FX Trading Systems Which Work

Summary

1. Trading systems
2. Managing your funds
3. Trader Psychology
4. Summary

There are many different methods, systems and strategies which traders, “newbies” and old “pro’s”, apply to the market to make a profit from the movements in the prices. Each trader will assert that his or her methods are the best and the most profitable, but the truth is that each trading system has its strengths and weaknesses. The real keys to making money from the Forex market are the following:

1. Having and clear and simple trading system, and applying it consistently
2. Managing the funds you are trading with tight disciplines
3. Taking control of your psychology

This article will examine each of these three keys separately and propose some simple guidelines for traders to follow to avoid being trapped by the market during the inevitable periods of volatility which occur daily.

1. Trading systems
There are essentially two types of systems which traders employ. These are:

a. Price following systems
b. Price prediction systems

Let’s examine each one briefly.

Price following systems

These are systems which rely on momentum indicators, oscillators and averaging methods to simply follow the market in the direction in which it is moving. The simplest of these is to find a suitable moving average (MA) and trade in the direction the MA is pointing, with the price on the correct side of that average.

One can add to that a whole variety of other indicators such as MACD, Stochastics, RSI and Bollinger Bands etc. One charting package I use has 29 different indicators, leading to an overload of endless possible combinations to use. Furthermore, there are about 20 different possible time frames to study. Its not hard to see why traders end up with the commonly know “paralysis of analysis” which is recognized by the comatose mouse hand and glazed eyes of someone sitting in front of the screen for 12 hours without taking a trade.

They key is to keep it simple. Decide on the time from you choose to trade from (scalpers may prefer 5 minute or 15 minute charts, whereas session/day traders may prefer 1 hour, 4 hour of day charts) and look for a very simple system which combines no more than 2 or 3 indicators. Such systems may also incorporate simple trend line studies, with the trade direction following the prevailing straight line trend.

When the signals are given by your system, take your trades confidently and consistently. Do not abandon your method and start searching for another after the first loss.

Price Prediction systems

These are systems which are generally longer term systems, applied to session, day or longer periods. They involve deciding the overall direction of the currency pair over a longer time frame and then trading a simple “buy on dips” or “sell on rallies” approach, depending on the direction you have decided on. There are various tools to help the strategy trader, such as horizontal lines, trend lines, Fibonacci retracement levels, moving averages and so on. These will help to a) identify the direction of trade, b) identify a logical entry point and c) identify a logical exit point. These trades can then be programmed into the dealing software and left to take care of themselves, allowing the trader spend his time doing other things. This form of trading requires more skill and experience, but this can be learned with time and practice.

Essentially, price following systems generally tend to be shorter term “scalping” type systems, which involve screen watching for a large part of each day. Price prediction systems tend to involve strategies lasting 8 hours up to several days and allow the trader to get away from the screen and enjoy more free time.

Everyone has their preference but I have found from my own experience and observations that intense screen watching cannot be sustained for very long by most traders, before burning out after several weeks or months. You can recognize these traders immediately by their bagged eyes, short tempers and lack of social skills.

2. Managing your funds
Whilst most traders can invent or learn a reasonable trading system to suit their styles of trading, many cannot manage their account safely enough to prevent large losses and the dreaded margin call. Even the some best traders in the World suffer from temporary lack of sanity in this area (including “yours truly”). Interesting case histories are described, for example, in Jack Schwager’s book “Market Wizards: Interviews with Top Traders”

There are three simple rules which can be applied here:

a) Never leverage over 10:1 and as your account grows larger, reduce this to below 5:1
b) Never risk more than 5% of your equity on a given day, and as your account grows, reduce this to less than 2%
c) Never take a trade where you are risking more than 50% of the projected gains from the trade with your stop loss. In other words, the Win/Lose ratio (profit target in pips/stop loss in pips) should be 2:1 or higher.

Following these simple rules, even with a half baked trading system, will ensure that you can lose 2 out of every 3 trades and still break even on your account.

3. Trader Psychology
All humans are subject to two (often opposing) forces – the mind and the emotions. The key to successful trading psychology is to prevent your emotions from dominating your mind.

The emotions you will experience will fluctuate wildly from fear to greed, to self-doubt and elation. These are all the enemy of the trader and need to be tempered by clear, objective and logical thinking.

Work out your trading strategy based on your previously defined system. Apply the system with safe account management rules, and shut out the emotional noise which will attempt to convince you to close early, over leverage, risk too much, risk too little etc.

4. Summary
It is clear that the best traders aim for small and consistent gains without seeking “the latest” system to produce enormous profits. There simply are no such systems which work reliably day in and day out. Keep your money management tight and keep your emotions in check and you should succeed.

Finally – it is well worth the money spent on good education. Attend a seminar by a truly active trader and teacher, and buy lots of books on the subject. Do not think you can go from “zero to hero” in the FX market without investing time, effort and money in learning from experienced players. The money you might save initially will probably be lost many times over as the market works you over later.

Stock Market Leadership

Stocks that act well while the Market is selling off may give you a clue to new Leadership

Over the past few years many investors have given up on the market especially when another round of selling has occurred. However this is exactly the wrong time to give up on the market because when the market reverses to the upside those stocks which had been acting well during the sell off may become the next big winners.

Here are a few examples of what I’m talking about. Let us compare the charts of HITK and USNA with the chart of the S&P 500 this past Summer and Fall when the market was selling off.

Looking at HITK first shows that this past Summer and Fall while the S&P 500 was dropping (points A to B) HITK was actually rising (points C to D) while completing the right side of a 1 1/2 year Cup. HITK then traded sideways for 4 weeks while developing a Handle (point E) and then broke out in late October. After breaking out HITK nearly doubled in price over the next few months before topping out in early January.

Now let us compare USNA with the S&P 500. USNA formed a 2 1/2 year Cup from the early part of 2000 until June of 2002. When the S&P 500 began to sell off last Summer and Fall USNA basically traded sideways during that period of time while developing a 4 month Handle from July through September. Then when the market made a bottom in early October and began to rally USNA broke out of its Handle on huge volume (point F). After breaking out in early October USNA then doubled in price over the next three months.

As you can see noticing which stocks are acting well when the market is selling off can give you a clue to whom the next leaders will be when the market begins to reverse strongly to the upside.

Earnings Growth and Stock’s Performance

Why Earnings Growth is Important to a Stock’s Performance

If you go back through the history of the stock market there is a recurring theme among those stocks which have had some of the strongest price appreciation and it’s related to their Earnings Growth. If you plot a chart of Earnings Growth versus a companies Stock Price there is a usually a strong relationship between the two.

Here are a few examples over the past few years. First lets look at ELNT and its associated table of Earnings Growth and Stock Price over the past two years.

Meanwhile if we take the table above and make a graphical plot of ELNT’s Earnings Growth versus its Stock Price show a very strong relationship. Notice how ELNT’s stock price (blue line) began to rise significantly as its Earnings Growth (red line) started to accelerate beginning in December of 1999 (point A) and continued through September of 2000 (point B). From September of 1999 until September of 2000 ELNT saw its stock price rise from $9 to over $90 a share for a return of nearly 900%.

Next look what happened as ELNT’s Earnings Growth peaked in September of 2000 and began to decelerate over the next several months. As you can see ELNT’s stock price dropped in unison with its Earnings Growth (points B to C) and eventually gave back much of its gains that had occurred in 2000.

Now lets look at another example which proves that even in a Bear Market stocks can do well if they have strong Earnings Growth. BEL was a company that had major problems with its Earnings Growth in 2000 as shown by the table below. BEL didn’t start to see any positive Earnings Growth until 2001 but when it did finally occur BEL’s Earnings Growth accelerated strongly in the latter half of 2001 into early 2002.

As shown by the graphical chart of the table above BEL’s stock price went nowhere in 2000 (points D to E) as their Earnings Growth remained negative. However as BEL’s Earnings Growth accelerated in 2001 into early 2002 investors took notice as BEL’s stock price exploded in early 2002 (point F to G). Since the Fall of 2001 BEL’s stock price has risen from around $4 to over $20 a share for a return of 375% even in a negative market environment.

As these examples show regardless of market conditions companies which have strong accelerating Earnings Growth have the potential to perform very well until their Earnings Growth begins to decelerate. If you don’t believe this go back and research some of the best performing stocks of all time and a majority of them will exhibit similar characteristics.

The key is to recognize those companies which are starting to establish a trend of accelerating Earnings Growth before everyone else does which takes a lot of time and research. This is what I do every week as I spend over 20 hours a week looking for companies that are starting to show signs of accelerating Earnings Growth. This is how I found BEL and ELNT well before their stock prices took off.

