Forex Day Trading

Trading online as a business requires a plan, a business plan. Previously I had posted an article, the most important aspect to be a successful day trader was to have a well structured trading plan. Most traders focus on executing trades with a high percentage of correct trades. Then calculate the winner ratio vs. the losing ratio in gains and losses. A common mistake would be to start you money management from this point. You business plan for trading should include this breakdown and tracking but you should establish a macro view to your investment and your business plan expenditures first. For example when figuring you max daily loss for a day of unsuccessful trading you would want to add the amount of your daily cost to run you trading operation. Data feeds, internet provider, phone, news letter subscriptions, educational material (books cds, seminars) etc. Software cost could be broken down to average out over yearly to daily costs. Any depreciation of equipment you own and use to run daily operations. The amount of items in your trading business is very streamlined in my opinion so adding all the information should not be difficult but it will give you a better understanding how to calculate your profit and/or loss. You will understand how much you need to profit daily just to break even and then how much profit you get to keep. Capital gains tax can be a subject by itself but more on that at a later date. As a matter of fact seek legal advice from firms that deal specifically with traders.

Your daily operation starting with your account balance and you daily cost to operate has an exact figure. Let’s say for example you are like many other traders and don’t have $100,000 to start with. The reason I said $100k was it is a well established amount to deal with drawdown, margin requirements and the learning curve you will under go. With that being said lets deal with the majority and take our example and use $10,000 as our account balance. Daily operation cost is $75 not including commissions. I rounded out 20 trading days a month with respect to half days before holidays, holidays and the weekends depending on the market you trade. Expenditures include data service, subscriptions, seminars, internet connection, phone, education material, and trading room fee. Let’s open our eyes and see that we are $8,100 in the hole, but then again our year of trading has not occurred yet. This information allows us to account for our operation which opens a better understanding to our trading day. This is the reason I love this business. It is so streamed lined. Operating cost is very low. There is basically no over head or inventory, equipment costs are minimal and you can operate from virtually anywhere.

Risk tolerance varies from person to person however there needs to be an outline. Since there are so many vehicle to trade it is difficult to pinpoint a level. You take your $10,000 and trade one contract on the e-mini s&p. Margin requirement at the time is $6,000 therefore $4000 is at risk before you get margin call and need to put more money in your account. I am not trying to be negative. It is a matter of understanding loss potential in real numbers. The e-mini contract would have to move 80 points against you to wreak havoc in your account. The market volatility today can cause this to happen in only a few days. Since this a business and most business owners operate full time we will assume that we monitor our operation consistently. To implement our risk threshold take a percentage of the account size plus cost to operate and decide the amount you are willing to risk each day. Five percent of account size plus expenses in our example trading one contract on the e-mini s&p would allow us to risk 8.5 pts or $425. Add the $75 to operate and you get your 5%. Reverse the outcome and you have had an excellent trading day. You can apply this to any market you want to trade.

Remove the stress and indecision from Day trading Forex. Click on the link to get the tools and education you need to Day trade futures. This is the second article I have posted on Trading for a Living so if you are interested check back here. I will continue to post information on the subject.

Learn to earn! Visit this blog and discover more about what is forex!