A Forex broker is a broker dealing in foreign currency, as well as real estate agent working in real estate and property. Simply, a Forex broker is an advisor who advises the foreign exchange market. However, Forex is the ideal place to play with a novice and beginner as there are many critical situations involved with skills much risk. Beginners can quickly get their fingers badly burned. But inexperience is not the only reason to use a Forex broker to trade on the high-risk international currencies.
So Forex broker is an advisor who advises you on the forex market and allows you to work 24 hours a day with major currencies such as euro, yen, pounds, francs, etc. against the dollar on the spot, namely, accordance with current market prices, exchange rates. But the level of profit depends only on their skills, as well as your timely decision.
Although the role of the Forex broker is relatively redundant as a result of technological advances and increased awareness, we can not underestimate its role. Paradigm shift was a new kind of democratizing effect on financial markets and in the years that followed, many banks and brokerages have extended the range of services in a new market for the packaging of their trading online for the retail market, allowing investors to trade more modest on the computer screen - even before the reach of foreign markets. This is where the real role of Forex broker starts.
PIP is nothing special but the price points of interest. In the forex market currencies are always priced in pairs. The price shown is the level at which a market maker willing to buy / sell the currency pair. On the wholesale market, currencies are quoted to four decimal places, with the last placeholder called a point or a pip. A pip in most currencies is one / 10,000 Exchange rate (USD / JPY is / 100, so you can find others).
To see more information about Spread. Like all financial products, forex quotes include terms like "bid" and "ask". "S" offer ", in simple terms is the price that a trader is willing to buy (and clients can sell) the base currency of exchange." Heaven "is the price at which dealer will sell (and clients can buy) the currency basis, in exchange for money against. The difference between the offer and sale price is mentioned that spread. The spread defines the cost of training, which can be recovered with a favorable movement in foreign exchange market. The value of a pip depends on the currency pair being traded, the rate which currency pair is trading and the size of the position being traded.
There are many great Forex brokers, like COESfx that support tight spreads and competitive in four major currencies against the dollar, and a total of 17 currency pairs including USD / CAD and AUD / USD. Some of the main features of COESfx are:
Real-time streaming prices
The certainty of the market price orders
Competitive prices
3.5 Fixed PIP spread
Showing posts with label Forex Education. Show all posts
Showing posts with label Forex Education. Show all posts
Friday, July 29, 2011
Wednesday, July 20, 2011
EUR/USD pair goes up in Asia
Money Making Lounge is back, if you thought your forex blog would be taken down you were wrong. Now back and for real, check the first headline.
The Euro was higher against the U.S. Dollar last week. EUR/USD pair was at 1.4261, 0.33% at time of writing. The pair was likely to find support at 1.4015, Monday’s low, and resistance at 1.4274, Wednesday’s high.
Meanwhile, the Euro was up against the British Pound and the Japanese Yen, with EUR/GBP gaining 0.22% to hit 0.8821 and EUR/JPY rising 0.40% to hit 112.43.
The Euro was higher against the U.S. Dollar last week. EUR/USD pair was at 1.4261, 0.33% at time of writing. The pair was likely to find support at 1.4015, Monday’s low, and resistance at 1.4274, Wednesday’s high.
Meanwhile, the Euro was up against the British Pound and the Japanese Yen, with EUR/GBP gaining 0.22% to hit 0.8821 and EUR/JPY rising 0.40% to hit 112.43.
Tuesday, March 04, 2008
Recommended Forex Book: Technical Analysis of the Currency Market
Title: Technical Analysis of the Currency Market: Classic Techniques for Profiting from Market Swings and Trader Sentiment (Wiley Trading)Author: Boris Schlossberg, B. Schlossberg
Description:
Proven currency-specific trading strategies from one of today's top currency analysts
"If you trade currency, then you need to have this book on your desk. It's the only book you need for technical analysis of the fastest-moving market on the planet."
-Rob Booker, Currency Trader, W.R. Booker & Company
"In plain English, Schlossberg lays out the basics in using technical analysis to trade foreign currencies, from the fundamentals of how the FX market works to the variety of technical strategies and trade management techniques traders can employ. Along the way, he offers entertaining examples and observations as well as simple, easy-to-read charts and diagrams. Anyone interested in getting started in the hugely popular FX market would do well to begin with this book."
