Recommended Trading Procedures

Trading over the Internet

Trading over the internet offers special opportunites, and is subject to special risks. Trading financial instruments is serious business. You must understand your risks, and you must develop procedures to mitigate them. This article is not about how to choose winning trades, but focuses on what you must understand and how to prepare for the unexpected, with an emphasis of preserving your capital.

If you are trading a Demo account, you still need to take heed, because you are training yourself for trading real money. Don't train yourself wrong.

Risks

Connecting to a broker and executing trades is done over the internet. There are numerous potential points of failure. Some of them are:

Failure of the broker's server
Failure of the broker's internet connection
Failure of the broker's software
Failure of any of the dozen or more routers between you and your broker
Failure of your internet provider
Failure of your internal network hardware or software
Failure of your router
Physical cut of any of your wiring
Failure of your hardware or software
Power Failure

When you open a trading account, your broker insists that you accept ALL of your own risk. When you choose "Enable trading" on Forex Money Map software you agree to assume ALL of your own risk.

Precautions

There are a number of precautions you can take.

I recommend that every trader have an emergency kit which should consist of:

A flashlight
A battery backup system (UPS) to run your computer during a power outage.
A Post-it note or other papers that includes your broker's trading desk phone number, your account numbers, your passwords.
A cell phone. You can put your broker's phone number in your speed dial

Comments on your trading setup

As I said, trading is a serious business. You wouldn't be here otherwise. Ask yourself the question: "How well should I be equipped? Should it be the best it can be?"

I recognize that our traders come from all over the world and all walks of life, so when I say "the best" it means the best available to you.

Your computer should be up to date, robust. I suggest that while you can, choose Windows XP over Vista. Personally, I buy the CPU that is on the faster end of the scale, but just not quite the latest and greatest. If you can afford and want the latest and greatest, then go for it. You should have all the RAM your hardware will support.

Multiple monitors are a trader's best friend. Multiple computers can be handy too.

The best internet connection is a dedicated T1. Most of us don't have that, although the Miami and Malibu trade rooms do.

The next obvious choices are DSL and Cable. Both of those are normally very good, but can be subject to your local carrier having oversold their capacity. It just depends on your local situations. I have a dedicated business grade DSL in my office and it is fine.

Whenever possible, avoid making any part of your connection wireless. Wireless connections of every kind are far less reliable than hard wired connections. Remember, we are providing professional grade streaming price quotes to you.

Satellite and Microwave connections are not very good. Don't use them unless you have no alternative.

Air Card, AKA Wireless Broadband, connections are the worst. They are the equivalent of a dialup over a cell phone. Your connection will drop repeatedly all day long. During those intervals of dropped and reconnecting, you do not have up to date prices, and at those moments, you will not be able to connect to your broker. If you must use this type of connection, you must understand the disadvantages. We have programmed FXMM to provide the best service possible over the worst type of connection. Understand your limitations.

Trading Procedures

Start your trading session by rebooting your computer. It will perform better. Get in the habit of doing your Windows Updates. Defrag your hard drive once in a while.

Here are some procedures that you can use when trading from Forex Money Map software. The principles of verification apply no matter what platform or broker you are using.

If you need to learn how to connect a Demo account, or real money account using Forex Money Map, study this article: Trading from the Grid

Let's assume you have followed those steps and are connecting to your account.

When you press the Buy or Sell button, you are attempting to place a trade. I say "attempting" because you still need to make sure what you wanted to happen, actually happened.

The first place you may wish to look is your Deal blotter ... the button with "D" on it. The deal blotter is a static list of your transactions with the broker. Review this as a step to verify that your trade was placed. You may wish to click on the vertical separator between TradeDate and Confirmation and drag it to the right, so you can see the time as well.

When I'm trying to confirm a trade I prefer the position window. Use the "P" button. Notice that there is a "Refresh" button on the Position Blotter. When you press the Refresh button, it is connecting directly to the broker's trade server for the latest information.

The Margin blotter, the "M" button, is also useful for confirming trades, if you are following it closely. You might notice the "Total available position" entry on the Margin blotter. As you approach your margin limit, this will approach zero. Click Refresh to get the latest.

Of the blotters, I use the Position blotter the most. I am most concerned about what open positions I have, and what my P and L are. That's the "Unrealized Gain or Loss" Column.

My personal procedure for opening a trade is this:

Visually confirm that the Lot Size pull down menu is set for the correct size of position I wish to trade.
Wait for my setup
Click the Buy or Sell
Watch for the AO button to appear on the Grid
Click the AO button
Click "Place Order" without taking the time to change anything. That is the fastest way to the best protection.
Now confirm on the Position blotter that I have the trade I think I should and for the size I think I should.
Now click the AO button and adjust my stop and limit to whatever my setup indicates
Check the Position blotter again to verify that my Associated orders are correct.

I know exactly what happened and where I am in the market.

When I exit a position, I follow a similar verification process using the blotters.

If at any point in your trading you think you should be in or out of the market differently than your blotters indicate, investigate immediately. Use the blotters. If you still can't verify that you are in or out of the market as expected, there are a couple of choices:

If you are trying to exit a position and cannot verify if that occurred, call your broker (only on real money accounts, never on Demo accounts)

If you feel you have more time, you may opt to log into your account from www.traderhouseglobal.net and investigate from there. Also while at the Margin Trader you can print out reports of your trades.

All of these things you need to work out on Demo accounts. Know your procedures. Practice them.

Remember:

There are multiple potential points of failure in internet trading
Get the best hardware and Internet connection you can
Assemble your emergency kit and procedures
Verify your trades in and out
Always use a Stop loss
....and remember that ultimately YOU are responsible for your trades, regardless of what goes wrong