Why Do Most Traders Fail To Make Money Currency Trading?

Based on reliable statistics, it is thought that approximately 90% of retail traders fail to make money currency trading. This is a scary thought for someone wanting to start out as a forex trader. Yet new people are attracted to forex trading every day and it’s obvious as to the reasons why.

Forex trading offers leverage benefits whereby a small margin deposit can control a much larger total contract. These days getting started in currency trading doesn't cost much either. Some Forex firms now offer 'mini' trading accounts with a minimum account deposit of only $200 with no commission trading, making forex trading much more accessible to the average individual. Forex trading offers the ability to make money trading currency pairs either 'up' or 'down', so a trader can profit either by going long or short, therefore there is never really a bear market in forex: the ultimate recession proof business.

Yet statistics tell us that things aren’t quite so easy. The main reason why traders fail to make money is that they lose early on and then struggle to turn it around. They trade without a system or without a plan. Even worse, they neglect rules of money management. People attracted to forex trading are generally very intelligent and bright people yet they make basic mistakes, trade on emotion and quite often even though they realize their mistakes, by the time they do it is often too late, they lose interest or give up.

If your forex trading strategy is based on a well thought out business system and strategy, you will make money currency trading in the long-term. Forex trading, more than any other business venture is about being professional. If you want to make money currency trading, you must realise that as an individual, you are competing against institutions which specialize in forex trading. They have armies of analysts and economists and traders who do fundamental analysis, technical analysis and quantitative analysis for them. They have risk analysts, risk managers, portfolio supervisors - all contributing to their efforts and their profits. You, as an individual trader do not have this luxury.

In the forex market information is money. Good information and good online forex trading systems are important. Good trading systems are the ones which focus on risk management; are suited to the individual; serve ultimately the purpose of helping you develop your own trading system and finally are simple to understand thus making them easier to follow & implement with discipline.

What Is Forex Market?

Forex market is the largest financial market in the world, with a volume over $1.95 trillion a day. "Forex" comes from words "Foreign Exchange". Forex is also referred to as "FX" or "Spot FX" market. I'm sure you know what foreign exchange means. If not, well, in foreign exchange offices you can change currencies (if you're going on a trip abroad, you need foreign currencies, right?).

Forex trading is the simultaneous buying of one currency and selling of another. Currencies are traded through a broker or dealer and are traded in pairs; for example the European euro and the US dollar (EUR/USD) or the British pound and the Japanese Yen (GBP/JPY).

So how do you make money with changing currencies? Let's say you see that EUR/USD current price is $1.2600. This means that you have to pay exactly $1.2600 to buy 1 EUR.

Let's then make a deal and buy some euros, at the same time selling dollars. If you bought some euros, you expect their price to raise, so you could sell them with a higher price than you bought them. As expecting the euro price to raise against the dollar, you're also expecting the dollar to go cheaper against the euro.

This means you have to give more and more dollars to get 1 euro. If the dollar goes cheaper, euro goes more valued. So now the EUR/USD price is $1.2650. You then sell euros, at the same time buying dollars. Since you bought cheaper euros and now you're selling more expensive euros, you'll get a profit from that.

Unlike other financial markets like the New York Stock Exchange, the Forex spot market has neither a physical location nor a central exchange. The Forex market is considered an Over-the-Counter (OTC) or 'Interbank' market, due to the fact that the entire market is run electronically, within a network of banks, continuously over a 24-hour period.

A properly trained Forex trader can potentially earn BIG PROFITS in every single month, week, or day! (Of course a poorly trained Forex trader can suffer big losses as well.)

All you need to get started is a computer, a high-speed Internet connection (Why? the currencies' prices are changing constantly and you need to keep up with them) and a trading software.

A good website for a beginner is BabyPips.com. BabyPips.com was created to introduce beginning traders to all the essential aspects of foreign exchange in a fun and easy-to-understand manner. Have fun!

Forex Fortunes - Use The News

In my time as a trader, I have never seen the benefit of announcements as being that great for off-the-floor traders. Generally anything you hear in the news is old information in the trading game, because the floor traders have access to it before everyone else.

Often the traders on the floor have already established the correct positions, before the announcement is made. This puts the public trader at a disadvantage.

The forex market has come along and changed that, because there is no trading floor, so everyone receives the information at the same time. This creates an even playing field for everyone.

There are several announcements that are made each month, that forex traders can use to their advantage. Since everyone gets the info. at the same time, its like being on the floor yourself. Some of the announcements that are beneficial to traders, are unemployment, interest rates, inflation, GDP, and the consumer price index.

There are others, and you have to also consider announcements by other countries. Using these announcements can be very beneficial to the part-time trader.

Often part-time traders do not have time to study the markets, but they can take advantage of the reactions to these announcements if they know how

Traders Are Flocking To The Forex

The forex, or Foreign Currency Exchange is vast and growing everyday. The forex market is larger than all other markets combined. Literally trillions of dollars are traded daily on the exchange.

The forex does not have an actual trading floor. It is made up of a network of banks, they use telecommunication systems, including the internet to conduct all transactions. Because of the accessibility of this market on the internet, it has exploded in recent years.

In the past the forex was only for banks to use to monitor the values of various currencies around the world. Back then only the richest people in the world were allowed on this playground, and they made fortunes. With the advent of the Internet, many of the financial markets were opening up more to the public.

Soon the banks that operate the forex saw that this could be a major benefit to them also. Thus the forex as we know it was born.

The forex is also a 24 hour per day market which makes it perfect for those who want ot trade part time. The sheer size of the forex is the attraction for many traders.

The forex is large enough to accommodate any size trade position with ease. Execution of trades are instantaneous and there is no slippage. Another big difference is there is no commissions on the trades.

All profit by the banking systems are generated by the spread. The spread is the difference in price between the seller and buyer.

These factors make the forex irresistible to traders. Because of the attraction of this market it is expected to continue to grow rapidly in the future.

There are several trading strategies that fit in well with the forex market. As I mentioned earlier this market is made for those who want to trade part time

How You Can Be Sabotaging Your Trading - And Not Even Know It!

Whilst trading routinely involves decision making, there are no more important decisions you have to make than when to close positions. Quite a few traders often overlook this part of trading or underestimate how important that it is. It is selling that impacts directly on whether or not you make any money trading. Buying shares is simply a means of putting yourself in a position to make money from trading.

There is a typical experiment which is conducted in Economic and similar classes, which relates well to selling shares. It involves dividing a room of people into two groups. Everybody in the first group is handed an imaginary coffee mug. People in the second group receive nothing.

Everybody in the first group is asked to write down on a piece of paper how much they would be prepared to sell their coffee mug for. Everybody in the second group is asked to write down on a piece of paper how much they would be prepared to buy the coffee mug for.

The amounts from all people within each group are compiled and an average calculated for each group. Generally speaking the average amount from the owners of the coffee mugs is double that of the average amount from the potential buyers of the coffee mugs. This observation supports the Endowment Theory.

The Endowment Theory suggests that people who own something place a greater value on it than those who do not have it. This is applicable in the sharemarket, and can affect your decision making when deciding to sell shares that you should be selling. Often you will find yourself owning shares and believing that they are worth more than what the present share price is. The only unfortunate thing about that is the real price is what it is presently trading for on the market and not what you think they should be worth.

This can affect you by convincing you not to sell shares when you may be best advised to sell them to stop any further potential loss. You may have bought shares for $4.00 and set a stop loss at $3.50 for example. A week later the shares are trading at $3.50 and you have received your cue to sell them. Thoughts enter you mind about how it was only a week ago that you paid $4.00 for them and how you think they are still worth that especially when you consider the report they released last week concerning future growth, for example.

These thoughts can paralyse you to take no action and not cut your losses and consequently have you breaking one of the most important time tested rules you can follow.

Are You This Trader?

Have you ever heard the Kenny Rogers song The Gambler. During the chorus there is a line that says;

You've got to know when to hold 'em, and know when to fold 'em

I want to cover the fold 'em part. This is usually the one that knocks the feet out from under the newbies.

So you have studied the manuals and all the course material. Incessantly, you have read every word, as quickly as possible. You have wired your $1,500.00 to the broker, you would have sent $2,500.00 but, you need to pay the mortgage. You have opened your self-directed account, opting for no broker advice. Who needs advice, you have a secret weapon...your trading manual that came with the course. Besides the broker doesn't realize that you are about to funnel money right out of the market, and into your bank account.

It's Monday morning, you called in sick so you could kick off your trading career. Of course, considering the lack of sleep last night, working today would have been hard anyway. You glance through your course material one more time a few minutes before opening bell. you are planning to trade the E-mini today. The bell rings, and you are off. You are looking to trade the opening gap, That's on page 12.

The market gaps up on the open just as planned, you go short. In 10 minutes the gap is closed and you exit. $75.00 richer for your trouble, well $60.25. Slippage and commissions got some of it. Feeling pretty good about your skill you wait for the next set up.

At about 11:00 A.M. you spot your next victim. It looks like a reversal off of support, You've seen 3 hits at that price level. You quickly double check the book to make sure. The chapter on support and resistance was toward the back, you were a little sleepy when you got to that part. Just as you thought, this is a support pattern. You quickly enter the buy order, you need a stop loss, but the market is moving and you don't have time. You decide to ride it out. You will watch every tick anyway.