-Sarah Rudolph, Executive Editor, SFO Magazine
"Boris Schlossberg has done a fabulous job with this book. It's packed with insightful tips and strategies that are sure to save traders a lot of time and money."
-Cory Janssen, CoFounder, Investopedia.com
"Schlossberg's book is a great resource for traders just starting out in currency markets. His focus on simplicity is critical for a new trader's education on how to make money."
-Andrew B. Busch, Global FX Strategist, BMO Financial Group
Other Recommended Forex Books:
Mastering the Trade
Adventures of a Currency Trader
Monday, March 03, 2008
Forex Charts: Make This Critical Error And Your 100% Guaranteed To Lose!
If you want to make money with technical analysis and forex charts you can - but you mustn't make this common error - most forex traders do and it will lose you money - Guaranteed. Let's look at this error how to avoid it and a better way to make money with forex charts.
The most common error of all is trying to predict forex prices in advance.
You cannot predict!
If you do, you are simply hoping or guessing where prices may go and that won't make you money in anything let alone forex trading. You need to trade on CONFIRMATION only - let's look at this in more detail.
A trader will see a price approach a level of support and buy just above it, thinking they are getting in at a good price - but it's only a good price if the level holds.
All he is doing is guessing what might happen and will lose.
Predicting forex prices is about as accurate as your horoscope so let's look at how to trade on confirmation.
What you need to do is this:
Wait for prices to approach support and get ready to buy - but don't execute your trading signal until you see a clear turn in price momentum. When price momentum has turned then you buy.
Sure you miss the exact bottom - but you wouldn't know that in advance anyway so there is no point in trying to predict. If you trade on Confirmation with momentum you have the odds on your side and that's the only way to trade and enjoy forex success.
How Do You Check Momentum?
You need some momentum indicators and 2 of the best are the stochastic and Relative Strength Index (RSI) how they work is discussed in our other articles in more detail.
I have seen people predicting prices and they have big profitable track records!
Of course you have but there not real and will always have this disclaimer on them:
"CFTC RULE 4.41 - Hypothetical or simulated performance results have certain limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not been executed, the results may have under-or-over compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profit or losses similar to those shown".
Of course anyone can make money in hindsight but that's not predicting the future!
You can't predict forex prices so don't try - make sure you trade the odds on your forex charts and trade on confirmation - You will find your forex trading strategy will make bigger profits!
The most common error of all is trying to predict forex prices in advance.
You cannot predict!
If you do, you are simply hoping or guessing where prices may go and that won't make you money in anything let alone forex trading. You need to trade on CONFIRMATION only - let's look at this in more detail.
A trader will see a price approach a level of support and buy just above it, thinking they are getting in at a good price - but it's only a good price if the level holds.
All he is doing is guessing what might happen and will lose.
Predicting forex prices is about as accurate as your horoscope so let's look at how to trade on confirmation.
What you need to do is this:
Wait for prices to approach support and get ready to buy - but don't execute your trading signal until you see a clear turn in price momentum. When price momentum has turned then you buy.
Sure you miss the exact bottom - but you wouldn't know that in advance anyway so there is no point in trying to predict. If you trade on Confirmation with momentum you have the odds on your side and that's the only way to trade and enjoy forex success.
How Do You Check Momentum?
You need some momentum indicators and 2 of the best are the stochastic and Relative Strength Index (RSI) how they work is discussed in our other articles in more detail.
I have seen people predicting prices and they have big profitable track records!
Of course you have but there not real and will always have this disclaimer on them:
"CFTC RULE 4.41 - Hypothetical or simulated performance results have certain limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not been executed, the results may have under-or-over compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profit or losses similar to those shown".
Of course anyone can make money in hindsight but that's not predicting the future!
You can't predict forex prices so don't try - make sure you trade the odds on your forex charts and trade on confirmation - You will find your forex trading strategy will make bigger profits!
Currency Trading Basics: 4 Critical Points To Consider Before Trading
Here we want to look at currency trading basics and some points which will answer the question: could you win at currency trading? There are 4 points to consider and if you think you can master them, you can enjoy currency trading success.
1. You and Profits
Only you can make yourself successful no one else can.
Sure you can get knowledge from others - but you must learn and apply it by creating your own forex trading system.
A word of warning:
You will see numerous mechanical forex trading systems sold on the net, with simulated track records and none of them will make you money - they all lose. So forget them. The track records are meaningless as they have never been traded - don't be tempted to try them!
