Most beginners underestimate the potentially devastating damage leverage can wreak on their accounts. Understanding leverage enough to know when to use it and when NOT to use it is critical to your success! Leverage is a very powerful tool but both old and new traders use it to destroy their trading capital simply because they…
Besides amplifying your losses, leverage also has another way of killing you. It’s a much slower kind of death though, kinda like dying by a thousand cuts. Most forex traders don’t see it coming and by the time they notice it, they’re DEAD. This killer we’re talking about is the associated transaction costs of using…
As a trader, it is crucial that you understand both the benefits AND the pitfalls of trading with leverage. Using a ratio of 100:1 as an example means that it is possible to enter into a trade for up to $100 for every $1 in your account. With as little as $1,000 of margin available in your account, you can trade up…
Similar to rectangles, pennants are continuation chart patterns formed after strong moves. After a big upward or downward move, buyers or sellers usually pause to catch their breath before taking the pair further in the same direction. Because of this, the price usually consolidates and forms a tiny symmetrical triangle, which is called a pennant….
Hopefully, you now have a better understanding of what “margin” is. If you don’t know what margin is, or think it’s an alternative form of butter, please read our previous lessons. Now we want to take a harder look at “leverage” and show you how it regularly wipes out unsuspecting or overzealous traders. Before…
A rectangle is a chart pattern formed when the price is bounded by parallel support and resistance levels. A rectangle exhibits a period of consolidation or indecision between buyers and sellers as they take turns throwing punches but neither has dominated. The price will “test” the support and resistance levels several times before eventually breaking out. From there, the price could…
Margin can be thought of as a good faith deposit or collateral that’s needed to open a position and keep it open. Margin trading gives you the ability to enter into positions LARGER than your account balance. Although buying and selling on margin does not provide leverage in and of itself, it can be used as a form of…
In a Wedge chart pattern, two trend lines converge. It means that the magnitude of price movement within the Wedge pattern is decreasing. Wedges signal a pause in the current trend. When you encounter this formation, it signals that forex traders are still deciding where to take the pair next. A Falling Wedge is a bullish chart pattern that takes place in an…
The head and shoulders chart pattern is a reversal pattern and most often seen in uptrends. Not only is “head and shoulders” known for trend reversals, but it’s also known for dandruff reversals as well. 😂 In this lesson, we’ll stick to talking about trend reversals and leave the topic of dandruff for another time. Head and Shoulders A…
Assume you are a successful retired British spy who now spends his time trading currencies. You open a mini account and deposit $10,000. When you first log in, you will see the $10,000 in the “Equity” column of your “Account Information” window. Usable Margin You will also see that the “Used Margin” is $0.00…