After 30 tense minutes you exit with another $60.25 in your pocket. You relax and get some lunch. You think about how you are a quick study, trading is pretty easy.

12:30 time to get back to work. Immediately you you spot a pattern, the pattern started during lunch. This time, you take the time to order a stop loss. You enter the trade and a few ticks go in your favor. Then it reverses, now you're down, down again, and again. A couple of minutes and your stop is hit. Your stop was set at 6 ticks, you wanted to have some breathing room. Down $89.25 on that one. After a couple minutes of feeling sorry for yourself, you notice that the price is coming back. You knew it, you were right all along. That stop is what cost you that money.

The manual said something about confirmation signals. Now that the move is confirmed, you will take your money right back.

You enter on a market order, no stop. You will just watch the ticks like before. The market goes back and forth for several minutes, slowly trending down. Nothing to be alarmed about, it will come back. Then several ticks go against you, then a pause. You think about exiting, but you be down for the day. The next instant the live quote ticker seems to spin, and turns red. You notice that your is heart keeping pace with it. You think, surely it will stop and come back. At that moment it does.

Now you are down several points, at this point you realize that you cannot recover all of it. You are hoping for just a few ticks in your favor before you exit. You wait, then the prices ticks back and forth. After a minute you can't take the pressure of seeing another spinning ticker, you exit the trade down several points. All told you have lost $432.00, almost 1/3 of your account. You decide to study the manual a little more.

Later that evening, you call in sick again. Of course, considering the lack of sleep you'll have tonight, working tomorrow would be kind of hard anyway.

This was a humorous look at this issue, but holding on to losing trades happens to traders everyday. No matter what system you use you have to understand the mathematics of trading your system. Ensure that your system is mathematically viable, and then you must adhere to the system 100%. It is of most importance to maintain psychological and emotional control in all your trades. Always trade with stop loss orders

Successful Online Forex Trading With A Mini Forex Account

Forex trading is one of the most highly considered occupations for many persons looking for an income generating activity that will allow them to set their own hours and live where they please. This thanks to its great advantages over other income generating occupations and its high profitability potential; among these advantages you will find that forex is extremely easy to access thanks to the internet; and also you will notice that forex has a high liquidity along with a high leverage.

Additionally there exists a great feature in Forex trading for those that are just starting and learning the ropes of this activity. There is something called, a Mini Account, and it uses a different leverage calculation than a regular account. This is, instead of trading full-size currency lots (100,000 units), you'll trade small lots that are just 1/10 the size (10,000 currency units), which will greatly reduces your risk. Pips in a Mini Account are worth, on average, $1 instead of the $10 value they regularly worth in a regular account. The Mini Forex account offers up to 200:1 leverage, this means that just a $50 margin deposit will allow you to trade lots worth roughly $10,000 , but the smaller lot sizes, with correspondingly smaller pip values, means that you'll be assuming less total risk.

In short these are the characteristics of a Mini Forex account:

- Minimum required account deposit = $300
- Recommended required account deposit = $2,000
- Traded in 10,000-unit currency lots
- Default Margin: set at 0.5% ($50 per mini-lot)
- Leverage = 200:1

Thought you’ll be trading a mini account, you will be still enjoying all the benefits that full-size forex account holders enjoy; including, same state-of-the art trading software, charts, resources, etc. As mentioned earlier, these mini accounts are ideal for new Forex traders because they will be able to develop a disciplined, rational forex trading strategy without excessively focusing on profits and losses.

Also there is no maximum trade volume when you use a mini account. Although the standard trade size is 10,000 units, you are not limited to trading one lot. You can trade many lots at once. For instance, you can trade 10,000 units, 50,000 units or 200,000 units. So, if you want to start Forex the right way you should seriously consider opening a Mini Forex account first and start building your Forex trader career from there.

An Introduction To FX Currency Trading

FX currency trading may be a new concept to some, but, there are plenty of people who find it a lucrative and worthwhile endeavor. Forex trading is done on the Global Foreign Exchange Market (often abbreviated to “FX”).

FX currency trading is the practice of buying and selling foreign currencies to turn a profit, and there are many different benefits and advantages to this kind of trading. Perhaps your portfolio is largely filled with stocks, mutual funds and bonds, but not currencies, in which case expanding to include foreign currencies is a great way to have your money in different aspects of the financial market.

Understanding FX Currency Trading

FX currency trading is done on the Global Foreign Exchange and is a 24 hour operation. The trading day begins in Sydney when their exchange opens for the day, and from there it moves around the globe as different markets throughout the world begin to open. The last major market to open is New York.

Yes, there are many different currencies throughout the world, but the majority of Forex trading is done with what are known as “the majors”. These are the major currencies of the world that are relatively economically stable, thus making them a good bet for FX currency trading. They include the Euro, British Pound, American, Canadian, and Australian Dollars, the Swiss Franc, and Japanese Yen.

FX currency trading may seem like an odd concept to some, so why would you want to buy and sell currencies? We are used to using currency to purchase material items so maybe buying currency seems a little strange.

Well, consider this – put simply, you stand a good chance of turning a profit when trading currencies. For example, if you see that the Euro price dropped considerably, that would be a good time to purchase some Euros. The next day, if it rises again, you can sell it and turn a profit on the difference.

Forex Trading Online

You can use the internet to do your FX currency trading, and there are plenty of software programs available that give you alerts concerning prices, market condition, whether you should buy or sell, etc. They also allow you instant access into the world of the Foreign Exchange market by being able to read current data.

Things to Consider

If you’ve decided to start FX currency trading, keep in mind that a good place to begin is by doing some research. Learn as much as possible in an effort to minimize your learning curve. Learning curves can be expensive, and one wrong decision can cost you a lot of money. Yes, Forex trading can be lucrative, but it can also be expensive, and the effects of poor judgment can be minimized if you simply allow yourself the proper time to understand the process.

Forex Trading Is Not Complicated Anymore!

Nowadays, we can almost do anything using internet, such as downloading music, buying and selling products, and that includes forex trading as well. In fact, Forex is one of the important term used for the trading of the world's many currencies.

The amount of Forex trading has reached $2 trillion daily. That amount is 100 times much bigger than the amount traded in the New York Stock Exchange which is the biggest market in the world. The most attractive things regarding the forex market is there are huge amount of buyers and sellers willing to trade frequently. Another thing is that forex trading can be done without any commission. Therefore, the investors will not be charged alot through pesky commissions even though they trade always.

Forex trading maybe a difficult concept to manage, with many different terms to understand at first. Understanding the terms is different from actually making a profit on the market. Fortunately, there are many guides you can search online so that you can understand the ways of forex trading more. Some of them may be a little bit costly, so it is important to do research whatever you buy. Many people try to sell general information, that can be found online free, in the form of e-books. However, even if you read and learn all the related information, you still can not become a master over night, or in a short period. It takes time, practice and patience.

Forex trading can be quite profitable, but also risky as well. You need to make sure that you really understand the margin trading and some special pitfalls, before trading extensively. When you trade, you should know that you are dealing with two different currencies, but not just one. It is all your own decision about which currencies you want to trad. You can either focus on the US dollar and the Euro, or you can even expand and deal with multiple currencies such as (USD/JPY= US dollar/Japanese Yen).

In short, it is important that you fully understand this is a very liquid market. You can easily make thousands, or even lose thousands. All the things will depend on the natural swing of the market. You will learn a lot once you read and experience the up and down in the market. There are a number of websites provide a little bit of a sample, in which they will provide you some fake money and try the market by yourself. So if you want to make money with Forex trading, work hard and try to do some research and you will find out more about the forex market.

Commodity Trading Courses

Many traders believe that, for those who wish to acquire or enhance their knowledge of day commodity trading skills, the best educational option is to attend a day trading course at an on-location site run by a reputable day trading firm. However, for many aspiring day traders, this option may not be feasible for a number of reasons. Another option is to take a day trading course in a "virtual classroom," by signing up at one of several online sites that offer such courses. Before signing up for an online course, make sure that it covers the most important day trading topic areas. At a minimum, a course should cover the following subject areas:

Trading terminologies that find and identify suitable stocks for day trading. Other topics should cover how to use trading software, the types of orders for trade execution, common trading mistakes and how to avoid them, Information should also show you how to interpret Nasdaq Level II screens, risk management strategies, technical chart analysis, the role of market makers and direct access trading, etc.

The following provides brief descriptions of four popular sites that offer online day trading courses or seminars: Daytrading University offers an online course aimed at those wishing to develop skills in day trading of Nasdaq stocks. The course content is organized into eight modules, each having over 15 separate lessons. The lessons include chart screen shots, other illustrations and offer a number of day trading tips and techniques.

Pristine.com offers a series of online seminars on various day trading techniques and strategies presented by way of streaming video and dynamic slide presentations. Online attendees have the ability to see and hear instructors teach each lesson.

Choosing A Forex Trading System - Part 1

There are many different kind kinds of Forex trading systems.

Of course, the most important Forex trading system is the one that is right for you.

As you search the web for Forex trading systems suitable to you there will be many seemingly appealing offers many promising to be so much better than the rest.

It can be difficult to compare some Forex trading systems due to the lack of performance information. You want to have enough information available to you for you to be able to make an intelligent decision. You need this valuable information prior to committing to purchase or lease a Forex trading system and before committing to the money necessary to properly fund a trading account.

