Forex trading can be difficult enough without making more work for yourself. You see some traders with lines and lines and different colours dotted about all over their charts and most of the time they have forgotten what half of them are there for. It is best to pick a simple strategy and stick to it or if you like to look at different trading signals have them on different charts and keep each chart minimised to 2 or 3 indicators, keep it simple.
It is not good trading strategy to use too many signals as you might find that some contradict others, for example, support and resistance levels shown on your charts with pivot points may contradict the support and resistance levels of Fibonacci levels. This is going to confuse the budding trader and will only lead to failure by either never getting into a trade or being to confused to exit a trade with maximum profit.
Some of the best ways to make forex trading simple is to use the simplest of strategies, support and resistance are the most common and many traders find the most reliable when it come to entry and exit strategies. A couple of moving averages of different Nbr levels and some pivot points are usually enough for most traders to make trading simple and still profit.
The key to success here is to find a simple strategy on one chart that works for you and if you want to confirm an entry or exit level with another method then have it on another chart so as not to confuse your main intention.
Monday, June 14, 2010
Tuesday, May 11, 2010
BASIC PRINCIPLES OF FOREX TRADING
1. Trading is an investment not an income.
It is important to have a realistic expectation of what you can achieve through forex trading. The nature of trading is such that you may make a good return on your initial capital over an annual period, but during that period you may have a number of consecutive losing months, with only a few bumper months inbetween. Therefore, even daytraders cannot claim to make a fixed amount per month which equates to a salary. You need to have another source of income to support yourself while trading forex. NEVER borrow money to trade with.
2. You can't predict the forex markets.
The forex markets are influenced by billions of traders, economic and political events. You simply cannot predict the direction and manner in which the markets will move.
Technical and fundamental analysis does much to provide a more educated guess than a simple coin toss but it is important to realise that each of these techniques will have a large failure rate. You will lose a large percentage of the time. Sometimes you will lose on more trades than you gain on. However, it is still possible to make money under these conditions by employing sound money management forex principles.
3. Let profits ride and cut your losses
The only way to make money from forex trading (or any form of trading) is by making enough money on your winning trades to cover your losses and to gain additional profit to grow your capital. This means letting your profitable trades ride and cutting your losses early. It is harder to put into practice than it sounds as psycologically it is much easier to "marry" your losing trades in the hope that the market will turn in your favour and grabbing your profit too soon when you see your hard earned gains slipping away as the market temporarily turns against you.
4. Trade according to a tried and tested system
This is one of the most important forex principles. The only way to cut out emotion in trading and adopt a more business-like and informed approach is to use a system of rules that have been developed and tested on market data. In this way, all the trade decisions have already been made before you even enter the forex market. This is a much less time consuming and less stressful way to trade for a living.
5. Employ a sound money management strategy
In our opinion, money management is the single most important aspect of any trading system and is badly neglected by forex beginners. It enables the trader to fully utilise their capital to grow their money as fast as possible while protecting them from excessive losses and final account blow out.
6. Don't ignore the fundamentals
Fundamental economic principles drive the foreign exchange rates of the world over the long term. However, they have minimal effect over the short-term and are thus not reliable to use for daytrading decisions.
Having said that, economic announcements sometimes have a profound effect on the markets, causing movements of hundreds of pips in a matter of hours. Therefore forex beginners ignore them at their peril!
7. Don't put your faith in the expert's recommendations and comments
There are literally hundreds of forex companies providing trading signals, daily commentary and trading recommendations. While it may be useful to read some of these to get an outside opinion, it can just be information overload for newcomers to the forex market, creating indecision and stress! Believe in your system and trade accordingly.
It is important to have a realistic expectation of what you can achieve through forex trading. The nature of trading is such that you may make a good return on your initial capital over an annual period, but during that period you may have a number of consecutive losing months, with only a few bumper months inbetween. Therefore, even daytraders cannot claim to make a fixed amount per month which equates to a salary. You need to have another source of income to support yourself while trading forex. NEVER borrow money to trade with.
2. You can't predict the forex markets.
The forex markets are influenced by billions of traders, economic and political events. You simply cannot predict the direction and manner in which the markets will move.
Technical and fundamental analysis does much to provide a more educated guess than a simple coin toss but it is important to realise that each of these techniques will have a large failure rate. You will lose a large percentage of the time. Sometimes you will lose on more trades than you gain on. However, it is still possible to make money under these conditions by employing sound money management forex principles.
3. Let profits ride and cut your losses
The only way to make money from forex trading (or any form of trading) is by making enough money on your winning trades to cover your losses and to gain additional profit to grow your capital. This means letting your profitable trades ride and cutting your losses early. It is harder to put into practice than it sounds as psycologically it is much easier to "marry" your losing trades in the hope that the market will turn in your favour and grabbing your profit too soon when you see your hard earned gains slipping away as the market temporarily turns against you.
4. Trade according to a tried and tested system
This is one of the most important forex principles. The only way to cut out emotion in trading and adopt a more business-like and informed approach is to use a system of rules that have been developed and tested on market data. In this way, all the trade decisions have already been made before you even enter the forex market. This is a much less time consuming and less stressful way to trade for a living.
5. Employ a sound money management strategy
In our opinion, money management is the single most important aspect of any trading system and is badly neglected by forex beginners. It enables the trader to fully utilise their capital to grow their money as fast as possible while protecting them from excessive losses and final account blow out.
6. Don't ignore the fundamentals
Fundamental economic principles drive the foreign exchange rates of the world over the long term. However, they have minimal effect over the short-term and are thus not reliable to use for daytrading decisions.
Having said that, economic announcements sometimes have a profound effect on the markets, causing movements of hundreds of pips in a matter of hours. Therefore forex beginners ignore them at their peril!
