Forex trading is a very profitable and lucrative investment option. But it is also a very risky investment alternative. For people who do not exactly know what they are doing, the advantages of investing in currency trading may lure many individuals to invest their hard-earned money on forex trading, only to find out eventually that things are not as simple and easy as they have thought it to be.

While it is true that forex trading can give an investor huge amounts of profits in a short span of time, there are accompanying risks involved. As any investor would know, high yielding investment alternative normally carry with them a corresponding high amount of risk involved. And forex trading is no different. The promises of high returns on one’s investment can turn out to be shocking losses for any individual investor who does not fully understand the business of forex.

Trading the forex markets involves leverage. Forex leverage makes it possible for an investor with a relatively small amount of capital to control fund which are usually 100 times the amount which he exposes with his trades. Leverage multiplies the effects of the changes in the prices of currency pairs that investors trade.

This characteristic of forex trading should warn investors that, just as profits can be quick and easy to come by with trading, losses can just be as easily absorbed, with the same amount of swiftness and magnitude.

That is why trading platforms have features to provide extra protection for investors who trade the forex markets. These are called stoploss levels. For every trade that an investor makes with his account, he can set a certain stoploss level where he instructs his broker to close that particular trade should the market go against his position and reach a certain level. This is also called “cutting losses”. Anyone who trades forex knows that no matter how diligently a trader studies the market and prepare his trading plan, losses are bound to occur. It becomes a matter of discipline for a trader to accept losses for a trade that goes against his position in the market.

Stoploss levels guarantee that your account would not be wiped out should the market continue to move against your open position. Stoploss levels give a trader the chance to cut his losses. And stoploss levels provide the opportunity to have a fresh new mindset when analyzing the forex market. Sometimes, this is what a trader needs to be able to clear his mind from losses. Cutting losses stops an investor from hoping that the market would reverse itself and follow the investor’s open position. Most of the time, it is that false hope that wipes out the entire account of a stubborn forex trader.

So while stoploss levels effectively reduce an investor’s equity everytime it is triggered, the benefits of using it to ensure that you can survive to open another trade with a fresh new mindset should be emphasized. Use stoploss levels to reduce the risks of an investment which is characteristically risky in the first place.

You may have already done your research all over the internet. You may have already read all the help e-books and forex trading manuals that you could get your hands on. You may have already scoured the various forex forums online and exchanged ideas with some forex traders about topics ranging from forex brokers to trading strategies. And you may have also tried on the different forex robots freely available in the market to help you with your trading.

You already have your forex trading strategy ready. You’ve tested it on countless demo accounts for months now. And now, you feel you are ready to go live. You have already opened a real, live forex account with your chosen broker. And the forex broker has already confirmed your deposit and your account is already all set for trading.

Clicking on that order button to enter your very first live forex trade can be a bit daunting. After all, you are now trading with real money here – real money that you worked hard for. There is not much room for error now. Every error that you make from now on will have to be paid for in real money. No more limitless demo accounts which you can open anytime just to see if a strategy that has been brewing in your head has potential for profitability. There are no more demo accounts that you can deliberately leave with open positions even if you go on extended vacations, and just check on them whenever you have time. You now have to focus and monitor each and every open trade that you make because it is now your real hard-earned money that is on the line now.

Actually, it is quite understandable that you would feel a bit uneasy making your first trade. But if you have indeed dome your homework prior to opening a real, live account, then you know that everything should work out fine for you. If you have consistently applied what you have learned in all the readings that you researched in the internet, you should be confident on what you are about to do.

The purpose of demo accounts is to prepare you for this. Demo accounts are not only for traders to try out their forex trading strategies, but they are also dry-runs for the real trading execution. You should have gotten a feel of how the market moves and how it can affect your decision-making in your trading. Of course, a demo account does not involve real money. And sometimes, that may make all the difference in clouding your judgment. But you should trust your judgment and how you have developed and fine-tuned your trading strategy. Your trading system should be the solid foundation to back you up in every move. It would be better if you have it all written down so that you can easily go back to them whenever you feel having any doubts or confusion.

