FOREX — Dealing With Your Losses

One of the most important rules of Forex trading is to keep your losses as small as you possibly can. With small Forex trading losses, you can stick it out longer than those times when the market moves against you, and be well positioned for when the trend turns around. The one proven method to keeping your losses small is to set your maximum loss before you even open a Forex trading position.
The maximum loss is the greatest amount of capital that you are comfortable losing on any one trade. With your maximum loss set as a small percentage of your Forex trading effort, a string of losses won't stop you from trading for any particular amount of time. Unlike the 95% of Forex traders out there who lose money because they haven't begun to use wise money management rules to their Forex trading system, you will be ok with this money management rule.
To use as an example, If I had a Forex trading float of $1000, and I began trading with $100 a trade, it would be reasonable for me to experience three losses in a row. This would reduce my Forex trading capital to $400. It would then be decided that they're going to bet $200 on the next trade because they think they have a higher chance of winning after having lost three times already.
If that trader did bet $100 dollars on the next trade because they thought they were going to win, their capital could be reduced to $250 dollars. The chances of making money now are practically nil because I would need to make 150% on the next trade just to break even. If the maximum loss had been determined, and stuck to, they would not be in this position.
In this case, the reason for failure was because the trader risked too much money, and didn't apply good money management to the play. Remember, the goal here is to keep our losses as small as possible while also making sure that we open a large enough position to capitalize on profits and minimize losses. With your money management rules in place, in your Forex trading system, you will always be able to do this.

The Power of Small Consistent Returns

For most of us, 'safe investments' are limited to the rate of return that we can earn on our savings accounts or long-term deposits. The return would depend on the interest rate applicable in each country. At the time of writing, November 2007, the interest rate earned on a savings account in Australia is around 7% a year. That is a return of 0.57% a month. Despite this fact, many have preconceptions regarding the type of returns they can make from trading the financial markets.
A novice trader puts on a winning trade and gains between ten to fifty percent of his trading account. He forms a belief that, by trading, he can quickly become a millionaire. Indeed, if we assume a 20% return per month on a $10,000 trading account, we can expect $89,161 by the end of our first twelve months of trading. What if we assume an estimate of 50% return per month? We would have $1,297,463 by the end of the year. Of course, the problem with expectations like these is that they are unrealistic. Even most of those who claim to have made these types of returns have only done so in simulated environments, in trading competitions using game accounts, for example, where real money was not at risk.
It is possible to make these types of returns for a short while but I have not heard of anybody achieving such steep returns consistently year after year. After testing hundreds of trading systems and ideas I have come to believe that systems, which seem to promise exorbitant returns, turn out to be over-optimized for the period they have been tested on. Or even worse, they have flaws in their logic or assumptions.
Lately, I have been looking at the performance reports of trading firms in the USA. What would you say if I told you that the top trading firm over the last ten years only made an average return of 25% a year and the median trading firm made somewhere around 15% a year? Well, this is in fact what I am telling you.
A 20% and a 15% return a year is 'only' 1.877% and 1.171% return a month, respectively. I am sure that many novice traders and investors reading this article will have a mix of reactions towards these figures. Some might laugh and scoff at such 'paltry' returns, secretly believing that they can do a lot better than just 1.877% a month. Others may be surprised or even disappointed because their dreams of living rich will not come as quickly as they hoped.
Setting aside your initial reaction to these figures however, let us refocus on what these numbers actually mean in the real world. I would like to show you that these types of returns are very powerful. With time, these seemingly small, but consistent, gains will give you enormous profits in the future.
15% A YEAR RETURN ON A $10,000 ACCOUNT
Let us start with the assumption of having a $10,000 account, making at least 1.171% return a month, or 15% a year, trading the market. Based on these, the projections are:

1. $11,500 (15% growth) after 1 year.
2. $13,223 (32% growth) after 2 years.
3. $20,108 (101% growth) after 5 years.
4. $40,432 (304% growth) after 10 years.
5. $163,475 (1535% growth) after 20 years.
6. $660,960 (6510% growth) after 30 years.

25% A YEAR RETURN ON A $10,000 ACCOUNT
Let us now assume having a $10,000 account, making at least 1.877% a month, or 25% a year, trading the market Based on these, the projections are:

1. $12,500 (25% growth) after 1 year.
2. $15,625 (56% growth) after 2 years.
3. $30,519 (205% growth) after 5 years.
4. $93,140 (831% growth) after 10 years.
5. $867,512 (8575% growth) after 20 years.
6. $8,080,034 (80700% growth) after 30 years.

It is very important to note that not all fund managers make money. Returns of 15% or 25% a year belong only to those money managers who were consistently profitable. Furthermore, these types of returns are out-of-bounds for most investors. To invest in such schemes, most of the fund managers I have been looking into will deal with you only if you are a 'sophisticated' investor with a spare $500,000 minimum to invest. In fact, the highest earner only took on investors with a minimum of $25,000,000 US dollars to invest. (I will not mention any names here, however, you can do your own research by typing "commodity trading advisors" in your favourite search engine.)
I do not know about you but I certainly do not have 25 million dollars lying around, to hand over for someone else to manage. The dilemma, however, is that life is way too short for me to be satisfied with a 7% annual return either. I guess this is why you and I have taken the decision to trade and invest in the financial markets ourselves. At least there, we have full control and responsibility over the returns we get. It has its risks, but we can all avoid being reckless if we keep realistic expectations.

Forex Risk Management

This aspect is one of the most important aspects you will ever read about trading.
Why is it important? In reality, we are in the business of making money, and to be able to do so we need to learn how to manage it well in order to prevent continuous loss. Ironically, this is one of the most overlooked areas in trading. Many traders are just anxious to get right into trading with no regards to their total account size. They simply determine how much they can lose in a single trade and get into the trade.
Trading on Forex, the investor has opportunities to multiply his money, but he also risks losing future profit and much more, the invested capital. Deviation from expected profit average is what determines the investor's risk on the financial market. Risk management methods are applied before and after opening positions. The main risk management method is applied to reduce losses.

Using Protective Stop-Loss to Control Risk

It is advisable to place a protective stop-loss for every open position. Stop-loss is a point when the trader leaves the market in order to avoid an unfavourable situation. When opening a position it is recommended to use stop-loss to insure against extra losses.
While in active trade it is good to protect your fund against potential total loss. That is the central purpose of money and risk management. Too often, the beginning trader will be overly concerned about incurring losing trades. Trader therefore lets losses mount, with the hope that the market will turn around and the loss will turn into a gain.
Almost all successful trading strategies include a disciplined procedure for cutting losses. When a trader is down on a position, many emotions often come into play, making it difficult to cut losses at the right level. The best practice is to decide where losses will be cut before a trade is even initiated. This will assure the trader of the maximum amount he or she can expect to lose on the trade.

