Stochastics are amongst the most popular technical indicators when it comes to Forex Trading. Unfortunately most traders use them incorrectly. In this article we will review the correct way to use this popular technical indicator.
George Lane developed this indicator in the late 1950s. Stochastics measure the current close relative to the range (high/low) over a set of periods.
Stochastics consist of two lines:
%K – Is the main line and is usually displayed as a solid line
%D – Is simply a moving average of the %K and is usually displayed as a dotted line
There are three types of Stochastics: Full, fast and slow stochastics. Slow stochastics are simply a smother version of the fast stochastics, and full stochastics are even a smother version of the slow stochastics.
Interpretation:
Buy when %K falls below the oversold level (below 20) and rises back above the same level.
Sell when %K rises above de overbought level (above 80) and falls back below the same level.
The interpretation above is how most traders and investors use them; however, it only works when the market is trendless or ranging. When the market is trending, a reading above the overbought territory isn't necessary a bearish signal, while a reading below de oversold territory isn't necessary bullish signal.
Trending market
When the market is trending is necessary to adapt the oscillator to the same conditions: When the market is trending up, then the signals with the higher probability of success are those in direction of the trend “Buy signals”, on the other hand when the market is trending down, selling signals offer the lowest risk opportunities.
Thus when the market is trending up, we will only look for oversold conditions (when the stochastics fall below the oversold level [below 20] and rises back above the same level) to get ready to trade, and in the same way, when the market is trending down we will only look for overbought conditions (when the stochastics rise above de overbought level [above 80] and falls back below the same level.
Taking all overbought/oversold signals during a trending market will lead us to many whipsaws. If you are not comfortable with the number of signals given, try expanding your trading to other currency pairs.
Trend-less market
During a ranging market we could use the interpretation explained above to trade off stochastics.
Divergence
Divergence trades are amongst the most reliable trading signals in the Forex market. A divergence occurs either when the indicator reaches new highs/lows and the market fails to do it or the market reaches new highs/lows and the indicator fails to do it. Both conditions mean that the market isn't as strong as it used to be giving us opportunities to profit from the market.
Stochastics can also be used to trade off divergences.
Price behavior
A price behavior can be incorporated into any kind of system or Forex strategy. When using divergences or overbought/oversold condition with a price behavior approach, the probability of success of our signals increases enormously. Why? Because price dictates at the end, how all indicators will behave, it also gives us a lot of information about the probable direction it will take in the future.
I hope this article helps you become a better trader.
Don't forget to read our risk disclaimer.
STRAIGHT FOREX © 2005, 2006, 2007
Friday, July 6, 2007
Bollinger Bands Can Give You a Huge Trading Edge
One of the critical pieces of forex education for any Forex trader is to understand the concept of standard deviation of price and how to use volatility to their advantage.
If you understand the concept you can easily apply it with Bollinger bands which are an essential tool for all forex traders.
Let¡¯s look at why Bollinger Bands are so useful and profitable, when incorporated in your Forex Strategy.
If you don¡¯t know what standard deviation is simply check our article on the concept ¨C right, let¡¯s take a look at Bollinger bands.
Bollinger Bands Defined
Bollinger bands are simply volatility bands drawn either side of a moving average.
You calculate Bollinger bands using the standard deviation of price over the same period as moving averages the mean price, then the volatility bands are plotted above and below the moving average.
Moving averages are used to identify the underlying trend of currencies and Bollinger bands take this one step further by:
Combining the moving average of the currency with the volatility of the individual market (or the standard deviation) ¨C this then creates a trading envelope ¨C with a middle mean price (moving average and 2 x bands (expanding or contracting) either side that reflect volatility or standard deviation.
As prices move away from the longer-term average, the standard deviation rises - and thus the bands will fluctuate in varying amounts, away from the average.
Why they work
In any market, the value of a currency traded tends to rise slowly over the longer term.
Prices can and do spike quickly in the short term, but will normally return to the longer term moving average - which represents fair value.
The standard deviation of the outer bands (how far they are from the mean) shows how far prices are from longer-term value.
Most price spikes are caused by trader psychology with greed and fear to the fore and this can be graphically seen with Bollinger bands.
So how should you use Bollinger bands?
There are 3 main ways to use them.
1. Spotting price spikes
When the bands are a long way from the mean you can use Bollinger bands as profit taking signal on existing trades or use them to spot contrary trades.
2. Enter exisiting trends
If you have a good trend in the forex markets then you can use dips to the middle band to buy at fair value.
3. Entering new trends
When prices are trading in tight range and start to breakout with a change in volatility a great new trend could be emerging.
Bollinger bands can certainly give you a new dimension to your forex trading strategy and any currency trading system can benefit from the extra insight that they can give you.
A word of warning
Like all technical indicators you should not use Bollinger bands in isolation to enter trades, however combined with timing indicators such as, the stochastic or RSI, then you have a powerful combination for greater FX profits.
With regard to forex education, knowing what standard deviation is and how to apply the concept through Bollinger Bands, will give you a huge trading edge, so make sure you use them.
About the Author
On all aspects of becoming a profitable trader including features, downloads and some critical FREE Trader PDF's and more FREE Forex Education visit our website at http://www.net-planet.org/index.html
If you understand the concept you can easily apply it with Bollinger bands which are an essential tool for all forex traders.
Let¡¯s look at why Bollinger Bands are so useful and profitable, when incorporated in your Forex Strategy.