So, get online. Run your forex trading platform. Get yourself ready by reviewing your trading system and your trading strategy. Have your trading plan prepared for all the eventualities. And trust your system to work. You have tested that system over and over again. And you know that there is no perfect system that would never lose. So what if you lose in your first trade? The important thing is you trust your system enough that in the long-run, it would produce profitable results for you.

So, go ahead. Click that order button. Enter your first trade.

Forex is a speculative form of investment. Add to that, leverage is allowed with forex investment. And this combination makes investing in forex trading a risky type of investment alternative.

But with the high risk characteristic of forex investments come the lucrative profit potentials that can be achieved when done correctly and wisely. Maybe you have heard of the scary statistic that 9 out of 10 forex investors lose their money on forex trading within the first few weeks of trading. And similarly, you may have also heard of the success stories of forex millionaires who trade for a living using forex investments.

So maybe you want to try your luck with forex trading. Of course, you would not be going into forex investments with just luck as your weapon. Maybe you have already done your research and your training. You may have already developed a profitable trading strategy using a demo account. And now, you want to test it on a real, live account.

But you are not sure as to how much would be the initial deposit that you should invest when you open your real, live forex account.

In order to come up with a figure, you should first ask yourself a few questions.

1.) How much investment can I afford to lose?

Let’s face it. Forex is very risky. And if 9 out of 10 investors lose their money in forex, better be prepared to be one of those nine unlucky investors. But of course, you would not be investing with a losing mindset. This is just to determine an amount which you would not lose sleep over should you lose entirely. Think of it as money that you would not be needing for the college education of your children. Or money that you can afford to splurge for in a vacation. This should be money that, once you lose, you can always get back without much heartache and hardships.

2.) How much is the minimum investment with the forex broker that you chose?

Whether you are targeting to open a standard account, or a mini account, or even a micro account, you should know the minimum investment that you forex broker allows. Then compare it with your answer to the first question of how much you can afford to lose. See where your amount can be accepted. It is usually advisable that you do not invest the floor minimum amount required by the forex brokers. For example, if the minimum for a mini account is USD 300, and USD 1,000 for a standard account, and you have exactly USD 1,000 in funds that you can invest, it is advisable that you choose a mini over a standard account even if your funds are sufficient to open a standard account. The reason for this is that you can have more margin to maneuver from with a mini account than with a standard account with the amount that you have. Surely, you know about margin requirements and proper capital management if you have already done your homework in these areas.

3.) Would the amount that you can invest be enough with the number of trades you would be making in any particular time be enough considering the type of trading strategy that you would use?

Different trading strategies require different types of margin. If your strategy requires that you open several lots at the same time, or that you strategy includes adding up trades at certain levels, you should compute if the money that you can invest is enough to cover the margin required for this type of trading. And not only should it be enough to cover the margin, but it should leave your account an acceptable room to breathe and maneuver should the market move against your position. Again, the reason for this should already be clear to you if you fully understand the value of risk management for your capital.

With those three questions, you should be able to arrive at the figure for your initial deposit for your live forex account. Remember that these guidelines are aimed to ensure that you have room for proper capital management while making sure that you minimize the risks associated with forex trading.

So maybe you have already read all the basics you need to know to be able to trade forex. You have scoured the various internet forums to get some tips and strategies on how you should trade currencies. And you have already started trading using a demo account with your chosen broker. So now, you are already thinking of opening up a real, live account.

But you wonder, how different is a demo account from a real, live account?

Real Live Account Means Real Money

At risk of stating the obvious, you are dealing with real, hard-earned money when you trade real, live accounts. And this alone carries with it a lot of implications as to how it is different from demo accounts.

First, since it involves real money, you do not have the luxury of just opening up another one in case you burn up the whole equity with losses. Well, of course, you can deposit real money once equity dries up. But it would cost you real money that you should be earning, instead of losing.

Added Pressure In Real Live Accounts

And since real money is involved, there is now pressure with every trading position that you open. There are times with demo accounts where you open an account because you want to try a strategy that you have been cooking up in your head. Before you click the trigger by clicking on that mouse to open a new trade, you would have to think things over and review your trading plan thoroughly before you get caught up in a trading position that you would regret later on.