Using Stop Loss Orders to prevent an Investing Disaster

Many investors fail to use a Stop Loss Order to protect themselves in case they end up buying a stock at the wrong time. In his book "How to Make Money in Stocks" William O’Neil states even the most successful investors maybe wrong about 50% of the time when choosing stocks to invest in. The key is to cut your losses early when a stock fails to follow through to the upside and minimize your losses. However many investors fail to do so and allow a small loss to turn into a much bigger one by not using a proper Stop Loss Order.

A good rule of thumb is to never let a stock drop more than 8% below the Pivot Point when it reverses to the downside after initially trying to breakout. Thus this is where a Stop Loss Order would come into play.

Let’s look at a specific example. CLZR first formed a Double Bottom pattern in 2002 and then traded sideways for 12 weeks while developing a Handle. While forming the Handle CLZR traded roughly between $6 and $7 with its Pivot Point near $7. CLZR then broke out strongly in February and above its Pivot Point (point A) and rose to $10 very quickly. In this case a proper Stop Loss Order should have been placed 8% or so below the Pivot Point of $7 near $6.50.

After rising very quickly and stalling out near the $10 level CLZR had then completed the right side of a 2 year Cup. Over the next 10 weeks CLZR traded sideways again between $7.50 and $9.25 while developing a Handle. Then in April CLZR broke out again and rose to $12.50 rather quickly. In this case if you had missed the original breakout in February you got a second chance in April and should have placed a Stop Loss Order 8% or so below CLZR Pivot Point of $9.25 near $8.50.

Remember its always important to use a Stop Loss Order just in case a stock doesn’t perform the way you think it will. Allowing a small 8% loss to turn into something much bigger can be avoided by using a proper Stop Loss Order as the example below shows.

Imagine if you would have bought AMZN right before it peaked in the late part of 1999 (point A) near $120 and failed to use a proper Stop Loss Order once it began to sell off. If you had invested $5000 in it during the latter half of 1999 and used an 8% Stop Loss Order you would have lost only $400 as it sold off. If you had held on to it and rode it down to the $10 level which occurred in the Fall of 2002 you would have lost over $4000 instead.

Trading in Partnership

Trading together with a friend can have its advantages. If one of you has more experience and the other more money, you can help your friend through your experience and he can help with margins. Together, you can trade larger size and perhaps make more profits. However, unless you both agree to the same line of action and what the possible contingencies might be, it is essential that you decide which of you is to execute the trades. It is more difficult reaching trading decisions together than on your own.

If you haven’t decided on the contingency measures in advance you’ll find yourself arguing and disagreeing in the middle of a trade going against you when timely action is of the essence. It can be quite disheartening and dangerous.

If you are not absolutely sure about your partner, and you don’t agree with the way he trades, you are better off trading on your own.

Take for example an instance where the order placed was ambiguous and the broker executed it twice. The traders accepted the mistake and then the market moved against them. The partner with the greater margins but less experience was in charge of execution. He placed the order before the market opened to roll the position out. The market moved against him, he covered the position at three times the premium received and then the market corrected. He was unable to get the other side because he couldn’t watch intraday.

Trading is a business! You must be totally prepared in terms of having a business plan, knowing how to place orders, and being on top of them from beginning to end. Even then things can go wrong, but being unprepared can lead to disaster. The smallest details must be thought of and prepared in advance, but mistakes and oversights still happen.

I came across an interesting concept. The path to enlightenment involves conquering five human weaknesses: greed, fear, ignorance, pride and jealousy. We should be all familiar with the first two, which cause much grief to traders, but the last three can be a big problems, too, so it’s worth pondering on them. Human weaknesses always show up to undermine one’s trading.

Greed makes people stay in a trade too long, or trade too big a size. Fear makes one get out of winning trades too early. Ignorance makes people commit innumerable mistakes. Pride doesn’t allow one to admit one is wrong and often, small losses are allowed to turn into huge losses because one doesn’t want to accept one is wrong. Jealousy can make one trade in a subjective manner.

A detached attitude is a great asset in trading. Trading is war and it is essential that you execute a pre-planned line of action flawlessly and unemotionally. You must be flexible and let things (that are now second nature) take their course. Be like an outside passive observer.

That is why it is so important to be at your best when trading. You must have all possible things on your side. You need to feel totally on top of it, prepared, in top physical shape,

by Joe Ross

Trading vs Gambling

What are the differences between trading and gambling?

Many people think that trading is similar to gambling. Is this really the case?

For example, let’s take a look at Black Jack. If you start with $10,000 gambling capital, placing bets of $100 per hand and play 100 hands per day, how long will you last? In the game of Black Jack, with Las Vegas Strip rules, a casino has a built-in advantage of 1.5% over the player in the long run. That means that on average, a player will lose $1.5 per any $100 he bets with. After 100 hands, on average he’ll be down $150. Starting with a capital of $10,000 a player would last about 67 gambling days. That is very similar to the previously described trading scenario. In such case I would choose gambling because at least I would be losing my money in a more pleasant environment.

I chose Black Jack for our example because it is the only casino game in which it is possible for a skilled player to increase his odds to such extent as to be able to beat the House in the long run. A skilled counter can obtain advantage of up to 1.5% per hand over the House in the long run. That means that such a player playing 100 hands per day and average hand being $100 could double his gambling capital of $10,000 in less than 50 days. Similar odds apply to trading stocks, with more potential for profit and less chances for being kicked out of a casino. In order to make it work for you, we’ll need to get the odds on your side. Now lets look at how we can extract as much profits from our trades as possible.

Understanding Trailing Stops

Once you are in the trade and the price has started moving in your direction, you need to extract as much profit as possible. Not being able to do so will make you a losing trader in the long run. How can a trader lose if he only takes small profits at a time? Profit is profit, isn’t it? Not exactly… Profit of $550 is not the same as a profit of $850. If such profits are followed by three losses of $200 each, profit of $550 will become $50 loss, while profit of $850 will become $250 win. Do you get my point?

Profits are always followed by losses and if the profits are small they will not make up for the losses that will eventually and surely follow. However, becoming too greedy can turn a small profit into a loss. This will make you lose money in the long run. The best solution to resolving these conflicts is to use trailing stops.

As the name says, trailing stop follows the stock price that is moving in your direction. For example, let’s say that we have bought two S&P 500 contracts at 875. We will automatically put our stop loss at 1 point below the support line or if that is over our 4% limit we will put our stop loss at 871. The price starts to move upwards and reaches 876. We will now move our stop loss at $871.75. For every one point move in our direction we will move our stop loss 0.75 points up (or down if we were in a shortsell trade).

However if we were trading two contracts and the price has in our example hit 879 (4 points profit for ES or 10 points for NQ) we would sell one contract to protect our profit and for the remaining contract we would use trailing stop.

What is The Law of Charts™?

The Law of Charts was discovered by Master Trader Joe Ross. As he likes to say, "It was there all along. It just happened to fall on my head much as the law of gravity was discovered when an apple fell on Isaac Newton’s head."

The Law of Charts defines four basic formations known as 1-2-3 lows and highs, Ross hooks, trading ranges, and ledges. These occur in all time frames because the depict human action and reaction vis-à-vis price movement.

What makes these formations unique is that they can be specifically defined. The ability to formulate a more precise definition sets these formations apart from such vague generalities as "head and shoulders," "coils," "flags," "pennants," "megaphones," and other such supposed price patterns that are frequently attached as labels to the action of prices.

A 1-2-3 high or low comes at the end of a trend or swing. It forms as the result of a change in the direction of prices. The 1-2-3 low forms as the result of buying pressure overcoming that of selling pressure. The 1-2-3 high forms as the result of selling pressure overcoming buying pressure.

A Ross hook™ always forms as the result of profit taking in an trend or swing.

A ledge forms as a result of profit taking, uncertainty about future price direction, or both. You might consider it as a pause in the overall movement of prices in a single direction.

A ledge is the smallest of a number of consolidation formations: it never consists of more than 10 or less than 4 price bars. It is denoted by containing two matching or nearly matching highs and two matching or nearly matching lows.

A consolidation consisting of eleven to 20 price bars is called a congestion, and a consolidation consisting of 21 or more price bars.

As simple as these definitions are, the have been found to constitute a "law." Any data that contains both a high and a low, will form these patterns; even data that has nothing to do with markets and trading.

Learn more about The Law of Charts, it is a free resource on our website. Study it as much as you want. And while you are visiting take a look at the Traders Trick™ entry.

The truth about Buy and sell signals

Hey Joe!
If I get all my buy and sell signals to work properly, I should come out a winner, right?