You're on your own - but that's the only place to be, if you want to enjoy currency trading success.
2. Working Smart
You don't get paid for effort in forex trading you get paid for being right with your trading signal and that's it.
You can learn all you need to know in about 2 weeks and you're done. It's a fact everything about successful forex trading can be specifically learned by anyone.
This was proved by trading legend Richard Dennis, who taught a group of people to trade in 14 days and they went on to make $100 million! Yes, forex trading is a learned skill - so where do you get the best education?
Well you can get a ton of free info on the net and you should also take a look at some books by the great traders from Amazon.
The best way to trade is to use a simple system, based upon forex charts but keep in mind - nothing complicated!
Simple trading systems work best, as they are more robust in real time trading with fewer elements to break.
Learning a trading method yourself is essential, as you will know how and why it works and this will give you:
3. Confidence
If you do not have confidence in what you are doing, you will never acquire the vital trait all traders' need - discipline.
Most traders who trade don't have confidence in what their doing - they follow news stories or other traders systems and when they hit a few losses, they throw in the towel.
You need confidence to allow you to accept short term losses as a natural part of making big longer term profits. No trading system is perfect, so you need to have confidence when you hit a bad spell.
4. Discipline
Confidence will give you discipline the vital trait all successful traders have.
To be successful you must follow your currency trading system with discipline and execute your trading systems to the rules of the system- through good times and bad.
If you don't have the discipline to follow your trading system you don't have one!
Finally ...
Forex trading is 25% method and probably 75% attitude.
The reason most traders fail is they simply cannot accept responsibility for their actions and blame everyone else - from their broker, to the wife for putting them in a bad mood!
If you are not prepared to accept responsibility and create and understand a framework of rules, you have the confidence to follow with discipline, then you need to forget forex trading and do something else.
Forex trading has huge rewards and is a big boys game and not for cry babies.
So if you understand the above and what you need to do and you're up for the challenge, then welcome to the world of currency trading!
We hope our quick review of the currency trading basics above help you on the road to currency trading success.
1. You and Profits
Only you can make yourself successful no one else can.
Sure you can get knowledge from others - but you must learn and apply it by creating your own forex trading system.
A word of warning:
You will see numerous mechanical forex trading systems sold on the net, with simulated track records and none of them will make you money - they all lose. So forget them. The track records are meaningless as they have never been traded - don't be tempted to try them!
You're on your own - but that's the only place to be, if you want to enjoy currency trading success.
2. Working Smart
You don't get paid for effort in forex trading you get paid for being right with your trading signal and that's it.
You can learn all you need to know in about 2 weeks and you're done. It's a fact everything about successful forex trading can be specifically learned by anyone.
This was proved by trading legend Richard Dennis, who taught a group of people to trade in 14 days and they went on to make $100 million! Yes, forex trading is a learned skill - so where do you get the best education?
Well you can get a ton of free info on the net and you should also take a look at some books by the great traders from Amazon.
The best way to trade is to use a simple system, based upon forex charts but keep in mind - nothing complicated!
Simple trading systems work best, as they are more robust in real time trading with fewer elements to break.
Learning a trading method yourself is essential, as you will know how and why it works and this will give you:
3. Confidence
If you do not have confidence in what you are doing, you will never acquire the vital trait all traders' need - discipline.
Most traders who trade don't have confidence in what their doing - they follow news stories or other traders systems and when they hit a few losses, they throw in the towel.
You need confidence to allow you to accept short term losses as a natural part of making big longer term profits. No trading system is perfect, so you need to have confidence when you hit a bad spell.
4. Discipline
Confidence will give you discipline the vital trait all successful traders have.
To be successful you must follow your currency trading system with discipline and execute your trading systems to the rules of the system- through good times and bad.
If you don't have the discipline to follow your trading system you don't have one!
Finally ...
Forex trading is 25% method and probably 75% attitude.
The reason most traders fail is they simply cannot accept responsibility for their actions and blame everyone else - from their broker, to the wife for putting them in a bad mood!
If you are not prepared to accept responsibility and create and understand a framework of rules, you have the confidence to follow with discipline, then you need to forget forex trading and do something else.
Forex trading has huge rewards and is a big boys game and not for cry babies.
So if you understand the above and what you need to do and you're up for the challenge, then welcome to the world of currency trading!
We hope our quick review of the currency trading basics above help you on the road to currency trading success.
