Monday, March 30, 2009

Currency Trading – Success Depends On One Critical Factor

Currency trading success depends on several factors but they all stem from one specific factor – If you don’t have it, you will probably join the 95% of losers.

It’s a common error made by novice traders, so let’s look at it:

You need confidence in the method you use.

This requires some more explanation.

It’s a fact that most traders don’t have ultimate confidence in their method because they do the following:

They try and buy a method from someone else and don’t understand the logic it is based upon. Because they don’t fully understand the logic, they fail to follow it through losing periods and throw in the towel.

If you want to succeed in Forex Trading you need to follow a method with rigid discipline, through inevitable losing periods.

If you don’t, you don’t have a method in the first place!

Furthermore most systems sold are junk.

There sold by writers, or failed brokers and simply don’t work.

These people rely on hypothetical track records and the greed of buyers, to make them think they will win, but of course they don’t.

So how do you get confidence in the method you use?

1. If you are buying a system

Only look for a track record in real time of 2 – 3 years duration – this proves that the logic of the system is soundly based.

By looking for a real time track record you can get rid of 95% or more of FOREX trading systems that are sold.

2. Understand the logic

However, even with a FOREX trading system that has worked in the past you still need to have confidence in it and that means understanding why it in depth, so you have confidence.

You also need to be happy with the drawdowns it incurs some traders can take for example 50% drawdowns - others can’t.

Look at the worst peak to valley drawdown and time to recovery.

Make sure your happy with it and that you can follow your system through drawdowns of similar magnitude.

3. The best way to achieve currency trading success is to:

Devise your own FOREX trading method.

While this may sound daunting, it’s easy to do.

You can build the system and test it and as it’s yours you will have total confidence and the discipline to follow it when the going gets tough.

Building a system is easy, if you do a little research and we have in our other articles shown you how to do this.

Many people think they can trade FOREX and have no real drawdown, but that’s not real life.

Drawdowns are emotionally and financially draining and confidence gives you the discipline to stick with your system.

by: kelly price

Check Out the Related Article : Make Money with Online Trading

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Saturday, March 21, 2009

Currency Trading Systems - Building a Profitable One in 4 Steps

If you want to trade currencies then you need a currency trading system that will get the odds in your favour and here we will show the basics that make a successful one. Anyone can build one and incorporate it in their Forex trading strategy and it's easy to do - Let's look at the basics.

1. Identifying the Opportunity
The best way to identify an opportunity is to use support and resistance and good old trend lines. We won't explain support and resistance here - but if you are not familiar with it look it up on the net - Here we want you to keep in mind one key point:

When you trade be selective and only trade valid support and resistance.
What do we mean by valid?

- The more tests the better- The more time frames involved the better- The longer the duration between the time frame the better
The above are just general guidelines - you can use 2 tests but 3 tests or more, are better and look for resistance or support that is considered important by the market.
You then need to decide after spotting the opportunity on your forex charts when to trade.

2. Executing the Trading Signal
Never simply buy into support or sell into resistance with your currency trading system.
This wont work, as your predicting what may happen and as you can't predict the future ( despite what many guru's will tell you), you are simply hoping or guessing and the market will kill you.

You need confirmation.

If you don't know what momentum indicators are look them up - you need them and there an essential part of your forex education.

You only need a couple to confirm the move - more is not better as you need a simple system - more complicated ones have more elements to break.
The way to use them is to watch for a level to hold and when momentum shifts away from the level then you trade.

Don't just look for support or resistance to hold though - incorporate breakout methodology. It's a fact that most trends start form new market highs NOT Market lows. So, if prices breakout supported by momentum buy them!
Most traders can't do this they want to get back in on a pullback that never comes - don't make this mistake trade the breakouts like the pros do.

Finally be very selective and only trade the best set ups - in forex trading you don't get paid for how often you trade you get paid for being RIGHT.

Trade sparingly and only trade the big high odds trades.

3. Stops and Profits
Stops are easy and behind support and resistance. Place them as soon as your currency trading system gives a signal.

If you are long term trend following, keep your stop well back and give the market room to breathe, so you don't get stopped out by random volatility.

You are going to miss the turn but as you can't predict that anyway, that's fine.
Catch 50 - 60% of the big trends and you will become very rich.
Swing trading is another matter.

You're looking for smaller moves and they can disappear quickly, so use a profit target and take your profit early!
Don't worry about perfection of what you might have made - concentrate on making money - no one is perfect but that won't stop you enjoying currency trading success.