If you don¡¯t know what standard deviation is simply check our article on the concept ¨C right, let¡¯s take a look at Bollinger bands.
Bollinger Bands Defined
Bollinger bands are simply volatility bands drawn either side of a moving average.
You calculate Bollinger bands using the standard deviation of price over the same period as moving averages the mean price, then the volatility bands are plotted above and below the moving average.
Moving averages are used to identify the underlying trend of currencies and Bollinger bands take this one step further by:
Combining the moving average of the currency with the volatility of the individual market (or the standard deviation) ¨C this then creates a trading envelope ¨C with a middle mean price (moving average and 2 x bands (expanding or contracting) either side that reflect volatility or standard deviation.
As prices move away from the longer-term average, the standard deviation rises - and thus the bands will fluctuate in varying amounts, away from the average.
Why they work
In any market, the value of a currency traded tends to rise slowly over the longer term.
Prices can and do spike quickly in the short term, but will normally return to the longer term moving average - which represents fair value.
The standard deviation of the outer bands (how far they are from the mean) shows how far prices are from longer-term value.
Most price spikes are caused by trader psychology with greed and fear to the fore and this can be graphically seen with Bollinger bands.
So how should you use Bollinger bands?
There are 3 main ways to use them.
1. Spotting price spikes
When the bands are a long way from the mean you can use Bollinger bands as profit taking signal on existing trades or use them to spot contrary trades.
2. Enter exisiting trends
If you have a good trend in the forex markets then you can use dips to the middle band to buy at fair value.
3. Entering new trends
When prices are trading in tight range and start to breakout with a change in volatility a great new trend could be emerging.
Bollinger bands can certainly give you a new dimension to your forex trading strategy and any currency trading system can benefit from the extra insight that they can give you.
A word of warning
Like all technical indicators you should not use Bollinger bands in isolation to enter trades, however combined with timing indicators such as, the stochastic or RSI, then you have a powerful combination for greater FX profits.
With regard to forex education, knowing what standard deviation is and how to apply the concept through Bollinger Bands, will give you a huge trading edge, so make sure you use them.
About the Author
On all aspects of becoming a profitable trader including features, downloads and some critical FREE Trader PDF's and more FREE Forex Education visit our website at http://www.net-planet.org/index.html
THE RISKS OF TRADING
Forex Investor Alert Printer Friendly Version
NATIONAL FUTURES ASSOCIATION
INVESTOR ALERT - AUGUST 2003
UNDERSTANDING THE RISKS OF TRADING IN THE
RETAIL OFF-EXCHANGE FOREIGN CURRENCY MARKET
Although every investment involves some risk, the risk of loss in trading off-exchange forex contracts can be substantial. Therefore, if you are considering participating in this market, you should understand some of the risks associated with this product so you may make an informed decision before investing.
Forex dealers are not all regulated the same way. Only regulated entities, such as banks, insurance companies, broker-dealers or futures commission merchants, and affiliates of regulated entities may enter into off-exchange forex trades with retail customers. Therefore, you should make sure the dealer is regulated and check out the dealer's registration status and background with its regulator.
Although forex dealers must be regulated, firms and individuals can solicit retail accounts for forex dealers and manage those accounts without being regulated. Therefore, you should find out if these persons are regulated. If they are not, you may be exposed to additional risks.
You can verify Commodity Futures Trading Commission (CFTC) registration and NFA membership status of a particular firm or individual and check their disciplinary history by phoning NFA at (800) 621-3570 or by checking the broker/firm information section (BASIC) of NFA's Web site at www.nfa.futures.org/basicnet/. You may also contact the other organizations listed at the end of this Alert.
You should protect yourself from fraud. Beware of investment schemes that promise significant returns with little risk. Carefully check out the firms and individuals you are dealing with. You should also take a close and cautious look at the investment offer itself and continue to monitor any investment you do make.
The market could move against you. No one can predict with certainty which way exchange rates will go, and the forex market is volatile. Fluctuations in the foreign exchange rate between the time you place the trade and the time you attempt to liquidate it will affect the price of your forex contract and the potential profit and losses relating to it.
You could lose more money than you initially invest. You will be required to deposit an amount of money (often referred to as "margin") with your forex dealer in order to buy or sell an off-exchange forex contract. Only a relatively small amount of money can enable you to hold a forex position for much more than the account value. This is referred to leverage or gearing. The smaller the deposit in relation to the underlying value of the contract, the greater the leverage.
If the price moves in an unfavorable direction, high leverage can produce large losses in relation to your initial deposit. In fact, even a small move against your position may result in a large loss, including the loss of your entire initial deposit and the liability for additional losses.
Buying and selling forex options present additional risks. Many of these risks are similar to those inherent in buying options on futures contracts. Therefore, you should consult NFA's brochure, Buying Options on Futures Contracts: A Guide to Uses and Risks.
You are relying on the creditworthiness and reputation of the other party to the transaction. Retail off-exchange forex trades are not guaranteed by a clearing organization. Furthermore, funds that you have deposited to trade forex contracts are not insured and do not receive a priority in bankruptcy. Therefore, you should know who you are dealing with.
There is no central marketplace. Unlike regulated futures exchanges, in the retail off-exchange forex market, there is no central marketplace with many buyers and sellers. The forex dealer determines the execution price, so you are relying on the dealer's integrity for a fair price.
