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Your FOREX Trading Philosophy
“Easy money” is the allure that captivates many beginning FOREX traders. FOREX websites offer “risk-free” trading, “high returns”, “low investment.” These claims have a grain of truth in them, but the reality of FOREX is a bit more complex.
Mistakes Of The Beginning Trader
There are 2 common mistakes that many beginner traders make: trading without a strategy and letting emotions rule their decisions. After opening a FOREX account it may be tempting to dive right in and start trading. Watching the movements of EURUSD for example, you may feel that you are letting an opportunity pass you by if you don’t enter the market immediately. You buy and watch the market move against you. You panic and sell, only to see the market recover.
This kind of undisciplined approach to FOREX is guaranteed to lose money. FOREX traders must have a rational trading strategy and not make trading decisions in the heat of the moment.
Understanding Market Movements
To make rational trading decisions, the FOREX trader must be well educated in market movements. He must be able to apply technical studies to charts and plot out entry and exit points. He must take advantage of the various types of orders to minimize his risk and maximize his profit.
The first step in becoming a successful FOREX trader is to understand the market and the forces behind it. Who trades FOREX and why? This will allow you to identify successful trading strategies and use them.
Accountability
There are 5 major groups of investors who participate in FOREX: governments, banks, corporations, investment funds, and traders. Each group has its own objectives, but 1 thing all groups except traders have in common is external control. Every organization has rules and guidelines for trading currencies and can be held accountable for their trading decisions. Individual traders, on the other hand, are accountable only to themselves.
Large organizations and educated traders approach the FOREX with strategies, and if you hope to succeed as a FOREX trader you must follow suit.
Money Management
Money management is an integral part of any trading strategy. Besides knowing which currencies to trade and how to recognize entry and exit signals, the successful trader has to manage his resources and integrate money management into his trading plan.
There are various strategies for money management. Many rely on the calculation of core equity — your starting balance minus the money used in open positions.
Core Equity And Limited Risk
When entering a position try to limit your risk to 1% to 3% of each trade. This means that if you are trading a standard FOREX lot of 100,000 you should limit your risk to 1,000 to 3,000. You do this with a stop loss order 100 pips (1 pip = 10) above or below your entry position.
As your core equity rises or falls, adjust the pound amount of your risk. With a starting balance of 10,000 and 1 open position, your core equity is 9000. If you wish to add a second open position, your core equity would fall to 8000 and you should limit your risk to 900. Risk in a third position should be limited to 800.
Greater Profit, Greater Risk
You should also raise your risk level as your core equity rises. After 5,000 profit, your core equity is now 15,000. You could raise your risk to 1,500 per transaction. Alternatively, you could risk more from the profit than from the original starting balance. Some traders may risk up to 5% against their realized profits (5,000 on a 100,000 lot) for greater profit potential.
These are the kinds of strategic tactics that allow a beginner to get a foothold on profitable trading in FOREX.
Mistakes of beginning futures and forex traders
There are many so called opportunities on the internet promising vast riches for little work in the area of forex trading and futures trading. Statistically 95% of beginning forex traders fail and quit. In this article I hope to provide a little sane advice, to increase this percentage for the good of all.
If you are like me you were attracted to futures or forex trading because both financial arenas offer highly leveraged results, which means that your profit “potential” in the short term seems to be very high.
Human emotion such as hope and greed trigger at this stage as you see an opportunity to escape your daily grind, and get a better life for you and your family. There is nothing wrong with this, but it is at this point that I need to inject a dose of reality.
Remember – 95% of all beginning forex traders fail! I’m going to try your patience and repeat this.
95% of all beginning forex traders fail! This also applies to futures trading and just about any form of speculation.
The exact reason for this is that they have been sold an idea – a potential for profit and they just look at the goal. Now this is fine, but all goals to be achieved involve doing something.
There are no free lunches in this world.
This is the point that is not confronted. You absolutely MUST confront this point if you want to have any chance of success.
We have a couple of things working against us and it’s not just the skill of trading that needs to be developed.
1. We are not used to getting something for nothing. Even if we win in trading we will believe that we just got free money and will unconsciously give it back.
2. We do not have the experience, even though we may have the education.
Knowledge without experience is shaky!
Therefore, to counteract these negative factors, we must have at least 2 things in place.
1. Trade a demo account for at least a few months until you can profit consistently from that.
2. Discipline to follow a trading system
3. A Money Management plan and policy.
Without taking at least these steps you are on very shaky ground and could be heading for the 95% class very fast.