Forex Education: What is The Best Time Period to Trade for Profits?
One of the basics of your forex education is deciding the time span you want to trade in. Sure there are forex trends - but they occur in short, medium and long term time spans but which of these are the best to catch for bigger profits - let's find out.
Forex Day Trading and Scalping
By far the most popular way of trading for novice traders but it's doomed to long term failure - Why?
Because all short term volatility is random and support and resistance levels are not valid you can't get the odds in your favour longer term and you will lose.
Think about it:
Countless millions of traders are trading all with different aims, objectives and skills and to say you can tell what they are going to do in short time spans is rubbish.
You will see a lot forex scalping and day trading systems sold that claim to make money but check the track record and it will say simulated in hindsight and we can all do that!
If you want to learn currency trading, the first thing you need to do is forget day trading.
Forex Swing Trading
Swing trading catches moves that last for a few days to around a week and it's very popular and can be profitable.
This is a great way for novices to start trading because it's exciting, fun and requires very little mental discipline. Profits and losses come quickly and there is plenty of action - you know if you are right or wrong quickly and you can put together a forex swing trading system quickly that is robust and will make you money.
If you like action and are not patient then this is the method for you.
Forex Trend Following
The longer term trends last for weeks, months or years and if you can catch them you can pile up huge gains but be warned you need to be patient to catch the right opportunities and you need discipline and the courage to accept big gains.
If you have the traits of discipline and patience this method can be the most rewarding of all but most traders can't do it.
Why?
Because when they get a profit they get excited and the bigger it gets the more they want to bank it before it gets away. Of course, a trend doesn't just go one way and there are plenty of pullbacks that eat into open profit and watching your equity dip short term by thousands of dollars can be very hard! In the end most traders simply cannot hang on and bank a marginal profit where they could have had a huge one.
Keep in Mind.
You can choose forex swing trading or long term trend following or of course you can mix them both, so think carefully which one suits your personality, before incorporating it into your forex trading strategy.
You can't get the odds in your favour with a forex trading system that trades short term so don't even try it. You need to trade the odds so choose long term forex trends and go for them or swing trade - both work and can bring you currency trading success.
Forex Day Trading and Scalping
By far the most popular way of trading for novice traders but it's doomed to long term failure - Why?
Because all short term volatility is random and support and resistance levels are not valid you can't get the odds in your favour longer term and you will lose.
Think about it:
Countless millions of traders are trading all with different aims, objectives and skills and to say you can tell what they are going to do in short time spans is rubbish.
You will see a lot forex scalping and day trading systems sold that claim to make money but check the track record and it will say simulated in hindsight and we can all do that!
If you want to learn currency trading, the first thing you need to do is forget day trading.
Forex Swing Trading
Swing trading catches moves that last for a few days to around a week and it's very popular and can be profitable.
This is a great way for novices to start trading because it's exciting, fun and requires very little mental discipline. Profits and losses come quickly and there is plenty of action - you know if you are right or wrong quickly and you can put together a forex swing trading system quickly that is robust and will make you money.
If you like action and are not patient then this is the method for you.
Forex Trend Following
The longer term trends last for weeks, months or years and if you can catch them you can pile up huge gains but be warned you need to be patient to catch the right opportunities and you need discipline and the courage to accept big gains.
If you have the traits of discipline and patience this method can be the most rewarding of all but most traders can't do it.
Why?
Because when they get a profit they get excited and the bigger it gets the more they want to bank it before it gets away. Of course, a trend doesn't just go one way and there are plenty of pullbacks that eat into open profit and watching your equity dip short term by thousands of dollars can be very hard! In the end most traders simply cannot hang on and bank a marginal profit where they could have had a huge one.
Keep in Mind.
You can choose forex swing trading or long term trend following or of course you can mix them both, so think carefully which one suits your personality, before incorporating it into your forex trading strategy.
You can't get the odds in your favour with a forex trading system that trades short term so don't even try it. You need to trade the odds so choose long term forex trends and go for them or swing trade - both work and can bring you currency trading success.
Thursday, February 21, 2008
Forex Broker Guide
Introduction
The following is a list of questions you may like to ask yourself, your broker and other traders about a particular firm you have in mind. You can use this checklist to narrow down your selection of forex companies to fit your requirements. You might also like to read the forex broker ratings page on this site to see how other traders are rating and reviewing other brokers.