The trading system could break down. If you are using an Internet-based or other electronic system to place trades, some part of the system could fail. In the event of a system failure, it is possible that, for a certain time period, you may not be able to enter new orders, execute existing orders, or modify or cancel orders that were previously entered. A system failure may also result in loss of orders or order priority.
* * *
Hopefully, this information has provided you with a better understanding of the risks involved in retail off-exchange forex trading. As mentioned above, retail off-exchange forex trading carries a high level of risk and may not be suitable for all investors. The possibility exists that you could lose all of your initial investment and be liable for additional losses. Therefore, you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with forex trading and make an informed decision after consulting with your financial advisor and considering your own financial situation and objectives. If you suspect any wrongdoing or improper business conduct by a forex dealer firm, you may contact or file a complaint with NFA by telephone at (800) 621-3570 or online at www.nfa.futures.org/basicnet/Complaint.aspx.
For further information, you should also consult the following resources:
Commodity Futures Trading Commission
In an effort to educate customers about the risks of forex trading, the CFTC issued a Forex Consumer Advisory in February 2001 cautioning the public to be skeptical of newspaper advertisements, radio and television promotions, and Internet Web sites that tout high-return, low-risk investment opportunities in forex trading. The CFTC also issued an Advisory in March 2002 on how firms may lawfully offer forex futures and option trading opportunities to the retail public. For more information on the CFTC's forex initiatives, visit the CFTC's forex Web page at www.cftc.gov/enf/enfforex.htm.
Other regulatory bodies and authorities:
* Federal Reserve Board (www.federalreserve.gov)
* Federal Financial Institutions Examination Council (www.ffiec.gov)
* Federal Deposit Insurance Corporation (www.fdic.gov)
* U.S. Securities and Exchange Commission (www.sec.gov)
* The Office of the Comptroller of the Currency (www.occ.treas.gov)
* Office of Thrift Supervision (www.ots.treas.gov)
* National Credit Union Association (www.ncua.gov)
* National Association of Securities Dealers Regulation, Inc. (www.nasdr.com)
* All U.S. Government web sites can be located through links at www.firstgov.gov
* Your state's securities commissioner (www.nasaa.org)
* The Attorney General's consumer protection bureau (www.naag.org/)
* The Better Business Bureau (www.bbb.org).
* Your state Attorney General's office and state banking, insurance and securities regulators (which often have their own web sites).
Recent NFA enforcement actions involving retail off-exchange forex trading:
NFA suspends Premier Trading Group and its owner, Douglas Brian Stevens
(April 2003)
NFA suspends Nexus Trading LLC and its owner Wesley A. Bennett Jr.
(January 2003)
NFA suspends and fines Midland Euro Inc and its president, Zvi Leichner
(December 2002)
NFA is a self-regulatory organization subject to oversight by the CFTC. NFA's primary mission is to protect investors and maintain market integrity.
NATIONAL FUTURES ASSOCIATION
INVESTOR ALERT - AUGUST 2003
UNDERSTANDING THE RISKS OF TRADING IN THE
RETAIL OFF-EXCHANGE FOREIGN CURRENCY MARKET
Although every investment involves some risk, the risk of loss in trading off-exchange forex contracts can be substantial. Therefore, if you are considering participating in this market, you should understand some of the risks associated with this product so you may make an informed decision before investing.
Forex dealers are not all regulated the same way. Only regulated entities, such as banks, insurance companies, broker-dealers or futures commission merchants, and affiliates of regulated entities may enter into off-exchange forex trades with retail customers. Therefore, you should make sure the dealer is regulated and check out the dealer's registration status and background with its regulator.
Although forex dealers must be regulated, firms and individuals can solicit retail accounts for forex dealers and manage those accounts without being regulated. Therefore, you should find out if these persons are regulated. If they are not, you may be exposed to additional risks.
You can verify Commodity Futures Trading Commission (CFTC) registration and NFA membership status of a particular firm or individual and check their disciplinary history by phoning NFA at (800) 621-3570 or by checking the broker/firm information section (BASIC) of NFA's Web site at www.nfa.futures.org/basicnet/. You may also contact the other organizations listed at the end of this Alert.
You should protect yourself from fraud. Beware of investment schemes that promise significant returns with little risk. Carefully check out the firms and individuals you are dealing with. You should also take a close and cautious look at the investment offer itself and continue to monitor any investment you do make.
The market could move against you. No one can predict with certainty which way exchange rates will go, and the forex market is volatile. Fluctuations in the foreign exchange rate between the time you place the trade and the time you attempt to liquidate it will affect the price of your forex contract and the potential profit and losses relating to it.
You could lose more money than you initially invest. You will be required to deposit an amount of money (often referred to as "margin") with your forex dealer in order to buy or sell an off-exchange forex contract. Only a relatively small amount of money can enable you to hold a forex position for much more than the account value. This is referred to leverage or gearing. The smaller the deposit in relation to the underlying value of the contract, the greater the leverage.
If the price moves in an unfavorable direction, high leverage can produce large losses in relation to your initial deposit. In fact, even a small move against your position may result in a large loss, including the loss of your entire initial deposit and the liability for additional losses.
Buying and selling forex options present additional risks. Many of these risks are similar to those inherent in buying options on futures contracts. Therefore, you should consult NFA's brochure, Buying Options on Futures Contracts: A Guide to Uses and Risks.
You are relying on the creditworthiness and reputation of the other party to the transaction. Retail off-exchange forex trades are not guaranteed by a clearing organization. Furthermore, funds that you have deposited to trade forex contracts are not insured and do not receive a priority in bankruptcy. Therefore, you should know who you are dealing with.
