Money Management

With very little in terms of an edge, but with a great deal of focus on money management, I have increased my trading account from $250 to $271.  My rules thus far - always look for at least 3 to 1 risk to reward, only take trades which have some edge, never risk more than 2% of core equity (equity - capital at risk, i.e. if I lost all the trades that I currently had on, what would my capital be).  I also have been tending toward trades which only risk 1% of core equity, I make the distinctions based on the 'probability' of the trade, or how good I think my odds will be, this is definately an area that I will have to devote more time towards.  I also need to begin focusing more time on my 'edge' now that I have a basic plan for money management.

Amazing Book

If you haven't already, you have to read Mark Douglas's book 'Trading in the Zone', it is perhaps the single best book I have
ever read on the subject of trading. It was recommended to me by a friend who has spent decades trading for institutions like
T. Rowe. Either way, if you have ever traded in any market this book will strike a chord with you, and help you in ways you
can't even believe. He really stresses risk management, treating trading as a probabilities game, not unlike gambling, and that
is just the start.

Still no trade.

I have been watching the markets and backtesting my strategy. I have also been reading. nearly every veteran trader out there tells me that the number one, most IMPORTANT thing to learn about trading is money management. So before I take my first trade I am going to setup a real concrete trading plan that includes a very definate section on money management. I will post links to my plans once I have a good draft version.

Thinking about a trade system.

I am going to start by testing a system in which I wait until the EURUSD or USDJPY (both 2 pip spreads) is trading inside the bollinger bands and the ADX is low (indicating a non-trending environment) when the price is near one extreme of the bands I will take a position in the opposite direction (i.e. the price is near the top band, I will got short) placing a TP before the opposite band and a SL just past the nearer band.  I will begin to report my progress starting tomorrow.

Setting up an account.

To get started I have opened a $250.00 dollar account at InterbankFX inspired mostly by their extreamly low lot size, you can trade .001 lots or 100 units at a time versus others where you must trade 100,000 or 10,000 units at a time. This will help me be able to control my risk more acurately. I am still searching for a system that I would feel comfortable starting with. My previous idea about a non-trending system may end up being sidelined for a trending system to get me started.

Which strategy to try first?

There are so many strategies and styles that reputedly work for trading forex that it is work just to pick a good strategy to begin with. I would like to start with something simple yet controvesial. It seems as though most traders in the forex world focus primarily on trending markets, for which currencies do trend about 1/3 of the time. I would like to try to opposite, earn money in non-trending markets. The moves will be shorter, but there should be more of them. Now I'm off to find a non-trending strategy that will be simple to implement.

Why trade Forex?

Of all the ways to earn a living, why would you trade forex?
Well, for starters, it is the most liquid market on the planet, with nearly 2 trillion dollars a day. Add to that the amazing leverage, plethora of trading methodologies and ease of opening accounts. Not to mention that there are many free charting packages with amazing technical analysis capabilities.
So, there is the why, but what about the how?
I am going to explore the why, and as I do, post the lessons I learn and the results that I get.