Your success as a Forex trader is measured primarily by your commitment to studying the markets, learning trading signals, being patient, and waiting until good trades make themselves known. It is also important to manage your money by the amount of lots you trade and where you place the stop losses.
Avoid comparing yourself to other currency traders and measuring the outward results of your efforts against theirs. Remember that traders have different styles and will make money at different paces in different times. Your responsibility is to develop your trading skills so you can make correct trading decisions. As you are learning you will have losses. You should not, however, become discouraged; discouragement will weaken your trading ability and cloud your judgment. You want to keep your expectations high. If you lower your expectations, your effectiveness will decrease, your desire will weaken, and you will have greater difficulty making good trades.
You can know you have become a successful Forex trader when you:
Feel in tune with the market.
Love to trade and take the profits the market wants to give.
Obey trading rules with exactness.
Live so your body and mind are rested and healthy.
Trade effectively every day, do your best to seek knowledge, learn, and improve.
Help to build up other traders wherever you go.
Warn people of the consequences of poor trading and money management practices.
Teach and serve other traders.
Help other traders at every opportunity, whether or not you will be paid for helping.
Sunday, August 31, 2008
Types of Exits
When exiting a trade, you can do so under four different assumptions. In the best of worlds, exit technique number one is the profit target. Exit technique number two is the trailing stop, which comes into play when the market is starting to move against you after you have accumulated an open profit. Number three is the stop loss for the occurrences when the trade goes against you right off the bat. Finally, you also can exit with a time-based stop, possibly in combination with any of exit techniques one to three. The time based stop is setting a time like at end of the day or when you leave for work etc.
Just a note:
A “margin call” in not an exit strategy.
Just a note:
A “margin call” in not an exit strategy.
Always Use Correct Stop-Loss Orders
Don’t ever let your losses run. Always use stop-loss orders! Nearly ALL traders make the mistake of allowing their losses to run, hoping that the market will return in their favor. Most often this will lead to an even bigger loss. Everyone needs to learn how to cut losses, and learn from their mistakes. A good suggestion is to make a habit of determining an acceptable profit target and risk tolerance level before entering any trade. Then simply place a stop-loss order at the appropriate price, but not so close to the market that it could remove you out of the position before the market has an opportunity to move in your favor.
Many people place their stop loss very close at the market open and just before a news announcement. This is setting up for a sure loss. When the market opens on Sunday it can gap causing you to be taken out of the market if you have a stop that is too close to the market. When a news announcement happens the spread can widen and take you out quickly. I have seen people straddle the market with tight stops and have both buy and sell orders taken out with in seconds. You need to learn where to place your stop-loss orders to minimize losses and maximize your profits.
Many people place their stop loss very close at the market open and just before a news announcement. This is setting up for a sure loss. When the market opens on Sunday it can gap causing you to be taken out of the market if you have a stop that is too close to the market. When a news announcement happens the spread can widen and take you out quickly. I have seen people straddle the market with tight stops and have both buy and sell orders taken out with in seconds. You need to learn where to place your stop-loss orders to minimize losses and maximize your profits.
Systems Will Make You a Better Trader
If you are going to become a better trader you will need to use a system to trade with. You will need to follow a solid set of rules that work and you have back tested. How do you back test? Just by doing the simulated trading you are back testing the trading system.
If you are able to make the same good trades time after time then you have a chance of becoming a good trader and the system you are using is a good one. You need to know why you are making good or bad trades. Your trading system should help you figure this out like the trade tracker. If you do not have a trading system you will have a problem determining why you are losing and your trades are being made off the cuff.
Even if you are trading with a good system you will need to use some judgment and get out of a trade if it doesn’t feel right. If you do not cut your winners short on a consistent basis then losing once in a while is ok. If your system is working for you then you should try and take all you see because you never know which signal will be one of the big winners.
A system is not just getting in the market; it should give you signals to get out and use stop losses as well. What is good about knowing how and when to exit is you do not have to worry about getting out too soon or too late: you let the system tell you what to do.
To back test your trading system you just need to practice simulated trading. This will tell you if you can read signals and make good calls when trading. Successful traders who put the work into doing what it takes to learn to trade, will come out ahead. Trading plans, trade journals and simulated trading are all keys to becoming a winning trader.
If you are able to make the same good trades time after time then you have a chance of becoming a good trader and the system you are using is a good one. You need to know why you are making good or bad trades. Your trading system should help you figure this out like the trade tracker. If you do not have a trading system you will have a problem determining why you are losing and your trades are being made off the cuff.
Even if you are trading with a good system you will need to use some judgment and get out of a trade if it doesn’t feel right. If you do not cut your winners short on a consistent basis then losing once in a while is ok. If your system is working for you then you should try and take all you see because you never know which signal will be one of the big winners.
A system is not just getting in the market; it should give you signals to get out and use stop losses as well. What is good about knowing how and when to exit is you do not have to worry about getting out too soon or too late: you let the system tell you what to do.
To back test your trading system you just need to practice simulated trading. This will tell you if you can read signals and make good calls when trading. Successful traders who put the work into doing what it takes to learn to trade, will come out ahead. Trading plans, trade journals and simulated trading are all keys to becoming a winning trader.
How Long Do I Stay in a Trade?
There are two things we all must learn. How long to stay in a trade when it is going against us and how long to stay in a trade when it is going in our favor.
We need a system and a set of rules that guide us on the beginning stop loss so it does not let us lose too much but also lets the market move enough so as not to take us out of the trade too soon or give us a “head fake”. This will help us control our fear. Then we also need to follow a system and a set of rules that let us know when to close a trade so greed does not take over and we lose all the money we have just made.
All we need to do is get some good signals and follow them.
We need a system and a set of rules that guide us on the beginning stop loss so it does not let us lose too much but also lets the market move enough so as not to take us out of the trade too soon or give us a “head fake”. This will help us control our fear. Then we also need to follow a system and a set of rules that let us know when to close a trade so greed does not take over and we lose all the money we have just made.
All we need to do is get some good signals and follow them.
The Secret of Building a Highly Profitable Trading Account
Have you ever stopped to think why the trading techniques that work for the world’s best trading gurus aren’t working for you? Why can they achieve substantial gains while you’re left in the dust?
What do they know that you don’t?
In reality, they know a lot of things that you probably don’t. Let me let you in on a little secret—you don’t need to know everything they know. There is one characteristic that every highly successful trader in the world has, and if you learn to master this one detail and integrate it into your trading, it will be enough to create more profitable trades than 1,000 hours of looking and studying charts.
Are you ready for this? If you have failed to create a high-profit trading account until this point, I can all but guarantee that your trading is failing in one crucial area – you are not following a trading system you have learned, and trust. A good trading system would show you why you should be trading in the direction of the trend on the 4-hour chart, or that perhaps you are trading in time frames that are too small (1-5 min).
Trading with the trend puts the odds in your favor and makes it easier to read and follow your indicators and your entry and exit signals. If you fail to follow the trend you will never have a consistently high profitable trading account. You will waste hundreds of hours looking at charts and wonder why you never reach the profit levels you dream of.
Disagree? Consider these simple examples:
Example 1 – Johnny makes 50 trades on the one and five minute charts and never looks at the direction of the trend. He is trying to trade the news, listen to other traders, guess which way the market will move, and by how much. He lets a little move in the opposite direction grow into a big loss because he does not know which way the market is moving and does not set a stop loss because he thinks that it will come back. He closes a profitable trade when he has a little profit because he is not giving the market enough room to breath, and does not know which way the trend is going. He is hoping for the homerun, but he will never hit a homerun if he is always bunting (trading in the 1 and 5 minute time frames). He will have 25 wins and 25 losses and wonders why his account stays the same or dips a little.
Example 2 – Jane makes 20 trades on the thirty minute, one hour, and four hour charts only taking trades in the direction of the trend. She does not let the news and other traders influence her trading. If the market moves against her she has her stop loss places and knows how much she will lose on each trade. If she gets taken out at a loss it is always a small loss. She always lets the market breath and move freely without closing a profitable trade because of a little fluctuation in the market. She is not looking for a homerun. She is just looking for the market to tell her when it is time to close her trades. Jane is happy to take what the market is willing to give her at that time. She does hit a homerun now and then with little effort and emotion. Of the 20 trades, she will have 15-18 of them be successful, causing her account to grow steadily.
Why You Can Do Even Better Than Jane
The example of Jane assumes that she never increases the number of lots she trades or adds on to a winning trade as her account grows. If she is trading with 1% of her account at the beginning of a trade and then adds on to the trade as it goes in her direction, when she gets add on signals then she will multiply 3 – 5 times the profit on her account on a good trade.
Even if Johnny works twice as hard and places twice as many trades, he won’t be able to catch up. Jane will soon be getting more profits and compounding the growth each day. Why won’t Johnny be able to keep up or even catch up? Because Jane has been compounding her profits by trading with the trend and adding on to her profitable trades. When she loses, it is small; when she wins, it is big because she has been working the trade. Can Johnny realistically trade enough to keep up with Jane?
In order for you to become a consistently profitable trader you will need to trade with the trend, trade with the trend, trade with the trend.