There is no central marketplace. Unlike regulated futures exchanges, in the retail off-exchange forex market, there is no central marketplace with many buyers and sellers. The forex dealer determines the execution price, so you are relying on the dealer's integrity for a fair price.
The trading system could break down. If you are using an Internet-based or other electronic system to place trades, some part of the system could fail. In the event of a system failure, it is possible that, for a certain time period, you may not be able to enter new orders, execute existing orders, or modify or cancel orders that were previously entered. A system failure may also result in loss of orders or order priority.
* * *
Hopefully, this information has provided you with a better understanding of the risks involved in retail off-exchange forex trading. As mentioned above, retail off-exchange forex trading carries a high level of risk and may not be suitable for all investors. The possibility exists that you could lose all of your initial investment and be liable for additional losses. Therefore, you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with forex trading and make an informed decision after consulting with your financial advisor and considering your own financial situation and objectives. If you suspect any wrongdoing or improper business conduct by a forex dealer firm, you may contact or file a complaint with NFA by telephone at (800) 621-3570 or online at www.nfa.futures.org/basicnet/Complaint.aspx.
For further information, you should also consult the following resources:
Commodity Futures Trading Commission
In an effort to educate customers about the risks of forex trading, the CFTC issued a Forex Consumer Advisory in February 2001 cautioning the public to be skeptical of newspaper advertisements, radio and television promotions, and Internet Web sites that tout high-return, low-risk investment opportunities in forex trading. The CFTC also issued an Advisory in March 2002 on how firms may lawfully offer forex futures and option trading opportunities to the retail public. For more information on the CFTC's forex initiatives, visit the CFTC's forex Web page at www.cftc.gov/enf/enfforex.htm.
Other regulatory bodies and authorities:
* Federal Reserve Board (www.federalreserve.gov)
* Federal Financial Institutions Examination Council (www.ffiec.gov)
* Federal Deposit Insurance Corporation (www.fdic.gov)
* U.S. Securities and Exchange Commission (www.sec.gov)
* The Office of the Comptroller of the Currency (www.occ.treas.gov)
* Office of Thrift Supervision (www.ots.treas.gov)
* National Credit Union Association (www.ncua.gov)
* National Association of Securities Dealers Regulation, Inc. (www.nasdr.com)
* All U.S. Government web sites can be located through links at www.firstgov.gov
* Your state's securities commissioner (www.nasaa.org)
* The Attorney General's consumer protection bureau (www.naag.org/)
* The Better Business Bureau (www.bbb.org).
* Your state Attorney General's office and state banking, insurance and securities regulators (which often have their own web sites).
Recent NFA enforcement actions involving retail off-exchange forex trading:
NFA suspends Premier Trading Group and its owner, Douglas Brian Stevens
(April 2003)
NFA suspends Nexus Trading LLC and its owner Wesley A. Bennett Jr.
(January 2003)
NFA suspends and fines Midland Euro Inc and its president, Zvi Leichner
(December 2002)
NFA is a self-regulatory organization subject to oversight by the CFTC. NFA's primary mission is to protect investors and maintain market integrity.
4 Tips For Choosing a Reputable Forex Broker
Finding a Forex broker is a tough process to navigate through and for most people, the necessity of outside assistance is needed. Trying to trade in the Forex market without a broker could lead to devastating results for the normal trader. Similarly, hiring the wrong Forex broker can lead to the same result as trying to muddle through it alone. It is highly important that you be diligent in researching any prospective brokerage firms to handle your financial portfolio.
A good Forex broker will supply you with clients that were successful and can attest to the specific broker's qualifications and success history. Put yourself in that position, would you testify to someone's strengths if they did a poor job for you? Client history testimony should be present in any prospective Forex broker and plentiful to indicate a solid background with trading. You can tentatively assess a lot from a Forex broker with a list of clients that will speak up for the brokerage firm or individual broker. It should be noted that all word of mouth testimony should be taken with a grain of salt and dissected to collect the pertinent information. Testimony should be used in your research to find a Forex broker but should not be the deciding factor.
Another good morsel to test the reliability of any potential Forex broker is the amount of information, literature and lessons that they are willing to give to you. Most Forex brokers are of a high reputation and a solid background however, there are many out there that don't have a good history or no history and it is wise to steer clear of these brokers. You are trying to find a trusted financial advisor and settling for second best, just won't do. The more a potential Forex broker is willing to do for you in the area of helping you understand the Forex trading system, the better quality trader they will be for you.
A good avenue to travel down when seeking a good Forex broker is to ask your acquaintances about Forex brokers and how they met. This can not only give you prospective referrals to great Forex brokers but will also equip you with ideas and resources that you may not have located. If you get a referral from friends, be sure to still research that specific broker and his qualifications before committing to any formal agreement.
The other factor in finding a good Forex broker is the margin of return that is offered. A Forex trading margin used to influence your money and many Forex brokers offer different margins. Finding a Forex broker, who gives a margin of ten to one isn't a very good find so it's worth the time to reinvest in research. Remember that this industry is all about customer service and catering to the clients so if your prospective Forex broker doesn't return your calls within a reasonable time frame it would be advisable to keep searching.
