Courage Under Stressful Conditions When the Outcome is Uncertain
by Jimmy Young of EURUSDTrader
All the foreign exchange trading knowledge in the world is not going to help, unless you have the nerve to buy and sell currencies and put your money at risk. As with the lottery “You gotta be in it to win it”. Trust me when I say that the simple task of hitting the buy or sell key is extremely difficult to do when your own real money is put at risk.
You will feel anxiety, even fear. Here lies the moment of truth. Do you have the courage to be afraid and act anyway? When a fireman runs into a burning building I assume he is afraid but he does it anyway and achieves the desired result. Unless you can overcome or accept your fear and do it anyway, you will not be a successful forex trader.
However, once you learn to control your fear, it gets easier and easier and in time there is no fear. The opposite reaction can become an issue – you’re overconfident and not focused enough on the risk you're taking.
Start by analyzing yourself. Are you the type of person that can control their emotions and flawlessly execute trades, oftentimes under extremely stressful conditions? Are you the type of person who’s overconfident and prone to take more risk than they should? Before your first real trade you need to look inside yourself and get the answers. We believe we can help you correct deficiencies before they result in paralysis (not pulling the trigger) or a huge loss (overconfidence). A huge loss can prematurely end your trading career, or prolong your success until you can raise additional capital.
Both the inability to initiate a trade, or close a losing trade can create serious psychological issues for a trader going forward. By calling attention to these potential stumbling blocks beforehand, you can properly prepare prior to your first real trade and develop good trading habits from day one.
The difficulty doesn’t end with “pulling the trigger”. In fact what comes next is equally or perhaps more difficult. Once you are in the trade the next hurdle is staying in the trade. When trading foreign exchange you exit the trade as soon as possible after entry when it is not working. Most people who have been successful in non-trading ventures find this concept difficult to implement.
For example, real estate tycoons make their fortune riding out the bad times and selling during the boom periods. The problem with trying to adapt a 'hold on until it comes back' strategy in foreign exchange is that most of the time the currencies are in long-term persistent, directional trends and your equity will be wiped out before the currency comes back.
The other side of the coin is staying in a trade that is working. The most common pitfall is closing out a winning position without a valid reason. Once again, fear is the culprit. Your subconscious demons will be scaring you non-stop with questions like “what if news comes out and you wind up with a loss”. The reality is if news comes out in a currency that is going up, the news has a higher probability of being positive than negative (more on why that is so in a later article).
So your fear is just a baseless annoyance. Don’t try and fight the fear. Accept it. Have a laugh about it and then move on to the task at hand, which is determining an exit strategy based on actual price movement. As Garth says in Waynesworld “Live in the now man”. Worrying about what could be is irrational. Studying your chart and determining an objective exit point is reality based and rational.
Another common pitfall is closing a winning position because you are bored with it; its not moving. In Football, after a star running back breaks free for a 50-yard gain, he comes out of the game temporarily for a breather. When he reenters the game he is a serious threat to gain more yards – this is indisputable. So when your position takes a breather after a winning move, the next likely event is further gains – so why close it?
If you can be courageous under fire and strategically patient, foreign exchange trading may be for you. If you’re a natural gunslinger and reckless you will need to tone your act down a notch or two and we can help you make the necessary adjustments. If putting your money at risk makes you a nervous wreck its because you lack the knowledge base to be confident in your decision making.
Patience to Gain Knowledge through Study and Focus
Many new traders believe all you need to profitably trade foreign currencies are charts, technical indicators and a small bankroll. Most of them blow up (lose all their money) within a few weeks or months; some are initially successful and it takes as long as a year before they blow up. A tiny minority with good money management skills, patience, and a market niche go on to be successful traders. Armed with charts, technical indicators, and a small bankroll, the chance of succeeding is probably 500 to 1. It's also good to know how currencies relate to each other. There are tools like the universal currency converter that make it easy to do this for you.
To increase your chances of success to near certainty requires knowledge; acquiring knowledge takes hard work, study, dedication and focus. Compile your knowledge base without taking any shortcuts, thereby assuring a solid foundation to build upon.
