create a Money Management strategy, you must understand this term, Equity.

Equity = Fund (your money in account) - Number of open positions. (This is just a simple formula)

If you look at the above simple formula, we can make a conclusion like this: If you have $ 200 in trading account and you open 1 position using a margin of $ 20, then your equity is still $ 180. If you reopen a position with a $ 20 margin, then your equity will be $ 160. You still think $ 160 is still a lot and intend to open the position again? Eits, that example above is just a simple formula.

We have not calculated the required margin usage, the lot and how much leverage is used. I'm sure $ 160 will disappear within a few days if your position is wrong.

If you're a tradint without proper fund management rules, you can actually say you're gambling, not investing. You do not see how your investment funds end up in the long run.

All you know is how much to get tens or hundreds of dollars in just one trade. Money Management not only protects margin funds in trading accounts, but also provides a very profitable portfolio for your long term investment objectives.

People go to Las Vegas, casinos or gambling houses to gamble and hope to win the jackpot in just one night and become rich. We know there are people who get that kind of luck. The question is how gambling houses still earn money the next day, even though they suffered losses due to 1 person who got the jackpot? In the long run, casinos still make a profit because they earn more money from people who do not win. The casino owner also believes that the person who got the jackpot will feel addicted and continue gambling in the following days. The result? Of course "Home Always Win" alias bandar will never lose, in the long run.

Then how to manage good funds?

Assume you choose risk percentage of 4% of total funds in trading account. If your funds are $ 100, then the value of 4% of $ 100 is $ 4. So in one maximum trade you incur a loss of $ 4 only. If the position is a loss, then your funds are still $ 96. Not bad. If using the percentage above, then your funds will be exhausted if in 25 times your open position losing positions in a row (25 x 4% - 100%).

If we use 2%, then required as many as 50 times the position of loss in a row for penyabis funds in trading accounts.

Or you can use a total percentage of risk by splitting in several positions. Your example chooses a 4% risk percentage. In 1 trading day you divide the 4% in some positions. Suppose you intend to open a position in several pairs at once such as USD / JPY and GBP / USD. Then the total margin used in both pairs is a maximum of 4%, should not be more.

Compare to this one ...

If you have $ 100 and set a 10% profit percentage. Certainly in your dreams is how to get 10% of $ 100 alias $ 10 in just 1 trade. If in 10 times you experience loss in a row, then run out without the rest.

The bad news is that many of the traders who manage management prefer to use the percentage of margin with how much of it he can. Indeed, human nature is greedy, or more thinking about how much he will get and ignore the risk of loss he has.

Remember, Forex Trading is a very appropriate investment for the long term, not a place to gain wealth in a short time.

Why Many Interested In Forex Trading?

Why Many Interested In Forex Trading?

The Foreign Exchange Market (Forex) is the largest financial exchange in the world. The amount of money vomume traded on the Forex market every day even reaches trillions of US dollars. The actors involved with this currency trading include big banks, central banks, currency speculators, multinational corporations, financial institutions and sometimes governments also play a role to stabilize the value of the currency.

Currently, a lot of retail traders (individual traders) who also participate in this forex market with the help of online brokers - commonly called forex brokers.

There is no exchange or place where buyers and sellers meet in the Forex market. All trades are done through computer network among traders in various parts of the world. In addition, unlike the stock market, the forex market is open 24 hours per day, as it is a global market. A market player in Hong Kong may be trading with a market player in Australia, while American market participants are sleeping.

There are several market systems in the Forex exchange system. First, there is a spot market. Spot market transactions are based on current currency values ??(real time prices).

In addition there are two types of other forex markets, namely forward and futures markets. In the forward market, the buyer and seller agree on the exchange rate and the date of the transaction that has been set for a certain time in the future.

In the futures market, the currency price is bought and sold on the basis of contract size and due date. Futures trading occurs in public commodity markets.

Unlike stocks, currencies are traded against each other. If the stock price is quoted (quoted) from the price per share. While the exchange rate is pegged with other currency exchange rates.

So if you look at the exchange rate of a currency on a television show or other media that says USD / IDR = 13,000, it means that the value of $ 1 equals 13,000 rupiah.

Forex market is generally considered less stable than the stock market because in one day trading can reach 100 pips, even more. However, currency movements in the forex market move in line with demand and supply from market participants. In addition, economic news released every day to make the price movement becomes very high.

If you are interested in a flexible investment, with the opportunity to earn a profit per day, why not try to start investing in forex trading?