Here are a few quick tips to help you hack your way through the jungle of available Forex trading systems:

1) Ignore the testimonials.

Your first job is to ignore the typically glowing testimonials telling you how great a certain Forex trading system is. Remember that these are most likely not typical results obtained with the trading system.

Now I’m not suggesting that you ignore all testimonials about all products. I’m simply suggesting that when it comes to testimonials about money making strategies that we all need to be more objective.

Don’t forget that a testimonial about a vacuum cleaner is a lot different that a testimonial about a trading system. For one thing everyone knows how a vacuum cleaner works and what it is supposed to do. Not everyone knows what a Forex trading system is and how it is supposed to work.

Not looking at the testimonials will allow you to be more objective in your evaluation. Also keep in mind that it is highly unlikely that you will buy your own private island based the few great trades you see in the testimonials.

Introduction to Stock Trading Software

What do you know about trading software? You purchase software, it trades for you and you'll become rich? Follow this article to learn something about trading software & systems.

How works a Trading Software

Before using trading software, you should have enough experience on investing in the stock market. Then you define your rules for software and it scans to finds what stocks are matched to your rules and makes sell or buy signals.

After software makes trading signals, brokers execute orders. Placing orders can be done by software or manually, it depends how you've programmed the software.

So, the process is:

1. You write your rules for software.

2. Software finds matched stocks to your rules and makes trading signals (sell or buy.)

3. Orders executed by broker.

Enough experience is Needed

As I said you should have enough trading experience in the market, in other words the ingredient for using software is experience plus a good understanding of technical analysis.

But, if I have enough experience, why I need software?

Advantages of using Software

1. Saving Time

There are so many stocks for investing; software scanning tools scan many stocks in a little time for investment opportunities based on your strategy.

2. Avoiding of Emotions

One of the most important reasons that cause investors loose is emotions. Investors always decide to avoid emotions but, they fall to this trap again. With using software you can control your emotions.

3. Managing your Portfolio

You can monitor your stocks and control your investment risk.

How to use Trading Software

1. Necessary for short term Investors

Software is necessary for day traders, swing traders and option traders. In general software is suitable for short term investors. If you are a long term investor, it may not necessary for you.

2. Choose software that fits your Needs

There are different kinds of software with various prices. Find what is suitable for your needs. Trading software packages can be divided into semi and fully automatic.

Fully automatic software can be programmed to buy and sell stocks automatically but, in semi automatic one you yourself place orders to brokers.

Before purchasing stock trading software, try their free trial version or buy a 100% money-back guarantee.

Some of famous software packages are: MetaStock, Tradestation, Interactive Brokers, Wealth Lab, AmiBroker and Tradecision.

How to Read Forex Quotes

vlvThere are many technical terms associated with foreign exchange trading. These terms are very important to the Forex trading and the information is also crucial for every trader. Two such import terms are quotation and spread. Quotation deals with the ask price of any cash commodity at a certain period of time. The word quote is sued in almost all kinds of businesses and stands for an approximate market price. The quotation is always used only for information purposes. Most foreign currencies are given a quotation in pairs. The Forex trading works only with currency pairs like the USD/EUR. Now the USD is the base pair while the EUR is the quote currency. The world’s financial wholesale markets quote a currency using 5 different yet important numbers. The last number is known as the pip.

Forex quotes come with two kinds of prices the bid price and the ask price. The quotations for both the prices are sent in real time and as a result the Forex market is able to ensure that all traders will receive a fair price while doing a transaction. Like all trading markets, the Forex market also has an immediate cost attached to establishing a position. Let’s take an example. If the USD/AUS bid is at 131.40 and the ask price is at 131.45 then there is a five-pip spread. This spread will define the traders’ cost. To a layman, a Forex quote might sound Spanish but in reality it is very simple. There are two very important things to remember and they are: The base currency, which is the first currency and the value is always 1. The most important currency or the heart of the Forex market is the US Dollar. In a quotation-involving USD as one of the currency, it will always be referred to as the base currency. If there is a quote for a currency pair of USD/JPY and if the value is 160.25, then it means that $1 is equal to 160.25 Yen.

If there is a currency pair, which has the USD as the base and if there is a rise in the currency quote then it would translate into appreciation for Dollar and depreciation for the secondary currency. Like the last example if the quote for the USD/JPY pair increased to 169.35 then that means that the Dollar is stronger. It also means that $1 can now buy 169.35 Yen. There are only three exceptions to this rule and they are the Australian Dollar, the Euro and the British Pound. If the dollar is paired with the Pound, and the quote for GBP/USD shows 2.3647 then it means that 1 pound is equal to $2.3647. In such pairs the US Dollars is not the base currency and a rising quote would mean that the US Dollar is depreciating. The third type of currency pair is the cross currency. This combination doesn’t use the US Dollar like AUD/JPY. In such a scenario, Australian Dollar would be the base currency. Probably now this might sound simpler to everyone.

European Single Currency

This time we’ll talk about European Union (EU) that involves a market with a single currency, a single Central Bank and a single monetary policy. There’ll be discussed European single currency, Monetary, and Fiscal policies, and effect of EU innovations on European countries from the economic perspective. The current situation in Europe and that affecting the members of the EU is one of unbalance. The Maastricht Treaty envisaged the creation of a European Central Bank, ECB. It also laid down set criteria for countries to fulfil before they could join the single currency. There were four key points that the main players of the treaty stressed were the vital characteristics that potential candidates must to be considered for entry.

Price stability in effect this means controlled inflation. The perspective country must for at least one year have had an inflation rate no more than 1.5% above the average of a most the three best performers already existing within the Union. This is because a union such as the EU would require its members to be of similar economic importance. If a candidates inflation rate exceeded the 1.5% precedent set it would harm the way that the EU functions by putting pressure on the top performers to lower their rates to create an equal set rate. Fiscal Convergence, or more simply a budget deficit. The treaty requires that the deficit should not be more than 3% of the GDP [Gross Domestic Product]. The accumulative debts should not exceed more than 60% of the GDP. Another demand is that there is stability within the currency for two years in the normal ERM bands without having devalued. This is as well as the specification that there are requests that the Interest Rate for a year long term shall not have exceeded by more than 2% of the average of at most the best inflation performer that already exists in the EU. The second phase is to start the Monetary union. On the 1st of January 199, states will start to use the Euro as an acceptable currency in the eleven states. National currencies will continue to circulate for a number of years. The ECB will take control over the monetary policy. National currencies will have parity against the Euro and not for instance against the French Franc or the German Deutschmarks.

The National Central Banks can no longer conduct their own Monetary policy. They will merely act as agents of the ECB. The exchange rate risk will be eliminated and there will be a single monetary policy throughout the European Union. The third stage will see the emergence of Euro bank notes and coins. These will circulate along with national currencies. In January 2002, the Euro notes and coins will b withdrawn from circulation as the Euro notes and coins start to circulate more widely. There will be co-ordinated switch to the Euro for transaction with the public. It is expected that the final changeover will be completed by 1st July 2002 when all national notes and coins will be withdrawn. There are several key points that the introduction of the Euro will bring. These factors will eliminate additional costs associated with national currencies, enhance price stability and transparency. It will also simplify travel across Europe, with prices stability and transparency. It will also simplify travel across Europe, with prices becoming fixed and travel more frequent. Another advantage would be the revenue saved in the transferring of one currency to the other, such a saving to the average person could mean a better holiday. If the single currency is embraced by Britain it may stimulate employment and will be able to compete with the dollar which has not been possible with regard to the national currencies of European countries, this would lead to both low inflation, and a stable monetary economy. However there would be some disadvantages of Britain scrapping the pound in favour of the European single currency. Some of these problems would be that the member states will lose their monetary policy freedom; governments will affect the employee’s contract in money terms. To even change all the machines, i.e. Cash machines, tills in be a long and costly process, not only will these be affected but so will all the business who have to change their computer systems. In a counter argument the structural weakness of the Euro, greatly effecting Britain decision. In my conclusion I have highlighted five specific Tests for Britain’s Entry to Europe.

Would entry be good for jobs, Investment will continue to come to Britain. Financial Services Industry will continue to dominate. Whether Business Cycles are compatible, whether there is sufficient flexibility to deal with problems. None of these factors have been met yet and it is unlikely that they will be clearly met. It has been argued that the European Central Bank’s decisions will have an impact on Britain.

Close attention will be required on the interest rates. Currently the interest rates will decline. There are several factors that may work against Britain. There could be a high degree of sterling volatility against the Euro. London may lose its position as the international financial centre. The government and central business will study the success of the Euro and see when the time is right.

Although there’re many facts about the pros and cons of joining the European single currency, ultimately it will be up to the British public in a referendum. It will be interesting to see how the media uses its influence as to whether the public will favour entry into Euro Land.

Overtrading: A Common Mistake

Over trading is one of the biggest causes why traders never make it in the financial markets. With a click of a button, a trader can place a trade anytime he wants. It takes tremendous discipline to hold yourself back from over trading. There are many reasons why one may choose to over trade.

1. Traders without a plan

Traders without a plan are my favorite type of traders because they will always lose. Without a plan, how would one know when to take a trade and when not to? Having a trading plan is a necessity. I can not trade if I do not have a plan for the day. I feel lost without one.

2. Revenge trading

Many new traders become tilted after a loss or a string of losses. This causes them to revenge trade just to break even. This often leads to reckless trading forcing a trade when opportunity is low.