Tuesday, November 27, 2007
top forex trading system
Each Forex trading system can be as individual as the person using it. One currency exchange trader will find a trading system that works perfectly for them and another Forex trader won't think it's worth the paper it's printed on. If you know something about trading in the Forex market, you know there are certain times of the day your should trade specific currency pairs to increase your odds of making winning trades. Trading off-hours, using the best Forex trading system could be the difference between winning and losing. Try to stay out of the market during the slow times as well.
Experienced Forex traders know the best times to trade in the Forex market. The best times are between the hours of 2AM and 11AM EST. At 2AM EST the European markets are just starting to open and at 3AM EST the London session starts to begin. At 7AM to 8AM EST the New York session start to come alive. At 8:30AM EST there are many news releases (mostly US ones) that can cause market to move. This is when price can move in a big way. These are the times most Forex trader love and this is where the money is made, and lost. The London session starts to close around 11:00am EST and the Forex market tends to slow down until the Asian market start up again around 7PM EST. Then everything starts all over again for the next day. That's why a good Forex trading system is so important to a Forex trader.
To make the most of a Forex trading system, you need one Forex trading strategy for trading at news times and another one to trade for the other times. A good trading strategy for trading the news is to do your homework beforehand. Know what the key news releases are for the day and find out what the consensus numbers are for each news report. There are many Forex news web sites, so I suggest looking at no less than 3 news sites to make sure the consensus numbers are close to each other. Sometimes Forex news websites get the wrong numbers, so doing your homework early, you will easily know if the consensus numbers are on the mark or not. At news release time, what you are looking for are the numbers with a shock value. Numbers that do not meet expectations but exceed or fall shot of the expected numbers. These are the news events to trade. You want to know beforehand what these shock value numbers are, and take action when they get released.
When news is out of the way for the day or it's a very slow news day, that's when you must have a Forex technical trading system. Forex technical trading is when you use forex charts and price action. Forex chart patterns, trendlines (trendline analysis), Fibonacci (Fibonacci numbers/Fibonacci studies) and a many other Forex trading tools can be used for analysis. Just remember to keep it simple. Do not go crazy with the number of tools you decide to use. I recommend picking two or three and work with them at all times. Give each one at least a months time to decide if it's working for you before you move on to another one. Some folks may find they don't like using Fib retracements for example, while other traders like myself, couldn't imagine trading Forex without them. All Forex traders are different so you need to find the best tools and Forex trading systems that work best for you.
There are lots of fantastic online Forex training web sites available to you today and most are free. You should read all you can about Foreign currency trading before jumping in to it. Forex trading is a great business and like any new profession, it takes a lot of time to learn and do it right. Just take your time and remember to get the best Forex trading system that works for you and stay with it.
Saturday, November 24, 2007
forex training tips
Before spending any amount of money on any Forex trading course or Forex training program there are some important aspects you need to take in consideration. There are many training programs available, but not every one of them suits the needs of every trader.
The first thing you should be looking in a Forex training program is the content of the material. Unfortunately, most courses or training programs focus or spend most of the time on basic concepts. Though these basic concepts are important, spending most of the course on them won’t help the trader to make consistent results.
The following subjects are what I consider the most important aspects of trading and every training program or trading course should address:
Forex trading basics. Review basic concepts such as: margin, type of orders, a little background, bid/ask, rollover, etc. You need to make sure you understand every single concept to perfection.
Main drawbacks of Forex traders. Being aware of the common mistakes made by Forex traders and knowing how to handle them will prevent new traders from making those mistakes.
Technical and fundamental analysis. These are the two main approaches adopted by Forex traders. Knowing how to properly apply each concept will definitely put the odds in your favor.
The three pillars of Forex trading. I consider that these three subjects have the most impact on every trader trading account.
Forex trading system development. Having the right system is a must if you want to have consistent profitable results. Having a system that doesn’t fit you will cause a series of problems that will make your trading account vanish away (second guessing the system, not following your system, etc.)
