Forex markets trend and if you look at a forex chart the big trends last for weeks or months and it's these trends you need to lock into to make big profits. Forget, short term moves forex trend following means longer term and bigger profits.
If you want to forex trend follow and make a lot of money with low risk, use the tips below in your forex trading strategy and you could soon be making triple digit gains.
First - you need patience the high odds breaks were looking for don't come around every day, you will get probably 5 - 6 big high odds trades per currency each year.
You need to wait for them.
Don't worry, I know traders who make triple digit gains trading just a few times a year. Remember - you are judged on the accuracy of your trading signal and market timing, nothing else and to be accurate you need to wait.
Second - Buy breakouts.
It's a proven fact that most big trends start from new market highs or lows and while it may appear, you have missed a bit of the move, the odds favor a continuation.
You need breakouts though that are valid and not all breakouts are the same in terms of the odds.
The best breakouts, feature several tests in several different time frames and the wider they are spaced apart the better. Generally, the more uncomfortable you feel and the more people who disagree with your trading signal the better - remember only a small minority win.
Most traders hate breakouts, they want to wait for a pullback ( which never comes) to get in at a better price - grit your teeth the odds are in your favor!
You should also use some momentum oscillators to confirm the move. We don't have time to discuss them here ( look up our other articles ) but they will tell you price velocity is moving in your favor and increase the odds of success.
NEVER - Buy or sell a breakout which is NOT supported by momentum.
Once the breakout occurs, your stop is easy - right below the breakout point.
The real key to forex trend following and milking the trends for all there worth is the way you move your stop. Most traders trail to quickly and get bumped out.
They then see the trend go back the way they though piling up thousands of dollars!
Don't let this happen to you. WAIT.
You want the trend well underway, before trailing your stop and you want to keep it behind random volatility ( if you don't know what standard deviation of price is make it an essential part of your forex trading education).
Accept that to hold the longer term trends, you are going to have to take short term price swings against you which eat into your open equity in the short term.
Don't worry to much about this.
You are after the bigger price at the end of the trade. Once a trend is in motion, we like to trail stops behind the 40 day ma. Sure, we give a bit back at the end but you don't know when a trend is over, or how long it will last, so there is no point in predicting.
Keep in mind, if you caught just 50% of every major trend, you would be very rich.
Does the above sound simple?
It is in terms of theory - but you must be disciplined in the execution and holding of your trades. No second guessing what the market may, or may not do!
Trend following forex, with a simple robust forex trading system based upon breakouts, will make money and will continue to make money and can help anyone achieve currency trading success.
Tuesday, July 1, 2008
Forex Trading Mistakes - 3 Deadly Mistakes Which Will Destroy Your Equity
I have been teaching forex trading for around 20 years and there are 3 forex trading mistakes which I see traders make time and time again and wipe themselves out. If you make any of these mistakes you will lose...
1. Learning The Wrong Information
Traders continue to try and trade with logic which doesn't work and fall victim to myths and marketing companies providing miss information. Here are some of the most common mistakes
Trying Forex Scalping or Day Trading.
Simply one of the dumbest forms of trading you can attempt. It's pretty obvious you cannot predict what millions of forex traders will do in a few hours, so don't try.
Predicting Markets in Advance
This is just another word for hoping and guessing and you won't get rewarded for that in life, or forex trading. Trade the reality of price or your predictions will be as accurate as your horoscope.
Following Experts or News Stories
Prices don't move on the above in isolation and although there good stories, that's all they are. Prices move on investor perception of the facts not the facts themselves.
Following Forex Robots
Good idea in theory but most of the ones you see for sale, don't have track records, just paper back tested simulations of profits. If they made as much as the vendors claim, the vendor wouldn't sell it to you for a few hundred bucks.
2. Not Appreciating the Skills Needed to Win
The skills you need in forex markets are totally different to those you need in any other occupation.
You need to realize this and prepare yourself to have a totally different mindset. Here are some problems that most traders cannot overcome
Working Hard Wont Help You
In most jobs the more effort you put in, the more you get out but not in forex trading. You get rewarded for being right with your trading signal and that's it and the time it took is immaterial, your judged on results.
Being Clever Wont Help You
How many traders have I seen who are clever and think they deserve success? Loads and they all lose.