I want you to be in the 5%
How to Win the Forex Battle
Every trading activity is in fact participating in a battle. Winning the battle is a matter of knowledge, skill and experience. If you miss any of those you are going to join the long line of losers. Some says that 95 to 99 percent of the traders are lining up on the losers side.
How to win the battle in the currency market? It is easy to answer that question, based on the above approach prepare yourself for the battle. If you treat currency market activity as a hobby youll ultimately lose all investments there. If you treat it as a business you still may loose everything.
The correct approach is: consider each pressing of the BuySell button as entering a battlefield. If you enter it without having a knowledge, skill and experience on how to win, you are destined to fail. You may have some lucky trades in the beginning, though. That, by the way, is the worst case scenario for the rookie in trading.
The earlier you get your bad lessons, the better for your overall experience. No mater how good you consider yourself prepared, after demo trading lessons, you have no idea of the forces ruling on the real market.
In fact the worst enemy you are going to face in the very beginning is not hiding behind the walls of the global currency trading centers. Your most dangerous foe is hiding deep inside of you. That enemy is so powerful that you will be amazed how quickly it will wash away all your carefully considered decision.
No one has been able to evade the force of that destructive power. No one can understand or realize that force unless it has been confronted face to face. Start trading with real money and youll face it too. Fear, Greed or Hope are some of the names of that power.
Fear forces you to sell near the bottom and buy near the top. Greed forces you to get out of the market prematurely. Hope will keep in the trade until you loose everything. Fear may save you but hope may wreck you completely. Greed will never make you rich.
It is easy to give advice to trade without emotions and use the logic, only. How you can achieve that if you never have been there. You need to go through that turmoil, pick up your loses due to your emotional decisions and than analyze.
Study all your bad trades, because they are the most precious gifts on the way to proficiency in trading. Growing as an experienced trader is possible only after getting your losses in the beginning. Then sit down and carefully study the lessons they brought to you.
One thing traders never want to do is to admit of being wrong. The market is a constantly changing and it demands flexibility in taking decision. That implies monitoring and constantly adjusting, changing your decision and action. When your logical analyzes suggest that you are wrong get out, quickly.
Once you overcome the emotions, concentrate on developing your signature way of trading. You can start with following different advisors and system and picking from them the things you like. Demo trade and test your ideas until you find the trade system which is matching completely your personality.
Now, you have to go back to emotion in a controlled way. Every time your system suggests a trade look inside you and see how you feel about this trade. You feel bad discard it. If you feel good keep it.
Here comes the final step: Looking for the final approval sign before submitting the trade. Here is the time, where the mastership shows up. Your weapon is loaded, the target is clearly seen on the visor and the finger is on the trigger. You have to make that final exhale, get the target over the cross point and shoot it.
How much knowledge, skill, experience and patience you need to build within in order to reach that very final stage of trading proficiency? Only youll know that and only you can do it. The rest is just numbers in your bank account.
Building a fortune by trading currency is not a mirage in the desert of live. There are hundreds of traders who are making living of that business and you can do it too. Study all you can find on the net and follow the steps of the best if you want to win that battle.
Helpful Forex strategies to become a successful investor
As currency trading has become one of the most recent ways of earning money, a large chunk of people take this option just as a hobby. This type of trading is performed by exchanging currency of one country with that of another. Currency trading, Forex trading signal, Forex trading strategy, and Forex alerts have made this industry the largest one if one is to consider its trading volume. To understand it better, let us take an example of an inter-bank trading. Bank X will take the quote from Bank Y of its currency, and Bank Y will provide the present rate of its currency. A deal will be finalized if Bank X will like the rate of Bank Y. and if the currency of Bank X rises against the currency of Bank Y, the former will enjoy the difference as its gain. Likewise individuals deal in the exchange of currencies in the Forex market and act according to the market position.
The Foreign Exchange market is popularly known as Forex, which has become the largest and frequently rising market in the whole world. It is also called as the transnational market as any person from any part of the world can enter into this market through the use of World Wide Web. Forex trading signal, Forex trading strategy and Forex alerts are carried out in the faith that the prices of the currency will change over a period of time, and the Forex traders will earn a profit if there is a rise in the value of bought currency and that of the selling currency.
