Forex Highlights

Forex Lessons – Beginner Lesson For Wannabe Forex Traders

September 1st, 2010 by admin in Trader Forex with 0 Comments

Forex Lessons

Forex training classes are a great way to learn to trade forex. They are basically a method of getting a good grounding of knowledge from which to springboard a successful trading career. In this article, let me give you your first lesson of forex.

The Big Global Picture

Forex is how much you can sell one currency for to buy another – just like when you go on vacation.

But what affects forex prices is the big global picture. It is not just the economic picture but anything that affects a country.

So, forex prices will also be influenced by war, the threat of war, emigration patterns, the weather and much more. This is what makes forex so fascinating, because it is influenced by pretty much everything. Forex Lessons

Buyers And Sellers

If you look at a forex chart for today, it will look like a bunch of waves, moving up and down. What causes these up and down movements is the pulling and pushing between buyers and sellers of a currency.

At any given time, there can be more people wanting to buy or there can be more people wanting to sell.

Just understand that the price movements, although influenced by global events, are actually drive by individuals in the market. Forex Lessons

Forex Is Not Gambling!

In gambling, whether you are betting on a sportsbook or at a casino, the house has a huge edge against you. It makes it very, very difficult to consistently win.

In forex, the commissions or fees that you pay to trade are minuscule in comparison. This means that, so long as you are disciplined, it is not difficult to make consistent profits.

The only obstacle to that is yourself…

Discipline

After you learn the basics, the most important thing that you need is discipline. Never trade on a “gut feel” and don’t risk more money if you’re losing. This is the mentality of a gambler soon to lose all his money.

Instead, you should trade based on good decisions, based on logic. Remove emotion from the equation as much as you can. Always practice good risk management and don’t risk too much on a single trade.

These are the traits that make the difference between a winning and a losing trader. Forex Lessons

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Become a Fearless Trader- Well the Rules of Fearless Trading

August 26th, 2010 by admin in Forex Tips with 0 Comments

Rules-based Trading is Fearless Trading 

Renowned trading coach Price Headley, author of “Big Trends in Trading”, once wrote about the dangers of letting your ego control your trading decisions, especially the three critical decisions of how much money to risk, when to enter a trade and when to get out.

  “The ego desires to make discretionary decisions because it desires to appear sophisticated, and daring, and to relieve boredom. But the point of trading is not sophistication, or excitement. It is to make money. So the key question to ask is, ‘What is the most effective way to trade?’. And the answer is, ‘Very systematically’.”

  The key to successful trading, he concluded, is the consistent application of clear, well-conceived and objective trading rules. One of the cruelest paradoxes of this incredibly fascinating and challenging pursuit is that trading seems to offer so much freedom, seemingly unlimited freedom to those who are successful at it, yet requires so much regimentation and self-control. An out-of-control trader, whether rookie or seasoned veteran, will crash and burn quickly. A trader in control of his emotions has the game nearly won at the start.

  The problem is, once the game is on, self-control seems to evaporate like water in the Gobi desert. But a good set of trading rules will give the newbie a fighting chance, and keep the veteran in the game long after many of his or her fellow traders have moved on to less stressful pursuits. Your rules don’t have to be sophisticated or designed by a Nobel Prize-winning economist. In fact, the simpler the better – as long as they are clear and as long as you follow them! Otherwise you will succumb, as every trader does on so many occasions, to what the trading psychology guru Mark Douglas called “The Four Primary Fears”.

  In his classic book “Trading in the Zone”, Douglas wrote that all trading errors – every single one – result from succumbing to one of these Four Primary Fears:

  1. The fear of being wrong.

  2. The fear of losing money.

  3. The fear of missing out (on the trade and profits).

  4. The fear of leaving money on the table, or giving back open profits.

  These fears lead traders to second-guess their well-designed systems, causing them to exit before an exit signal is given, or to jump in before an entry signal is given. We’ve all jumped into trades too soon, afraid that the market was going to run away without us. And we’ve all jumped out too soon, whether second-guessing the entry and not waiting for the trade to develop or snatching the quick profit instead of letting the trade play out and hit our target. Witness the Four Primary Fears in action.

  The solution?

  1. Have a well-designed (and profitable) system.

  2. Have a clear set of rules for entering and exiting trades.

  3. Follow your rules!

  A well-designed system allows you to trade securely, even serenely, in the knowledge that over time you will make money, and that the result of any single trade doesn’t matter to the profitability of your system. After all, losses are part of the best systems ever designed. So is giving back some open profits on each trade. To expect otherwise is to expect, literally, perfection! And in this business, as in life, that is not rational!

