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Currency Trading Success - Be Objective NOT Subjective or Lose Your Equity Quickly

Thursday, June 28, 2007

If you want to make money from forex trading and achieve currency trading success you need to make sure your forex trading strategy is objective as possible and keeps subjectivity out.

Many traders make the mistake of including to much subjectivity in their trading plan and lose; lets look at why this can be fatal.

Why Subjectivity will ensure you lose.

Many traders need to make a lot of subjective judgements about their trading signals before executing them – The problem is, the subjectivity that they have in their judgements sees their emotions come into play and they lose.

Let’s look at an example.

Elliot wave and cycles are supposed to objective yet you have to spot the set ups and make subjective judgements.

This means that you can be tempted to over ride signals, take signals you shouldn’t and generally let your emotions dictate your forex trading strategy.

The same goes for those traders who want to trade by following online news wires.

They need to decide how much the news has been discounted and how valid it is – this is difficult or near impossible and again, emotions come into play and the trader losses.

Be objective! and Create Rules

A better way to trade is to create a set of objective rules for your currency trading system, which mean you do NOT have to make subjective judgements – you simply follow the rules.

This keeps you focused and disciplined and keeps your emotions out of trading.

Here us a simple system that is an objective set of rules and consist of three main components.

1. Look For Valid Support or Resistance

This is support and resistance tested several times, that line up on the weekly and daily charts at the same critical levels.

2. Look For Tests of the Above

When the price moves towards the support and resistance – You should then have a timing indicator to either indicate it will hold or fail.

3. Timing a Trade

If price momentum falls into the levels using the stochastic and Relative strength Index (RSI) a short trade is taken.

If the support or resistance is broken and confirmed by the previous two indicators then a long trade on the breakout is taken.

That’s it no guessing or subjective judgement used, this currency trading strategy is a simple set of rules that are followed

Trading signals are executed in line with the trading rules.

Sounds simple?

It is! Most traders can’t do this they want to subjectively decide if the trade looks good and impose their own judgements upon the trade - in forex trading this is fatal!

Discipline goes out the window and emotions dictate the trading strategy and trading equity is lost.

Destructive Emotions

The enemy of any trader is his or her emotions. This is why most novice traders lose, they can’t get an objective plan and set of rules they can follow with discipline.

If you want to achieve currency trading success, make sure your currency trading system is objective as possible and keeps subjective judgements and emotions out or you will lose to.

FOREX Education - Getting the RIGHT Education to Win

If you want to win at FOREX trading you need the right education. The fact is 95% of novice traders lose all their equity quickly, that’s not because they don’t work hard or can’t win - they simply put their efforts in the wrong area.

Let’s look at how to achieve currency trading success by learning forex trading the right way.

Use the Internet

You can get all the Forex education you need for free on the net, you simply have to look in the right areas, which we will explain in more detail in a moment.

A fatal mistake

Is to think you can buy success from a guru or mentor on the net.

Most of the information sold is junk or available free anyway.

Many traders are duped by attractive advertising copy, claiming that you can make huge regular profits by buying an e-book for $100 or so, but the reality is:

If the information was so good it would not be sold; these vendors would simply trade for themselves and the fact is they don’t.

They make money from selling you forex education NOT trading and their forex trading systems simply don't work.

If you can find a trader with a real time track record of profits, their information may be worthwhile, but trust me, there are not many who can provide this.

The best way is to do it on your own and you can get it all the Forex Education you need for free.

Working smart not hard

Trading is very different to many other ventures in life, in that the effort you put in has no relation to the money you make.

You get paid for getting market direction right not how much effort you put in.

You should as beginner either start with long term trend following strategy or try swing trading – NEVER attempt day trading.

Forex day trading simply doesn’t work, as the data is to short to be reliable and is meaningless.

More novice traders start with forex day trading than any other method and they lose – don’t fall into this trap.

Long term trend following suits the patient trader, while forex swing trading suits the trader who likes to trade a bit more and is less patient.

Basics

To start get an understanding of support of resistance and technical analysis.

Next, you need to integrate a few indicators to confirm price momentum into support and resistance levels and see the odds of them holding.

Below find some indicators that are great for triggering forex trading signals and determing price momentum:

Stochastics, Relative Strength Index (RSI), Average Directional Movement (ADX)

Below find some indicators to determine help you spot support and resistance (in addition to trendlines) and determine targets and strength of the trend.

Bollinger Bands, MACD and moving averages.

If you learn about all the above indicators, support and resistance and also how a breakout strategy works, you will have ALL the forex education you need.

This will help you put together a simple, robust currency trading system, that can make fx profits.

When devising a forex trading strategy the above will help you make money in swing trading or trend following and you should spend no more than 30 minutes a day.

A Simple way to Forex Profits

A simple system also works better than a complicated one, as its more robust in real trading, with fewer elements to break.

Many traders over complicate their system and think more is better, but the reverse is true.

Final Words

The above will get you started with your forex education for currency trading success and you will have the basics to build on to make great regular profits from forex trading in under an hour a day.

Finally, you wont have spent a cent finding out the basics for this success – good luck!

Forex Trading Strategies in Forex Market

Monday, June 25, 2007

In order to succeed in forex market, one can follow certain strategies like technical analysis, fundamental and economic analysis, combination of these two, different currency pair relationships etc.