3. Chasing the markets

Alot of new traders feel more pain when they have missed a move than an actual loss. This is why new traders love to chase the markets. If price has moved away from your projected entry point, let it go. There are plenty of more opportunities. Chasing is one of the worst habits a trader can have. Not only does it offer you low rewards, it also gives you a horrible entry and alters your stop loss placement. Always think about the risk before the profits.

When you have a plan to follow, it is easy to filter out bad trades from good one. This keeps you discipline and selective in your trades. I personally do not like trading more than 5 round trips a day. Patience is a virtue. There are always good high probability trading opportunities everyday. Just sit tight and don't jump the gun.

One way to control a loss is by reducing your size. The problem with gamblers is that they will often double up their stake so they can get even quicker. This usually leads to a greater loss and devastation. Having the strength to grind your way back from a loss is important in trading. Whenever I am having a losing streak, I will trade small and gradually recover. This also gives me the confidence I need after a string of losses.

Choosing A Forex Trading System – Part 3

OK, in our last installment I showed you how a sample of a Forex trading system with a high percentage of winning trades could still be a losing system overall.

The whole point of the exercise was to get you to take a closer look at the performance results of trading systems that you are interested in pursuing. Now that you know that it is possible to lose money trading a system with over 90% winners, you’ll be able to look at the next advertisement for a Forex trading system much more objectively.

Let’s take another look at our example:

Trading System A Performance

Number of trades = 1000
% of Winning trades = 92%
% of Losing trades = 8%
Average Winning trade = $180
Average Losing Trade = -$2100

A few quick calculations tells us that this trading system had Total Net Profit of -$2,400

The Total Net Profit is an important factor in any trading system although it doesn’t tell the full story.

Here’s how the Total Net Profit is calculated:

Total Net Profit = Gross Profit – Gross Loss

In our example above these figures would be:

$165,600 – $168,000 = -$2,400

As stated above the Total Net Profit for this trading system is negative. This is important to note. As you can see, if the only information you originally had access to was the percentage of winning trades you would have started to trade a losing trading system. Now with a little more information such as the Total Net Profit we are clearly able to see that all the glitters is not gold.

Please note that it is unlikely that anyone would be openly advertising the fact that even though their trading system has a high percentage of winning trades that it is a losing system.

In the next part of our series we’re going to take the performance data we currently have at our disposal and generate a very important number to know in evaluating any trading system.

5 Kick-Arse Tactics To Seize Favorable Probabilities at Forex

As you ponder how to balance your forex portfolio, it is important to map out sure-fire strategies beforehand.

With your plan, you optimize your reward with respect to the expected risk, and tweak probabilities to your favor. Forex strategies must be disciplined and limit risk; simultaneously, it positions you at the most favorable advantage in the market.

A beginner’s strategy is the fundamental Moving Away Average, which is draws predictions from technical study over 12 periods, with each period 15 minutes in length. Trading decisions based on the MAA technique considers historical data to arrive at relatively safe predictions.

We use a simple algorithm for MAA. When currency price crosses above the twelfth period, simply move away it is a signal to stop and reverse. In this way a long position will be liquidated and a short position will be established, both using market orders. This system keeps trades constantly active in the market, with either a short position or a long position after the first signal. Risk is minimized.

Intermediate level strategy calls for analysis of support and resistance levels. The market likes to trade above support levels and trade below resistance levels. If either a support or a resistance level is broken, then the market follows through in the direction given. These breakpoints can be determined by analysis of the chart and assessment of where the chart has encountered unbroken support or resistance in times past. Identify these critical points and you can ascertain periods when you plan to open or close a position.

An advanced tactic that many consider exotic is the balloon strategy. The Balloon is an option that balloons, or increases in size when triggers are breached. Take the case of an investor who predicts that the dollar will gain strength against the Euro in the near future and is currently trading at one hundred, the investor will see one hundred ten as having strong resistance, but he also believes it will be broken.

Now, rather than buying straight US dollars at one hundred for the next six months the investor will purchase at “at the money” balloon call with a One Hundred Ten trigger and multiple of two. The investor then acquires a One Hundred Ten call in USD110mm. However if the dollar and Euro ever trade at or above one hundred ten, the 110 call will double to USD 20mm.

A day trader at heart? The Double Bottom is definitely for you. Significant to the short term trader, the double bottoms indicate a possible major change in currency sentiment and indicates a shifting trend. The pattern is used on all times frames, and many compelling intraday and long term bull markets are identified from this setup.

Analysts recognize that double bottoms quickly reflect strong support levels. When prices fail to break support in the down trending markets on more than one occasion we see powerful changes of trend. These reversal signals are revealing. The most common portal where a trader will open on a double bottom trade is upon a maneuver through the high of the two troughs. This high embodies secondary resistance, and when penetrated confirms a price reversal. From this vantage point, stops are placed around the lows of the patterns because a move below lows negates the pattern premise. Easy isn’t it?

To round of your arsenal of forex implements, arm yourself with the ichimoku chart. These charts consist of following indicators, which identify support and resistance levels and create trading beacons in a manner that is akin to moving averages. A contrast however between both is that the Ichimoku chart lines swing forward in time, creating vast swathes of support and resistance zones while decreasing the risk of trading false breakouts. They are arrived at with data on trend existence, direction, support and resistance.

New Frontiers in FOREX Market Analysis

This type of article is one of the most fun for me to write because it's really just a romp through the imagination. Since the 1990's, I have made a hobby out of exploring new and varied ideas for analyzing the markets, and this is a great opportunity to dust off some of my old notes, publish some of those ideas and perhaps get some feedback on them. I'm also looking forward to using some of the following concepts in my ongoing research work on FOREX price behavior. So put on your "what if..." hats and let's get started!

Market Models - Old & New

Most traders are familiar with the two basic schools of market analysis that we call Fundamental Analysis and Technical Analysis. In the 1970's, members of the academic community proposed a new model of the market known as the "Efficient Market Hypothesis". This is more commonly known as the "Random Walk Theory" and basically said that the first two schools of thought were both wasting their time. In response to the Random Walk Model, other academics put forth an even newer theory of how markets work called "Behavioral Finance". These are all examples of comprehensive explanations of what factors drive market prices. Here's a brief summary of market models, some of which are only in their infancy:

Fundamental: Market prices are driven by tangible events and conditions in the real world, such as earnings, sales, management, natural disasters, weather, economic conditions, geopolitical tensions and so forth.

Technical: Market prices are driven by what prices have done in the past. As traders observe these past and present price movements, their expectations about future prices lead to feelings of greed and fear which in turn create buying and selling pressures.

Random Walk: Current market prices are efficient reflections of all known fundamental and technical information, so we can discern nothing about future price movements. The factors that cause future price movement will be so varied that such movements can only be random in nature.

Behavioral Finance: Prices are driven by human psychology which is not always rational. Traders may base expectations about price movements, risk and reward on erroneous reasoning, thus causing prices to behave in non-random ways. Bubbles and crashes are classic examples of this.

Chaos Theory: Market prices are part of a non-linear dynamic system in which outputs are re-introduced back into the system as inputs, causing complex behavioral loops and very sensitive dependence on slight variations in conditions.

Fractal Geometry: Price patterns are recursively nested, meaning that a large pattern may be composed of several smaller similar or even identical patterns and so on through all time scales. Elliot Wave Theory is a classic example of this idea.

Scott's Emergent Property Model: I've discussed this one in more detail in other articles, but the idea is basically that identifiable properties of price behavior emerge from the combination of unique individual trading styles of the current market participants. An analogy would be how a person's personality emerges from the combination of individual neurons in their brain. This price behavior changes gradually over time in an evolutionary way in the same way that the behavior of an organism changes over time due to both internal changes in its makeup and external pressures from its environment.

My apologies if I have neglected or grossly mis-represented any of the various ways of explaining what makes the market tick.

Finding the Best Broker for Forex Trading

When we talk of any money transactions like those pertaining to the stock exchange, one hears a lot about brokers. FOREX traders are known to use brokers to carry out their transactions for them. So how would one define a broker? In the true sense of the word, a broker is a person or a company that a prospective investor trusts to buy and sell as per his decisions. He then pays the broker a commission which is how the brokers earn their money. A fund for margin trading necessitates the FOREX broker to be connected with big financial institution like banks. As protection against fraud and abusive trade practices a broker should be registered as a Futures Commission Merchant or FCM with the Commodity Futures Trading Commission or CFTC.

An account would need to be set up with a FOREX broker before trading FOREX. There are a lot of brokers available on the Internet and one need to go through all that they are offering as part of their services before making an informed decision and ensure that you are apprised of the fees and other charges involved. As with all businesses the best way to advertise is the kind that goes by word of mouth and this applies to FOREX trading as well. Get information from friends and associates who have been dealing with brokers and find out the pitfalls in any that you need to be aware of and if they had any problems with their particular broker.

Everyone who has something to sell will have excellent pre-sales services and these may differ from the actual service they provide once you are registered with them. Look out for this aspect especially if you are looking at online FOREX brokers. Brokers need to be quick with buying and selling and ideally an online broker should ensure automatic execution with clearly stated policies on slippage and what percentage of slippage to expect in normal and fast moving markets. You would need to know what spread the broker is talking about, whether it is fixed or variable as per type of account, do mini accounts attract wider spreads and the charges for this, if any. More profit is accrued by the trader for smaller spreads but it may lead to a trade off between service and spread so go into the nitty gritty of the deal before signing up with any broker.