5 Suggestions You Must Follow To Become a Profitable Trader
1. Trade in the direction of the trend
I had heard “trade in the direction of the trend” or “The trend is your friend” for years but didn’t quite get it. Then I read an article a few years ago, and it changed the way I look at charts and the market. In the article it stated that you should always trade in the direction of the trend of the four-hour chart. That seemed so long to wait for a trade. I was trying to make trades on the 1, 5, and sometimes 15-minute charts. Then I realized that I could still trade on the smaller time frames but only make trades in the direction of the four-hour chart. When I did this even if the trade went against me it seemed to always come back in my favor. This way I stopped hoping it would come back in my favor because I knew the odds were in my favor that it would come back for me.
I have also traded the 4-hour time frame successfully. This way I do not have to be in front of the computer as much and I have been making more money with less work. Try doing this on a demo account and see how it works for you.
2. Start small with each trade
When you place that first trade on a trend it can be scary. At this point in the trend you are not sure if this is a real trend or just a channel or retracement. Enter the market small, risking just a few lots until the trend confirms itself. Then you can add on to maximize the profitability of the trend.
Add to each trade when it starts to trend. We like to start out small with one lot when the trend is in question then add more lots as the trend proves itself. The add on positions are less risky than the first positions in a trend. The more the trend proves itself, the less risky it becomes. There are several add on signals in most trends, so why not add on multiple lots when the trade is headed in a direction, and then close all the positions when the trend comes to an end or when you have good exit signals? This way you can increase your profits on a trade by 3 to 5 times that of scaling out. Of the entry methods we have discussed you have two choices: start big and scale out or start small and add on.
I have heard many people say when you make a trade, you should scale out of the trade closing a portion of the trade as the trade starts to get more profitable. They usually start out with several lots. I thought this was strange to close a profitable trade when the trend was just starting to move. Also why put on several lots and expose yourself to more risk when you are not sure if this is a trend or not? I have come to the conclusion that the people who suggest a larger first position with scaling out of the trade is because they do not have any better exit signals than to just take a little profit as the trade progresses.
If you do not have a trading system that gives you exact exit signals and good add on signals then you could become a better trader if you found a system that would help you with this.
3. Trade with a stop loss
Trading with a stop loss is one of the most important parts of the trade. It falls under the category of money management. This is more important than the entry and exit points of a trade. The first loss is always the smallest and that is usually at the stop loss.
When you trade with stop losses, you have a much greater chance of being in the trading game longer than if you do not trade with a stop. On a trade system advertisement the instructor was saying he puts on his stop loss and his target take profit and goes and does something. He said he would have a profit or a loss. Most of the time he had a profit because he gave the market room to breathe. If he was stopped out, then the market usually was making a turn and changed direction. So he was stopped out at the smallest loss. Then, he would look to get back in the market the way the market wanted to go.
Successful traders have all lost money from time to time. They know this is part of the game. You just need to learn to manage the wins and losses.
4. Trust your indicators
One of the first things you should do as a trader is to become good at using some indicators of your choice, and then trust them. Your indicators will serve you well.
No indicator or even a set of indicators will be right all the time. But you need to trust them and use your stops for the complete trading program.
Most indicators have certain signals that are always right. If this is true, then why not wait for the ideal signals to present themselves and have more successful trades? You will make more money waiting for the signals to come to you rather than chasing trades and jumping in at every anticipated or hoped for signal. There will be a signal and a trigger entry point. Most mistakes are made when the trade is entered on the signal and not on the trigger entry point. DO NOT anticipate an entry signal; wait for it to come to you. The market will tell you when it is going to give you some money, usually through your indicators.
5. Follow your rules
Every trading strategy has some trading rules to follow. Every game has a set of instructions to follow to be able to win.
This is one time GUYS, that you should study the instructions and trading rules before you start to trade. There are a couple of reasons for this. One: you will not develop bad habits you have to break. Two: you will develop the habit of studying the markets, which is what you will have to do the rest of your trading career.
By learning the rules and following them you will then be able to develop a good trading plan. The trading plan is usually your way of trading the market, the way you will enter, exit, study and read the market. It will tell you the time you will trade and how much of your account you will trade. It will also show you how much of a draw down you will take and how you are going to handle your emotions.
The market does not care if you win or lose your money. The market does not have emotions. But the market will tell you what it is going to do if you will follow the rules of your trading system. Trading the Forex market is not a race with yourself or anyone else; it is an individual effort to develop your skills to be able to trade well.
LEARN THE RULES, TRADE THE MARKET, AND BE PROFITABLE.
My Overall Thoughts on Building a Highly-Profitable Trading Account
I think that quite a few of us want to be profitable traders without taking the time to become a good trader. The secret is learning and practicing a good trading strategy, being determined to follow the rules, and stick with it until you succeed.
If you trade with the trend and follow your trading strategy rules, profits are inevitable. Ask yourself if you’re willing to study and learn one strategy well rather than run with every new thing that comes along. If you’re not willing to take the time to study, practice, and follow the rules of a system, it will be really hard to become a profitable trader. If you are, you will have a very profitable account someday. That’s when you’ll know that you have made your dream come true.
What do they know that you don’t?
In reality, they know a lot of things that you probably don’t. Let me let you in on a little secret—you don’t need to know everything they know. There is one characteristic that every highly successful trader in the world has, and if you learn to master this one detail and integrate it into your trading, it will be enough to create more profitable trades than 1,000 hours of looking and studying charts.
Are you ready for this? If you have failed to create a high-profit trading account until this point, I can all but guarantee that your trading is failing in one crucial area – you are not following a trading system you have learned, and trust. A good trading system would show you why you should be trading in the direction of the trend on the 4-hour chart, or that perhaps you are trading in time frames that are too small (1-5 min).
Trading with the trend puts the odds in your favor and makes it easier to read and follow your indicators and your entry and exit signals. If you fail to follow the trend you will never have a consistently high profitable trading account. You will waste hundreds of hours looking at charts and wonder why you never reach the profit levels you dream of.
Disagree? Consider these simple examples:
Example 1 – Johnny makes 50 trades on the one and five minute charts and never looks at the direction of the trend. He is trying to trade the news, listen to other traders, guess which way the market will move, and by how much. He lets a little move in the opposite direction grow into a big loss because he does not know which way the market is moving and does not set a stop loss because he thinks that it will come back. He closes a profitable trade when he has a little profit because he is not giving the market enough room to breath, and does not know which way the trend is going. He is hoping for the homerun, but he will never hit a homerun if he is always bunting (trading in the 1 and 5 minute time frames). He will have 25 wins and 25 losses and wonders why his account stays the same or dips a little.
Example 2 – Jane makes 20 trades on the thirty minute, one hour, and four hour charts only taking trades in the direction of the trend. She does not let the news and other traders influence her trading. If the market moves against her she has her stop loss places and knows how much she will lose on each trade. If she gets taken out at a loss it is always a small loss. She always lets the market breath and move freely without closing a profitable trade because of a little fluctuation in the market. She is not looking for a homerun. She is just looking for the market to tell her when it is time to close her trades. Jane is happy to take what the market is willing to give her at that time. She does hit a homerun now and then with little effort and emotion. Of the 20 trades, she will have 15-18 of them be successful, causing her account to grow steadily.
Why You Can Do Even Better Than Jane
The example of Jane assumes that she never increases the number of lots she trades or adds on to a winning trade as her account grows. If she is trading with 1% of her account at the beginning of a trade and then adds on to the trade as it goes in her direction, when she gets add on signals then she will multiply 3 – 5 times the profit on her account on a good trade.
Even if Johnny works twice as hard and places twice as many trades, he won’t be able to catch up. Jane will soon be getting more profits and compounding the growth each day. Why won’t Johnny be able to keep up or even catch up? Because Jane has been compounding her profits by trading with the trend and adding on to her profitable trades. When she loses, it is small; when she wins, it is big because she has been working the trade. Can Johnny realistically trade enough to keep up with Jane?
In order for you to become a consistently profitable trader you will need to trade with the trend, trade with the trend, trade with the trend.
5 Suggestions You Must Follow To Become a Profitable Trader
1. Trade in the direction of the trend
I had heard “trade in the direction of the trend” or “The trend is your friend” for years but didn’t quite get it. Then I read an article a few years ago, and it changed the way I look at charts and the market. In the article it stated that you should always trade in the direction of the trend of the four-hour chart. That seemed so long to wait for a trade. I was trying to make trades on the 1, 5, and sometimes 15-minute charts. Then I realized that I could still trade on the smaller time frames but only make trades in the direction of the four-hour chart. When I did this even if the trade went against me it seemed to always come back in my favor. This way I stopped hoping it would come back in my favor because I knew the odds were in my favor that it would come back for me.
I have also traded the 4-hour time frame successfully. This way I do not have to be in front of the computer as much and I have been making more money with less work. Try doing this on a demo account and see how it works for you.
2. Start small with each trade
When you place that first trade on a trend it can be scary. At this point in the trend you are not sure if this is a real trend or just a channel or retracement. Enter the market small, risking just a few lots until the trend confirms itself. Then you can add on to maximize the profitability of the trend.