Monitoring The Trades More Closely

And for anyone who has made the jump from demo accounts to real, live accounts, there is a noticeable difference with the way one would monitor the open positions that he has. Unlike with demo accounts when one would open a trade, probably set stoploss levels and profit target, and then just wait for whichever gets hit first, it would become totally different with real, live accounts. Psychologically, even if you know that you already have the target profits and stoploss points in place to be triggered automatically, you would still be constantly checking on how the market s doing and where the prices are going.

While this can actually be a good thing, in the sense that you are always aware of how the market moves in relation to your position, and make the necessary adjustments if you deem them fit, this may also work to your real, live account’s detriment. Changing trading plans more often can lead to weaker trading plans altogether. Simply put, a plan which is not always followed is not really good for the overall system of trading. Forex traders work hard in developing their systems. And constantly changing plans would dilute that system until it becomes unrecognizable anymore. And following the rules of the system is important in evaluating a system’s profitability and effectiveness.

The Forex Broker Factor

With regard to the ways orders are taken in and accepted by your forex broker, there should not be much of a difference between demo accounts and real, live accounts. Although most forex brokers have different hosts and servers for their demo accounts and real, live accounts, we should actually expect that real, live accounts should be technically more dependable. Of course, there are times, especially during extremely volatile market situations when orders would not be filled up instantly as prices move extra-ordinarily fast in these situations. Some brokers add a few pips in their spread to be able to adapt to these times. These mostly happen when some sensitive economic data is released. But market conditions usually returns to normal after a few minutes. If your forex broker gives you a totally different trading environment with their real, live accounts as compared to their practice, demo accounts, then maybe you should try considering looking for another forex broker.

So, with all of these differences between demo accounts and real, live accounts, it is actually up to the forex trader on how he would adapt to the discrepancies. The demo accounts were there for the forex investor to practice trading and develop an effective forex system. Learn to apply the system that you developed and adapt to the changes and pressure of trading a real, live account. It is this ability to adapt and implement your system with strict discipline that would spell out the profitability of your forex trading account.

Many individual investors are now looking at forex trading as an alternative form of investment. While this speculative investment option has the potential to be extremely profitable for anyone willing to learn and master the skills and knowledge needed to conquer the forex market, strict discipline is still needed to be able to succeed in forex trading.

Various information about forex trading, and forex investments in general, can be found all over the internet. Many forex forums also offer the needed assistance for forex newbies in trying to learn their way around forex trading. Numerous forex strategies are even developed in these forex forums where the members help each other in formulating and fine-tuning several forex strategies. And this is where forex newbies seek the help of more experienced forex traders in learning how to trade.

An integral part of forex trading is employing the right kind of forex trading strategy. Depending on the personality of the forex investor, there are different types of trading strategies available. There are trading strategies which are geared more towards the long-term positioning of the trades. While there are some trading strategies which are aimed at breakouts in price charts using a number of technical indicators. While there are other trading strategies which take advantage of small price retracements and scalping the forex markets for small profits.

But whatever forex trading strategy it is that a trader chooses to use, it is necessary to fine-tune that forex strategy to fit one’s trading personality and investment goals. This is why developing one’s own trading strategy is important in forex trading. In as much as various forex traders have various trading tendencies and characteristics, one should develop a trading strategy which is according to the way he thinks and decides.

It is only through developing your very own trading strategy would you be very comfortable with every decision that you make because these decisions are based on your own experience and developed through your very own trading familiarity.

Of course, this is not say that each forex trader should develop his own trading strategy from scratch. Adapting a trading strategy where one feels very comfortable at is a good way to start developing one’s own style. While adapting another traders trading strategy, you can start inserting your own strategies to fine-tune the system where you would feel more and more comfortable. Examples of these fine-tuning techniques would be the application of stoploss points and how you specifically pinpoint those levels according your own research. The addition of your favorite technical indicator that you have learned to trust in your trading may also be applied. And you may even have your own style of exiting a trade – like maybe you prefer graduated exit for one particular position.

All of these examples are just supplementary techniques and strategies which can help a trader become more comfortable with the decisions that he is making with his trades. After all, a system which you do not fully trust can only lead you to shaky decisions with your trades as the foundations by which you base your trades are not built solidly. Developing your own trading strategy is a learning process with the ultimate goal of constantly improving your trading system towards a more profitable investment.