Money management. This is considered by many successful traders to be the most important single aspect of trading. Money management helps to increase your profits geometrically and at the same time limit your losses (i.e. a good risk reward ratio of about 2:1 will make you money in a Forex trading system that is right only 38% of the time.)
Trading psychology. Being aware and knowing hot to handle the psychological barriers that affect every trader decision will put the odds in your favor.
Other important aspects every training program should include are: Developing habits for success (such as discipline patience, taking responsibility of every action, commitment, etc.,) understanding and taking our trading as a business, risk and trade management.
forex quotes
We know that the FX market is the largest in the world and that your broker or institution that you are trading with is collecting quotes from a centralized feed or individual quotes comprising of interbank rates.
So how are these forex quotes made up? Well, as we previously mentioned currencies are traded in pairs and are each assigned a symbol. For the Japanese Yen it is JPY, for the Pounds Sterling it is GBP, for Euro it is EUR and for the Swiss Frank it is CHF. So, EUR/USD would be Euro-Dollar pair. GBP/USD would be pounds Sterling-Dollar pair and USD/CHF would be Dollar-Swiss Franc pair and so on.
You will always see the USD quoted first with few exceptions such as Pounds Sterling, Euro Dollar, Australia Dollar and New Zealand Dollar. The first currency quoted is called the base currency.
When you see forex quotes you will actually see two numbers. The first number is called the bid and the second number is called the offer (sometimes called the ASK).
If we use the EUR/USD as an example you might see 0.9950/0.9955 the first number 0.9950 is the bid price and is the price traders are prepared to buy Euros against the USD Dollar. The second number 0.9955 is the offer price and is the price traders are prepared to sell the Euro against the US Dollar.
These quotes are sometimes abbreviated to the last two digits of the currency such as 50/55. Each broker has its own convention and some will quote the full number and others will show only the last two.
You will also notice that there is a difference between the bid and the offer price and that is called the spread. For the four major currencies the spread is normally 5 give or take a pip.
To carry on from the symbol conventions and using our previous EUR quote of 0.9950 bid, that means that 1 Euro = 0.9950 US Dollars. In another example if we used the USD/CAD 1.4500 that would mean that 1 US Dollar = 1.4500 Canadian Dollars.
The most common increment of currencies is the PIP.
Currencies in the FOREX market are traded on a price interest point (pip) system. Each currency pair has its own pip value.
Since we have a currency PAIR such as EUR/USD, we need a way to talk about its price value. Whenever you see a FOREX price quote, you will see something listed along the lines of the following:
USD/JPY: 112.46 - Seconds later - 112.51
The first part before the first dash refers to the bid price. In other words it's what you obtain in JPY when you sell USD. In example above, the bid price is 112.46. The second component, which comes after both dashes and usually occurs minutes or seconds later, is used to obtain the ask price, this is what you have to pay in JPY if you buy USD.
In this example, the ask price is 112.51. The difference between the bid and the ask price is called the spread. In the example above, the spread is .05 or 5 pips.
USD/JPY: 123.50
When you see a Forex currency pair price quote, like the one above, just remember that that last digit of the price (after the decimal point) is referred to as the pip. So if you see a quote (118.50) and then a qu.ote in one minute of (118.51), then you should automatically know that the price rose by 1 pip.
Similarly, if you see a price quote of 118.58 and then after 5 minutes it's 118.50, the price dropped by 8 pips. The pip is always the last decimal place of the currency price quote.
In the FOREX market your main objective is to capture as many profitable pips as possible!
In the "Majors", this would include USD/JPY, USD/CHF and USD/CAD. For these currencies and many others, quotes are expressed as a unit of $1 USD per the other currency quoted in the pair such as JPY.
In the example above, a quote of USD/JPY 123.50 means that one U.S. dollar is equal to 123.50 Japanese yen.
When the U.S. dollar is the base unit and a currency quote goes up, it means the dollar has appreciated (become stronger) in value and the other currency has deppreciated (become weaker). If the USD/JPY quote increases to 124.01, the dollar is now much stronger than the JPY because with that same $1 USD you will be able to buy more yen than you could earlier.