Add to each trade when it starts to trend. We like to start out small with one lot when the trend is in question then add more lots as the trend proves itself. The add on positions are less risky than the first positions in a trend. The more the trend proves itself, the less risky it becomes. There are several add on signals in most trends, so why not add on multiple lots when the trade is headed in a direction, and then close all the positions when the trend comes to an end or when you have good exit signals? This way you can increase your profits on a trade by 3 to 5 times that of scaling out. Of the entry methods we have discussed you have two choices: start big and scale out or start small and add on.
I have heard many people say when you make a trade, you should scale out of the trade closing a portion of the trade as the trade starts to get more profitable. They usually start out with several lots. I thought this was strange to close a profitable trade when the trend was just starting to move. Also why put on several lots and expose yourself to more risk when you are not sure if this is a trend or not? I have come to the conclusion that the people who suggest a larger first position with scaling out of the trade is because they do not have any better exit signals than to just take a little profit as the trade progresses.
If you do not have a trading system that gives you exact exit signals and good add on signals then you could become a better trader if you found a system that would help you with this.
3. Trade with a stop loss
Trading with a stop loss is one of the most important parts of the trade. It falls under the category of money management. This is more important than the entry and exit points of a trade. The first loss is always the smallest and that is usually at the stop loss.
When you trade with stop losses, you have a much greater chance of being in the trading game longer than if you do not trade with a stop. On a trade system advertisement the instructor was saying he puts on his stop loss and his target take profit and goes and does something. He said he would have a profit or a loss. Most of the time he had a profit because he gave the market room to breathe. If he was stopped out, then the market usually was making a turn and changed direction. So he was stopped out at the smallest loss. Then, he would look to get back in the market the way the market wanted to go.
Successful traders have all lost money from time to time. They know this is part of the game. You just need to learn to manage the wins and losses.
4. Trust your indicators
One of the first things you should do as a trader is to become good at using some indicators of your choice, and then trust them. Your indicators will serve you well.
No indicator or even a set of indicators will be right all the time. But you need to trust them and use your stops for the complete trading program.
Most indicators have certain signals that are always right. If this is true, then why not wait for the ideal signals to present themselves and have more successful trades? You will make more money waiting for the signals to come to you rather than chasing trades and jumping in at every anticipated or hoped for signal. There will be a signal and a trigger entry point. Most mistakes are made when the trade is entered on the signal and not on the trigger entry point. DO NOT anticipate an entry signal; wait for it to come to you. The market will tell you when it is going to give you some money, usually through your indicators.
5. Follow your rules
Every trading strategy has some trading rules to follow. Every game has a set of instructions to follow to be able to win.
This is one time GUYS, that you should study the instructions and trading rules before you start to trade. There are a couple of reasons for this. One: you will not develop bad habits you have to break. Two: you will develop the habit of studying the markets, which is what you will have to do the rest of your trading career.
By learning the rules and following them you will then be able to develop a good trading plan. The trading plan is usually your way of trading the market, the way you will enter, exit, study and read the market. It will tell you the time you will trade and how much of your account you will trade. It will also show you how much of a draw down you will take and how you are going to handle your emotions.
The market does not care if you win or lose your money. The market does not have emotions. But the market will tell you what it is going to do if you will follow the rules of your trading system. Trading the Forex market is not a race with yourself or anyone else; it is an individual effort to develop your skills to be able to trade well.
LEARN THE RULES, TRADE THE MARKET, AND BE PROFITABLE.
My Overall Thoughts on Building a Highly-Profitable Trading Account
I think that quite a few of us want to be profitable traders without taking the time to become a good trader. The secret is learning and practicing a good trading strategy, being determined to follow the rules, and stick with it until you succeed.
If you trade with the trend and follow your trading strategy rules, profits are inevitable. Ask yourself if you’re willing to study and learn one strategy well rather than run with every new thing that comes along. If you’re not willing to take the time to study, practice, and follow the rules of a system, it will be really hard to become a profitable trader. If you are, you will have a very profitable account someday. That’s when you’ll know that you have made your dream come true.
Do I Have The Right Kind of Money to Trade The Forex Market?
One of the best ways to lose your money is to try and trade when you need the money to pay bills. You do not have any room for a draw down. If you have a loss then you try harder to make it up to reach your required objective. When you do not reach it you start to over trade your account and lose the money faster. You start to break all of your trading rules and have no discipline. Then your emotions creep in and now you are out of control and frustrated. In fact you have almost lost any chance of being successful.
You do not have any control as to when and how much the markets will give you. You need to be relaxed and in tune with the market. Not stressed and fighting the market. The market does not care if you win or lose. So put the odds in your favor and only trade with money you can afford to lose.
You do not have any control as to when and how much the markets will give you. You need to be relaxed and in tune with the market. Not stressed and fighting the market. The market does not care if you win or lose. So put the odds in your favor and only trade with money you can afford to lose.
Can You Learn The Forex Market
We visited Springfield Illinois where Abraham Lincoln lived and had a successful law practice. We were able to take a tour of the house where he lived when he ran for President of the United States. The guide shared with us that the house was small when they first moved in and as he became more successful in his law practice he added on to his house. We then visited a replica of a little town where he lived for 9 years and was a partner in a mercantile business. We found out that he was a successful surveyor as well.
What does this have to do with the currency market? I was thinking how Lincoln learned how to do his many professions, it was by studying asking questions and practicing. That is how we have to learn how to trade, by studying, asking questions and practicing. I talk to many people that want someone else to trade for them because they think they can’t learn how to trade forex. Then there are the people that want to find a system that will do all the trading for them so they just turn it on and the money comes in. A person has to be careful about whom they get to trade their accounts because it seems that most professed money managers just manage to loose all the money. If there is am automated trading system that makes all the money and the investor doesn’t have to do anything then we have not seen nor heard about it.
My point is that the currency market is learnable but it does take a lot of study, asking questions, and practice. It is not for everyone but it can be for many if they put in the effort. This does not mean you can sit and look at charts hour after hour and get the knowledge you need to be a successful trader . It means there will be a lot of reading, listening to trainers, watching videos, and learning trading systems along with looking at the charts. It is fun and can be rewarding and it does take a lot of work. Make sure there is fun in your trading or you will not be with it very long.
What does this have to do with the currency market? I was thinking how Lincoln learned how to do his many professions, it was by studying asking questions and practicing. That is how we have to learn how to trade, by studying, asking questions and practicing. I talk to many people that want someone else to trade for them because they think they can’t learn how to trade forex. Then there are the people that want to find a system that will do all the trading for them so they just turn it on and the money comes in. A person has to be careful about whom they get to trade their accounts because it seems that most professed money managers just manage to loose all the money. If there is am automated trading system that makes all the money and the investor doesn’t have to do anything then we have not seen nor heard about it.
My point is that the currency market is learnable but it does take a lot of study, asking questions, and practice. It is not for everyone but it can be for many if they put in the effort. This does not mean you can sit and look at charts hour after hour and get the knowledge you need to be a successful trader . It means there will be a lot of reading, listening to trainers, watching videos, and learning trading systems along with looking at the charts. It is fun and can be rewarding and it does take a lot of work. Make sure there is fun in your trading or you will not be with it very long.
Don’t Think You’re Better Than The Market
good rule to follow is to always use good money management. The market doesn’t care if you win or lose your money. It is always moving and there is always something happening.
Some people get into a trade and let it run against them thinking it will come back. When it doesn’t come back usually one of the following two things occur:
1. They run the risk of a margin call.
2. They put more money in their account to prevent the margin call. (Not a good idea)
You also need to learn to leave your emotions out of your trading. Don’t try to beg the market to go in your direction. Because there are many people that haven’t learned to keep their emotions in check and they are begging and praying for it to go in the opposite direction that you want it to go.
Never trade with your emotions or your pocket book. Learn some good trading rules and techniques, and then follow them.
Some people get into a trade and let it run against them thinking it will come back. When it doesn’t come back usually one of the following two things occur:
1. They run the risk of a margin call.
2. They put more money in their account to prevent the margin call. (Not a good idea)
You also need to learn to leave your emotions out of your trading. Don’t try to beg the market to go in your direction. Because there are many people that haven’t learned to keep their emotions in check and they are begging and praying for it to go in the opposite direction that you want it to go.
Never trade with your emotions or your pocket book. Learn some good trading rules and techniques, and then follow them.
Think Of Trading As Points And Percentages
We talked about the amount of risk a trader has in the market now it is time to talk about how you feel about money. If you have a big attachment to money then it will cause a big emotional strain when you lose some of the money.
One of the hardest things a new trader has to learn is how to loose. Losing is part of trading. Losses need to be looked at as expenses, or cost of doing business. There is no Holy Grail or magic trading system that just has to be turned on and the money will roll in.
If you can’t change your relationship with money, then just don’t think about it. Focus instead on numbers. Think of a % of your account, risk-to-reward ratio, and points to be made as profit not as points to be lost.
Once you learn how to make points then the money will come. You can accelerate the amount of money you make with good money management once you know how to make the pips.
