in the previous post, i stated how important it is to see where you stand from a financial point of view before beginning investing.
Calculating Your Balance Sheet
Posted by TradingForexProfit | 8:10 PM | Personal Finance | 0 comments »So you heard about the stock market and the potential riches it can give you?. Great. Now hold on. Before you go out and open an account with a broker and put your saving or the money you've got and start trading you need to first make an analysis of your financial situation.
This is a crucial step. If your financial situation isn't sound, you have no place in the stock market or in the investing world.
In order to analyze your financial situation, be sure to follow these steps:
1. Establish a starting point
You need to find out how much money you can afford to invest in stocks. The first rule of investing is: Never invest money you cannot afford to lose. That means that if you got $4000 in a bank account, and only have that one bank account and your job, and want to invest that $4000 in the market, forget it.
Now, that you have your starting point – wanting to analyze your financial situation, turn to step 2
2. Prepare a balance sheet
A balance sheet is a list of your assets, your liabilities and what each item is currently worth, so you can arrive at your net worth. Net worth = total assets – total liabilities.
Here is how a balance sheet looks like for a small business:
Don't worry, your balance sheet wont' be that complex (although this one is a fairly short one).
Now let's start in preparing your balance sheet.
Pull out a pen/pencil and paper. (I have included an excel spreadsheet at the end of the post for those of you who love excel).
The second document you should prepare is your income statement. An income statement lists your total income and your total expenses, that way you can see how well you are doing.
If total income > total expenses, great !
If total income <>
Make sure you have an emergency fund !
Your main goal here is to have a reserve fund comprised of 3 to 6 months of your living expenses in cash. Why ? Because you might lose your job, and finding a new job could take anywhere from 3-6 months, and this way you will be safe in case the unfortunate event happens. Too many people don't have an emergency fund, and thus they put themselves at risk.
Be sure that before you think about putting money into the market you have an emergency fund.
Now let's move on
- List your assets in decreasing order of liquidity
Liquidity refers to how quickly you can convert an asset into cash. Listing your assets in order of liquidity on your balance sheet gives you an immediate picture of which assets you can quickly convert to cash and which ones you can't.
Here is an example of a list of assets in order of liquidity. Use it as a guide for making your own asset list
Asset Item | Market Value | Annul Growth Rate% |
Cash on hand and in checking | $200 | 0 |
Bank savings accounts and certificates of deposit | $1,000 | 2% |
Stocks | $5,000 | 10% |
Mutual Funds | $2,000 | 9% |
Collectibles, art etc | $250 | |
Auto | $5,000 | -10% |
Residence | $150,0000 | 5% |
Total Assets | $163,450 | |
- List your liabilities
Liabilities are bills that you're obliged to pay. It is important to also keep track of your liabilities, because otherwise you may end up thinking that you have more money than you really do.
Look at the table below as an example and use it as a template for your list
Liabilities | Amount | Paying Rate |
Credit Cards | $4,000 | 15% |
Personal loans | $15,000 | 10% |
Mortage | $100,000 | 8% |
Total liabilities | $117,000 | |
Net worth indicates your total wealth. You can calculate it with this basic equation: total assets – total liabilities = net worth
In our example, our net worth would be: $163,450 – $117,000= $46,450
- Now analyze
You have created your balance sheet. Now analyze it and identify ways in which you can increase your wealth. For example taking the money from the cash account and paying off the debt on the credit card because it charges you a lot of interest, etc
Taking hold of your personal finances is a very important part of your journey to becoming financially independent.
I recommend using Quicken as your tool for personal finance. I use it and am very happy with it.
You know you've been trading too long when...
Posted by TradingForexProfit | 10:21 AM | Entertainment | 0 comments »this is a list of funny quotes taken from different forex forums regarding the above statement. it is meant to be funny, but in some cases it is so true :))
remember that GBPUSD trade form yesterday ?
right after i woke up today, at 7:00(GMT+2) i saw an opportunity in GBPUSD and shorted it at 1.8284.
Sold EURJPY at 154.66
Sold GBPUSD at 1.8465
closed EURCHF at 1.5923 for a total loss of -17 pips.
