Stocks -
It will be a bloodbath at the start of trade here and HK....in fact in almost all markets. Then....depending on the US futures, things may calm down in the afternoon.
So...selling is out of the question unless the stock you are planning to cut is still holding well inspite of all the fears. Then I would strongly advise you to do that to cut down on your holding. Best to remain in CASH...in time of fears, CASH is KING!
Buying? well...unless you have a pretty strong stomach for seeing the stock price falling like no tomorrow then you are welcome to the idea. Not a good idea....btw
for the moment. Why? We have seen stock prices improving lately therefore they have more chances to fall as compared for it to go higher.
Cannot think of a good reason to buy....except if you just want to scalp the market for super short term trade. ( to close positions within the same day ). There will be chances to do that at the start of the market. Go for those stocks that have volume....easier to cover the positions "long or short".
Forex -
For Eur/USD pair....still got some way to fall as more "bad" will surface. Support maybe at 1.16/7 level just as the analyst's predict.
For USD/JPY pair....may see a higher bias due to it's safe haven status as the USD. And for short term....it should be pretty range bounce around the 91.5 to 92.5 level.
For the rest of the major pairs....most will be in lower bias except GBP.
Saturday, June 05, 2010
Markets Tank: Stocks End the Week In Free Fall.
Provided by the Business Insider, June 4, 2010:
Following two straight up days, it looked like the panic might be out of this market. Nope, not even close. Fresh Euro panics combined with signs for weakness in the US to savage markets.
But first, the scoreboard: Dow: -324, down 3.16% S&P 500: -38, down 3.44% NASDAQ: -84, down 3.64%
And now, the top stories:
* The panic really got started pre-market, when a rumor started spreading that SocGen was facing a big derivatives loss. The euro plunged, even though the rumor was never confirmed. Combined with the market's newfound source of panic, Hungary, things were already looking bad early in the day.
* The second thing to club this market was the jobs report, which came in WAY worse than expectations. There's still virtually no private sector job creation. By all accounts, the jobs recovery seems to have plateaued.
* The LMRP is on the Deepwater Horizon gusher, but there's no indication yet that it's working significantly. BP has expressed some optimism that it will work, but nobody will feel confident about that for some time.
* The action in the commodities space was simply horrendous. Copper and palladium, two industrial metals we've been focusing on closely were savaged. Gold however did rally.
* As a politician, Barack Obama is in a total tailspin. The jobs situation made things worse. Earlier this week he appeared to tip a strong report, but it came in week. Then when he spoke this morning, he ignored how bad it was, and sounded foolish.
* A shale explosion in Pennsylvania has cast a pall over the natural gas industry, one group that was expected to benefit in the post Deepwater Horizon era.
* The euro fell below $1.20.
* The oil spill has officially hit the beaches of Pensacola, FL.
The result of a perfect storm???? Are we to see another a stock market crash? The following is a forecast based on historical patterns in price and time.
Equities continue to follow the pattern that preceded the 1929 and 1987 crashes, especially as it relates to time. To recap, the initial leg of the 1929 decline lasted 23 days. A 5 day correction was followed by the next down leg, which lasted 12 days. The initial low was broken on the 6th day of the 3rd down leg and the decline began to accelerate considerably on the 8th day. At the crash low (12th day low), the DJIA had shed 45% of its value from the September 1929 top. The 11th day was the first “Black Monday”.
In 1987, the first leg of the decline consumed 19 days and the following correction lasted 8 days. The initial low was broken on the 6th day of the 3rd down leg and the decline began to accelerate considerably on the 8th day (I didn’t have to change that sentence at all). At the crash low, the Dow was off 38% from its August high. The second “Black Monday” was the 12th day.
Now, in 2010, the first leg of the decline consumed 21 days (as opposed to 23 and 19) and the following correction lasted 6 days (compared with 5 and 8 days). IF the Dow continues to follow the ‘crash path’, then the May low would be broken late next week (the 6th day is Friday the 11th). The decline would accelerate the following next week. 12 days for the crash leg of the decline and 40% (compared with 45% and 37%) would result in the Dow at 6755 on June 22nd. Interestingly, June 21st is a Monday.
Again, this is simply a forecast based on historical patterns in price and time. If the current situation begins to diverge from the path laid out here, then we’ll know that something else is probably in the works. Clearly, the implications for FX (and all markets) are extraordinary.
Don't you agreed if this trend in the stock market continue...we are likely to see the 3rd Black Monday on June 21st. Be prepared!
Following two straight up days, it looked like the panic might be out of this market. Nope, not even close. Fresh Euro panics combined with signs for weakness in the US to savage markets.
But first, the scoreboard: Dow: -324, down 3.16% S&P 500: -38, down 3.44% NASDAQ: -84, down 3.64%
And now, the top stories:
* The panic really got started pre-market, when a rumor started spreading that SocGen was facing a big derivatives loss. The euro plunged, even though the rumor was never confirmed. Combined with the market's newfound source of panic, Hungary, things were already looking bad early in the day.
* The second thing to club this market was the jobs report, which came in WAY worse than expectations. There's still virtually no private sector job creation. By all accounts, the jobs recovery seems to have plateaued.
* The LMRP is on the Deepwater Horizon gusher, but there's no indication yet that it's working significantly. BP has expressed some optimism that it will work, but nobody will feel confident about that for some time.
* The action in the commodities space was simply horrendous. Copper and palladium, two industrial metals we've been focusing on closely were savaged. Gold however did rally.
* As a politician, Barack Obama is in a total tailspin. The jobs situation made things worse. Earlier this week he appeared to tip a strong report, but it came in week. Then when he spoke this morning, he ignored how bad it was, and sounded foolish.
* A shale explosion in Pennsylvania has cast a pall over the natural gas industry, one group that was expected to benefit in the post Deepwater Horizon era.
* The euro fell below $1.20.
* The oil spill has officially hit the beaches of Pensacola, FL.
The result of a perfect storm???? Are we to see another a stock market crash? The following is a forecast based on historical patterns in price and time.
Equities continue to follow the pattern that preceded the 1929 and 1987 crashes, especially as it relates to time. To recap, the initial leg of the 1929 decline lasted 23 days. A 5 day correction was followed by the next down leg, which lasted 12 days. The initial low was broken on the 6th day of the 3rd down leg and the decline began to accelerate considerably on the 8th day. At the crash low (12th day low), the DJIA had shed 45% of its value from the September 1929 top. The 11th day was the first “Black Monday”.
In 1987, the first leg of the decline consumed 19 days and the following correction lasted 8 days. The initial low was broken on the 6th day of the 3rd down leg and the decline began to accelerate considerably on the 8th day (I didn’t have to change that sentence at all). At the crash low, the Dow was off 38% from its August high. The second “Black Monday” was the 12th day.
Now, in 2010, the first leg of the decline consumed 21 days (as opposed to 23 and 19) and the following correction lasted 6 days (compared with 5 and 8 days). IF the Dow continues to follow the ‘crash path’, then the May low would be broken late next week (the 6th day is Friday the 11th). The decline would accelerate the following next week. 12 days for the crash leg of the decline and 40% (compared with 45% and 37%) would result in the Dow at 6755 on June 22nd. Interestingly, June 21st is a Monday.
Again, this is simply a forecast based on historical patterns in price and time. If the current situation begins to diverge from the path laid out here, then we’ll know that something else is probably in the works. Clearly, the implications for FX (and all markets) are extraordinary.
Don't you agreed if this trend in the stock market continue...we are likely to see the 3rd Black Monday on June 21st. Be prepared!
US Dollar at key Juncture as S&P, Dow Jones Near Critical Levels - copied fr yahoo
The US Dollar finished the week higher against all G10 and other major currencies, fueled by a substantial decline in the S&P 500 and broad deterioration in financial market risk appetite. A flight to safety following a relatively disappointing US Nonfarm Payrolls report was the clear highlight of the week’s trade for the safe-haven Greenback; the poor labor market result counter-intuitively forced sizeable dollar gains.
Once-a-decade hiring for the 2010 US Census accounted for a whopping 90 percent of all net job gains through the month of May, and the private labor market added a mere 41,000 jobs through the period. Markets had ostensibly hoped for stronger signs that the US economy was on the mend and quickly sold risky assets in response to the disappointment. Whether or not the US Dollar can continue to gain will almost certainly depend on the next moves in the fast-falling S&P 500. Recent financial market turmoil leave USD momentum to the topside, but it will be critical to watch financial markets in the days ahead.
With the S&P 500 trading near significant support near the 1050 mark, the next week of trading could very well set the tone for the next months of trading. Our Senior Currency Strategist argues that recent price action has seen remarkably similar patterns to that which preceded 1929 and 1987 stock market crashes. It is obviously quite the leap to predict that the stock market could see such a sharp drop through such a short period of time, but the similarities are difficult to ignore. Markets remain on edge and intraday price swings have been exacerbated by low trading volumes. If we see a panic in earnest, one cannot rule out an intraday move similar to the “flash crash” seen just one month ago. It will be very important to watch how key risk barometers behave around key technical and psychologically significant price support levels. Traders should be on the lookout for sharp price moves following this coming Friday’s Advance Retail Sales data. Given market focus on the relative health of the US consumer, any especially large surprises could force significant short-term moves. The same can be said for the subsequent University of Michigan Consumer Confidence report, but it serves to note that markets’ reaction to the U Michigan data has been muted as of late. The key questions rolling forward are whether we’ve truly seen the worst of recent market turmoil and whether the US economy has turned the corner towards growth. With that in mind, we will continue to follow any and all developments in economic data and—more importantly—financial markets’ attitude towards fundamental developments. - DR
Once-a-decade hiring for the 2010 US Census accounted for a whopping 90 percent of all net job gains through the month of May, and the private labor market added a mere 41,000 jobs through the period. Markets had ostensibly hoped for stronger signs that the US economy was on the mend and quickly sold risky assets in response to the disappointment. Whether or not the US Dollar can continue to gain will almost certainly depend on the next moves in the fast-falling S&P 500. Recent financial market turmoil leave USD momentum to the topside, but it will be critical to watch financial markets in the days ahead.
With the S&P 500 trading near significant support near the 1050 mark, the next week of trading could very well set the tone for the next months of trading. Our Senior Currency Strategist argues that recent price action has seen remarkably similar patterns to that which preceded 1929 and 1987 stock market crashes. It is obviously quite the leap to predict that the stock market could see such a sharp drop through such a short period of time, but the similarities are difficult to ignore. Markets remain on edge and intraday price swings have been exacerbated by low trading volumes. If we see a panic in earnest, one cannot rule out an intraday move similar to the “flash crash” seen just one month ago. It will be very important to watch how key risk barometers behave around key technical and psychologically significant price support levels. Traders should be on the lookout for sharp price moves following this coming Friday’s Advance Retail Sales data. Given market focus on the relative health of the US consumer, any especially large surprises could force significant short-term moves. The same can be said for the subsequent University of Michigan Consumer Confidence report, but it serves to note that markets’ reaction to the U Michigan data has been muted as of late. The key questions rolling forward are whether we’ve truly seen the worst of recent market turmoil and whether the US economy has turned the corner towards growth. With that in mind, we will continue to follow any and all developments in economic data and—more importantly—financial markets’ attitude towards fundamental developments. - DR
Japanese Yen: Risks For Intervention Could Resurface as Kan Takes Office - copied fr yahoo
The Japanese Yen bounced back on Friday following a shift in market sentiment, but the political uncertainties surrounding the world’s second largest economy could weigh on the exchange rate over the near-term as the Democratic Party of Japan’s Naoto Kan takes control of the government. However, as risk trends continue to dictate price action in the currency market, a rise in safe-haven flows would strengthen the Yen as investors scale back their appetite for risk. Meanwhile, Bank of Japan Governor Masaaki Shirakawa said that the “economy is making firm progress toward sustainable growth” as global trade picks up, but went onto say that the debt crisis could pose a threat if European policy makers fail to temper the risks for contagion.
After Mr. Hatoyama stepped down from his post earlier this week, former Finance Minister Kan was elected the new Prime Minister and pledged to “convince the public that real reforms are entering the stage of concrete implementation” as the economy struggles to shake off the recession. However, market participants anticipate that under the new leader, government efforts to temper the appreciation in the exchange rate will become a top priority in order to increase the competiveness of Japanese goods, and speculation for a currency intervention are likely to resurface going forward as Mr. Kan plans to work closely with the central bank and introduce “sweeping revenue reforms” in order to balance the risks for growth and inflation. Meanwhile, Bank of Japan board member Miyako Suda said “uncertainties has risen” as a result of the European debt crisis, and warned that the instability in the global financial market “could lead to a deterioration in corporate and household sentiment, hurting capital and consumer spending not only in Europe but Japan as well.” At the same time, Haruyuki Toyama, who heads the financial market department at the central bank, said that the BoJ’s JPY 20M commercial lending program “seems quite a success” as conditions improve, and policy makers may look to support the economy throughout the second-half of the year as the private sector remains weak.
Nevertheless, the economic docket for the following week is expected to show the trade surplus narrow to JPY 871.9B in April from JPY 1074.7 in the previous month as recent strength in the Japanese Yen weighs on foreign demands, while the preliminary reading for the leading index is forecasted to fall back to 102.5 during the same period from 102.7 in March. At the same time, the final GDP reading for the first quarter is anticipated to show the growth rate increase 1.0% during the first three-months of the year compared to an initial forecasts for a 1.2% expansion, while the GDP deflator, which acts as a broad gauge for inflation, is projected to decline at an annualized pace of 3.0%. As a result, market participants may raise expectations for further loosening in government policy, which could stoke expectations for the BoJ to introduce additional measures as the outlook for growth and inflation weakens. - DS
After Mr. Hatoyama stepped down from his post earlier this week, former Finance Minister Kan was elected the new Prime Minister and pledged to “convince the public that real reforms are entering the stage of concrete implementation” as the economy struggles to shake off the recession. However, market participants anticipate that under the new leader, government efforts to temper the appreciation in the exchange rate will become a top priority in order to increase the competiveness of Japanese goods, and speculation for a currency intervention are likely to resurface going forward as Mr. Kan plans to work closely with the central bank and introduce “sweeping revenue reforms” in order to balance the risks for growth and inflation. Meanwhile, Bank of Japan board member Miyako Suda said “uncertainties has risen” as a result of the European debt crisis, and warned that the instability in the global financial market “could lead to a deterioration in corporate and household sentiment, hurting capital and consumer spending not only in Europe but Japan as well.” At the same time, Haruyuki Toyama, who heads the financial market department at the central bank, said that the BoJ’s JPY 20M commercial lending program “seems quite a success” as conditions improve, and policy makers may look to support the economy throughout the second-half of the year as the private sector remains weak.
Nevertheless, the economic docket for the following week is expected to show the trade surplus narrow to JPY 871.9B in April from JPY 1074.7 in the previous month as recent strength in the Japanese Yen weighs on foreign demands, while the preliminary reading for the leading index is forecasted to fall back to 102.5 during the same period from 102.7 in March. At the same time, the final GDP reading for the first quarter is anticipated to show the growth rate increase 1.0% during the first three-months of the year compared to an initial forecasts for a 1.2% expansion, while the GDP deflator, which acts as a broad gauge for inflation, is projected to decline at an annualized pace of 3.0%. As a result, market participants may raise expectations for further loosening in government policy, which could stoke expectations for the BoJ to introduce additional measures as the outlook for growth and inflation weakens. - DS
Euro Takes the Next Step towards Crisis, Slips to Four Year Lows - copied fr yahoo
How can this happen to an economy that have been backed by a 750 billion euro guarantee? Having danced around a meaningful support level for two weeks (the midpoint of EURUSD’ historical range), the market’s most liquid currency pair finally took the next step down into the abyss. The fundamental drive for this unfavorable move: concern over the financial health and stability of the regional economic and monetary union. It may seem trivial that a European Union as peripheral as Hungary can pose a significant threat to the entire system; but the group is on such shaky ground that even a small spark can set off a disastrous fire. Is a serious default or the exit of a major EU member on the horizon? Will authorities actually move in to prevent such an event? The answer to these questions could define the future of the shared currency.
To be clear, the situation in the European Union has not improved material over the past three or so weeks; it just so happens that risk aversion had eased and the regional economy was no longer the subject of constant scrutiny. This disregard of future uncertainties wouldn’t last for long though. Either conditions would have to materially improve or the reality of Europe’s situation would simply await the next tumble in sentiment. Naturally, with investors still adjusting to the reality that global growth was leveling off and yield forecasts were barren; it is no surprise that speculative assets and fundamentally weakened currencies would pitch lower. This time around, however, it was news from the Euro Zone that would catalyze sentiment rather than the other way around. Little more than a month in power, the new Hungarian government has said the former administration had “manipulated” figures and “lied” about the state of the economy. This has put the nation in a “grave” position; and it has been suggested that a default is not an exaggeration at this point. These are loaded comments when officials around the region are attempting to tread carefully. Clearly, anything less than cheerleading can accelerate disaster.
But what impact could a Hungarian default have on the European Union and the euro? Hungary is not a particularly large economy and it is not part of the Eurozone. However, a default on its debt can prove a crippling blow to something more important than debt obligations themselves: confidence. A default from this economy could theoretically translate into losses for neighbor economies that have exposure to Hungary’s debt. Yet, the sting of actual losses is not even that important. For investors, trouble for this particular economy can easily be construed as regional problems (it isn’t difficult to convince the masses of this given the circumstances). With capital flowing away from Europe and into US, Asia and other liquid regions, the withdrawal of liquidity forces borrowing costs for other struggling EU nations (think Greece, Portugal, Spain, Ireland, Italy, etc) higher. That only further exacerbates the struggle these economies face in balancing deficit cuts and economic recovery. And, should the emergency credit line be put to the test, we would likely see that few have the means to lend and those that do would likely renege as they see the problem overwhelm the solution.
