Trading education » Forex Trading

Forex Currency Trading Systems – The Fibs Ain’t No Lie – A Systems Approach to Trading the Forex

admin — Wed, 30 Jun 2010 20:46:53 +0000

When it comes to trading the Forex having a trading system is the number one key to success. Making currency trades as “mechanical” as possible is the only way to sanely trade a market where the traders fear and greed are always in play.

This is where a trading system shines. Having a system that says when “A” happens you automatically execute trade “B.” This kind of system has a great effect at removing much of our emotional trading.

How The Systems Work

As you probably know, Forex trading is based on the relationship of one currency to another – called pairs. And these pairs are used to create a trade. For instance you believe that the Euro is due to rise against the Dollar – or said another way – you believe the Euro is strong and the US Dollar is weak. Based on this assumption you would expect to see the Euro rise in value over the dollar and if it did you would profit.

So the pair you would be trading is the EUR/USD pair where the first currency listed, in this case the Euro is called the base currency. The second, in this case the US Dollar, is called the counter or quote currency. Each pair is quoted with a single number that expresses the relationship between the pairs. So if a quote of 1.4525 were quoted that would mean that it would take 1.4525 Dollars to exchange for a single Euro.

The Fibs

Fibonacci, often called the fibs, are a method of gaining some measure of predictive pricing in the Forex markets. They are based on the famed number sequence developed by a mathematician named, you guessed it, Fibonacci. The sequence that he developed is a sum where each of the two preceding numbers are added to form the next in the sequence. So a sequence starting from the number 1 would look like 1,1,2,3,5,8…and so on.

The Forex is especially sensitive to the fibs. If you spend any time with your currency charts you will notice how prices turn at or near Fibonacci numbers.

Now of course then numbers are not as neat and clean as 1,1,2,3,5 etc. In the currencies they look more like. .236, .50, .382, .618, etc., Using this type of number sequence you will find that you can use the Fibs as a price point to enter or exit a trading position. They offer a seasoned trader a certain measure of predictive capability.

They can be used in you trading system as the response to other market signals so if you get a market signal that tells you to enter the market long the Euro, then your mechanical response would be to wait until the prices broke through the next Fibonacci resistance line and then enter your position. Waiting for this type of movement would help prove that the price was on the rise.

Of course this is assuming that you expect the price of the Euro to go up, and that is not the only way the market could move, but this is the beauty of the Forex, you can trade the market up or down. It lets you make money in both directions.

By: Nigel Banks

Learn Currency Trading – 5 Common Deadly Mistakes

admin — Mon, 28 Jun 2010 06:58:59 +0000

If you want to learn currency trading you need to get the right forex education and avoid the mistakes of the losing majority. The mistakes below are common ones but there easy to avoid and you must do so if you want to enjoy currency trading success.

1. Following a Vendor Blindly

One of the most common errors is to think someone else can give you success – they can’t.

Most systems sold are junk – but even if you do find a good one, how can you follow it with discipline if you don’t know how it works?

You cant to have discipline to follow a system you must have confidence in it so you need to take the time to develop your own trading system or have total confidence in someone else’s logic.

2. Trading News Stories

We have more news at our disposal than ever before and all those stories are very convincing – but that’s all they are stories. The news reflects the greed and fear of the crowd and they lose longer term – try and trade news stories and you are guaranteed to lose as well.

The best way for any novice to trade is to simply follow the reality of price action on a forex chart and trade it – your trading the truth not an opinion and that is the only way to win.

3. Day Trading

Simply the dumbest way to trade.

It doesn’t work as all short term volatility is random and you can’t get the odds in your favour.

Don’t believe me?

Try and find a forex day trader with a real ( not simulated ) track record that’s made real dollars over the long term. Let me know if you find one I have been searching for 25 years and still not found one!

Avoid day trading at all costs!

4. Trying to Predict Forex Prices

If you try and predict prices in advance you’re hoping or guessing and that won’t get you anywhere in life and certainly not forex trading.

You must not predict wait for momentum to confirm a turn and you can look up how to do this in our other articles – it is essential to confirm a price turn, rather than simply guess when it might come.

5. Markets are Scientific

It’s amazing how many people buy into this myth yet it’s obviously not true.