Wrong! The perennial questions are, "Should I buy? Should I sell?" All too many traders focus their efforts on identifying buy and sell signals. In fact, that’s what most trading books consist of-some way to find buy and sell signals. Trading systems are usually all about "where to get in."

The research and analysis traders do is geared towards reaching the goal of getting that magic "base line" directive to guide their actions. How ignorant can you be?

Any successful, experienced trader will tell you that although properly identifying buy/sell signals is important, it’s not the key to being successful. Instead, the way you manage each trade is what will determine your success.

Traders who take the baseline approach tend to believe that the success of their trading activity is dependent on following the right buy/sell signals at the right time. Clearly, it’s important that a trader be able to understand the process of generating signals and to use the methods involved. Realistically though, almost any trader can find a way to generate signals (whether using technical methods already out there, coming up with their own system, or using their platform’s automated signal generation tools).

Any successful, experienced trader will tell you that your trade doesn’t begin and end with a buy or sell. There’s a trade management process involved. For each trade you make, you’re making a group of decisions. The way you manage and time those decisions is what will determine the success of your trade.

Let’ say two traders get the same signal at the same time and act on it. One’s trade may result in profits while the other’s results in losses. How is this possible? It can occur because each trader made a different combination of decisions throughout the course of the trade. The decisions might include scaling in and/or out of the trade, using or not using trailing stop losses, setting or not setting profit objectives prior to entry, patience or lack thereof, etc. The trader who made the most effective overall combination of decisions will have the better trade results in the end. Of course, there are times when pure chance, gives the better result to the worst trader.

It’s very important to regard trading as a process, and to understand that as a trader your efforts need to be focused on the activity of trading itself, as opposed to getting a quick base line answer. Because there are many things to take into consideration in making your trades successful, it’s essential that you educate and train yourself in all the different areas. Learn how to develop better trading plans and analysis methods, and then learn how to apply what you’ve developed to the process of a making a trade-from the original impulse to enter or stay out of a trade to the control of your thought processes and emotions in managing that trade.

Disgruntled Trading -Trading Plans

The following situation happens quite often to many traders. Look it over and see if it has been happening to you:

You have been faithfully following your trading plan and the rules you’ve set for trading. By following them you are now in a trade that doesn’t look so good. At the same time, by following your trading plan, you see that you’ve missed a beautiful move in a different market, one that could have made you a lot of money.

You are in a bad trade and you’ve missed out on a great trade. You become disgruntled. You think to yourself that your trading plan must not be so great. You think there must be a better methodology that you should use that will prevent this from happening. You think to yourself, "Yes! That’s it, I’ll change the way I do things." So you create a new rule or modify an old one so that such a rule would have let you capture the trade you missed and avoid the one you took. Have you been making this mistake?

Here’s another way it can happen: You are in a trade, and your rules cause you to be stopped out with little or no profit. Shortly after you exit the trade according to plan, prices take off and move to where, had you stayed in, you would have made substantial profits. The move leaves you sitting there thinking you are stupid. You reason that there must be something wrong with the way you do things.

Your rules, your plan, or both must not be right. So you change what you are doing, or make a new rule so that the next time this happens, you won’t be left behind.

You have just abandoned all of the hard work you’ve previously done that enabled you to successfully trade futures. You’ve abandoned your education and learning. You’ve abandoned the wisdom that will enable you to be consistently successful as a trader. You’ve just started trading history, and you are supposed to be trading on the future movement of prices. You are trading what happened, not what will happen. By not being willing to be left behind, you are setting yourself up for being left out.

If you’ve been having thoughts, or have been acting as we’ve just described, you have a terrible problem with greed. Why? Because greed can never get enough. You can’t satisfy greed. Greed wants more, and yet more.

Not every trade is your trade. Not every trade has to work out for you. You have to be satisfied with getting a reasonable share of trades that fit your description of a good trade. Some of those trades will turn out to be great trades, others are good trades, and a certain percentage of your trades will be bad. There’s no way around it.

Not every good trade will turn into a great trade. When you enter a trade according to your rules and trading plan, you have no idea whether or not it will turn out to be a good trade, much less a great trade. The reality of trading is that, try as you might, you cannot know the future.

Whenever we miss a big move and then try to find some pattern, indicator, rationale, or modification to make to what we are doing so that the next time we will not miss the "big" move, it is a part of the hunt for something magic ¾ a continuation of our quest for the holy grail of trading.

What a terrible mistake to allow yourself to make. Winning as a trader consists of making some small profits and some larger profits on a regular basis. Obviously, there will be some losses. We regularly want to keep losses small, but there are times when a loss will get away from us and turn out to be bigger than desired.

If adversity causes you to become disgruntled, then you really need to examine your thinking and your approach to trading. Your trading plan must allow for disappointment and loss.

You’ve got to believe in what you are doing and be able to trade from the knowledge that when you follow your rules and your plan, you will make money from your trading.
When you become disgruntled and begin to change your plan, your rules, or both, you are setting yourself up for almost certain failure and the worst thing that can happen to a trader ¾ you will lose the courage of your convictions. Without it you cannot trade with any level of confidence.

This is why we encourage you to write out the reasons and rationale for every trade you make, even if you have to do it after you have completed the trade. You must develop a keen recognition of the trades that are your trades. Write out your trading plan every day and for every trade you intend to make. If you did not have time to plan every trade, be sure to review those you did make without pre-planning. Then you can go back over your trading and be able to see why and when you are successful.

Reminder: Here are some steps to take before the market opens.

· View major formations on the charts of those futures you intend to trade. View potential congestion areas, get the big picture from the longer term charts.

· Write down all potential entries as you see them on the chart.

You need to go through this exercise every day that you trade. This takes discipline. However, doing so will help you develop the kinds of habits that will mold you into a great trader.

If you are too busy to be disciplined, then you are too busy to trade. If you don’t discipline yourself, you will soon disappear from the trading scene.

Using the 10 Day Moving Average of the VIX (Volatility Index) to time a Reversal in the the S&P 500

Investors can get an idea of when the market may reverse when the 10 Day Moving Average (MA) of the Volatility Index (VIX) becomes significantly stretched away from its 10 Day Moving Average (MA). A simple example is shown below which compares the 10 Day MA of the VIX to the S&P 500.

Notice when the VIX got stretched significantly away from its 10 Day MA (blue line) to the upside (points A) that the S&P 500 made a bottom (points B) and then reversed to the upside.

Thus keeping track of where the Volatility Index is in relation to its 10 Day Moving Average can give investors a clue to when the market may be getting close to a near term bottom and possible upside reversal.

Planning: A Key to Successful Trading

From time to time I get some very interesting confessions. Here is a very recent one, along with a solution.

"Hey Joe! I had been looking at a profitable trade setup all day. I studied indicator after indicator looking for confirmation, even though I know many are correlated and redundant. But I just kept on searching. I thought, ’Maybe I missed something.’ My account is now so small that I just wanted to be sure that this was the right trade. My thought was that I must take into consideration anything and everything that could cause this trade to fail. I can’t afford to lose any more money. What should I do?"

Well, my friend, you need to be able to make a decision, but you can’t do it if you are trading undercapitalized and making your trading decisions out of fear and uncertainty.

You are suffering from too much analysis. You are looking at so many things, you no longer can see straight. If you keep on over-analyzing your trades, it may develop into a deep-seated psychological problem.

Carefully analyzing the possible consequences of your trading decisions is healthy, but it becomes unhealthy when it is overdone. When it comes to trading, it’s important to have a clearly defined trading plan. You want to be sure that any given trade is not going to wipe out your trading account. That is one of the reasons we want you to use a time stop in addition to a money stop. When you use both types of stops you are clearly defining the signs and signals that indicate your trading plan is not working, suggesting that you should close out the trade to protect your capital.

Trading, by its very nature, is uncertain. There is little that can be described as security for traders. Every trade is a new event, and every entry is an entirely new business. A trader does not have the luxury of living from his past accomplishments.

If you have an unquenchable thirst for certainty, then trading is not for you. Uncertainty in trading is co-equal with insecurity. If money represents security to you, you have a real problem as a trader. Losing money not only costs you your financial security, but also your emotional security.

At many of my seminars and private tutorings I tell people that I have completely divorced myself from the money involved in trading. I don’t even know until the end of the month whether I have won or lost. I trained myself to think of trading as an endeavor in which I strive to make points. Only later are those points translated to dollars. In that sense, for me trading is a game. But I never lose sight of the fact that trading is also a serious business.

Insecurity in traders who over-analyze manifests in searching for the holy grail of trading, desperately seeking the right indicator or the perfect trade setup. The problem you’re having is that even when you see something, you are not sure it is sufficiently perfect for you to act on. Why? Because you lack confidence in your ability to trade what you see. Because you lack confidence in yourself. And because you fear the pain of another loss.