In the long-term, the EU’s solvency and unity are the primary concerns for the euro. However, this is a matter that could take considerable time to unfold. In the meantime, risk appetite will treat the euro as if it were at the top of the risk spectrum – the most sensitive to risk aversion at least. As for scheduled event risk, the ECB rate decision is top concern. There is no chance of a rate hike according to the markets and economists (overnight index swaps only see a total of 30 bps over the next 12 months). On the other hand, it is highly likely that we will see reference in the statement that follows and Trichet’s commentary to the EU’s financial and economic uncertainties. - JK
Latest forecast outlook for Euro -
The break below the 2009 lows at 1.2330 is significant and now exposes a fresh drop over the coming weeks back towards the 2006 lows in the 1.1600’s. Medium-term technical studies are however quite oversold, so we would not rule out the possibility for some corrective upside before the market heads lower. Ultimately, a lower top is sought out ahead of 1.3000, and ideally by 1.2670, ahead of the bearish resumption into the 1.1600’s.
Continued fiscal crises in the Euro Zone have effectively eliminated speculation that the European Central Bank would soon raise interest rates, prompting further monetary stimulus from the ECB and forcing sharp Euro declines. The EURUSD pair has been relatively disconnected from relative shifts in interest rate forecasts; the threat to Euro Zone stability has been a far more influential market mover than the comparatively small shifts in rate expectations.
The Euro has closed much of its valuation gap with the US Dollar but prices remain above the PPP-implied “fair” exchange rate by nearly 1000 pips, hinting that further downside is ahead. It is also important to consider that markets tend to overshoot long-run PPP readings and a push into undervalued territory is not out of the question. The long-run case for further losses seems straight-forward: bailing out spendthrift EU members will pile debt onto those countries whose economies drive growth in the region (such as Germany); the financing of this burden will push up borrowing costs and slow economic growth, leaving ECB rates at low levels even as recovery – and thereby the outlook for monetary policy – become increasingly firm in the US. However, this scenario has had ample opportunity to be priced in and the bears may find it difficult to sustain the push lower in the near term without a fresh catalyst. Risk aversion seems to be the only likely candidate to fill that role: with China proactively moving to slow its economy amid fears of asset bubbles and runaway inflation and the EU hamstrung, the US is left as the sole major driver of global economic recovery; if the States are unable to shoulder this burden and the rebound falters, a renewed flight out of risky assets promises to send the greenback higher. Otherwise, an upward correction may prove inevitable before the next major leg of the down move begins. Still, from a purely valuation-oriented standpoint, the bias remains bearish.
What is Purchasing Power Parity?
One of the oldest and most basic fundamental approaches to determining the “fair” exchange rate of one currency to another relies on the concept of Purchasing Power Parity. This approach says that an identical product should cost the same from one country to another, with the only difference in the price tag accounted for by the exchange rate. For example, if a pencil costs €1 in Europe and $1.20 in the US, the “fair” EURUSD exchange rate should be 1.20. For our purposes, we will use the PPP values provided annually by Bloomberg. We compare these values to current market rates to determine how much each currency is under- or over-valued against the US Dollar.
To be clear, the situation in the European Union has not improved material over the past three or so weeks; it just so happens that risk aversion had eased and the regional economy was no longer the subject of constant scrutiny. This disregard of future uncertainties wouldn’t last for long though. Either conditions would have to materially improve or the reality of Europe’s situation would simply await the next tumble in sentiment. Naturally, with investors still adjusting to the reality that global growth was leveling off and yield forecasts were barren; it is no surprise that speculative assets and fundamentally weakened currencies would pitch lower. This time around, however, it was news from the Euro Zone that would catalyze sentiment rather than the other way around. Little more than a month in power, the new Hungarian government has said the former administration had “manipulated” figures and “lied” about the state of the economy. This has put the nation in a “grave” position; and it has been suggested that a default is not an exaggeration at this point. These are loaded comments when officials around the region are attempting to tread carefully. Clearly, anything less than cheerleading can accelerate disaster.
But what impact could a Hungarian default have on the European Union and the euro? Hungary is not a particularly large economy and it is not part of the Eurozone. However, a default on its debt can prove a crippling blow to something more important than debt obligations themselves: confidence. A default from this economy could theoretically translate into losses for neighbor economies that have exposure to Hungary’s debt. Yet, the sting of actual losses is not even that important. For investors, trouble for this particular economy can easily be construed as regional problems (it isn’t difficult to convince the masses of this given the circumstances). With capital flowing away from Europe and into US, Asia and other liquid regions, the withdrawal of liquidity forces borrowing costs for other struggling EU nations (think Greece, Portugal, Spain, Ireland, Italy, etc) higher. That only further exacerbates the struggle these economies face in balancing deficit cuts and economic recovery. And, should the emergency credit line be put to the test, we would likely see that few have the means to lend and those that do would likely renege as they see the problem overwhelm the solution.
In the long-term, the EU’s solvency and unity are the primary concerns for the euro. However, this is a matter that could take considerable time to unfold. In the meantime, risk appetite will treat the euro as if it were at the top of the risk spectrum – the most sensitive to risk aversion at least. As for scheduled event risk, the ECB rate decision is top concern. There is no chance of a rate hike according to the markets and economists (overnight index swaps only see a total of 30 bps over the next 12 months). On the other hand, it is highly likely that we will see reference in the statement that follows and Trichet’s commentary to the EU’s financial and economic uncertainties. - JK
Latest forecast outlook for Euro -
The break below the 2009 lows at 1.2330 is significant and now exposes a fresh drop over the coming weeks back towards the 2006 lows in the 1.1600’s. Medium-term technical studies are however quite oversold, so we would not rule out the possibility for some corrective upside before the market heads lower. Ultimately, a lower top is sought out ahead of 1.3000, and ideally by 1.2670, ahead of the bearish resumption into the 1.1600’s.
Continued fiscal crises in the Euro Zone have effectively eliminated speculation that the European Central Bank would soon raise interest rates, prompting further monetary stimulus from the ECB and forcing sharp Euro declines. The EURUSD pair has been relatively disconnected from relative shifts in interest rate forecasts; the threat to Euro Zone stability has been a far more influential market mover than the comparatively small shifts in rate expectations.
The Euro has closed much of its valuation gap with the US Dollar but prices remain above the PPP-implied “fair” exchange rate by nearly 1000 pips, hinting that further downside is ahead. It is also important to consider that markets tend to overshoot long-run PPP readings and a push into undervalued territory is not out of the question. The long-run case for further losses seems straight-forward: bailing out spendthrift EU members will pile debt onto those countries whose economies drive growth in the region (such as Germany); the financing of this burden will push up borrowing costs and slow economic growth, leaving ECB rates at low levels even as recovery – and thereby the outlook for monetary policy – become increasingly firm in the US. However, this scenario has had ample opportunity to be priced in and the bears may find it difficult to sustain the push lower in the near term without a fresh catalyst. Risk aversion seems to be the only likely candidate to fill that role: with China proactively moving to slow its economy amid fears of asset bubbles and runaway inflation and the EU hamstrung, the US is left as the sole major driver of global economic recovery; if the States are unable to shoulder this burden and the rebound falters, a renewed flight out of risky assets promises to send the greenback higher. Otherwise, an upward correction may prove inevitable before the next major leg of the down move begins. Still, from a purely valuation-oriented standpoint, the bias remains bearish.
What is Purchasing Power Parity?
One of the oldest and most basic fundamental approaches to determining the “fair” exchange rate of one currency to another relies on the concept of Purchasing Power Parity. This approach says that an identical product should cost the same from one country to another, with the only difference in the price tag accounted for by the exchange rate. For example, if a pencil costs €1 in Europe and $1.20 in the US, the “fair” EURUSD exchange rate should be 1.20. For our purposes, we will use the PPP values provided annually by Bloomberg. We compare these values to current market rates to determine how much each currency is under- or over-valued against the US Dollar.
Friday, June 04, 2010
Half Empty Or Half Full - Which Are You?
Many successful traders take a systematic approach to trading. They start with a hypothesis about the market or certain economic conditions. They follow up the hypothesis by creating a trading plan, and then they finalize the process by placing a trade to test their position. It’s very step 1, step 2, and so on.
Sometimes a plan is on the money and the result is…. Money! The hypothesis and trading plan worked out at the given moment and the end product is a success trade. Probably more often, though, the hypothesis and supporting trading plan are off mark, and things are reversed.
No money! Actually, less money!
At this point, modifications to the trading plan (or even the original hypothesis) are needed. We always want to know what we didn’t do right, or identify anything we overlooked or didn’t take into consideration, and then try again. Of course this has to be done with as little emotion as possible, or else we start to feel like the eternal pessimist:
“What am I doing? I’m always wrong; never right. This should have worked!”
It’s easy to start thinking like this, especially for novice traders and beginners, who tend to wear emotion on their sleeve. Even the most cheerful, blubbliest, sunshine loving, professional optimist would start doubting herself. After pessimism has swallowed her body whole, the only logical products to follow are denial, hopelessness and a craving to make right, right now! And when we mix emotion and trading, the only outcome is loss.
What you want to do when things haven’t gone your way is imagine the other side of the fence, imagine the glass half full, and imagine that things will more likely go well than badly.
Example: I lost $10,000 on my last trade meant for my son’s college education! Look on the brighter side – Stanford is out of the question, but the local community college is perfect! I’m saving money and my son will more than likely live at home, under my watch at all times.
Okay, maybe that’s not the most realistic or best example for this situation, but it’s a possibility. Just remember: It works to think positively and like an optimist. And sometimes thinking positively means thinking how things could have gone worse.
Example: I lost $10,000 on my last trade meant for my son’s college education! Luckily, my teenaged daughter’s ever-ringing cell phone/handily woke me up in time for me to close my losing position. I would have lost $30,000 by the end of the trading day!
Now that’s a way to think optimistically. Sure you lost $10K, but it could have been three times worse. Research shows that those who focused more on the how things could have been much worse during a setback actually felt better about the situation than those who contemplated on how things could have turned out better. Crazy!
Your recovery from a setback is directly related to how you view the setback when it happens. If the event is viewed as a total lose or end of the world occurrence, there’s a pretty good chance that emotion will overpower you. As you read above, too much emotion intermingling with you trading can lead to despair and hopelessness, and a feeling to regain your loses immediately.
Bad idea! Stay away and calm yourself first! Rather than jumping right back into the swing of things, take time to grasp the situation. Step back and relax. You need to rejuvenate your psychological juices before getting back to trading.
Take the setbacks as learning experiences. Dissect your errors to find what went wrong and rework your strategy with the necessary changes. Find out what needs improving to make the profits rather than crossing your fingers and wishing upon a star.
It’s so easy to fall apart and doubt your progress when your “bullet proof” trading plan doesn’t return profits. Dwelling on what could have been will only frustrate and dishearten you to continuing in your quest for pip gains. Your job, if you chose to accept it (and you must!), is to be the ultimate optimist, the overoptimist. Keep your focus on solving the problems that keep you from profits, and don’t dwell on the mistakes. Think systematically and unemotionally. Take your future trade as just another problem to solve. If it doesn’t work out the first time, take the high road, and fix what needs fixing. Don’t doubt your hard work, even if it doesn’t produce results. Each failure and mistake is another learning block for you to tuck away in your “experience bag.” Think happy, think sunshine, smile. Your trading will reflect your positive attitude.
Sometimes a plan is on the money and the result is…. Money! The hypothesis and trading plan worked out at the given moment and the end product is a success trade. Probably more often, though, the hypothesis and supporting trading plan are off mark, and things are reversed.
No money! Actually, less money!
At this point, modifications to the trading plan (or even the original hypothesis) are needed. We always want to know what we didn’t do right, or identify anything we overlooked or didn’t take into consideration, and then try again. Of course this has to be done with as little emotion as possible, or else we start to feel like the eternal pessimist:
“What am I doing? I’m always wrong; never right. This should have worked!”
It’s easy to start thinking like this, especially for novice traders and beginners, who tend to wear emotion on their sleeve. Even the most cheerful, blubbliest, sunshine loving, professional optimist would start doubting herself. After pessimism has swallowed her body whole, the only logical products to follow are denial, hopelessness and a craving to make right, right now! And when we mix emotion and trading, the only outcome is loss.
What you want to do when things haven’t gone your way is imagine the other side of the fence, imagine the glass half full, and imagine that things will more likely go well than badly.
Example: I lost $10,000 on my last trade meant for my son’s college education! Look on the brighter side – Stanford is out of the question, but the local community college is perfect! I’m saving money and my son will more than likely live at home, under my watch at all times.
Okay, maybe that’s not the most realistic or best example for this situation, but it’s a possibility. Just remember: It works to think positively and like an optimist. And sometimes thinking positively means thinking how things could have gone worse.
Example: I lost $10,000 on my last trade meant for my son’s college education! Luckily, my teenaged daughter’s ever-ringing cell phone/handily woke me up in time for me to close my losing position. I would have lost $30,000 by the end of the trading day!
Now that’s a way to think optimistically. Sure you lost $10K, but it could have been three times worse. Research shows that those who focused more on the how things could have been much worse during a setback actually felt better about the situation than those who contemplated on how things could have turned out better. Crazy!
Your recovery from a setback is directly related to how you view the setback when it happens. If the event is viewed as a total lose or end of the world occurrence, there’s a pretty good chance that emotion will overpower you. As you read above, too much emotion intermingling with you trading can lead to despair and hopelessness, and a feeling to regain your loses immediately.
Bad idea! Stay away and calm yourself first! Rather than jumping right back into the swing of things, take time to grasp the situation. Step back and relax. You need to rejuvenate your psychological juices before getting back to trading.
Take the setbacks as learning experiences. Dissect your errors to find what went wrong and rework your strategy with the necessary changes. Find out what needs improving to make the profits rather than crossing your fingers and wishing upon a star.
It’s so easy to fall apart and doubt your progress when your “bullet proof” trading plan doesn’t return profits. Dwelling on what could have been will only frustrate and dishearten you to continuing in your quest for pip gains. Your job, if you chose to accept it (and you must!), is to be the ultimate optimist, the overoptimist. Keep your focus on solving the problems that keep you from profits, and don’t dwell on the mistakes. Think systematically and unemotionally. Take your future trade as just another problem to solve. If it doesn’t work out the first time, take the high road, and fix what needs fixing. Don’t doubt your hard work, even if it doesn’t produce results. Each failure and mistake is another learning block for you to tuck away in your “experience bag.” Think happy, think sunshine, smile. Your trading will reflect your positive attitude.
Why Don't You Get a Life.
Trading foreign currencies isn’t the easiest business to get involved in, especially for beginners or those with limited trading experience. Your most successful traders undoubtedly have several years combined experience in the Forex and other financial markets. Expert traders and those traders that make a living trading the Forex often advocate that beginners take a methodology similar to students beginning an advanced degree program at any one of the different types of professional schools (e.g. vocational, college or university, graduate school).
My time served in the arena of higher education has confirmed that moving ahead in such a program requires some level of commitment to reading, studying, and maybe even attending a study session related to the given field. To move to the top of that class, however, requires even greater discipline and more time committed to learning the course curriculum. I gained this “knowledge” strictly by not doing than by doing. I left the “doing” up to the “smart” kids in class; I won’t lie. At that time, the level of educational excellence at which those kids were working was higher than what I was willing to work for. And as you can image, the results at year end were justified. The smart kids were still smart kids, and I was, well, not. And I hated them for it. Funny how that works, huh?
Was I right to hate the “smarties”? Sure, why not! They got the good grades! They had the good hair! They studied hard and long. They gave up evenings and weekends of partying and fun for… the library. They actually read the homework assignments. I mean, what’s not to hate?. They probably attended Harvard or Princeton, and then went on to create a social networking site, which they sold to the highest bidder for billions, only to... let me stop my ranting.
Like school, learning to trade currencies is very similar in the type of commitment required to be successful. The best and the brightest of the Forex world have put in the time and effort, gaining invaluable skill, and becoming seasoned traders. Going into school, medical and law students know what’s required to succeed in the program, so limiting their social lives to better focus on developing their skills becomes a necessity. All efforts are centered on learning about their field, often at the sacrifice of hanging out with peers or living the “normal” life. The life balance is tipped dramatically in favor of work over play.
But is this balance the only way to become a successful Forex trader (or pediatrician, or nuclear engineer, or angio-radiologic technologist), one who is at the top of their game? Would you be mad at me if I said “Yes, it’s the ONLY way!”? One school of thought thinks so.. My thought is that it depends on the level of happiness in your life you want to retain during your educational journey.
Forex trading can be time consuming when you factor in the beginner’s learning curve, strategy creation, demo trading, learning to read, back testing, figuring out how to use your mouse and the list goes on. The more time you spend learning Forex, the more you are exposed to the workings of the Forex market. With time you start to build a good skill set for trading, and your experience grows with every trade. But with time spent learning and trading Forex, time is taken away from something else – your family, your friends, your other job, your toe nails, your dog, your lawn, your social life. My answer – to each his (or her) own. There’s no right or wrong answer here, folks.
Yes, your money is on the line (that’s if you’ve taken that big step to trading real money), but that doesn’t necessarily translate into ALL OUT FOREX OPEN 24/7! The most successful traders will tell you that trading isn’t only about that winning trade, but it’s also about what you learn along the way. There’s the mental challenge of trading. There’s the benefit of learning how others make money trading foreign currency. There’s the excitement of learning new investment strategies. It’s the process, man, the process!