Try and be to complicated in forex trading and you will lose, because simple systems work best and always will, as they are more robust with fewer elements to break.
Running with the Pack
Most traders cannot detach themselves from the herd and in society that's good - but in forex trading the pack lose and you must isolate yourself from majority opinion and its very hard to do trading signals when no other traders agree with you and the news is talking the market the other way!
You Have to Look Stupid to Win
You compete in an arena where only you can be wrong and the market is always right.
You are going to be wrong a lot of the time and the market is going to make you look stupid and forget all the nonsense you read about having 90% accurate trading and no drawdown and get prepared for weeks of losses.
Fact is you need to accept these losses to win and stick with your plan.
Most traders want to be perfect and win all the time and that's not the world of forex. You need to keep your eye on the long term profits you can make but accept short term drawdown.
3. Failures in Discipline
The previous two mistakes lead to this one. You have heard how important it is and you wont win unless you can execute your forex trading system with discipline - if you don't, you don't have a system in the first place!
Being disciplined means learning the right forex education and having total confidence in your method. From confidence, you will get discipline and this means you can stick with your plan, though periods of losses and achieve long term currency trading success.
Trading forex is not easy and you wouldn't expect it to be with the rewards on offer - but get the right education, avoid the above mistakes, get the right mindset and you can succeed and earn a lot of money.
How to Handle Your Money While Doing Forex Trading
Now if you are a new forex trader then your best bet as always is to manage your money in a correct way. Bad money management can ruin you chances of making success out of your forex trading foray. There are literally thousands of people who venture into the world of currency trading but then beat a hasty retreat as they do not have good money management practices and hence lose their money very quickly.
Here are a few tips that can be very helpful while take a leap into the dungeons of the currency trading with little or no knowledge. I will call them rules for the trade each and every time you do those trades.
Always make sure that you have a put a limit on the number of dollars you want to trade or for that matter what will be the size of the trade. The other way to say this is to tell that how many trades you can leave open at any given point of time. In forex markets leverage plays a big role so make sure that your leverage does not exceed 10% of the entire account. By this I mean that you will only trade for $20 if you have $200 in your account. This is known as pip value and you should try to restrict it to $ 2 for $2000 account. I am reasonably sure that this will help you in your currency trading.
Now make a ground rule about how much you are wiling to accept as risk and stop your losses when that threshold is reached which means that when you trade plan ahead and effective planning is key to success. Set a limit for your stop loss so that you do not lose money fast or infinitely and set a limit to your profit too as that will help in narrowing the risk bandwidth.
So plan ahead and plan for both loss and profit.
Manage your risk and manage it to la level of 2% per trade.
Do not over leverage your money.
Remember it is easier to get swayed when you are making money and throw caution to winds but the fact is that will only decrease you chances of success in the long run. Strategize as if you are in marathon and not in a 100 meter dash. That is the key to your success in the forex markets.Remember money management will also help in every aspect of the forex trading including reaping in the profits and also maximizing them.
Here are a few tips that can be very helpful while take a leap into the dungeons of the currency trading with little or no knowledge. I will call them rules for the trade each and every time you do those trades.
Always make sure that you have a put a limit on the number of dollars you want to trade or for that matter what will be the size of the trade. The other way to say this is to tell that how many trades you can leave open at any given point of time. In forex markets leverage plays a big role so make sure that your leverage does not exceed 10% of the entire account. By this I mean that you will only trade for $20 if you have $200 in your account. This is known as pip value and you should try to restrict it to $ 2 for $2000 account. I am reasonably sure that this will help you in your currency trading.
Now make a ground rule about how much you are wiling to accept as risk and stop your losses when that threshold is reached which means that when you trade plan ahead and effective planning is key to success. Set a limit for your stop loss so that you do not lose money fast or infinitely and set a limit to your profit too as that will help in narrowing the risk bandwidth.
So plan ahead and plan for both loss and profit.
Manage your risk and manage it to la level of 2% per trade.
Do not over leverage your money.
Remember it is easier to get swayed when you are making money and throw caution to winds but the fact is that will only decrease you chances of success in the long run. Strategize as if you are in marathon and not in a 100 meter dash. That is the key to your success in the forex markets.Remember money management will also help in every aspect of the forex trading including reaping in the profits and also maximizing them.