4. Managing Your Money
Forex trading is risky, that's why the rewards are so high. Many traders however try and restrict risk so much they create it.

They trade to often have stops to close and move them too quickly and end up losing.
Confront risk cheerfully!
Forget all the common wisdom about risking 2% per trade- if you're trading a $10,000 account that's 200! If you don't risk much you wont win.

If you have a high odds trade risk 20% and have the courage of your conviction.
If you take calculated risks at the right time you can enjoy currency trading success.
So there you have it the above is a simple system - support resistance and a few confirming indicators and the best systems are.

Keep in mind that forex trading is as much to do with mindset as method and you need to maintain discipline.

Simple currency trading systems are easier to understand, apply and have confidence in which leads to the discipline to follow your currency trading system to long term currency trading success.

By: kelly price
Check Out the Related Article : The Benefits of Forex Trading

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Tuesday, March 17, 2009

Choosing A Forex Trading Course

Are you looking to choose a good forex trading system, one that will be worth your time and effort learning how to trade?
Well, there are a couple of key points to keep clearly in mind, even before you go out hunting for a system to learn.

Firstly, some systems perform better than others in areas such as profitability and drawdown. These are vital.

Secondly, some systems can be taught more easily than others, take less time to trade, as well as suiting your personal daily routine better. You need to ask yourself: Do you want to trade all day long 5 days a week, or trade for 2-3 hours 3 times a week to make the same profit?
So when we’re choosing a forex trading system, especially if we haven’t had much experience with forex before, we’d want to jump in with some thought and consideration behind it.
We’re aiming for this:
We want to find a forex trading system that’s profitable enough for us, that has an acceptable drawdown, and that actually fits into our daily routine! If and when any of these 3 factors are not there, we find ourselves not able to continue trading the system.
So continue reading to find out how to choose a forex system that’s worth putting in the time and effort in to learn!

So here are the 7 power points when checking out a forex system or training course that you’ve found:

1. The profitability of the system.
This is shown as either pips per month, or when assuming a certain float amount, the dollar amounts per month.

These profit figures are often quoted in pips per month, as it’s one way of comparing trading systems, despite the fact that people are trading different trade sizes.

However, when looking at pip profit figures, just be aware that if you assume a fixed risk model, that the average face value that people will trade with any given float, will depend on the average risk per trade. This in turn, depends on the average stop loss distance for that system. But the stop loss distance is not often quoted.

As an example, say you want to trade with a 2% fixed risk model. If the average risk per trade in the first system is say 30 pips, and in the second system is 60 pips, then the average face value would be twice the size in the first system for any given float. If both systems produce the same average pip profit per trade, say 100 pips, the first system will, in terms of dollar amounts, produce the higher profit.

If on the other hand, we’re assuming a fixed dollar risk model, then the amounts you put in will depend on the size of the float.

2. The maximum drawdown either historical or based on real trading.
The maximum historical drawdown of a system is the largest decrease in equity that has happened in the past during backtesting or real time trading of the system.

When comparing drawdown between systems, you can either look at pips, or if using a assumed float, look at the dollar value. Then with this dollar value, express it as a percentage of the cash float used. For example, if the maximum historical drawdown was $6000 based on a $10 000 cash float, then the drawdown is 60%, expressed as a percentage of the cash float.
As well as using this drawdown figure to compare systems, you can also use it to figure out the amount of funds you’d need to start trading the system.

In the example we just mentioned, you’d need at least $16 000 in the beginning ideally, to trade the system. That is $10 000 float plus backup of $6000. This is in case a drawdown occurs when you first start trading, not months or years after you start. It’s wise to be prudent and to have backup.

3. What’s the win loss ratio of the system?
The “win-loss” ratio of the system, is the percentage of winning trades compared to losing trades. A high win-loss ratio is a bonus, in that the system may be psychologically easier to trade.

But more ultimately, you need to look at both the win loss and profit loss ratio, which we come to now…

4. The “profit-loss” ratio of the system.
The “profit-loss” ratio is the average size of winning trades compared to losing trades.
A high ratio means that the system is pretty robust. And this is a strength.

So if the “profit-loss” ratio multiplied by the “win-loss” ratio is greater than one, then you’re on the right track, that is, the system is profitable. You’d want this ratio to be 2 or 3 or more, not just bordering on one, which means that the system is profitable with a good edge.

5. The consistency of the system, by month and by year.
If you can find a profitable system, with a reasonable drawdown, and is very consistent, then that’s great. Look at the monthly, quarterly and yearly results to best tell this.