One of the hardest things a new trader has to learn is how to loose. Losing is part of trading. Losses need to be looked at as expenses, or cost of doing business. There is no Holy Grail or magic trading system that just has to be turned on and the money will roll in.
If you can’t change your relationship with money, then just don’t think about it. Focus instead on numbers. Think of a % of your account, risk-to-reward ratio, and points to be made as profit not as points to be lost.
Once you learn how to make points then the money will come. You can accelerate the amount of money you make with good money management once you know how to make the pips.
Trading as a business
If you take trading seriously you will think of trading as a business. Not just a hobby, or a way to get a quick rush, or a way to escape life’s problems, or a way of spending some of your extra time. You can think of trading, as a lot of things but to make the big bucks you talk and dream about, you need to think of it as a business.
Businesses have income and expenses. Most of us know that you have to spend some money to make money. When you lose, that is an expense and when you win, that is income.
Most successful business take off slowly build a good foundation then take off. All businesses have different time frames before they become successful. Many businesses have to adjust when their markets changing. By making small changes in the way they do things as they learn and grow they are staying in tune with their market.
You are much more likely to become profitable when you realize that trading is a business. Do not take it personal when you’re struggling. Do not put blame on someone or something else when you lose. Just learn how to run your business take it at the speed you feel comfortable with. Learn to trade, practice, implement, evaluate, learn to trade more, practice again, implement and evaluate. Do this over and over with each trade and watch your business grow.
Businesses have income and expenses. Most of us know that you have to spend some money to make money. When you lose, that is an expense and when you win, that is income.
Most successful business take off slowly build a good foundation then take off. All businesses have different time frames before they become successful. Many businesses have to adjust when their markets changing. By making small changes in the way they do things as they learn and grow they are staying in tune with their market.
You are much more likely to become profitable when you realize that trading is a business. Do not take it personal when you’re struggling. Do not put blame on someone or something else when you lose. Just learn how to run your business take it at the speed you feel comfortable with. Learn to trade, practice, implement, evaluate, learn to trade more, practice again, implement and evaluate. Do this over and over with each trade and watch your business grow.
Three Things That Give You An Edge
You need three things in your trading system to have the edge you are looking for:
1. Signals that give you distinct alerts for entry and exit points.
2. The ability to determine the direction of the trend, so you know which way to trade.
3. A system which allows you to time your entry. Having that can make you a lot of extra pips. It is important to know how much money you are willing to risk on each trade.
When you know how and when to get into the market and how much you have at risk, it takes a lot of the emotion and guess work out of trading. Then, if you can add a system to know where to put your stop loss once the trade is profitable, you have a good foundation to work with. This will allow you to protect your profit and help you determine how and when to add on to a profitable trade. Start with a good foundation and grow from there. There are many traders that spend years trying to find something that works, and even then they are still not quite satisfied.
1. Signals that give you distinct alerts for entry and exit points.
2. The ability to determine the direction of the trend, so you know which way to trade.
3. A system which allows you to time your entry. Having that can make you a lot of extra pips. It is important to know how much money you are willing to risk on each trade.
When you know how and when to get into the market and how much you have at risk, it takes a lot of the emotion and guess work out of trading. Then, if you can add a system to know where to put your stop loss once the trade is profitable, you have a good foundation to work with. This will allow you to protect your profit and help you determine how and when to add on to a profitable trade. Start with a good foundation and grow from there. There are many traders that spend years trying to find something that works, and even then they are still not quite satisfied.
Bull Markets | Bear Markets - Which Should I Trade?
The term “Bull Market” is used to describe when a market is going up. Therefore, the term “Bear Market” is used to describe when the market is going down. Therefore, you’d be better off not to sell in a bull market and not to buy in a bear market.
Nevertheless, there are some traders that say they like to trade the retracements. This is like trading against the trend or trying to swim up stream. Yes it can be done, but why trade the hard way for the least amount of money? Instead, you can trade with the trend or with the current and make more money with less effort.
If you sell when the market is going up or buy when the market is going down you will make less money with a greater risk of loss. I have heard people say that they like to do dollar cost averaging and they keep buying when the market is going down, with the hopes that the market will turn and come back in their favor. Some times it does come back and other times they get a margin call before the market turns and comes back for them.
It is smart trading to learn what the market is willing to give and then taking it. Do not try to get more than the market is willing to give or you will loose some or all of what you have. You are getting in tune with the market when you want what the market wants and take what the market is willing to give. Nothing more, nothing less.
The terms “Bull” and “Bear” come from the manner in which each animal attacks. The bull uses its horns and thrusts them up in the air, whereas the bear swipes down with its paws. So, if the trend is up, its a bull market, if the trend is down, its a bear market.
Nevertheless, there are some traders that say they like to trade the retracements. This is like trading against the trend or trying to swim up stream. Yes it can be done, but why trade the hard way for the least amount of money? Instead, you can trade with the trend or with the current and make more money with less effort.
If you sell when the market is going up or buy when the market is going down you will make less money with a greater risk of loss. I have heard people say that they like to do dollar cost averaging and they keep buying when the market is going down, with the hopes that the market will turn and come back in their favor. Some times it does come back and other times they get a margin call before the market turns and comes back for them.
It is smart trading to learn what the market is willing to give and then taking it. Do not try to get more than the market is willing to give or you will loose some or all of what you have. You are getting in tune with the market when you want what the market wants and take what the market is willing to give. Nothing more, nothing less.
The terms “Bull” and “Bear” come from the manner in which each animal attacks. The bull uses its horns and thrusts them up in the air, whereas the bear swipes down with its paws. So, if the trend is up, its a bull market, if the trend is down, its a bear market.
Trend and Money Management
There are many Forex traders and thus there are many things that they feel are important to do to manage their money. We have found that the trend is the most important requirement to make money using technical analysis. The tools used to measure the trend are not perfect, yet very helpful…so a trader will need to be aware of the risk in trading and protect themselves against sudden turns in the market.
When a trader decides to enter a trade he must also decide when he is going to exit the trade. The trader needs to decide when to exit the trade if it is positive and if the trade turns negative. Making the decision at which price to set your stop loss before entering a trade is a way of protecting against large losses. If the stop loss is going to be far enough away from the entry price to make the trader feel uncomfortable then there are two things that can be done:
1. Trade with a smaller lot size.
2. Do not take the trade at all. It is best to be in control of your emotions and your investment capital before you enter a trade.
One of the greatest advantages when entering a trade is that an exit point can be established at a point that if reached the trader knows that something is wrong, either with his research or the market behavior. This is one way that the risk or loss can be determined right in the beginning of the trade. Because the risk can be determined, money management principles can be applied that will lower the chance of loss. By trading in the direction of the four hour trend you will also lower the risk in trading. Being patient and waiting for the market to give an entrance signal is another way of limiting risk and managing your account balance.
Follow the trend and see how much easier and less stressful your trading will become.
When a trader decides to enter a trade he must also decide when he is going to exit the trade. The trader needs to decide when to exit the trade if it is positive and if the trade turns negative. Making the decision at which price to set your stop loss before entering a trade is a way of protecting against large losses. If the stop loss is going to be far enough away from the entry price to make the trader feel uncomfortable then there are two things that can be done:
1. Trade with a smaller lot size.
2. Do not take the trade at all. It is best to be in control of your emotions and your investment capital before you enter a trade.
One of the greatest advantages when entering a trade is that an exit point can be established at a point that if reached the trader knows that something is wrong, either with his research or the market behavior. This is one way that the risk or loss can be determined right in the beginning of the trade. Because the risk can be determined, money management principles can be applied that will lower the chance of loss. By trading in the direction of the four hour trend you will also lower the risk in trading. Being patient and waiting for the market to give an entrance signal is another way of limiting risk and managing your account balance.
Follow the trend and see how much easier and less stressful your trading will become.
NEVER Stop Practice TradingNEVER Stop Practice Trading
It is a well known fact that if you take time away from your skill, it takes a bit of concentration and practice to get back on top of your game. Professional athletes have to work hard on their skills to get back to peak levels of performance after the off season. The same thing holds true for Forex traders. It may be different amounts of time and different levels of effort to get back into trading shape but it does take time and effort.
Learning doesn’t stop once trading with real money begins. In fact, it is the exact opposite; the learning curve actually accelerates. I know of many traders that will trade with a live and a demo account in tandem. They place the same trade on each account and find themselves trading the two accounts differently.
When the demo starts to make more money than their live account it is easy for them to see what they are doing different and correct the difference. The wise traders will learn from tandem trading and those traders that should not have started trading live are still wondering what is happening to them.
Other traders say “it is no fun to demo trade” and other traders say “I don’t learn when trading a demo account”. One suggestion is to trade with a mini account and only place micro mini lots i.e. 0.01 lots. This is trading with a penny. If they do lose 100 pips they have only lost one dollar. If this is what it takes, you still need to practice. Remember perfect practice makes perfect results.
Use the 5 and 15 minutes time frames, and signals to get in and out of the market. Using the smaller time frames over many currency pairs you will get a lot of practice in a short amount of time.
Practice, have fun, and trade well.
