Millionaire TradersQ: We think we’ve come to very similar conclusion in our trading.
Basically you’re either right or you should be out.
A: Exactly. You said it perfectly. You’re either right or you should
be out. Then you have to gauge how good of a trader you are,
and for me it’s around that 15 pips. If I didn’t find that 15-pip
top or bottom and the currency keeps going, I may have come
in too early. But then, you know, I’m not scared to come back in
that same direction a little higher. So once that happens then, you
know, hopefully I’ve done some right risk management. Maybe I
haven’t used all my leverage. Say I’ve only come in with $300,000
on the first trade and it’s gone 15 pips against me, then I’ll close it.
Then I see that it starts to exhaust again. I come in with a million.
So hopefully the$300,000 that I lost 15 on becomes negated in
just 5 or 6 pips of the new larger trade and then I’m in the right
direction at the right time.
Q: Just to clarify, because essentially you’re talking about exhaus-
tion levels and trying to come in at the right time. You’re basically
looking to come in at weak points but in the direction of the overall
strength. So if, the dollar is strong on a long-term trend, what you
want to be looking at is for the euro to rally a little bit. But once the
euro/dollar rally reaches its point of exhaustion, that’s when you
want to short it. Is that what you mean by picking those spots?
A: Yes, that’s correct. I look to do that. If I picked the right
direction, and again I’m assuming I know the overall direction, I
am going to be confident in the trade.
Q: Talk to us about leverage. Leverage in the FX market is
enormous. It can be as large as 200 to 1, meaning that you could
control 10,000 units with as little as $50 worth of equity.
A: Right.