Here’s how I was taught to do my analytical work.

First, I went through all my charts to get an overview of the markets. During that time, I looked for trending markets. Trend lines were placed on the charts as long as they had a 30° or greater angle. Until I became used to what that looked like, I used a protractor to determine the angle. This action got me used to identifying the trend. These days it is easily done with your software.

Next, I went through all my charts again looking for "against the grain" moves-the intermediate trend that went against the longer term trend. This alerted me to markets that might soon resume trending.

Then I went through all my charts looking for Ross hooks™. I marked each hook with a bright red "h". Then, in light of the size of my margin account, I tried to select those markets that appeared to have the greatest potential, and I placed order entry stops just above or below the hooks. These were resting orders in the market. I tried to never miss a hook. I phoned my orders in daily.

How did I know which markets had the greatest potential? The answer is simple. I selected those markets that had the strongest trend lines.

Now there was a trick to this. I didn’t want too steep an angle, because in a rising market that often signals that the end of a move is near. Markets that break out too fast and go straight up rarely give an opportunity for entry before they start to chop around in congestion. Markets that have been going up at a steady angle, and suddenly that angle steepens-goes parabolic, are giving a warning that the move may soon be over.

In down markets I was willing to allow a steeper angle, because often a market will move down a lot faster than it moved up.

What I most wanted was trending markets that were making a retracement. Then I could attempt an entry as the market retraced, when it reached the proximity of the trend line, and then seemed to resume its trend, and when it took out the Ross hook™ created by the retracement.

Sometimes I had to wait for weeks before the markets started trending. The same is true today; nothing has changed other than that intraday it can happen a lot sooner. There will usually be at least a couple of markets in that condition, but there are times when there are none.

Yet I did my homework every day. The only way to know when an important breakout, the beginning of a trend, would occur, was to perform my daily analytical work.

Finally, I would set my work aside and take a break for dinner. After dinner, when my head had cleared a bit, I would look at my charts again. I would then do my best to come up with a trading plan. I would try to think through what I was going to do. I would ask myself a million "what if’s." I tried to anticipate what might happen in the market.

Often that kind of thinking would cause me to eliminate some of my potential trades. Also, a second look at times resulted in "why didn’t I see this before?"

For instance, what if you look at a market that is approaching its trend line. Isn’t it reasonable to ask yourself, "If this market breaks the trend line, what would I do?" Ask yourself how such an event would change the picture. If you had a position, would you still want to hold it? If you had no position, would this cause you to take a position opposite what was the trend? If it would, then why not place an order entry stop with limit, just the other side of that trend line? Very often, when prices approach a trend line from what has been a trending channel, they are already in a counter trend within the channel. That means a breakout of the trend line would be a continuation of this newly formed trend.

Finally, I would put my work aside and go to bed. In the morning I would look at my charts once again. Then I would write out scripts for the orders I wanted to place.

I would rehearse how authoritatively I was going to give these orders.

I did all this and more before I entered a trade. But do you know what most traders do? They do their analysis after the trade is made. Too often, they do it when the trade is already going against them.

How many times have you entered a trade, and then said to yourself, "Oh no, why didn’t I see that before?" How could you have seen it if you hadn’t looked, and looked again, and thought about it, and then perhaps looked one more time?

Also, many traders do their analysis after entering the trade in search of a justification for having entered. "Now I’m in the trade, let’s see if I can find out a couple of good reasons as to why!"

If you want to be a successful trader, you have to be hard. Hard on yourself and hard on your broker. I don’t mean that you have to be a rat, or be impolite, or be contemptuous. You just have to be firm in all that you do. You can’t afford to be "Mickey Mouse" about the way you do things. This is a business; you must be businesslike in conducting your affairs.

As a business person, you must manage your business. One of the main functions of management is planning. You have to plan your trades. Other things to look for as you go through your charts are: One-two-three formations, cups with handle, matching congestions, reversal bars, and Doji’s. These should all be part of your plan.

Some people give more thought to choosing which flavor ice cream to eat than to which market to enter and how and when to do it.

By not taking the time for preparation, you end up not having enough time to weigh the pros and cons or really familiarize yourself with what you are getting into.

You don’t have time to realize that prices have supported two ticks away from your entry about forty times in the past. You don’t have time to see that you are trading right into overhead selling. You don’t have time to notice that if prices break out of yesterday’s high, they will also probably take out a Ross hook. You don’t have time to see where prices are in relation to the trend line. You don’t have time to really grasp the overall trend, or the wave that is going counter trend. You don’t have time to really consider where you will place your stop. You don’t have time to read the market and to see what it might be telling you.

All of these things can be done ahead of time. If you do not do your homework, you will end up chasing markets in a desperate attempt to get into "the big move."

How to Make Consistent Profits Trading Futures Part I

One of the mistakes I consistently made in my early years as a trader was to try to make too much money in relation to my trading capital. To make £1000 a day while Futures Trading with £10,000 is absurdly ambitious; of course I have done it many times, as would anyone with this intention, but I have also gone bust on more than one occasion. To have the aspiration of taking £1000 out of the market each day, when trading with £10,000 or under is, I think, a quick route to the poor house.

So what is a reasonable objective for a day / futures trader?

A few weeks ago I visited an ex-floor trader who has set up a trading operation backing young aspiring traders. I was interested to find out from him how he trains his team. The essence of his approach is to give them a grounding in discipline and confidence. He believes that confidence is one of the primary keys to success in futures trading and that confidence is a by-product of taking money out of the market.

One of the reasons he has chosen to work with young futures traders is that he wants people who have minimal financial commitments. He knows it will take a while for them to start earning an income from the business. So his belief is that if his traders can regularly take small amounts of money out of the market, their knowledge, skills and confidence will grow and in time they will become bigger traders. What is critical about this approach is that his traders do not grow in size until they have achieved consistent, regular success on a small scale; and we are talking small, I mean £25 or £50 in a day.

What can we learn from this low risk approach? Well first let me ask you: what is more important, to make money today, or to become a consistently profitable trader? Because if we want to become consistently successful traders we need to take a different tack than if we are just out to make as much money as we can today.

So back to the question, what is a reasonable objective for a day trader? Well let’s look at bringing our daily target right down to £100, with £10,000 of trading capital, i.e. 1%. Now £100 a day, trading a market like the FTSE seems an achievable target to me. That is a net profit of 10 FTSE points a day. Can you come up with a system that trades 5 times a day and has an average net profit of 2 points? Or a system that trades 10 times a day with an average net profit of 1 point?

Is that a yes I hear? Because if you can make an average of £100 a day you will double your money in 100 trading days i.e. 20 weeks or about 5 months. If you double you position size every time you double your money, your account will grow to £1,000,000 in 140 weeks, which is less than 3 years! Of course this does not take into account the impact of tax; but my point is that by taking a low risk, conservative approach to trading objectives, we give ourselves the chance to grow and develop into traders, while also availing ourselves of the possibility of a deceptively good return.

If at this point you are tearing your hair out and screaming at the screen that I am a fool for suggesting that you can trade a strategy that averages a few points a trade, I assume that you are not familiar with the benefits of direct access trading. Direct access trading effectively gives everyone and their uncle the same low costs, immediate trade execution and access as was exclusively enjoyed by the floor traders before the advent of the electronic market place. To learn about the advantages of direct access trading...

Futures Spread Trading

How professional traders optimize profits

Futures spread trading is probably the most profitable, yet safest way to trade futures. Almost every professional trader uses spreads to optimize his profits. Trading spreads offers many advantages which make it the perfect trading instrument, especially for beginners and traders with small accounts (less than $10,000).

The following example of a Soybean-Spread shows the advantages of futures spread trading:

Example: Long May Soybeans (SK3) and Short November Soybeans (SX3)

Four Advantages of Futures Spread Trading

Advantage 1: Easy to trade

Do you see how nicely this spread starts trending in mid February? Whether you are a beginner or an experienced trader, whether you use chart formations or indicators, the existence of a trend is obvious. (If you are looking for a concept of how to identify a trend, we strongly recommend visiting http://www.tradingeducators.com/?source=Tradejuicetrading_philosophy.htm). Spreads tend to trend much more dramatically than outright futures contracts. They trend without the interference and noise caused by computerized trading, scalpers, and market movers.

Advantage 2: Low Margin requirements

Many spreads have reduced margin requirements, which means that you can afford to put on more positions. While the margin on an outright futures position in corn is $540, a spread trade in corn requires only $135 — 25% as much. That’s a great advantage for traders with a small account. With a $10,000 trading account risking 8% of your account, you can enter 6 corn spreads, instead of only 1-2 outright corn futures trade. How’s that for leverage?