It is essential to understand the broker's margin terms before you take on a contract with any broker as the life blood of the FOREX trading is these margin accounts. You would need information on things like the calculation of margins, requirements of the margin, whether the margin changes are based on the currency that is being traded and whether the broker has different margins for different accounts like mini accounts and standard accounts.

Fast moving markets need that you have reliability and an ability to perform and since trading software is very essential for online FOREX traders, see that you pan the options available, maybe try a demo or two and then make your decision. Ideally the software should have auto trading, trailing stops and chart trading as some of its special features. They may be charged extra so check what you need and go through the charges with the broker as well. Minimum account balances, interest account balances, currency trading and if non-standard sized lots are traded as well as clients' funds insurance and to what extent are some things for which the broker would have certain policies and one must get all the information on them.

Two Forex Technical Indicators That Will Help The Trader

The objective of every forex trader is to become a profitable trader. But achieving this goal is not always an easy task, so it’s vital that you learn how to use as many of the technical indicators as you can. These indicators are very useful parameters that will tell you with a pretty high probability what the forex markets are more likely to do in their apparently disordered behavior.

MACD and RSI are two of these indicators; but what’s the meaning of these letters? Here is the answer:

Moving Average Convergence Divergence: MACD is a more detailed method of using moving averages to find trading signals. This indicator was developed by Gerald Appel, the MACD plots the difference between a 26-day exponential moving average and a 12-day exponential moving average. A 9-day moving average is generally used as a trigger line, this means that when the MACD crosses below this trigger it is a bearish signal (time to sell) and when it crosses above it, it's a bullish signal (time to buy).

This indicator will help the trader using MACD studies to have an early signal of what the market will do next. When the MACD turns positive and makes higher lows while prices are still tanking, this is usually a strong buy signal. Conversely, when the MACD makes lower highs while prices are making new highs, this could be a strong bearish divergence and a sell signal.

The other indicator, RSI, stands for Relative Strength Index. The RSI indicator measures the markets activity as to whether it is over bought or over sold. It gives a trader an indication of which way the Market is moving at the moment. It is important to note, that this is a leading indicator and thus allows one to see what the market is about to do next and then act accordingly in order to have gains. The higher the RSI number, the more over bought it is and conversely the lower the RSI number, the more over sold it is. It is a great leading indicator for the micro and macro reversals in the forex market.

Trading Is a Mind Game

Some of the greatest philosophers, priests, scientists and sportsman have said that winning is not an art, it all in the mind! So if you are planning to invest in Forex trading then you need to be mentally prepared. It is one of the best mind games that you will ever get to play. The first thing to do is change your mindset. Instead of thinking like any other normal person, you need to start thinking like a speculator, like a Forex trader. There many examples of Forex traders with experience and capability waste their career in the most unimaginable manner. This happens when they waste most of their time trying to perfect their knowledge of analyzing and reading Forex trading charts etc. As a result 95% of the traders have lost in the long run.

Anyone with an average intelligence can understand how the Forex trading market works although it might take a few years of following the market. But that’s about it! It doesn’t take a great IQ or knowledge to beat the odds and earn a profit in a Forex trading. The most important thing is the decision that you make. The decision making process maybe long and there might be some planning behind it but sometimes traders seem to take too long to take a decision and often that ends up being a wrong decision. This is one of the most important things behind success or failure. Some traders make quick decisions but are not able to stick by them or do a follow up and as a result they end up being on the losing side.

The reason why people avoid making a decision is because it’s painful and traders often have a ready assumption that their decision might not be the right one. So basically, the Forex trading market is playing with their mind. But they are not able to understand that if they can have some confidence in what they are doing, they will be able to sustain the pressure. There are many traders who shy away from making even short-term decisions. The pain being talked about has nothing to do with actual losses. It is from the fact that the traders are speculating already about future losses and feeling helpless that they don’t know what is going to happen tomorrow. At the end of the day everything depends on the trader’s ability to take a decision in spite of knowing that there is no guarantee to the Forex markets movement and taking a right decision. The Forex market is volatile and ups and downs are going to be there always. This is one fact every trader needs to live with. Keeping in mind the volatility, the Forex trader has to keep cool and be disciplined. It is like mentally preparing yourself in advance for what lays ahead so that you will not be caught off guard. The same mind game that most generals’ use in a war is what Forex trading offers.

Beginning Education In Forex Trading – Change Your Portfolio, Your Profits and Your Life

Are you aware that by beginning education in forex trading you could significantly boost your investment income….and reduce the time and the fees you’re now sacrificing for other investment methods? You may be thinking, "Why Forex instead of stocks, bonds, mutual funds, or real estate?" There’s several benefits to Forex trading. Beginning education in forex trading could be the “turning point” of your financial future.

For years only the "big boys" i.e. large banks, people with millions to invest, and large companies with operations in more than one nation were the only ones to reap the rewards of Forex trading. All that has changed. Now individuals like you and I can easily use forex trading as a regular means for investment profits. Online Forex trading sites are readily available to the small investor. Some will even allow you to open as account with as little as $250.00. Most, if not all, of these sites have beginning education in forex trading available free of charge.

Beginning Education In Forex Trading- The Basics

Trading currencies is not affected by changing bull or bear markets. The trading occurs in pairs. An example would be trading US dollars to the Euro.

Simply put forex (foreign exchange) trades are made based upon the value of one currency as compared to another. The values of currencies are constantly changing. Quotes on prices are quoted in pips (percentage in point). If a particular currency quote goes higher, it means that currency is stronger. If it goes lower it means the currency weakening.

To place a forex trade means you’re buying one currency and selling another. Basic factors used to determine how and when to place trades are relative interest rates, economic stability, political stability, and the trade status of the country. Eighty percent of forex trade on a daily basis involves nine major currencies: the U.S. dollar, Euro, yen, Swiss franc, British pound, Canadian dollar, and the Australian dollar.

Paper trading is a good method to use when beginning education in forex trading. It gives you the ability to see in real-time the results of your chosen trades without affecting your financial stability. Most online sites allow you to “practice trade” before you begin investing real money.

Forex trading offers more benefits than any other investment market. Forex trading outweighs traditional investing in crucial areas. The first is the ability for timely trading. If you’re trading stocks, it must be done in an eight hour day, five day a week schedule. Forex trades six days a week, 24 hours a day. Forex trading allows you to trade on your schedule. You’re able to minimize the potentials for loss when occurrences dictate…not when the market opens.

Lower transaction costs are another primary benefit of trading forex. With stocks broker fees, and/or commissions per transaction must be deducted from profits. In the forex market online forex site make their money between the bid price and the asking price. Thus you’re able to invest as much or as little as you want without fluctuations in your profits.

Specific industry moves have little effect, if any on forex trading. Bull or bear markets don’t have the effect as with trading stocks.

In summary, trading forex is quite different than other investment vehicles. Initially it may take you more time to grasp the overall specifics and develop strong analysis techniques. The time spent initially can bring you a lifetime of rewards. Investigate beginning education in forex trading today.

Automated Trading Orders in Forex Trading

Practical trading involves lots of simulations and automated trade orders using the power of computer. Charting, graph plotting, and automated trade orders; all these are used to enlighten your routine trading work and it spares you more time in studying the market.

Some of the well known trading orders are zero stops, stop order, limit orders, good till cancelled (GTC), as well as market on close order. These orders are used along with different trade strategies in different trading market. In Forex trading, limit orders and stop loss orders are the two auto-trade order used.

Limit orders:

As a trader, you can place these orders when you wish to buy/sell the currency at a better price compare to current market. Limit orders are often used to take win automatically when the price reaches certain level. For example, current EUR/USD is at 1.2693 and your predetermined limit order is to sell all at 1.2700. The order will auto-execute whenever the price reach 1.2700.

It is important to learn that limit orders can be only placed at least the minimum distance from the current market price. Also, such order can be cancelled or modified anytime by you as long as the limit order price tag is set further than the minimum distance allowed.

Stop orders:

Stop orders, or sometimes known as stop loss orders, are automated orders used to restrict and limit the losses of an open position. It can also be used to lock on a profit in your trade when the market is going in your favored direction.

Stop orders work similarly to limit sell orders, it predetermine what is the lowest price to sell in certain deals. For example, EUR/USD 1.2693 with stop order at 1.2685, the system will sell your portion of USD if the price touches the 1.2685 level. The price 1.2685 is guaranteed on such case, meaning even if the market sink too fast and it falls below 1.2685, you still can sell your money in the price that you set earlier. Stop order works perfectly well in handling your risks profile.

New Frontiers in FOREX Market Analysis

This type of article is one of the most fun for me to write because it's really just a romp through the imagination. Since the 1990's, I have made a hobby out of exploring new and varied ideas for analyzing the markets, and this is a great opportunity to dust off some of my old notes, publish some of those ideas and perhaps get some feedback on them. I'm also looking forward to using some of the following concepts in my ongoing research work on FOREX price behavior. So put on your "what if..." hats and let's get started!