About the Author
Troy Degarnham is the author and webmaster of http://www.forex-trading-brokers.info, an informative website about Forex Trading. Extensive help and tips on trading systems, software, signals, day trading, forex brokers, courses, and other secrets to help you gain financial freedom.
by adry fx
A good Forex broker will supply you with clients that were successful and can attest to the specific broker's qualifications and success history. Put yourself in that position, would you testify to someone's strengths if they did a poor job for you? Client history testimony should be present in any prospective Forex broker and plentiful to indicate a solid background with trading. You can tentatively assess a lot from a Forex broker with a list of clients that will speak up for the brokerage firm or individual broker. It should be noted that all word of mouth testimony should be taken with a grain of salt and dissected to collect the pertinent information. Testimony should be used in your research to find a Forex broker but should not be the deciding factor.
Another good morsel to test the reliability of any potential Forex broker is the amount of information, literature and lessons that they are willing to give to you. Most Forex brokers are of a high reputation and a solid background however, there are many out there that don't have a good history or no history and it is wise to steer clear of these brokers. You are trying to find a trusted financial advisor and settling for second best, just won't do. The more a potential Forex broker is willing to do for you in the area of helping you understand the Forex trading system, the better quality trader they will be for you.
A good avenue to travel down when seeking a good Forex broker is to ask your acquaintances about Forex brokers and how they met. This can not only give you prospective referrals to great Forex brokers but will also equip you with ideas and resources that you may not have located. If you get a referral from friends, be sure to still research that specific broker and his qualifications before committing to any formal agreement.
The other factor in finding a good Forex broker is the margin of return that is offered. A Forex trading margin used to influence your money and many Forex brokers offer different margins. Finding a Forex broker, who gives a margin of ten to one isn't a very good find so it's worth the time to reinvest in research. Remember that this industry is all about customer service and catering to the clients so if your prospective Forex broker doesn't return your calls within a reasonable time frame it would be advisable to keep searching.
About the Author
Troy Degarnham is the author and webmaster of http://www.forex-trading-brokers.info, an informative website about Forex Trading. Extensive help and tips on trading systems, software, signals, day trading, forex brokers, courses, and other secrets to help you gain financial freedom.
by adry fx
A Quick Forex Guide for Traders
In this Forex course we will review some steps you need to take care before you venture into your trading journey. Most traders venture into the Forex market with little or no experience in the Forex market. This results in painful experiences like loosing most of the risk capital, frustration because it seemed so easy to make money, etc.
The first thing you need to realize is that, it is not easy to make money. As every other endeavor in life, where important rewards are to come after mastering it, you need to work hard. You need to get very well educated and experienced before having the possibility to receive important rewards on it. The key on mastering the Forex market relies on commitment, patience and discipline.
Ok, you have decided you are going to trade the Forex market, you have seen several advertisings featuring how easy is to make money in the Forex market. You might think this is your opportunity to reach your financial freedom, right away, time is money, why waiting any longer if you have the opportunity to make money now. I know, I've been there, but you have a chance now, I didn't, no body told me what I am going to tell you.
We, Forex traders, make transactions based on a set of rules. These sets of rules are what we call a Trading System. Our systems tell us the exact time where we need to get in the market and out the market in order to make a profit (i.e. buy low sell high.)
Creating a system is the first big step you need to take care first. Why is this so important? Because you need to build a system that suits your personality, otherwise you are going to find hard to follow it, thus hard to profit from.
A system can be based on technical indicators or what we called a mechanical system or based on experience and intuition or what we call discretionary systems. I highly recommend using and trying first a mechanical system, because discretionary systems are dangerous during the early stages of a Forex trader (can lead to indiscipline.) With experience, on later stages, you will find out which signals work better and which ones to avoid.
The next step in this Forex course is to try your system on a demo account. Most Forex brokers offer a demo account, an account with virtual money. This is an excellent choice to test your trading system as there is no money at risk. In this step you will figure out if the strategy works for you. If you feel comfortable trading it, then it is most likely to produce good results. How much time should you stay in this step? It varies, but you shouldn't go one step further until your system gets consistent profitable results over a period of time. It can take many months, but remember, you need to be patient.
You must be honest to yourself; you need to take every single signal generated by your system, not only the signals you thought were going to work, otherwise, you are going to have problems in the next two steps.
Ok, by know you had consistent profitable results on your demo account. You might think its time to go full. Nope, nope, nope. There is a big difference between trading a demo and a real account. The most important difference lies on emotions (fear, greed, anger, etc.) These are psychological barriers that affect every single decision made by traders regardless of what he/she is trading (stocks, bonds, Forex, futures, grains, etc.) These emotional factors, in my opinion, are the most determinant factor that separates profitable traders from the others.
The next step in this Forex course is specially designed to deal with emotions and to confirm the results obtained in the prior step (consistent results in a demo account.) At this step you need to trade in a real account with limited funds. Some brokers offer fractional lot trading. Meaning you are able to trade any desired amount (even cents.) The important thing here is that these emotions we've been talking about are present only when there is real money at risk. At this stage, you are going to see if you are really comfortable trading your system and if you are able to trade with such system, remember different systems produce different emotions. If you are able to produce similar results than those obtained in a demo account, then ready for the next step. If you didn't, then you might need to create another system, there is chance your system never fit you. If you created consistent profitable results on this stage, you have a chance to produce similar results in the next one, on the other hand, if you didn't produce good results in this stage, you will not be able to make on the next stage. Remember, you need to do things right, and be honest to yourself.