Advantage 3: Higher return on margin

Each point in the spread carries the same value ($50) as each point in the outright futures ($50). That means that on a 3 point favorable move in corn futures or a 3 point favorable move in the spread, you would earn $150. However, the difference in return on margin is extraordinary:
Corn futures - $150/$540 = 27.8% return
Corn spread - $150/$135 = 111% return
And keep in mind that you can trade 6 times as many spread contracts as you can outright futures contracts. In our example you would achieve a 24 times higher return on you margin.

Advantage 4: Low time requirements

You don’t have to watch a spread all day long. You do not need real-time data. The most effective way to trade spreads is using end-of-day data. Therefore, spread trading is the best way to trade if you do not want to watch or cannot watch your computer all day long (i.e. because you have a daytime job). And you can save all the money you would have had to spend for real-time data systems (up to $600 per month).
So where is the catch?
If futures spread trading is so fantastic, why does it seems that hardly anybody trades spreads? Well, it is not true that hardly anybody trades spreads: the professional traders do, every day. But either by accident or design, the whole truth of spread trading has been hidden from the public over the years.
The purpose of this website is to inform you about futures spread trading. In the following we will answer the four frequently asked questions:

• What is a spread?
• Why trade spreads?
• What can you expect when trading spreads?

What Is a Spread?

A spread is defined as the sale of one or more futures contracts and the purchase of one or more offsetting futures contracts. You can turn that around to state that a spread is the purchase of one or more futures contracts and the sale of one or more offsetting futures contracts. A spread is also created when a trader owns (is long) the physical vehicle and offsets by selling (going short) futures. Furthermore, a spread is defined as the purchase and sale of one or more offsetting futures contracts normally recognized as a spread by the fact that the two sides of the spread are actually related in some way. This explicitly excludes those exotic spreads put forth by some vendors, which are nothing more than computer generated coincidences which are not in any way related. Such exotic spreads as Long Bond futures and Short Bean Oil futures may show up as reliable computer generated spreads, but bean oil and bonds are not really related. Such spreads fall into the same category as believing the annual performance of the U.S. stock market is somehow related to the outcome of the Super Bowl sporting event. In any case, for tactical reasons in carrying out a particular strategy, you want to end up with:

• simultaneously long futures of one kind in one month, and short futures of the same kind in another month. (Intramarket Calendar Spread)
• simultaneously long futures of one kind, and short futures of another kind. (Intermarket Spread)
• long futures at one exchange, and short a related futures at another exchange. (Inter-exchange Spread)
• long an underlying physical commodity, and short a futures contract. (Hedge)
• long an underlying equity position, and short a futures contract. (Hedge)
• long financial instruments, and short financial futures. (Hedge)
• long a single stock futures and short a sector index.

The primary ways in which this can be accomplished are:

• Via an Intramarket spread.
• Via an Intermarket spread.
• Via an Inter-exchange spread.
• By ownership of the underlying and offsetting with a futures contract.

Intramarket Spreads

Officially, Intramarket spreads are created only as calendar spreads. You are long and short futures in the same market, but in different months. An example of an Intramarket spread is that you are Long July Corn and simultaneously Short December Corn.

Intermarket Spreads

An Intermarket spread can be accomplished by going long futures in one market, and short futures of the same month in another market. For example: Short May Wheat and Long May Soybeans.
Intermarket spreads can become calendar spreads by using long and short futures in different markets and in different months.

Inter-Exchange Spreads

A less commonly known method of creating spreads is via the use of contracts in similar markets, but on different exchanges. These spreads can be calendar spreads using different months, or they can be spreads in which the same month is used. Although the markets are similar, because the contracts occur on different exchanges they are able to be spread. An example of an Inter-exchange calendar spread would be simultaneously Long July Chicago Board of Trade (CBOT) Wheat, and Short an equal amount of May Kansas City Board of Trade (KCBOT) Wheat. An example of using the same month might be Long December CBOT Wheat and Short December KCBOT Wheat.

Why Spreads?

The rationale behind spread trading is one of the best-kept secrets of the insiders of the futures markets. While spreading is commonly done by the market "insiders," much effort is made to conceal this technique and all of its benefits from "outsiders," you and me. After all, why would the insiders want to give away their edge? By keeping us from knowing about spreading, they retain a distinct advantage.
Spreading is one of the most conservative forms of trading. It is much safer than the trading of outright (naked) futures contracts. Let’s take a quick look at some of the benefits of using spreads:

• Intramarket, and some Intermarket, spreads require considerably less margin, typically around 25% - 75% of the margin needed for outright futures positions.
• Intramarket, and some Intermarket, spreads offer a far greater return on investment than is possible with outright futures positions. Why? Because you are posting less margin for the same amount of possible return.
• Spreads, in general, trend more often than do outright futures.
• Spreads often trend when outright futures are flat.
• Spreads can be filtered by virtue of seasonality, backwardation, and carrying charge differentials, in addition to any other filters you might be using in your trading.
• Spreads can be used to create partial futures positions. In fact, virtually anything that can be done with options on futures can be accomplished via spread trading.
• Spreads allow you to take less risk than is available with outright futures positions. The amount of risk between two Intramarket futures positions is usually less than the risk in an outright futures position. The risk between owning the underlying and holding a futures contract involves the least risk of all. Spreads make it possible to hedge any position you might have in the market. Whether you are hedging between physical ownership and futures, or between two futures positions, the risk is lower than that of outright futures. In that sense, every spread is a hedge.
• Spread order entry enables you to enter or exit a trade using an actual spread order, or by independently entering each side of the spread (legging in/out).
• Spreads are one of the few ways to obtain decent fills by legging in/out during the market Closing.
• Live data is not needed for spread trading, saving you $$ in exchange fees.
• You will not be the victim of stop running when using Intramarket spreads.

What Can You Expect?

Here is an example of what you can expect from Intramarket spread trading. We think you may be pleasantly surprised!!

This spread was entered not only on the basis of seasonality, but also by virtue of the formation known as a Ross hook (Rh). The spread moved from -69.0 to -7.5 = $3,075 per contract. The margin required to put on this spread was only $608, thus the return on margin is more than 500%.

Here is an example of an Intermarket spread. Look at the the following chart: Would you want to have been long live cattle from December until February?

But, what about a spread between Live Cattle and Feeder Cattle?

The spread moved from -10,200 to -7,200 = $3,000 per contract. The margin required to put on this spread was only $540. The return on margin is more than 550%.

Lastly, we show you another intermarket spread. This one was made between Euro and British Pound. Although you might have made money on a Euro trade, you would have suffered from serious whipsaw during the entire length of the trade.

What about a spread between the Euro and the British Pound?

You didn’t have to be in this spread for very long in order to take some fat profits: During February the spread moved from $32,500 to $36,187.50 = $3,687.50 per contract.

How do I start trading spreads?

We can barely scratch the surface of what is available in the almost lost art of spread trading. There are times when seasonal spreads, coupled with chart formations, make a lot of sense. Backwardation in any market often provides an excellent signal for entry into a spread.

Achieving Trading Perfection

Achieving Trading Perfection - Trade quality, not quantity. Take the best of the best. Get the big picture. If you haven’t previously come across such advice, or if you have and are not following it, it is time that you take these words to heart. But how?

Trade selection and adequate planning go hand in hand. This is where most would-be professional traders miss the boat.

Much more money is made as a result of proper planning than from sitting and trading everything that comes along or "looks" good.

It’s difficult to fully understand why people think they have to trade so much. It’s difficult to truly grasp why people think that they have to take as many trades as they do.

Just the opposite is true. There is a correct approach to each and every trade. That is what achieving perfection is all about.

It all starts with proper management: planning, organizing, delegating, directing, and controlling.

These facets of management must be woven together into your trading; they do overlap.

Although planning is the major management function involved in achieving perfection, you can’t possibly plan well unless you are organized to do so.

You must have your tools at hand: your trading software, your data, the proper equipment. All of the rudiments for planning must be in place, which in itself is a part of organizing.

You must be physically fit when you plan: well nourished, properly exercised, well rested and mentally alert - all part of having your life organized, all part of achieving perfection as a trader.

To be a winning trader, you have to be among the best. There can be no middle ground. There are only winners and losers, and to be a winner you have to be a champion. And, just like any champion, you must have discipline, self-control, and a willingness to train, train, train.

There are no runners-up in trading, you either get the gold or you give the gold. Often, while others are busy going to parties or watching sports events, you are busy poring over charts, studying, thinking, planning. When others are listening to music or watching TV, you are busy practicing your trading, practicing trade selection, working hard to become a more astute trader.