Risk a Tolerable Account Portion Per Trade Position

To manage your invested fund well, you have to decide before the opening of any position how much of the money you can afford to lose in case the trade goes negative from your projection. For instance, you may decide that for every opened position your risked money will be 3%, 5% or 10% of the total fund, by so doing you have known prior to the execution of the trade the highest amount that can ever go out of your money on that single trading position, by so doing you have even taken away emotion.
The factor needed to work out this are:

1. The fund balance in your account.
2. The number of pip set as stop loss.
3. The lot size (volume) traded.

For example:
Let's say your fund balance is $5000 and your predetermined stop loss pip is 50 pips (selecting the number of your stop-loss pips should be from your analytical research) and you are ready to risk only 2% of your fund for a position.
What do you do?
Work out the 2% of $5000
Which is = $100.
Implying that you can afford to lose $100 in case of any eventuality.
Then, Divide $100 by 50 pips
It will be $2
Your lot size must be 1 pip to $2. That will be 0.2 lot size.
So you must use 0.2 lot size.
As much as possible try not to be greedy, to be less greedy is to be able to minimize risk.
In a way leverage can help to control risk: if your leverage is relatively low it will limit you against opening a trade with high lot size.

Re-Evaluate Your Strategies

The other key element of risk control is overall account risk. If trade is going against you, at what point will you stop and re-evaluate your trading strategy? Is it when you lost 30% of your money or 50% or 80% or when you lost the entire money? Assess your market analytical methods and see if there would be need for further perfection or even a change.
Also, check out if your set lot size is too large for your entire account size.
Risk management and fund management go hand in hand, if you manage your FUNDD well you are equally reducing your risk, also if you control your risk well you are equally protecting your fund.

Free Forex Strategies: Where to Get Started?

Forex trading is a specialist job. It requires a good understanding of the market trends and forex news. However, the timing of entry and exit plays a crucial role in determining your profit levels. With free forex strategies, you can time your investments properly and ensure profitable trading.
Five Most Popular Free Forex Strategies
Here are some free forex strategies that will assist you in improving your chances of trading profitably:
Buying on margins: When buying on margins, the broker allows a higher degree of leverage to the trader. Thus, the trader can invest an amount higher than the actual value of his live trading account. However, the trader faces high risks, as profits are highly dependent on trading entry and exit. Only an experienced trader can make good profits while buying on margins.
Historical levels: It refers to the maximum and minimum range in which the value of a currency pair has fluctuated during a given period in time. Analyzing the level gives a general idea of the possible values of the currency in the near future. Analyzing historical values is a time taking task, but it is the safest strategy for novice traders. There is a very low probability of a currency value deviating from the historical levels without any major news outbreak.
Loss Order: With the stop loss order strategy, a trader determines the value of a currency pair in advance. This helps to minimize the risk of major losses and increases the possibility of trading profitably.
Managed accounts: This strategy is aimed at those individuals who want to invest in the currency market, rather than being interested in physical trading. Managed accounts work similar to the mutual funds arrangement. The individual invests money with a forex trading company. Experienced traders with the company use investors' money for forex trading. The profit generated or loss incurred is shared among the individual investors. Although managed accounts are not very profitable, they save investors' time and efforts required for trading profitably.
Simple Moving Average: Also known as SMA, it is the average exchange value for a specific pair of currency over a period of time. You can make investment decisions by relying on SMA values for any given currency. Investing in currencies that have stable SMA values is a safe way to trade forex.
by Kitz S
The Author Kitz by profession is a digital marketer. He finds his interest in Forex trading and writes for forex niche websites. Note: Free forex strategies do not guarantee financial returns. However, they provide a safe and secure passage to smart trading. To learn free forex strategies, you can visit http://forex-rateit.com/. Forex Rateit! is an online resource to educate users about the nuances of forex trading and it helps you with up-to-date information on the forex market, including news, comprehensive forex broker reviews and educational articles.

Discretionary Trading vs. Robots

I have been trading for more than 15 years now.
When I first started, in 1994 as far as I remember, there wasn't a lot of softwares on the market and of course we didn't talk about forex yet.
But, "magic systems" were already spreading over the web. You were finding different kind of gurus selling their black box that only professionals use, of course, promising you a fortune in a matter of days or even hours...
One after the other, the gurus disappear leaving place to others.
Today, you can find thousand of "wonderful" systems if you type "trading system" on any search engine. You may read numerous articles promoting the success of such expert advisor or trading robot.
Speaking of robots, it's amazing how people believe in automatic trading. They think they can go to work in the morning, leaving behind them this wonderful robot catching pips on the forex market all alone. Have you been given the chance to get this ultimate trading system only used by banks or institutionals ? Just be patient, a smart guy will soon propose a good one, maybe the best.
I use an ironic tone on purpose because I am tired to see all this disillusion from people who still believe in Santa Claus. Get back on earth, my friends, there is no easy way to earn money on the financial markets. Most of the traders, living from their activities, won't share their work with you.
The good news is you can learn to trade by yourself. Today, you can get very good trading courses on the web, free or not. You have access to valuable ressources if you take the time to select websites.
Now, what are we supposed to do with all these trainings and advices, you might ask?
Well, if you want to be successfull in trading, whatever the market, you will have to learn to become a trader. You will have to develop your system, or trading approach, and adopt a good attitude through a back-tested money management (the one you feel confortable with and which works).
So, as a summary:

• learning the trading basics from books or online ressources (technical analysis etc.)
• develop you own trading system which could be as easy as efficient
• use a money management system which is a necessary condition to make your trading system profitable
• learn how to behave properly while trading (have you heard of the emotions control...)

When I use the word "system", I don't make reference to any automatic trading or robot. Besides the fact I can't stand automatic systems, it has been proven that systematic trading doesn't work on the long term.
Why is that ? We know that patterns always repeat themselves cycle after cycle so we could imagine a easy way to benefit from this repetition. The answer relies in the human being behavior on the market. Traders are filled with emotions like greed or fear. Even if most traders now recognize the usual patterns and knows how to follow a trends, most of the time they let themselves overwhelmed by emotions when the market doesn't react like it should...
That leads this question: why discretionary trading works?
Dicretionary approach consists in following a trading system (because you always need some king of system) through the human eye. A trader, controlling his emotions and analysing the market with objectivity, has the ability to understand the market crowd represented by all the traders. He will be able to understand the excesses and adjust his trading accordingly.
A robot will enter a position as soon as a resistance or support is broken or when a 38% fibonacci retracement has been reached etc. Of course a trader would initially adjust his robot parameters according to his strategy but he won't be able to "play" new market conditions for exemple.
The market likes to defeat all automatic systems which tend to setup logical stop losses and profit targets. Have you ever seen the wonderful spikes on the forex market, in particular after news releases...
A discretionary approach will never prevent you from losses. Any trader will suffer from losses. It is part of the activity. If you don't want to loose, you should try no-risk investments offering 2-3% a year.
But at least, you will always control what you are doing, knowing exactly what the market is leading and if this is a good moment to enter a position or not.
You have obviously a set of rules, explaining the "when & how" you enter a position, but you may adjust your strategy according to certain market conditions.
Be careful though. You need to stick to the plan you implemented when developing your trading system and money management. It's a very important aspect of the trading. But once again, there is no automatic entry position. For the exits, it's a bit different because you can set a profit target in advance and exit the position automatically. You developp this aspect in your money management rules.
I hope I gave you the desire to become a real trader using a discretionary approach, far from automatic systems which definitly don't work. Trading can be fascinating if you give yourself the means to do it properly.

