Profit from FOREX Trading with Minimal Risk

Prices are measured in pips. A pip is the smallest movement that currencies move. For example if the current bid price of the USD/CAD is 1.2542 then it means it cost 1.2542 CAD to buy 1 USD. If you buy $1000 of this, one mini lot, it will mean you need to put up $5 for the trade (at 200:1 leverage). If the the price then rises to 1.2552, the rate has done up 10 pips and you will profit from that move.

Since we are highly leverage and can trade bigger positions than we have in our account, we use something called stops. Stops are a maximum loss in pips we are will take on a trade.

If in the above example we set a stop of 25 pips, the most we will lose on the trade is $2.5. If our original trade is for $10,000 (and we put up $50 for the trade) the most we will lose is $25. Thus our maximum loss is this number, but we can make gains that are much larger than our losses.

So we set out stop with our $1000 (and we need at least $5 in our account) and we set our stop of 25 pips. If we enter at 1.2542 we put a stop at 1.2517 (25 pips below entry). This sets a maximum loss. Now we wait. If the price goes up 150 pips we reap a tidy profit. For this position, $15 while only risking $2.50. As our positions get bigger we can make large amounts.

For instance if we trade $30,000 at a time (meaning we only need to put up $150 for the trade to happen) we would make $450 on that same trade while risking $75. To be able to trade this volume you should have at least $1500 in your account. In this way the risk of your trade ($75) is less than 5% of your total account size.

That is a phenomenal return to be able to make $450 in a single trade off of only having an account with $1500 in it. Granted losses do occur, which is why the stops are in place to control losses. These types of moves occur everyday and can be captured quickly, everyday.

If you would like to know more, are interested in learning how to start trading, need help with trading methods or want to know who to trade with, visit me at http://www.vantagepointtrading.com