Some people won’t mind a slightly higher drawdown and less consistency, if the profitability was much higher. However, others depending on their circumstances and personality may want consistency more than profitability, to an extent. There’s a different sweet spot for everybody! What’s your sweet spot?

6. How much time do you need to trade the system each day?
Some forex systems require about 15 minutes a day to trade, and these are usually daily systems. And others need a few hours per day to achieve similar returns.

On a slightly different note, some forex systems trade the major economic announcements. In these systems of course, you know exactly when you need to be at the computer. Do you want to be a day trader, or do you prefer to trade a short time a day and then focus your day on other businesses?

7. Is the system quite systematic, quite discretionary, or a combination of the two?
A mostly mechanical system is an advantage in that they’re teachable and learnable. There’s less need to learn discretionary skills that come from real-time paper and live trading, although it’s rarer to find systems that are 100% mechanical.

For example, when putting in your support and resistance lines, does the course give you clear rules so that your lines, and therefore your trading decisions will be close to that of the person that’s teaching you, or the mentor that developed the system.

Even better, do they have weekly examples of how they draw their lines to fine tune your drawing of these lines?
Now that you know these keys to assessing a forex system, go on and have some practice looking at various forex strategies for yourself.

You’ll save effort and frustration if you choose a system that was worth learning and trading!
So consider the above points when looking at various forex trading systems that you’re thinking of learning.

If you’re a beginner, have patience, as you’ll need to learn the basics and then practice assessing a forex system for yourself.
If you know what you’re looking for, you’ll be able to more easily forex system that suits your daily routine and is profitable, not one that causes frustration!
So have some practice assessing forex systems. There may a forex seminar or forex introduction session near you, where you can go and check their system out for yourself.

By: Mark Hamburg

Check Out the Related Article : The Benefits of Forex Trading

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Wednesday, March 11, 2009

Best Online Trading

Best Online Trading -Trading In Virtual World

Online stock trading has a taken a new dimension today. In the stock markets officials are nothing a large amount of stock is being traded and a major rise in the opening of share trading accounts. Previously, everything was done manually or at the stock exchange and was the monopoly of few trading agencies but due to advancement in technology now everything has come to a finger click. No more waiting for replies from brokers!! On the other hand, Information of current market trends ups and downfall everything is easily available in the respective website. All the investor has to do is via Internet decide on the stock purchase and sales and easily earn in loads.

Strategies of Trading

In stock market investing, it is very commonly observed that small investors go through major losses due to lack of the knowledge of online stock trading strategy. The way of good trading strategy is of two ways. First, invest on an undervalued stock so that your investment should not go at total loss. Emotion should be kept out of mind and one should mentally acquire an upper and lower selling limit. Reflex ability should be maintained in this matter, when trading stock the instrument should be moveable, otherwise these trading would not work.

Day –Trading

The individuals are not aware what the Wall Street professionals have in store in them at all. Moreover, they know at what they are good in doing and giving the best shot. They do things like questionable analyst upgrades for other companies. In addition, those are the clients of the brokerage firm, for which the analyst is working. Therefore, the company or a corporate can sell it at a higher price. Day traders do not sleep at night it seems that they even dream about selling and buying stocks. Day traders are in born to trade. They know how to do business and make profit upon the market. By day trading, the day trader can earn in millions every day. The day traders invest blindly in the stock market today.

The truth behind the stock market is that it is game of fortune the big play with their money in the stocks . They try their hand in every aspect to earn a large profit out of their stocks. Moreover, their greed for money even takes them higher. In addition, a good portion of money is made out of by not informing the stock trader and investor who blindly trades and makes his contribution in the stock market today.

Discount Stock Trading

The most affordable way of buying stocks is through discount brokers. Nevertheless, a discount broker would only give a little about the company shares and that would not clarify the information about the stocks at a whole. Therefore, a full service barker is necessary for full financial advice support that cans advice on stock selections and financial planning. The foremost thing in stock broking is to rely on yourself that is to study and personally thus avoiding being less reliable on investment advisors or full service brokers. However, financial advisers can be of extremely helpful when you are real financial crisis. They are help at hand. They should be kept handy when needed.

Best Online Trading

when someone is thinking of investing in an open market, he should follow some real good guideline. He should know the terminology of share trading. He has to have a good financial background in order to gain success in stock trading. You have to volatile and quite familiar with the stock market in order to make a good profit. But you don’t have to be so much savvy with the stock market.

By: Vijayseo

Check Out The Related Article : The Benefits of Forex Trading

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