REST — the Key to Success in Financial Investments

In order to be profitable in any form of investment, a trader needs to put every defining factor into perspective. Although the market is dynamic in its nature, it is important for every trader to have some established rules that govern their trading. This means that by fixing some aspects of your trading, you are indirectly taking care of your emotions, and thus giving yourself an edge to succeed in your chosen investment. “REST” above stands for Risk, Entry, Stop loss, and Target, and in the following paragraphs, I will explain why it is important to fix the above parameters if one aims at becoming successful in trading.
RISK: This is one easily overlooked aspect of trading. It is nothing but wise for any trader to be conscious of the risk that they are taking in any particular trade. Before taking a position, traders need to know how much money they might lose, and make sure it is within their comfort zone before they place the trade. Without proper risk management , traders cannot make defined claims on the profitability of their trading approach. For example, a trader might be over- risking during a losing streak or under-risking while they are scoring home runs. There are many different models of risk management in the investment world; however, there is one very nice model that requires a trader to risk a fixed percent of their equity in any trade that they take. The aim here is to increase your profitability during winning streaks while reducing your potential losses when the losing trades surface. This is the model that I personally use for my trading and it works well.
ENTRY: Based on the experience that I have garnered over the years, I have come to believe that it is also very important for traders to have a fixed entry for their trades. This might sound a little confusing; nevertheless, it is pretty simple. Anyone who has been around the block for a while should know that round numbers are good levels of support and resistance. These are numbers that end in .50 or .00; for example, 1.4200, 1.4250, etc. The reason behind this is that most of the big investors tend to base their entry and exit at round numbers, thus causing a change in market bias at those price levels. That being said, not all round numbers serve as entry prices, but when they are in the neighborhood of a bullish or bearish confluence, they tend to serve as near perfect entry levels.
STOPLOSS: before entering a trade, it is important to have pre- determined stop loss levels and actually place the stop loss order while you are placing your entry order. Under no circumstance should you move your stop loss further away from entry price after you have entered a trade. If there is need to trail your stop loss, it should be towards the entry or against the direction of current market bias as a way of minimizing potential loss. One big mistake a lot of traders make involves the idea of mental stop loss. This basically means that the trader determines a stop loss level; however, they don’t actually place the stop loss order but are willing to manually close the position should price get to that level. Please, this approach is not acceptable in the world of profitable trading. I mean, if you already know the price level you are willing to exit your trade, why can’t you just place it as a stop loss order? It is that simple. Market volatility can change instantaneously, thus moving price hundreds of pips in a couple of minutes. For example, on 6th September, 2011 during the SNB intervention, the Swiss franc pairs moved more than 800 pips in less than 5 minutes! Imagine you were using mental stop loss and stepped out to go and get a cup of coffee just to come back 5 minutes later and see your live account in red. Remember, such news is not usually posted on economic calendars. So, be warned.
TARGET: Just like in the case of stop loss, it is also necessary to have a pre- determined profit target level before entering a trade. Don’t let your emotions take charge of your trading by deceiving you to believe that the current market volatility will continue in your favor past your target level, thus causing you to get greedy by modifying your target in search for more pips or worse still, remove it completely. Fix your targets and make sure they are logical also. The market usually shows repetitive price patterns, and you can benefit from this by reading price action and setting your target levels accordingly.
It is only when you fix the “REST” above that you can have some rest and leave the rest to the market.

Market Mechanics — Understanding Market Movements in the Foreign Exchange Market

Have you ever wondered what causes price movements in your forex charts? Or why the market usually retraces at some point even in clearly established trends? Or better still, why some retracements finally become strong enough to form a whole new trend? This article is aimed at answering the questions above. Notice that a good understanding of market mechanics will definitely help you as a trader by fine- tuning your entry, exit, and stop loss levels, thus yielding better trading results.
Before we delve into the topic, I will like to explain four major reactions that lead to price movements, and in what direction each of them effects their movement in the market.

• Buyers entering the market: definitely, buyers entering the market will create a bullish reaction, thus causing upward price movement.
• Sellers entering the market: in a similar manner, there would be a downward price movement when sellers enter the market thereby creating a bearish reaction.
• Buyers leaving the market: when buyers are leaving the market, it gives a similar reaction as sellers entering the market. Therefore, this will cause a downward price movement.
• Sellers leaving the market: sellers leaving the market will create a bullish reaction, thus causing upward price movements.

At every point in time while the market is open, a combination of some or all of the above is occurring. This means that the final price movement you actually see on your chart is the resultant of the market vectors listed above. For example, if we are in an uptrend, and are spotting bullish market reaction, it means that we have more net buyers than sellers which are causing the resultant upward movement. Now, as the swing tops out, those buyers who have been scoring profits all along will begin to bank their profits, thus buyers leaving the market. When this is happening, it causes a downward price movement as indicated above which we term retracement. Also, some sellers who were able to predict the end of the bullish swing will also jump in thereby augmenting the downward retracement. As price retraces to a bullish confluence below, those sellers, who entered at the top of the bullish swing, will begin to take their profits( sellers leaving the market), and more buyers will enter the market hoping to continue with the trend to the upside- the general result being a net bullish market reaction. The opposite is the case for a bearish trend.
So, what happens during a trend change? Most trend changes are signaled by fundamental analysis or by bigger investors massively closing out portions of their position which are usually huge enough to break levels of confluence in the previous direction of the trend. When this happens, emotion sets in, and other traders around the world will be keen in taking positions against the previous trend. This action increases the net volume in the new direction, thus creating a whole new trend.

Scalping in Forex Trading

Foreign exchange trading can be done short term or long term. Almost all of the day traders are short term traders who open positions every day and close those positions before the close of the day. Some traders use fundamental research as a trading system. They are generally long term traders opening a trade for two weeks or some months. Scalping is an example of the strategies to trade forex on a short term basis. It's a trading style where little price openings made by bid / ask spreads are exploited. It routinely involves closing a position within just a few mins or perhaps 2nd. Scalping means making 2-5 pips per trade ; it is predicated on the proven fact that almost all of the time the markets are consolidating. To explain the majority of the time there are no important movement in the markets. Scalpers look for the period when the market is consolidating and ranging like when between the closing of the US currency markets and the opening of the European currency markets. In this period forex markets incline to range for hours without much movement. This is the time when scalpers like to trade. However, the more you trade, the higher your trading cost becomes. For instance if the broker gives a four pips spread to you than this four pip is your trading cost per trade. You'll have to make more than four pips per trade to start making profits. To become successful at scalping you want in depth knowledge of technical research. You must have an idea of the way to establish over / under brought, support and resistance levels, trendlines, trading channels etc before entering into a trade. Forex brokers do not like scalpers. Plenty will try and ban you on one pretext or another if you are using scalping as your trading technique. So, first check with your broker before adopting this style of trading. To make profit with scalping, you want to scalp many times in a day. At the end of the day, the pips made should be more than the pips lost. To make good profit with scalping you may have to use high leverage. Is it a good thing? Is leverage dangerous? Yep , it is similar to a dangerous weapon that cuts all ways. Leverage works in your favor so long as you are on the right side of the markets. But it'll finish you if you get caught on the incorrect side of the market. Understand leverage before you employ it.