Part of achieving perfection involves the diligent study of charts. The data, as presented on your screen and preserved as charts, are, for the most part, all you have for making trading decisions. They are a picture, a visualization of what is taking place in the reality of the market. Your job in achieving perfection and becoming an adequate trader is to picture and imagine in your mind what makes prices move and form the way they do. Ask yourself, "How does what I see in front of me relate to the supply and demand for the underlying?" Ask yourself, "Is what I am seeing on the chart even related to supply and demand, or is what I am seeing related to an engineered move by some insider or market mover?"

Supply and demand are not what makes prices move or fail to move most of the time. The sooner you realize that fact, the better off you will be. Markets are engineered, manipulated ¾ you need to know that.

But there’s more to a chart than merely price patterns. Reflected in the chart are the emotional reactions of human beings. Reactions to rumors and news; to national and world events; to government reports - these, too, are on the charts.

You might say that price movement, or the lack thereof, is the net effect of all the perceptions of all the traders who are participating in the market for a particular futures.

There is something else on the charts, something that too few take into account. That something is the manipulations from and by the insiders, the market movers, and by commercials holding large inventories of the underlying you are attempting to trade.

In achieving perfection as a trader, you must train yourself to look for evidence of any and all of these things as you study your charts. It is the cumulative action of all perceptions which causes patterns to form on a price chart.

You must learn to look for the truths in the markets. There are certain truths which are self-evident; they are always true. For instance, take the phenomenon of a breakout. When prices break out, no one can change the fact that they did break out. It is a fact and it is true. The breakout may turn out to be a "false" breakout, but nevertheless it is a breakout. As part of achieving perfection in your trade selection skills, you have to learn to tell which breakouts are most likely true breakouts, and which ones are most likely false. How can you know? By the price patterns on the chart.

And what about trend? Your job in achieving perfection as a trader is to master how to trade a trend. A trend is a trend, is a trend. It is a trend until the end, and part of your job is to know when a market is not trending.

The trend is the trend while it lasts. While a market is trending it is telling the truth. The trend can change, but the truth is the truth. If prices are rising, the trend is up. If prices are falling, the trend is down. The truth can be found in the trend. It is an immutable fact. You are to learn to make my money by trading with the trend. You are to learn what constitutes a trend. You have to learn to spot trends early so that you can make the most out of the market while it is trending. Your job in achieving perfection as a trader is to learn to recognize when a trend will most likely begin, and just as important, to learn to be even more adept at deciphering when a trend is ending.

In achieving perfection, you must learn to recognize "your" trade(s), and to take only "your" trades. Trade the formations and patterns that you can easily recognize and identify.

You must learn to trade using tips and tricks that you are shown and to accumulate and keep a collection of techniques that result in the selection of high probability trades.

How are you to do all this? Practice, practice, PRACTICE. Practice recognition of congestion areas. Practice recognition of high probability breakouts. Practice trend recognition. Practice and more practice. Just like anyone who wants to achieve perfection at anything, there must be total dedication, study, practice and more practice. You are to become a trading virtuoso. You are to practice, yet always realizing that you will never attain true perfection, that there is always room for improvement. There is usually a way to refine: ways that you can do things better, more efficiently, and with greater speed and finesse.

Global Forex Trading – The Easy Way to Make Money

Global forex trading was founded in 1997 and is today one of the world’s leading providers when it comes to forex real time trading. Global forex trading offer you the chance to deal in real time online currency trading that is making millions of forex brokers rich each day.
Global forex trading serves over 100 countries, using its DealBrook FX2 software and 24 hour market access with one of the highest levels of customer service available in the forex trading industry. With Global forex trading forex brokers have access to pricing for more than 60 currency pair and excellent analytical services from renowned experts. There are up to the minute currency news bulletins and advanced forex charts available. Global forex trading boasts that they provide the only forex trading platform that is suitable for both beginners and professionals.
Forex Trading Advantages
The forex trading market is open 24 hours a day and is today the most liquid market in the world. With forex and the available leverage strategy you can use 100 to 1 leverage which in turn reduces the need for large amounts of capital to be placed in your account. Forex trading is also commission free and trading is available on more than 60 currencies worldwide. Another advantage of forex trading is of course the fact that it is global and there are not restrictions placed on shorting which means that you can enjoy your profit opportunities no matter what the market condition.
Prior to reading this information you may have assumed that forex trading was only available for large investors but thanks to Global forex trading smaller transactions are now available which allows all traders to take part giving everyone the opportunity to profit from forex trading. Don’t you think it’s time you started profiting?
Our mission is to gather all Forex info on one place. Find it only on the Forex

Best Forex Online Platforms Trading

The term forex refers to Foreign Exchange. The foreign exchange market deals basically with the trade of a particular currency for another. It is considered to be the world’s largest financial market. The forex market includes various levels and forms of trading. It includes the trade carried out between various banks, currency speculators, central banks, governments, multinational corporations, and various other financial markets and institutions.
The main advantage which forex trading has over the conventional New York Stock Exchange and other similar stock exchange markets is that the traders can trade any time of the day. The conventional stock exchange markets limit the trading in the actual trading hours of the market. The best forex online platforms trading is preferred nowadays by most people owing to the fact that it enables forex trading anytime of the day and from anywhere in the world. This is done by giving access to traders of the online community of forex trading through online trading platforms.
The forex market is a great success compared to the other stock markets owing to the fact that the currency exchange market of the world operates around the clock. The prime requisites for a trader thus are time, money, a computer with the Internet facility and a telephone. The traders or the banks just need to log in to their forex trading account to start trading.
The best forex online platforms trading are also highly beneficial owing to the numerous advantages. The forex market is estimated to witness the trade of around one trillion dollars. The primary process can be understood in simple terms. It involves the trading of one country’s currency for another country’s currency.
The best forex online platforms trading are also the fastest and the most efficient modes of online forex trading. The traders can gain large profits owing to the structure of the market.

Online Forex Trading Education

There are many people who are interested in forex trading. But before you start trading in forex, getting a good online forex trading education is important. The forex market is largely a technical market with its own forex terms and processes so it is important you grasp the fundamentals with an online forex trading education.
Why Online Forex Trading Education?
Most people who want to try forex trading are often busy with other aspects of life to take care of. They probably do not have the time to attend a course on forex trading. Therefore, an online forex trading education is more suited.
Since it’s online, you can take your time to read and digest the information at your own pace. Also most of the basics of forex trading can be found online for free. There are tons of websites that provide free forex trading courses and tutorials.
There are also free forex trading seminars online available plus advanced forex trading courses online such as the forexmentor program. While it’s usually not free, the costs are pretty cheap compared to attending a forex trading course in a classroom.
Another important part of an online forex trading education is practice. I believe no matter how well you understand forex trading or if you score an A in a forex trading course, the real deal comes when you actually start trading.
Most forex trading sites provides a demo account for new beginners to forex trading to learn how to manage their forex trading account. There is no monetary risk, so it is a very good way to learn the ropes.
Once you feel you have sufficient experience, you can open a regular forex trading account or a mini forex account. I would highly recommend you open a mini forex account and start trading in smaller amounts. It has all the features of a regular forex accounts yet you can start one usually with about US $100.
It’s important you do not rush through your online forex trading education. Take your time to understand and start trading in small amounts to practice. As the saying goes, practice make perfect.
Ricky Lim runs an online forex trading education site for beginners. Visit his site today for more forex tutorials such as a free forex trading strategy.

10 More Forex Trading Essentials For Winning Forex Trading

here are some simple but very effective 10 essentials that every Forex trader should follow in order to become as successful as possible as a Forex trader which I have previously discussed. This article will discuss another 10 essentials of Forex trading. Keep reading to get instant access to a Forex $100.000.00 demo account.
Essentials Of Forex Trading Number 1: In order to succeed as a Forex trader you must be 100 percent committed. The Forex market is not a playing field. It should be respected and treated seriously.
Essentials Of Forex Trading Number 2: Forex trading is a business. Like in professional property investing, there should be no emotions involved whatsoever. The Forex market is not a place to show your bad side and your bad habits.
Essentials Of Forex Trading Number 3: The best Forex traders think one way only. If the trend is down then sell rallies. If the trend is up then buy the dips.
Essentials Of Forex Trading Number 4: The busiest hours in the Forex, bar none, are the London hours, after 2am New York time, when the rally for the Euro begins.
Essentials Of Forex Trading Number 5: Wait for bona fide signals at all times. Look for the clues in the MACD divergence, trendline breakouts and pivot point breakthroughs.
Essentials Of Forex Trading Number 6: Follow the leader. Price is the number one main indicator. Be patient and wait for it to reveal itself.
Essentials Of Forex Trading Number 7: The best trades are made in and around pivot points. All other areas are dead man’s land.
Essentials Of Forex Trading Number 8: Always take the little time required to draw pivot points on your 15 minute chart.
Essentials Of Forex Trading Number 9: If you’re wondering how many signals you need before you pull the trigger, one is enough, but more than enough make the signal all the more stronger and clearer.
Essentials Of Forex Trading Number 10: Every Forex trader makes mistakes, and costly ones at that. Don’t beat yourself up over it. Accept the mistake, analyze what you did and move on.
Although this list is relatively short these are very powerful 10 essentials of Forex Trading. These 10 essentials of Forex trading build a strong foundation, particularly for beginner Forex traders. I strongly suggest you print out this list and look at it every day you do Forex trading to remain focused. Keep reading to get the chance to practice and perfect your Forex trading with a $100,000.00 Forex demo trading account.
Copyright 2007. Are you ready to get the best education in Forex trading? “Fast Education For Fast Forex Profits” is what this Forex Trading System Course. is all about. Learn how to start making money trading the Forex market within 30 days. Study, practice, trade – get a 30 day FREE trial to practice Forex trading with your own $100,000.00 Forex account so you never have to risk any of your own money!

