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A normal part of online forex trading is drawdown. It’s not often talked about because it isn’t “sexy,” but drawdown isn’t something you need to be afraid of.
Drawdown is when your trading account equity moves down in value. Forex traders want their balance to go up, so periods of declining account equity are typically feared, but they shouldn’t be because drawdown is normal.
Eliminating drawdown completely would require you to accurately & consistently pick the HIGHEST price & LOWEST price in every trend. This is almost impossible due to variation in prices, known as volatility in financial markets. Nobody on earth can accurately get the highest price & lowest price on each trend. We can get good prices, but there’s always a better price we could have got.
Close Enough for Profits
As a forex trader you can correctly guess the trend direction. If prices are likely to go up, you buy. If they are likely to go down, you sell. But once you buy/sell to open a position, it doesn’t mean prices will turn around the moment you place your order. Moments after you open your trade, a better price is often available. When this better price is available, you are experiencing DRAWDOWN…
This is ok.
Sometimes better prices are available DAYS after you opened your position, resulting in a larger drawdown. You don’t want to panic, because you still may be correct about prices going up over the longer term. You can also benefit from periods of drawdown.
Larger Profits with Drawdown?
A period of Drawdown is a windup for better profits.
Let’s look at a trade where we buy (long) 1,000 units of EUR/USD @ 1.3100. Prices expected to rise to 1.3300. Wait to 1.3300 to sell.
Look at these 3 scenarios:
Scenario #1 – No DRAWDOWN: If prices go from 1.3100 straight up to 1.3300, we make 200 pips on this trade. This is the ideal case as we won’t experience any drawdown.
Scenario #2 – Moderate Drawdown: If prices go from 1.3100 down to 1.3000, we are at 100 pips of DRAWDOWN. This is a point where some traders get nervous, start feeling sick and start to doubt what they’re doing. But there’s also an opportunity. We could buy another 1,000 units @ 1.3000. This brings our average open price to 1.3050. Now, when the price rises to 1.3300 we make 500 pips profit! This is 250 pips per 1,000 units traded.
Scenario #3 – Severs Drawdown: If prices go from 1.3100 down to 1.2900, we are at 200 pips of DRAWDOWN. This would tempt many traders to panic, but it’s also an opportunity to increase profits. If we buy another 1,000 units @ 1.2900, we make 600 pips profit when we reach our target at 1.3300. This is 300 pips profit per 1,000 units traded!
As you can see, larger drawdown gives potential for higher profits. The key is not to confuse drawdown with trend reversal. As long as you still believe you are right about trend direction, drawdown is really just a difference in timing between you & the market…a difference that can earn you higher profits.
Avoid Drawdown Denial
There are times when you should cut your losses and prevent drawdown from wiping you out. There is a point where drawdown turns into devastation. It’s a line you need to walk carefully. It’s not something to fear, it’s something you need to understand how it fits within your trading system.
With portfolio hedging, drawdown is automatically accounted for & used to grab higher profits when the drawdown turns into a huge UPSWING! To receive the benefits of a well planned money management system that uses drawdown as an advantage (and avoids drawdown as much as possible), check out the rapid forex hedge report today.
Credit Card companies are now starting to BAN all forex trading websites. This will soon change the entire forex education industry as we know it.
Why Pick On Forex Sites?
Credit Card companies aren’t just picking on forex websites, they are starting to change their policies for other categories of websites as well.
The reason that credit card companies are turning against FOREX websites is that the overwhelming MAJORITY of Forex websites provide trading methods that DON’T WORK.
That’s right, 99% of websites claiming to teach you how to trade forex simply DON’T WORK.
It’s an ugly truth that usually isn’t talked about…
Forex Credit Card Crackdown
It started about a month ago when paypal stopped accepting payments for forex related products and services. Yesterday I received an email from my merchant (Plimus) stating that credit card companies have changed their policies and no longer accepting transactions for forex. There appears to be no appeal process, just a flat out refusal to process credit card transactions for forex websites.
While this change won’t affect Forex Brokers, it will affect websites that TEACH forex trading, or provide forex SOFTWARE.