  So, have faith in your system and faith in your rules and trade well. If your system is a good one you will make money. But perhaps just as importantly, if you follow the rules of your system, instead of reacting to your emotions when deciding whether to enter or exit a trade, the whole enterprise of trading will be much more enjoyable for you.

  Happy Trading!

About the Author
CFD FX Report is a real time tool for clients with an interest in the trading of stock markets, stocks, indices and commodities globally and forex.CFDs (Contracts For Differences) are one of the worlds’ fastest growing trading instruments that allows clients to profit from a rising and falling market. The CFD FX Report is a company comprising of expert traders that analyse the market daily and are able to make recommendations for the following day trades based on this analysis. The CFD FX Report is released everyday at 6.30 p.m. (Singapore time) for review by the clients for the next trading day so you are ready for trading when the Singapore Stock Exchange Opens.
We provide real time sms and email service for our trade ideas as well as full member support. The trading tool that traders needs. Free 1 week trial

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Secrets to Successful Trading: How to Find a Day Trading System That Works

August 26th, 2010 by admin in Forex Tips with 0 Comments

Trading with a system will dramatically improve your chances of making money in the markets.

The next challenge is to find a daytrading system that works. Today you have the chance to choose from more than 300 trading systems available. Unfortunately just 10% of them are trading profitably.

In the next three minutes I will present you the 10 Power Principles for Successful Day Trading Systems, which will help and support you in your research.

Principle #1: Few rules – easy to understand

It may surprise you that the best daytrading systems have less than 10 rules. The more rules you have, the more likely you “curve-fitted” your trading system to the past, and such an over-optimized system is very unlikely to produce profits in real markets.

It’s important that your rules are easy to understand and execute. The markets can behave very wild and move fast, and you won’t have the time to calculate complicated formulas in order to make a trading decision. Think about successful floor traders: The only tool they use is a calculator, and they make thousands of dollars every day.

Principle #2: Trade electronic and liquid markets

We strongly recommend that you trade electronic markets because the commissions are lower and you receive instant fills. You need to know as fast as possible if your order was filled and at what price, because based on this information you plan your exit.

You should never place an exit order before you know that your entry order is filled. When you trade open outcry markets (non-electronic) you might have to wait awhile before you receive your fill. By that time, the market might have already turned and your profitable trade has turned into a loss!

When trading electronic markets you receive your fills in less than one second and can immediately place your exit orders. Trading liquid markets you can avoid slippage, which will save you hundreds or even thousands of dollars.

Principle #3: Make consistent profits

You should always look for a trading system that produces a nice and smooth equity curve, even if in the long run the net profit is slightly smaller. Most professional traders prefer to take small profits every day instead of big profits every now and then. If you trade for a living, you need to pay your bills from your trading profits, and therefore you should regularly deposit profits into your trading account.

Making consistent profits is the secret of successful traders!

Principle #4: Maintain a healthy balance between risk and reward

Let me give you an example: If you go to a casino and bet everything you have on “red”, then you have a 49% chance of doubling your money and a 51% chance of losing everything. The same applies to trading: You can make a lot of money if you are risking a lot, but then risk of ruin is very high. You need to find a healthy balance between risk and reward.

Let’s say you define “ruin” as losing 20% of your account, and you define “success” as making 20% profits. Having a trading system with past performance results let you calculate the “risk of ruin” and “chance of success”.

Your risk of ruin should be always less than 5%, and your chance of success should be 5-10 times higher, e.g. if your risk of ruin is 4%, then your chance of success should be 40% or higher.

Principle #5: Find a system that produces at least five trades per week

The higher the trading frequency the smaller the chances of having a losing month. If you have a trading system that has a winning percentage of 70%, but only produces 1 trade per month, then 1 loser is enough to have a losing month. In this example, you could have several losing months in a row before you finally start making profits. In the meantime, how do you pay for your bills?

If your trading system produces five trades per week, then you have on average 20 trades per month. Having a winning percentage of 70% – your chances of a winning month are extremely high.

That’s the goal of all traders: Having as many winning months as possible!

Principle #6: Start small – grow big

Your trading system should allow you to start small and grow big. A good trading system allows you to start with one or two contracts, and then increase your position as your trading account grows. This is in contrast to many “martingale” trading systems that require increasing position sizes when you are in a losing streak.

You probably heard about this strategy: Double your contracts every time you lose, and one winner will win back all the money you previously lost. It’s not unusual to have 4-5 losing trades in a row, and this would already require to trade 16 contracts after just 4 losses! Trading the e-mini S&P you would then need an account size of at least $63,200, just to meet the margin requirement. That’s why martingale systems don’t work.