Learning doesn’t stop once trading with real money begins. In fact, it is the exact opposite; the learning curve actually accelerates. I know of many traders that will trade with a live and a demo account in tandem. They place the same trade on each account and find themselves trading the two accounts differently.
When the demo starts to make more money than their live account it is easy for them to see what they are doing different and correct the difference. The wise traders will learn from tandem trading and those traders that should not have started trading live are still wondering what is happening to them.
Other traders say “it is no fun to demo trade” and other traders say “I don’t learn when trading a demo account”. One suggestion is to trade with a mini account and only place micro mini lots i.e. 0.01 lots. This is trading with a penny. If they do lose 100 pips they have only lost one dollar. If this is what it takes, you still need to practice. Remember perfect practice makes perfect results.
Use the 5 and 15 minutes time frames, and signals to get in and out of the market. Using the smaller time frames over many currency pairs you will get a lot of practice in a short amount of time.
Practice, have fun, and trade well.
When To Trade With Real Money
When did the training wheels come off the bike? When does the parent let the new driver go solo? When can the new pilot fly solo? When does a trader start to use real money? The answer to these questions will be different for everyone.
One of the first things in each of these examples would be the level of confidence the participants have in themselves. With the bike rider, it might be when he/she does not touch the training wheels any more. With the student driver and pilot, it might be when they have passed some tests and practiced enough to be proficient in the operation of the car or plane. In trading it might be when the trader has more winning trades than losing trades in their demo accounts and knows how to operate the trading platform. Everyone progresses at a different pace and is ready to move on to the next level at different times.
These are the steps we recommend:
1. Learn how to use the trading platform
2. Learn the basics of a trading strategy
3. Practice simulated trading using the strategy
4. Practice demo trading
5. Practice visualization trading.
6. In the demo account there should be more winning trades than losing trades.
7. When the confidence is there move onto live trading.
The object is to be a good trader before you try to make a bunch of money. The money will come after you master the above steps on becoming a good trader. If a new trader tries to skip some steps in the learning process and has some success, then they were lucky. There is no short cut to learning how to trade well. The market does not care whether you make or lose money. The currency market has a way of keeping traders humble. It is always best to learn and follow some trading rules in becoming a good trader.
One of the first things in each of these examples would be the level of confidence the participants have in themselves. With the bike rider, it might be when he/she does not touch the training wheels any more. With the student driver and pilot, it might be when they have passed some tests and practiced enough to be proficient in the operation of the car or plane. In trading it might be when the trader has more winning trades than losing trades in their demo accounts and knows how to operate the trading platform. Everyone progresses at a different pace and is ready to move on to the next level at different times.
These are the steps we recommend:
1. Learn how to use the trading platform
2. Learn the basics of a trading strategy
3. Practice simulated trading using the strategy
4. Practice demo trading
5. Practice visualization trading.
6. In the demo account there should be more winning trades than losing trades.
7. When the confidence is there move onto live trading.
The object is to be a good trader before you try to make a bunch of money. The money will come after you master the above steps on becoming a good trader. If a new trader tries to skip some steps in the learning process and has some success, then they were lucky. There is no short cut to learning how to trade well. The market does not care whether you make or lose money. The currency market has a way of keeping traders humble. It is always best to learn and follow some trading rules in becoming a good trader.
Which Comes First, The Skill or The Money?
You should only trade with a forex strategy that you’ve proven to yourself. One of the most important tools you need to learn how to use, even before you start trading at any level is how to use the trading platform. We offer a free forex video tutorial that shows you how to set-up and use the MT4 trading platform. There are people that open a live account, get into a trade and do not even know how to close the trade. Then they want the broker to give them their money back, and make things even for them. Once you can use the trading platform proficiently you can move on to learning the trading strategy you are looking at.
You should always practice trading to become acquainted with the indicators. When enough time has been give to simulated trading and the entry and exit signal are easily spotted then move on to demo trading. When demo trading play money is being used with live data feed and real time results. When the winning trades are happening more often than the losing trades, then consider opening a live account with real money. Use the 80-20 rule to determine the proper time to start live trading. At this point you may feel like you are a great trader but you now have to deal with your emotions. The best thing to do is start out trading with very small trades. If the amount of money you will lose on a single trade is uncomfortable to you, then you may want to lower the amount of money you have in the trade. For example: If you set your stop loss at 50 pips and you do not feel good about losing $50.00 on a one lot trade, then you could place a 0.1 lot trade which would give you a loss of only $5.00 if your stop loss is hit. If you feel comfortable with the $5.00 loss then it is ok to be in the trade.
You should always practice trading to become acquainted with the indicators. When enough time has been give to simulated trading and the entry and exit signal are easily spotted then move on to demo trading. When demo trading play money is being used with live data feed and real time results. When the winning trades are happening more often than the losing trades, then consider opening a live account with real money. Use the 80-20 rule to determine the proper time to start live trading. At this point you may feel like you are a great trader but you now have to deal with your emotions. The best thing to do is start out trading with very small trades. If the amount of money you will lose on a single trade is uncomfortable to you, then you may want to lower the amount of money you have in the trade. For example: If you set your stop loss at 50 pips and you do not feel good about losing $50.00 on a one lot trade, then you could place a 0.1 lot trade which would give you a loss of only $5.00 if your stop loss is hit. If you feel comfortable with the $5.00 loss then it is ok to be in the trade.
Controling Risk
Some people say you should not risk any more than 2 percent of your account on any one trade, while others say between 3-4% is max. One thing is for sure, you should be conservative. We feel you should never risk any more than 5 percent of your account on any one trade. We also recommend that you start out small then add on to the trade once you see it is moving in a strong trend. Now let me clarify why I say 5 percent. Most of the time you should start out around the 1-2 percent range then add-on when the trade goes in the direction of the trend. When the small initial order is profitable then move the stop loss so the trade is at a break even or even a little profitable, this way there will not be a loss on the trade.
Now look for the add on signals. At this time the trade is showing the true trend and it is easier to add on to the trade with greater confidence and trading 5 percent of the account is not an issue. It is possible to trade much more than 5 percent of the account and only have 1 or 2 percent at risk for the rest is protected by your stop losses in a profitable position. Until proper preparation and practice have taken place, do not trade real money.
You should always know where your stop loss is going to be placed before you enter a trade. Once the trade moves in your direction then move the stop loss to a point that is at least break even or where you have a slight profit. Know what your exit signals are and close your positions when the signals are given. Do not try to get more than the market is going to give.
You need to take care of your emotions. If you have a loss and do not know how to handle it then you will become afraid to trade. So set an amount that you can afford to lose both emotionally and financially. Once you have reached that limit then you should do some more simulated trading to sharpen your skill on spotting your entry and exit signals. Once you feel good about that then move on to demo trading. When you are ready to trade live again start out small and grow from there.
You will always need to control financial risk as well as the emotional risk. If either side gets out of control then it could take you out of the market.
Now look for the add on signals. At this time the trade is showing the true trend and it is easier to add on to the trade with greater confidence and trading 5 percent of the account is not an issue. It is possible to trade much more than 5 percent of the account and only have 1 or 2 percent at risk for the rest is protected by your stop losses in a profitable position. Until proper preparation and practice have taken place, do not trade real money.
You should always know where your stop loss is going to be placed before you enter a trade. Once the trade moves in your direction then move the stop loss to a point that is at least break even or where you have a slight profit. Know what your exit signals are and close your positions when the signals are given. Do not try to get more than the market is going to give.
You need to take care of your emotions. If you have a loss and do not know how to handle it then you will become afraid to trade. So set an amount that you can afford to lose both emotionally and financially. Once you have reached that limit then you should do some more simulated trading to sharpen your skill on spotting your entry and exit signals. Once you feel good about that then move on to demo trading. When you are ready to trade live again start out small and grow from there.
You will always need to control financial risk as well as the emotional risk. If either side gets out of control then it could take you out of the market.
6 Things That MUST Not Be Used In Your Trading
There are certain things that must be kept out of your trading, such as emotion, revenge, anger, your pocketbook, and fear. Every trader should follow a set of rules or guidelines in order to be a successful trader. When you trade without rules, you are essentially trading blindfolded.
Emotion: Wanting the market to go a certain way.
Revenge: Some people think they will get even with the market if they stay in or keep on putting on losing trades one after (cost averaging). The market doesn’t care about what you want. It will show you what it is going to give so learn to only want what the market is willing to give at any given time.
Anger: People will get angry with themselves and do foolish things to try and make up for a mistake.
Pocket book: When you are getting out of the market because you can not afford to let the market move a little. You were over trading your account or did not have enough money to trade to start with. A new trader with an under funded account has a greater chance of failure because he does not have enough room to let the market move and a little loss takes a big part of his trading account. This increases his emotions and compounds the trade.
Greed: When a trade has ended expecting it to give you more. Then it turns and you lose all you just made.
Fear: Many times people have fear because they are trading with money they can not afford to lose.
The Rules: A pre-defined trading plan. How many lots, how many pips, when to trade, when to get in, how long to stay in, practicing good money management, etc. It also means keeping a journal of your trades to learn from the positive and the negative trades and make sure your rules are working. Be sure you know what your trading platform can show you and how to use it’s features to your benefit.
