Discipline. We hear that word all the time and know that having it is important in most every area of our lives but what does it mean to the forex trader? In short, it means the difference between failure and success.
Any trading strategy or investment plan, no matter how good it looks on paper or how well it has worked for someone else, is worthless without proper execution of that plan. That sounds easy, but if it was easy 90% of forex traders wouldn't fail. It isn't the system or insider knowledge or any other secret that makes the 10% successful when all the others are wiped out in a month. It's discipline.
Begin with your trading strategy. If you don't have one, get one. There are many resources devoted to this topic and forums where you can talk to experienced traders to learn their strategies, adapting the information you learn to create your own detailed strategy that suits your style that you know you can follow. For example, don't think you can implement the strategy of a day trader when your lifestyle won't allow you to follow the markets 24 hours a day.
Write your strategy down in detail and keep it in front of you. Write down every detail of when you will enter a trade and when you will exit. Define a stop loss and profit target, exact criteria and solid rules that you will not stray from. Then follow those rules. Every time. Even if it takes staring at the screen for hours watching the market and waiting, letting trades go that don't exactly fit your rules, setting a stop loss and accepting the loss, sticking with your proven system through a string of losing trades and studying the market every day.
Easier said than done when emotions get in the way.
Trading is filled with emotions, the movement of the markets is based on them. Greed and fear. The high and excitement of a profitable trade, the discouragement or even anger at the losing trade. The fear of loss. You wouldn't be human if you didn't feel all of these emotions. The discipline is not letting them rule you or even enter into your trades at all.
One of the strongest emotions is fear of losing money. Most people through the whole of their lives have learned to associate money with security, feelings of self worth, prosperity and freedom. The threat of a loss of money can trigger that defense mechanism that could lead to the premature exit of a profitable position before the exit signal generated by your trading system. It could also lead you to not take a signal if you've had a series of losing trades..
The flip side, but equally powerful and motivating, is greed. It can cause you to hold your position longer than your trading system dictates, beyond the time the exit signal is generated. It can make you open a position without an entry signal from your system or cause you to violate your money management system by increasing your position amount after winning trades.
Your goal is not the quick profit but consistency in your trading system performance and confidence that you will achieve your profit objectives if you strictly follow your system. You've tested it with your demo accounts and refined it so trust it and trust yourself.
Using a forex trading mechanical trading system you can solve all problems caused by your emotions by automating the trading process. By following the professionally created trading system, the beginning trader will gain confidence and thus apply that discipline that is so hard for many to overcome.
Confidence in your trading and money management systems will force you to follow them. Without that confidence you will certainly deviate from them with negative consequences to your financial and emotional well-being. Success will only come when you take each and every signal your system generates to build your confidence in it. That will strengthen your discipline help you stick to the system during the inevitable losing streaks.
There is no such thing as a perfect trading system. Foreign currency trading is a game of probabilities so as long as you stick to a proven method you will reach your profit objective in time. Learn to treat wins and losses with the same emotional detachment by shifting your emotions from the price to the system and how well you are following it.
The mastery of emotion is a long and difficult road which is why beginning traders are encouraged to automate trading systems. Confidence, discipline, success.
Daily Forex
For full details of the program visit us (Daily) Forex Charts
Tuesday, April 14, 2009
Choosing a Reputable Forex Broker
Choosing a broker for your forex trades can be an overwhelming task. There are so many! What do you look for? What questions do you ask? How do you know if a company is reputable? It's very important to do thorough research and well worth the time and effort to both save and make you money in the future. Following are some criteria to help you with your decision.
You want to begin with a list of companies that are reputable. A good place to start is an internet forum used by foreign currency traders where you can ask what brokers they use and recommend as well as brokers you want to avoid.
Since there is no central governing body for the forex market, it's important to choose a company that is operating in a country with strong regulatory requirements. These include the US, UK, Australia and Hong Kong. In the US, for example, forex brokers are required to be capitalized with a minimum of 20 million dollars to insure the protection of their clients' funds. The better capitalized the company, the more likely it is to be able to protect your funds in a time of crisis.
Find out if your potential broker is registered as a Futures Commission Merchant (FCM) with the Commodity Futures Trading Commission (CFTC). Also investigate the broker through the National Futures Association's (NFA) Background Affiliation Status Information Center (BASIC). The NFA website is a valuable resource for potential investors.