You can be dedicated to learning and developing your skills as a trader, but a balance must be struck between your trading and the rest of your life. Stress outside of your trading has a way of finding its way back in. Stay happy. Get a life. For....I go and feed the fishes, swim, sauna or just pop into the gym for a good workout to sweat out the dirt hehe.
My time served in the arena of higher education has confirmed that moving ahead in such a program requires some level of commitment to reading, studying, and maybe even attending a study session related to the given field. To move to the top of that class, however, requires even greater discipline and more time committed to learning the course curriculum. I gained this “knowledge” strictly by not doing than by doing. I left the “doing” up to the “smart” kids in class; I won’t lie. At that time, the level of educational excellence at which those kids were working was higher than what I was willing to work for. And as you can image, the results at year end were justified. The smart kids were still smart kids, and I was, well, not. And I hated them for it. Funny how that works, huh?
Was I right to hate the “smarties”? Sure, why not! They got the good grades! They had the good hair! They studied hard and long. They gave up evenings and weekends of partying and fun for… the library. They actually read the homework assignments. I mean, what’s not to hate?. They probably attended Harvard or Princeton, and then went on to create a social networking site, which they sold to the highest bidder for billions, only to... let me stop my ranting.
Like school, learning to trade currencies is very similar in the type of commitment required to be successful. The best and the brightest of the Forex world have put in the time and effort, gaining invaluable skill, and becoming seasoned traders. Going into school, medical and law students know what’s required to succeed in the program, so limiting their social lives to better focus on developing their skills becomes a necessity. All efforts are centered on learning about their field, often at the sacrifice of hanging out with peers or living the “normal” life. The life balance is tipped dramatically in favor of work over play.
But is this balance the only way to become a successful Forex trader (or pediatrician, or nuclear engineer, or angio-radiologic technologist), one who is at the top of their game? Would you be mad at me if I said “Yes, it’s the ONLY way!”? One school of thought thinks so.. My thought is that it depends on the level of happiness in your life you want to retain during your educational journey.
Forex trading can be time consuming when you factor in the beginner’s learning curve, strategy creation, demo trading, learning to read, back testing, figuring out how to use your mouse and the list goes on. The more time you spend learning Forex, the more you are exposed to the workings of the Forex market. With time you start to build a good skill set for trading, and your experience grows with every trade. But with time spent learning and trading Forex, time is taken away from something else – your family, your friends, your other job, your toe nails, your dog, your lawn, your social life. My answer – to each his (or her) own. There’s no right or wrong answer here, folks.
Yes, your money is on the line (that’s if you’ve taken that big step to trading real money), but that doesn’t necessarily translate into ALL OUT FOREX OPEN 24/7! The most successful traders will tell you that trading isn’t only about that winning trade, but it’s also about what you learn along the way. There’s the mental challenge of trading. There’s the benefit of learning how others make money trading foreign currency. There’s the excitement of learning new investment strategies. It’s the process, man, the process!
You can be dedicated to learning and developing your skills as a trader, but a balance must be struck between your trading and the rest of your life. Stress outside of your trading has a way of finding its way back in. Stay happy. Get a life. For....I go and feed the fishes, swim, sauna or just pop into the gym for a good workout to sweat out the dirt hehe.
The Clock is Ticking
TRADING...even when done on a full-time basis, demands a lot of time and mental and physical energy. It's equivalent to a brand new job or the new "thing" you decide to spend your life doing. For some, it's your first time really exposed to this industry, let alone anything investing related. Sure, you've done the 401K thing at work, but that was multiple-choice. You do your best to read and learn everything you can get your hands on, when you have the time. Many beginners, however, underestimate just how much there is to learn about the markets, indicators, and economics in general. And get information overload from Day 1.
And lets be realistic - most of you aren't trading full-time. You've got a "day" job and more than likely a family to manage. Your trading consists of the few hours during the week and weekend when you can get away from your hectic life and focus on all things Forex. To help yourself, many of you start your trading day (or night) by formulating a To-Do or Action Items list.
You write out all the things you expect to get done by the end of the night, next week, and next month. You have some things that need immediate attention - those you'll tackle today. There are some things that need to get done now, but they're very time consuming - you'll try to fit those in today. Finally, you list the "wants - not needs" that aren't critical at this very moment, but are still important enough to eventually need completing.
You start on the first task, usually something quick and easy - sharpen a box of new pencils, install a new trading software platform, or peruse the beginner's forums. You complete the small task with lightning quickness and you move on to the next task that also needs immediate attention. Halfway through the next task, the phone rings.
"Hey, Mom. What a surprise!" Geez, we just talked last week. "Sure, I always have time."
45 minutes later you're off the phone and back to work. "Wow," you exclaim to yourself. "Where's the day going?" So, you get back on task and back to what you were doing. An hour or so later you've satisfied your immediate worries/tasks and you're on to one of the more important ones - like familiarizing yourself with Japanese Candlesticks at your most favorite and oh-so-funny Forex web site.
"Oh, this won't take too long. Candlesticks sound easy."
But do you ever get through an hour of learning candles? Nope, usually because the phone rings, or you feel the need to check your email, or the kids come a screaming about after school sports, or the boss calls needing a revision of the TPS report immediately, or dinner needs cooking, or something. The corporate world calls it "fire fighting," or "putting out fires." You've got your daily task list, but unforeseen "fires" erupt and need immediate attention. You're taken away from the current work load, breaking your focus and momentum. For others (myself included), not effectively managing all the items on our plate gets us into trouble. And this could be due to distraction (like the 18 hours of Law and Order televised daily, or the season premiere of American Idol), procrastination or just pure pressure to meet a deadline.
We need help!
Effective time management skills and having realistic expectations both play an important role in your trading development. A trading strategy has to be well planned, which usually mean hours spent reading journals, examining financial reports, and deciphering charts. And while the experience and knowledge you gain from doing each one of these tasks does play a role in the success of your trading plan, you'll soon realize that it gets tough spending too much time completing each one. With the recent discovery that a typical day only comprises of 24 hours, science tells you that you can only do what you have time to do, and your time is up! Your body is next to respond to your nonstop need for production by shutting down completely. Your body will only expend as much energy as you give it before needing a recharge. Unless, of course, you're a robot!
Expectation is important to keep under control because expectation can work for you or against you. Expectations set too high do a great job at creating pressure. When you're already burdened with too much to do and then pressured on top of that, anxiety kicks in and takes over your spin. You sit there biting your nails, thinking off all the things that need to get done.... yesterday, and nothing gets done! I know you really think you can back-test your latest trading strategy for the past 30 years and read the most recently released market reports from all world banks before lunch, but a lowering of your expectations is in order. Putting too much pressure on yourself to get something or many things done will only lead to more stress on your mind and body. Be realistic in your approach and expectation, and you'll see the difference in your productivity.
"Why don't you go do something productive with yourself," yelled my mother so lovingly, right before she chased me away from the television with her slipper.
How do you determine how much time to spend on formulating a trade or strategy? Honestly, there isn't one right answer. You've just got to be realistic about the time you have available to spend on the trade. Sure, reading ten trading books is beneficial to your learning, but reading them all at the same time doesn't work for most. You must realize your currently work load and prioritize those things that will be the most beneficial to your learning at that moment.
Which trading ideas or strategies do you follow? Many times you put together a great strategy that is highly successful but the prep time is mind-boggling. You have another strategy that doesn't return as well but is easier to execute. It's a balancing act where you have to decide whether dedicating large amounts of time to high ROI trades is worth it. The clock is definitely your enemy when you're just getting started in Forex. But getting more trades under your belt will be more beneficial to your experience in the long run.
There are only so many hours in the day for you to work with. That makes time a valuable commodity. Make a conscious effort when creating goals and timelines to be realistic about the amount of work needed to fulfill those goals and the amount of time you have to spend to complete those goals. Profitable trades don't only happen to perfectionist and those traders who spend every waking hour researching and testing. It is sometimes necessary to bring things into focus and down to eye level, out of the clouds. You can keep that big picture in your wallet, but remember not to place the bar too high that it can't be reached. Prioritize the tasks that will be most beneficial to your learning and keep things simple. In the end, success will only be another trade away.
And lets be realistic - most of you aren't trading full-time. You've got a "day" job and more than likely a family to manage. Your trading consists of the few hours during the week and weekend when you can get away from your hectic life and focus on all things Forex. To help yourself, many of you start your trading day (or night) by formulating a To-Do or Action Items list.
You write out all the things you expect to get done by the end of the night, next week, and next month. You have some things that need immediate attention - those you'll tackle today. There are some things that need to get done now, but they're very time consuming - you'll try to fit those in today. Finally, you list the "wants - not needs" that aren't critical at this very moment, but are still important enough to eventually need completing.
You start on the first task, usually something quick and easy - sharpen a box of new pencils, install a new trading software platform, or peruse the beginner's forums. You complete the small task with lightning quickness and you move on to the next task that also needs immediate attention. Halfway through the next task, the phone rings.
"Hey, Mom. What a surprise!" Geez, we just talked last week. "Sure, I always have time."
45 minutes later you're off the phone and back to work. "Wow," you exclaim to yourself. "Where's the day going?" So, you get back on task and back to what you were doing. An hour or so later you've satisfied your immediate worries/tasks and you're on to one of the more important ones - like familiarizing yourself with Japanese Candlesticks at your most favorite and oh-so-funny Forex web site.
"Oh, this won't take too long. Candlesticks sound easy."
But do you ever get through an hour of learning candles? Nope, usually because the phone rings, or you feel the need to check your email, or the kids come a screaming about after school sports, or the boss calls needing a revision of the TPS report immediately, or dinner needs cooking, or something. The corporate world calls it "fire fighting," or "putting out fires." You've got your daily task list, but unforeseen "fires" erupt and need immediate attention. You're taken away from the current work load, breaking your focus and momentum. For others (myself included), not effectively managing all the items on our plate gets us into trouble. And this could be due to distraction (like the 18 hours of Law and Order televised daily, or the season premiere of American Idol), procrastination or just pure pressure to meet a deadline.
We need help!
Effective time management skills and having realistic expectations both play an important role in your trading development. A trading strategy has to be well planned, which usually mean hours spent reading journals, examining financial reports, and deciphering charts. And while the experience and knowledge you gain from doing each one of these tasks does play a role in the success of your trading plan, you'll soon realize that it gets tough spending too much time completing each one. With the recent discovery that a typical day only comprises of 24 hours, science tells you that you can only do what you have time to do, and your time is up! Your body is next to respond to your nonstop need for production by shutting down completely. Your body will only expend as much energy as you give it before needing a recharge. Unless, of course, you're a robot!
Expectation is important to keep under control because expectation can work for you or against you. Expectations set too high do a great job at creating pressure. When you're already burdened with too much to do and then pressured on top of that, anxiety kicks in and takes over your spin. You sit there biting your nails, thinking off all the things that need to get done.... yesterday, and nothing gets done! I know you really think you can back-test your latest trading strategy for the past 30 years and read the most recently released market reports from all world banks before lunch, but a lowering of your expectations is in order. Putting too much pressure on yourself to get something or many things done will only lead to more stress on your mind and body. Be realistic in your approach and expectation, and you'll see the difference in your productivity.
"Why don't you go do something productive with yourself," yelled my mother so lovingly, right before she chased me away from the television with her slipper.
How do you determine how much time to spend on formulating a trade or strategy? Honestly, there isn't one right answer. You've just got to be realistic about the time you have available to spend on the trade. Sure, reading ten trading books is beneficial to your learning, but reading them all at the same time doesn't work for most. You must realize your currently work load and prioritize those things that will be the most beneficial to your learning at that moment.
Which trading ideas or strategies do you follow? Many times you put together a great strategy that is highly successful but the prep time is mind-boggling. You have another strategy that doesn't return as well but is easier to execute. It's a balancing act where you have to decide whether dedicating large amounts of time to high ROI trades is worth it. The clock is definitely your enemy when you're just getting started in Forex. But getting more trades under your belt will be more beneficial to your experience in the long run.
There are only so many hours in the day for you to work with. That makes time a valuable commodity. Make a conscious effort when creating goals and timelines to be realistic about the amount of work needed to fulfill those goals and the amount of time you have to spend to complete those goals. Profitable trades don't only happen to perfectionist and those traders who spend every waking hour researching and testing. It is sometimes necessary to bring things into focus and down to eye level, out of the clouds. You can keep that big picture in your wallet, but remember not to place the bar too high that it can't be reached. Prioritize the tasks that will be most beneficial to your learning and keep things simple. In the end, success will only be another trade away.
Forget that Perfect Trade....that is for fool to think about.
When you're risking your own money, do you feel the need to find that secret information that nobody yet knows or find the perfect trade setup?
Some traders are so obsessed with trying to find the perfect trade that they end up not trading enough to come out profitable. Trading is not the line of work you want to be if you're a perfectionist. You can plan a trade systematically only to end up losing money because an unforeseen event invalidates the trade setup you so thought was sooo perfect and your trade slaps you in the face and goes against you.
While you don't want to become a careless and impulsive trader, you don't want to be an extreme perfectionist either. Remember there's no such thing as a guaranteed profit.
Instead of being perfect, try being average. For all the "A" students out there, I know this almost sounds blasphemous since I'm basically suggesting you strive for a "C" grade. But give it a try.
Rather than look for the "perfect" setup, just find a profitable setup. Yes, you might make less profit per trade, but you'll feel better. Compare how it feels to strive for perfect standards versus average standards. You may find that you prefer average standards since you're more relaxed. Since you'll be putting on more trades, your profits will improve.
Trading is all about probabilities. You must make many trades to get the law of averages to work in your favor. As long as the setups are solid, and you're using sound money management and risk control, you'll make enough trades to come out ahead. You'll be able to get the losing trades "off your back" and focus on winning trades.
If you're an uptight perfectionist, you'll always be on edge and will hardly be able to execute any trades. This will be your downfall because you won't be able to pull the trigger on traders that were "less than perfect" but were profitable.
Dare to be average and see what happens. A student who makes straight "A's" may be smarter but the "C" student sitting behind him may be richer. Esp if born with a golden spoon in his mouth. Even if he is a fool....it doesn't matter much anyway with you have bags full of money waiting of you in the bank.
Some traders are so obsessed with trying to find the perfect trade that they end up not trading enough to come out profitable. Trading is not the line of work you want to be if you're a perfectionist. You can plan a trade systematically only to end up losing money because an unforeseen event invalidates the trade setup you so thought was sooo perfect and your trade slaps you in the face and goes against you.
While you don't want to become a careless and impulsive trader, you don't want to be an extreme perfectionist either. Remember there's no such thing as a guaranteed profit.
Instead of being perfect, try being average. For all the "A" students out there, I know this almost sounds blasphemous since I'm basically suggesting you strive for a "C" grade. But give it a try.
Rather than look for the "perfect" setup, just find a profitable setup. Yes, you might make less profit per trade, but you'll feel better. Compare how it feels to strive for perfect standards versus average standards. You may find that you prefer average standards since you're more relaxed. Since you'll be putting on more trades, your profits will improve.
Trading is all about probabilities. You must make many trades to get the law of averages to work in your favor. As long as the setups are solid, and you're using sound money management and risk control, you'll make enough trades to come out ahead. You'll be able to get the losing trades "off your back" and focus on winning trades.
If you're an uptight perfectionist, you'll always be on edge and will hardly be able to execute any trades. This will be your downfall because you won't be able to pull the trigger on traders that were "less than perfect" but were profitable.
Dare to be average and see what happens. A student who makes straight "A's" may be smarter but the "C" student sitting behind him may be richer. Esp if born with a golden spoon in his mouth. Even if he is a fool....it doesn't matter much anyway with you have bags full of money waiting of you in the bank.
You don't have to win every battle, just the war.
It's easy to get caught up in daily defeats. Your trading strategy isn't working. You're losing money hand over fist even though you know your system works and you're following all the rules.
If you aren't careful, you could get discouraged and feel like giving up. When you aren't making the profits you desire, you could end up feeling like a failure, thinking you'll never make it as a trader.
When you are discouraged by everyday setbacks, it's crucial to keep your eye on the big picture. You could be losing a battle here and there, but you may end up winning the war.
Many traders make the mistake of letting their feelings of worth be determined by everyday trading results.
You think, "If I make profits today, and every day this week, I'm doing well. But if I end up losing most days, then I'm doing horrible!."
This kind of thinking is based on how people view compensation for a conventional 9-to-5 job. You put in your 40 hours, do a good job, and you get paid handsomely. You feel good for working diligently and productively for the week.
But when you trade, you may not always receive sufficient compensation for your efforts. When you don't reach the profit goals you set, you can feel as if you didn't get paid enough for your efforts.
It's going to be tough, but as a trader, you must avoid thinking in these conventional terms. An extremely productive week may produce ZERO profits. When you are trying to achieve a certain level of income in a given timeframe, you are setting "performance goals" that you may not be able to achieve.
A better kind of goal to set is a "learning goal."
You may not be able to achieve a particular performance goal during a given week; that is, you may not always be able to achieve a particular dollar amount, but you can achieve a particular learning goal.
Every day you trade, you gain valuable experience regarding how you approach the markets. You see various setups and learn how they can or can't lead to a profitable trade. Don't undervalue these learning experiences.
Every day, you are achieving learning goals. Your daily efforts may not directly lead to profits, but indirectly, they do add to your wealth of experiences. You may only win a battle here and there, but when you add up the battles you do win, over the long haul, you end up mastering the markets, and winning the war in the end.