Emotion: Wanting the market to go a certain way.
Revenge: Some people think they will get even with the market if they stay in or keep on putting on losing trades one after (cost averaging). The market doesn’t care about what you want. It will show you what it is going to give so learn to only want what the market is willing to give at any given time.
Anger: People will get angry with themselves and do foolish things to try and make up for a mistake.
Pocket book: When you are getting out of the market because you can not afford to let the market move a little. You were over trading your account or did not have enough money to trade to start with. A new trader with an under funded account has a greater chance of failure because he does not have enough room to let the market move and a little loss takes a big part of his trading account. This increases his emotions and compounds the trade.
Greed: When a trade has ended expecting it to give you more. Then it turns and you lose all you just made.
Fear: Many times people have fear because they are trading with money they can not afford to lose.
The Rules: A pre-defined trading plan. How many lots, how many pips, when to trade, when to get in, how long to stay in, practicing good money management, etc. It also means keeping a journal of your trades to learn from the positive and the negative trades and make sure your rules are working. Be sure you know what your trading platform can show you and how to use it’s features to your benefit.
How Important is an Exit Strategy?
There is a saying: “cut your losses and let your winners run.” I know that is not what some people teach, they say when you get some profit you should bank some of the profit and move your stop loss to a break even. That way you will not take a loss on the trade. They are saying that when the market is moving in your direction, to get out before you lose-just take a little bit of the profit on the trade. I have often wondered what their exit signals are if they are willing to close part of a trade and see what the rest is going to do. That seems like gambling to me. (Lets see what happens.) This tells me that they do not have a good exit strategy.
I think you should start out small like trading only one lot to start with. When you see add on signals you should add on 2, 3, 4 or more lots once the trend is truly telling you which way the market is going. If they have a good exit strategy why are they only closing a portion of the position? I say why not close the whole trade if the market looks like it is going to turn on you. If the market retraces a little, and takes off again, you can get back into the trend.
I think you should start out small like trading only one lot to start with. When you see add on signals you should add on 2, 3, 4 or more lots once the trend is truly telling you which way the market is going. If they have a good exit strategy why are they only closing a portion of the position? I say why not close the whole trade if the market looks like it is going to turn on you. If the market retraces a little, and takes off again, you can get back into the trend.
The Importance of Losing when Trading
In real estate the three most important things to an investor are location, location, location. In trading the three most important things are: money management, timing your exits and timing your entries; in that order. More important than how much you make on a trade is how little you lose on the losses. When you are looking for a place to exit a trade you want to consider a location that will not cost too much. Think of how much you will lose before you think of how much you will make. A losing position should be exited as soon as they have reached your worst-case scenario. By staying in a trade so you don’t lose money is not the way to make money. For a pip saved is a pip earned. Learning how to lose correctly is one of the most important things a trader can do. It is important to know how to hold on to a good trade. But if you do not know how to get out of a bad trade you will not go very far as a trader. If you are properly capitalized no one trade will take out your account. Sticking to trading with a stop loss is critical because a small loss does not mean very much but a large loss can end your trading career both financially and emotionally.
Every trader needs to understand that losing is different from a loss. All traders have lots of little losses because that is part of trading. It is when you have little losses turn into large losses is when you have lost. Once a trader knows it is normal to lose then it is easier to get out of bad trades. Even if you are a poor trader you will have some good trades. And you will have a chance at success if you learn to cut your losses short. The skill comes when you can cut a bad trade but still let the market have a chance to work so you can capture the good trade.
A trade needs to have time to develop. But a trade needs to be closed when you know you are wrong. A good exit strategy combines knowing when to hold em and knowing when to fold em.
Every trader needs to understand that losing is different from a loss. All traders have lots of little losses because that is part of trading. It is when you have little losses turn into large losses is when you have lost. Once a trader knows it is normal to lose then it is easier to get out of bad trades. Even if you are a poor trader you will have some good trades. And you will have a chance at success if you learn to cut your losses short. The skill comes when you can cut a bad trade but still let the market have a chance to work so you can capture the good trade.
A trade needs to have time to develop. But a trade needs to be closed when you know you are wrong. A good exit strategy combines knowing when to hold em and knowing when to fold em.
Be a Trend Trader, Don’t Pick Tops & Bottoms
I see many people trying to pick tops and bottoms in the market. They feel bad if they leave a little bit of money on the table. The truth is that you cannot pick tips or bottoms. You can however lose a lot of money trying to pick them. The best approach is to take a portion out of the middle.
Find some indicators that give you signals when the market is starting to move. When it does move, get in and then add on to your position as the trend gets underway.
I think it is best to start out small with (one lot) and a stop loss. Once the market tells you that it is really moving then add on to your position. Once the market tells you that the trend is over,close all of your positions at one time when the trend has ended. Exercising a little patience and waiting for a proven direction to take, can increase your odds of profiting and somewhat reduce your risk.
Once you are out of the trade then start looking for another entry point. There is always another trade just around the corner in either the same pair or another currency pair.
Find some indicators that give you signals when the market is starting to move. When it does move, get in and then add on to your position as the trend gets underway.
I think it is best to start out small with (one lot) and a stop loss. Once the market tells you that it is really moving then add on to your position. Once the market tells you that the trend is over,close all of your positions at one time when the trend has ended. Exercising a little patience and waiting for a proven direction to take, can increase your odds of profiting and somewhat reduce your risk.
Once you are out of the trade then start looking for another entry point. There is always another trade just around the corner in either the same pair or another currency pair.
Should You Trade The News?
Hi everyone. I’ve been getting a lot of questions about when, how and even if you can profitably trade the news, so I decided to write this post to hopefully answer all those questions. It’s kind of long but I think you will benefit from it.
Many times the big pip movements take place when news is released … 30-50-100 pip movements in minutes are common. It is a natural reaction to want to get in on some of that. It looks easy but it may or may not be easy. The price moves up and down, the spreads are wide and you can’t get filled. What looks easy is also frustrating.
At news times the market does make big moves. There are a lot of news announcements each week creating many chances for pips to be made. News release times can be found on the Forex Factory website. The main things to look for would be which country is having a news announcement and what time the news is being announced. This will give heads up as to which currency pairs to trade.
Every news announcement does not have to be traded. Here is a list of some of the better U.S. Market news announcement topics.
• Employment Growth
• Interest Rate decisions
• Trade Balance
• Gross Domestic Product
• Retail Sales
• Durable Goods
• Inflation reports (Consumer Price Index and Producer Price Index)
• Foreign Purchases report
Also look for similar reports from other countries that will give good moves.
Trading news announcements can be the riskiest type of trading that one can do. Many traders loose more money trying to trade the news than at any other time.
The most profitable way I have found to take advantage of the news announcement is to wait for trading signals to give you the best entry point. You should not just enter with a guess of which way you think the move will go. You may have to wait from 5 to 30 minutes before you see a proper entry signal. Another way to get a feel as to when the market is tradable is to wait until the spreads come back to normal. This way the market is letting you know that a direction may be forming.
Good trades may be found on many different time frames. The 5-minute time frame seems to be good when the market is moving fast. Good signals can be seen and acted upon with the 5 minute when the market is moving fast. The one-minute time frame has too much noise for most traders (up and down movement).
During the first 5 to approximately 30 minutes the market moves up or down and may not give a good signal. But once there is a proper signal, based on indicators then it can be a good move. Also one of the great things about focusing on news releases is that they are scheduled in advance. A trading schedule can be planned around the news announcements.
Many people put on pending orders with tight stop losses. Then they find themselves in and out of the market in a few short minutes, or seconds, with big losses. This may happen because of the spreads widening. With a 10 pip stop loss and the spread widening to 12, for example, a trade would be open and closed as soon as the trade was placed. The best way is to trade with the direction of the trade, the way the market decides to go, and not try to guess which way it will go. The market moves not so much by what the news says but by the reaction of the traders to the news.
One thing to look for is when the market is quiet for a few hours before a news announcement. In other words it is moving sideways. When this happens, the market is waiting for the news announcement then it will start to move in the direction the traders trade it.
Another observation that happens often enough to be of some value is to check the direction of the trend on the currency pair you are going to trade. Once the direction of the trend is determined only place trades going in that direction. After the impact of a news announcement is over the market tends to move in the direction of the overall trend. To check the directions of the trend use the 4 hour chart. There are a couple of things that can be done to determine the direction of the trend. The easiest, and my favorite strategy is to place two moving averages on a chart, 3 period shift 0 simple at the close, color yellow and 5 period 3 shift simple at the close color, purple, as shown below. When the Yellow crosses the purple line going down it is a downtrend and when the yellow crosses the purple going up it is an up trend.
Another way to get a general direction of the trend is to look at a 4 hour chart and draw a line from the point where your price bars start on the screen on the left hand side, to where they end on the screen, right hand side. This will give an indication of the direction of the trend also. (see below)
Trend lines may also be drawn. Once the direction of the trend is determined the news may be traded in the direction of the trend for a less risky trade.