The following links will also give you some background information on U.S. FCMs (Futures Commission Merchants).
- Selected Financial Data for FCMs
- NFA Background Affiliation Status
1. Word of Mouth
- What do other traders say about the broker?
- What is their customer service/dealing desk like?
2. Safety of Funds
- Is the broker regulated?
- What regulatory organisation are they registered with and what protections does this afford you?
- Are client funds insured against fraud at the firm?
- Are client funds insured against bankruptcy of the firm?
3. Execution
- What business model do they operate? i.e. Market Maker, ECN or NDD?
- How fast is their order execution?
- Are orders manually or automatically executed?
- What is the maximum trade size before you are put on manual execution?
- Are all clients trades offset?
4. Spread
- How tight is the spread?
- Is it fixed or variable?
- Is it larger for mini accounts?
5. Slippage
- How much slippage can be expected in normal and fast moving markets?
6. Margin
- What is the margin requirement? e.g. 0.25% (max 400:1 leverage), 0.5% (max 200:1 leverage), 1% (max 100:1 leverage), 2% (max 50:1 leverage), etc.
- Does it change for different currency pairs or days of the week?
- Is it the same for standard and mini accounts?
7. Commissions
- Do they charge commissions? (Most market makers commissions are built into the spread, whereas ECN's charge a small fee)
8. Rollover Policy
- Is there a minimum margin requirement in order to earn rollover interest?
- What other requirements or conditions are there for earning rollover interest?
9. Trading Platform
- How reliable is it during fast moving markets and news announcements?
- How many different currency pairs can you trade?
- Do they offer an Application Programming Interface (API) for automated trading systems?
- Does it offer any other special features? (e.g. One click dealing, trading from the chart, trailing stops, mobile trading etc.)
10. Trading Account
- What is the minimum account opening balance?
- What is the minimum trade size?
- Can you adjust the standard lot size traded?
- Can you earn interest on unused equity in your account?
GoForex
The following is a list of questions you may like to ask yourself, your broker and other traders about a particular firm you have in mind. You can use this checklist to narrow down your selection of forex companies to fit your requirements. You might also like to read the forex broker ratings page on this site to see how other traders are rating and reviewing other brokers.
The following links will also give you some background information on U.S. FCMs (Futures Commission Merchants).
- Selected Financial Data for FCMs
- NFA Background Affiliation Status
1. Word of Mouth
- What do other traders say about the broker?
- What is their customer service/dealing desk like?
2. Safety of Funds
- Is the broker regulated?
- What regulatory organisation are they registered with and what protections does this afford you?
- Are client funds insured against fraud at the firm?
- Are client funds insured against bankruptcy of the firm?
3. Execution
- What business model do they operate? i.e. Market Maker, ECN or NDD?
- How fast is their order execution?
- Are orders manually or automatically executed?
- What is the maximum trade size before you are put on manual execution?
- Are all clients trades offset?
4. Spread
- How tight is the spread?
- Is it fixed or variable?
- Is it larger for mini accounts?
5. Slippage
- How much slippage can be expected in normal and fast moving markets?
6. Margin
- What is the margin requirement? e.g. 0.25% (max 400:1 leverage), 0.5% (max 200:1 leverage), 1% (max 100:1 leverage), 2% (max 50:1 leverage), etc.
- Does it change for different currency pairs or days of the week?
- Is it the same for standard and mini accounts?
7. Commissions
- Do they charge commissions? (Most market makers commissions are built into the spread, whereas ECN's charge a small fee)
8. Rollover Policy
- Is there a minimum margin requirement in order to earn rollover interest?
- What other requirements or conditions are there for earning rollover interest?
9. Trading Platform
- How reliable is it during fast moving markets and news announcements?
- How many different currency pairs can you trade?
- Do they offer an Application Programming Interface (API) for automated trading systems?
- Does it offer any other special features? (e.g. One click dealing, trading from the chart, trailing stops, mobile trading etc.)
10. Trading Account
- What is the minimum account opening balance?
- What is the minimum trade size?
- Can you adjust the standard lot size traded?
- Can you earn interest on unused equity in your account?
GoForex
Essential Elements of a Successful Trader
Courage Under Stressful Conditions When the Outcome is Uncertain
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 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.
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.
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 can correct any 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.
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.
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.
Jimmy Young
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 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.
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.
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 can correct any 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.
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.
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.
Jimmy Young
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