EUR/USD Analysis - 27 February 2009

I'm back from my extended holiday in Thailand and am ready to start blogging again. Thailand was amazing by the way and I will definitely be going back later in the year. Thanks to Matt, one of my blog readers, for showing me round Phuket. I had a great time.
I want to start by looking at the EUR/USD pair. Before I left I wrote this post on 19 January explaining why you should look out for a breakout below 1.4218 and 1.4141. Well as it turned out the price fell sharply and fell below these two levels shortly after I wrote this post, and my prediction of a significant fall has actually come true.
However we are now at a very interesting point and it's not easy to predict where we go from here. If you go back to the low of 2009, ie the beginning of March, and plot fibonacci levels based on the highest point which occurred in November of last year, you can see that the price has hit the highly significant 61.8% level already. This level was around 1.3483 and the price has since rebounded slightly to 1.3616.
So this fibonacci level could act as a crucial support level and we may well see the price slowly creep upwards towards the EMA (200), which currently stands at 1.4218. Indeed I think this is most likely scenario, but if the price were to close below 1.3483 in the coming weeks, then it could easily retest last year's lows in my opinion.
Anyway going back to my January prediction, it's worth noting how much money you can potentially make if you look for possible breakouts on the longer term charts. These two levels were highly significant and once they were taken out, there was always likely to be  heavy fall. You don't always have to trade the short-term charts. Just a handful of these breakout trades can generate some very healthy profits.

Forex Trading - Why Investors Love Trading Forex Currencies?

Every day more folk wish to learn about currency trading. What's forex trading and why is it becoming so favored, especially among sole investors? Currency exchange is short for "FOReign EXchange." currency trading is sometimes called currency exchange Trading, Currency Trading or FX Trading.
The forex market is a money market where currencies of different countries are traded. Some of the most well liked currencies traded are:

• Euro
• United States Dollar
• Australian Dollar
• Euro
• Japanese Yen

Foreign currencies are continually traded. Banks and other official establishments help the trading of foreign currencies. Investments go up and down in worth based on currency exchange rates. Currency exchange transactions involve one entity purchasing a number of one currency in exchange for paying some another. Currency trading is highly favored, particularly with individual backers.
The most important reasons for this are following:

1. Trading can be done independently from home
2. Trades are placed at the push of a button and are activated instantly
3. Trading is available 24 hours a day, 5 days a week
4. High volumes are traded making fills easy
5. High volatility in the forex market makes for great profit opportunities
6. Money management is easy with automated stop features
7. High leverage accounts available
8. Small capital is required to trade (some accounts can be as small as $100)
9. Brokerage fees are a small, fixed amount
10. Trading strategies can be totally automated

The forex market is an example of the biggest and most liquid finance markets around the planet. The typical daily volume in the world forex market in May 2008 was around $3 trillion. Each day thousands are wanting to learn currency trading and because of its booming popularity it continues to expand at the rapid rate of almost 40% every year.

The Top Forex Currency Pairs in Forex Trading

The Foreign exchange exists because multi-national companies and states need to buy and sell products / services from outside sources. To do that, they need to exchange their home currency with that of other nations.
As you know, not all currencies have the same purchasing power so nations, banks, and firms exchange their money with each other just as holiday makers do when traveling abroadsame idea, simply a LOT bigger scale! In reality, the Currency exchange is the single biggest monetary market on the planet and upwards of 1.8 trillion greenbacks are traded each daybetween the hours of five p.m. EST Sun. through four p.m.EST Fri.
Between those hours, the currency market is open and there are always brokers out there prepared to buy and sell positions. However, unlike the NYSE, there's no centralized exchange but rather an informal network of PCs supplied by finance corporations, central banking organizations, and other giant players which help help the trades.
The currency market basically trades many different currency pairs. The base currency is the first one in the pair and was employed to line up the trading account. The counter currency is the second in the pair and is often known as the terms currency. A characteristic lot is $100,000 and a stockholder might have an interest in the currency pair Dollars / CAN for example. That implies the financier would buy $100,000 worth of Canadian greenbacks with the base currency ( $ ) at this exchange rate to open a position.
Whilst there are lots of different currencies exchanged on the Currency exchange, financiers are suggested to focus only on currencies that trade with the $ . The Dollars backs virtually ninety percent of all trades on the Currency exchange and it's one of eight main players in the market, including : U.S. Greenback ( Bucks ) Brit Pound Sterling ( GBP ) Euro dollar ( EUR ) Canada Buck ( CAN ) Australian Greenback ( AUD ) Swiss Franc ( CHF ) New Zealand Greenback ( NZD ) Eastern Yen ( JPY ) By sheer volume alone, the Greenbacks / EUR and Greenbacks / GBP are the 2 preferred currency pairs on the Currency exchange based on volume. However, this does not actually mean that they are always the best investment options at any given point. The currency pairs with the best pip movement are also the most volatile and dangerous. The trick for any financier is to spot the currency pair that has the best potential for pip movement with the least volatility.
Only research of technical info can offer that information but there are brokers out there offering this info as an element of their service package so it's a wonderful idea to see what is offered before signing on the dotted line with any explicit broker. Again, the hottest currencies aren't always going to be the most successful so be certain to investigate plenty of charts and track price movements between different pairs over the same period to help find the best pair for you which will give the best profit potential and the least volatility.

Online Currency Trading Speeds Up

Online trading flourished in the dot-com boom and remains a well-liked way for individual stockholders to control their portfolios. Long past are the times when one wanted to call a broker to trade stock and the high costs related to such one on one transactions. Conventional online trading is conducted employing a Web browser and an online broker. To set an order, a customer logs on to a broker's site and the broker submits it to the market.
But even this strategy may lead to a slower execution of the order. New advances in technology have made the method quicker and more effective. Direct Access Trading, a. K. A DAT, has quickly become the choice for both casual and heavy stockholders. One company helping people harness the power of this technology is RushTrade. Using special software, shoppers place orders to buy and sell instruments that are routed to the market using direct access technology.
The software investigates which route will permit for the best execution. Direct Access Trading can shave anywhere from a few seconds to a couple of minutes off exchange times. By executing orders faster, financiers get the best price available without needing to wait for an agent to execute the order. Quicker exchange speed isn't the sole benefit of Direct Access Trading over standard online trading, lower-cost bulk transactions are another and. Traders find such speed and cost-effectiveness fascinating, irrespective of whether or not they trade a number of times per quarter or many times per day. Firms like RushTrade have structured commission schedules that fit any sort of investor.