If you merely focus on how much money you make as a trader, and use a conventional payment schedule, you'll work your butt off but fail to get the conventionally defined "paycheck" you expect, and feel ripped off. But if you define your paycheck in unconventional terms as the amount of experience you gained, you'll feel rewarded for making a series of trades, profitable or not, and feel you've accomplished something.
And regardless of how much money you actually make, you will have indeed accomplished something: You will have further honed your trading skills.
In the big scheme of things, winning these minor battles will help you win the war. You'll master the markets and become a winning, profitable seasoned trader.
If you aren't careful, you could get discouraged and feel like giving up. When you aren't making the profits you desire, you could end up feeling like a failure, thinking you'll never make it as a trader.
When you are discouraged by everyday setbacks, it's crucial to keep your eye on the big picture. You could be losing a battle here and there, but you may end up winning the war.
Many traders make the mistake of letting their feelings of worth be determined by everyday trading results.
You think, "If I make profits today, and every day this week, I'm doing well. But if I end up losing most days, then I'm doing horrible!."
This kind of thinking is based on how people view compensation for a conventional 9-to-5 job. You put in your 40 hours, do a good job, and you get paid handsomely. You feel good for working diligently and productively for the week.
But when you trade, you may not always receive sufficient compensation for your efforts. When you don't reach the profit goals you set, you can feel as if you didn't get paid enough for your efforts.
It's going to be tough, but as a trader, you must avoid thinking in these conventional terms. An extremely productive week may produce ZERO profits. When you are trying to achieve a certain level of income in a given timeframe, you are setting "performance goals" that you may not be able to achieve.
A better kind of goal to set is a "learning goal."
You may not be able to achieve a particular performance goal during a given week; that is, you may not always be able to achieve a particular dollar amount, but you can achieve a particular learning goal.
Every day you trade, you gain valuable experience regarding how you approach the markets. You see various setups and learn how they can or can't lead to a profitable trade. Don't undervalue these learning experiences.
Every day, you are achieving learning goals. Your daily efforts may not directly lead to profits, but indirectly, they do add to your wealth of experiences. You may only win a battle here and there, but when you add up the battles you do win, over the long haul, you end up mastering the markets, and winning the war in the end.
If you merely focus on how much money you make as a trader, and use a conventional payment schedule, you'll work your butt off but fail to get the conventionally defined "paycheck" you expect, and feel ripped off. But if you define your paycheck in unconventional terms as the amount of experience you gained, you'll feel rewarded for making a series of trades, profitable or not, and feel you've accomplished something.
And regardless of how much money you actually make, you will have indeed accomplished something: You will have further honed your trading skills.
In the big scheme of things, winning these minor battles will help you win the war. You'll master the markets and become a winning, profitable seasoned trader.
You can't handle the truth!
For novice Forex traders there always exists the desire to be right. What better to help justify their progress as traders than their decisions being correct, resulting in a successful trade? Yet this yearning to be right can get them into trouble.
To keep from having to deal with the consequences of bad trading decisions (or indecision), some traders will put off placing the trade all together. Others will go as far as holding a losing position, hoping the market will turn in their favor to prove their judgments right.
In these events, the need to be right is smothering any chances of success and doing nothing to help the trader grow. When there's hesitation at that critical moment of a trade, fear takes over, and the trader can't make a move. And when a trader is scared, he stays clear of making trades at all. You have to trade and trade and trade to learn the markets and sharpen your skills. Accepting criticism is an important trait that may help you get over those fears of trading by providing insight about your trading shortcomings
Why do we have such a hard time accepting criticism? For one, criticism has negative connotations, usually associated with poor performance, doing something wrong, or not being sufficient enough in the task at hand. Most people, traders included, don't take well with negative feedback or comments. Some of the psychological aspects of the way we now deal with criticism are deeply rooted in our past, from experiences with our parents and school teachers. They were in the position to correct us and tell us when we were wrong, and some were more extreme than we liked with their criticism. They definitely had a psychological impact on us was there, with many of us now transferring those experiences to our trading.
Here is where we can make a change. Don't let criticism take an emotional toll on you. Don't take it as a personal attack, but as an opportunity to possibly make some changes. View criticism only as information you can use to better your skills. Removing the emotional ties to your performance is vital to using criticism constructively.
We also have a tough time accepting criticism because, deep down, we all want to be perfect. This position has been ingrained in us since our early days in school. You are taught to be. And if you're always right, you'll undoubtedly be successful. You usually didn't get a second chance at correctly answering a question or fixing your mistakes on a test you bombed. You weren't allowed the option of trying again and sharpening your skills.
Many traders take this position with their Forex trading. But this is where trading is different. You have the power to (demo) trade over and over again. Start with a small trade, learn from your errors, and try again. It's that simple. This process will give you experience with the Forex market and allow you to sharpen your trading skills, all while managing your risk effectively.
Don't be afraid of criticism... look for it! Keep an open mind and don't take everything so personal. Learn to view criticism as only information, and take it as free advice and training. It's not enough just making a trade and living with the outcome. To be a successful trader, you want to understand why you lost or won, and sometimes the best way of determining this is from someone else (through their experiences, views and comments). The better you get at staring criticism in the face AND learning from it, the more you help to develop your own trading skills. TRADE ON!
To keep from having to deal with the consequences of bad trading decisions (or indecision), some traders will put off placing the trade all together. Others will go as far as holding a losing position, hoping the market will turn in their favor to prove their judgments right.
In these events, the need to be right is smothering any chances of success and doing nothing to help the trader grow. When there's hesitation at that critical moment of a trade, fear takes over, and the trader can't make a move. And when a trader is scared, he stays clear of making trades at all. You have to trade and trade and trade to learn the markets and sharpen your skills. Accepting criticism is an important trait that may help you get over those fears of trading by providing insight about your trading shortcomings
Why do we have such a hard time accepting criticism? For one, criticism has negative connotations, usually associated with poor performance, doing something wrong, or not being sufficient enough in the task at hand. Most people, traders included, don't take well with negative feedback or comments. Some of the psychological aspects of the way we now deal with criticism are deeply rooted in our past, from experiences with our parents and school teachers. They were in the position to correct us and tell us when we were wrong, and some were more extreme than we liked with their criticism. They definitely had a psychological impact on us was there, with many of us now transferring those experiences to our trading.
Here is where we can make a change. Don't let criticism take an emotional toll on you. Don't take it as a personal attack, but as an opportunity to possibly make some changes. View criticism only as information you can use to better your skills. Removing the emotional ties to your performance is vital to using criticism constructively.
We also have a tough time accepting criticism because, deep down, we all want to be perfect. This position has been ingrained in us since our early days in school. You are taught to be. And if you're always right, you'll undoubtedly be successful. You usually didn't get a second chance at correctly answering a question or fixing your mistakes on a test you bombed. You weren't allowed the option of trying again and sharpening your skills.
Many traders take this position with their Forex trading. But this is where trading is different. You have the power to (demo) trade over and over again. Start with a small trade, learn from your errors, and try again. It's that simple. This process will give you experience with the Forex market and allow you to sharpen your trading skills, all while managing your risk effectively.
Don't be afraid of criticism... look for it! Keep an open mind and don't take everything so personal. Learn to view criticism as only information, and take it as free advice and training. It's not enough just making a trade and living with the outcome. To be a successful trader, you want to understand why you lost or won, and sometimes the best way of determining this is from someone else (through their experiences, views and comments). The better you get at staring criticism in the face AND learning from it, the more you help to develop your own trading skills. TRADE ON!
Common Mental Mistakes New Traders Make...or screwed-up traders make.
Before you open a real live account it is important that you familiarize yourself with the most common mental mistakes new traders make. You'll probably still make them anyway, but at least you'll actually be aware you're making them which hopefully will make easier for you to correct them.
Overconfidence
Trading for a living can be a dream come true, but it can also be a nightmare. If believe trading is easy, you're done before you even started. Trading is not easy. Trading is hard. Real hard. It's hard to consistently remain mentally focused and stay disciplined. Know that going in and you increase your chances of success big time.
Lack of Emotional Control
Your mind always assumes the worse. It does that to protect you from harm. Because there is a potential that you'll lose money and all the mental anguish that brings, the mind tells you not to do a trade.
You have to learn how to override this self-protecting mechanism if you want to be a trader. Talk to your mind. Tell it you are fine with doing the trade. Remind it that have a stop placed and you will not be harmed if it doesn't work out. Convince your mind that in order to make money trading you need to take risks and the risks that you are taking have been carefully planned and measured.
Fooling yourself
Once you are in a trade do not try and justify its merit. The market does that for you. The final outcome of your trade should be a stop loss triggered, breakeven, or profit taken Once the trade is completed, don't dwell on it. Every trade is different and what worked this time may fail next time. Review it briefly and go on to next trade. Focus on the overall trading and don't spend too much time on each individual trade. This will make you an excellent trader. Accept the outcome of your trades. But don't accept not sticking to your game plan.
Jumping the gun
Traders are constantly jumping into the right position at the wrong time because they're afraid they are going to miss it, especially at market turning points. Don't be afraid to miss the first 25% of the move; and get out after 75%. Catching 50% of a confirmed move will produce awesome results. You will also not have to deal with getting stopped out and then watch the price reverse and go in your direction.
Not Thinking in Probabilities
Accept your trade losses as being normal. Don't beat yourself up over them or try to unnecessarily tinker with preset stop loss and take profit. Don't expect to be right 100% of the time.
Overconfidence
Trading for a living can be a dream come true, but it can also be a nightmare. If believe trading is easy, you're done before you even started. Trading is not easy. Trading is hard. Real hard. It's hard to consistently remain mentally focused and stay disciplined. Know that going in and you increase your chances of success big time.
Lack of Emotional Control
Your mind always assumes the worse. It does that to protect you from harm. Because there is a potential that you'll lose money and all the mental anguish that brings, the mind tells you not to do a trade.
You have to learn how to override this self-protecting mechanism if you want to be a trader. Talk to your mind. Tell it you are fine with doing the trade. Remind it that have a stop placed and you will not be harmed if it doesn't work out. Convince your mind that in order to make money trading you need to take risks and the risks that you are taking have been carefully planned and measured.
Fooling yourself
Once you are in a trade do not try and justify its merit. The market does that for you. The final outcome of your trade should be a stop loss triggered, breakeven, or profit taken Once the trade is completed, don't dwell on it. Every trade is different and what worked this time may fail next time. Review it briefly and go on to next trade. Focus on the overall trading and don't spend too much time on each individual trade. This will make you an excellent trader. Accept the outcome of your trades. But don't accept not sticking to your game plan.
Jumping the gun
Traders are constantly jumping into the right position at the wrong time because they're afraid they are going to miss it, especially at market turning points. Don't be afraid to miss the first 25% of the move; and get out after 75%. Catching 50% of a confirmed move will produce awesome results. You will also not have to deal with getting stopped out and then watch the price reverse and go in your direction.
Not Thinking in Probabilities
Accept your trade losses as being normal. Don't beat yourself up over them or try to unnecessarily tinker with preset stop loss and take profit. Don't expect to be right 100% of the time.
Acting on Impulse - are you guilt of it or have you ever done that before?
Have you ever ditched your trading plan? If not, you should read this anyway because you're most likely lying. If you have, why do you think you're so "unfaithful"?
Do you blame it on your personality? Temporary insanity? Or an excuse that its' just part of trading?
You might actually be right. There are many factors that could contribute to your lack of discipline.
Depending on your personality, background, training, and experience with the markets, you may have trouble controlling your tendency to act on impulse.
For some, impulsivity is in their blood. They have trouble concentrating. They are easily bored. They look for quick thrills for relief. For others, impulsivity is related emotional weakness. Some people have so much trouble controlling their emotions that they react impulsively out of frustration.
Temporary setbacks are inescapable when trading. When the extremely emotional trader encounters one of these setbacks, he or she becomes overly distressed, and may close a position early, or in a fit of frantic, make a major trading mistake that can only be fixed by closing the position.
No trader is perfect though. Any trader can act impulsive at times. Research has shown, for example, that when people are tired, they have difficulty concentrating. As much as your conscious mind cares about sticking to your trading plan, your unconscious mind thinks, "Who cares? I just want to get this over so I can chill out." Your psychological resources have been exhausted. When you push yourself to the limits, you'll have trouble concentrating on your trading plan and obeying it.
Other traders may be impulsive because they lack experience. You can't expect to stick with a trading plan when you don't what the hell you're doing. If you're new to forex, you'll lack confidence and feel uneasy You'll start hesitating to pull the trigger. You won't want to risk your money because you don't have that strong belief that your plan will produce a profit like seasoned traders display.
Trading plans must be clearly defined and easy to follow. When you have an incomplete trading plan where important parts are left unclear, you'll have trouble following it. A trading plan should consist of clearly defined entrance and exit strategies. Signals that indicate how the trade is going are also important. Don't underestimate the importance of clearly mapping out a trading plan. You can't stick with a trading plan that you can't follow.
The winning trader is the disciplined trader. Disciplined traders stick with trading plans. They don't act on impulse. It's essential that you identify the reasons you find yourself trading on impulse. It could be your personality or it may just be situational, but whatever it is, you must gain awareness of these factors and resolve them. Once you control the urge to act on impulse, you'll trade more profitably.
Do you blame it on your personality? Temporary insanity? Or an excuse that its' just part of trading?
You might actually be right. There are many factors that could contribute to your lack of discipline.
Depending on your personality, background, training, and experience with the markets, you may have trouble controlling your tendency to act on impulse.
For some, impulsivity is in their blood. They have trouble concentrating. They are easily bored. They look for quick thrills for relief. For others, impulsivity is related emotional weakness. Some people have so much trouble controlling their emotions that they react impulsively out of frustration.
Temporary setbacks are inescapable when trading. When the extremely emotional trader encounters one of these setbacks, he or she becomes overly distressed, and may close a position early, or in a fit of frantic, make a major trading mistake that can only be fixed by closing the position.
No trader is perfect though. Any trader can act impulsive at times. Research has shown, for example, that when people are tired, they have difficulty concentrating. As much as your conscious mind cares about sticking to your trading plan, your unconscious mind thinks, "Who cares? I just want to get this over so I can chill out." Your psychological resources have been exhausted. When you push yourself to the limits, you'll have trouble concentrating on your trading plan and obeying it.
Other traders may be impulsive because they lack experience. You can't expect to stick with a trading plan when you don't what the hell you're doing. If you're new to forex, you'll lack confidence and feel uneasy You'll start hesitating to pull the trigger. You won't want to risk your money because you don't have that strong belief that your plan will produce a profit like seasoned traders display.
Trading plans must be clearly defined and easy to follow. When you have an incomplete trading plan where important parts are left unclear, you'll have trouble following it. A trading plan should consist of clearly defined entrance and exit strategies. Signals that indicate how the trade is going are also important. Don't underestimate the importance of clearly mapping out a trading plan. You can't stick with a trading plan that you can't follow.
The winning trader is the disciplined trader. Disciplined traders stick with trading plans. They don't act on impulse. It's essential that you identify the reasons you find yourself trading on impulse. It could be your personality or it may just be situational, but whatever it is, you must gain awareness of these factors and resolve them. Once you control the urge to act on impulse, you'll trade more profitably.
Don't Set Yourself Up to Fail - be it stock or forex!
Have you set yourself up to fail? Here are the bare minimum you need in order to avoid failure as a trader:
Money
Trade only with money you can afford to lose. Many new traders trade with their milk money and wonder why they feel scared when they enter and watch their trade. If you want to trade calmly and rationally, you must trade with only money you can afford to lose. If you have nothing to fear by losing, you'll feel more relaxed. You will trade better and make less errors.
Plan
Don't trade by the seat of your pants. Map out your trades in detail. Know where to enter or where to exit. When you execute the trade, stick with your trading plan. Know what to do and when. Amateur traders do the opposite. They have no clue where to enter and exit. If they do have a plan, it's probably unclear and difficult to follow. They don't know what to do so they eventually panic. Creating a plan and following it will help you avoid costly trading errors.
Sleep
Don't miss sleep. When you're tired, it's hard to concentrate. Your emotions take control of you and you feel deep frustration, even when you face a minor setback. Concentration requires energy, and when you're tired you don't have enough energy to trade and end up making errors and losing money. Get sufficient sleep so you can stay alert and are ready for action.
Trading is hard enough. You don't need to sabotage yourself. By trading with money you can afford to lose, sticking to your trading plan, and making sure you get enough sleep, you give yourself the best chance to grab some pips from the market on a consistent basis.
Money
Trade only with money you can afford to lose. Many new traders trade with their milk money and wonder why they feel scared when they enter and watch their trade. If you want to trade calmly and rationally, you must trade with only money you can afford to lose. If you have nothing to fear by losing, you'll feel more relaxed. You will trade better and make less errors.
Plan
Don't trade by the seat of your pants. Map out your trades in detail. Know where to enter or where to exit. When you execute the trade, stick with your trading plan. Know what to do and when. Amateur traders do the opposite. They have no clue where to enter and exit. If they do have a plan, it's probably unclear and difficult to follow. They don't know what to do so they eventually panic. Creating a plan and following it will help you avoid costly trading errors.
Sleep
Don't miss sleep. When you're tired, it's hard to concentrate. Your emotions take control of you and you feel deep frustration, even when you face a minor setback. Concentration requires energy, and when you're tired you don't have enough energy to trade and end up making errors and losing money. Get sufficient sleep so you can stay alert and are ready for action.
Trading is hard enough. You don't need to sabotage yourself. By trading with money you can afford to lose, sticking to your trading plan, and making sure you get enough sleep, you give yourself the best chance to grab some pips from the market on a consistent basis.