History of Government Intervention & Central Banks in the Past

History of Government Intervention & Central Banks in the Past

The following is a publication of interventions conducted by central banks in the forex market, including:

Intervention of central banks and the forex government

1978-1979 - At this time the US dollar exchange rate is under heavy pressure due to high oil prices. In addition, high US inflation and a worsening balance of payments make the US dollar depreciate. In November 1978, a program to restore and stabilize the US dollar. The government and the US central bank at that time disbursed up to $ 30 billion to buy the USD currency in order to make the US dollar again appreciated.

1980-1981 - US authorities and government plunge into the forex market to stabilize the too-strong dollar exchange rate.

September 1985 (Plaza Accord) - Germany, Japan, Britain, France and the United States - met at the Plaza Hotel in New York to discuss concerns about the very strong dollar exchange rate against currencies in European countries. Within a few weeks there was an intervention by selling US dollars in G5 currency.

February 1987 (Louvre Accord) - Dollar exchange rate weakens, US trade deficit rises and prospects for weakening US economy after several months of Plaza Accord deal. Plaza Accord raises concerns in Europe and Japan about the continued weakening of the dollar. Group of Five (G5) coupled with Italy met at the Louvre in Paris and agreed to "boost the stability of the US dollar exchange rate. The United States government publishes that they often intervene directly to buy dollars.

1988-1990 - The strengthening of the US dollar continues and is too high. The United States intervened after the Group of Seven declared the importance of maintaining exchange rate stability.

1991-1992 - US and European central banks intervened several times amid falling US economy into recession during the Gulf War, which led to a weakening in the value of the dollar. The United States intervened on both sides, spending more than $ 2.5 billion buying dollars and then selling $ 750 million to stabilize it.

April - August 1993 - The US government buys dollars and sells yen simultaneously.

Apr 1994-August 1995 - The dollar plunged to the lowest level against German Mark currency, reaching 1.41 levels in July 1995, and touching post-World War II lows against the yen below 83 in April 1995. Starting April 1994 , The United States intervened directly. Often cooperates with Japan's central bank and European banks to support USD currency. Combined intervention with European banks in this period took place on 15 August 1995.

April - June 1998 - The yen exchange rate is too weak to make the BOJ intervene to stabilize its currency. At that time the dollar reached the level of 144 against the yen. On June 17, 1998, the BoJ and the US Government intervened together to spend $ 833 million to buy the yen.

Jan 1999 - April 2000 - Japan is worried about the overpowering yen value, trading about 108 against the dollar in January 1999. The strengthening is feared will disrupt Japan's economic recovery process. BoJ intervened in the forex market to stabilize the yen exchange rate. The BOJ sells the yen at least 18 times in this period, including once through the Federal Reserve and once through the ECB. Despite the intervention, USD / JPY yen continued to strengthen and reached level 102 in April 2000.

22 September 2000 - European Central Bank, Japan and United States for the first time to intervene together since the last time occurred in 1995. The three major central banks intervened to encourage the euro to strengthen after the exchange rate reached a low point below 85 cents . At that time the euro had lost nearly 30 percent of its value since its launch in January 1999. This was the first intervention by the ECB since its inception.

3 - 10 November 2000 - The ECB and central banks in other eurozone countries intervene at least twice to buy the euro, after earlier the EUR / USD was able to rebound by 5% from its lowest level at 0.8225.

17 & 21 September 2001 - BOJ intervenes by selling yen and buying dollars (buying USD / JPY).

24, 26, 27 and 28 September 2001 - BOJ intervened by buying USD / JPY just as the previous 3 days. The intervention comes amid worries over rising exports and raising the value of the yen after Sept. 11 in the United States. Need to know, this time intervention is also the action of euro purchases made by the ECB but use on behalf of the BoJ. Subsequently on September 27, the Japanese government said that the Federal Reserve of the New York section intervened using "backups" from the BoJ.

May 22, 2002 - The BOJ intervened by buying USD / JPY, after the dollar fell to its lowest level at 123.50 against the JPY as it cast doubt on the pace of US economic recovery. BoJ intervened at a price of 123.80 - 123.90 yen per dollar.

May 23, 2002 - The BoJ intervened two days in a row, taking action at 123.90 - 123.95.

May 31, 2002 - The BoJ intervened by buying USD / JPY as the dollar fell to around 123 levels. This intervention brought the dollar exchange rate back to 124.50 against the yen.

June 4, 2002 - The BoJ intervened by selling the yen and lifting the dollar from the 123.35 level.

June 24, 2002 - The BoJ intervened by selling the yen in Asian market session, lifting the dollar to 122.80 level from 121.10.