There are various Forex trading strategies that should be followed by every Forex trader in order to gain a large number of profits. This Forex strategy system includes:
Ability to read or know the Forex trading strategies
Adopting reliable and effective Forex trading strategies
Implementing Forex trading strategies without involving costly software
Taking the option of simple moving
Deriving resistance and support levels
The Forex traders should not indulge themselves in adopting complex strategies but should focus on easy and simple strategies in order to implement them as soon as possible and enjoy the results. Moreover, there are various companies that offer the services of working on behalf of the traders and providing them with simple Forex trading strategy. Online Forex alerts are also a helpful for people trading in the Currency trading market as up-to-date position of the market is revealed.
Consistent and efficient strategies should be employed so that even if the market is facing small changes, it should not hit or affect the plan of the Forex strategy system. The best part about entering this field is that this profession can be taken by any person regardless of his or her educational background. But while Forex trading strategy proves to be a successful profession, it carries high level risks as well. So, while entering the field of currency trading, it is advisable that the traders should consider their objectives with great care so as to eliminate the possibility of facing losses. Also, one should take advice regarding the risks involved in the Forex trading strategy from financial advisors to gain heavy profits.
For more information on Forex, Forex signal, Forex strategy system, Forex trading signal, Forex trading strategy, Forex alerts and Currency trading, log on to www.Connection2forex.com
Tags: forex, forex signal, forex strategy system, forex trading signal, forex trading strategy, forex alerts, currency trading.
ForexTester – professional forex training software.
Recently new forex software, which could be useful for many traders, was released.
ForexTester – is a professional forex trading simulator. It reproduces fluctuations of currency exchange rates for any chosen period of time with regulated speed of quotes updating. A user can make trading decisions on historical data, develop and test trading strategies.
This software – is an excellent tool for quick and convenient study of trading, for gaining and improving trading skills without risking real money.
The main purpose of this forex software is to provide a trader with opportunity to develop individual discretionary methods of market analysis and making corresponding trading decisions. Such trading strategies usually are very difficult to be realized as mechanical trading systems, but they are of high potential to be ignored.
Generally, for achieving stable positive results in trading, it is necessary to have a confluence of several important factors: method of analysis, system of making decisions for openingclosing positions, risk- and moneymanagement, discipline in implementing of worked out rules.
Forex trading, as a profession, demands possessing professional knowledge and professional skills. That is why it is naive to expext stable positive results after practicing on demo-accounts, provided by forex-brokers, reading news feed or useless articles on fundamental analysis.
There are hundreds of books written on the theme of technical analysis methods, but just a few programs, which provide the opportunity for full studying the efficiency of these methods and working-out concrete rules of making corresponding trading decisions.
It is difficult to study the technical analysis methods objectively because of two reasons. First, particular features of human psyche in subjective perception and interpretation of graphical information, and second, psychology of decision making.
When a person studies charts with historical data in retrospective, he presumes himself of being able to analyze the situation and make the best possible trading decision. He tries to look at things with optimism and overestimates information sufficiency. But in real-time conditions a trader confronts with uncertainty and suddenly recognizes insufficiency of information, which can drive to doubtfulness and increasing of mistakes at decision making.
It is necessary to posess special way of thinking, precision and unambiguity in judgements, to eliminate emotions out of trading process. This task is not for one day. Only through deliberateness of actions, striving for objectivity and by systematical training such tasks can be realized.
Development of technical analysis methods and making corresponding trading decisions often implies thorough studying of price patterns and indicator signals. Subsequently, there are systematization of observations and then the determination of clear and unambiguous rules, which heshe can apply to eventually become professionally qualified and profitable trader.
Would you like to study how to correctly use Andrew’s Pitchfork, fibonacci retracements, trendlines, Bill Williams’ set of indicators (including Alligator, fractals, Awesome oscillator) from Trading Chaos, Regression Channels or simple signals, such as moving averages crossover, ForexTester (www.forextester.com) could help you. Ability of convenient using of graphical studies and option to add custom indicators via open interface, contribute to comfortable and flexible environment for gaining knowledge and skills, which are necessary to a professional forex trader.
Forex Trading System: Discretionary vs. Mechanical Systems
There are basically two types of Forex trading systems, mechanical and discretionary systems. The trading signals that come out of mechanical systems are mainly based off technical analysis applied in a systematic way. On the other hand, discretionary systems use experience, intuition or judgment on entries and exits. But which one produces better results? Or more importantly, which one fits better your trading style? These are the answers we will try to answer on this article.
We will first analyze the pros and cons about each system approach.
Mechanical systems
Advantages
This kind of system can be automated and backtested efficiently.