Market Models - Old & New

Most traders are familiar with the two basic schools of market analysis that we call Fundamental Analysis and Technical Analysis. In the 1970's, members of the academic community proposed a new model of the market known as the "Efficient Market Hypothesis". This is more commonly known as the "Random Walk Theory" and basically said that the first two schools of thought were both wasting their time. In response to the Random Walk Model, other academics put forth an even newer theory of how markets work called "Behavioral Finance". These are all examples of comprehensive explanations of what factors drive market prices. Here's a brief summary of market models, some of which are only in their infancy:

Fundamental: Market prices are driven by tangible events and conditions in the real world, such as earnings, sales, management, natural disasters, weather, economic conditions, geopolitical tensions and so forth.

Technical: Market prices are driven by what prices have done in the past. As traders observe these past and present price movements, their expectations about future prices lead to feelings of greed and fear which in turn create buying and selling pressures.

Random Walk: Current market prices are efficient reflections of all known fundamental and technical information, so we can discern nothing about future price movements. The factors that cause future price movement will be so varied that such movements can only be random in nature.

Behavioral Finance: Prices are driven by human psychology which is not always rational. Traders may base expectations about price movements, risk and reward on erroneous reasoning, thus causing prices to behave in non-random ways. Bubbles and crashes are classic examples of this.

Chaos Theory: Market prices are part of a non-linear dynamic system in which outputs are re-introduced back into the system as inputs, causing complex behavioral loops and very sensitive dependence on slight variations in conditions.

Fractal Geometry: Price patterns are recursively nested, meaning that a large pattern may be composed of several smaller similar or even identical patterns and so on through all time scales. Elliot Wave Theory is a classic example of this idea.

Scott's Emergent Property Model: I've discussed this one in more detail in other articles, but the idea is basically that identifiable properties of price behavior emerge from the combination of unique individual trading styles of the current market participants. An analogy would be how a person's personality emerges from the combination of individual neurons in their brain. This price behavior changes gradually over time in an evolutionary way in the same way that the behavior of an organism changes over time due to both internal changes in its makeup and external pressures from its environment.

My apologies if I have neglected or grossly mis-represented any of the various ways of explaining what makes the market tick.

Day Trading - Why 98% of People Lose Money in the Markets

Almost all people that venture into the world of Day Trading do so with grand thoughts of wealth and easy money. 99% of these people will wind up handing their hard earned money to myself and others which have figured out the game. Yes, it is a game that is extremely hard to master and has endless dead ends. It can begin to feel as if you are a mouse in a never ending maze. You can spend years running around the maze working on endless ideas and methods all of which lead to the same inevitable end.. Losing money!

You might be wondering, who is this guy writing this article? How did supposedly he, and others learn the secret to the game. I would like to claim that I have superior intelligence but that would not be true. Like Edison the inventor of the light bulb, once you have done things wrong long enough, lost enough money, and have been beaten down to the point of giving up, only then, if you can muster the fortitude will you finally begin to see through all of the hyped claims of the failed systems and unyielding methods from your past.

The plain truth is, the sooner you stop looking for the easy money the quicker you will begin to understand why and how those that do win the game take an unfair advantage over those that don’t.

Each person's first introduction into the game of trading is always because someone has been sold on the idea that trading is simple and easy if you purchase the “right system” or methodology from the guru of the hour. These marketers are relentless at taking your money. They are system/methodology designers which understand exactly how to manipulate the various system components to fit anyone‘s taste and temperament. How many times have you been told that you simply need to find a system that fits you and your personality. This is a half truth as no system will fit you for very long if it is not consistently profitable.

Most systems being sold on the internet today clearly explain a entry set-up, but are so vague in regards to exit that they are completely useless. I can’t tell you the number of systems/methods that I have personally purchased that are nothing short of out right fraud in regards to their advertising. Most systems have been back-tested and optimized to the point that on paper they look unbelievable, but in real time they simply fall apart. It seems that people are willing, even anxious to hand over their hard earned money to anyone claiming to hold the key to easy riches.

Now that you have been warned about the fraud and false claims within the industry lets discuss one of the primary reasons that most people lose money. It is the bid/ask spread of entering and exiting the market along with the cost of commissions that stack the deck heavily against those that use methods which try to scalp small profits out of the market. These costs can easily cost you any chance of being profitable. Let me explain, if using the S&P 500 e-mini contract, the minimum tick size is .25 point or $12.50. When you enter and exit a position you will be giving up 2 ticks or $25.00 plus commissions to the spread. Lets say you are using a method in which you are trying to achieve a 2 point target or $100.00 with a limited risk of also only $100.00. Your spread give-up and commission will run you at least $30.00 per contract. This means that the position is already deep in the hole before you begin. The market will have to move and extra $30.00 before you will achieve your target. Theoretically in price movement terms, a win is worth $70.00 and a loss will cost you $130.00. You must win almost 2 times to every loss just to breakeven.

How To Choose a Forex Trading System That Works and Suits You

There are so many different trading systems you could use to trade the forex market, some better suited to certain people than others. For example some people may find it easier to comprehend and take into account fundamental factors as opposed to looking at a screen covered in technical indicators, and vice-versa.

The first logical step in determining what type of trading system would best suit you is actually being aware and understand the widely known methods of analysis used in trading the currency market. Once you are aware of the tools that are available, you can generally tell what type of analysis suits you. For example some of the main technical analysis methods which are popular include:

* Pivot points
* Chart patterns
* Fibonacci retracements
* Candlestick patterns

And some fundamental factors which are widely used include analyzing:

* Interest rates
* Trade balances
* Unemployment rates
* Gross domestic product (GDP)

You may now actually be able to develop your own system by combining certain methods of analysis together, giving you a method which you are comfortable with. On the other hand you may decide that you would like to trade someone else’s system, either way, that brings us to the next step which is determining the profitability of a trading system.

Determining Profitability

Most people would think that back testing is the best way to determine a systems profitability. However back testing doesn’t always give you a true idea of how profitable a system is. The reason for this is because when you’re back testing your system on historical charts, you are only seeing the obvious setups which have occurred, and not always seeing the ones that are less obvious. These less obvious ones sometimes can produce losses, which is why back testing isn’t always the best method to implement.

A better method of determining profitability is by trading your system in real-time with a demo account. This would give you a true understanding of what your system is capable of. This would also allow you to familiarize yourself with your trading platform at the same time. When determining profitability you must look at it in terms of expectancy and opportunity.

Expectancy & Opportunity

These two factors together will be able to tell you what you could expect to make over a period of time. Expectancy is calculated with the following formula:

(Probability of winning × average win) – (Probability of losing × average loss)

This will give you a figure which is the average amount you can expect to make per trade. This shouldn’t be a negative amount, if it is you should look at some other method of trading since you cannot make money on a system that produces a negative expectancy. Obviously the higher this figure is the better. Now to the opportunity factor.

The opportunity factor is how often you are able to trade using your system. By multiplying your expectancy figure with your opportunity factor it will tell you how much you could expect to make over a period of time. The more opportunity you have to trade, the more money you should expect to make. This now brings us to the last component of a trading system, money management.

Money Management

Without proper money management you will end up as a statistic. In other words one of those 90%+ of traders who loose their money. Money management tells you how much of your account balance to risk per trade. The whole point of money management is to ensure your survival over the long term, and to preserve your capital.

The most common form of money management is the percent risk model which tells you not to risk more than x percent of your account balance on any one trade. A range between 1-3% is generally an accepted amount which has been a reliable percentage to use in order to make money in the long term.

How to Trade Forex The Safe Way

In order to reduce losses in trading in the forex market, you will need the necessary and adequate amount of risk management systems in place. Staying afloat is essential in staying in the forex game. It will be unlikely that you will recover from a loss of money that you cannot afford to lose. A good trader will know how to reduce losses quickly and also ride profitable positions higher. Systems such as stop losses and profit caps are needed to keep losses manageable.

Stop losses are so essential to make a successful trade that most brokers will not allow you to trade without a stop-loss in place. A stop-loss is a system that automatically closes out a position when the bid or offer price reaches the given level. For example if your long (you have bought) a currency, your stop-loss will be placed below the current market price and will be activated if the price falls past this threshold. Stop losses are beneficial to traders because it is positive knowledge that you’re protected from a downside risk. This is useful for novice traders because they can become ‘emotionally trapped’ in a falling trade.

Guaranteed stop-losses are offered by some brokers and will provide extra protection for traders. Rare intervals where the market gaps – decreasing without trading at each consecutive rate – and traders who have no acquired guaranteed stop-losses are only assured of getting the next available price. Factors such as central bank or government intervention, political, war or natural crises may cause falls that expose traders without guaranteed stop-losses to substantial losses. Stop-losses can be moved higher or lower to suit the trader. By reducing the stop-loss (placing it closer to the purchase price) you’ll limit the potential size of your loss and by increasing it (placing it further away from the purchase price) you will increase your exposure.

Profit caps are opposite to stop-loss because you place a limit on the profits that you have made. It is beneficial for traders who leave trades unattended over night; a profit cap will be triggered when the market moves through a given threshold and will secure the profit made for the trader.

Automatic triggers are needed to limit the risk but money management is as important. This means making the decision on how much money you can afford to lose on a trade and how much you are able to invest. It is also recommended that you invest no more than 10% of your available funds in any single trade. These practices and systems will certainly help you in protecting your funds from losses. Mental discipline is also needed to become a successful trader.

Entries, Exits, Emotions and Trading Profitably

Entries & exits, emotions and making money.

Do you have difficulty or challenges with any of these?