Why?

Because if prices did move to a scientific theory, there would be no market, as we would all know the price beforehand and there would be no market. The reason a market moves is because we all have different opinions of where the price may go.

The far out investment crowd love scientific theories and like to follow the works and methods of gurus such as:

Gann, Elliot and Fibonacci.

Well they made no money with their theories in forex trading and neither will you.

So if you want to learn currency trading correctly avoid the common mistakes enclosed and work and getting a simple forex trading system which will help you trade the odds, you can understand and can apply with discipline.

If you learn currency trading the correct way ( and 95% of traders don’t ), then you can enjoy currency trading success and create a life changing income – good luck!

By: Kelly Price

Trading Emini Futures – The Failure to Cut Losses Short Revisited

admin — Sun, 09 May 2010 16:52:29 +0000

Emini futures, or simply eminis, are smaller-sized contracts of “full-grown” futures contracts that have been around for decades. Unlike the latter that have been traded on physical exchanges, eminis have always been traded electronically, allowing retail traders with access to the Internet to compete against institutional traders from the comfort of their homes or home based offices.

Futures offer much greater leverage than stocks or bonds, and practically only trading currencies on the Forex can provide even better leverage. While this leverage can be also very risky in the hands of unskilled traders, this somehow has not prevented wannabe traders from flocking to emini futures or Forex.

Trading eminis is not easy, although it can be mastered given enough time and dedication. The basic trading rules apply here just as in trading stocks or bonds, but due to this enormous leverage following these rules is even more important than in stocks or else it’s very easy to end up blowing one’s trading account in no time.

One of such rules insists that you “let your profits run”. Another urges you to “cut your losses short.” Both make a lot of sense and when combined, they give rise to much more intelligent trading.

Let us discuss the latter here as it seems to be of even more importance than the former. This is so because ignoring this rule is a sure path to ending up with a totally depleted account relatively quickly when trading emini futures.

Yet, this rule is often violated despite the grave consequences that doing so entails. Why is it so, one can wonder. Let us address this issue here as that is not always done in an exhaustive, comprehensive manner.

There is no doubt that trader’s ego is involved in this process. Most humans, traders being no exception, do not like to admit that they have made a mistake, so they would rather wait for things to somehow get worked out in their favor while they adjust their stop-loss and keep going deeper into the red zone. This is often no more than wishful thinking that masquerades as eternal hope. Yes, it is true that to be a good trader one has to be an optimist, but one also has to be a realist and being self-disciplined. Violating basic rules of trading is hardly a sign of solid self-discipline.

But there is also another reason why overriding this rule often takes place. At the core here seems to be the lack of confidence in one’s trading methods. This is what also can make the trader to hold to his losing position because he does not believe that he will be able to get a better trading opportunity. Had he believed a much better opportunity is likely to present itself while he is stuck with his loser, he would have cut it much faster.

The moral from the last observation is this: if you are considering trading emini futures or any other market, for that matter, you want to make sure you have a good solid strategy that you trust as this can only help you to cut your losses short.

By: Waldemar Puszkarz

Online Forex Trading – The Best Field To Excel In Life

admin — Thu, 06 May 2010 22:03:20 +0000

Online forex trading is fast finding a large number of interested people these days. Thanks to the advent of the internet the entire process has become that much easier. Before you were to start with trading it is always preferable that you equip yourself with at least the basic knowledge about the entire process. You should for instance understand the forex market is generally speaking a technical market with its own processes and terms which you need to understand first.

The problem that a lot of people face with forex trading education is not finding enough time. Although this is the case with a majority of the people you can easily attend a course on forex trading online. Such online courses have come as a boon to busy people for whom regular classroom sessions are not a possible option. One great thing with such online courses is that you can learn at your own pace. You can now take all the time in the world to read and then assimilate all the information in your mind. Another major advantage with online courses is that you can learn most of the basics for free. There are numerous websites that offer free tutorials.

You can also attend numerous free seminars online which deal with all types of trading. You can find even advanced courses being offered by several websites. Even though these courses do not come free they are still far cheaper than attending a regular classroom session. One thing that you must remember, whatever may be your mode of learning, is that it comes more out of practice. To put it in simple words, it is only when you are actually trading that you get to learn a lot of important things about the entire process of currency trading.