When the trend is UP, on the 4 HR chart, and the news drives the market DOWN, after a drop in the price, watch for a turn in the price to the up side with a continuation of the direction of the trend.
When the trend is down, on the 4 HR chart, and the news drives the market up. Watch for a turn to the down side with a continuation of the trend.
When the trend is up, on the 4 HR chart, and the news drives the market up, you can see a sharp move up with a period of rest then a then a resuming of the trend.
When the trend is down, on the 4 HR chart, and the news drives the market down, you can see a sharp move down with a period of rest then a continuation down then a resuming of the trend.
Below is an example of a good trend and some of the areas where news went against the trend then came back. You will also see places where the news went with the trend.
While trading the foreign currency market don’t think of it as an ATM machine were the market owes you something. Especially when trading the market around news time. If 20 people show up to buy and there are only 10 lots for sell then someone will not be filled until some more lots become available. When the price gets good enough for the seller then you may buy but it may not be at the price you would like. This all happens very quickly at the time news is being announced.
There are traders that do make money trading the news. It is a more common reality that more traders will lose their money while trying to trade the news. Trading any strategy takes time and practice. Skills need to be developed to become good with the use of any indicator. Trust also needs to be developed as to what the indicators are saying. If the news is traded right with solid trading principle where a bit of the trade is taken out of the middle and not going for the tops and bottoms of the movement then there is a chance of having success trading the news.
Many times the big pip movements take place when news is released … 30-50-100 pip movements in minutes are common. It is a natural reaction to want to get in on some of that. It looks easy but it may or may not be easy. The price moves up and down, the spreads are wide and you can’t get filled. What looks easy is also frustrating.
At news times the market does make big moves. There are a lot of news announcements each week creating many chances for pips to be made. News release times can be found on the Forex Factory website. The main things to look for would be which country is having a news announcement and what time the news is being announced. This will give heads up as to which currency pairs to trade.
Every news announcement does not have to be traded. Here is a list of some of the better U.S. Market news announcement topics.
• Employment Growth
• Interest Rate decisions
• Trade Balance
• Gross Domestic Product
• Retail Sales
• Durable Goods
• Inflation reports (Consumer Price Index and Producer Price Index)
• Foreign Purchases report
Also look for similar reports from other countries that will give good moves.
Trading news announcements can be the riskiest type of trading that one can do. Many traders loose more money trying to trade the news than at any other time.
The most profitable way I have found to take advantage of the news announcement is to wait for trading signals to give you the best entry point. You should not just enter with a guess of which way you think the move will go. You may have to wait from 5 to 30 minutes before you see a proper entry signal. Another way to get a feel as to when the market is tradable is to wait until the spreads come back to normal. This way the market is letting you know that a direction may be forming.
Good trades may be found on many different time frames. The 5-minute time frame seems to be good when the market is moving fast. Good signals can be seen and acted upon with the 5 minute when the market is moving fast. The one-minute time frame has too much noise for most traders (up and down movement).
During the first 5 to approximately 30 minutes the market moves up or down and may not give a good signal. But once there is a proper signal, based on indicators then it can be a good move. Also one of the great things about focusing on news releases is that they are scheduled in advance. A trading schedule can be planned around the news announcements.
Many people put on pending orders with tight stop losses. Then they find themselves in and out of the market in a few short minutes, or seconds, with big losses. This may happen because of the spreads widening. With a 10 pip stop loss and the spread widening to 12, for example, a trade would be open and closed as soon as the trade was placed. The best way is to trade with the direction of the trade, the way the market decides to go, and not try to guess which way it will go. The market moves not so much by what the news says but by the reaction of the traders to the news.
One thing to look for is when the market is quiet for a few hours before a news announcement. In other words it is moving sideways. When this happens, the market is waiting for the news announcement then it will start to move in the direction the traders trade it.
Another observation that happens often enough to be of some value is to check the direction of the trend on the currency pair you are going to trade. Once the direction of the trend is determined only place trades going in that direction. After the impact of a news announcement is over the market tends to move in the direction of the overall trend. To check the directions of the trend use the 4 hour chart. There are a couple of things that can be done to determine the direction of the trend. The easiest, and my favorite strategy is to place two moving averages on a chart, 3 period shift 0 simple at the close, color yellow and 5 period 3 shift simple at the close color, purple, as shown below. When the Yellow crosses the purple line going down it is a downtrend and when the yellow crosses the purple going up it is an up trend.
Another way to get a general direction of the trend is to look at a 4 hour chart and draw a line from the point where your price bars start on the screen on the left hand side, to where they end on the screen, right hand side. This will give an indication of the direction of the trend also. (see below)
Trend lines may also be drawn. Once the direction of the trend is determined the news may be traded in the direction of the trend for a less risky trade.
When the trend is UP, on the 4 HR chart, and the news drives the market DOWN, after a drop in the price, watch for a turn in the price to the up side with a continuation of the direction of the trend.
When the trend is down, on the 4 HR chart, and the news drives the market up. Watch for a turn to the down side with a continuation of the trend.
When the trend is up, on the 4 HR chart, and the news drives the market up, you can see a sharp move up with a period of rest then a then a resuming of the trend.
When the trend is down, on the 4 HR chart, and the news drives the market down, you can see a sharp move down with a period of rest then a continuation down then a resuming of the trend.
Below is an example of a good trend and some of the areas where news went against the trend then came back. You will also see places where the news went with the trend.
While trading the foreign currency market don’t think of it as an ATM machine were the market owes you something. Especially when trading the market around news time. If 20 people show up to buy and there are only 10 lots for sell then someone will not be filled until some more lots become available. When the price gets good enough for the seller then you may buy but it may not be at the price you would like. This all happens very quickly at the time news is being announced.
There are traders that do make money trading the news. It is a more common reality that more traders will lose their money while trying to trade the news. Trading any strategy takes time and practice. Skills need to be developed to become good with the use of any indicator. Trust also needs to be developed as to what the indicators are saying. If the news is traded right with solid trading principle where a bit of the trade is taken out of the middle and not going for the tops and bottoms of the movement then there is a chance of having success trading the news.
Why You Need a Trading Plan
You can learn a lot about the Forex currency market. You can have a great system for trading but without a good trading plan and the discipline to stick to it, you will NEVER be profitable.
Your trading plan will continually move you in the correct direction to make money trading the currency market. If you can make a living without a plan, you must be a market genius.
Let us give you some good reasons why you should have a trading plan.
Why Do You Need a Trading Plan?
First of all, it moves you down the right path.
It is imperative that you develop consistency in your trading. We all have our daily routines, which help us make each day a success. As a trader, a routine is vital to your success. Not only does a routine improve your chances for success, but you are able to measure your success and change something in your routine if you are not getting your desired results. Make a plan, and stay with it. If you don’t, it will be hard to consistently make money and you’ll never know if your routine is worth keeping. Read your plan daily, follow it and you will stay on track with your goals.
Secondly, successful trading is not just a hobby.
I say this because successful trading requires that you have a business mindset. All successful businesses have a plan. By sticking to a plan a business will be successful. If it stops following the plan, it will become weak in its industry and fall by the wayside. Don’t think that your plan is set in stone and can’t be altered. Many times it may be necessary to update it, but the important issue is that you always have a plan.
The difference between the winning traders and losing traders is a plan. If you have a good plan (developed over time) and you stick to it, you will become successful!
Don’t get tied down trying to make some complex business plan. Make a simple plan and add to it as you learn. Whether it is simple or complex, I can’t stress to you enough that you FOLLOW YOUR PLAN.
Basics for Your Plan
1. What Are My Goals
Take some time and think about what you want to accomplish as a trader.
Do you plan on making currency trading your main source of income?
Make a realistic goal on how much return you would expect with your current trading skill and experience.
Remember, all your goals don’t have to deal directly with making money. They can be oriented around learning specific details in the forex market, or they can even be personal.
Ask yourself what you would like to accomplish through this experience, and remember why you are doing it if times get rough. Hopefully you will have worthy enough goals that they will constantly motivate you.
A goal to make a lot of money is not really a goal. It will be the end result of accomplishing the goals you have set.
2. Trading Routine
As discussed previously, a trading routine is an important part of your trading plan. By having one, you will already know:
At what times you analyze the market and plan your trades
The best time for you to place trades and watch the market.
At what specific times throughout the day that you will check the market.
Example: I will analyze the market each evening when I get home from work and just before I go to bed. I will watch the market for an hour in the morning before I go to work. I will check the market when each new 4 hour bar is formed when I am awake.
3. Trading System
The trading system is the foundation of your trading plan. At least a month before you start trading real money, test your system out using your Pre-Launch Trading and Demo Trading.
Some of the most essential things you should include in your system are:
• The maximum percentage you will risk on each trade.
• How many lots you will trade.
• Which time frames you will look at.
• The entry and exit signals you will use.
Example: I trade the US market. I trade in the direction of the trend on the 4 hour chart. I trade when I get at least two confirmation signals (on the time frame that is easiest to read at the time I am trading). I will always start each trade with only one lot. I will add on to the trade as new signals present themselves. I will exit all positions when my manual trailing stop is hit or when two price bars close below the purple line.