Forex Drawdown and Forex Strategies

Forex investors should know how to evaluate investment strategies based on the risks that their accounts are exposed to based on forex drawdown. Forex drawdown is the amount, either in absolute value or percentage terms, of decline in a forex account’s equity through the course of trading.

For any given instance that a position is opened in trading account, the value of its equity changes from time to time depending on the current floating profit or floating loss that the open trade is incurring. Even if the said trade has not yet been closed and liquidated, the equity also rises and falls as the price for the traded currency pair fluctuates.

Forex drawdown is important in determining if a forex strategy is a good strategy. Forex drawdown gives the forex investor an idea of how risky a forex strategy is. If a trading strategy has a relatively large amount of drawdown when compared as a percentage to the account’s equity, that strategy may be considered risky. It is risky because it puts excessive strain of the account’s equity for the open trades it takes before it can make a profit. And an excessive forex drawdown may also eventually lead to a forex account losing a considerable part of its value as a result of risky trading strategies.

Forex Drawdown and Signal Providers

Forex drawdown can also be used to evaluate forex trading signal providers. In the same way that strategies are assessed by the risk factor that it exposes a trading account, forex signal providers should also be evaluated with the amount of risk their signals put on an account. Forex trading signal provider should be able to give profitable trading signals to their clients without taking too much risks. The value of any amount of profit generated by trading signals should be analyzed in view of the risks that were taken during the trade to achieve that level of profitability. As an example, if a forex signal provider suffered a floating loss of 100 pips before the price of the currency pair turned around and hit a 10 pip profit, is it worth it for the investor? The forex investor risked 100 pips to be able to gain just 10 pips of profit.

Risk Factor and Forex Drawdown

While the example above was made using pips as the basis of analysis, the more correct and more accurate way of evaluating forex drawdown and the risks involved should be by using the percentages based on the forex account’s equity. Of course, different forex investors have different appetites for risk. And depending on how much risk you are willing to take, the amount of forex drawdown varies from one investor to the next. But remember that most of the time, the amount of risk that a forex investor is willing to take, based on the relative amount of forex drawdown that he exposes his account to with his trades, usually determines if his account can survive the volatile markets of forex in the long run. The profitability of a forex account is usually correlated to the length of time the account stays alive to trade in the forex markets.

So evaluate the risk factor you are willing to take with your forex account by computing the forex drawdown you are willing to take with every trade that you open. Proper capital management should dictate that forex drawdown be maintained at a minimal amount for an account to remain profitable in the long run.

Volatility of the Forex Markets

For anyone who has ever traded forex, he knows that the market can get extremely volatile at times. An economic data released that is either falls short or exceeds market expectations by a wide margin can trigger massive movements in the market. Or sometimes, without much stimulus to jolt the market, simple technical reasons such as being overbought or oversold in its technical price levels are enough to bring extreme volatility to certain currency pairs.

There are some forex traders who love this. They simple live for these moments of extreme volatility in the forex markets. And why not? These instances provide the perfect opportunities for forex investor to earn money. And earn money extraordinarily.

Big movements in the forex market give forex traders the opportunity to maximize the profit potentials from their trading positions. No one makes big profits when the market is stagnant. That is why many forex traders prefer the action of an active market.

But just as the double-edged sword can cut both ways, volatility in the forex markets can also either give you and your account great profits, or it can also inflict in your account massive losses. If your position is against the market movements, your losses would quickly pile up one the price levels accelerate away from your trading position.

The Use Of Stoploss Points

This is where stoploss points come in useful. Think of stoploss points as safety nets.

Just like the safety nets being used by acrobats in high-flying stunts, safety nets are there with the hopes that you would never have to use them. But once you are forced to use them, you are just glad that they exist because they keep you alive.

In forex stoploss levels function the same way. Forex traders hope that the market does not hit their stoploss levels because it would mean that they would be acquiring losses in their forex accounts. But looking on the bright side, the losses incurred as a result of a stoppage from the stoploss points actually ensures that your account is still alive. The account stays alive to trade in other opportunities. And for anyone who has traded forex, he knows that opportunities are endless in forex.

