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Essential Investment Books – What I Learned Losing a MILLION Dollars

Friday, July 06, 2007

This book by Jim Paul and Brendan Moynihan is a book any trader should read – The book correctly states that there are lots of different ways to make money and only a few ways to lose it. Therefore you need to concentrate on not losing first

If you have not read this book you will see the markets in a completely different light and one that could lead you to bigger profits and is simply one of the best investment books ever writtten.

What I Learned Losing a Million Dollars is a fascinating, insightful, easy-to-read true story of Jim Paul’s rise from a humble country background to jet-setting millionaire trader and Governor of the Chicago Mercantile Exchange.

It is an examination of the lessons he learned from losing a million dollars in the market which brought about his demise and then covers his rise from the ashes.

This book contains no technical theories and really focuses on how NOT To lose money – there are plenty of ways to make money so how come most traders lose it?

The answer lies as we have stated that:

It’s not how you make money that’s important there are many ways to do that, but are only a few ways to lose it and if you are mindful of them and don’t make losing mistakes - you can emerge a winner.

The book is essentially divided into two parts:

Section 1

The first half of the book about Jim’s life makes you feel close to him and the experience he is facing as his world crashes around him. It’s both funny and sad in equal measure and is a superb fiction story.

Section 2

After the loss and its aftermath, comes the authors views of what he had learned and this really is original, thought provoking and insightful. The authors show you how to identify and manage the risks, both monetary and emotional that is part of any decision making including trading.

Playing great defense

The authors covers the key areas ALL losing traders fail in, that let losses get out of control.

Key areas covered are:

- The three biggest mistakes traders make and how to avoid them.

- Why the most important part of building wealth is not losing it.

- The psychological pattern which all losses take in a traders head, regardless of the position size

The discussion on the risk/reward ratio, and why most other books get it wrong is perhaps the most interesting part of the book.

This point is worth the books price alone as the aothor explains

Why you have to take into account the PROBABILITY of return, and PROBABILITY of loss, when trading and not simply divide the size of your expected return by the size of your expected loss, as most authors suggest – if you do you will lose!

This really is the key point of the book if you want to keep losses under control as it states in the preface.

“This book is a case study of the classic tale of countless entrepreneurs: the risk taker who sees an opportunity, the idea that clicks the intoxicating growth, the errors and the collapse. Our case is that of a trader, but as with all case studies and parables the lessons can be applied to a great many other situations.

If you want a book to show you the importance of emotional discipline and the art of risk management, then this is it.

This book has recently gone out of print, so get your hands on a second hand copy or get to the library and read it.

Forex Trading - If you Work To Hard You Will Lose!

In forex trading many traders think because they are clever or smart, that they have more chance of winning, but the EXACT opposite is true. There are many clever traders, yet they lose because being clever and making money are NOT compatible.

Let’s look at this in more detail.

The Work Ethic Does Not Apply

In many jobs the more hours you put in the more you get out, but the normal work ethic simply does not apply in forex trading – you get your reward from being right about market price and not the effort you have put in to generate your trading signals.

If you took ten minutes to place your trading signal or 10 hours, the only thing that matters is the result of your action.

In society of course, we are taught knowledge is power and many clever traders think the more the better.

They feel they have a right or deserve profits, because they are cleverer than others.

This is a dangerous assumption!

Most clever traders tend to come to the market with an ego and an ego is one of the worst traits you can have when currency trading.

Below are some common errors that clever forex traders make, in addition to working to long on their forex trading strategy.

1. They construct clever complicated trading systems thinking the more complicated they are, the more their chances of success.

The reality is that simple systems work best, as they are more robust in the face of brutal market conditions.

2. They see the market as they want to see it and not as it is.

There is only one price that is right – the market price. Many clever traders can’t take this, they think the price should be what they have decided and they hold and justify losing positions because of it. They then get frustrated when the gains are not what they expect. Of course, they are making the critical error of letting their emotions get involved -his means discipline goes out the window and their forex trading system disintegrates.

Work Smart – Keep It Simple – Accept The Reality!

There are many traders who never went to college, who use simple systems and have a humble approach to forex trading, yet they make huge sums of money. They often beat traders who would seem to have more advantages than them, but as we have seen, it is the simple trader who has the edge.

They realize knowledge for the sake of it is no use and that simple systems work better than complicated ones – they are accepting the reality of trading:

The market is all powerful over them and they need to accept it.

This doesn’t mean you can’t make money – just like the sea captain knows the ocean is more powerful he can make a living from it providing he obeys its rules.