Help is also available for beginners in the form of demo accounts at most of the websites that deal with forex trading. You can very easily learn to manage such online forex trading accounts, with a little bit of practice. Since most of the times there is no monetary risk involved, these demo accounts provide for a good opportunity to learn how the market acts and how to respond.

Once you have got the feel of it you can then up grade to a regular fully functional account. Experts always recommend though that even when you open a regular account; it is always preferable that you start trading in small amounts, during the initial stages. You should always keep all these aspects in mind when dealing with online forex trading.

By: James C Hardy

Forex Trading Made Easy – A 3 Step Simple to Follow Plan For Big Profits in 30 Minutes a Day!

admin — Wed, 05 May 2010 19:27:19 +0000

Here we will discuss the subject of Forex trading made easy and despite the fact that over 90% of traders lose money, it’s a known fact that Forex trading is a learned skill and in this article, we will show you how to get the right mindset and education, to enjoy big profits in 30 minutes a day.

Lets go to the first step to success which should be obvious but most traders don’t understand it and lose money – here it is:

1. Accept Responsibility for Your Actions

Most traders don’t and they think they will get rich quick by buying a Forex robot for a hundred dollars or so and making no effort. These systems are laughable in their claims of easy money and anyone who tries them soon gets wiped out. If only making an income for life was as easy as paying a hundred dollars and making no effort. Accept you have to work and now for some good news…

2. Get a Simple Robust Strategy

Forex trading is simple and simple, robust systems work best. If you make a strategy too complicated, it simply has to many parameters to break. Many people think there is some holy grail system and constantly look for it – but there isn’t one so don’t bother looking. Get a simple strategy and you will do just fine and you should be able to learn a system which can make you great profits in around two weeks.

Learning a system which can make money is easy but you have to adopt the mindset to make it work lets take a look at why and how you can get the mindset of a winner.

3. Staying on Course with Your System

When you trade, you will have losing periods, all traders do and it’s the way you deal with these losses which is the key to making money in Forex. Let them run and hope they turn around and you will lose, cut them quickly and you can preserve your equity, until you hit profits again. When you trade Forex, you need to keep your emotions out and follow your system with discipline.

Be a Winner…

Simply understand the three points above and you can enjoy currency trading success. If you do understand them, you can see how you can win and make great profits, when the vast majority of traders lose – good luck and good trading!

By: Kelly Price

Forex: Money Management Principles

admin — Sun, 02 May 2010 20:35:25 +0000

Trade With Sufficient Captial

One of the worst blunders that forex traders can make is attempting to trade without sufficient capital.

The trader with limited capital not only will be a worried trader, always looking to minimize losses beyond the point of realistic trading, but he will also frequently be taken out of the trading game before he can realize any sense of success trading the method(s) or patterns.

Exercise Discipline

Discipline is probably one of the most overused words in forex trading education. However, despite the cliché, discipline continues to be the most important behaviour one can master to become a profitable trader. Discipline is the ability to plan your work and work your plan.

It’s the ability to give your trade the time to develop without hastily taking yourself out of the market simply because you are uncomfortable with risk. Discipline is also the ability to continue to trade the methods and patterns even after you’ve suffered losses. Do your best to cultivate the degree of discipline required to be a world-class trader.

Employ Risk-to-Reward Ratios

The following shows you possible risk-to reward ratios, and the win ratios required to break even in a trading system.

Risk-to-Reward Ratio (in pips)and Win Ratio Required to Break Even(%)

40/20 (2 to 1) = 67%, 40/40 (1 to1) = 50%, 40/60 (1 to 1.5) = 40%,

40/80 (1 to 2) = 33.5%,

60/20 (3 to 1) = 75%,

60/60 (1 to 1) = 50%,

60 /90 (1 to 1.5) = 40%,

60/120 (1 to 2) = 33.5%

Important Note

Never risk more pips on a trade then you plan to make. It doesn’t make sense to risk 100 pips in order to make only 10. Why? See below example.

Profit taking level (pips): 10

Stop used or pips at risk: 100

You win 10 times which makes 100 winning pips.
You ONLY lose once and have to give back all profits!!!