Principle #7: Automate your trading

Emotions and human errors are the most common mistakes that traders make. By all means you have to avoid these mistakes. Especially during fast markets, it is crucial that you determine the entry and exit points fast and accurately; otherwise, you might miss a trade or find yourself in a losing position.

Therefore you should automate your trading and look for a trading system that either already is or can be automated. Automating your trading makes it free of human emotion. The buy and sell operations are all automatic, hands-free, with no manual interventions and you can be sure that you make profits when you should according to your plan.

Principle #8: Have a high percentage of winning trades

Your trading strategy should produce more than 50% winners. There’s no doubt that trading systems with smaller winning percentages can be profitable, too, but the psychological pressure is enormous. Taking 7 losers out of 10 trades and not doubting the system takes great discipline, and many traders can’t stand the pressure. After the sixth loser they start “improving” the system or stop trading it completely.

Especially for beginners it is a big help to gain confidence in your trading and your system if you have a high winning percentage of more than 65%.

Principle #9: Look for a system that is tested on at least 200 trades

The more trades you use in your back testing (without curve-fitting), the higher the probabilities that your trading system will succeed in the future. Look at the following table:

Number of Trades 50 100 200 300 500 Margin of Error 14% 10% 7% 6% 4%

The more trades you have in your back testing, the smaller the margin of error, and the higher the probability of producing profits in the future.

Principle #10: Chose a valid back testing period

I recently saw the following ad: “Since 1994 I’ve taught thousands of traders worldwide a Simple and Reliable E-Mini trading methodology”.

That’s very interesting, because the e-mini S&P was introduced in September 1997, and the e-mini Nasdaq in June 1999, therefore, none of these contracts existed before 1997. What kind of e-mini trading did this vendor teach from 1994-1997???

The same applies to your back testing: If you developed an e-mini S&P trading strategy, then you should back test it only for the past 2-4 years, because even though the contract has existed since 1997, there was practically nobody trading it (see chart below):

Now you know how to separate the scam from good working trading systems. By applying this checklist you will easily identify trading systems that work and those that will never make it.

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How to Achieve Currency Trading Success: Part 2

August 24th, 2010 by admin in Currency Trading with 0 Comments

Choosing a Trading Method

While there are many ways to achieve currency-trading success, all methods have the following salient points in common:

1. Simplicity

Most of the best trading systems are simple.

There is no correlation between how complicated a strategy is and how successful it will be.

In fact, the simpler a system the more likely it is to be robust in the face of changing market conditions.

Some of the most successful systems of all time have been extremely simple and you don’t need much mathematical knowledge to understand them.

2. Liquidate Losers Quickly and Run Big Profits:

The basis of any successful trading systems that deals in leveraged products is:

You need to be able to run the big profitable trends and exit losers quickly.

All good trading methods do this, and use strict money management rules, to ensure preservation of equity.

3. Understand your Method

This may sound obvious, but you need to understand your trading method, and the logic behind it, so you can execute it with confidence and discipline.

4. The Importance of Discipline

Currency trading success is rooted in a successful method applied with discipline. This means a trader has a method and follows it. This however is much harder in practice than many traders believe.

When money is on the line all traders emotions come into play and unless they can maintain discipline, currency-trading success will elude them.

Let’s look at some ways to maintain self-control and discipline when making trading decisions:

Firstly, you must be confident in your trading method. You should know exactly what you are going to do:

· When a signal indicates that you should enter a trade

· When a signal tells you to exit

You must execute your trading method in a disciplined fashion; if you don’t, you won’t have a method in the first place!

Secondly, and perhaps the best way to maintain self-control and discipline, is to feel confident in your trading method from the start.

If you have confidence when you execute your trades, you will “know” that over time they will be successful – even if you are suffering a string of short-term losses.

You must execute the buy and sell signals with confidence – these signals will lead to currency trading success in the long run, as you rigidly adhere to your method.

You need to stick with your method through good and bad times, and confidence in the underlying logic, will help you remain disciplined.

The more disciplined you are in trading, the more profits you will make longer term.

You should not underestimate the need for discipline, if you want long-term currency trading success.

If you read Jack Shwager’s Market Wizards, and the New Market Wizards, where he interviews the top traders of all time, you will see how all of them place an influence on discipline.

Currency trading success relies on a number of factors and these are:

Robust trading method + discipline = currency trading success

Remember, when trading any method, it will be of little use to you, unless you have confidence in it and can execute it with discipline.

There are a number of variables involved in longer-term currency trading success and the above are the salient points to keep in mind when deciding how to trade currencies.

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