And in a market where volatility suddenly increases into extreme levels without much warning, stoploss levels are extremely important to prevent your account from being wiped out. The extreme volatility, when not agreeing with your trade position, can inflict huge losses in your account when not checked immediately. And stoploss points are there specifically for that purpose – to check the skid of a wrong trade.

Stoploss To Wake Up The Forex Investor

Stoploss levels can also be a forced wake up call for some investors who hang on to false hope. It is human nature to hope that the position we take is the right position and that the market would eventually agree with us, But sometimes, stubbornness prevents some forex investors to see clearly and cut their losing positions. A stoploss point would force them to do that. A stoploss level, when hit, would force the trader to analyze what went wrong and actually give him a fresh start in analyzing the market. It is easier to study new positions when you are not holding on to false hopes which sway your objectivity astray.

Stoploss levels should be carefully computed and analyzed for them to be effective. But they are necessary safety precautions that you should never forget for every trade that you make.

With the numerous forex trading signal providers available on the internet nowadays, there are various ways in which forex traders and currency investors, in general, use them. Whether the signal providers offer their services for free or for a fee, forex investors take advantage of these signals they provide in a variety of ways.

Depending on what type of forex trader you are, and what kind of trading strategy you employ, there are certain forex signals providers that would fit your trading personality. And based on these, you should choose which signal provider would complement your trading system to maximize profits and minimize risks for your forex trading account.

Trading Signals As Confirmation

Some forex traders prefer to do their trading analysis on their own. They study the charts on a regular basis, plot support and resistance levels, utilize relevant technical indicators, prepare for important economic data releases, and map out a specific trading plan for whichever way the market goes. They have identified entry and exit points for the currency pairs they trade. And they just wait for the market to show signs of life. And they react to whatever the market gives them.

But these forex traders also use the signals given out by forex trading signal providers. But they do not rely solely on these signals. They just use the signals as confirmation for the trade plans that they have prepared in advance. They take advantage of trading signals, especially if they are provided by free forex trading signal providers, by using them as a sort of second opinion about their forex trading analysis.

They compare what these forex trading signal providers give out with their own technical and fundamental analysis. And they study which points they agree upon and which points they differ at. And based on these, the forex trader may decide whether to continue with his plans of trade, or revise his strategy in view of the analytical input of the forex signal provider.

Or sometimes, the whole process goes in reverse. A forex trader takes the trading signal given out by the trading signal provider. Then, he analyzes it based on his own criteria. And he comes up with his own concluded plan of trade which is essentially a combination of both strategies. Whatever strategy that can assure him of the highest probability of profit and minimal losses, he would take.

Trading Signals As Trigger

For some forex traders, they have chosen to let the experts do the forex analysis for them. Maybe they have already tried doing the technical and fundamental analysis on their own and realized that they are not really cut for it. So they just rely on the forex experts and listen to their opinions when it comes to currency trading.

These types of forex trader usually use the forex trading signals as triggers themselves. They do not add the extra analysis of their own. They take the signals on its face value and use them straight on their trading. They trust the forex trading signal providers to give them profitable signals based on the providers’ own analysis.

The important work for the forex investor lies in choosing the right forex trading signal provider for him. Since he would be putting full confidence on the signal provider, he must choose wisely beforehand. Depending on the type of trading personality of the forex investor, he can choose the best signal provider that would fit his trading goals and objectives. Historical performance is a good gauge of how a signal provider would perform in the future. And a providers track record can give the forex investors the necessary data to evaluate if the provider is the right signal provider for them.

Trading Signals As Trade Orders

Then, there are forex trading signal providers which provide signals that translate directly as orders for those forex investors who choose to employ their services. Simply put, it’s like having a forex robot trading your account for you. But the major difference is that the signals, where the orders are based upon, are given out by human forex experts. These human experts, who serve as the forex trading signal providers, base the signals that they give out on their own technical and fundamental analysis. Depending on how you view purely mechanical trading robots, there are some forex investors who still prefer the human factor in evaluating trading decisions.