It's understandable if you do. These are the most common challenges for traders, and the most burning questions that are brought up on a very regular basis. I know exactly how you feel. The frustration of knowing that you're smart enough to make it work, yet losing money or just breaking even really is nerve-racking.

Seeing your money disappear with trades where the market moves against you and you hang on to it, hoping that it will turn around, then having it turn into a sizable loss is just gut-wrenching.

Even worse is when you miss out on one that you pick right or either act too late or hang on to it too long and watch your profits vaporize.

Then the confusion sets in. You get gun-shy about even entering trades and your confidence is circling the drain. It's a downward spiral that is totally opposite of what you expected when you got into trading.

There is hope, though.

You are definitely smart enough, and have what it takes. I know that because you would never have been in a position to even consider trading if you hadn't already proved it.

You're experiencing challenges with the entries and exits, emotions and making money because those challenges are the result of what happened when you first started trading. Nobody told you about it because they didn't know.

What happened is a series of events that seem perfectly normal and logical, on the surface. But when you look deeper, you see that these events actually set people up to do things that they wouldn't do otherwise.

Like jump into a treacherous endeavor unaware of what they're in for and unprepared to deal with the traps and pitfalls that await them.

Like putting substantial sums of money at high risk, without properly planning the trades out and having an exit strategy fully in place.

Like I said, I know how you feel. I've been there and felt the anguish of watching my money disappear in trading. Like you, I got lured into trading naive of what really happens and what it takes to truly trade profitably.

Fortunately, after considerable research and reflection, I was able to see the forest for the trees and discover the truth of what happens and why so many smart people don't make money trading.

When I first made the discovery and thought on the matter, it almost sounded like a mental and emotional trap that would be part of a conspiracy, although it could never be proved.

It sure does seem like a lot of good people get sucked into trading and their money taken by a very small few.

If you're considering trading or if you've already begun and you're finding difficulty, then you'd better get your guard up and think twice before continuing.

You have real money at stake, and the odds are more against you than you realize. You can turns those odds around, if you can get out of the "get rich quick" frame of mind and take a more realistic look at trading, with some good guidance from someone who's already been down that road.

The Size Of The Forex Market

Most of the experienced traders around the world consider the Forex market as the best and most profitable of the capital markets. During many years forex trading had been the great and exclusive domain of major banks, very large financial institutions and the countries central banks; a good example of such a bank would be the U.S. Federal Reserve Bank. But over the last few years, thanks to the internet era, the market has been opened to anyone willing to learn the right techniques in forex trading and with the intentions of making substantial profits as the above mentioned institutions, that annually and consistently make pretty high profits from trading in the Foreign Exchange market.

The foreign exchange market (FOREX) will exist wherever one currency is being traded for another. This market, also known as “currency market”, is by far the largest market in the world in terms of all the cash value traded per day, this trading includes all that is being performed between large commercial banks, central banks, currency speculators, governments, and other financial markets and institutions. The trades taking place in the forex markets across the globe it’s known to exceed on average $1.9 trillion/day. Retail traders, this is, small speculators are only a small part of this market, but this doesn’t mean they can’t grab huge profits if they have learn the right way to trade the Forex. These individual traders participate in the market through broker firms.

According to many experts, the foreign exchange market will have doubled in size in just three years, this thanks to increased participation by fund managers and pension funds. A financial services research firm said it expected the total global average daily volumes on the forex market to exceed $3,000bn next year (2007). Forex volumes, which rose from $1,770bn in 2004 to $2,000bn last year, were set to rise to $2,600bn this year and $3,600bn next year.

Day Trading - Why 98% of People Lose Money in the Markets

Almost all people that venture into the world of Day Trading do so with grand thoughts of wealth and easy money. 99% of these people will wind up handing their hard earned money to myself and others which have figured out the game. Yes, it is a game that is extremely hard to master and has endless dead ends. It can begin to feel as if you are a mouse in a never ending maze. You can spend years running around the maze working on endless ideas and methods all of which lead to the same inevitable end.. Losing money!

You might be wondering, who is this guy writing this article? How did supposedly he, and others learn the secret to the game. I would like to claim that I have superior intelligence but that would not be true. Like Edison the inventor of the light bulb, once you have done things wrong long enough, lost enough money, and have been beaten down to the point of giving up, only then, if you can muster the fortitude will you finally begin to see through all of the hyped claims of the failed systems and unyielding methods from your past.

The plain truth is, the sooner you stop looking for the easy money the quicker you will begin to understand why and how those that do win the game take an unfair advantage over those that don’t.

Each person's first introduction into the game of trading is always because someone has been sold on the idea that trading is simple and easy if you purchase the “right system” or methodology from the guru of the hour. These marketers are relentless at taking your money. They are system/methodology designers which understand exactly how to manipulate the various system components to fit anyone‘s taste and temperament. How many times have you been told that you simply need to find a system that fits you and your personality. This is a half truth as no system will fit you for very long if it is not consistently profitable.

Most systems being sold on the internet today clearly explain a entry set-up, but are so vague in regards to exit that they are completely useless. I can’t tell you the number of systems/methods that I have personally purchased that are nothing short of out right fraud in regards to their advertising. Most systems have been back-tested and optimized to the point that on paper they look unbelievable, but in real time they simply fall apart. It seems that people are willing, even anxious to hand over their hard earned money to anyone claiming to hold the key to easy riches.

Now that you have been warned about the fraud and false claims within the industry lets discuss one of the primary reasons that most people lose money. It is the bid/ask spread of entering and exiting the market along with the cost of commissions that stack the deck heavily against those that use methods which try to scalp small profits out of the market. These costs can easily cost you any chance of being profitable. Let me explain, if using the S&P 500 e-mini contract, the minimum tick size is .25 point or $12.50. When you enter and exit a position you will be giving up 2 ticks or $25.00 plus commissions to the spread. Lets say you are using a method in which you are trying to achieve a 2 point target or $100.00 with a limited risk of also only $100.00. Your spread give-up and commission will run you at least $30.00 per contract. This means that the position is already deep in the hole before you begin. The market will have to move and extra $30.00 before you will achieve your target. Theoretically in price movement terms, a win is worth $70.00 and a loss will cost you $130.00. You must win almost 2 times to every loss just to breakeven.

How To Read Forex Currency Pairs

The Forex market is known by its immense volume of transaction per trading day, and it is because of this that it’s impossible for a single of the market’s forces to noticeably control the market direction for any considerable length of time, opening many opportunities for traders of any size.

Among the most important factors that influence currency prices you must consider the economic and political conditions in the home country of the particular currencies you are willing to trade. There are three important factors influencing the price f any currency: Inflation, political stability, and interest rates. All this factors fall into what’s known as “fundamentals” in the trading world. Additionally, governments will always be a factor in the currency markets, they will often try to establish some kind of control over the price of their currency by either intentionally flooding the market, to lower the price; or buying large quantities, to raise the price.

The first thing you should know if you want to read currency quotes correctly is that each particular currency is given a three letter code which is used in forex quotes. The most common currencies are: European euros (EUR), US dollars (USD), United Kingdom pounds (GBP), Australian dollars (AUD), Japanese yen (JPY), Swiss francs (CHF) and Canadian dollars (CAD). One more thing you must learn when you start trading forex is that the foreign exchange prices are indicated by quotes in a fraction like mode, and this are called currency pairs. The first currency is called the 'base' and the second is called the 'quote' currency. In the following example: USD/EUR = 1.1896

This currency pair is formed by US dollars and European euros. The base currency (USD) is always considered ‘1’ and the quote currency shows how much it costs to buy one unit of the base currency. In this example, 1 US dollar will cost you 1.1896 euros.

By examining the data of any trading software, you will notice that forex quotes are shown in a 'bid' and 'ask' prices format. What ‘Bid’ means is the price that buyers will pay for the base currency, while at the same time selling the quote currency, and ‘Ask’ is the price at which the sellers will sell the base currency, while at the same time buying the quote currency.

Mindset of Trading

Here the 5 areas to share about the mindset and how to become a better trader and the articles below serve as a reminder to me just as important (maybe more important) than learning the technical indicators.

Develop Consistency - We should try to create a mindset of consistency by developing beliefs which support us in obtaining this result. In order to develop consistency, try to objectively identify your edges, defining the risk in each trade in advance, and accepting the risk to be able to exit a position when a defined loss level is realized.

Trading is a Probability Game - You can't be a perfectionist and expect to be a great trader. Your losses (that you hope will return to breakeven) will kill you.

In Too soon or getting In Too Late - These mistakes come from traders not having a well-defined plan of how they will enter the market. This positions the trader as a reactive trader instead of a proactive trader, which increases the level of emotion the trader will feel in reacting to market movements. A written plan helps make a trader more systematic and objective, and reduces the risk that emotions will cause the trader to deviate from his plan.

Not taking profits on winners and letting winners turn to losers - Again this is a function of not having a properly thought-out plan. Entries are easy but exits are hard. You must have a plan for how you will exit the market, both on your winners and your losers. Then your job as a trader becomes to execute your plan precisely.

Great traders don't place their own expectations on to the market's behavior - Poor traders expect the market to give them something. When conditions change, a smart trader will recognize that, and take what the market gives.

Does Your Forex Strategy Include The Fibonacci Two-Step?