Thursday, June 03, 2010
Maximizing Your Trading Profits!
You no doubt know about the Forex maxim that states, ‘cut your losses, but let your profits run’. Sounds great, but how exactly do you maximize your profits? If you cannot develop a trading strategy to achieve this objective, then your chances of making a good Forex living are greatly diminished.
Why is it so hard to hold on to winning trades? This is because the fears that can frequently arise at the sight of a large profit can entice you to close your positions prematurely. You could well do this action because you become scared that a sudden reversal will generate a significant loss.
You will also find that watching a profit vanish before your very eyes can invoke many mind-numbing emotions that will cripple the consistency of your trading decisions.
If you were unfortunate to suffer a series of consequent losses, then you could experience a severe drop in confidence. You may then develop a tendency to snatch at smaller profits before they can achieve their real earning potential.
Sadly, you have probably entered good trading opportunities, but either took premature profits or you were stopped out. You could well have then watched in frustration as price proceeded in your chosen direction amassing significant profits, but without you participating any further.
You must understand that in order to become a successful trader that you will have to know how to select the correct strategy and to be able to manage risk once you have opened your positions. You must realize that there are no magic rules or easily obtained secrets with Forex trading. However, a well-designed trading strategy will generate profits if applied properly and consistently.
You may be surprised to realize that many traders actually consider the maxim ‘let profits run’ to be an incorrect statement. If you are a trend follower and are hoping to catch a large price movement, then it is crucial that you let your profits run.
However, many trading strategies exit positions for other reasons such as a chosen time period, e.g. a few days after entry. Obviously, letting profits run is not an inherent part of this type of trading. You must realize as well that many traders believe that setting profit targets is one of the few ways to guarantee that you will achieve profits. This is because these actions can help to control your emotions.
In addition, you will find that if you try to attain a trading system capable of capturing large trends, then this action will generate many human emotions such as fear and greed that can have devastating effects on the standard of your trading decisions.
As you will have observed from the above, the concept of ‘letting profits run’ sounds good on paper, but is controversial and prone to human emotion. Is there a solution? Yes, there is, but you will need to enhance, tweak and test your trading strategy until it begins to achieve your objectives. 100% agreed with this statement. Easy to say....but hard to see it thru esp with money is concern.
Why is it so hard to hold on to winning trades? This is because the fears that can frequently arise at the sight of a large profit can entice you to close your positions prematurely. You could well do this action because you become scared that a sudden reversal will generate a significant loss.
You will also find that watching a profit vanish before your very eyes can invoke many mind-numbing emotions that will cripple the consistency of your trading decisions.
If you were unfortunate to suffer a series of consequent losses, then you could experience a severe drop in confidence. You may then develop a tendency to snatch at smaller profits before they can achieve their real earning potential.
Sadly, you have probably entered good trading opportunities, but either took premature profits or you were stopped out. You could well have then watched in frustration as price proceeded in your chosen direction amassing significant profits, but without you participating any further.
You must understand that in order to become a successful trader that you will have to know how to select the correct strategy and to be able to manage risk once you have opened your positions. You must realize that there are no magic rules or easily obtained secrets with Forex trading. However, a well-designed trading strategy will generate profits if applied properly and consistently.
You may be surprised to realize that many traders actually consider the maxim ‘let profits run’ to be an incorrect statement. If you are a trend follower and are hoping to catch a large price movement, then it is crucial that you let your profits run.
However, many trading strategies exit positions for other reasons such as a chosen time period, e.g. a few days after entry. Obviously, letting profits run is not an inherent part of this type of trading. You must realize as well that many traders believe that setting profit targets is one of the few ways to guarantee that you will achieve profits. This is because these actions can help to control your emotions.
In addition, you will find that if you try to attain a trading system capable of capturing large trends, then this action will generate many human emotions such as fear and greed that can have devastating effects on the standard of your trading decisions.
As you will have observed from the above, the concept of ‘letting profits run’ sounds good on paper, but is controversial and prone to human emotion. Is there a solution? Yes, there is, but you will need to enhance, tweak and test your trading strategy until it begins to achieve your objectives. 100% agreed with this statement. Easy to say....but hard to see it thru esp with money is concern.
How to Recover from a series of Forex Losses
You are probably aware that one of the most important concepts that you have to understand in order to achieve Forex success is that you must maximize your profits on your winning trades whilst minimizing your losses on your losers. If you are a novice or have been trading for a short time, then you may have already experienced a run of poor performances.
You must always remember that even successful forex traders suffer more losing trades than winning ones over any given time-frame. However, they always ensure that the win:loss and risk:reward ratios of their trading strategies guarantee that they will achieve profits over the long haul.
So, what can you do if your wins have become fewer and further between whilst your losses are stacking up? Here are a few ideas that you might try.
You must never overtrade your account by risking more than your budget can comfortably sustain. In addition, if you are trying to trade more than one currency pair, then you should cut back. You can always trade more once you are proficient at trading one currency pair.
You should consider maintaining a trading diary. You can then research at a later date into its contents to identify any common threads to your trading. You may be able to increase your number of wins whilst reducing your losses by performing this action.
Perhaps you have become jaded by trading forex for too long. If so, then take a break and gather your thoughts and allow your sub-conscious to process all your trading experiences to date. You might get a flash of inspiration or important insights by doing so.
You should also consider reverting back to demo-testing and thoroughly retesting your trading strategies. You need to carefully calculate their win:loss ratios and expectancy values in order to detect any deterioration in their performances.
Whatever you do, do not try and regain all your losses by undertaking a solve-it-once-and-for-all type of trade. This is trading suicide and you will only endure further larger financial losses by adopting this approach. If you feel that you have a need compelling you to trade, then you should do so by risking only small amounts of your budget.
You can achieve this objective by opening a micro Forex account which will permit you to risk only 10 cents a pip. Always keep in mind that successful traders are first great survivors and then great earners.
You must always exhibit good levels of discipline and patience. You will find that this is best done by trading a well-developed and thoroughly tested trading plan. You need to follow a set of instructions that clearly identify good entry and exit points for all your new trading opportunities. In addition, you must gain a good understanding of money management concepts so that you can provide the optimum protection for your account balance.
You should also consider seeking new sources of education that can enhance your Forex knowledge. You must develop faith and trust in your trading strategies in order to achieve Forex success.
You must always remember that even successful forex traders suffer more losing trades than winning ones over any given time-frame. However, they always ensure that the win:loss and risk:reward ratios of their trading strategies guarantee that they will achieve profits over the long haul.
So, what can you do if your wins have become fewer and further between whilst your losses are stacking up? Here are a few ideas that you might try.
You must never overtrade your account by risking more than your budget can comfortably sustain. In addition, if you are trying to trade more than one currency pair, then you should cut back. You can always trade more once you are proficient at trading one currency pair.
You should consider maintaining a trading diary. You can then research at a later date into its contents to identify any common threads to your trading. You may be able to increase your number of wins whilst reducing your losses by performing this action.
Perhaps you have become jaded by trading forex for too long. If so, then take a break and gather your thoughts and allow your sub-conscious to process all your trading experiences to date. You might get a flash of inspiration or important insights by doing so.
You should also consider reverting back to demo-testing and thoroughly retesting your trading strategies. You need to carefully calculate their win:loss ratios and expectancy values in order to detect any deterioration in their performances.
Whatever you do, do not try and regain all your losses by undertaking a solve-it-once-and-for-all type of trade. This is trading suicide and you will only endure further larger financial losses by adopting this approach. If you feel that you have a need compelling you to trade, then you should do so by risking only small amounts of your budget.
You can achieve this objective by opening a micro Forex account which will permit you to risk only 10 cents a pip. Always keep in mind that successful traders are first great survivors and then great earners.
You must always exhibit good levels of discipline and patience. You will find that this is best done by trading a well-developed and thoroughly tested trading plan. You need to follow a set of instructions that clearly identify good entry and exit points for all your new trading opportunities. In addition, you must gain a good understanding of money management concepts so that you can provide the optimum protection for your account balance.
You should also consider seeking new sources of education that can enhance your Forex knowledge. You must develop faith and trust in your trading strategies in order to achieve Forex success.
Are You a Gambler or a Trader?
You must strive hard not to consider Forex trading as another form of gambling. All the aspects are there for you to treat it in exactly that way. However, if you persist with such an approach, then the end results will not be pleasant.
Many novices just become hooked on trading because they like the adrenaline rush when they are right. They also feel that they need to feel part of such a large game which involves a massive daily turnover of trillions of dollars. However, if you have such a mindset, then your Forex psychology is totally wrong especially if you are seeking financial freedom from Forex.
Perhaps you enjoy trading on the edge and basing your trading decisions on just your gut instincts. However, without supporting your decisions with solid information, you are basically exposing yourself and your Forex account balance to unacceptable levels of risk.
So, how can you differentiate between when you are gambling and when you are opening a sensible Forex position? One of the main differences is information. For instance, if you possess little and poor quality information, then more likely your trades will just be gambles.
If you are a trader who studies just very short-term charts to evaluate your key Forex parameters such as support and resistance points, then you are still gambling. Similarly, if you trade fundamental news events in a mindless way without grasping a full comprehensive of market expectations, then again your approach is very amateurish and doomed to failure.
In contrast, if you trade using a well-developed and thoroughly tested strategy, then you can consider that you are making a serious effort because your chances of success are greatly increased. You must understand quickly that there are no magic formulae or mystic chants that you can utilize to ensure instance Forex success.
Instead, you must approach your Forex trading with a professional mindset knowing that to achieve profits will require significant amounts of hard work. Forex is such a complex subject that even such an approach will not guarantee you success, but at least your losses will be under much better control.
If you undertook a comparison between performing these two types of trading, then you will be quite shocked at the end results. When you trade just on your whims and impulses, then you will subject yourself to an emotional roller-coaster as you witness your account balance fluctuating rapidly. Eventually, you will almost certainly lose all your equity using such an approach.
In contrast, if you were to trade with discipline using concepts such as risk and money management, then your experiences should be completely different. You will find that you will make fewer, but more careful trades. As such, although you may not realize constant profits, you will notice that you are losing smaller amounts. These are good signs because preserving your bank balance must be your number one priority. After all, you will no longer be able to play the Forex game without money.
Many novices just become hooked on trading because they like the adrenaline rush when they are right. They also feel that they need to feel part of such a large game which involves a massive daily turnover of trillions of dollars. However, if you have such a mindset, then your Forex psychology is totally wrong especially if you are seeking financial freedom from Forex.
Perhaps you enjoy trading on the edge and basing your trading decisions on just your gut instincts. However, without supporting your decisions with solid information, you are basically exposing yourself and your Forex account balance to unacceptable levels of risk.
So, how can you differentiate between when you are gambling and when you are opening a sensible Forex position? One of the main differences is information. For instance, if you possess little and poor quality information, then more likely your trades will just be gambles.
If you are a trader who studies just very short-term charts to evaluate your key Forex parameters such as support and resistance points, then you are still gambling. Similarly, if you trade fundamental news events in a mindless way without grasping a full comprehensive of market expectations, then again your approach is very amateurish and doomed to failure.
In contrast, if you trade using a well-developed and thoroughly tested strategy, then you can consider that you are making a serious effort because your chances of success are greatly increased. You must understand quickly that there are no magic formulae or mystic chants that you can utilize to ensure instance Forex success.
Instead, you must approach your Forex trading with a professional mindset knowing that to achieve profits will require significant amounts of hard work. Forex is such a complex subject that even such an approach will not guarantee you success, but at least your losses will be under much better control.
If you undertook a comparison between performing these two types of trading, then you will be quite shocked at the end results. When you trade just on your whims and impulses, then you will subject yourself to an emotional roller-coaster as you witness your account balance fluctuating rapidly. Eventually, you will almost certainly lose all your equity using such an approach.
In contrast, if you were to trade with discipline using concepts such as risk and money management, then your experiences should be completely different. You will find that you will make fewer, but more careful trades. As such, although you may not realize constant profits, you will notice that you are losing smaller amounts. These are good signs because preserving your bank balance must be your number one priority. After all, you will no longer be able to play the Forex game without money.
Identifying Quality Forex Trading Opportunities
If you are trying to detect a new trade that possesses a good profit potential, then you have to understand that your selection process must satisfy certain criteria. For instance, your new potential trade must have both a high profit potential and low degree of risk.
You are well-advised to evaluate these requirements before you even consider opening any new positions. You will discover that the more effort and attention that you apply to assessing the potential quality of each of your new trades, the better chances you will have of attaining both success and profits.
As such, you need to acquire a good understanding of your selection criteria. You must as a top priority seek new trading opportunities with low levels of risk. Your own psychology will partly determine the amount of risk that you are prepared to take. In fact, there are two main factors that you will need to consider. They are the size of your account balance and your ability to deal with uncertainty. You should utilize a good money management strategy to help you determine the best solution for controlling risk.
Always remember that you must never risk money that you can ill-afford to lose. You must concentrate your efforts on assessing this risk factor in the most professional manner as possible before even considering opening new positions.
As you become more experienced at Forex trading, you will find that the best trading opportunities will always provide you with the optimum reward to risk ratio. However, how do you locate them? You can achieve this objective by painstakingly researching into the performance of your trading strategy using extensive demo testing.
If you do not possess a trading strategy, then you are well-advised to design or acquire one. At the end of each sequence of testing you must evaluate the performance of your strategy by determining its reward:risk ratio and expectancy value.
You will then have a professional means of determining how well your strategy is at identifying the best trading opportunities. After you have successfully achieved this goal, you will be in a much better position of capturing trades that exhibit both high profitability and affordable levels of risk.
Another major factor that will contribute to your risk levels is the amount of time that you can afford to monitor your Forex trading. For instance, if you do not have a great deal of time at your disposal, then this will certainly affect the quality of your Forex trading decisions. Under such circumstances, you should definitely not consider intraday trading in any shape or form because you will only lose money.
You should also realize that if you risk more than you can afford to lose, then you will subject yourself to undesirable amounts of tension that can directly influence the quality of your trading decisions. You must always remember that if you do not fully comprehend all the features of a new trade, then you are well-advised to reject it and seek other opportunities.
You are well-advised to evaluate these requirements before you even consider opening any new positions. You will discover that the more effort and attention that you apply to assessing the potential quality of each of your new trades, the better chances you will have of attaining both success and profits.
As such, you need to acquire a good understanding of your selection criteria. You must as a top priority seek new trading opportunities with low levels of risk. Your own psychology will partly determine the amount of risk that you are prepared to take. In fact, there are two main factors that you will need to consider. They are the size of your account balance and your ability to deal with uncertainty. You should utilize a good money management strategy to help you determine the best solution for controlling risk.
Always remember that you must never risk money that you can ill-afford to lose. You must concentrate your efforts on assessing this risk factor in the most professional manner as possible before even considering opening new positions.
As you become more experienced at Forex trading, you will find that the best trading opportunities will always provide you with the optimum reward to risk ratio. However, how do you locate them? You can achieve this objective by painstakingly researching into the performance of your trading strategy using extensive demo testing.
If you do not possess a trading strategy, then you are well-advised to design or acquire one. At the end of each sequence of testing you must evaluate the performance of your strategy by determining its reward:risk ratio and expectancy value.
You will then have a professional means of determining how well your strategy is at identifying the best trading opportunities. After you have successfully achieved this goal, you will be in a much better position of capturing trades that exhibit both high profitability and affordable levels of risk.
Another major factor that will contribute to your risk levels is the amount of time that you can afford to monitor your Forex trading. For instance, if you do not have a great deal of time at your disposal, then this will certainly affect the quality of your Forex trading decisions. Under such circumstances, you should definitely not consider intraday trading in any shape or form because you will only lose money.
You should also realize that if you risk more than you can afford to lose, then you will subject yourself to undesirable amounts of tension that can directly influence the quality of your trading decisions. You must always remember that if you do not fully comprehend all the features of a new trade, then you are well-advised to reject it and seek other opportunities.
Locating Reliable Sources of Forex Information
If you have ever tried to research or review a Forex product, then you probably spent significant time scrolling through the internet desperately searching for reliable sources. In addition, you probably waded through the immense number of sites advertising an ocean of products such as Forex software, Forex trading strategies, robots and courses, etc.
Did you spend much time wondering which of the many descriptions and reviews were genuine? How could you differentiate between what is true and what is scam? You must have certainly noticed that a product was ranked in the top ten, for example, by a site whilst ranked outside the top hundred by another.
Unfortunately, many of these sites are owned by affiliates who select their top products based on their levels of commission. As such, their product descriptions are practically meaningless and are even bordering on scam in some cases. Just to be fair, this is not the case across the board and there are many sites that do provide reliable and accurate information and reviews of the various Forex service providers.
If you are trying to use the internet to locate a good Forex product, then you will have difficulty if you depend on this method. Your main problem is that you just cannot take at face value any product, review, description or ranking that is written on these websites.
Basically, you need a secondary confirmation about the validity of these information sources. You can attempt to achieve this by visiting Forex forums that are dedicated to discussing your products of interest. You should be able to find some because the internet is inundated with them. Hopefully, you will be able to read about other traders’ experiences concerning your items and their associated websites.
However, you must again beware because many affiliates have invaded these forums as well and distribute their very biased opinions in order to promote their own items. In addition, you will notice that there are many more negative comments than positive ones which again makes the task of deciding what the truth is even more difficult. This is because it is hard to distinguish the genuine negative reviews from those produced by affiliates rubbishing the product in order to promote their own.
So, how can you extract yourself out of this quagmire? You basically need to locate individuals or entities that have acquired reputations that you can trust. You can do this by creating a database containing all the websites and forums that you visit and monitoring them constantly over a period of time.