When the signal providers send out their trading signals, these are translated into trading orders directly by the forex investor’s forex broker. So, it becomes automatic. The order is entered in behalf of the investor and shall be closed once another signal is sent out by the signal provider. All the forex investor has to do is to monitor the trades and evaluate is he is being profitable with the signals sent out by his provider.

This is a fairly new innovation in the forex investment industry. And the best thing about this is that the services are free. The forex trading signal providers give out their signals for free. And the fore brokers convert those signals into trades also for free.

But the way it works is beneficial for everyone involved. The forex broker gets more business with every trade taken. The Forex trading signal provider gets commission from the broker for every signal that he sends out. And the forex investor, at no extra cost, gets the advice of a forex expert to improve his forex trading and hopefully, accumulate profits for his forex trading account.

Isunia’s profit curve is like a well-measured slope that shows the steady rise in its equity. This is usually the signature of an account that is traded with an Expert Advisor. And true enough, Isunia utilizes a forex robot in trading this account. And that trading robot is primarily responsible for this steady rise in profits for Isunia.

Isunia also uses some hedging strategy with the trading robot that he is using. Therefore, it should be important to note that anyone eyeing to use Isunia as his trading signal provider should remember these two important factors. Isunia uses Metatrader 4 as his platform, and your forex broker should allow hedging for you to be able to utilize Isunia’s trading signals.

With that said, analyzing Isunia’s trading statistics would lead one to conclude that he is using one very powerful EA in his trading. With a trading winning percentage of 97%, Isunia is able to achieve a Return On Investment of 441% in only 31 weeks of trading as of March 2, 2010.

His drawdown statistics, however, may elicit some concern for conservative investors as he pegged his maximum drawdown at 31%. That is quite a hefty amount for any conservative investor who aims to protect his equity more than to grow it aggressively.

But for an aggressive investor, such a drawdown may be an acceptable figure as his ROI results certainly justify the risks that the EA is making.

For investors who prefer the emotionally-detached trading of a forex robot, then Isunia may be the right provider for your account. You can check the trading records for yourself and see how the account grew so fast in only about half-a-year of trading.

Isunia uses short term trend as basis for his trading positions. And he recommends some amount of strict capital management so that the signals he provides does not blow out your account away. As with any other strategy in forex, a well-thought-of and thoroughly-computed capital management strategy should be strictly observed. Know the number of lots that should be used optimally with this strategy. And calculate the total amount of equity that should be exposed with Isunia’s appetite for risk. And with all of these factors being factored in the trading of your account, you can certainly copy the rising slope of Isunia in you own equity curve.

View Isunia’s trading records here and scrutinize every trade that the trading robot has made. Better yet, open your own demo account and try out Isunia as you free service provider and watch your demo account rise steadily.

Just one look at the profit curve for Racscave’s account and you would already wish that it was your account. It follows a nice, steady rise in equity where drawdowns are at a minimum and profit spikes are nowhere to be found. This simply means one thing – consistency.

The consistent returns in the trading of Racscave imply that his trading is a result of a well-thought-of strategy which does not depend on the luck of a few big trades to grow the account. For an account with a trading record of almost one year, Racscave shows that profitability can be consistently mastered with forex investments.

Racscave’s record shows a 539% Return On Investment in just a period of 50 weeks as of February 23, 2010. This is combined with a maximum drawdown of 12%. That is a pretty acceptable drawdown considering the high and consistent returns that Racscave has been pulling in week after week of forex trading.

With a 92% winning percentage in his trades, Racscave utilizes a wide variety of currency pairs when trading the forex markets. He uses technical analysis 80% of the time in his trading decisions with some fundamental influence based on market movements. His trades are very much varied in their approach and exits. They range from short and aggressive scalps, while some are swing and more long term position trades.

Racscave recommends the way an investor should apply capital management should he be chosen as a signal provider. He strictly requests conservative lot positioning and ultra-tight capital management when trading with his system. This would allow less risk while maximizing the possible pips gained with his signals.

If you are still not yet convinced, try to see for yourself how Racscave’s equity curve looks like here. Consistency is the name of the game. And Racscave is certainly a master of it as seen with this curve.

Open a demo account now and watch you demo account’s equity form into a nice and consistent curve in the weeks to come.