The last stage is trading in a real account with sufficient funds. If you are at this stage, and have passed successfully every prior stage, then you have a chance to make it, go ahead and try it, you need to be confident in yourself and in your system, your strategy have already produced consistent profitable results, there are reasons to believe you are going to make it. Very few traders fail at this stage (if passed successfully prior stages.)
Trading successfully is no easy task, it requires a lot of work, patience, discipline, and education. By completing the steps outlined in this Forex course, you have a chance to produce profitable results. I repeat it again, you need to be honest to yourself about the results obtained in every stage. Some times you might need expert guidance regarding your system development strategies.
STRAIGHT FOREX © 2005, 2006, 2007
The first thing you need to realize is that, it is not easy to make money. As every other endeavor in life, where important rewards are to come after mastering it, you need to work hard. You need to get very well educated and experienced before having the possibility to receive important rewards on it. The key on mastering the Forex market relies on commitment, patience and discipline.
Ok, you have decided you are going to trade the Forex market, you have seen several advertisings featuring how easy is to make money in the Forex market. You might think this is your opportunity to reach your financial freedom, right away, time is money, why waiting any longer if you have the opportunity to make money now. I know, I've been there, but you have a chance now, I didn't, no body told me what I am going to tell you.
We, Forex traders, make transactions based on a set of rules. These sets of rules are what we call a Trading System. Our systems tell us the exact time where we need to get in the market and out the market in order to make a profit (i.e. buy low sell high.)
Creating a system is the first big step you need to take care first. Why is this so important? Because you need to build a system that suits your personality, otherwise you are going to find hard to follow it, thus hard to profit from.
A system can be based on technical indicators or what we called a mechanical system or based on experience and intuition or what we call discretionary systems. I highly recommend using and trying first a mechanical system, because discretionary systems are dangerous during the early stages of a Forex trader (can lead to indiscipline.) With experience, on later stages, you will find out which signals work better and which ones to avoid.
The next step in this Forex course is to try your system on a demo account. Most Forex brokers offer a demo account, an account with virtual money. This is an excellent choice to test your trading system as there is no money at risk. In this step you will figure out if the strategy works for you. If you feel comfortable trading it, then it is most likely to produce good results. How much time should you stay in this step? It varies, but you shouldn't go one step further until your system gets consistent profitable results over a period of time. It can take many months, but remember, you need to be patient.
You must be honest to yourself; you need to take every single signal generated by your system, not only the signals you thought were going to work, otherwise, you are going to have problems in the next two steps.
Ok, by know you had consistent profitable results on your demo account. You might think its time to go full. Nope, nope, nope. There is a big difference between trading a demo and a real account. The most important difference lies on emotions (fear, greed, anger, etc.) These are psychological barriers that affect every single decision made by traders regardless of what he/she is trading (stocks, bonds, Forex, futures, grains, etc.) These emotional factors, in my opinion, are the most determinant factor that separates profitable traders from the others.
The next step in this Forex course is specially designed to deal with emotions and to confirm the results obtained in the prior step (consistent results in a demo account.) At this step you need to trade in a real account with limited funds. Some brokers offer fractional lot trading. Meaning you are able to trade any desired amount (even cents.) The important thing here is that these emotions we've been talking about are present only when there is real money at risk. At this stage, you are going to see if you are really comfortable trading your system and if you are able to trade with such system, remember different systems produce different emotions. If you are able to produce similar results than those obtained in a demo account, then ready for the next step. If you didn't, then you might need to create another system, there is chance your system never fit you. If you created consistent profitable results on this stage, you have a chance to produce similar results in the next one, on the other hand, if you didn't produce good results in this stage, you will not be able to make on the next stage. Remember, you need to do things right, and be honest to yourself.
The last stage is trading in a real account with sufficient funds. If you are at this stage, and have passed successfully every prior stage, then you have a chance to make it, go ahead and try it, you need to be confident in yourself and in your system, your strategy have already produced consistent profitable results, there are reasons to believe you are going to make it. Very few traders fail at this stage (if passed successfully prior stages.)
Trading successfully is no easy task, it requires a lot of work, patience, discipline, and education. By completing the steps outlined in this Forex course, you have a chance to produce profitable results. I repeat it again, you need to be honest to yourself about the results obtained in every stage. Some times you might need expert guidance regarding your system development strategies.
STRAIGHT FOREX © 2005, 2006, 2007
Essential Elements of a Successful Trader
Essential Elements of a Successful Trader
by Jimmy Young of EURUSDTrader
Courage Under Stressful Conditions When the Outcome is Uncertain
All the foreign exchange trading knowledge in the world is not going to help, unless you have the nerve to buy and sell currencies and put your money at risk. As with the lottery “You gotta be in it to win it”. Trust me when I say that the simple task of hitting the buy or sell key is extremely difficult to do when your own real money is put at risk.
You will feel anxiety, even fear. Here lies the moment of truth. Do you have the courage to be afraid and act anyway? When a fireman runs into a burning building I assume he is afraid but he does it anyway and achieves the desired result. Unless you can overcome or accept your fear and do it anyway, you will not be a successful trader.
However, once you learn to control your fear, it gets easier and easier and in time there is no fear. The opposite reaction can become an issue – you’re overconfident and not focused enough on the risk you're taking.
