The 2% guideline is a powerful tool in Currency dealing trading.
By implementing this guideline you`re using a strategy that reduces the
dimension your failures during losing lines, an essential consideration. There
is, however one small warning that you need to be aware of when using the 2%
guideline to determine how many Currency dealing stocks you are going to buy.
As you know, the number of stocks you can purchase is determined by your
maximum reduction and the dimension your quit. This means that by increasing
your danger, you can also improve the cash value of the place you start. By
simply diminishing your quit dimension, that is by setting a more restrictive
stop-loss, you can improve the cash value of the place you start.
To avoid a situation where you could end up with excessively large
roles that may put your Currency dealing trading flow at danger, you can select
to introduce an extra guideline. This guideline would limit the cash value of a
place to be no more than a set amount of your whole Currency dealing trading
flow.
For example, you might select that you`ll never start a place that
has a cash value of more than 25% of your whole Currency dealing trading flow.
This guideline would only be implemented if, after determining the formula that
decides how many stocks you buy, you look for the cash value of that place
would greater than 25% of your flow. If this happened, you would scale down the
place to make sure it did not surpass that 25%.
The amount that you select upon is determined by the type of
program you`re dealing, the dimension your flow, and your individual threshold
for danger. Generally, smaller Currency dealing trading drifts might use 25%,
and larger Currency dealing trading drifts might use as little as 10% or even
5%. There are no specified numbers, and the amount that you select is
determined by your individual circumstances.
Once this tendency is repaired for you will have all your control
guidelines in place, ready to control your danger in the Foreign exchange
market. Now you need to take the next step. Test your program to discover out
which of the factors best suit you, remembering always that place measurement
is the most significant part of any program design. It is the lynchpin of
control. Once you`ve tested your program, and fine-tuned your guidelines, you
will be well on your way to becoming a successful Currency trader.