Of course there are exceptions to this rule and these are the British pound (GBP), the Australian dollar (AUD) and the Euro (EUR). In these cases, you might see a quote such as GBP/USD 1.4366, indicating that one British pound equals 1.4366 U.S. dollars. These currency pairs are like this because they are stronger than the USD in value.
With these three currency pairs, where the U.S. dollar is not the base rate, a rising quote means that the USD is weakening, because it now takes more U.S. dollars to equal one pound, euro or Australian dollar.
To sum up this point, if a currency quote goes up then it increases the value of the base currency. A lower quote means that the base currency is weakening.
There are some currency pairs that do not involve the U.S. dollar. These currencies are called cross currencies, but the idea is exactly the same. For example, a quote of GBP/JPY 210.95 signifies that one GBP is equal to 210.95 Japanese yen.
Nearly all the brokers you will deal with will work all this out for you. They may have slightly different conventions, but it is all done automatically. It is good however for you to know how they work it out. In the next section we will be discussing how these seemingly insignificant amounts can add up.
In summary, currency traders must become familiar also with the way currencies are quoted. The first currency in the pair is considered the base currency; and the second is the counter or quote currency. Most of the time, U.S. dollar is considered the base currency, and quotes are expressed in units of US$1 per counter currency (for example, USD/JPY or USD/CAD). The only exceptions to this convention are quotes in relation to the euro, the pound sterling and the Australian dollar - these three are quoted as dollars per foreign currency.
Forex quotes always include a bid and an ask price. The bid is the price at which the market maker is willing to buy the base currency in exchange for the counter currency. The ask price is the price at which the market maker is willing to sell the base currency in exchange for the counter currency. The difference between the bid and the ask prices is referred to as the spread.
The cost of establishing a position is determined by the spread, and prices are always quoted using five numbers (for example, 134.85), the final digit of which is referred to as a point or a pipFriday, November 2, 2007
forex strategies
Wealth System Solutions is a company that researches companies with low-cost programs for trading the forex to see if they are profitable or not. The forex, or foreign currency exchange market, is the largest financial market in the world. In fact, the daily trading volume of the forex is now over two trillion dollars. The most recent program Wealth System Solutions has tested is the Forex-Kiss system.
Only banks and large institutions used to be allowed to trade the forex. Clients used to have to provide a million dollars to have their funds traded in this market and the managed account was charged 30% just to have it managed by a certified, professional trader. Some companies have made profits only because of their earnings in this, the world's largest financial market.
In the past decade, the small investor has been allowed to enter the forex market and brokers will allow a trader to enter the market with as little as $250. However, this is a dangerous practice for the trader, especially the forex currency trading beginner.
The low account is open to swings in the market and vulnerable to losses and the novice trader ends up losing his or her funds and not being able to trade. Large traders count on this and when there are winning trades in the market, there also have to be losing trades. Even so, an individual can safely open a mini forex account with as little as $1,000 and feel comfortable as a beginning trader.
95% of new traders lose their accounts. With proven, profitable and inexpensive systems, the forex trader can be part of the elite 5% who actually earn money in this lucrative market. The Forex-Kiss system is based on an automated system developed for trading the forex market using robots to trade using the Meta Trader 4 trading platform (a platform is the software where you make and manage your trades).
One of the nice aspects of trading a forex system is that forex brokers allow you to sign up for a free, practice trading account. They generally give you anywhere from $10,000 to $100,000 in "play money" enabling the trader to try a system and feel comfortable with it before they enter the market with real money in a live account.
In a recent, private conversation, an expert trader using the Forex-Kiss system let slip that the trader was earning 25% per week using that particular system. As Wealth System Solutions has tested this forex system, we cannot dispute these findings. A trader can indeed double their money monthly using this automated trading system.
In summary, the Forex-Kiss trading system is a recommended forex trading strategy because of its low cost, automation, and profitability. It was recently rated as the number one recommendation at Forex Money Online.