Bought EURCHF 1.5940
Today I closed the open trades from 19 September
Sold USDCHF at 1.1177, closed trade the same day at 1.1066 - 111 pips
Sold USDCAD at 1.0658, closed the trade the same day at 1.0644 +14 pips
No trades today using this method
Sold USDCHF at 1.1101, closed the trade the same day at 1.1061 + 40 pips
09 September 2009
Posted by TradingForexProfit | 2:33 PM | GBPJPY daily breakout system | 0 comments »That means that our entry orders will be:
Buy Stop: 195.87
Sell order was triggered, but did not have enough steam to reach our take profit, and reached our stop-loss.
Trades taken: 5
Wins:2
Loss:3
Pips:-50 pips
well today EURGBP and GBPCHF still haven't convinced me, but I made 49 pips today on EURAUD.
toal for this week so far: 502 pips.
again, bear in mind that this may not happen every week.
I will later post an article about how 20-50 pips/day can make you rich. and I will also talk about the pips/day mentality.
Everything I write is about stuff I have learned and which are proven in time.
So stay tuned
No trades taken today, however keeping an eye on GBPCHF and EURGBP, potential trades for tomorrow
I am currently working on a new system that I will be testing in the weeks to come.
So far, it has generated 453 pips for 08 September.
The orders I set were the following:
GBPJPY sell at 191.54 closed at 189.88 +166 pips
EURCHF sell at 1.6024 closed at 1.5970 +54 pips
GBPUSD sell at 1.7649 closed at 1.7552 +97 pips
CADJPY sell at 101.46 closed at 101.09 +37 pips
EURADU buy at 1.7360 closed at 1.7459 +99 pips
TOTAL PIPS: 453
not bad for one day, not bad at all.
Mind you, this is just one day, a system has to be tested for a long period of time.
And the best way to test a system is to forward test it in real time, and not back-test it.
08 September 2009
Posted by TradingForexProfit | 12:23 AM | GBPJPY weekly breakout system | 0 comments »The entry orders for this week are:
Buy stop = 190.34
TP = 193.21
Sell stop = 187.47
SL = 190.34
TP = 184.60
But as you can see if you look at your daily chart of GBPJPY, the price opened at a staggering 430 pips difference from frida's close, nowhere near our entry orders and thus making them obsolete.
08 September 2009
Posted by TradingForexProfit | 12:16 AM | GBPJPY daily breakout system | 0 comments »Well, a new trading week has started, and together with it, we received a surprise from GBPJPY as it opened at 193.40.
That's 430 pips between friday's closing price and monday's open. wow.
Anyway, so the trade wasn't triggered today. Oh well, tomorrow is also a day.
Trades taken: 4
Wins:2
Loss:2
Pips:0 pips
Candle opened at 189.32 and quickly began a strong down move, making our goal of 50 pips easy.
high for today:189.47
low for today:186.15
For the first day of the week starting 08 September the entry orders will be:
Sell Stop:185.92
Buy Stop:189.70
So far this strategy has produced:
Trades taken: 3
Wins:2
Loss:1
Pips:50 pips
The highest high for GBP/JPY during the last 30 years was 571.98, it was on Feb 80.
The lowest low for GBP/JPY during the last 30 years was 129.32, it was on April 95.
The highest month range during the last 30 years was on Nov 82 (open price was 464.77 and reached a low of 395.66, which is almost 6900 pips in one month.
The biggest drop for GBP/JPY was 44000 pips during the period of Feb 80 and April 95. (15 years)
The biggest climb was 12200 pips during the period of April 95 and July 2007 (12 years)
04 September 2009
Posted by TradingForexProfit | 1:46 AM | GBPJPY daily breakout system | 0 comments »Today GBPJPY continued its downtrend, but not enough to hit our TP. Actually, during the day it tried a bit of a retrace, so that our SL was hit. So, the total for today: -67 pips.
Today's high: 194.06
Today's low: 191.91
That means that our entry orders will be:
Buy stop:194.29
SL: 193.62
TP: 194.96
Sell stop: 191.68
SL: 192.35
TP: 191.01
So far this strategy has produced:
Trades taken: 2
Wins:1
Loss:1
Pips:0 pips
03 September 2009
Posted by TradingForexProfit | 9:54 AM | GBPJPY daily breakout system | 0 comments »This was a great trade. From the beginning of the asian session GBPJPY started declining, and our entry order at 193.90 got hit. Soon afterwards, our TP got hit at 193.23, and thus resulting in 67 pips for today - 8 pips spread = 59 pips.
