Filed in Business by on November 30, 2012

Forex trading as a profitable investment (2)
November 30, 2012 by kunle Adeyeri

‘Kunle Adeyeri

Last week’s article generated a lot of interests and uproar. I received many mails on my calculation of 240 per cent annual return on an investment of N400,000 ($2,500). For those who claim it is high-risk or a tall order, please find below my analysis based on the assumptions that you can read the market trend and also reversals, scalp, take opportunity of resistance and support levels and profit management in an intra-day trading.
Rate based on $1=N160
On 0.1 lot which gives $1 profit make 25pips in a day, hence profit of $25
On 0.2 lot which gives $2 profit make 13pips in a day, hence profit of $26
On 0.3 lot which gives $3 profit make 9pips in a day, hence profit of $27
On 0.4 lot which gives $4 profit make 7pips in a day, hence profit of $28
If you cannot achieve any of these above in one, two or three orders in a day, then you need to quit trading, find a better training outfit to sharpen your skill or release your account to a professional trader to manage.

Trade planning
Planning is crucial to online forex trading as a profitable investment. Plan yourself and your trade. Please make use of the guides below.

Trading Style
Determine your trading style, Scalping, intra-day, or swinging.

Your trading style will determine what time frame chart (Periodicity) will suit you. For intra-day traders and scalpers, one minute to four hours will be okay. Swingers will probably use daily, weekly or monthly chart.

Trading Time
Forex trading is a 24-hour market, but a good trader needs not stay glued to the screen all the time as most ‘outsiders’ believe. In this part of the world it is better to trade in the European and American market peak periods between 9.00am and 3.00pm. You could even trade for just 30 minutes and make your target!
Do I trade economic calendar or news? As an intra-day trader there is need to acquaint yourself with the economic news and the time of their release, as such always cause some volatility. There are sites you can check up on upcoming news, such as, etc. Here you will get the degree of volatility. Some traders (technical) avoid trading at these periods while some take advantage.
What currency pair do I trade? Mostly traded currency pairs are EUR/USD, GBP/USD, which are traditional ones emphasised during short trainings/seminars. But trading is really about opportunities. The Meta trader platform offers a variety of pairs to choose from.

This is the capital one has at any time to trade with. The real planning is focused on it. It must be jealously guarded. To remain in the market always and also make profit, your lot size must be weighed with your equity to avoid greed. This is where most new, amateur and immature traders fall prey to the market. Once you have a proper understanding and application of this, there is no cause to exercise any fear in forex.

This is a loss a trader is determined to bear. This is done by setting a Stop loss to a trade to cut off in case of a counter trend. This is a very good practice. As a good trader it is a said that you need to determine a percentage of loss you can bear or risk out of your equity before thinking of a profit. Most traders also get disappointed as they see their Stop loss taken only in the next minute to see the trend going the way they intended.

This is the expected profit a trader wants to make. It is a target. Once reached or nearly met, you are advised to quit trading and transfer your profit to your profit management account. Never re-trade with your profit. Many are good traders but greed does override their emotions.

Profit strategies
Plan how to make your money.

Pivot, Resistance and Support levels
These are points to place trade limits and stops to cash on opportunities of prices bouncing back.

Daily Range
A consistent trading of a pair may give the trader knowledge of it. Based on technical analysis and cumulative average on daily movement a good trader should be able to make money on this tool

Repeating pattern
‘The market is a repeating pattern’ is one thing you hear or learn as a beginner in Forex. A technical trader who is versed in ability to read charts irrespective of periodicity can see these formations

A technical trader versed in the art of using the candlesticks can recognise reversal patterns. This is one of the best ways to make money in Forex


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