Other more advanced techniques are SAR, CCI, Stochastics, MACD, Liner Regression, Bollinger Bands etc.

One should not be scared of the terminology involved. One should follow a strategy which one can understand and follow well.

The two most important strategies of technical and fundamental analysis are also used in stock markets. It may be advisable to use both of them while some people may use either one.

Fundamental analysis covers economic and financial factors like GDP, inflation, employment figures, devaluation, trade statistics, capital movements etc. In technical analysis one takes help of charts, graphs, bars, trends etc.

Whatever the strategy one adopts, one should learn to be a disciplined trader. For this, one should consider the following:
• Always use stop losses of some kind
• Don’t use all of your balances, but keep some separately available for special situations.
• Start with small lot sizes
• Always have a win / loss limit
• Adjust margin according to market conditions
• Always get new training and education

Some people also use intra day strategy. With this, one can use multiple time frames for analysis like one minute, 15 minutes. 30 minutes and 60 minutes frames.

One noteworthy element of forex trading is risk management. This consists of stop losses and trailing stops. One needs to learn how to establish stops, fix initial stops and experiment with trading plans at the margin. One has also to learn trailing, breakeven and time stops.

Risk management seems to have become easier with more flexibility in forex trading rules. There is full transparency now in this, better ability to put bids and offers within narrow spreads and less cost per ticket. Some forex trading platforms automatically close all positions if an account declines 60%. This provides some added safety.

FX trading like commodity trading is always conducted on “margin”. The general ratio is 50:1 and can go up to 100:1 in some cases. This means that against every margin of $1000, one can hold a position of up to $50,000. In currency trading what one can lose at the most is just the amount of margin while as the potential for profits is substantial.

Forex - Trade The Non-Farm Payroll Report for Super Profits

Many investors in the foreign-exchange (FOREX) market trade only at or around the time of the release of the U.S. Non-farm Payroll Report (NFP). They are attracted by the volatility of currencies - particularly the major pairs involving the U.S. dollar - that occur during that time. Investors relying on this and other financial news events for their trading activity are referred to as news traders. Many others, while perhaps utilizing other methods of trading are sure to include the NFP on their trading calendars. Let's find out why so many traders are interested in this report.

The NFP comes out once per month, typically on the first Friday at 8:30 a.m., New York time. On occasion, it will come out on the second Friday of the month rather than the first, but always at the same hour of the day. The U.S. Department of Labor is responsible for the compilation and release of the report, which is kept secret until the official time for release arrives. The report contains data regarding unemployment in non-agricultural sectors of the U.S. economy. Incidentally, other industrialized countries also publish some semblance of this type of report. Simply put, if the numbers published in the NFP represent a major revision of the estimates previously made, the market response is likely to be quite pronounced.

The reaction to the anticipated NFP data on the part of traders world-wide, in terms of buying and selling activity, generally causes the price of the U.S. dollar to spike up or down. This usually happens the very moment the report becomes public. Sometimes, the spike occurs early, i.e. within the minute immediately preceding the 8:30 a.m. release. Although less frequently, it has also been observed that the spike can occur up to 15 or 20 minutes after the release of the report.

Other regular financial reports can also move currency prices, but are not as consistently dramatic or dynamic as the NFP in their result. Within the past couple of years, the range of movement in the price of the U.S. dollar as a result of the NFP has usually been between 50 and 90 pips in one general direction. Re-tracement, i.e. movement of the price back toward the original price, often provides additional trading opportunities. Many traders experience returns ranging from 5 to 20 percent from this one report alone.

Why does the NFP stand out in its ability to move the market? The NFP is published by the government of the United States as an official statement of what the U.S. economy is doing. Based on the contents of the report, the measurement of the health of the country is viewed in terms of its employment situation. Many scholars and traders alike view the employment situation in a country as a leading indicator of how things are economically with that country. If the employment situation is bleak, so must be its general economy. A weak economy invariably spells bad news for the currency of that particular country.

One must acknowledge and appreciate that the U.S. dollar has always generated a lot of interest among traders world-wide. Known for its liquidity, relative stability, and being backed by the world’s largest economy (at least until China takes the number one spot as expected in 2026), the greenback is often accepted as payment for goods and services all around the world. This is true even where it is not the official currency in a given jurisdiction. It is one of the relative few currencies known as “hard currency”, in the global financial realm. It is always in the spotlight as a global player.

Recent times have seen the U.S. dollar in a weakening trend in comparison to other currencies. Undoubtedly, global events including the U.S. involvement in Iraq, Pakistan and Afghanistan have contributed to the dim view shared by some regarding the value of the dollar. On the other hand, some see it as a good opportunity for U.S. corporations, large and small, to export goods and services to other countries. This may result in a rebound of the dollar in the long term.

Various strategies have been devised to take advantage of the tendency of the market prices to spike during the time of the NFP news release. As one might expect, some strategies work better than others. More and more vendors and programmers are developing and selling automated software to traders interested in the fast-paced environment surrounding the release of the NFP. The price range of such software can be anywhere from a few hundred dollars to several thousand dollars. Of course, manually trading the NFP can still be done successfully as many traders are proving. Regardless of the method or strategy, many in the trading world will continue to pay attention to the NFP and utilize its release as one of the greatest regular and recurring opportunities for trading in the FOREX market.