Why Forex Trading is better than Stock or Commodities Trading

My purpose for writing this article is to show to you the benefits of trading on the currency market. However, there's one parable that I need to dispel before I'm going further. The parable is that there's a difference between trading and investing. To dispel that parable I quote from Al Thomas, President of Williamsburg Investment Company, who wrote If it is not going Up, do not buy It. He claimed Everybody who invests is a trader, only the period of time is different.
it's a lesson that I took seriously after taking a thrashing in the market in two thousand. So now, let's compare features of currency trading to those of stock and commodity trading. Liquidity - The currency market is the most liquid money market on the planet around 1.9 trillion bucks traded common-or-garden. The commodities market trades around 440 bn. bucks a day, and the US market trades around two hundred billion greenbacks a day. This makes sure better trade execution and stops market manipulation. It also guarantees simply executable trading. Trading Times The currency market is open twenty-four hours a day ( except weekends ) meaning that in the USA it opens at 3:00 pm Sun. ( EST ) and closes Fri. at five hundred ( EST ), permitting active traders to pick the times they need to trade. Commodities trading hours are all over the board depending on which commodity you are trading. Including extended trading times US stocks can be traded from 8:30 am to 6:30 pm ( ET ) on weekdays. Leverage depending on your FOREX account size, your leverage could be 100:1, though there are Foreign exchange brokers that offer leverage of nearly 400:1 ( not that I would ever endorse that kind of leverage ).
Leverage in the stockmarket can be as high as 4:1, and in the commodities market, leverage varies with the commodity traded but it can be quite high. As the commodity markets are not as liquid as the currency market, its leverage is intrinsically riskier. Though I wasn't shut out of a commodity trade by the day limit, the fear was always in the back of my mind. Trading costs Exchange costs in the currency market is the difference between the buy and sell cost of each currency pair. There are no brokerage fees. For both the stock and the commodity markets, there are exchange costs and brokerage costs.
Even if you use cut price brokers, those charges add up. Minimum investment You can open a currency trading account for as little as $300.00. It took $5,000 for me to open my futures trading account. Focus 85% of all trading transactions are made on seven major currencies. In America stock market alone there are forty thousand stocks. There are just over 2 hundred commodity markets, though a few are so illiquid that they are not traded except by hedgers.
As you can see, the less number of instruments permits us to study every one closer. Trade execution In the currency market, trade execution is sort of immediate. In both the equity and commodity markets, you count on a broker to execute your trades and their results are often inconsistent. Whilst all these features make trading the currency market extremely interesting, it does needs plenty of education, discipline, commitment and patience.

Trading Without A Stop Loss Is The Quick Way To The Poorhouse

One of the most basic errors inexperienced forex traders make is trading without using stop losses. However this is one of the most important lessons you will learn as a trader because a solid stop loss strategy is vital if you want to make long-term profits.
A lot of people start trading the markets and do okay until a trade suddenly moves sharply against them. This can easily happen when trading forex because certain pairs can move a hundred points or more in a matter of minutes, particularly after important economic data announcements. This can result in a large loss of capital and can even wipe new traders out completely.

Some of these people will have been scared off the markets altogether and will probably never be drawn to forex trading again, but others will realise that they need to implement tight stop losses in order to preserve their capital and make money in the long run.

Indeed a solid stop loss strategy can make the difference between making and losing money. For example if you target 50 points per trade and have a stop loss of 50 points also you may find that having a tighter stop loss of say 25 points may increase your overall profits.
It obviously depends on your trading strategy, but for the most part it's generally better to set a target price that's further away than your stop loss. This is because this way your winning percentage of trades doesn't need to be so high in order to make decent profits.
The best strategy in my opinion is to let your winning trades run as long as possible. You can either leave them open until the price move seems to be running out of momentum, or you can do what I do and close half the position quite early for a decent enough profit and let the other half run, moving the stop loss to your initial entry point so it's essentially a free trade.
Whichever strategy you employ, the important point to remember is that you must use stop losses if you're serious about becoming a successful forex trader.

(If you would like full details of my main forex trading strategy please subscribe to my newsletter by filling in the short form above).

High Probability Forex Trading

High probability forex trading is all about taking positions where the odds of you making a profit are massively in your favour. So whether you are a short-term or long-term trader you always want to be looking for positions where you are more likely to win than lose.

This sounds obvious but most traders don't take probabilities into account when trading, which is a shame because it's quite easy to do, and could result in them being far more selective about their trading, and therefore more profitable.
All you need to do is to rate each potential trade out of 10 regarding the probability of the trade being a winning one, before you enter a position. So for example if you are thinking about entering a short position, and the technical indicators heavily back you up, for example MACD and TRIX have crossed down, RSI and Stochastics are in overbought territory, and EMA's have turned downwards, then you may rate your chances of winning as good and may give this set-up an 8, 9 or even 10 out of 10.
Therefore this trade would clearly be worth entering because the odds of you winning are high. If however, the technical indicators are conflicting with each other, for example, then you may only rate this trade as a 5 or 6 out of 10, which means it probably wouldn't be worth trading.
I use this system myself and only trade positions that I have assigned an 8 or higher. This ensures that my win ratio is always quite high, and it prevents me from taking any impulsive or risky trades.
This is why I like trading my 4 hour trading strategy (available by signing up to my newsletter) because the EMA crossovers that it highlights are nearly always around 8 out of 10 or higher, based on past results. So they therefore have quite a high success rate.
This is also why I don't like to trade off of 1 or 5 minute charts because whatever system I try (and I've experimented with a lot of systems and strategies in my time), I very rarely find trades that I am very confident of and that therefore merit a high rating out of 10. Nearly every trade is borderline and therefore around a 5 or 6 out of 10 at best.
So next time you trade the forex markets, you may like to try giving each of your potential trades a rating out of 10, based on the probability of it being a winning one, and only trade those coming in at 8 or higher. This way your win ratio will probably be a lot higher and your profits should hopefully increase because you are not trading those borderline trades that you shouldn't have traded in the first place.

Forex Exit Strategies: The Two Part Exit Strategy

In forex trading the exit strategy really is very important. Many people spend all of their time developing a winning system, and then once they've done so they will employ a strict stop loss policy to minimize their losses. However they will then neglect the exit strategy because they are just happy to be making some money, but in the long run you really do need to develop an exit strategy that will maximize your gains.
One of the very best strategies you can use is the two part exit strategy. This is the exit strategy I use myself when I'm trading my 4 hour trading system, and it's arguably the main reason why this system is so profitable.
I mainly trade the GBP/USD, EUR/USD and USD/JPY pairs using this method and my exit strategy is always the same. As soon as the position is in profit by 50 points (or 40 points if trading the USD/JPY pair) I will close half the position and let the other half run, moving my stop loss up to break-even.

This way not only do you guarantee a profit from nearly every trade you enter, but you can also get yourself into a free trade position with the second half of the position very early on, so you can hold out for the really big gains if you so wish.

The great thing about this strategy is that even if a trade doesn't work out, it will nearly always move at least 50 points in your favour before reversing, so you will often profit from the bad trades as well as the good ones.
This is exactly what happened yesterday on the GBP/USD pair. The EMAs that I use for this particular strategy crossed upwards on the 4 hour chart and I went long at 1.6402. This trade didn't work out as planned but it still went up around 70 points which was more than enough to bank my usual 50 point profit with half the position. The stop loss for the second half of the position was then moved up to break-even and it was later triggered, but this was still a profitable trade overall because of the two part exit strategy that I use.
The hardest part is deciding where to exit the second half of your position when trades do move in your favour. This is probably where my system could be improved slightly, because I usually exit a position based on gut instinct mainly, using a few technical indicators in conjunction with established support and resistance levels as guidance.
However the overall point I want to get across is that you really should consider using a two part exit strategy when trading forex because this will allow you to target the really big points gains whilst also ensuring that you still make some money from the less successful trades as well.
This is a strategy that many of the professional traders use, and if you want further proof of this you only have to look at the new Forex Income Engine 2.0 course from Bill Poulos. Each of the three day trading methods included in this course use a two part exit strategy in much the same way.

When Is The Best Time Of The Day To Trade Forex?