You may then be able to detect a pattern that could help you target those whose opinions are well-regarded by others. If you are able to achieve this task, you could then focus your efforts on their viewpoints.
Another method would be to search for organizations that release Forex news articles and reviews on a regular basis such as daily. You can have more confidence in their opinions especially if you can confirm that they have a deep concern for maintaining a good reputation. If so, you will be able to place more faith in their articles because they will then have a loathing to be associated with unsubstantiated opinions. At present, I am using the daily forex outlook news letter from MF Global as a rough guide when I trade.
Did you spend much time wondering which of the many descriptions and reviews were genuine? How could you differentiate between what is true and what is scam? You must have certainly noticed that a product was ranked in the top ten, for example, by a site whilst ranked outside the top hundred by another.
Unfortunately, many of these sites are owned by affiliates who select their top products based on their levels of commission. As such, their product descriptions are practically meaningless and are even bordering on scam in some cases. Just to be fair, this is not the case across the board and there are many sites that do provide reliable and accurate information and reviews of the various Forex service providers.
If you are trying to use the internet to locate a good Forex product, then you will have difficulty if you depend on this method. Your main problem is that you just cannot take at face value any product, review, description or ranking that is written on these websites.
Basically, you need a secondary confirmation about the validity of these information sources. You can attempt to achieve this by visiting Forex forums that are dedicated to discussing your products of interest. You should be able to find some because the internet is inundated with them. Hopefully, you will be able to read about other traders’ experiences concerning your items and their associated websites.
However, you must again beware because many affiliates have invaded these forums as well and distribute their very biased opinions in order to promote their own items. In addition, you will notice that there are many more negative comments than positive ones which again makes the task of deciding what the truth is even more difficult. This is because it is hard to distinguish the genuine negative reviews from those produced by affiliates rubbishing the product in order to promote their own.
So, how can you extract yourself out of this quagmire? You basically need to locate individuals or entities that have acquired reputations that you can trust. You can do this by creating a database containing all the websites and forums that you visit and monitoring them constantly over a period of time.
You may then be able to detect a pattern that could help you target those whose opinions are well-regarded by others. If you are able to achieve this task, you could then focus your efforts on their viewpoints.
Another method would be to search for organizations that release Forex news articles and reviews on a regular basis such as daily. You can have more confidence in their opinions especially if you can confirm that they have a deep concern for maintaining a good reputation. If so, you will be able to place more faith in their articles because they will then have a loathing to be associated with unsubstantiated opinions. At present, I am using the daily forex outlook news letter from MF Global as a rough guide when I trade.
Start Your Forex Career by Trading the EUR/USD
You will find that the most highly traded currency pair in the world is the EUR/USD. If you are just starting your Forex career, then you are well-advised to trade this pair first until you are more experienced. You will benefit from trading the EUR/USD because it is highly liquid and is one of the least expensive pairs to trade. You need to realize that 80% of all Forex transactions are placed with the EUR/USD.
In Forex, the Euro is termed the base currency whilst the USD is the counter currency. This means that when you are quoted a price for the EURUSD, the value represents the number of dollars you will receive for each of your Euros. For example, if EUR/USD is posting 1.3010, then you can buy 1.3010 US dollars with each of your Euros.
You can profit by trading the EUR/USD if you can correctly predict the future direction that the pair will take. For instance, if you believe that the dollar will appreciate against the Euro, then you should sell the EURUSD. For example, consider that you decide to sell the EUR/USD when its price is 1.3550. If this currency does, in fact, drop to 1.3400, then you will realize a profit of 150 pips.
A pip (percentage in point) represents the smallest price unit in Forex trading. Prices of currency pairs, except the USD/YEN, are always displayed to the fourth decimal point, e.g. 1.3005.
Forex brokers charge a spread for each currency pair they allow you to trade. In Forex trading, the difference, between the price that you can buy a currency pair and the one at which you can sell it, is termed the spread. You must always strive to trade currency pairs with the lowest spreads as possible in order to keep your costs down.
This is one of the EUR/USD strengths because it offers very low spreads even down to as low as 1 pip. You must realize that should you select to trade a currency pair that exhibits a higher spread, then you will find it harder to achieve short-term profits. You will also discover that traders prefer to utilize the EUR/USD as their primary tool to speculate on the overall value of the dollar.
If you can believe that there may be a significant change in the value of the EUR/USD, then you can trade it knowing that you can benefit from two of its major attributes which are a low spread and high market liquidity. The latter quality is important because you can trade a currency pair without almost any restrictions if its liquidity is high because there will always be another party willing to complete your transaction.
Some Forex traders trade the EUR/USD exclusively because of the advantages it possesses compared to other currency pairs. As such, you will need to devise a trading strategy to allow you to capture profits consistently by detecting good EUR/USD trading opportunities. That is why....I focus on this pair to trade most of the time and also of the lowest commission. Can be compared to the USD/JYP pair too esp for us trading in the day time when Japan is live.
In Forex, the Euro is termed the base currency whilst the USD is the counter currency. This means that when you are quoted a price for the EURUSD, the value represents the number of dollars you will receive for each of your Euros. For example, if EUR/USD is posting 1.3010, then you can buy 1.3010 US dollars with each of your Euros.
You can profit by trading the EUR/USD if you can correctly predict the future direction that the pair will take. For instance, if you believe that the dollar will appreciate against the Euro, then you should sell the EURUSD. For example, consider that you decide to sell the EUR/USD when its price is 1.3550. If this currency does, in fact, drop to 1.3400, then you will realize a profit of 150 pips.
A pip (percentage in point) represents the smallest price unit in Forex trading. Prices of currency pairs, except the USD/YEN, are always displayed to the fourth decimal point, e.g. 1.3005.
Forex brokers charge a spread for each currency pair they allow you to trade. In Forex trading, the difference, between the price that you can buy a currency pair and the one at which you can sell it, is termed the spread. You must always strive to trade currency pairs with the lowest spreads as possible in order to keep your costs down.
This is one of the EUR/USD strengths because it offers very low spreads even down to as low as 1 pip. You must realize that should you select to trade a currency pair that exhibits a higher spread, then you will find it harder to achieve short-term profits. You will also discover that traders prefer to utilize the EUR/USD as their primary tool to speculate on the overall value of the dollar.
If you can believe that there may be a significant change in the value of the EUR/USD, then you can trade it knowing that you can benefit from two of its major attributes which are a low spread and high market liquidity. The latter quality is important because you can trade a currency pair without almost any restrictions if its liquidity is high because there will always be another party willing to complete your transaction.
Some Forex traders trade the EUR/USD exclusively because of the advantages it possesses compared to other currency pairs. As such, you will need to devise a trading strategy to allow you to capture profits consistently by detecting good EUR/USD trading opportunities. That is why....I focus on this pair to trade most of the time and also of the lowest commission. Can be compared to the USD/JYP pair too esp for us trading in the day time when Japan is live.
Your main Forex weapon is your Mindset
Perhaps you have noticed that your trading performance is affected by the way you perceive the world around you. This is because you require your full alertness and concentration to focus exclusively on the complexities of Forex. This is especially so if you practice day-trading and need to constantly monitor your open positions.
Your chief problem is the stress levels that emulate because you cannot afford to constantly make errors and generate increasing losses. In addition, you probably feel a sense of isolation if you are an independent trader, who works at home. If you have suffered under these conditions, then you could well have experienced periods of intense trauma.
Such situations are not good for promoting successful Forex trading because your ability to achieve positive results depends on your state of mind. You definitely need a mindset possessing tranquility and harmony in order for you to make any real Forex progress.
The main reason for this is that all your trading decisions must be of a consistently high standard and devoid of any negative emotions and sentiments. Your chances of succeeding as a Forex trader will be greatly enhanced if you can achieve such a positive mindset. In contrast, you will find that your ability to make quality decisions will diminish and your thinking will become unstable if you constantly let your emotions dominate your trading mentality.
You must understand that one of your main weapons in your battle against Forex is your own mindset. As such, you should always make your Forex decisions based on what you have scientifically and professionally deduced rather than your whims and gut instincts. If you can properly harness your mindset, then you will discover that your trading results will dramatically improve.
You have no doubt experienced that you can quite easily lose your concentration and calm when your mind becomes unstable and anxious. This is because you no longer perceive reality as your main focal point because your thoughts stray from realistic goals into dreaming the near impossible.
You will also discover that your moods can affect your trading results as well. This is because your moods can strongly influence your decision making and place your trading positions at increasingly risk.
Unfortunately, there are no mystic chants or magic formulae that you can use to ensure your Forex psychology is properly primed for Forex trading. We all have spontaneous natures that can induce quick changes in moods and mindsets without prior announcements.
As such, if you begin to feel overwhelmed by negative emotions, then your safest option is to stop trading in order to preserve your bank balance. You need to give yourself time to re-focus your mind and this is best done by removing yourself away from your trading environment.
Instead, if you persist in trading, then you will find that your trading decisions will decrease in quality and your losses will stack up. This is especially so if Forex is experiencing high levels of volatility.
Your chief problem is the stress levels that emulate because you cannot afford to constantly make errors and generate increasing losses. In addition, you probably feel a sense of isolation if you are an independent trader, who works at home. If you have suffered under these conditions, then you could well have experienced periods of intense trauma.
Such situations are not good for promoting successful Forex trading because your ability to achieve positive results depends on your state of mind. You definitely need a mindset possessing tranquility and harmony in order for you to make any real Forex progress.
The main reason for this is that all your trading decisions must be of a consistently high standard and devoid of any negative emotions and sentiments. Your chances of succeeding as a Forex trader will be greatly enhanced if you can achieve such a positive mindset. In contrast, you will find that your ability to make quality decisions will diminish and your thinking will become unstable if you constantly let your emotions dominate your trading mentality.
You must understand that one of your main weapons in your battle against Forex is your own mindset. As such, you should always make your Forex decisions based on what you have scientifically and professionally deduced rather than your whims and gut instincts. If you can properly harness your mindset, then you will discover that your trading results will dramatically improve.
You have no doubt experienced that you can quite easily lose your concentration and calm when your mind becomes unstable and anxious. This is because you no longer perceive reality as your main focal point because your thoughts stray from realistic goals into dreaming the near impossible.
You will also discover that your moods can affect your trading results as well. This is because your moods can strongly influence your decision making and place your trading positions at increasingly risk.
Unfortunately, there are no mystic chants or magic formulae that you can use to ensure your Forex psychology is properly primed for Forex trading. We all have spontaneous natures that can induce quick changes in moods and mindsets without prior announcements.
As such, if you begin to feel overwhelmed by negative emotions, then your safest option is to stop trading in order to preserve your bank balance. You need to give yourself time to re-focus your mind and this is best done by removing yourself away from your trading environment.
Instead, if you persist in trading, then you will find that your trading decisions will decrease in quality and your losses will stack up. This is especially so if Forex is experiencing high levels of volatility.
Do you Forecast Forex or Use Reality Trading?
When you first became aware of Forex, you may have been introduced to the idea that you have good chances of forecasting its movements because Forex exhibits predictable patterns. Obviously, if this is true, then you would certainly have chances of gaining some handsome profits. Of course, this is the dream of all traders whether they are novices or experienced.
How valid is this claim is the key question? Forex definitely generates major trends that are produced by such events as growing risk appetite and flights to safety, etc. If you were to study the Forex market psychology that initiates many of the well-known Forex patterns such as head and shoulders, then you could fine-tune your forecasting skills that would definitely rake in the cash for you.
However, this is much more difficult than you would originally expect. The sheer truth is that the movements of Forex follow no simple or complex formula, but seem to proceed in some type of ordered chaos.
If you studied trading charts for long enough, then you can definitely identify that Forex creates trends that do have a tendency to exist for some time. As such, you are probably well-advised to attempt to trade them as opposed to trying to forecast their creation.
If you do so, you must ensure that you do not fall into the novice’s trap and focus on studying trading charts using very short time-frames. Instead, you must quickly acquire an understanding about the power of the longer time-frames.
You need to realize that you can gain a better and more meaningful picture of the movement patterns of currency pairs if you do so. Also, you will find that longer time frames act as filters by smoothing out much of the random noise that Forex generates. This noise problem becomes increasingly amplified when you utilize time frames of shorter duration.
In fact, when you start trading you should not really consider using time frames of less than one hour. You will discover that you can detect Forex features such as trends much better by using the daily and weekly ones.
You need to realize that although a currency pair is following a trend and could have been for some time, there may still be rapid price fluctuations that are produced every minute or hour. In fact, you could conclude that the trend contains and controls many smaller price movements within its limits.
As such, the problem that you will face if you persistently use shorter time frames is that you will find that your trading is constantly diverted by Forex noise. However, should you select the wiser choice and utilize longer time-frames, then all this noise will be filtered out providing you with much clearer trading opportunities.
You need to be aware that many novices cling to the shorter time frames because they believe that the greater levels of action created by the random noise will make them rich quickly. This idea is badly flawed and will only result in consistent losses,not to mention big money ones!.
How valid is this claim is the key question? Forex definitely generates major trends that are produced by such events as growing risk appetite and flights to safety, etc. If you were to study the Forex market psychology that initiates many of the well-known Forex patterns such as head and shoulders, then you could fine-tune your forecasting skills that would definitely rake in the cash for you.
However, this is much more difficult than you would originally expect. The sheer truth is that the movements of Forex follow no simple or complex formula, but seem to proceed in some type of ordered chaos.
If you studied trading charts for long enough, then you can definitely identify that Forex creates trends that do have a tendency to exist for some time. As such, you are probably well-advised to attempt to trade them as opposed to trying to forecast their creation.
If you do so, you must ensure that you do not fall into the novice’s trap and focus on studying trading charts using very short time-frames. Instead, you must quickly acquire an understanding about the power of the longer time-frames.
You need to realize that you can gain a better and more meaningful picture of the movement patterns of currency pairs if you do so. Also, you will find that longer time frames act as filters by smoothing out much of the random noise that Forex generates. This noise problem becomes increasingly amplified when you utilize time frames of shorter duration.
In fact, when you start trading you should not really consider using time frames of less than one hour. You will discover that you can detect Forex features such as trends much better by using the daily and weekly ones.
You need to realize that although a currency pair is following a trend and could have been for some time, there may still be rapid price fluctuations that are produced every minute or hour. In fact, you could conclude that the trend contains and controls many smaller price movements within its limits.
As such, the problem that you will face if you persistently use shorter time frames is that you will find that your trading is constantly diverted by Forex noise. However, should you select the wiser choice and utilize longer time-frames, then all this noise will be filtered out providing you with much clearer trading opportunities.
You need to be aware that many novices cling to the shorter time frames because they believe that the greater levels of action created by the random noise will make them rich quickly. This idea is badly flawed and will only result in consistent losses,not to mention big money ones!.
Surviving The Forex Slow-Go
They say that trading Forex is not for the feint of heart. And as we all know, for the most part, that is true. It's fast, it's exciting, it's an adrenaline junkie's dream. For the most part.
Particularly for the day trader in Forex, the constant action and fluctuations are what make the game appealing. The changes in trends; the riding of the trends; the reversals of positions; and even the quick stop-loss holds everyone's noses close to the computer's screen(s). And the beauty is that you can jump from Forex pairing to Forex pairing and have more balls in the air than the best juggler. Sure, the risk is more, but so are the opportunities!
Believe it or not, the situations listed above aren't the most dangerous times for the Forex trader. For obvious reasons, there are no real “safe” times for the Forex trader, but like everything else, it's all relative. The most dangerous time for the Forex trader is not when the markets are wild and there are massive fluctuations in the market. Those are the good times. Those are the times when it's easy to get in and easy to get out. When you can cut a loss short and ride a profit comfortably. Those are the times that grab your attention and don't let it go, because a brief lapse could mean a missed opportunity or a sudden loss. Those are days of missed breakfasts or lunches or dinners and coffee at the desk.
Even the Forex markets take a break some days. There are days, for as many reasons as there are days, that there is what seems to be an interminable amount of inactivity in the markets. It could be that pending news is due out. It could be a Fed report is being released. It could be the banks are gearing up to do something big; or nothing at all. It doesn't matter. The reasoning behind the lull shouldn't be the concern of the Forex trader. The lull itself is the only thing that matters. The market isn't moving. It's just not doing anything. Fifteen minutes seems like fifteen hours.
This inactivity is possibly one of the biggest land mine zones for the Forex trader. Traders want to trade. It's as natural as fish swimming or football players taking steroids. But the inactive market can pose the biggest potential for loss simply because of its inactivity. What generally happens is that a trader places a trade and the market moves against him or her. A slight bit. Nothing much. But then it stays there. The inactivity convinces the trader that they're wrong, so not only will they get out of the trade taking a loss, but will reverse the trade thinking the trend is going in the opposite direction. And the cycle begins. At the end of the day the Forex trader can't believe the losses sustained in such a limited trading range. But it happens all the time. All the time.
The solution is simple, but not easy, and only involves two words: “Walk away”. The market isn't going anywhere. It will be there tomorrow and the day after. Go play golf. Go for a walk. Solve world hunger. Anything that will involve just walking away. If you insist on trading at all, have a game plan and don't try to day trade. Place a trade and put stop losses on both sides of the trade. And then...walk away. If you sit there and watch the screens it is a sure bet that you're going to change those stops or get rid of them entirely.
There will be plenty of days of action in the Forex markets, and you'll be there to take advantage of them. But some days...even the markets need a day off. Then you are cooked....but the stop-lost should be able to help to clear out any wrong assumption.