7. Don't put your faith in the expert's recommendations and comments
There are literally hundreds of forex companies providing trading signals, daily commentary and trading recommendations. While it may be useful to read some of these to get an outside opinion, it can just be information overload for newcomers to the forex market, creating indecision and stress! Believe in your system and trade accordingly.
Thursday, April 22, 2010
Where to find a good Forex trading system?
Whether you are looking to write your own Forex trading system or borrow and improve an existing one, there are several, so far the best, websites, which could be of a good help:
Forexfactory.com — a large forum with lots of free Forex trading systems, strategies, ideas, as well as expert advisors.
Forex-tsd.com — huge resource, known mostly for its best custom made MT4 indicators, has a section with trading systems, but now they have introduced an elite paid member section.
Forex-strategies-revealed.com — a large quality website with a free collection of Forex trading systems from simple to advanced.
Forexfactory.com — a large forum with lots of free Forex trading systems, strategies, ideas, as well as expert advisors.
Forex-tsd.com — huge resource, known mostly for its best custom made MT4 indicators, has a section with trading systems, but now they have introduced an elite paid member section.
Forex-strategies-revealed.com — a large quality website with a free collection of Forex trading systems from simple to advanced.
Saturday, February 20, 2010
Tips For Becoming a Profitable Forex Trader
Regardless of your trading style; day trading, swing trading, or position trading there is a simple step by step plan you can use to improve your odds for success.
1. Start by paper trading until you can be consistently profitable on paper. I would also recommend doing a lot of practice trading with a real-time demo account. This is the next best thing to real trading without risking money.
2. Regardless of how much money you have, start trading with a small amount of money and work up over time. You need to make all your mistakes with the smallest amount of money. Trust me, it will be a lot less painful!
3. If you are a day trader, avoid the very small time-frames like 1 or 2 minute as you get a lot of signals which can lead to over trading. These fast time-frames are full of market noise and insignificant price activity.
4. Make sure that all your entry criteria are met for the trade setup. Don't jump the gun until everything is in place.
5. If there are no clear signals in the market, then do nothing. Forcing trades almost always ends up with losses.
6. Always place your protective stop immediately after entering the trade!
7. In your studies you will be exposed to many techniques. You will improve your results by concentrating on only one or two strategies. Get real good and consistently profitable with them first.
8. Don't watch too many currencies at one time. This leads to too much confusion and indecision about which trade to take. I wouls stick to two or three of the major currency pairs.
9. Win, lose or draw don't deviate from your strategies or change things.
1. Start by paper trading until you can be consistently profitable on paper. I would also recommend doing a lot of practice trading with a real-time demo account. This is the next best thing to real trading without risking money.
2. Regardless of how much money you have, start trading with a small amount of money and work up over time. You need to make all your mistakes with the smallest amount of money. Trust me, it will be a lot less painful!
3. If you are a day trader, avoid the very small time-frames like 1 or 2 minute as you get a lot of signals which can lead to over trading. These fast time-frames are full of market noise and insignificant price activity.
4. Make sure that all your entry criteria are met for the trade setup. Don't jump the gun until everything is in place.
5. If there are no clear signals in the market, then do nothing. Forcing trades almost always ends up with losses.
6. Always place your protective stop immediately after entering the trade!
7. In your studies you will be exposed to many techniques. You will improve your results by concentrating on only one or two strategies. Get real good and consistently profitable with them first.
8. Don't watch too many currencies at one time. This leads to too much confusion and indecision about which trade to take. I wouls stick to two or three of the major currency pairs.
9. Win, lose or draw don't deviate from your strategies or change things.
Saturday, February 13, 2010
CHOOSING AN ONLINE FOREX BROKER
Foreign exchange (FOREX) is the arena where a nation's currency is exchanged for that of another. The foreign exchange market is the largest financial market in the world, with the equivalent of over $1.9 trillion changing hands daily: more than three times the aggregate amount of the US Equity and Treasury markets combined with other financial markets.
The foreign exchange market is the place where currencies are traded. Currencies are important to most people around the world, whether they realize it or not, because currencies need to be exchanged in order to conduct foreign trade and business.
Before trading Forex you need to set up an account with a Forex broker. What exactly is a broker? In simplest terms, a broker is an individual or a company that buys and sells orders according to the trader's decisions. Brokers earn money by charging a commission or a fee for their services. Deciding on a broker requires a little bit of research on your part, but the time spent will give you an insight into the services that are available and fees charged by various brokers.
When selecting a prospective Forex broker, find out with which regulatory agencies each dealer is registered. The Forex market is label as "unregulated" market, and it basically is.
In the United states a broker should be registered as a futures commission Merchant (FCM) with the Commodity Futures Trading Commission (CFTC) and a NFA member. The CFTC and NFA is here to protect the public against fraud, manipulation, and abusive trade practices.
The foreign exchange market is the place where currencies are traded. Currencies are important to most people around the world, whether they realize it or not, because currencies need to be exchanged in order to conduct foreign trade and business.
Before trading Forex you need to set up an account with a Forex broker. What exactly is a broker? In simplest terms, a broker is an individual or a company that buys and sells orders according to the trader's decisions. Brokers earn money by charging a commission or a fee for their services. Deciding on a broker requires a little bit of research on your part, but the time spent will give you an insight into the services that are available and fees charged by various brokers.
When selecting a prospective Forex broker, find out with which regulatory agencies each dealer is registered. The Forex market is label as "unregulated" market, and it basically is.
In the United states a broker should be registered as a futures commission Merchant (FCM) with the Commodity Futures Trading Commission (CFTC) and a NFA member. The CFTC and NFA is here to protect the public against fraud, manipulation, and abusive trade practices.
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