It has very rigid rules. Either, there is a trade or there isnt.
Mechanical traders are less susceptible to emotions than discretionary traders.
Disadvantages
Most traders backtest Forex trading systems incorrectly. In order to produce accurate results you need tick data.
The Forex market is always changing. The Forex market (and all markets) has a random component. The market conditions may look similar, but they are never the same.
A system that worked successfully the past year doesnt necessary mean it will work this year.
Discretionary systems
Advantages
Discretionary systems are easily adaptable to new market conditions.
Trading decisions are based on experience. Traders learn to see which trading signals have higher probability of success.
Disadvantages
They cannot be backtested or automated, since there is always a thought decision to be made.
It takes time to develop the experience required to trade successfully and track trades in a discretionary way. At early stages this can be dangerous.
Now, which approach is better for Forex traders? The one that fits better your personality. For instance, if you are a trader that finds it hard to follow your trading signals, then you are better off using a mechanical system, where your judgment wont play an important role in your system. You only take the trades that your system signals.
If the psychological barriers that affect every trader (fear, greed, anger, etc.) puts you in unwanted scenarios, you are also better off trading mechanical systems, because you only need to follow what your system is telling you, go short, go long, close a trade. No other decision has to be made.
On the other hand, if you are a disciplined trader, then you are better off using a discretionary system, because discretionary systems adapt to the market conditions and you are able to change your trading conditions as the market changes. For instance, you have a target of 60 pips on a long trade. But the market suddenly starts trending up pretty strongly, then you could move your target to say 100 pips.
Does it mean that trading a discretionary system has no rules? This is absolutely incorrect. Trading discretionary systems means that once a trader finds hisher setup, the trader then decides what to do. But every trader still needs certain rules that need to be followed, such as the size of the position, conditions that have to be met before thinking to get in the market, and so on.
I am a discretionary trader. The main reason I chose a discretionary system is that my trades are based on price behavior, and as you already know, the price behaves similar to the past, but it is never identical, therefore the outcome of every trade is unknown. However, I do have rigid rules on my system, certain conditions have to be met before I even think in getting in a trade. This keeps me out of trouble, once my setup is present and in accordance with the rules I have set, then I closely watch the price behavior and finally decide whether it is a good opportunity or not.
Whether you choose to be a discretionary or a mechanical trader there are some important points you should take in consideration:
1.You need to make sure the Forex trading system you are using totally fits your personality. Otherwise you will find yourself outguessing your system.
2.You also need to have some rules and most importantly have the discipline to follow them.
3.Take your time to build the perfect system for you. Its not easy and requires time and hard work, but at the end, if done correctly, it will give you consistent profitable results.
4.Before going live, try it on a demo account or even on a small account (I will go for the second option, since psychological barriers will be present.)
Forex Technical Analysis: The Art of Predicting the Future by
Forex Technical Analysis: The Art of Predicting the Future by Studying the Past
Technical Analysis is the easiest and most precise way of trading the FOREX market known by the forex traders community. All available information on any particular currency, and its impact on traders, and the market, are already reflected in a currency’s price. The foreign exchange market is mostly composed of trends and is, therefore, a place where technical analysis can be used very effectively. Experience in trading has shown that history repeats itself – over time, certain chart patterns become consistent, predictable and very reliable. The problem is being able of spoting them. There’s always more than meets the eye at first glance.
Prices move in trends; and the traders who don’t know this fact obviously have no need to implement a trading methodology on technical analysis, they havent even realized yet. But, over 100 years of research has shown that those who trade “with the trend”, more often than not, greatly improve their chances of winning in the forex markets (i.e., making a profitable trade).
Many times finding the prevailing trend will help you become aware of the overall market direction and offer you better visibility–especially when shorter-term movements tend to clutter the picture. And many times following the trend will bail you out of an initially less than great entry point.
The main question you may be asking yourself by now is; how does technical analysis help you to determine what the trend of the market is and how does it help your efforts to trade with the trend and not against the trend?
It is important to mention that no one is claiming technical analysis as the magic bullet of trading . And if you ask, which indicators are better in Forex trading? The answer is none – technical indicators should simply be components of your overall customized personalized trading system and not systems in and of themselves. They are like tools in a tool kit, not the kit itself!)