Particularly for the day trader in Forex, the constant action and fluctuations are what make the game appealing. The changes in trends; the riding of the trends; the reversals of positions; and even the quick stop-loss holds everyone's noses close to the computer's screen(s). And the beauty is that you can jump from Forex pairing to Forex pairing and have more balls in the air than the best juggler. Sure, the risk is more, but so are the opportunities!
Believe it or not, the situations listed above aren't the most dangerous times for the Forex trader. For obvious reasons, there are no real “safe” times for the Forex trader, but like everything else, it's all relative. The most dangerous time for the Forex trader is not when the markets are wild and there are massive fluctuations in the market. Those are the good times. Those are the times when it's easy to get in and easy to get out. When you can cut a loss short and ride a profit comfortably. Those are the times that grab your attention and don't let it go, because a brief lapse could mean a missed opportunity or a sudden loss. Those are days of missed breakfasts or lunches or dinners and coffee at the desk.
Even the Forex markets take a break some days. There are days, for as many reasons as there are days, that there is what seems to be an interminable amount of inactivity in the markets. It could be that pending news is due out. It could be a Fed report is being released. It could be the banks are gearing up to do something big; or nothing at all. It doesn't matter. The reasoning behind the lull shouldn't be the concern of the Forex trader. The lull itself is the only thing that matters. The market isn't moving. It's just not doing anything. Fifteen minutes seems like fifteen hours.
This inactivity is possibly one of the biggest land mine zones for the Forex trader. Traders want to trade. It's as natural as fish swimming or football players taking steroids. But the inactive market can pose the biggest potential for loss simply because of its inactivity. What generally happens is that a trader places a trade and the market moves against him or her. A slight bit. Nothing much. But then it stays there. The inactivity convinces the trader that they're wrong, so not only will they get out of the trade taking a loss, but will reverse the trade thinking the trend is going in the opposite direction. And the cycle begins. At the end of the day the Forex trader can't believe the losses sustained in such a limited trading range. But it happens all the time. All the time.
The solution is simple, but not easy, and only involves two words: “Walk away”. The market isn't going anywhere. It will be there tomorrow and the day after. Go play golf. Go for a walk. Solve world hunger. Anything that will involve just walking away. If you insist on trading at all, have a game plan and don't try to day trade. Place a trade and put stop losses on both sides of the trade. And then...walk away. If you sit there and watch the screens it is a sure bet that you're going to change those stops or get rid of them entirely.
There will be plenty of days of action in the Forex markets, and you'll be there to take advantage of them. But some days...even the markets need a day off. Then you are cooked....but the stop-lost should be able to help to clear out any wrong assumption.
How Low Can Forex Go?
Greece is falling apart. Spain isn't far behind. Nobody really knows what is going on with the American economy. The Euro keeps dropping and is at a four year low. If you are a staunch bull it's time to act like a real life bear and go into hibernation. The Forex market is getting tanked.
In this kind of environment, there are a few philosophies that run rampant and should probably be avoided at all costs. The most obvious dangerous philosophy right now in the Forex frontier is, “it's time to pick bottoms”. Can it happen that you'll successfully pick the bottom and ride it on up to unforeseen gains? Absolutely. Is it probable? Absolutely not. There is one advantage to trying to pick a bottom of any slide in the Forex market, or in commodities: As opposed to trying to pick a top, where there are infinite possibilities; by picking a bottom, the market (whatever market you may be dealing with) can only go down to zero. So, in a sense, by trying to pick a bottom, your risk (relatively speaking) is limited. The obvious problem is that so very few of us are sufficiently capitalized to ride a series of wrong decisions down to zero.
The next most prevalent dangerous philosophy in these kinds of markets is: “The market is due for a correction”. This statement is heard in both Forex and commodities markets, and the statement, in any situation at all, is false. The market is never “due” for a correction. The market is never due for anything, particularly a “correction”. This implies that the market, somehow, is wrong. The market is never wrong. The market is always where it should be at any particular time and it is never up to us to decide whether it is right or it is wrong. If you ever try to tell a market what to do it will most often times respond to you with a margin call. Large banks may be able to get away with it. Large corporations may be able to get away with it. The individual Forex trader was never meant to get away with it. You can look at your empty account balance and tell yourself that you were right and the market was wrong and it will change nothing. The successful Forex trader doesn't fight it. The successful Forex trader rides it.
The third most prevalent dangerous philosophy in these kinds of market is: “Waiting for the market to turn around”. Whether you are waiting for a bull market to become bearish, or a bear market to become bullish, the one thing that is in common in both these situations is the word “waiting”. And waiting often times means leaving money on the table. There is an inherent fear amongst Forex traders of getting “caught”. Either caught short, or caught long, which results in a loss. Nobody wants this to happen but it will, and it does to everyone. But it's nothing that a well-placed stop-loss order can't solve. It's better than waiting. If you're waiting for the perfect market and the perfect chart point to get involved in a market, you're going to be passing up many opportunities. There is always a trend to be spotted. Some are long, and some are short. They're there to be had.
The answer to the question, “How low can Forex go?”?
Who cares? that goes for stock trading too.
In this kind of environment, there are a few philosophies that run rampant and should probably be avoided at all costs. The most obvious dangerous philosophy right now in the Forex frontier is, “it's time to pick bottoms”. Can it happen that you'll successfully pick the bottom and ride it on up to unforeseen gains? Absolutely. Is it probable? Absolutely not. There is one advantage to trying to pick a bottom of any slide in the Forex market, or in commodities: As opposed to trying to pick a top, where there are infinite possibilities; by picking a bottom, the market (whatever market you may be dealing with) can only go down to zero. So, in a sense, by trying to pick a bottom, your risk (relatively speaking) is limited. The obvious problem is that so very few of us are sufficiently capitalized to ride a series of wrong decisions down to zero.
The next most prevalent dangerous philosophy in these kinds of markets is: “The market is due for a correction”. This statement is heard in both Forex and commodities markets, and the statement, in any situation at all, is false. The market is never “due” for a correction. The market is never due for anything, particularly a “correction”. This implies that the market, somehow, is wrong. The market is never wrong. The market is always where it should be at any particular time and it is never up to us to decide whether it is right or it is wrong. If you ever try to tell a market what to do it will most often times respond to you with a margin call. Large banks may be able to get away with it. Large corporations may be able to get away with it. The individual Forex trader was never meant to get away with it. You can look at your empty account balance and tell yourself that you were right and the market was wrong and it will change nothing. The successful Forex trader doesn't fight it. The successful Forex trader rides it.
The third most prevalent dangerous philosophy in these kinds of market is: “Waiting for the market to turn around”. Whether you are waiting for a bull market to become bearish, or a bear market to become bullish, the one thing that is in common in both these situations is the word “waiting”. And waiting often times means leaving money on the table. There is an inherent fear amongst Forex traders of getting “caught”. Either caught short, or caught long, which results in a loss. Nobody wants this to happen but it will, and it does to everyone. But it's nothing that a well-placed stop-loss order can't solve. It's better than waiting. If you're waiting for the perfect market and the perfect chart point to get involved in a market, you're going to be passing up many opportunities. There is always a trend to be spotted. Some are long, and some are short. They're there to be had.
The answer to the question, “How low can Forex go?”?
Who cares? that goes for stock trading too.
Live Forex Trading Takes No Prisoners
On the surface, Forex appears to be relatively simple. Basically, you just speculate on whether currency pairs will rise or fall in value. If you are successful with your predictions, then you make profits. Otherwise, you will lose your money. Period!
Forex is open to all levels of participants ranging from large financial institutions and governments to ordinary folk like you and me. In addition, the Forex market is so large that no organization on its own can dominate it. This means that you are fundamentally on the same pegging as the big boys.
Forex can also be very exciting to trade because it involves such a massive flow of money. You may have been attracted by all its positive attributes for creating a home-based business.
However, you will find that that it can be an arduous road learning how to trade Forex successfully if you follow the route of the common herd. You need to stack the odds in your favor if you want to make real progress. How do you do that?
Well, first you must clear your mind of all the fantasy. Forex is anything, but simple and will take you some time to master. So that is where you start finding the time to develop your new skills.
If you are just starting Forex or have been trading unsuccessfully for some, then cease any attempts at to trade live. Instead, you will need to revisit the drawing board and revert back to demo trading. However, you must adapt your mindset to imagine that you will be trading live in demo mode. The more successful you can stimulate live conditions, the more useful this activity will be.
For instance, use the equity amounts that you plan to utilize when you go live. The imaginary $50,000 or so that is provided by Forex brokers is a complete waste of time unless you have that amount to invest.
Most sources advise that you should use demo trading for periods of about a couple of months. However, this is completely wrong! If you do so, then you are completely underestimating the complexities of Forex. If you know that doctors, lawyers and airlines do not become qualified in that sort of time, then what makes you think that you can master one of the world’s most complex subjects so quickly?
Instead, you should aim to demo trade sensibly for periods that could extend for a year or more. You must learn and obtain a feel about leverage, time-frames, different technical indicators, fundamental events and trading strategies to name just a few vital Forex topics.
Try trading using low leverage with strong money management concepts. Take your time and investigate each Forex feature. Aim to trade conservatively and attempt to earn just small profits each month initially. Seek further comprehensive information should the need arise.
Do not think about live trading until you can demonstrate completely that you can make money demo trading. Do not delude yourself because live Forex trading takes no prisoners then again...which form of gambling take live prisoners?
Forex is open to all levels of participants ranging from large financial institutions and governments to ordinary folk like you and me. In addition, the Forex market is so large that no organization on its own can dominate it. This means that you are fundamentally on the same pegging as the big boys.
Forex can also be very exciting to trade because it involves such a massive flow of money. You may have been attracted by all its positive attributes for creating a home-based business.
However, you will find that that it can be an arduous road learning how to trade Forex successfully if you follow the route of the common herd. You need to stack the odds in your favor if you want to make real progress. How do you do that?
Well, first you must clear your mind of all the fantasy. Forex is anything, but simple and will take you some time to master. So that is where you start finding the time to develop your new skills.
If you are just starting Forex or have been trading unsuccessfully for some, then cease any attempts at to trade live. Instead, you will need to revisit the drawing board and revert back to demo trading. However, you must adapt your mindset to imagine that you will be trading live in demo mode. The more successful you can stimulate live conditions, the more useful this activity will be.
For instance, use the equity amounts that you plan to utilize when you go live. The imaginary $50,000 or so that is provided by Forex brokers is a complete waste of time unless you have that amount to invest.
Most sources advise that you should use demo trading for periods of about a couple of months. However, this is completely wrong! If you do so, then you are completely underestimating the complexities of Forex. If you know that doctors, lawyers and airlines do not become qualified in that sort of time, then what makes you think that you can master one of the world’s most complex subjects so quickly?
Instead, you should aim to demo trade sensibly for periods that could extend for a year or more. You must learn and obtain a feel about leverage, time-frames, different technical indicators, fundamental events and trading strategies to name just a few vital Forex topics.
Try trading using low leverage with strong money management concepts. Take your time and investigate each Forex feature. Aim to trade conservatively and attempt to earn just small profits each month initially. Seek further comprehensive information should the need arise.
Do not think about live trading until you can demonstrate completely that you can make money demo trading. Do not delude yourself because live Forex trading takes no prisoners then again...which form of gambling take live prisoners?
Protecting Yourself from Forex Horror
If you have ever endured a losing streak when trading Forex, then you will know what a debilitating experience it can be. Did you feel extremely helpless and worried? I know I did as I watched all my money vanish before my very eyes. One of the big problems was that I did not know when to quit and accept reasonable losses. I just hung on hoping desperately that Forex would alter it direction and all would be well in the world again.
Yes, eventually it did reverse and proceed back in my originally chosen direction. Not that this development did much for me because my account was already dead and buried by then. At times like these, you will finally acknowledge the sheer relentless power of Forex trading. You do not want to get on the wrong side of this monster.
If you have been trading Forex for a while, then you must have come across many such horror stories mingled with some successful ones. So, how can you determine when it is time to quit under such circumstances? The following trading example may provide you with some answers.
Assume you have a Forex account balance of $50,000. Your research convinces you that the Euro is in freefall because some of the member states of the Eurozone have serious financial problems. As a result, you plunge in and sell the EUR/USD at 1.2400 using $20,000 of your balance. For simplicity, assume you are then risking $20 per pip.
Image that there is an initially plunge to 1.1900 producing you a profit of 500 pips. You have successfully made a profit of $10000 in the matter of days. Obviously, you would be ecstatic about this result. Unfortunately, Forex has the habit of making you select poor decisions just after your best successes.
This is because at these moments, everything starts to crumble. Instead of the currency pair falling further, the Euro starts to rally strongly. You may think that this is just a temporary correction before the bear trend resumes. You could get out and still preserve some of your profit, but you do not.
You could quite easily convince yourself that your fundamental analysis cannot be wrong so you should stick with your trade. However, you wake up the following morning and discover to your horror that the rate has now climbed to 1.2600. If you quit now, not only would you have lost all your winnings, but you would now experience a significant loss.
If you acted like me under these conditions, you will now feel sweat forming on your brow whilst your adrenaline goes into overload. What should you do? Hang in or quit? Why did you not take all those wonderful profits earlier?
Trades can always go wrong and you simply cannot subject yourself constantly to so much pressure. Instead, you should utilize less leverage, risked just 2% of your account and use better risk and money management strategies. You must never expose yourself to such horror. Yes...same apply to stock trading too....sighed!~!
Yes, eventually it did reverse and proceed back in my originally chosen direction. Not that this development did much for me because my account was already dead and buried by then. At times like these, you will finally acknowledge the sheer relentless power of Forex trading. You do not want to get on the wrong side of this monster.
If you have been trading Forex for a while, then you must have come across many such horror stories mingled with some successful ones. So, how can you determine when it is time to quit under such circumstances? The following trading example may provide you with some answers.
Assume you have a Forex account balance of $50,000. Your research convinces you that the Euro is in freefall because some of the member states of the Eurozone have serious financial problems. As a result, you plunge in and sell the EUR/USD at 1.2400 using $20,000 of your balance. For simplicity, assume you are then risking $20 per pip.
Image that there is an initially plunge to 1.1900 producing you a profit of 500 pips. You have successfully made a profit of $10000 in the matter of days. Obviously, you would be ecstatic about this result. Unfortunately, Forex has the habit of making you select poor decisions just after your best successes.
This is because at these moments, everything starts to crumble. Instead of the currency pair falling further, the Euro starts to rally strongly. You may think that this is just a temporary correction before the bear trend resumes. You could get out and still preserve some of your profit, but you do not.
You could quite easily convince yourself that your fundamental analysis cannot be wrong so you should stick with your trade. However, you wake up the following morning and discover to your horror that the rate has now climbed to 1.2600. If you quit now, not only would you have lost all your winnings, but you would now experience a significant loss.
If you acted like me under these conditions, you will now feel sweat forming on your brow whilst your adrenaline goes into overload. What should you do? Hang in or quit? Why did you not take all those wonderful profits earlier?
Trades can always go wrong and you simply cannot subject yourself constantly to so much pressure. Instead, you should utilize less leverage, risked just 2% of your account and use better risk and money management strategies. You must never expose yourself to such horror. Yes...same apply to stock trading too....sighed!~!
Slowly Climbing to the Summit of Forex Success
Extensive research into the habits of Forex traders found that there are a number of common reasons why most novices lose their initial equity quickly and many traders fail.
If you can learn how to avoid or counter these problems, then you will have made great steps in joining the 10% of Forex experts.
For instance, you must not repeatedly become side-tracked by new products and ideas of dubious quality. Instead, you must seek sources of education from acclaimed professionals.
You must not over-estimate your abilities as well. You may already be proficient in other subjects but this will have no bearing on how well you will perform at Forex trading. This is because it is such a complex subject and has a game plan entirely of its own.
You must learn to assess the market for what it is and not what you think it should be. The latter approach will obliterate you equity in no time at all.
If you appreciate that other professionals, such as doctors and lawyers, do not master their crafts in a matter of months, then you will realize that you must approach Forex in the same way.
You must try not to make your trading complex by using sophisticated Forex trading strategies. If you do, then you could well obscure vital price formations that could have a serious adverse effect on your results.
Instead, you need to design a simple trading strategy and then optimize its performance at adjusting one parameter at a time. You need also to assess the performance of your strategy by calculating its expectancy value after each test.
You need to progress your trading strategy through phases of small incremental steps of risk commencing from demo trading through to full live testing. Yes, this will take you considerable amounts of time but at least by then you will know what you are doing.
If you really want to succeed at Forex trading, then you must roll-up your sleeves and take responsibility for all your actions, especially the negative ones such as your losses.
If instead, you try and take too many shortcuts such as listening to so-called Forex gurus or buying robots, then you will never develop your own database of Forex knowledge and experience.
You cannot depend totally on any single technical or fundamental technique, just by itself. Instead, you must take the time to fully integrate the ones of interest into a complete trading strategy. You must learn as well how to trade without involving your emotions.
You must forget about all the marketing publicity surrounding Forex that could have made you believe that you could become a millionaire overnight.
Instead, you must develop your patience because it is one of your main keys to success. For instance, you must preserve with a trading strategy once you have made a selection. You must try to test and assess it thoroughly instead of leaping onto any new Forex gadget that comes along promising you the earth. How true! It really takes time, heartache, trials or errors and there is still no sure-win method that one can use forever as trading conditions change and one has to go along with it. No point fighting it...same for trading trend to but there is always a turning point. The successful trader will be able to pin-point the actual turning point and time the trade accordingly. Not just patience but also must have the trading discipline to go with it in order to be an all-rounder.
If you can learn how to avoid or counter these problems, then you will have made great steps in joining the 10% of Forex experts.