This attitude means that humble traders can take losses easily, maintain discipline and when the markets gives them an opportunity they can take it.

Keep It Simple

A simple forex trading strategy can be learned in about 2 weeks and it can be applied in less than an hour a day yet, this will not prevent the trader making huge capital gains.

In forex trading keep it simple work smart not hard and adopt a humble attitude and you can make a lot of money, it really is that simple.

Currency Forecasting - Not For The Feint Hearted

Monday, July 02, 2007

Currency Forecasting is an important resource in the quest to develop a better understanding of the diverse forces which influence rates of currency exchange throughout the world.

The art of currency forecasting advocates using an approach which comprises a combination of both technical and fundamental analysis. To provide a framework for effective decisions in this complex field, a good currency forecasting system needs to keep the operator informed with respect to both the world markets and intricate other factors that cause currency fluctuations.

Foreign exchange markets are influenced by changing relationships between countries and also internal situations such as the state of economies and changes of Governments. Even climatic variations have been shown to cause currency fluctuations.

Many professional currency traders use these fundamental aspects as the basis for decision making whereas others base their trades on mathematical models such as the Fibonacci ratios which have stood the test of many years. Fibonacci traders use mathematical models which indicate levels of resistance and support for various currencies at certain prices.

From my experience, I would recommend that you adopt a plan and stick to it whether you decide to use either fundamental of charting models. Search the internet for proven methods and consider undertaking a training course to expand your knowledge.

When you gain confidence and are ready to make your first investment make it a small one...or better still, make "paper trades" to test the value of your method.

You will hear stories of people who make huge profits with smart currency forecasting and trading but remember, for every winner, there is a corresponding loser. Good Luck

Forex Education - 5 Tips To Avoid The Online Currency Trading Trap

Online currency trading in increasing in popularity and with it comes the good, the bad and the “you know what.” Like any business venture there are people out there waiting to take advantage of you and people who genuinely want to help.

Some people hocking learn to trade packages are internet marketers riding the wave of a hot market in search of profits, while others are season professionals looking to create a win-win scenario for you.

So what do you do?

Here are 5 simple thoughts to keep in mind as your search for your Forex education online:

1. The Forex Education Program Itself

You want to make an assessment of the Forex education program’s approach to learning and ensure it matches your style. Some people can learn by reading a book (very few!), while other require a more structured hand holding approach. Some like a classroom environment, while others want to learn live and online.

Make sure you have access to live instructors, this will be your life-line when things get tough. Bottom line; If it resonates with you, then it most likely will fit and you will learn.

2. Guarantee Needs to be Real

Make sure the Forex education program you consider offers an adequate guarantee. Some programs out there offer only a 2-week trial for big dollar training packages. The refund period should be appropriate for the cost and 30-days at a minimum. The guarantee should provide adequate time to evaluate the product or service and then some.

On the flip side of the coin, if the guarantee is acceptable and you have not acted to properly evaluate the product or service within the time frame you should evaluate your own position to determine if you are ready for the training.

No Forex education product or service will make you money sitting on the self.

3. Coaching Required

We all need a coach. Yes, all the information you need to become a successful trader is online. Great, where do you start and how much money are you willing to lose separating the good information from the bad, let alone implementing this vast resource of information?

Any person who participates in activities that require peak performance in order to achieve success (Forex trading qualifies!) needs a coach. Make sure your Forex education includes programs that have individual or group coaching as part of the package. Nothing will accelerate learning like live interaction and mentorship. Don’t fall for the go it alone approach.

4. Establish Your Goals Prior to Learning

Ensure your personal goals are congruent with your Forex education goals. Be clear on why you want to learn Forex trading and what you want to get out of your training. Clarity will ensure the investment in your Forex education will be profitable.

Trading is all about personal responsibility. There is an old Buddhist saying that when you are ready to lean the teacher will appear. Remember, you are 80% of the success equation.

5. Fast Profits Beware!

If any Forex education product or service promises fast money, don’t think; just run away as fast as possible. Forex trading is a process that has to be learned like any other profession. Profitable Forex education will never focus on the money, the curriculum will be established entirely around learning the Process of Forex Trading.

The only Holy Grail in Forex trading lies in the six inch space between your ears. Learn the process and the money will take care of itself!

When done right, Forex trading should be an almost boring repeatable process. In fact the most valuable investment you will ever make is the one in yourself. Your Forex education will determine whether you eventually achieve your financial goals or not.

Remember, there is no such thing as failure there is only feedback. Keeping these tips in mind when searching for your Forex education product or service will allow you find a partner in your success.