How To Read Forex Charts

The forex market can be a confusing place to be in, especially if you are new to the field of currency trading. This is where the knowledge of how to read forex charts can be of immense help. Experienced traders always reiterate the point of proper training before making a foray into forex trading for this reason. There are many online tutorials available these days which can equip you with the basic knowledge of the forex market. It is also preferable that beginners make a start with smaller accounts before graduating on to bigger things in the forex market.
These days to a large extent the question of how to read forex charts has been answered by the numerous forex charting software that is available. This software can help you keep track of both your money as well as your time. Such software tools can come in handy if you are interested in being a forex trading pro. The charts generated by such software would give you a deep insight into the workings of the large forex market.
The currency trading market is the largest and perhaps the busiest market in the world. It is sometimes very difficult to keep track of all the happenings in the market. Unfortunately though for every forex trader, keeping track of various important happenings in the market is something that becomes almost imperative. This is where good forex charting software can come in handy. Using these software tools you will be able to keep track and also study the behavior of the forex market and that too over long periods of time. This study would help you immensely when you actually trade in the market.
The answer to the question how to read forex charts probably lies in installing forex charting software. Various trends and patterns based on forex charts can be generated in a matter of minutes using these specialized software tools. This type of detailed analysis based on forex charts help traders to make an informed decision. Forex charting software has come as a relief to those who were till now wondering how to read forex charts If you are someone who is wants to become a successful trader in the forex market and is wondering how to read forex charts help is at hand in the form of charting software. Apart from helping in reading forex charts they would also help in predicting future market trends, thereby giving that much needed edge to a forex trader.

Trading Forex is a Recession Proof Business

Trading forex has been described as a recession proof business. And yet other voices caution that trading forex is not a way to get rich quick and that it can lead to financial hardship.
So should you trade forex? What are the issues you need to consider here?
Trading forex (short for the foreign exchange market) is like any other skill. It takes time to master the art/science of the forex market. Yes, you might open a forex account and experience the thrill of a few profitable trades but that does not make you a competent trader. Indeed spectacular performance in any past period is no guarantee of future returns, of course.
As you learn to trade the forex you will see that it is both challenging and attractive because of its potential profits. The only time forex is not being traded is when the whole world is in a weekend.
However, before deciding to become a forex trader you should consider your investment objectives, level of experience and level of tolerance for risk. Trading forex has been likened to like watching a school of fish move — one minute it is total harmony, the next minute complete chaos.
Until recently, trading forex has been largely the realm of major professional players with global activities – like banks, commercial organizations with global connections, and of course forex brokers.
However, there are now ways for individuals who do not have much time or much spare cash to participate in forex trading. This forex trading system has been designed for regular people who have jobs and families (which is why they don’t have much time or much spare cash, of course).
As a result, the forex trade is now available as a home based business for people all around the world.
Today you can open a forex trading account with as little as $100.
Not only that, you do all your forex trading on the weekend. You can learn more right now at

Forex Buy and sell indicators by Ivan Tan

The fluctuations in the FX market or the foreign exchange market are recorded and displayed by the forex buy and sell indicators. Thus the buy and sell indicators are the most perfect tools for assessing the currency rates and thus devise a currency buying or selling plan.
The buy and sell indicators are the ones which are derived by correlating the past trend and the current trend of the currency. Thus it is a good indicator of the projections of the currency. When manually a currency is analyzed there are chances of human errors caused by the psychological state of the person. The buy and sell indicators nullifies the human errors and can be trusted.
The buy and sell indicators helps the trader to decide when to sell a currency or when to buy one. There are different algorithms used for making the indicators and most of the indicator data may vary slightly. However, which ever be the indicator it specifies the best currency to be sold and the best to be bought at a given time. Thus the buy and sell indicators influence the traders immensely to buy or to sell a particular currency at a given time.
There are free and paid softwares or buy and sell indicators. The free ones are never inferior to the paid ones, but some paid softwares allow additional functionalities that are not available with the free softwares. An example of paid software is the Forex Auto Pilot, this is a highly automated software and is capable of initiating a trade. The trader just has to specify the ranges of the minimum values and the maximum values that he intends to trade and the software does the rest. This software also has a good indicator and shows the projections in a real time basis.
The buy and sell indicators are thus the tools that helps the traders to decide on which currency to sell or purchase at a given time of the day. The indicators show the projections of the currencies as live graphs or projections. The indicators can be used to see the gains of the currencies in the past period and the current trends of the currency. The indicators also show the future projections thus the trader can plan his purchase or sell out. This is more suitable for the beginners.
There are a lot of free forex indicators available in the market, but it is always better to go for a paid one because of the added functionalities that it offers.
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Forex Broker

A broker is any person or firm that charges a fee in exchange for executing trades for a trader. A Forex broker does not charge a commission for placing a buy or a sell order the way a real estate broker would charge a percentage fee of the total price of a sale. A Forex broker is paid according to the spread – or the difference between the trader’s bid for a currency, and the seller’s asking price for that currency. Usually this spread is less than 0.1% or ten pips. (Pips are the smallest movement a currency can make on the Forex. Pips are commonly called referred to as points.) The lower the spread, the less a trader pays a Forex broker for a trade.
The Forex market is global and does not have one central regulatory agency like the Security Exchange Commission. Each country is responsible for the actions of trades in it’s own country. A Forex broker in America must register with the Commodities Futures Trading Commission (CFTC). While traders are not regulated, Forex brokers are. A Forex broker must be registered as a Futures Commercial Merchant (FCM) before that Forex broker is allowed to accept a deposit for an account from a trader. Once registered, a Forex broker is given an identification number so that a trader can check the status of a Forex broker before hiring that Forex broker. There are such people known as introducing brokers who may solicit traders for a registered Forex broker, but the introducing broker cannot accept a deposit for a trader’s account. It is a good idea for any trader hiring a Forex broker to check the status of the Forex broker with the authorities.
Kevin Anderson is the owner and opperator of http://www.forextradingcenter.info a site developed to give users the most updated information, articles, and news related to the Forex Market.

Techniques for Advanced Forex Trading

Forex is a potential platform for earning substantial profit. In fact it is one of the largest trading markets of the world. Featuring an average daily trade of US$ 2 trillion and above, this market is best known for its high scale trading volume and intense liquidity. Adding to this, today with the advancement of technology it can be done from anywhere of the world. Backed up by world-wide web, you can easily trade in the forex market at the comfort of your own home. However, it is important to understand that fx trading is based hugely on speculation. You must be smart enough to guess exactly when the rate of a certain currency pair will rise and go down, and then buy or sell based on that. Indeed it is said that if you learn to study the speculation of this market, you will have a better chance of getting profit.

Today, it is more advanced and turned into an active investment arena, where only a factual understanding of the intricacies and complexities can make your capital grow every day. Moreover, like any other business, it also involves some amount of risks. There is no shot fx trading technique for success in the currency trading market, but there are some well-known techniques that can assist you formulate a good advanced foreign exchange trading strategy. Here are few essential techniques that can help you cut your losses and increases profits:

Forex Scalping: It is a latest technique of trading where profits are taken after relatively small moves in the forex market. It is a technique where trading is done over small time frames, and smaller profits are taken more frequently. As the position exposed to the market is shorter, it automatically reduces the risk of adverse market events causing the price to go against the trade. It is a different approach to most other forex strategies, but still requires you to analyze the market to ensure that the set up for a trade is present. This type of trading greatly appeals to day traders and those who look to reduce the risk involved in trading currencies.

