Investment decision matters the most in forex market; where to invest and what would be its duration is a question to answer. Comparison between “Short term” and “Medium term” investment in Forex Market will help you for better understanding over the forex market.
I think the proper introduction of a novice trader in the operation of the forex market should start first by the medium term. It happens that the medium term is easier to understand, produces less stress compared to the short term, you do not need hundreds of transactions per month and above who can properly combine technical analysis with fundamental. Moreover, operating in the medium term it suits people who work and do not yet have the currency market as their main source of income (which I’m sure are many of you). I define the medium-term trend as the context where strategies are applied in scenarios four hours and day where operations could be open a few days, weeks or even months. It is also important to have good stop’s protection when such strategies so that market volatility and the news does not fulminate our positions so easily used.
Kathy Lien, known and successful forex trader worldwide fame tells us : “My best trades are certainly those where technical analysis with fundamental analysis converge.” Mark Douglas traders famous teacher says: “The ratio Risk: Benefit a trader must be at least 1: 3, which means you risk a dollar for every $ 3 of profit potential (another way to understand it is to risk 150 pip’s and risking 200 to win 450 or 600 pip’s and seek) “. If we combine these concepts see who are the medium-term systems best suited to trading for a novice operator that has just begun in forex.
Suppose you. We have a strategy (a system) trend that has a probability of operations for and against 50% and 50% respectively. As a medium-term system you. No need “to do operations,” only those where technical analysis and strategy come together and give an input that also has a key support (macroeconomic). Moreover, this trend has a system of risk and return ratio of 1: 3 and only risk per trade as most 2% of the amount of total capital. For example, if the trader makes 10 trades (uninterrupted losses) capital of the trader will have decreased by almost 19%, but is still with intact chances to recover. Then come the operations for bringing the end of the operation number 20 the trader’s capital is more than 46% of the initial amount, because it was earning three times as risky.
Although you. Seems unusual to have a system that has 50% chance for it is not easy or simple to develop from the point of view of strategy and discipline. I did not mention to discourage (the opposite), I bump for you to take into account and seek strategies with this profitability ratio. I do not think that there is no magic secret strategies are not naive that’s just cheap publicity of those who operate real accounts. I think there are good systems that after being tested by you. On a Back testing can offer the odds in your favor consistently (mathematically). Hence always smile when I read in different pages to characters commenting that their systems have an effectiveness of 70% or 80%, so help me God, if that were true these people would be billions and do not understand they do on the web giving us the “goose golden egg. “
But do a little more real the situation and assume that the system now has a medium-term probability of success of 40% and 60% failure. Even in that context, the trader will end quite positive at the end of the operation number 20 with just over 25% of profits. All this (again) thanks to have a system which seeks to earn triple the stakes. Even I am going to complicate the situation and assume that the trader has a system where the odds are in your favor only 30% against 70%, despite having lost continuously for 70% of events The trader still has “the ability to rise and only 30% in favor of operations to be almost 7% return at the end of all operations”.
At least reflect a little about everything and avoid read part of the large number of losers in this market that understanding nothing about capital management issues and want to learn Forex autodidact. A strategy that has a ratio of 1: 3 allows you to recover quickly even when they “have bad times”. And operate the medium term lets you do operations quality and not quantity. I think that after being a successful trader medium term (that experience) could operate more chance of success in the short term because in smaller contexts much more skill, market knowledge and emotional control is needed. I think it’s a logical process: learning to operate well in the medium term and then move to short.