Start by analyzing yourself. Are you the type of person that can control their emotions and flawlessly execute trades, oftentimes under extremely stressful conditions? Are you the type of person who’s overconfident and prone to take more risk than they should? Before your first real trade you need to look inside yourself and get the answers. We can correct any deficiencies before they result in paralysis (not pulling the trigger) or a huge loss (overconfidence). A huge loss can prematurely end your trading career, or prolong your success until you can raise additional capital.
Both the inability to initiate a trade, or close a losing trade can create serious psychological issues for a trader going forward. By calling attention to these potential stumbling blocks beforehand, you can properly prepare prior to your first real trade and develop good trading habits from day one.
The difficulty doesn’t end with “pulling the trigger”. In fact what comes next is equally or perhaps more difficult. Once you are in the trade the next hurdle is staying in the trade. When trading foreign exchange you exit the trade as soon as possible after entry when it is not working. Most people who have been successful in non-trading ventures find this concept difficult to implement.
For example, real estate tycoons make their fortune riding out the bad times and selling during the boom periods. The problem with trying to adapt a 'hold on until it comes back' strategy in foreign exchange is that most of the time the currencies are in long-term persistent, directional trends and your equity will be wiped out before the currency comes back.
The other side of the coin is staying in a trade that is working. The most common pitfall is closing out a winning position without a valid reason. Once again, fear is the culprit. Your subconscious demons will be scaring you non-stop with questions like “what if news comes out and you wind up with a loss”. The reality is if news comes out in a currency that is going up, the news has a higher probability of being positive than negative (more on why that is so in a later article).
So your fear is just a baseless annoyance. Don’t try and fight the fear. Accept it. Have a laugh about it and then move on to the task at hand, which is determining an exit strategy based on actual price movement. As Garth says in Waynesworld “Live in the now man”. Worrying about what could be is irrational. Studying your chart and determining an objective exit point is reality based and rational.
Another common pitfall is closing a winning position because you are bored with it; its not moving. In Football, after a star running back breaks free for a 50-yard gain, he comes out of the game temporarily for a breather. When he reenters the game he is a serious threat to gain more yards – this is indisputable. So when your position takes a breather after a winning move, the next likely event is further gains – so why close it?
If you can be courageous under fire and strategically patient, foreign exchange trading may be for you. If you’re a natural gunslinger and reckless you will need to tone your act down a notch or two and we can help you make the necessary adjustments. If putting your money at risk makes you a nervous wreck its because you lack the knowledge base to be confident in your decision making.
Patience to Gain Knowledge through Study and Focus
Many new traders believe all you need to profitably trade foreign currencies are charts, technical indicators and a small bankroll. Most of them blow up (lose all their money) within a few weeks or months; some are initially successful and it takes as long as a year before they blow up. A tiny minority with good money management skills, patience, and a market niche go on to be successful traders. Armed with charts, technical indicators, and a small bankroll, the chance of succeeding is probably 500 to 1.
To increase your chances of success to near certainty requires knowledge; acquiring knowledge takes hard work, study, dedication and focus. Compile your knowledge base without taking any shortcuts, thereby assuring a solid foundation to build upon.
Jimmy Young
by Jimmy Young of EURUSDTrader
Courage Under Stressful Conditions When the Outcome is Uncertain
All the foreign exchange trading knowledge in the world is not going to help, unless you have the nerve to buy and sell currencies and put your money at risk. As with the lottery “You gotta be in it to win it”. Trust me when I say that the simple task of hitting the buy or sell key is extremely difficult to do when your own real money is put at risk.
You will feel anxiety, even fear. Here lies the moment of truth. Do you have the courage to be afraid and act anyway? When a fireman runs into a burning building I assume he is afraid but he does it anyway and achieves the desired result. Unless you can overcome or accept your fear and do it anyway, you will not be a successful trader.
However, once you learn to control your fear, it gets easier and easier and in time there is no fear. The opposite reaction can become an issue – you’re overconfident and not focused enough on the risk you're taking.
Start by analyzing yourself. Are you the type of person that can control their emotions and flawlessly execute trades, oftentimes under extremely stressful conditions? Are you the type of person who’s overconfident and prone to take more risk than they should? Before your first real trade you need to look inside yourself and get the answers. We can correct any deficiencies before they result in paralysis (not pulling the trigger) or a huge loss (overconfidence). A huge loss can prematurely end your trading career, or prolong your success until you can raise additional capital.
Both the inability to initiate a trade, or close a losing trade can create serious psychological issues for a trader going forward. By calling attention to these potential stumbling blocks beforehand, you can properly prepare prior to your first real trade and develop good trading habits from day one.
The difficulty doesn’t end with “pulling the trigger”. In fact what comes next is equally or perhaps more difficult. Once you are in the trade the next hurdle is staying in the trade. When trading foreign exchange you exit the trade as soon as possible after entry when it is not working. Most people who have been successful in non-trading ventures find this concept difficult to implement.
For example, real estate tycoons make their fortune riding out the bad times and selling during the boom periods. The problem with trying to adapt a 'hold on until it comes back' strategy in foreign exchange is that most of the time the currencies are in long-term persistent, directional trends and your equity will be wiped out before the currency comes back.
The other side of the coin is staying in a trade that is working. The most common pitfall is closing out a winning position without a valid reason. Once again, fear is the culprit. Your subconscious demons will be scaring you non-stop with questions like “what if news comes out and you wind up with a loss”. The reality is if news comes out in a currency that is going up, the news has a higher probability of being positive than negative (more on why that is so in a later article).