I've recently received an email from a recently retired businessman who is intending to spend 3 or 4 hours a day trading the forex markets, and just wanted to know which hours of the day are the easiest to make money.
I may have answered this question before on my blog but I thought it was worth another mention anyway. The very best session to make money (on a short-term time frame) is between 08.00 and 12.00 GMT in my experience. If you focus your attention on the GBP/USD and EUR/USD pairs during this time then you will have ample opportunities to make some decent returns.
So why is this the best time?

Well for a start you can concentrate purely on technical analysis because apart from the occasional announcement at 09.30, there are very few external factors than can influence the markets during this time. This is not the case a few hours later when the US market opens and the big market-moving data releases are made, which can render your technical analysis completely useless.

The other reason why I like this particular session so much is that this is the time when you get strong trends either upwards or downwards. So a lot of the time you just need to look at the 15 minute chart, for example, to get an idea of the morning trend, and then pan down to the 5 minute chart to get a good entry point when the opportunities present themselves.
For example if the 15 minute chart is trending upwards during the morning session, then you could wait for a slight pull-back on the 5 minute chart followed by an upwards EMA crossover for an opportunity to go long and ride this trend.
So as I say, 08.00 - 12.00 GMT is my favourite and most profitable time to trade the markets. This is obviously not the most convenient time for traders based in the US, so for my American friends I would say the next best time to trade is between 13.30 and 16.30 GMT (ideally after the important economic announcements are out of the way).

Some Excellent Forex Advice From One Of My Readers

Well I'm back from an extended Christmas break and want to wish everyone a Happy New Year first of all, but I also want to share with you some excellent forex advice that was sent to me over the Christmas period by Mike Vaiana, who is one of my email subscribers. He has kindly given me permission to share this information with you so here is a summary of the main points he made:
“The deal is that I have spent a lot of time grasping at straws and happened to clutch yours one time to my benefit for which I thank you sincerely. The four-hour method and associated materials are of great benefit to me, the Forex trader of nearly a year now, with brains beaten to a pulp and ass kicked until recently to show for it. Actually, I am a retired professor of English and computer science and am constantly impressed by the wealth of substantial, scholarly materials available on the subject of money changing, not the least of which is your site. The truth with associated references as I have found it so far is as follows:
1) Philosophy. It's a speculative gamble. http://neif.org/Zurich_axioms.pdfThe axioms are akin to Darvas's Wall Street: The Other Las Vegas.
2) Method. One has to be able to interpret Metatrader charts with indicators that do not lie. Such indicators I've found to date are: A. Your notions about the Moving Average crossovers. B. Bill Williams' Chaos Theory. http://www.alpari-forex.com/en/chaos/ I use the Accelerator Oscillator at defaults to gauge the speed of the trend, the Awesome Oscillator at defaults to evaluate the mass of the trend (mass increases with the square of the velocity, as I recall, or, put another way, don't stand in front of a bus rolling downhill and try to stop it), and the Fractals indicator to view pivot points. Williams' indicators are accessed via the Insert>Indicators>Bill Williams dropdown menu in Metatrader 4. C. Accumulation/Distribution set at 14 on one-minute chart. D. Average Directional Movement Index set at 4 on one-minute chart. E. Relative Strength Index set at 9 on a one-minute chart. F. Stochastic set at 5,3,3. G. Volume. If there's a volume spike, something is going to happen.
3) Common sense and discipline, expressed as "Control Yourself." See what is there. Forget what happened yesterday. Don't get in too deep, and don't get in too fast. The entry point is where you make your money. Enter at perceived Support or Resistance, then wait a couple of ticks and add to the position. Relative to getting in too deep, it speaks for itself, if one were to be on the wrong side of it. Even if one were, one eventually could get out, if one were not in too deep. If one were, one's account would be blown out. Will also mention a couple of neat broker setups: FXCM Micro whereneophytes can learn without getting killed, and eToro which has a neat visual interface and is rather bald about presenting the Forex for what it is. This with the caveat that it's fun to play with a snake until it bites one.
I have a sombre addition I am constrained to make and it concerns the Fatal Flaw. (http://en.wikipedia.org/wiki/Hamartia provides a pretty good overview of it).
My experience after five years of trading stock options and one year in the Forex trenches is that if one has any personal weakness the market will discover it, exploit it, and, if possible, ruin one with it. My dad always used to remark that it isn't the things one does right that kill one. Case in point: Somebody I know consistently refuses to place a protective stop. In the case of stock options, it is through fear of being blown out by market makers. In the case of the Forex, it is through supposition that the trade moving against one will go just far enough to activate the stop, then reverse and head for just where one originally supposed it would. This supposition may or may not be true–I suspect that it is in the case of a rangebound pair over the duration of the range. When the breakout occurs, Heaven help one. The cure, of course, is a disciplined, mechanical trading approach. If 50 bucks is enough to lose on a trade, then place the stop thus, first off. The party under discussion, of course, complains that he doesn't want to lose the 50 dollars. Besides, there's no way the market could move that way. Having thus decided for the market which direction it should travel, he snoozed. Today he has a new JPG screenshot on his desktop entitled "Believe It." If and when the account is refunded, he intends to reference the JPG and do what he should. That remains to be seen.
On a more pragmatic note, not that having one's account blown out, again, isn't, so just for the hell of it I put two Relative Strength indicators (values 3 and 7) in the same frame in the Metatrader and found the 3 crossing the 7 a valuable result. What is presently needed is something to indicate the magnitude of the move. In the stock market it can be the percentage of the float that is moving; in the Forex I don't know. Possibly mere relative volume count is sufficient; possibly tweaking Williams' chaos indicators may be useful. We'll see. Anyway, James, it is good to hear from you, and I hope to do so again. Yours truly, Mike Vaiana.”
(Thanks once again Mike for this excellent email and thanks for allowing me to share it with my readers. You make some excellent points and I'm sure many of my readers will find this information to be extremely useful).

The Average True Range (ATR) Technical Indicator

The Average True Range technical indicator, or ATR for short, is a very useful indicator because it instantly tells you how volatile the markets are. A low ATR reading indicates that the market is relatively flat with narrow trading ranges (which is why the ATR is always low in the overnight trading session) whilst a high reading indicates a highly volatile market.

This may not sound very useful but the Average True Range indicator can be invaluable, particularly if you are a momentum trader. What you really want to be looking out for are sudden increases in the ATR from a low base. This is a strong signal that the currency is potentially breaking out from a tight range and about to make a big move one way or the other.

The ATR indicator doesn't tell you the direction of the move, only the volatility, so once you see a strong increase you should take a look at other technical indicators to see if it's a position worth trading. The best positions are those that correspond with a MACD crossover and/or an EMA crossover such as the EMA (5) crossing the EMA (20), for instance.
For additional confirmation you may also like to use Bollinger Bands, which provide another measure of volatility. A breakout from narrow Bollinger Bands in conjunction with a sharp increase in the ATR from a previously low base is an excellent signal that a currency is breaking out of a tight range.
Overall it's definitely worth at least consulting the Average True Range indicator every so often, because it will instantly provide clues as to how volatile the markets are and whether or not they are worth trading.

Moving Average Crossovers

Moving average crossovers are used extensively by forex traders and occur when a shorter period moving average crosses a longer period moving average. So a good entry point is generally obtained by entering a position soon after the crossover has taken place.