Fibonacci can be a very valuable addition to the tools in your Forex strategy, even if you are a reasonably new trader. Experiment with the guidelines below and learn to do the Fibonacci two-step:

Fibonacci levels indicate more often than not how far price is going to go before it stalls and pulls back. It also provides a number of levels where price can pull back or retrace before moving on in the direction of the trend.

The 4 most common retracement levels are (figures rounded off) 1. 38%, 2. 50%, 3. 62%, and 4. 79%.

The two most common extension levels are 1.27% and 1.62%.

Using the Fibonacci tool that comes with most charting packages, simply drag the tool from the most recent swing high/low to the previous swing/high or low and take special note of the 50% retracement level.

In a nutshell, the Fibonacci Two-Step means you set an entry order to be pulled in if and when price touches the Fib50% retracement level, and you set your target at the Fib1.27% extension level.

However, for these trades to be high probability with minimal risk a couple quick calculations are necessary.

What is your stop value? 25-30 pips? If it’s more can your equity cover it if you lose the trade? For many traders 25-30 pips is a reasonable stop.

So before entering the trade, measure the distance between the Fib50% retracement level, your possible entry point, and the Fib79% retracement or even the 100% level. If it is more than 25-30 pips, pass on the trade. The risk is too great. If price pulls back further than the Fib50% level even all the way back to the last swing high/low, you will be in trouble.

However, if the Fib79% or 100% level are within 25-30 pips of your entry at Fib50%, you have a possible trade.

Now calculate how many pips from Fib50% to the extension at Fib127% - this will be your profit ratio. Supposing your stop is set at 25 pips, perhaps somewhere between the Fib79% retracement level and the swing point, and your target at the Fib127% extension is 36 pips, that’s a good risk/reward ratio! You are risking 25 pips to get 36.

It is often advisable to set your target 3 or 4 pips above the Fib127% level as sometimes price doesn’t quite make it before it pulls back.

Use this strategy in line with your other indicators and trade in the direction of the trend for minimal risk.

Why is this strategy so successful? Because it’s not too ambitious. Price will often pull back to the Fib50% level and no further. It will often go to the Fib127 and no further. So using these two levels puts one on middle ground with a higher chance of getting taken into the trade with the target successfully met.

Forex Strategy: How The MACD Indicator Can Save You Anxiety

The MACD (Moving Average Convergence Divergence) indicator can add a degree of certainty to your Forex strategy.

As with any indicator, it is too risky to enter trades on this signal alone. However, as we will see, used with caution on higher time frames, it can help confirm you are going in the right direction and that your trade is higher probability.

First, let’s take MACD apart and describe it’s component parts.

The default MACD on most charting packages sets 2 EMA’s (Exponential Moving Averages) at 26 and 12 days.

This is represented by a colored line (color varies according to charting package) which crosses a different colored 9 EMA often termed the trigger line.

When MACD (the 12/26 EMA) crosses above the trigger line (9 EMA) upward momentum is indicated and vice versa.

A center line, or zero line, often called the water line is also shown in the MACD indicator. When MACD is above the water line an upward trend is indicated, when it is below the water line, a downward trend is indicated.

MACD also includes a histogram, small vertical lines that appear above or below the zero line, not unlike mountains and valleys in appearance.

MACD is a lagging indicator which follows price action.

The histogram is an indicator of MACD. So watching the histogram can give you an early indication of where MACD is going. The height of the histogram can be a good momentum indicator.

How can you use MACD to your advantage?

If you want to be very cautious in your Forex strategy, going only for high probability trades, then pay attention to MACD on the 4 hour and 1 hour charts.

Some traders will only enter a trade when the 4 hour and 1 hour MACD’s are going in the same direction. This will mean a lot less trades but the ones you do take are likely to be profitable. (Agreement of the two MACD’s is used in conjunction with other indicators, not by itself.)

MACD on the 1 hour chart is particularly powerful. If you want to stay out of trouble and avoid trades you might later regret, NEVER trade against the direction of the 1 hour MACD. To do otherwise is not necessarily foolhardy if you know what you are doing.

But for the newer, less experienced trader, only trading long when MACD has crossed up, or short when MACD has crossed down on the hourly chart when your other favorite indicators line up, will make for a higher success rate with your Forex strategy. It will also save you much anxiety!

Trendline Backside Forex Strategy: Getting In At The Optimum Price

Knowing how to utilize the power of trendlines as part of your forex strategy can make a big difference to your profits. Getting in at the right level results in more pips which can accumulate steadily.

Two methods of drawing trendlines are:

1. The common sense method. By just running the eye over a candle chart, it is easy to identify a series of lower highs or higher lows. Drawing a trendline across the tops or the bottoms will indicate where price is likely to bounce in the future.

It is not necessary to be obsessive about the trendline having to touch exactly all the highs and lows. In some cases they may touch the bottom of some candle shadows, in other cases, they may touch the bodies of the candles.

2. The Tom DeMark method. Tom DeMark, a highly respected market analyst, suggests connecting the last high with the previous high in a downtrend and extending the line past current price action OR connecting the last low with the previous low in an uptrend and extending the line past current price action.

Highs are candles that have lower candles adjacent to them on the left and right and lows are candles that have higher candles adjacent to them on the right and left.

These trendlines can be regularly updated as new highs and lows are formed.

Many traders enter a trade on the break of a trendline as part of their forex strategy. That works for many.

However, there is a way to use trendlines to ensure an optimum entry point.

Often, not always, price will break a trendline and move away 10 or 20 pips. Then, it comes back to test the backside of that trendline. That’s where you enter the trade.

If the trendline break coincides with your other favorite indicators such as pivot points, Fibonacci calculations, set an entry order for price to take you in when it comes back to test that level.

That way you enter the trade at an optimum level and squeeze even more pips out of the move.

Of course, price may not come back to test the backside of the trendline so your order doesn’t get taken in and you miss the move. No problem. As a trader patience is an essential quality you develop as a part of your forex strategy. You simply wait for the next time!

Forex Strategy: How Do You Trade The Non-Farm Payroll Report?

In the development of your forex strategy do you wonder how you can trade the non-farm payroll report?

Seeing this is one of the most, if not the most, volatile announcement during the month (first Friday in every month) newer traders watch the huge movements and wonder how to make money from all that volatility.

Here’s an answer you may not fully appreciate until some explanation is offered. “How do I trade the non-farm payroll report?” The answer is: “By maintaining a neutral position!”

To put it another way, YOU DON’T!

The market is far too volatile at this time to expect a high probability trade. There may be some gamblers out there who relish the thought of ‘placing a bet’ to go long or short. But serious traders know better.

Actually, the professional traders I know all say the same thing: “Stand aside and wait for the market to calm down.”

This may take between 30 to 45 minutes in some cases and even then the direction of the market may be uncertain.

Some suggest you can trade volatile market movers such as the non-farm payroll report by waiting for the first leg of the move, up or down, then wait for price to pull back 10 or 15 pips, then enter a trade to catch the second leg of the move which often follows.

That’s one possibility but still very high risk. Personally I prefer to base my forex strategy on sound market assessment and carefully researched trades.

However, while many professional traders sit out the non-farm payroll report, that doesn’t mean they don’t trade afterwards. After the market has made a violent move in one direction you sometimes see price stalling and then give a clear signal that it’s momentum is exhausted.

This may be in the form of a candle pattern such as a hammer with a very large shadow which also happens to be on a key support or resistance level.

Now you can enter a trade with a small level of risk as you place your stop just above the high or low of the candle signal.

This advice applies to all fundamental announcements which are considered ‘market movers’. By developing a cautious forex strategy based on sound trading principles, you will enjoy this business and get the satisfaction of seeing your account equity steadily growing.

Making Money In Forex Trading Fact or Fiction?

Find out the real truth about making money in forex trading.

Recently theres been a surge of everyday, average investors choosing to invest the majority of their portfolio in forex trading. If you talk with those people, you'll find many feel making money in forex trading is much easier than using more traditional types of investing.

The process used for making money in forex trading has a different set of strategies, and plan that trading stocks, mutual funds or bonds. The forex market is a little more complicated to learn, but once you understand the forex market and currency exchanges the possibility of making money in forex is good.

Making Money in Forex Trading - The Advantages

There are advantages to the forex market not available when you invest in the stock market realm. First off, industry changes and changes in company profits dont affect the forex market. Bull and bear markets wont cause major fluctuations as in normal stock trading.

Another advantage is the fact forex trading is open twenty-four hours a day, six days a week. Its not like learning about a major industry event in the evening news and not being able to do anything until the market opens on Monday. You can make your trades anytime of the day.

Learning about making money in forex trading has never been easier. Many online brokerage sites offer free information and education about learning how to invest the forex market. You can also train in real-life" trading without using any money. Its the online version of paper-trading. Youll be able to fine-tune your market strategies and analysis before you actually risk any of your own money.

As with any form of investment there is the potential for loss. Setting your stop points and minimizing your loss potential is not at all difficult, once you understand the forex lingo, and how currencies are traded.

Making money in forex trading occurs by buying and selling once currency for another. The trading is done in pairs. Quotes are displayed in the same manner. The money you make is determined by the change in pips.

Simply put forex (foreign exchange) trades are made according to the value of one currency as compared to another. These values of currencies are constantly changing. Quotes on prices are quoted in pips (percentage in point). If a particular currency quote goes higher, it means that currency is stronger. If it goes lower it means the currency weakening.