[FOREX TIP] 5 Simple Steps to Successful Forex Trading

The most common mistakes made in Currency Trading can be directly linked to a few basic misunderstandings of the market.

We’re flooded with information and opinions, and unfortunately for you and me, there are no magic wands to reveal who is genuinely looking out for our best interests. Everyone is out to make a buck, and sometimes the little guy can get swallowed in the waves created by the giants.

5 Simple Steps to Successful Forex Trading

It’s human nature to let your emotions influence your decisions. Fear of losing money, greed and the “what if’s” all can shift your viewpoint, and the correct decision can be lost along the way. We’ve all lost money in the forex right? It’s the promise of getting out of the drudgery of 9-5, of a secure and comfortable way of life, managed from your laptop, which draws us all like moths to a bright light. What you need is a plan, a step by step formula to wade your way through the inconsistencies, the half-truths, and just the plain out incorrect.

Step 1 – Foundation

Trading is a business, whether you plan on entering full time or just starting a part time venture. All the rules of successful businesses apply – you need to make a plan and follow through.

Ask yourself important questions – How much time can I wait for profit? Can I wait 6 months and follow the trend, or do I need to be out every day? How much time can I invest daily? Can I afford to sit in front of the computer screen for 6 hours, waiting for the perfect volatile moment? Can I automate, and trust someone else’s opinion to make my decisions for me? Do I want to spend the time to have mastery over currency trading, or would I prefer to use the expertise of someone who’s been there?

We’ve all heard stories of traders who just want to get out there, let experience teach them – and we all know the endings to such stories (unpleasant to say the least). It is VITAL for the success of your trading that you have a solid foundation and plan, and that you stick to it under all conditions. It’s very easy to go out of your business model “just this once”, and have it end in spectacular failure. Develop an execution plan. Buy or sell under those conditions, no exceptions.

Step 2 – Trading Plan

Write everything down. You can’t control the markets, you can’t control the price action – you can only control your participation. You need to set a regular time to sit down and review your positions and systems, and write that down. Find what it is that you need to become a disciplined proactive trader in the forex currency exchange market. You need to write your plan down, and write your results down, so you can learn what your winning behavior is and what your losing behavior is.

Maybe you’re going to paper trade for 30 days, maybe join a trading group by November this year, maybe read two books by the end of the month, it doesn’t matter. Without records to review, you cannot know what is working for you.

It is easier to write successful rules, if you have documentation showing what is working for you and what is not. Make note of your time invested in the behavior, the number of winners/losers, amount won/lost. You can use this to plan your successful trading, which works right for you, the individual.

Step 3 – Paper Trading

Paper trading is generally the first port of call for those trying to learn currency trading. However it can be dangerous, as it can give a false sense of security. Your psychological viewpoint will not be the same if you’re not risking anything, therefore your decision making will be different than if it was in real time.

You’re not exposed to the real emotions of trading, because there is no risk. Paper trading can help you get familiar with your platform; make sure that your mistakes are not going to be common errors from software. In order to really learn, however, you need to be doing it out in the real world, where your fears can influence your choices.

Step 4 – Real Time – Get in!

Your ultimate goal is to have a bank account that’s growing, right? In order to do that, you need to start trading. We know that you can’t pretend to trade. It’s important for you to get some real, emotional, and psychological experience of trading under your belt, so you can make educated decisions. You will have losses. Nobody has 100% winning trades, and there is no system or set of rules that will give you a guarantee.

Your goal with trading is to get in touch with what you personally need to learn to be successful. What is it that let you down with that trade? Write it down, document it, and work out a plan to get past it. You will only learn your strengths and weaknesses after you have some real time forex experience. Every successful trader has had to face whatever it is that holds them back.

Step 5 – Get Help

Find a community of traders or like minded individuals who will empower you to make the right decisions. It will help you stay focused and disciplined on what really matters. Learn from their mistakes by observing how others trade and the problems that they have faced. You will avoid costly errors this way. Share your experience with others, on a web forum, seminar, or trading group, and you will reap the reward of their shared information and education. Build on their success, and remember – all successful people in any profession share their knowledge.

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[FOREX TIP] Expand Your Trading Knowledge through Constant Reading

Over the last few years, trading on the world’s foreign exchange markets (or forex) has become a hot and trendy way to make (and lose!) a fortune. The professional who works for banks and investment firms takes many years to become a good trader.

Unfortunately, many people have also released information (usually at a high price too!) that make the average person think they too can trade forex with the “big boys” with only a few hours of training. The end result is normally the person loses their shirt (or car, or house, or…).

Expand Your Trading Knowledge through Constant Reading

Today, there are so many online courses, expensive seminars given by flashy presenters and even one-on-one coaching devoted to helping people learn to trade forex. Despite these, most adults prefer to get their information using books. But, just like the others, there are hundreds of titles available (some cheap, some incredibly expensive!), so how do you know which is the best one? This post will examine how to choose a good title and how to identify which books are a waste of money.

Expand Your Trading Knowledge through Reading – Why Books are the best

The main reason books are best is because people can read and re-read any chapter or passage as many times as they need until they fully understand the concepts. Most expensive seminar speakers won’t be able to repeat themselves over and over just for you, so is it any wonder why books have this advantage? One of the cornerstones of adult education is that adults like to learn at their own pace. Books provide this for them, as other avenues may be on a timeline.

Which Books are the best?