If you are familiar with my main forex trading strategy (available by filling in the short form to the right), you will know that I place great importance on these moving average crossovers. I personally like to use Exponential Moving Averages (EMAs) because they respond the quickest to changes in price (although they are still lagging indicators to some extent).

I like to trade when the EMA (5) crosses the EMA (20) when trading forex, and indeed when trading stocks as well, and it tends to work well in general providing you only trade those crossovers that are in the same direction as the overall trend.
You don't necessarily have to use these particular periods though because there are lots of other combinations that are popular with traders. For example some people like to use 8 and 21 periods while 20 and 50, and 50 and 200 are also popular combinations depending on your own particular trading style and the time frame that you use.
You will generally find that whichever combination of moving averages you use, you will have more success as you lengthen the time frame. So moving average crossovers on the monthly charts, for instance, provide very strong trading signals whereas the crossovers on the 1 minute and 5 minute charts are a lot less reliable.
Of course if you want to increase your success rate even further you can also use moving average crossovers in conjunction with other technical indicators. However you don't want to use too many otherwise it just complicates matters, and you will find that you get a lot fewer set-ups as a result.

Keeping A Forex Trading Diary

When you first start trading forex, one of the most important things you can do is to keep a forex trading diary. In this diary you will want to make a note of every single trade, both winners and losers, and you should ideally add comments to each one noting why a trade went right and why a trade went wrong.

This is one of the best ways of learning how to trade the forex markets profitably. By keeping a forex trading diary you can quickly identify which trades are losing you money, and therefore you can either cut out these types of trades completely or try and modify them so they become profitable.

Another benefit of keeping a forex trading diary is that it requires and encourages discipline, which is one of the key attributes a successful forex trader must have.
The trading diary itself can be as through or as brief as you want to make it. For example, you could include a chart with each trade plus reasons for entering and exiting where you did, the maximum profit that could have been achieved, the stop losses - were they too close or too far away, and so on. Alternatively you could just record the profit and loss per trade and a quick sentence or two about why a trade did or did not go according to plan.
The important point is that you actually record your trades so that you can learn from your mistakes and become a more profitable trader in the long run. Once you get to the stage where you've developed and perfected a certain trading system that generates consistent profits, then you can start thinking about dispensing with a trading diary, but until then a forex trading diary should be an absolute necessity.

Weekly Trading Update - 07-11 December 2009

It's been a fairly quiet week this week with just two trades to tell you about. Thankfully both turned out to be winning trades, although I could have made more by letting them run for a while longer. The first trade was on the GBP/JPY pair and the second was on the USD/JPY pair.

I'll start with the GBP/JPY pair first of all because this was my most profitable trade. I highlighted this potential set-up on this blog back on Monday night, and the subsequent EMA crossover occurred a few hours later in the overnight trading session.

After a slight retracement the following morning I managed to get a decent entry point, entering a short position at exactly 146.00. I provided an in-running commentary of this trade in the original blog post, but if you've haven't already read it, I closed half the position for 70 points and the other half at 144.20 for a 180 point profit.
The one other trade was on the USD/JPY pair. I've been watching this pair closely because the Supertrend indicator has recently turned green on the daily chart (indicating a bullish trend). So after a nice little sell-off I was waiting for the EMAs to cross upwards on the 4 hour chart, for a fairly safe trade, and it worked out fairly well.
The crossover occurred overnight once again, as is often the case with the yen-related pairs, but I managed to enter a long position first thing this morning at 88.75 (a little later than I would have liked). I closed half the position for 40 points and closed the second half of the position at 89.35 a short while ago.
It may well continue to creep up towards the 90.00 level but with consumer confidence figures due out in a short while, I thought it was best to take the profits and finish up for the week.
(If you would like full details of my main 4 hour trading strategy, you can access it for free when you subscribe to my newsletter. Simply fill in the short form above).

The New Capital Requirements Takes Its Toll on New Forex Brokers

There has been a state of unrest amongst new Forex brokers owing to the fact that the NFA has pushed through an increased entrance barrier. This requires a higher capital for new Forex brokers which can be a problem for most, if not all.

However, the move to raise entrance barriers has its benefits if better understood by Forex brokers, new and old alike. The increase in entrance barriers serves beneficial for the industry of foreign exchange. Despite the increase, the move ensures that those who newly enter the industry still have sufficient resources remaining and still be financially stable. This is helpful since the capital market tends to be unstable. The move also ensures that brokers receive sufficient expertise to manage the risks that may be encountered by Forex brokers, both new and old.

Many firms now have been expecting the move brought about by the NFA and has welcomed the change. New rules are to be adopted and duly accepted by the firm and its staff. For those in the know, the move to increase capital requirements puts forth that the industry of foreign exchange is growing more important as the time goes on.

Clients need not worry that the firms they are associated with will file for bankruptcy because established firms have already sufficient funds to back them up in anticipation for the change. The new move by the NFA does not hinder the industry in no way at all but rather helps in the improvement of its standards providing better services for its clients.

The Top Currencies Making it in Foreign Exchange Trading

With so many countries involved in the money market, it is obvious that you are going to be dealing with a lot of currencies. But with foreign exchange, the art comes in knowing which currencies are more active and which are not.

 

What’s the deal, you may ask? In foreign exchange, you don’t want to be left with a currency that has little or no interest and which may get stuck with you as you will be having difficulty selling the currency. And most of all, if you have your hands on the active currencies, there is a narrower spread between bids and ask price which would make it easier for you to gain profit.

 

There are seven currencies that are making it big in foreign exchange trading. These are the United States Dollar, the Euro, the Japanese Yen, the British Pound, the Swiss Franc, the Canadian Dollar, and Australian Dollar. 

 

Among the seven currencies, the United States Dollar is the most traded currency. This is followed by the Euro and the Japanese Yen. These three currencies are commonly labeled the globe’s three major economic powerhouses.

 

The increased activity of these currencies owes a lot to the performance of the country itself, economy-wise. The

United States is known for its export powerhouse and is the leading exporter of products in the world. The Euro is a combination of a number of strong economic nations in Europe. Japan has a technological advantage all over the world. These are the very reasons that make their currency among the top three.

Forex News Trading

Forex news trading is one of the hardest trading methods to master. It is based on taking very quick trades straight after the important economic data figures are released each day, and taking advantage of the short-term volatility that occurs straight after these announcements. It requires great skill and knowledge even if you only trade these news announcements on a technical basis.

I personally tend to stay out of the markets around the time of these announcements because they tend to distort the markets, but I have heard of a few traders who make an absolute killing just by trading these economic data releases.

One such trader is Henry Liu. He trades the forex markets based entirely on fundamental analysis, which is of course determined to a large extent by news announcements of the latest economic figures. I have to admit I hadn't heard of Henry until recently but in the last few weeks I've received emails from two separate subscribers to this blog who both recommend his course highly.
It's called News Profiteer and in this course you will discover the profitable trading methods that Henry uses himself to trade the news releases as well as lots of additional information such as how to make additional profits from identifying the market sentiment and the daily market cycles. There are also other bonuses including the free daily newsletter where Henry gives you his daily alerts for the forthcoming trading day, plus his top trading ideas and strategies for that day.
I have to admit I haven't bought the course myself simply because trading the news doesn't really appeal to me, but if you are interested in forex news trading, then from what I've heard from a few of my subscribers, the News Profiteer forex trading course could prove to be a very profitable investment.