Forex Hedging: It is a technique that helps in reducing some of the risk involved in holding an open forex position. It decreases the risk by taking both sides of a trade at once. If your broker allows it, a simple way to hedge is just to initiate a long and a short position on the same pair. Advanced traders sometimes use two different pairs to make one hedge, but that can get very complicated.

It is important to understand that much of the risk involved in holding any forex position is market risk; i.e. if the market falls sharply, your losses may escalate dramatically. So if you have an open Forex position with fine projection but you think the currency pair may reverse against you, it is advised to hedge your position.

Forex Position Trading: Forex position trading approach is yet another trouble-free technique to boost your position size without increasing your risk. This trading tactic is very effective with mini lots. The major highlight with this technique is that - with forex position trading your exposure to the market is less and so therefore is no need to monitor the market continuously. Moreover, you may even earn profit with negligible loss that can further boost your trading confidence. For Example- you might make a short trade on EUR/USD at 1.40. If the pair is ultimately trending lower, but happens to retrace up, and you take another short at say 1.42, your average position would be 1.41. Once the EUR/USD drops back below 1.41, you will be back in overall profit.

Today forex trading is all about watching your options when you make a trade. Aside from using effective risk management and extreme vigilance, advanced trading can be an alternate way to make profits and control losses. Nevertheless, these above mentioned advanced trading techniques are more about using the market behavior to your advantage. Utilizing these advanced techniques can give you the edge from other average trader.

Automated Forex Trading

Trading locations are scattered all around the world, rather than being centered in just a few major cities of the USA or Europe.

Of course, as with any major market, many factors can influence foreign exchange rates, which may account for the powerful attraction for many Forex traders - the excitement. Average daily turnover in the foreign exchange market stands around 2 to 3 trillion dollars. That's DAILY turnover, and the figures come from none other than the Triennial Central Bank Survey of the BIS (Bank for International Settlements).

And the trend is upward. In other words, more money gets traded with each passing year, and may surpass $3 trillion within a very few years.

Perhaps most amazing, however, is the fact that anyone can enter this market and begin to trade foreign currencies. Entry requirements are low. This has been both a positive (because initial deposits are minimal) and a negative (a lack of experience can bring losses very quickly).

Now however, Forex trading can be partly automated by software that is sophisticated enough to offset much of a beginner's lack of knowledge. Even better, this software is not at all expensive - not when compared with the profits it may bring.

The concept of automation marks an important new trend in the foreign exchange trading market. The Interbank spot Forex market has also considered automating as well.

Automation actually brings a number of important benefits to Forex traders - especially those just entering the market.

With your computer handling much of the trading process for you, transactions can be done in real time. Although manual systems are well established, they have never offered the speed that an automated Forex trading system does. All trades are initiated and completed within milliseconds, which can be a huge plus because they virtually eliminate any lag time.

Problems that characterized manual trading methods can now be addressed and eliminated, or at least minimized. For example, if a trader were hit by a few losses in a row, he could be wiped out and unable to make new trades. This problem can easily be addressed using an automatic trading system.

Automated Forex trading also permits greater diversification. In the past, if you wanted to trade more currency pairs simultaneously, or a wider variety of them, you were limited by your memory and concentration. But thanks to automated trading, you can execute trades with other traders in Singapore or London or wherever, even it's midnight where you are. Thus you have the option of doing multiple exchanges.

You can also quickly evaluate various trading models from short-term data, projecting trends for as short as 15-minute or half-hour time slices.

As mentioned, extreme liquidity makes the Forex market unique. And greater automation will only increase this liquidity, with funds flowing faster than ever.

Risk becomes easier to manage with automation. International checks, now commonly used in Forex market purchases, are synchronized via automation technology. Since automated transactions are handled in real time, there is little chance of delayed payments, reducing the risk of non-payment by either party. And although issues still exist with the use of automated systems, they can easily be addressed and resolved through consistently updating the technology.

With the spread of automated Forex trading, the $3 trillion daily turnover may soon be far surpassed. And given the fast, efficient trades between any and every time zone, Forex trading is certain to remain one of the most profitable business models in today's changing world.

Trading with Strategy

Trading successfully is by no means a simple matter. It requires time, market knowledge and market understanding and a large amount of self restraint. ACM does not manage accounts, nor does it give market advice, that is the job of money managers and introducing brokers. As market professionals, we can however point the novice in the right direction and indicate what are correct trading tactics and considerations and what is total nonsense.

Anyone who says you can consistently make money in foreign exchange markets is being untruthful. Foreign exchange by nature, is a volatile market. The practice of trading it by way of margin increases that volatility exponentially. We are therefore talking about a very ’fast market’ which is naturally inconsistent. Following that precept, it is logical to say that in order to make a successful trade, a trader has to take into account technical and fundamental data and make an informed decision based on his perception of market sentiment and market expectation. Timing a trade correctly is probably the most important variable in trading successfully but invariably there will be times where a traders’ timing will be off. Don’t expect to generate returns on every trade.

Let’s enumerate what a trader needs to do in order to put the best chances for profitable trades on his side:

Trade with money you can afford to lose:

Trading fx markets is speculative and can result in loss, it is also exciting, exhilarating and can be addictive. The more you are ’involved with your money’ the harder it is to make a clear-headed decision. Money you have earned is precious, but money you need to survive should never be traded.

Identify the state of the market:

What is the market doing? Is it trending upwards, downwards, is it in a trading range. Is the trend strong or weak, did it begin long ago or does it look like a new trend that’s forming. Getting a clear picture of the market situation is laying the groundwork for a successful trade.

Determine what time frame you’re trading on:

Many traders get in the market without thinking when they would like to get out, after all the goal is to make money. This is true but when trading, one must extrapolate in his mind’s eye the movement that one expects to happen. Within this extrapolation, resides a price evolution during a certain period of time. Attached to this is the idea of exit price. The importance of this is to mentally put your trade in perspective and although it is clearly impossible to know exactly when you will exit the market, it is important to define from the outset if you’ll be ’scalping’ (trying to get a few points off the market) trading intra-day, or going longer term. This will also determine what chart period you’re looking at. If you trade many times a day, there’s no point basing your technical analysis on a daily graph, you’ll probably want to analyse 30 minute or hour graphs. Additionally it is important to know the different time periods when various financial centers enter and exit the market as this creates more or less volatility and liquidity and can influence market movements.

Time your trade:

You can be right about a potential market movement but be too early or too late when you enter the trade. Timing considerations are twofold, an expected market figure like CPI, retail sales or a federal reserve decision can consolidate a movement that’s already underway. Timing your move means knowing what’s expected and taking into account all considerations before trading. Technical analysis can help you identify when and at what price a move may occur. We will look at technical analysis in more detail later.

If in doubt, stay out:

If you’re unsure about a trade and find you’re hesitating, stay on the sidelines.

Trade logical transaction sizes:

Margin trading allows the fx trader a very large amount of leverage, trading at full margin capacity (in ACM’s case 1% or 0.5%) can make for some very large profits or losses on an account. Scaling your trades so that you may re-enter the market or make transactions on other currencies is generally wiser. In short, don’t trade amounts that can potentially wipe you out and don’t put all your eggs in one basket. ACM offers the same rates regardless of transaction sizes so a customer has nothing to lose by starting small.

Gauge market sentiment:

Market sentiment is what most of the market is perceived to be feeling about the market and therefore what it is doing or will do. This is basically about trend. You may have heard the term ’the trend is your friend’, this basically means that if you’re in the right direction with a strong trend you will make successful trades. This of course is very simplistic, a trend is capable of reversal at any time. Technical and fundamental data can indicate however if the trend has begun long ago and if it is strong or weak.

Market expectation:

Market expectation relates to what most people are expecting as far as upcoming news is concerned. If people are expecting an interest rate to rise and it does, then there usually will not be much of a movement because the information will already have been ’discounted’ by the market, alternatively if the adverse happens, markets will usually react violently.

Use what other traders use:

In a perfect world, every trader would be looking at a 14 day RSI and making trading decisions based on that. If that was the case, when RSI would go under the 30 level, everyone would buy and by consequence the price would rise. Needless to say, the world is not perfect and not all market participants follow the same technical indicators, draw the same trendlines and identify the same support & resistance levels. The great diversity of opinions and techniques used translates directly into price diversity. Traders however have a tendency to use a limited variety of technical tools. The most common are 9 and 14 day RSI, obvious trendlines and support levels, fibonnacci retracement, MACD and 9, 20 & 40 day exponential moving averages. The closer you get to what most traders are looking at, the more precise your estimations will be. The reason for this is simple arithmetic, larger numbers of buyers than sellers at a certain price will move the market up from that price and vice-versa.