This type of trading makes no sense and you will lose on the long term guaranteed!

By: Toby Smitz

Successful Forex Trading – Secrets of the Millionaire Traders and What You Can Learn From Them

admin — Thu, 29 Apr 2010 08:39:49 +0000

Successful forex trading can be achieved by anyone so, what separates out the real pros who make huge long term profits, from the vast majority of losers? Let’s find out…

I am going to start with an experiment which is in fact one of the most successful in trading history which proved anyone could learn to trade.

The Experiment

The experiment took a group of ordinary people, who ranged from a security guard to a kid fresh from school and in 14 days they learned to trade – the result?

They made a $100 million and went down in history as legends.

The experiment was conducted by trading legend Richard Dennis, who wanted to prove anyone could learn to trade, with the right trading education and he proved the point.

The paradox is – anyone can learn to trade but most people lose. So what set this group of millionaire traders apart?

The answer is, forex trading is mostly down to mindset and not method, further explanation will make this clear…

If you take the above trading experiment, the system the traders learned was simple ( a long term trend following breakout method), so simple in fact they mastered it in 14 days. The hard part though was not learning the trading system, but learning to apply it with discipline.

The Key to Forex Success

You need to have a totally different mindset when trading forex.

For example, you can only be wrong and the market price is always right, it will give you long periods of losses and make you look a fool. The challenge for any forex trader is to keep going, through these losing periods, executing trading signals with discipline, until you hit a home run.

You have to have a set of rules you can survive with and have total confidence in them to bring you victory. This means not falling prey to your emotions and ego as most traders do and staying on course.

If you can’t follow a method with discipline you don’t have one!

Dennis knew this and that is why he made them not just learn the system but taught them everything about it, so they had confidence and could stay on course.

A Mindset for Success

Anyone can learn Forex trading and that’s a fact, what you need to concentrate on is your mindset. This means having these traits – An acceptance of you are responsible, confidence in what you are doing, iron discipline to reach your goal and a humble nature with no ego.

If you think it’s easy to do this -its not but if you come into forex trading with the right attitude, learn the right education and trade with discipline you can win.

In any financial market the trader is not defeated by the market itself, he defeats himself success comes from within and if you want to be a successful forex trader you can be its as simple as that.

By: Sonia Kristina

Automated Forex Trading – The Expert Advisors – 5EMAs

admin — Thu, 22 Apr 2010 23:26:17 +0000

The Forex currency exchange is getting more popular everyday, but everyone seems to think it is just evil, another way for the big corporations to stick it to the little guy. 95% of the people who trade forex WILL LOOSE THEIR MONEY, they will consistently give their money to the other 5% and they couldn’t be happier. Now, with the introduction of forex currency trading software the currency exchange market is getting easier to manage and easier to profit from.

Consider this, if you found out there was a way to automate everything you needed to do in the forex currency exchange to make money, would you do it? Most people think this forex currency exchange market can only be traded by a genius or someone who can stand to sit at their computer for hours, even days on end…watching the forex markets every move. There is system that is as close to fully automated as it gets, and as with any other Expert Advisor, you only need to configure the software and then let it do its thing.

The 5EMAs forex trading system has just recently been released to the public as an actual product. The formula for the trading system is relatively simple since its very name employs that it can accommodate 5 different trading styles from scalping, swing-trading or day-trading. The 5EMAs forex trading system can be used for long term as well as short term goals, thus allowing the average joe to keep his/her job while still making money on the forex currency exchange.

The 5EMAs forex trading system shows you how to, in a step-by-step guide, identify accurate trades with the potential for huge returns, this alongside forex money management strategies that were specifically designed for this system. This currency trading software is but a fraction of the cost of many of the other forex trading systems out there, it is a wise investment simply because of the value of the knowledge this system offers, it has the potential to be incredibly invaluable if its put to good use.

Most currency trading software enters a trade when the trade is either already at its peak or already over, the forex system triggers trades in the very beginning of a move. You wont be losing out on the meat and potatoes of a big move with this forex system in place. This system is very easy to use, even for a beginner with no forex experience can put together a solid strategy with the guide that comes with this 5EMAs forex trading system. Taking the time to read it can make all the difference in the world, it can be the difference between quitting your job or loosing the next mortgage payment.