Forex Candlesticks Made Easy

Candlestick charts are generally regarded as being more effective than bar charts because they can give vital clues as to a currency's future movements. However candlestick charts and indeed candlestick analysis is quite a complex subject which is why I strongly recommend grabbing yourself a copy of 'Forex Candlesticks Made Easy'.

This concise guide will tell you everything you need to know about candlestick charts and patterns. Plus not only will you learn about all the basic candlestick patterns, but you will also learn the advanced highly effective techniques used by many of the top professional traders to make consistent profits from trading.

So whether you know absolutely nothing about candlestick analysis or whether you have a good understanding but want to know how to find the most profitable candlestick patterns, I can highly recommend you check out this excellent guide.

May 15, 2008 2008 Investor's Superconference

If you would like to learn the very best investing and trading strategies from leading professionals, then you may be interested in the Investor Superconference 2008.

It's taking place in Orlando, Florida in a few weeks time between June 5th and June 8th, and features some of the leading traders on the planet including one of my own inspirations, Dr Alexander Elder, whose book 'Come Into My Trading Room' played a major part in helping me to become a profitable trader.

If I didn't live on the other side of the world I would probably attend this event myself just to see him, but there's a number of other speakers who would be well worth listening to as well such as Ron Ianieri from Options University who is one of the most renowned and respected experts on options trading.

Weekly Trading Update - 26-30 September 2011

After a brilliant week last week, the profits have been harder to come by this week. In fact it's been a very poor week. The markets moved too much early on to trade any early morning breakouts. There was just the one trade on Wednesday but that resulted in a 20 point loss (after being 15 points in profit).

My 4 hour trading system (see right for more details) wasn't too successful either because there were a few false moves. So let me briefly talk you through some of the trades that I placed.

On the FTSE 100 I went short yesterday at 5158, and was really confident about this one. This had all the hallmarks of a high probability trade. On the 4 hour chart there was a downward EMA crossover and 2 consecutive bearish pin bars before that. However the price still went up and I had to take a 40 point loss.

Thankfully the FTSE fell again this morning and I was able to enter another short at 5170. This time I closed the entire position for 40 points. I would normally have closed half and let the other run, but as it's Friday I decided to play it safe.

It was a similar story on the EUR/USD pair as well. I entered a short position at 1.3555 and closed the entire position for 50 points a short while ago.

There was one other trade that I placed. This was on the GBP/USD on Wednesday night. It was late at night and the EMAs looked like they were crossing downwards and I eagerly entered a short position just before I went to bed (rather than wait for confirmation of a downward crossover). Sadly I paid the price and my 40 point stop loss was taken out overnight.

I was tempted to enter a short on the GBP/USD pair this morning as well but thankfully I chose the EUR/USD pair instead.

Overall though I finished the week pretty much where I started, and with the stock markets lacking any clear direction, it has been quite a frustrating week.

Weekly Trading Update - 12-16 September 2011

My main 4 hour system (see right for more details) didn't find any trades at all this week on the major currency pairs. So it was left to my breakout system to do the business, and luckily there were 3 winning trades in total.
They were all on the GBP/USD pair, as always. The first of these was on Tuesday. The overnight trading range was just over 40 points, so I was looking to go long or short on any breakouts after 8.00 (UK time). On this occasion the price broke downwards and I went short at 1.5816.
I was preparing myself to take a loss if the pivot point was hit, but thankfully the price started to fall again and I was grateful to take a 16 point profit after the S1 level was taken out. In hindsight this wasn't a great risk-reward trade.
The second breakout trade occurred yesterday morning. The GBP/USD was again trading in quite a narrow range overnight and I went long this time at 1.5795 after an upward breakout. The R1 level was 27 points higher, and luckily I managed to close the trade at this level.
The final trade occurred today and is actually still in progress at the time of writing. After a downward breakout I opened a short position at 1.5770. However with the S1 level 46 points lower, I decided to close half the position for 20 points, move my stop loss down to break-even and see what happens.
It's been a really profitable week regardless, particularly with BP and a few other shares rising strongly, so I thought I might as well hold on for a decent return. I am not really expecting this S1 level to get hit, but it will be a nice bonus if it does.
Anyway I will update you with the results of this trade later on. Have a great weekend.
(UPDATE: Within seconds of publishing this post, I was stopped out at break-even, ie 1.5770. I knew I should have closed the entire position for 20 points. Never mind.)

Forex Made Easy for Everyone

Forex made easy is as simple as you would want it to be. The foreign exchange market is a worldwide market and according to some estimates is almost as big as thirty times the turnover of the US Equity markets. That is some figure to chew on. Forex is the commonly used term for foreign exchange. As a person who wants to invest in the forex market, one should understand the basics of how this currency market operates. Forex can be made easier for beginners to understand it and here's how.
Foreign exchange is the buying and the selling of foreign exchange in pairs of currencies. For example you buy US dollars and sell UK Sterling pounds or you sell German Marks and buy Japanese Yen. Why are currencies bought or sold? The answer is simple; Governments and Companies need foreign exchange for their purchase and payments for various commodities and services. This trade constitutes about 5% of all currency transactions, however the other 95% currency transactions are done for speculation and trade. In fact many companies will buy foreign currency when it is being traded at a lower rate to protect their financial investments. Another thing about foreign exchange market is that the rates are varying continuously and on daily basis. Therefore investors and financial managers track the forex rates and the forex market it on a daily basis.
Those who are involved in the forex trade know that almost 85% of the trading is done in only US Dollar, Japanese Yen, Euro, British Pound, Swiss Franc, Canadian Dollar and Australian Dollar. This is because they are the most liquid of foreign currencies (can be easily bought and sold. In fact the US Dollar is most recognizable foreign currency even in countries like Afghanistan, Iraq, Vietnam etc).
Being a truly 24/7 market, the currency trading markets opens in the financial centers of Sydney, Tokyo, London and New York in that sequence. Investors and speculators alike respond to the ever-changing situations and can buy and sell simultaneously the currencies. In fact many operate in two or more currency market using arbitrage to gain profits (buying in one market and selling in another market or vice versa to take advantage of the prices and book profits).
While dealing in forex, one should have a margin account. Quite simply put if you have US$ 1,000 and have a forex margin account which leverages 100:1 then you can buy US$ 100,000 since you only need 1% of the US$100,000 or US$1,000. Therefore it means that with margin account you have US$ 100,000 worth of real purchasing power in your hand.
Since the foreign currency market is fluctuating on a continuous basis, one should be able to understand the factors that affect this currency market. This is done through Technical Analysis and Fundamental Analysis. These two tools of trade are used in a variety of other markets such as equity markets, stock markets, mutual funds markets etc. Technical Analysis refers to reading, summarizing and analyzing data based on the data that is generated by the market. While fundamental Analysis refers to the factors, which influence the market economy, and in turn how it would affect the currency trading. Of course there are other economic and non economic factors which can suddenly affect the trading of the forex markets such as the 9/11 tragedy etc. One needs to have a shrewd acumen and a few number crunching abilities to strike gold in the forex market.