Now, yestersday's (02 September) numbers are as follows:
High: 194.86
Low: 192.57
That means that the following pending orders need to be placed:
Buy Stop: 195.09
SL: 194.26
TP: 195.99
Sell Stop: 192.34
SL: 193.24
TP: 191.67
So far this strategy has produced:
Trades taken: 1
Wins:1
Loss:0
Pips:59
02 September 2009
Posted by TradingForexProfit | 12:06 AM | GBPJPY daily breakout system | 0 comments »So, yesterday's high was 196.88. That means:that we will set our buy stop at 197.11 (+23 pips from high) and our stop loss at: 195.98. Take profit will be 197.78
Buy: 197.11
SL: 195.98
TP:197.78
Yesterday's low was at: 194.13
Sell:193.90
SL: 195.03
TP: 193.23
01 September 2009
Posted by TradingForexProfit | 11:20 PM | GBPJPY weekly breakout system | 0 comments »
An interesting thing happened today. Today's candle opened at 196.75 as you can see from the picture above.
The sell-stop was at 197.60, so the trade wasn't triggered.
When you look at it, you would say right now: argh, i have missed a great opportunity. well over 250 pips. 250 is a meaningful pip account so i understand why you would feel this way.
However, don't feel bad. Opportunities will always exist in forex. One of the most important thing to remember is that not being in a trade is better than being in a losing trade.
So, 0 pips for this week based on this strategy
01 September 2009
Posted by TradingForexProfit | 6:49 AM | GBPJPY daily breakout system | 0 comments »As i said in my previous post, the pending orders set on Friday were:
Buy Stop: 200.58
TP: 201.25
SL: 199.91
Sell Stop: 197.37
TP: 196.47
SL: 198.04
Today however, GBPJPY opened at 196.75 and rapidly declined to 195.32. It closed at 198.32 on Friday, so that is a 300 pip move very rapidly.
Unfortunately, my order did not get filled, so 0 pips for today. One might think: I just missed a great opportunity, and be sad, i mean a 300 pip move like that in such a short time... but don't think/feel like that.
There will always be opportunities in forex. And remember,a no-trade is better than a losing trade.
0 pips for today
Total pips beginning September 01: 0
GBPJPY weekly breakout system
Posted by TradingForexProfit | 1:25 PM | GBPJPY weekly breakout system | 0 comments »This is a weekly GBPJPY breakout system, which uses the last 2 candle of the 4 hr chart as the breakout boundry.
Will start testing this system beginning from tomorrow, September 1st, and will post results here.
Entries for next week
Buy stop = 199.12
SL = 197.60
TP = 200.64
Sell stop = 197.60
SL = 199.12
TP = 196.08
GBPJPY daily breakout system
Posted by TradingForexProfit | 12:55 PM | GBPJPY daily breakout system | 0 comments »This is a daily breakout system. it is supposed to give you an average of 50 pips daily. ( a note: do not believe in those averages, pip win/loss ratio is much more important than daily pips, because there can be some good days and there can be some bad days).
System Setup:
Currency Traded: GBPJPY
Necessity: High and Low of the previous day
Entry: +/- 23 pips from the High/Low of the previous day
Exit: +/- 90 pips from the High/Low (including entry pips)
Stop Loss: 67 pips
Risk Reward Ratio: 1:1
Time to set trade: at the beginning of the Asian Session: around 12:30 am EST
I recommend using FXDD to try this out, as their candle closes when we enter new entry buy or sell stops.
I will be trading this method and posting results here, beginning from tomorrow, September 1st.
High of Friday, 29 Sept: 200.35
Low of Friday, 29 Sept: 197.60
Buy Stop: 200.58
TP: 201.25
SL: 199.91
Sell Stop: 197.37
TP: 196.47
SL: 198.04
You probably all heard of the forex market by now. Forex stands for FOReign EXchange, and is the biggest market in the world, surclassing all other markets in terms of liquidity, volumes etc.
Plain put, imagine forex like a stock market, but instead of trading shares, you trade currency pairs such as EUR/USD for example.
Pertaining to the stock market, you probably have also heared a lot of people who have made a killing in the stock market. Well, considering that forex is xx bigger than the stock market in terms of turnover, volume and liquidity, imagine what you can do in forex.
Welcome to my forex trading blog. Here you will learn about forex trading and tips on how to trade forex successfully for a profit