June 26, 2002 - The Bank of Japan intervened by selling the yen and lifting the dollar to 121.35 from earlier at 120.20. The second intervention lifted the dollar around 121.10 from the previous 120.50. Then the third intervention was made early in the European session and raised USD / JPY to 120.70 from 120.03. In its official publication, the BoJ is estimated to have purchased an estimated $ 18.56 billion in intervention operations during June, as well as on May 31.

June 28, 2002 - B0J intervened by selling yen. The Federal Reserve and the ECB also sell the yen on behalf of B0J in early New York session trading. ECB confirm that they are buying EUR / JPY. In official data, many traders also took part in this action and caused a sharp EURJPY move from 118.10 to the highest position above 119. Other data also said that the Fed bought USD / JPY from 119, lifting the dollar to the highest position to the area of ??120.35 against the yen. Data released by the BoJ a month after the intervention showed that Japan disbursed around 520.5 billion yen to weaken the value of the yen.

January 2003 - This time Japan intervened alone without 'help' from the central bank. This intervention was conducted under the supervision of the newly appointed major finance diplomat Zembei Mizoguchi at the time. The Japanese government said the intervention cost about 700 billion yen.

February 28, 2003 - Japan's Finance Ministry has confirmed it has intervened for two consecutive months, buying dollars and euros worth about 513 billion yen. In an official report that the Japanese government has asked the BoJ to enter the market several times by the end of February and buy euros and sell the yen.

January - March, 2003 - Official data show that the Japanese government has spent around 2.5 trillion yen on currency intervention in January to March.

May 13, 2003 - Japan intervened by selling the yen after the dollar fell as low as 116.36 yen in late Asian trade. There is no confirmation from the Japanese government on how much funding is needed.

June 2003 - Japan sold around 628.9 billion yen in currency markets in the period May 29 - June 26 to stem the yen's strengthening.

July 2003 - Japan sold around 2.0272 trillion yen in July to prevent a stronger yen.

September 2003 - Japan sold around 4.4573 trillion yen, considerable funding for intervention in the currency market in September after earlier refraining from an intervention plan suspended in August. Economists say that all interventions were made before September 20, when the Group of Seven industrialized nations issued a statement calling for flexibility in exchange rates.

October 2003 - Japan sells about 2,723 trillion yen between September 27 and October 29 On September 30, the Ministry of Finance confirmed that the Japanese government buys USD / JPY, acting through the Federal Reserve of New York.

November 2003 - Japan sells about 1.5996 trillion yen between October 30 and November 26. In this period the dollar briefly fell to its lowest level at 107.52 against the yen.

December 2003 - Japan sells about 2.2519 trillion yen between 29 November and 26 December. The Treasury said in its budget plan for 2004/05 that it would raise its total fund for intervention to 140 trillion yen from 79 trillion in 2003. Before the budget is passed, the finance minister asks the BOJ to provide short-term funds by buying foreign bonds and pledging will buy it back.

January 30, 2004 - Japan sells about 7.1545 trillion yen between 27 December and 28 January. In this period the Dollar fell to its lowest level around 105.45 against the yen on Jan. 27. Japan's Finance Ministry also sold 5.014 trillion yen of foreign bonds to the BoJ to raise funds for intervention through repo agreements in which it will buy back the bonds in the future.

February 2004 - Japan continues to intervene with substantial funds, spending about 3.3420 trillion yen to stem the yen's rise. The dollar briefly hit 105.14 yen after a 4.5% rebound.

March 2004 - Japan sells around 4.7026 trillion yen in currency intervention throughout March. In Q1, Japan sold 14.8315 trillion yen to stem the yen's rise, breaking into the market for 47 days between Jan. 1 and March 31. This March is the end of a 15-month campaign by Japan to curb the yen's rise. Total funds spent reached 35 trillion yen or more than $ 300 billion.

June 2007 - New Zealand intervened for the first time since the NZD currency was issued in the forex market. This intervention was made after the demand for NZD currency pushed it to its highest level in 22 years. At that time NZD / USD reached the level of 0.7640. The price is considered by the New Zealand central bank (RBNZ) is a price that does not go in and does not match the prospects of the current economic fundamentals.

March 12, 2009 - SNB intervenes to weaken the CHF currency. This intervention is for the first time since August 1995 after the franc touched a low of 1.4576 per euro. This intervention then pushes EUR / CHF to 1.5450.

Dec 2009 - Mar 2010 - Traders cited SNB activity on 21 December, 29 January, 12 February, 23 February and 2 March to maintain the 1.46 level per euro.

April 2010 - SNB intervenes in the FX market to weaken the franc against the euro. Swiss government data showed foreign exchange reserves in the form of the CHF currency of 28.7 billion francs ($ 24.83 billion) rose to 153.6 billion francs in April. SNB adds to its foreign exchange intervention to keep EUR / CHF holding around 1.43.