Because forex trading is relatively new, the marketplace is full of liars and cheats who are more than ready to take the money of anyone willing to read their crap. The first thing you need to look at is the title. If it makes an outrageous claim, such as “One hour to forex MILLIONS!” or “Make MILLIONS trading forex for only 5 minutes a day!”, chances are it won’t tell you anything you couldn’t easily find for free on the Internet. It’s a case of “If it’s too good to be true, it probably is” and you should avoid it at all costs. These types of books usually don’t emphasize the huge risk that comes with trading forex enough, or even at all!

What you should be looking for in a book is an experienced author who presents information in a calm manner and gives practical and reasonable advice. An author who uses glitzy and showy language is usually trying to pull the wool over your eyes. The main thing you should be asking this kind of author is if it is SO easy to make a huge fortune trading forex, why would you waste time writing books and usually charging a fortune for them?

However, if an author uses straightforward and logical language, it can probably suggest that the author knows what he is talking about and is sharing what he has learned from his experience with trading forex. A successful trader who has made a fortune and has taken some time out to share his experiences doesn’t have to impress anyone!

Another thing to look at is how the book is presented. An e-book filled with spelling, punctuation and grammar mistakes sold by someone on his website is probably another clue that the author makes more money from selling eBooks than actually trading. However, if the book looks like it was written and edited by professionals and is presented in a straightforward manner, it is highly likely this is a good book to read, as it will probably discuss the pros and cons of forex trading in a logical manner, including all the risk associated with forex trading.

The last thing you may want to do is a little bit of online research about the author him/herself. Have there been any reviews of the book? If so, are they online testimonials on the author’s website? Has the author been mentioned in any recent news stories, especially about trading forex? Can you find out the background of the author? How much actual trading experience does he/she have (as opposed to writing forex books)? All this information could be found out online is relatively little time. Also, there are numerous online forex forums where average people can probably give you their opinions on a certain book for free.

Finding the right books for learning about forex trading can be a daunting task. While there are some very reputable authors out there who have genuinely made a fortune trading forex, there are a lot of authors who try to pass themselves off as great traders but are merely interested in making money selling their books rather than actually trading. Forex trading is a great example of “Those who can do. Those who can’t, teach.” Do your research and you may make your fortune in this wonderful profession of trading.

 

 

 

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[FOREX TIP] Forex Basics: The Importance of Charts in Forex Trading

What role do charts play in Forex trading? Are they of any value? Can a retail trader use charts exclusively for trading success? These are just but a few of the questions we are going to answer in this post. Using charts for Forex trading is the primary analysis tool for Forex retail traders. This is simply because the fundamental analysis required for understanding global events, market moving news, interest rates, economic growth and other fundamental information is beyond most retail traders.

Even if it were possible for a retail trader to totally understand fundamental events, it would require painstaking research, analysis, and interpretation before fundamental analysis could be turned into anything useful for actual trading.

Charts for Forex Trading

To trade using the chart, there are several key points that a trader might find it useful to understand. They are:

1. Charts are based on price history. That is, charts are formed on what has already happened in the past
2. Chart patterns are also based on price history

• Technical Indicators are based on past information. That is to say, the price has to move first before the indicator moves. Not the other way around

In essence, everything that you see on the chart is based on past price movement. The fundamental tenet of technical analysis in using the chart for trading is that the past can PREDICT the future.

In case you didn’t see it, I emphasized the word “predict”.

The Value of Chart Trading For the Forex Trader

Charts provide past information to the trader, in the anticipation that the past can provide some clues to possible future price movement. But that is where beginning traders can take the wrong idea home.

Chart trading provides clues, helps us to predict and anticipate possible future price movements, but they do not guarantee the movement of the market.

The inexperienced trader’s first encounter with Technical Analysis is akin to moving into a new realm in trading, where seemingly the Holy Grail of trading can be found when this subject of Technical Analysis is unlocked.

And because of this expectation, some traders tend to trade with charts as if it were the Holy Grail. How you ask?

Some of the ways of this happening are:

1. By taking unnecessary risks that are too large for their account size to handle.
2. By putting their ego on the line by thinking their analysis has to always be spot on.

• By believing that charts are the primary influence on how the markets move.

 

People Move the Markets

People are the ones that move the markets. Traders in banks, hedge funds, central banks and other financial institutions influence the way the markets move. Sometimes, they use the charts. Sometimes, they use fundamental analysis to make their decisions.

While charts provide valuable information in how one should begin to anticipate potential price movements in the future, they are not and will never be the “Holy Grail” of trading. With a good technical analysis trading system, you can put the probabilities of success on your side, but that alone will not guarantee you success.

Other factors like your trade management, position sizing, personality, time available, understanding of how markets work, and many other elements will influence your success in trading.

There are times when one might want to stay out of the markets. Times when there is huge uncertainty in the markets that could throw all your technical analysis awry.

An Example

For example, let’s say your technical analysis indicates that the market should go down. But you didn’t realize that an announcement on interest rates is coming up. Just as you place a trade towards the downside, the announcement released is a bullish one that is contrary to most expectations.

What happens then is the market participants rush in to cover their sell trades, and start going long by buying. Even though technical analysis has indicated the most likely trade is to the downside, news announcements can completely throw your trade off.

Using the Charts

When you use the chart for your trading, always remember that you could be right, and you could also be wrong.

While you don’t always have to know the content and implications of news announcements, knowing WHEN these announcements are going to take place could be very helpful in your decision-making. To either stay out or to reduce the size of your trade.

Charts do provide value to trading success, but they are not the “Holy Grail” of trading. In every single case, the Holy Grail of trading that needs to be polished is right there, between your two ears.

 

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