Good News for the Consumer
This move by the credit card companies will effectively put the bogus forex websites out of business. Of course this presents a unique challenge for the handful of forex websites that ACTUALLY teach you how to make money for real with forex (like rapidforex.com).
There’s another hidden benefit for forex traders…
Using credit cards for ANYTHING is the WORST thing you can do if you’re trying to create wealth. If you understand compound interest, the last thing you want to do is to pay it…you want to trade forex so you can COLLECT it!
The Most Moral Decision
There is still time before the credit card companies get to all of the forex websites.
Here’s what I’m doing that I feel is the most MORAL decision in order to help you build wealth, trade forex, and live a better life. I’m making a few changes.
Change #1 No Banner Ads
I’ve removed the banner ads from the Rapid Forex website. There is only one method of trading that I know works, and that is portfolio hedging.
I used to allow advertisements on the website because it was profitable for me to do so. But in an effort to clean up the forex education industry, I’ll only be promoting the trading methods that put PROFITS in my POCKET directly through my own PERSONAL FOREX TRADING.
Change #2 No Credit Cards
Ok, so the credit card companies made this choice for me. From this point forward I won’t be accepting credit cards for Hedge Report membership. I’ll be accepting checks. I’ll be cutting everyone a nice deal since this requires a little extra effort.
What’s IRONIC is that the Hedge Report is more PROFITABLE than EVER.
The Hedge Report will still continue because it’s generating excellent profits for the members and I.
In the next few days I’ll be posting the RESULTS of ACTUAL Hedge Report portfolio performance since the Hedge Report began. I’ll also update the website regularly in the future to show those results as they change and grow.
These are the SAME trades that I and the members of the Hedge Report have also traded.
The Hedge Report is a REAL trading method producing REAL profits for REAL traders.
I’ll also be providing a special deal for you to join the Hedge Report. Since I won’t be accepting credit cards, you won’t have to worry about getting automatically rebilled for something you’re not using. This allows you to only pay for the Hedge Report as long as you’re actually making money from using it.
This is actually a more fair deal for you
I only know of ONE method that makes consistent profits from forex trading, so that’s the ONLY method that I will be sharing with you on the Rapid Forex website. If I discover another method that actually works, I’ll share that with you as well.
So far after 15 years of studying forex, there’s only one that I’ve found that really works…
I’ll be reopening membership to the Hedge Report as soon as I can show you the updated profits we’re generating, the Hedge Report is kicking ass and making great profits. I’ll show you what they are in the next few posts.
Since moving to Maui, I’ve been pretty relaxed about my forex trading. The rapid forex blog has readers all around the world, and everyone has a different time that’s convenient for trading…
So I decided to do an experiment…
Starting tonight with the open of the London session tomorrow, I am going to follow the following schedule by watching for forex trading opportunities at the following times:
- London Market Open – 7 am GMT, 3 am EST, 9 pm Hawaii
- New York Market Open – 12 pm GMT, 8 am EST, 2 am Hawaii
- Sydney Market Open – 9 pm GMT, 5 pm EST, 11 am Hawaii
- Tokyo Market Open – 11 pm GMT, 7 pm EST, 1 pm Hawaii
I will be there for a minimum of the first hour of trading following the market open times for these major markets.
Best times to Trade?
One of the classic recommended best times to trade is in the London/NY market overlap session, which is from 1 pm to 5 pm GMT, 8 am to noon EST, and 2 am to 6 am Hawaii.
For me this time is the most inconvenient because it means that I’ll end up sleeping through several hours of daylight. I’m on Maui to enjoy it, so I personally need to select different hours…
Forex Trading Experiment Round 1
After a week or two at this pace, I will switch my schedule to the 2nd hour of market activity. Then I’ll try trading the final hour. After doing this experiment for the next month, I’ll determine if this method works best, or if I should just focus on one market overlap session.
If you’re a live forex trading member, you’ll be able to pick any of these times to trade. I’ll let you know the results as I conduct this experiment to determine the ideal trading schedule!
Experiment With Me
It would be fun to know what works best for you. Feel free to follow this experiment yourself, or design your own experiment. It will be fun to all learn together during this experiment. I look forward to reading your comments about what works best for you!