May 2010 - Swiss National Bank re-intervenes in the market to weaken the franc as the currency reaches historical highs above 1.40 per euro.

Manage Maximum Loss in Any Open Position

Manage Maximum Loss in Any Open Position

Each person's abilities are different. Likewise with the ability and readiness to bear also vary also. You must decide how much maximum loss you are willing to pay in a single trading session.

Why do we need and must calculate the loss before we start trading? So that we can keep the losses to a minimum. By determining a small maximum loss, your total float / margin trading will not decrease a lot if you suffer a losing streak and can still survive and restore the losses that have occurred.

Notice the following table. For example your Float trading is 100 million. Means the maximum loss you bear in a single trading session if your maximum loss of 2% is 2 million. Whereas 20% is 20 million.

The above example is for one time trading. That is in one trading session = 1 day you are trading. So in 1 day / 1 session in multiple trading times you only prepare 2 Million loss in a day, no more than that, if your Maximum Loss is 2%.
2% is a very tolerable number and is recommended by other professional traders.

Why only 2%? I think it's very little and if the percentage is bigger I can still call it. Wait a minute, do not take too little little things lightly. Even small things can make your life happy or miserable.

Let us illustrate the activity in one of the following trading sessions. You take Maximum Loss with maximal value of 2% of 100Million capital. And 5 times your first trading session loses in a row. Let's calculate.

-The first Trading session of 100 Million funds you lose by 2%. Means you lose 2 Million. Funds remaining = 98 Million
-The second trading session of your fund 98Million you lose a 2%. Means you lose 1.96 Million. Funds remaining = 96.4 Million
and so on until you lose and lose 5 times.

That is the count according to Maximum Loss 2%. Consider the following table with a different Maximum Loss percentage.

Well, you already understand it. What if you take a greater risk? Such as 20%. Indeed if you can and know the exact price will be where you can get rich in a day, but also will be very faster also to go bankrupt. With only 5 times lost your trading, your money will be 32.7 million.

You'll have to make a 300% profit to get your capital back up to 100 Million as it once was. By setting the Risk, you can minimize Loss and maximize profits. Do not ever think it's impossible we lose 5 consecutive first trading dal. Do not say it's not possible yet. All can happen beyond your expectations. So by arranging your losses with Maximum Loss, you will quickly adapt and become a professional trader.

Let's take another example with a smaller fund. Above we calculate the percentage loss by one day, this time we will calculate the percentage loss with the calculation of each open position. Why do we use percentage of each open position? Because this is often used by the majority of most traders.

Such as you have a $ 500 in trading account, then how many lots are safe to use? We try to use the lot per position with a percentage loss of 2%.

You have $ 500. 2% of $ 500 is $ 10. Each open position you set a Stop Loss of 50 pips. So if using 2% percentage with stop loss 50 pips, then the safe lot used is 0.20. Because if you suffer a loss of 50 pips, then your loss is $ 10 only ($ 0.20 x 50 = $ 10).

Then if in 5 consecutive times you experience loss, then the funds in your account is still $ 451.9.

Not bad if using 2% in every open position. Better than you use the calculation of margin endurance in using lots like 100 - 200 pips margin resistance only. It would be better to calculate the loss like this because it is easier for you to measure the calculation.

The Influence of Fiscal Policy Against Currencies

The Influence of Fiscal Policy Against Currencies

Fiscal policy is determined by the government, to determine the amount of money earned from state revenues as well as the budget to be spent on specific goals, such as to increase employment and inflation.

If we see in theory, fiscal policy is issued to influence economic activity. In contrast to monetary policy, which is more focused on interest rates and the amount of money in circulation. Because the government tries to influence the economy directly, fiscal policy has a significant effect on economic indicators.

There are two types of fiscal policy

-) Expansive fiscal policy - which aims to lower taxes and increase government spending, thereby encouraging more spending and encouraging economic activity.

-) The contractionary fiscal policy - which means raising taxes and lowering the budget.

This fiscal policy theory is based on "Keynesian Economics" where economic productivity is controlled by governments that directly regulate and monitor taxes and public spending.

The effect of fiscal policy on the forex market has no direct impact. There is such a process with changes in the inflation rate that will ultimately affect the exchange rate of the currency. In the eyes of fundamental analysis, fiscal policy also influences many other factors such as employment.

When the government promises a tax reduction, it is also part of fiscal policy. In this way the government can increase economic activity. Conversely, lowering taxes can encourage more budget spending. It also helps boost market demand, and may be an indication that soon currency exchange rates will increase.