So your fear is just a baseless annoyance. Don’t try and fight the fear. Accept it. Have a laugh about it and then move on to the task at hand, which is determining an exit strategy based on actual price movement. As Garth says in Waynesworld “Live in the now man”. Worrying about what could be is irrational. Studying your chart and determining an objective exit point is reality based and rational.
Another common pitfall is closing a winning position because you are bored with it; its not moving. In Football, after a star running back breaks free for a 50-yard gain, he comes out of the game temporarily for a breather. When he reenters the game he is a serious threat to gain more yards – this is indisputable. So when your position takes a breather after a winning move, the next likely event is further gains – so why close it?
If you can be courageous under fire and strategically patient, foreign exchange trading may be for you. If you’re a natural gunslinger and reckless you will need to tone your act down a notch or two and we can help you make the necessary adjustments. If putting your money at risk makes you a nervous wreck its because you lack the knowledge base to be confident in your decision making.
Patience to Gain Knowledge through Study and Focus
Many new traders believe all you need to profitably trade foreign currencies are charts, technical indicators and a small bankroll. Most of them blow up (lose all their money) within a few weeks or months; some are initially successful and it takes as long as a year before they blow up. A tiny minority with good money management skills, patience, and a market niche go on to be successful traders. Armed with charts, technical indicators, and a small bankroll, the chance of succeeding is probably 500 to 1.
To increase your chances of success to near certainty requires knowledge; acquiring knowledge takes hard work, study, dedication and focus. Compile your knowledge base without taking any shortcuts, thereby assuring a solid foundation to build upon.
Jimmy Young
Forex Story
Warren Buffett (the world’s second richiest man, Berkshire Hathaway Inc. chairman) said on CNBC televesion "Over time unless we have a major change in trade policies, I don’t see how the dollar avoids going down… I don’t have any idea whether it will be this month or this year or next year, but we are force-feeding dollars on to the rest on to the rest of the world at the rate of close to a couple [1.8] billion dollars a day, and that’s going to weigh on the dollar."
Are you thinking about launching a career in forex trading? Forex trading is serious business that can you very well off or bankrupt. Deciding to delve into this kind of business means that you are prepared to risk something in exchange for quite a bit of earnings. Thus, it is crucial that you know what factors separate the winners from the bigger chunk of losers in the trading game.
Trading is not for everyone. Same as other businesses it need talent, research, knowledge, passion, investment and hard working. I don’t except that all people will want to make their wealth this way but if try to get a head financially you might well work to look.
Trading is well suited to people who are logical rather than emotional it is a system focus rather than people focus some people have the gift of the gab and become a successful salesperson others are not suited to it. I believe if you are discipline, logical and like to following a system you could be able to maximum your nature talent in a home trading environment.
Most people run around searching the hype around trading. It is made out to be a magic way to make money. The truth is, it is a skill that needs to be learned and practice before it will pays off.
For most of the last 8 years I have gravitated around trading, I have traded option, futures, commodity, indices and forex. There is no magic. I was looking around trying to found the holy grail that works every time in every markets.I was deeply frustrated to find so many of the courses were mostly hype. The system that was presented look great in theory but the reality was a lot more painful.
Apart to make my bank balance consistently go up I knew everything about trading. The truth is I search for the magic way of predicting markets and getting rich without any effort, and lost plenty of money on the quest.
One day I meet a young trader far away apart in age with me. He was trading for a living for some years, amazingly he proved to me that a basic trading and focus on psychology of trading far more serious profitable … it’s open my eyes to stop looking around and try to predict the markets. Instead I focused on being profitable.
It might be your time now to find away to your path of successful trading by having someone that work close to you on daily basis to ensure that you in the right track to be the part of 5 % people that survived and success in this business.
learn forex
www.learntradefx.com
Are you thinking about launching a career in forex trading? Forex trading is serious business that can you very well off or bankrupt. Deciding to delve into this kind of business means that you are prepared to risk something in exchange for quite a bit of earnings. Thus, it is crucial that you know what factors separate the winners from the bigger chunk of losers in the trading game.
Trading is not for everyone. Same as other businesses it need talent, research, knowledge, passion, investment and hard working. I don’t except that all people will want to make their wealth this way but if try to get a head financially you might well work to look.
Trading is well suited to people who are logical rather than emotional it is a system focus rather than people focus some people have the gift of the gab and become a successful salesperson others are not suited to it. I believe if you are discipline, logical and like to following a system you could be able to maximum your nature talent in a home trading environment.
Most people run around searching the hype around trading. It is made out to be a magic way to make money. The truth is, it is a skill that needs to be learned and practice before it will pays off.
For most of the last 8 years I have gravitated around trading, I have traded option, futures, commodity, indices and forex. There is no magic. I was looking around trying to found the holy grail that works every time in every markets.I was deeply frustrated to find so many of the courses were mostly hype. The system that was presented look great in theory but the reality was a lot more painful.
Apart to make my bank balance consistently go up I knew everything about trading. The truth is I search for the magic way of predicting markets and getting rich without any effort, and lost plenty of money on the quest.
One day I meet a young trader far away apart in age with me. He was trading for a living for some years, amazingly he proved to me that a basic trading and focus on psychology of trading far more serious profitable … it’s open my eyes to stop looking around and try to predict the markets. Instead I focused on being profitable.
It might be your time now to find away to your path of successful trading by having someone that work close to you on daily basis to ensure that you in the right track to be the part of 5 % people that survived and success in this business.
learn forex
www.learntradefx.com
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