How Has The Internet Opened Up The Forex Industry?
Traditionally forex trading was always the preserve of the rich and wealthy, and was generally carried out by large financial institutions, either for themselves or for wealthy clients. That's all changed, however, since the internet was invented.
Forex trading is now open to all adults around the world who have access to the internet. As the internet and it's usage has grown and grown, the number of forex brokers offering the ability to trade the markets has also grown. Now anyone can trade forex, whether you're wealthy or not, because many firms allow you to start trading with just a small deposit of a few hundred dollars. So you just need to open an account, make a deposit and start trading.
So it's very easy to start trading forex, however making a profit is a different matter. In order to do so you need to learn a number of skills first of all. You obviously need to learn the basics such as how to place a trade and what the different terminology means, as well as learning how to read price charts and how currency pairs move.
You need to understand fundamental analysis and technical analysis. Fundamental analysis is basically economic data and news announcements that impact upon certain currencies, and technical analysis is the study of charts and price movements to spot recurring patterns that can help you to make future trading decisions.
The internet has made this analysis a lot easier because you can access breaking financial news as it happens online, and you can use the many real-time charting software packages that are available to analyse the charts and make trading decisions. These are available either as a standalone package or you can access them via your forex broker who will often supply charts for free.
Another reason why the internet has opened up the forex industry is because you can now share ideas and trading strategies with other forex traders through live chat rooms and forums. These can be absolutely invaluable resources if you are just starting out and need advice from more experienced traders because it will help shorten the steep learning curve. It's quite easy learning how to trade, but learning to trade profitably is another matter altogether.
So overall the internet has had a major impact on the forex industry because it has enabled the wider community to trade the markets rather than trained professionals working for large banks. Many people have been drawn to forex trading because of the unlimited gains that can be made, particularly if leverage is used. However the fact that it is so readily available means that it is easy for people to lose a lot of money as well, particularly if they don't have a solid trading strategy, so there are pros and cons to the opening up of the forex industry.
Forex Fundamental Analysis - Prices Do not Move in Line With the Facts!
Secured Loans
www.accepted.co.uk |
How many traders trade breaking news stories and believe the above? Loads and they are all going to lose. If you are using forex fundamental analysis you can but you must be aware of one key fact and factor it in to your forex trading strategy and its this...
Forex Fundamentals don't move to the facts - they move to how investors perceive the fasts and this means trying to trade breaking news is doomed to failure.
This is obvious if you look at the past fact:
Markets rally when there most bearish and crash when there most bullish. We all have the same facts to look at but you me and millions of other traders draw our own conclusions from these facts.
We all have them now at the click of a mouse and institutional investors have no advantage, as they did in years gone by.
So how do you trade the fundamentals?
You can trade them and here you have to understand and humans behave and think.
Human psychology on the whole is ruled by greed and fear and they will always push prices to far up or down, in relation to these emotions, prices then break, return to fair value and then the same pattern repeats again and again.
This is obvious from any forex chart and short term price spikes never last.
Most savvy traders look at the big long term fundamentals that drive price and then use technical indicators to detect overbought and oversold levels to enter trading positions and take profits.
This is an effective way of trading as the long term fundamentals in forex markets last for months or even years. The reason for this is the currency reflects the underlying economic cycle of the country they represent and these cycles last for months and years.
You can of course just use forex charts, as they take into account the fundamentals as well.
All they assume is that all known fundamentals will show up in price action and they also measure psychology as well, as human behaviour shows up in repetitive price patterns on the chart.
For most forex traders using forex charts is time efficient and means you trade the reality as it is with no guessing and you are seeing all the facts and more importantly, what investors think of them right before your eyes.
So don't be tempted to trade breaking news stories or listen to all the convincing analysis you hear from experts -there just stories and cannot be traded.
Will Rogers once famously say:
" I only believe what I read in the papers"
He was joking of course but how many traders read a news story and try and trade it. So no matter how convincing the news is remember - it's not the news itself that's important, you need to look at human psychology.
Forex fundamentals analysis is hard on its own and doesn't give you the whole picture, so trade the reality you see on a forex chart and you will not only see the fundamentals but how they are perceived all at the same time.
Subscribe to:
Posts (Atom)