Don’t expect to just set it and forget it, the system needs to be properly setup, so reading the guide front to back before starting is a VERY good idea. Some forex trading software wont give you a follow up report after the trade is over or signals to use to watch the market for big moves.

By: Luis Aguirre

Forex News Trading System – 3 Cautions Related to Any System Based on Trading Forex News

admin — Thu, 22 Apr 2010 12:29:27 +0000

Forex System based on trading news should be selected very carefully. Primary reason being that trading during any fundamental announcement or news is one of the most explosive time during a trading session. The market can move 100s of pips in matter of seconds. Thats why the risk involved are more than trading using technical analysis.

Still, because of profit potential, trading during forex news announcement is one of the most tempting proposition for forex traders. When you are selecting any forex news based system, please make sure that it covers below mentioned 3 risks -

1. What is the strategy to protect forex account when market moves against your trade direction – The beauty of forex news is that it cannot be predicted which direction it will move. Naturally, it is very necessary that a strong strategy should be in place to protect the account incase market moves in the opposite of anticipated direction. If such strategy is not in place, your complete account is under big risk.

2. How much will be the profit target – The way forex market reacts to fundamental news is based on a factor of “Expectation”. For example, Lets imagine that the trader community believes that as per next Non Farm Payrolls the unemployment will be 8% as against 6% during last months announcement. But when NFP comes out and unemployment is said to be at 7.9%, market will treat this as positive for US economy and Dollar will become stronger and market will move in USD direction. How much it will move will be based on much better the results are from expectations. The forex news trading system should definitely cover what should be a realistic profit target based on the news results.

3. Is your forex broker cooperative – No forex news system will work if the broker cannot allow you to trade using live prices during fundamental announcements. During some volatile announcements, the currency pair prices are delayed by the some of the forex brokers. Thats because they discourage trading news. If thats the case, then either you drop idea trading forex news or you must choose a new broker.

By: Rahul G

Forex Trader Training – 2 Misunderstood Aspects Forex Trading

admin — Tue, 20 Apr 2010 14:58:02 +0000

Many people who try their hand at Forex trading often have misconceptions about the currency market. In this article, I will reveal to you four of the most commonly misunderstood aspects of Forex trading, and what it means to retail traders like you and me.

Misunderstood Aspect #1: There are no commission fees in Forex trading

This is technically true because most Forex brokers don’t take a cut from your winnings. Commissions are fees paid to brokers whenever anyone makes money, and it is usually a percentage of how much you win.

But while there are no such ‘commissions’ paid out to brokers, many people think that this means the brokers don’t charge them anything at all. Actually, the brokers DO charge you a certain fee – it’s just not based on a percentage of your winnings, that’s all.

Instead, most Forex borkers charge a transaction fee known as a ’spread’. Essentially they charge you a small fixed amount whenever you buy a currency pair, based on the size of your trading lot. The spread usually costs you about 2-5 pips, depending on the currency pair you’re looking at. If you’re trading buying one standard lot of the EUR/USD currency pair for example, and the spread is 2 pips, the transaction fee is $20 (1 pip in the EUR/USD = $10).

So now you know that you’re being charged every time you make a trade. How will this affect your trading strategy? Scalpers should all be aware about the exact pip spread their brokers charge because they will enter into numerous trades in each trading day… a 1 pip spread difference can save them as much as $100 every day.

Misunderstood Aspect #2: Anyone can make money at all times of the day

This is misunderstood aspect is mainly due to the fact the currency market operates 24 hours a day. When the market is open at all times, it’s natural to assume that there are people making money every single minute.

However, this is quite far from the truth. Why?

As you should know by now, there is only profit potential when the market is moving. One cannot make money trading in a flat market. You’ll either need an upward or downward market movement to make money.

And if you look at the trading charts, you’ll notice particular periods of each trading day when volatility is relatively low – these are typically the non-U.S. and non-London market trading times when the American and European institutional traders are not active (it’s after-office hours for them).

But that’s not to say that no one can make any money during periods of low volatility; it’s just that the period of time when the most money is made is during the U.S. and London market trading hours when volatility and liquidity is high.

By: Harold Hsu