4. What is My State Of Mind?
Being calm and relaxed is an important part of trading. By following your routine you can be in a better state of mind than if you run in and look at the market to try and get a few pips while checking the price randomly through out the day. Your routine will help keep your emotions in check.
Example:
• I will look for signals-not guess which way the market is going.
• I will only trade in the direction of the trend.
• When I lose on a trade I will see what I can learn and move onto the next trade.
• I will not try and get even with the market.
• I will not be hard on myself for losing on a trade.
• I will use each trade as a learning experience.
5. Your Trading Journal
Make sure you log the details of each trade and record the reasons for the trade in your Trade Tracker sheet. This will be a constant progress report and allow you to evaluate yourself from time to time. You will learn from your mistakes, and realize how much of a better trader you’ve become. This will give you the confidence to be even more successful later on. It will better help you keep track of your goals and remind you what you need to do to accomplish them. It doesn’t take long to write down your trades, and will be well worth your time.
Summary
Your trading plan will be just like a flight plan; it will keep you on target toward your goals.
Review your trading plan every time you trade and stick to the plan.
You may have all the knowledge out there and be able to talk the talk, but if you do not put that knowledge into a trading plan it will be much harder to apply it in your trades and be successful.
Keep in mind when you start to trade with real money you are actually creating a business, and any business needs a plan to succeed. If you do not want to start a business then stick to Pre-Launch and Demo trading and treat it as a game until you have the confidence to do so.
Below you will find an example of a trading plan.
You should make up your own trading plan from the suggested outline above.
You will be amazed that by following the trading plan you will stay in trades longer and reduce the amount of poor trades you make.
TRADING PLAN
(Example)
I never trade when I am tired, upset or rushed. I check the markets when I get home from work.I set up signals just before I go to bed.When an alert sounds I check the market and place my trades based on entry signals.I never anticipate what the market will do I trade only with signals.I always trade with a stop loss.
I check the market when I get out of bed.
I always trade in the direction of the trend on the 4-hour chart.
I enter the market on the time frame that is easiest to read.
I always use signals to enter and exit a trade.
I always make my own decisions to enter/exit a trade.
I always start a trade with one lot.
I only add to a trade when there are signals.
I never trade with more than 10% of my trading account.
I record my trades in my trading journal.
I accept losses and move on to the next trade.
(Losing is part of trading)
I take responsibility for my successes and failures in the market.
(I do not blame others)
I practice trade daily ___ weekly ___ for 15 minutes.
I want what the market is willing to give.
(No greed or fear)
Your trading plan will continually move you in the correct direction to make money trading the currency market. If you can make a living without a plan, you must be a market genius.
Let us give you some good reasons why you should have a trading plan.
Why Do You Need a Trading Plan?
First of all, it moves you down the right path.
It is imperative that you develop consistency in your trading. We all have our daily routines, which help us make each day a success. As a trader, a routine is vital to your success. Not only does a routine improve your chances for success, but you are able to measure your success and change something in your routine if you are not getting your desired results. Make a plan, and stay with it. If you don’t, it will be hard to consistently make money and you’ll never know if your routine is worth keeping. Read your plan daily, follow it and you will stay on track with your goals.
Secondly, successful trading is not just a hobby.
I say this because successful trading requires that you have a business mindset. All successful businesses have a plan. By sticking to a plan a business will be successful. If it stops following the plan, it will become weak in its industry and fall by the wayside. Don’t think that your plan is set in stone and can’t be altered. Many times it may be necessary to update it, but the important issue is that you always have a plan.
The difference between the winning traders and losing traders is a plan. If you have a good plan (developed over time) and you stick to it, you will become successful!
Don’t get tied down trying to make some complex business plan. Make a simple plan and add to it as you learn. Whether it is simple or complex, I can’t stress to you enough that you FOLLOW YOUR PLAN.
Basics for Your Plan
1. What Are My Goals
Take some time and think about what you want to accomplish as a trader.
Do you plan on making currency trading your main source of income?
Make a realistic goal on how much return you would expect with your current trading skill and experience.
Remember, all your goals don’t have to deal directly with making money. They can be oriented around learning specific details in the forex market, or they can even be personal.
Ask yourself what you would like to accomplish through this experience, and remember why you are doing it if times get rough. Hopefully you will have worthy enough goals that they will constantly motivate you.
A goal to make a lot of money is not really a goal. It will be the end result of accomplishing the goals you have set.
2. Trading Routine
As discussed previously, a trading routine is an important part of your trading plan. By having one, you will already know:
At what times you analyze the market and plan your trades
The best time for you to place trades and watch the market.
At what specific times throughout the day that you will check the market.
Example: I will analyze the market each evening when I get home from work and just before I go to bed. I will watch the market for an hour in the morning before I go to work. I will check the market when each new 4 hour bar is formed when I am awake.
3. Trading System
The trading system is the foundation of your trading plan. At least a month before you start trading real money, test your system out using your Pre-Launch Trading and Demo Trading.
Some of the most essential things you should include in your system are:
• The maximum percentage you will risk on each trade.
• How many lots you will trade.
• Which time frames you will look at.
• The entry and exit signals you will use.
Example: I trade the US market. I trade in the direction of the trend on the 4 hour chart. I trade when I get at least two confirmation signals (on the time frame that is easiest to read at the time I am trading). I will always start each trade with only one lot. I will add on to the trade as new signals present themselves. I will exit all positions when my manual trailing stop is hit or when two price bars close below the purple line.
4. What is My State Of Mind?
Being calm and relaxed is an important part of trading. By following your routine you can be in a better state of mind than if you run in and look at the market to try and get a few pips while checking the price randomly through out the day. Your routine will help keep your emotions in check.
Example:
• I will look for signals-not guess which way the market is going.
• I will only trade in the direction of the trend.
• When I lose on a trade I will see what I can learn and move onto the next trade.
• I will not try and get even with the market.
• I will not be hard on myself for losing on a trade.
• I will use each trade as a learning experience.
5. Your Trading Journal
Make sure you log the details of each trade and record the reasons for the trade in your Trade Tracker sheet. This will be a constant progress report and allow you to evaluate yourself from time to time. You will learn from your mistakes, and realize how much of a better trader you’ve become. This will give you the confidence to be even more successful later on. It will better help you keep track of your goals and remind you what you need to do to accomplish them. It doesn’t take long to write down your trades, and will be well worth your time.
Summary
Your trading plan will be just like a flight plan; it will keep you on target toward your goals.
Review your trading plan every time you trade and stick to the plan.
You may have all the knowledge out there and be able to talk the talk, but if you do not put that knowledge into a trading plan it will be much harder to apply it in your trades and be successful.
Keep in mind when you start to trade with real money you are actually creating a business, and any business needs a plan to succeed. If you do not want to start a business then stick to Pre-Launch and Demo trading and treat it as a game until you have the confidence to do so.
Below you will find an example of a trading plan.
You should make up your own trading plan from the suggested outline above.
You will be amazed that by following the trading plan you will stay in trades longer and reduce the amount of poor trades you make.
TRADING PLAN
(Example)
I never trade when I am tired, upset or rushed. I check the markets when I get home from work.I set up signals just before I go to bed.When an alert sounds I check the market and place my trades based on entry signals.I never anticipate what the market will do I trade only with signals.I always trade with a stop loss.
I check the market when I get out of bed.
I always trade in the direction of the trend on the 4-hour chart.
I enter the market on the time frame that is easiest to read.
I always use signals to enter and exit a trade.
I always make my own decisions to enter/exit a trade.
I always start a trade with one lot.
I only add to a trade when there are signals.
I never trade with more than 10% of my trading account.
I record my trades in my trading journal.
I accept losses and move on to the next trade.
(Losing is part of trading)
I take responsibility for my successes and failures in the market.
(I do not blame others)
I practice trade daily ___ weekly ___ for 15 minutes.
I want what the market is willing to give.
(No greed or fear)
The Smart Way to Lose a Forex Trade
We have seen over the years traders will trade without a stop loss for fear of a small loss. When the market turns against them they let it run in the wrong direction rather than getting into the trade and trade with the move. Their total focus is set on wishing the market would turn and come back for them. Now the trade is several hundred pips against them and they can’t take it any longer so they close the trade and take a big loss and feel good that they did not lose more.
We all have to realize that a loss in trading is part of trading. We need to put the advantage in our favor so we will win more than we lose and not fall in love with a trade that is losing and let it run. When we take a trade we need to know where our stop loss is going to be then let the market tell us when to get out.
Once we have profit in a trade we need to concentrate on protecting the profit. So it is best to protect profit rather than hope a loss will get smaller. The first loss is always the smallest and will give you better vision for the next trade.
We all have to realize that a loss in trading is part of trading. We need to put the advantage in our favor so we will win more than we lose and not fall in love with a trade that is losing and let it run. When we take a trade we need to know where our stop loss is going to be then let the market tell us when to get out.
Once we have profit in a trade we need to concentrate on protecting the profit. So it is best to protect profit rather than hope a loss will get smaller. The first loss is always the smallest and will give you better vision for the next trade.
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