If you are a trader, let alone a long-term trader, it is good to always follow the fiscal policy development of the government. In addition to the precaution and avoid the currency trend change can also seek clues of currency exchange rate increase more quickly.

Beware Against Forex Brokers

Beware Against Forex Brokers

The popularity of the foreign exchange investment business or the Forex market as a way to earn revenue has resulted in the rise of recent Forex frauds.

Indeed, we rarely see or read in the media about people who lose all the savings they get with difficulty in this forex trading. Whether it is fraud through individuals who give the lure of a profit can give a few percent just by investing funds. In addition, other fraud is where when a trader (managing his own funds) loses his money in an online forex broker who can say 'abal-abal'.

We will discuss about 'fraud' which is often done by brokers that are not credible or often called a scam broker.

Brokers who have Credibility (trusted) high is very important for those of us who are just starting to plunge into this online forex world. Broadly speaking, truly trusted brokers have been registered on a financial regulation that has high security procedures. Minimal brokers are listed in one of the financial regulators such as FCM (Futures Commission Merchant), CFTC (Commodity Futures Trading Commission). Currently, many financial regulators are emerging and arguably have good procedures such as the CySEC (Cyprus Securities and Exchange Commission), the Australian Securities and Investment Commission (ASIC), the FSA (Financial Services Authority) and others.

In Indonesia alone there are official regulators such as Bappebti (Commodity Futures Trading Supervisory Agency).

Needless to say, forex brokers who are not registered with clear regulations will usually be 'blur' when their financial condition or system is in turmoil and carry their clients' money.

We have a lot of foreign online forex brokers who provide ease and have a high credibility that helps us to conduct transaction activity in the forex market. If you are still not sure to use foreign forex brokers, you can also use a local forex broker, but by researching in advance whether the local broker has Bappebti's regulation and also pocketed the operating license from OJK.

Choosing The Right Forex Pair For You

Choosing The Right Forex Pair For You

Choosing a forex pair or currency pair in forex trading is something that is important but rarely noticed by traders, especially beginner traders. Choosing a pair that matches our trading type character is very important, it is to find comfort in trading activities. Well what should be considered in choosing the best forex pair?

Things we should find out to find the best pair we can know through the spread. The majority of brokers offer small spreads, especially in EUR / USD pair. Yes, most brokers provide the lowest spread against this currency pair. In the broker fix spread, EUR / USD is offered with a spread of at least 2 pips and a maximum of 3 pips, but on the ECN broker can reach 0.8 pips or even lower. Of course the EUR / USD pair is favored by the scalper as it is known for its low spreads and stable movements.

Like EUR / USD, the GBP / USD pair is also a bit similar, but sometimes it has a higher spread, just a few pixels. The GBP / USD currency pair is also well known for its high volatility and range every day, so often intraday traders make orders on these currency pairs.

You need to know, even though the GBP / USD is known as a pair that has a stable movement like EUR / USD, but now the couple becomes more 'wild' moves due to very sensitive to issues and political developments between the EU and Brexit Referendum. So expect you to be more careful if trading in GBP / USD pair and coincide with events that discuss Brexit, such as the development of Brexit negotiations.

The USD / JPY currency pair is sensitive to what is happening to Japan and the United States, whether it be economic or central bank policy. It is usually negatively correlated with the movement of EUR / USD. When the USD strengthens, the EUR / USD pair will move down and also USD / JPY will strengthen. While in the EUR / JPY pair will usually move randomly with the shadow (tail) on each candlestick.

The USD / CAD pair trades the dollar against the Canadian dollar. Pair is closely related to world oil movement. Because Canada is the world's oil supplier, so oil prices will affect the value movement of the Canadian dollar. Sometimes this pair is negatively correlated to USD / JPY, although both base currency is USD. This is due to the negative correlation between oil price and USD value.

Japan is an oil consuming nation and when the price of world oil rises then Japan will also pay more to buy oil, it affects the decline in the Yen currency. Well on the science of correlation strategy pair it is often used by traders to seek profit in USD / JPY and USD / CAD pair.

AUD / USD, this currency pair is related to gold price due to gold commodity price correlation with Australian dollar. When the price of gold soars, the value of the AUD currency will usually strengthen and make the AUD / USD currency pair move up. This is because the Australian State is one of the largest gold producers in the world. It is also used by traders who are able to analyze the movement of gold as well as the inverse correlation to the US dollar exchange rate.

Well that's how to choose a forex pair that suits your ability and type of trading. In order to understand what influences the currency movement you should learn about the economic conditions and related commodities.