For instance, you must not repeatedly become side-tracked by new products and ideas of dubious quality. Instead, you must seek sources of education from acclaimed professionals.
You must not over-estimate your abilities as well. You may already be proficient in other subjects but this will have no bearing on how well you will perform at Forex trading. This is because it is such a complex subject and has a game plan entirely of its own.
You must learn to assess the market for what it is and not what you think it should be. The latter approach will obliterate you equity in no time at all.
If you appreciate that other professionals, such as doctors and lawyers, do not master their crafts in a matter of months, then you will realize that you must approach Forex in the same way.
You must try not to make your trading complex by using sophisticated Forex trading strategies. If you do, then you could well obscure vital price formations that could have a serious adverse effect on your results.
Instead, you need to design a simple trading strategy and then optimize its performance at adjusting one parameter at a time. You need also to assess the performance of your strategy by calculating its expectancy value after each test.
You need to progress your trading strategy through phases of small incremental steps of risk commencing from demo trading through to full live testing. Yes, this will take you considerable amounts of time but at least by then you will know what you are doing.
If you really want to succeed at Forex trading, then you must roll-up your sleeves and take responsibility for all your actions, especially the negative ones such as your losses.
If instead, you try and take too many shortcuts such as listening to so-called Forex gurus or buying robots, then you will never develop your own database of Forex knowledge and experience.
You cannot depend totally on any single technical or fundamental technique, just by itself. Instead, you must take the time to fully integrate the ones of interest into a complete trading strategy. You must learn as well how to trade without involving your emotions.
You must forget about all the marketing publicity surrounding Forex that could have made you believe that you could become a millionaire overnight.
Instead, you must develop your patience because it is one of your main keys to success. For instance, you must preserve with a trading strategy once you have made a selection. You must try to test and assess it thoroughly instead of leaping onto any new Forex gadget that comes along promising you the earth. How true! It really takes time, heartache, trials or errors and there is still no sure-win method that one can use forever as trading conditions change and one has to go along with it. No point fighting it...same for trading trend to but there is always a turning point. The successful trader will be able to pin-point the actual turning point and time the trade accordingly. Not just patience but also must have the trading discipline to go with it in order to be an all-rounder.
Maintaining a Cold Detachment when Forex Trading
You will find that there is always a lot of debate about how easy it is to learn Forex properly so that you can gain a constant stream of profits by trading it.
Many strongly suggest that it is relatively simple and that all you basically have to do is to choose the correct trading strategy and you will be assured of success.
However, this train of thought clashes dramatically with historical records and statistics that emphatically demonstrate that there are, in fact, very few Forex winners.
Research into why this discrepancy exists indicates that emotions are one of the biggest problems that traders face. Basically, novices, in particular, let the quality of the trading decisions be negatively influenced by their gut feelings and whims.
This is certainly not desirable because Forex is so complex and dynamic in nature that you must always be in top notch form to generate the correct assessment of a new development very quickly.
You simply do not have the time to hesitate for too long otherwise you could badly affect the timing of possible new trading opportunities. For instance, greed can be very destructive in these cases.
This is because you may feel some attachment to all the cash flying around Forex because you could think that you should be entitled to at least a slice of the action. If you are constantly focusing your attention on and dreaming of money, then this is bound to affect the quality of your trading decisions.
Instead, you need to clear your mind of such superficial thoughts and concentrate in a more scientific and robotic way by analyzing Forex in terms of pips gained and lost.
If you can change your mindset to process and analysis each trading situation with a cold detachment, then you will find that your emotions will not bubble to the surface so often. Consequently, you should discover that your money will take care of itself.
You also need to design or arrange your trading space so that you can minimize all your distractions. This is especially important if you need to monitor your trades constantly over extensive periods of time.
You should also try to keep your trading simple. If you constantly clutter your mind by over-analyzing, then you will not possess the ability to focus clearly enough on key trading decisions.
You must always strive not to overtrade by subjecting your useable margin to intense pressure. If you deploy good money management strategies, then you should ensure that this will not happen.
Otherwise, you will subject yourself to extreme levels of stress and tension that can wear down your resolve as well as degrade the quality of you trading decisions.
How can you possibly maintain a cool front if you are constantly worried that you may be receiving a margin call from your Forex broker? These days the chances of such an event happening are very real because of the very high levels of volatility existing in the current market.
For forex and stock trading...the same things apply if you want to be a good trader!
Many strongly suggest that it is relatively simple and that all you basically have to do is to choose the correct trading strategy and you will be assured of success.
However, this train of thought clashes dramatically with historical records and statistics that emphatically demonstrate that there are, in fact, very few Forex winners.
Research into why this discrepancy exists indicates that emotions are one of the biggest problems that traders face. Basically, novices, in particular, let the quality of the trading decisions be negatively influenced by their gut feelings and whims.
This is certainly not desirable because Forex is so complex and dynamic in nature that you must always be in top notch form to generate the correct assessment of a new development very quickly.
You simply do not have the time to hesitate for too long otherwise you could badly affect the timing of possible new trading opportunities. For instance, greed can be very destructive in these cases.
This is because you may feel some attachment to all the cash flying around Forex because you could think that you should be entitled to at least a slice of the action. If you are constantly focusing your attention on and dreaming of money, then this is bound to affect the quality of your trading decisions.
Instead, you need to clear your mind of such superficial thoughts and concentrate in a more scientific and robotic way by analyzing Forex in terms of pips gained and lost.
If you can change your mindset to process and analysis each trading situation with a cold detachment, then you will find that your emotions will not bubble to the surface so often. Consequently, you should discover that your money will take care of itself.
You also need to design or arrange your trading space so that you can minimize all your distractions. This is especially important if you need to monitor your trades constantly over extensive periods of time.
You should also try to keep your trading simple. If you constantly clutter your mind by over-analyzing, then you will not possess the ability to focus clearly enough on key trading decisions.
You must always strive not to overtrade by subjecting your useable margin to intense pressure. If you deploy good money management strategies, then you should ensure that this will not happen.
Otherwise, you will subject yourself to extreme levels of stress and tension that can wear down your resolve as well as degrade the quality of you trading decisions.
How can you possibly maintain a cool front if you are constantly worried that you may be receiving a margin call from your Forex broker? These days the chances of such an event happening are very real because of the very high levels of volatility existing in the current market.
For forex and stock trading...the same things apply if you want to be a good trader!
Is Scalping a Form of Forex Gambling?
Forex scalping is a trading strategy that has gained popularity over recent years primarily because the design of many Forex robots is based upon its concepts. Many novices favor it as well because they are drawn to the fast action of scalping believing that they can become rich from its sheer speed of operation.
The big question is: can you really achieve success using this strategy? When you attempt to scalp Forex you are aiming to perform many trades and target small profits every time.
One of the main concepts of this trading method is that you will try to reduce your risk exposure by ensuring that the duration of each of your trades is always very short.
You must also not try to implement this strategy during times of high volatility especially when major Fundamental data releases are scheduled. Instead, you should attempt to detect trading periods that are exceptionally calm.
Many proponents of scalping aim to trade during 4:00 pm EST and 8:00 pm EST daily when Forex is practically asleep. This is because countries such as the USA, Canada, Eurozone and Britain do not post new economic data during this period.
Trades can be completed extremely quickly even in a matter of seconds sometimes. Scalpers also try to target profits equaling about two to three times the spread of the currency pair they are trading.
However, although there may be benefits, there are certainly many problems associated with this trading method. For instance, if you do not know what you are doing, then you are practically trading market noise, which cannot be healthy for your equity.
As you will be using extremely low time-frames, you cannot depend on their associated statistics because they will be of poor quality and totally unreliable.
You certainly will not be searching for any long-term price formations such as trends. In addition, you will definitely subject yourself to high levels of mental stress if you plan to monitor all your very short-term trades.
This is because you will have to make many very fast trading decisions if you intend to activate numerous buying and selling opportunities in short trading sessions.
Normal Forex trading can induce high levels of tension, but does not compare with what you could subject yourself through scalping. Your main problem emulates from the fact that should you keep stumbling because you cannot maintain high levels of quality trading decisions, then you could place your equity under a lot of pressure.
If your errors start to mount up, then you may attempt extreme measures to correct your declining status. You cannot even fall-back on any technical tools to help you because they are practically useless when utilized with extremely short time-frames.
Instead, you may attempt to increase your profits by using more leverage, but this practice is extremely dangerous as you will be exposing your equity to extreme levels of risk.
Perhaps your best bet is to try to locate a mentor who has already mastered this strategy.
This strategy can be used for stock trading too. In the end....the broker makes the most money hehe!
The big question is: can you really achieve success using this strategy? When you attempt to scalp Forex you are aiming to perform many trades and target small profits every time.
One of the main concepts of this trading method is that you will try to reduce your risk exposure by ensuring that the duration of each of your trades is always very short.
You must also not try to implement this strategy during times of high volatility especially when major Fundamental data releases are scheduled. Instead, you should attempt to detect trading periods that are exceptionally calm.
Many proponents of scalping aim to trade during 4:00 pm EST and 8:00 pm EST daily when Forex is practically asleep. This is because countries such as the USA, Canada, Eurozone and Britain do not post new economic data during this period.
Trades can be completed extremely quickly even in a matter of seconds sometimes. Scalpers also try to target profits equaling about two to three times the spread of the currency pair they are trading.
However, although there may be benefits, there are certainly many problems associated with this trading method. For instance, if you do not know what you are doing, then you are practically trading market noise, which cannot be healthy for your equity.
As you will be using extremely low time-frames, you cannot depend on their associated statistics because they will be of poor quality and totally unreliable.
You certainly will not be searching for any long-term price formations such as trends. In addition, you will definitely subject yourself to high levels of mental stress if you plan to monitor all your very short-term trades.
This is because you will have to make many very fast trading decisions if you intend to activate numerous buying and selling opportunities in short trading sessions.
Normal Forex trading can induce high levels of tension, but does not compare with what you could subject yourself through scalping. Your main problem emulates from the fact that should you keep stumbling because you cannot maintain high levels of quality trading decisions, then you could place your equity under a lot of pressure.
If your errors start to mount up, then you may attempt extreme measures to correct your declining status. You cannot even fall-back on any technical tools to help you because they are practically useless when utilized with extremely short time-frames.
Instead, you may attempt to increase your profits by using more leverage, but this practice is extremely dangerous as you will be exposing your equity to extreme levels of risk.
Perhaps your best bet is to try to locate a mentor who has already mastered this strategy.
This strategy can be used for stock trading too. In the end....the broker makes the most money hehe!
June
Luckily....since the start of this month ( June ) things changed for the better. Kena 4D on Wednesday....total $650, also not bad. Then for forex....made back more than 100% of my initial capital for just 3 days of trading.
On Tuesday....focus on EUR/USD and EUR/GBP pairs and today....just focus on USD/JYP
pair. Yes, fool around with USD/CHF and AUD/USD too but didn't do well for both so end up closed the positions and just focus on the major pairs. On Wed....also traded
the EUR/USD and EUR/GBP pairs....won some "kopi" money. Really made me "confidence"
about trading the forex. How is do it? Frankly....I just follow the guide from MF Global Forex team and traded with my gut feel. Whacked the whole lot included the leverage of 1x50 for the 3hrs-core trades. Within....that time frame, got profit of over 20 to 30%. The beautiful thing....was the almost perfect timing of closing the trades, all my traded pairs dropped within minutes of my closing. SUPER...."swee" same for today. Enter the USD/JPY ( long ) at around 12+pm.....and continue to add position until max out and I closed most of my major trades by 6pm. In the morning...entered USD/AUD ( long ) and USD/CHF ( short ) and after I closed the position....both went the other way round. The timing was off....so just managed to make some "kopi" money.
Btw....I started with forex after attending classes at FXDS for 8 weeks on Oct 09 but somehow I just couldn't get the hang of trading. Lost half my capital till end of May.....and within 3 "good days", got back what I lost plus 10+% for suffering haha. My capital was US$5K with Onada. Now....I am confident of my trading using my gut feel of things plus the trading analysis from MFG. Hope my luck hold out long enough haha.
OK....something about my style for trading forex. I will start with 20% then slowly build up my positions. I will add position if my initial trade shows negative result within 10 mins of opening trade. Will continue till it show a position return. But for today's trade....I start off with 50% and added the balance within a couple of mins when it shows a positive result ( meaning the call from MFG was right ). Then as and when the pips accumulated....and the margin allowed for further adding of positions....I kept on adding.
Near the end....I saw that what I added started to stay negative, I closed all the major positions except the newly added ones ( smaller positions so it is fine with me to hold out ).
On Monday....it was different. I started out with 2 pairs EUR/USD and EUR/GBP. My EUR/USD immediately show good results....but my EUR/GBP "tanked". After 15 mins, again added one position each for both. Again....show the same result. After 1+hr of trading....the EUR/USD were showing a gain of over 100 pips while the EUR/GBP was the other way round....minus of over 100 pips. Max out all my capital plus leverage
for both pairs.
Then another 1hr passed....EUR/USD were showing well over 170 pips gain while the other pair was down by 120+ pips. So fed-up....closed my EUR/USD pair and put all the money on EUR/GBP pair. After a couple of hours later....it shot up!!! swee swee
and it was show a nice gain of 150+ pips. My eyes....were so tired at looking at the pc. And after my Korean drama ended at 10pm....I closed all positions. Bagged 1+K for that....2 pairs. Oh....earlier in the day, already bagged close to $500+ for just trading EUR/USD pair.
What I meant by "kopi" money....anything from one to two hundreds dollars hehe. Anything less....I don't want to mention. Frankly....maybe I was lucky with my trades these few days. I hope to continue....by not losing "big" money for the whole month of June then...I can safely say that my gut feel is "okay" for trading forex. If not....it is back to the drawing board ( in this case....back to more training classes ).
Oh....another thing that I found out is "trading discipline", must die die
stick to the trading plan for the day plus only enter trade within a certain set-up. If that is not met....no trade if already open position and it shows negative or wrong direction, immediately closed trade and called it a day. ( no more trade for that day ). Go swimming, feeding fish, sauna, gym...and do other errands but no more looking at the pc. Same for stock trading too.
On Tuesday....focus on EUR/USD and EUR/GBP pairs and today....just focus on USD/JYP
pair. Yes, fool around with USD/CHF and AUD/USD too but didn't do well for both so end up closed the positions and just focus on the major pairs. On Wed....also traded
the EUR/USD and EUR/GBP pairs....won some "kopi" money. Really made me "confidence"
about trading the forex. How is do it? Frankly....I just follow the guide from MF Global Forex team and traded with my gut feel. Whacked the whole lot included the leverage of 1x50 for the 3hrs-core trades. Within....that time frame, got profit of over 20 to 30%. The beautiful thing....was the almost perfect timing of closing the trades, all my traded pairs dropped within minutes of my closing. SUPER...."swee" same for today. Enter the USD/JPY ( long ) at around 12+pm.....and continue to add position until max out and I closed most of my major trades by 6pm. In the morning...entered USD/AUD ( long ) and USD/CHF ( short ) and after I closed the position....both went the other way round. The timing was off....so just managed to make some "kopi" money.
Btw....I started with forex after attending classes at FXDS for 8 weeks on Oct 09 but somehow I just couldn't get the hang of trading. Lost half my capital till end of May.....and within 3 "good days", got back what I lost plus 10+% for suffering haha. My capital was US$5K with Onada. Now....I am confident of my trading using my gut feel of things plus the trading analysis from MFG. Hope my luck hold out long enough haha.
OK....something about my style for trading forex. I will start with 20% then slowly build up my positions. I will add position if my initial trade shows negative result within 10 mins of opening trade. Will continue till it show a position return. But for today's trade....I start off with 50% and added the balance within a couple of mins when it shows a positive result ( meaning the call from MFG was right ). Then as and when the pips accumulated....and the margin allowed for further adding of positions....I kept on adding.
Near the end....I saw that what I added started to stay negative, I closed all the major positions except the newly added ones ( smaller positions so it is fine with me to hold out ).
On Monday....it was different. I started out with 2 pairs EUR/USD and EUR/GBP. My EUR/USD immediately show good results....but my EUR/GBP "tanked". After 15 mins, again added one position each for both. Again....show the same result. After 1+hr of trading....the EUR/USD were showing a gain of over 100 pips while the EUR/GBP was the other way round....minus of over 100 pips. Max out all my capital plus leverage
for both pairs.
Then another 1hr passed....EUR/USD were showing well over 170 pips gain while the other pair was down by 120+ pips. So fed-up....closed my EUR/USD pair and put all the money on EUR/GBP pair. After a couple of hours later....it shot up!!! swee swee
and it was show a nice gain of 150+ pips. My eyes....were so tired at looking at the pc. And after my Korean drama ended at 10pm....I closed all positions. Bagged 1+K for that....2 pairs. Oh....earlier in the day, already bagged close to $500+ for just trading EUR/USD pair.
What I meant by "kopi" money....anything from one to two hundreds dollars hehe. Anything less....I don't want to mention. Frankly....maybe I was lucky with my trades these few days. I hope to continue....by not losing "big" money for the whole month of June then...I can safely say that my gut feel is "okay" for trading forex. If not....it is back to the drawing board ( in this case....back to more training classes ).
Oh....another thing that I found out is "trading discipline", must die die
stick to the trading plan for the day plus only enter trade within a certain set-up. If that is not met....no trade if already open position and it shows negative or wrong direction, immediately closed trade and called it a day. ( no more trade for that day ). Go swimming, feeding fish, sauna, gym...and do other errands but no more looking at the pc. Same for stock trading too.
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