As a Forex Technical Trader, your goals are:
#1) To figure out the price action of the currency pair. Price is the main concern. If the EURUSD is at 1.3226 and goes to 1.3219, 1.3112, 1.3008 – the market is in a down trend. Despite what every technical indicator might predict, if the trend is down, stay with the trend. Indicators showing where price will go next or what it should be doing are useless. A trader need only be concerned with what the market is doing, not what the market might do. The price tells you what the market is doing.
#2) To always remember that technical indicators are only giving you confirmations based on what the market is telling you. So listen and pay close attention to the market and let it dictate which method you will use and which tool you will pull out of your bag of strategies and techniques. For only by listening to the markets will you ever be able to conquer it successfully and become a profitable trader.
Forex and Some Important Facts about Bollinger Bands.
Forex trading is nowadays one of the most looked after occupation for many persons of all ages around the world. This is due to its great advantages over other capital markets and its high profitability potential; among these advantages you will find that is extremely easy to access a trading platform from the best forex broker firms thanks to the internet; and also you will notice that Forex has a high liquidity along with a high leverage.
But having a good broker firm and great trading platform is only one part of what you need in order to make your forex trading career a winning and profitable one. You need to have the right knowledge and techniques in order to forecast with the best accuracy what the market will do next. One of the techniques used to predict the Forex market behavior is that based on Bollinger Bands.
These Bollinger Bands are what is called a technical trading tool and they are widely used in the capital markets (including Forex) and were created by John Bollinger in the early 1980s. These bands technique was formulated based on the need for adaptive trading bands and the discovery that the volatility of the markets was a dynamic phenomena, not a static one as was widely believed at the time.
Bollinger Bands consist of a chart of three curves drawn in relation to currency pairs prices. The band situated in the middle is a measure of the intermediate-term trend and is usually a simple moving average, that serves as the base for the upper and lower bands. The interval between the upper, lower and the middle bands is determined by the volatility of the market, typically the standard deviation of the same data that were used for the moving average. The default parameter is 20 periods and two standard deviations above and below the middle band; of course this may be adjusted to suit your needs.
In short, the purpose of Bollinger Bands is to provide a relative definition of high and low price. By definition prices are considered high when touching the upper band and low when they touch the lower band. This relative definition can be used by the Forex trader to compare price actions and as a very useful indicator when the purpose of the trader is to arrive at rigorous buy and sell decisions.
Forex And Daytrading
Online trading is great way for serious investors to make money, but inexperienced traders often wind up with big losses. A good set of instructions can minimize the risks and save months of expensive trial-and-error learning.
Day Trading
Day Trading had its heyday during the bull market of the 1990′s. All the amateurs have since dropped out, but day trading is still being practiced by professionals. There are fewer opportunities in the current market, but skilled investors can still find them if they know what to look for.
FOREX Trading
The Foreign Exchange Market (FOREX), the world’s largest financial exchange market, originated in 1973. It has a daily turnover of currency worth more than 1.2 trillion pounds.
Unlike many other securities, FOREX does not trade on a fixed exchange rate; instead, currencies are traded primarily between central banks, commercial banks, various non-banking international corporations, hedge funds, personal investors and not to forget, speculators. Previously, smaller investors were excluded from FOREX due to the huge amount of deposit involved. This was changed in 1995, and now smaller investors can trade alongside the multi-nationals. As a result, the number of traders within the FOREX market has grown rapidly, and many FOREX courses are appearing to help individual traders increase their skills.
As a matter of fact, it’s advisable to take FOREX training even before opening a trading account.
It is vital to know the market mechanics of FOREX, leveraging in FOREX, rollovers and the analysis of the FOREX market. Due to this fact, potential FOREX traders would do well to either enroll in a FOREX training courses or even purchase some books regarding FOREX trading.
There are pros and cons to enrolling into a FOREX course. For beginners a FOREX course is a rapid method of learning the basics of FOREX trading. Not much time is spent on history of the market or arcane economic theories. Often, on-line or phone support from a skilled FOREX trader is available to answer any questions. Also, the information is condensed and practical, often with graphs and charts.
The disadvantage is the price, as courses are more expensive than a paperback from the bookstore. Also,
the course may just teach the approach of the trader who wrote it, and individuals have different trading strategies. The student may grow accustomed to the logic and focus of the teacher without coming to realise that nothing is predictable in the FOREX market, and many different strategies will bring profits in varying market circumstances. Also, knowledge of practical applications may not be enough, as the FOREX is highly unpredictable and there are many external factors, such as political issues, affecting the flow of finances in the market.
The best advice would be to do some background research on the FOREX market first, and then enroll in a course.