trading example

Trading Manual Part 12: Trading Example

Trade Example

On the next page you can find a clear example of a trade which is running. You can
see the AUD/USD pair on the 4-Hour timeframe. So, every candlestick you see on this
chart, represents 4 hours of price action.

example of fibonacci retrasement

Fibonacci Retracement

In this case, we see a perfect Fibonacci retracement in combination with a moving
average cross, and a double bottom; which gave us enough confluences to enter this
trade. More on the breakdown of a trade will be discussed later on!

We entered this trade because the overall direction of this trend was bullish to.
When we are dealing with an upward trend, it means that we can safely enter a buy
position. Remember, we are not trading counter trend wise. We’ve explained all
details on this before!

fibonacci CFD trading manual

As you can see, the profit target for this trade is 90 pips. So, in this example we are
trading with a €10.000 account. We are trading at max. 2% risk which will be €2OO on
this €10.000 account. If handle this risk management, it would basically take around
50 losing trades to wipe out your total account balance. So, basically you have
nothing to worry about as long as you stick to your trading plan!

So, 2% risk €2OO is the maximum amount you want to put at risk. As you can see in
the example, we handle a stop-loss of 45 pips. What we need to do now is calculate
what lot size we could take for this particular trade. So, €2OO (2% risk) divided by 45
pips = €4,44 per pip. We should always make this calculation before we enter a trade
You simply need to be sure (and comfortable) with the lot size, so your emotions
won’t bring you down during the trade. Luckily we don’t have to do this manually all
the time, as we have a perfect online calculator for this! However, it’s essential to
know why, and how, we are doing this.

 

Stigmatization of trade

So, to summarize this trade, we buy AUD/USD with a 45 pip stop-loss and a 90 pip
target; We have a risk to reward ratio of 1:2 and we are using a lot size of €4,44 per
PIP

When the trade plays out in our favor, we are looking at a decent profit of 90 pips
multiplied by €4,44 per pip = €399,60. This would be a very decent trade if we think
that we are only risking half of that amount to gain this.

The larger the account, the larger your pip value (lot size) will become on the same
risk percentage. This would truly increase your profits to, as a higher lot size, will
bring you a higher pip value. lf your account was €100.000 in this example, it would
have brought you a good €3996,00!

 

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