Brokers earn their money through commissions and fees. Many charge you a spread which is the difference between the buying and selling prices for a currency pair and can vary depending on the type of account you open. Look carefully at what the company's rates apply to. There may be a higher brokerage fee for different trading instruments that rarely apply to the types of trades you place.
Read the fine print. Many companies will tack on extra hidden fees that can add costs to each trade. They can include charges for transferring funds, insurance, administration charges and the like.
Other things to look for are available currency pairs, interest rates on margin accounts, and trading hours. You will also want to know the broker’s margin and minimum trading size requirements. Compare brokers' policies since one might offer higher margin accounts while another may have lower transaction costs.
The trading software offered by Forex brokers is an important factor in your decision on which broker to use. This software, or trading platform, will enable you to research currency pairs and place orders.
Open a demo account, so that you can try out their platform before you sign up and execute real trades.
Things to consider in evaluating the platform are:
1. Is the software easy for you to use? If it isn't, then it won't be much good to you.
2. Does it include your account information? It should display your balance, available margin, your gains and losses so you can track and manage your trades.
3. Does it give you real time quotes?
4. Does it allow instant execution of a trade?
5. Are there technical analysis tools? Look for a broker that offers charting and analysis software that suit your needs.
Once you've done your research and found the reputable company with the platform suiting your needs and trading preferences, you will decide on the type of trading account. There are several types to choose from:
1. A mini or micro account is a good way to test the waters and is good if you don't want to take big risks. A mini account requires only a small initial investment that you can hopefully grow to open a standard or normal account.
2. The standard or normal account is the most risky but the most profitable. The initial investment requirements are larger with the advantages including higher leverage, better margin requirements and lower margin account interest rates. Only experienced forex traders should open a standard account.
3. Managed accounts are accounts where the foreign currency broker makes the buy and sell decisions and handles the account. Your only task is to secure your capital.
Now that you’ve picked a broker and decided which type of account to open with them, you are ready to begin. Go forth and trade!
You want to begin with a list of companies that are reputable. A good place to start is an internet forum used by foreign currency traders where you can ask what brokers they use and recommend as well as brokers you want to avoid.
Since there is no central governing body for the forex market, it's important to choose a company that is operating in a country with strong regulatory requirements. These include the US, UK, Australia and Hong Kong. In the US, for example, forex brokers are required to be capitalized with a minimum of 20 million dollars to insure the protection of their clients' funds. The better capitalized the company, the more likely it is to be able to protect your funds in a time of crisis.
Find out if your potential broker is registered as a Futures Commission Merchant (FCM) with the Commodity Futures Trading Commission (CFTC). Also investigate the broker through the National Futures Association's (NFA) Background Affiliation Status Information Center (BASIC). The NFA website is a valuable resource for potential investors.
Brokers earn their money through commissions and fees. Many charge you a spread which is the difference between the buying and selling prices for a currency pair and can vary depending on the type of account you open. Look carefully at what the company's rates apply to. There may be a higher brokerage fee for different trading instruments that rarely apply to the types of trades you place.
Read the fine print. Many companies will tack on extra hidden fees that can add costs to each trade. They can include charges for transferring funds, insurance, administration charges and the like.
Other things to look for are available currency pairs, interest rates on margin accounts, and trading hours. You will also want to know the broker’s margin and minimum trading size requirements. Compare brokers' policies since one might offer higher margin accounts while another may have lower transaction costs.
The trading software offered by Forex brokers is an important factor in your decision on which broker to use. This software, or trading platform, will enable you to research currency pairs and place orders.
Open a demo account, so that you can try out their platform before you sign up and execute real trades.
Things to consider in evaluating the platform are:
1. Is the software easy for you to use? If it isn't, then it won't be much good to you.
2. Does it include your account information? It should display your balance, available margin, your gains and losses so you can track and manage your trades.
3. Does it give you real time quotes?
4. Does it allow instant execution of a trade?
5. Are there technical analysis tools? Look for a broker that offers charting and analysis software that suit your needs.
Once you've done your research and found the reputable company with the platform suiting your needs and trading preferences, you will decide on the type of trading account. There are several types to choose from:
1. A mini or micro account is a good way to test the waters and is good if you don't want to take big risks. A mini account requires only a small initial investment that you can hopefully grow to open a standard or normal account.
2. The standard or normal account is the most risky but the most profitable. The initial investment requirements are larger with the advantages including higher leverage, better margin requirements and lower margin account interest rates. Only experienced forex traders should open a standard account.
3. Managed accounts are accounts where the foreign currency broker makes the buy and sell decisions and handles the account. Your only task is to secure your capital.
Now that you’ve picked a broker and decided which type of account to open with them, you are ready to begin. Go forth and trade!
Monday, April 13, 2009
Forex Scams: How to Spot Them
The ads for foreign currency trading, or forex, are everywhere. You've seen them and it's probably why you're reading this now.
"Make $1000 per week, every week."
"We guarantee you will make at least a 30-40% rate of return within two months."
"Whether the market moves up or down, in the currency market you will make a profit."
"Your investment is secure."
As the old adage goes, if it sounds too good to be true, it probably is. With the number of forex scams that have exploded with the emergence of the internet, that adage should always be at the forefront of your mind.
Foreign currency trading is legitimate, accounting for trillions of dollars in trades every day. It is one of the largest financial markets in the world, including trading between large banks, currency speculators, governments and corporations. It's that legitimacy that seeds the ground for frauds.
The internet is the fertilizer. It's an inexpensive way to lure millions of victims with attractive websites that appear legitimate promising high-return, low-risk investment opportunities or even highly-paid currency trading employment opportunities for quick wealth.
While the currency market has long had its share of swindlers, it has become the biggest source of financial fraud since early 2008 with the average victim losing $15,000. According to the North American Securities Administrators Association, "off-exchange forex trading by retail investors is at best extremely risky, and at worst, outright fraud."
Typically, investors are promised thousands of dollars in profits in just a few weeks or months, with an initial investment of only $5,000. Often, the investor’s money is never actually placed in the market through a legitimate dealer at all, but simply stolen. Known as “bucket shops”, your money appears to be invested as you watch the phony platform, but in reality it has never entered the market at all.
The Warning Signs of Forex Scams
1. Avoid opportunities that sound too good to be true. Get-rich-quick schemes tend to be frauds. There is no such thing as a "free lunch", there's always a catch.
2. Stay away from any company that guarantees large profits or promises extremely high performance. Those claims are often false.
3. Avoid companies that promise little or no financial risk, especially in the forex market. Currency markets carry substantial risks and are not the place to invest funds you can't afford to lose. You can lose it all quickly trading foreign currency futures or options.
4. Don't trade on margin unless you understand what it really means. Many currency traders will ask you to give them money for "margin", often in the range of $1,000 - $5,000 which actually controls much larger dollar amounts of trading. It makes you responsible for losses much greater than the amount you deposited.
5. Be wary of sending or transferring cash on the internet and be alert to the dangers of trading on-line. Many of these phony companies are not located in the US and don't display any address or other information identifying their nationality. If you transfer money to them it will be very difficuly or impossible to recover.
6. Get the company's performance track record. Beware of any company who isn't willing to provide you, in writing, complete and verifiable information about the company's performance record on behalf of other clients. Check any information you get regarding the company's or individual's background. If you aren't convinced that it is completely legitimate, avoid it.
Foreign currency trading can be a profitable investment strategy when you take the steps to become well educated in what it is and what it isn't. Do your homework first and protect yourself from the experienced con artists who want to part you from your hard-earned cash.
"Make $1000 per week, every week."
"We guarantee you will make at least a 30-40% rate of return within two months."
"Whether the market moves up or down, in the currency market you will make a profit."
"Your investment is secure."
As the old adage goes, if it sounds too good to be true, it probably is. With the number of forex scams that have exploded with the emergence of the internet, that adage should always be at the forefront of your mind.
Foreign currency trading is legitimate, accounting for trillions of dollars in trades every day. It is one of the largest financial markets in the world, including trading between large banks, currency speculators, governments and corporations. It's that legitimacy that seeds the ground for frauds.
The internet is the fertilizer. It's an inexpensive way to lure millions of victims with attractive websites that appear legitimate promising high-return, low-risk investment opportunities or even highly-paid currency trading employment opportunities for quick wealth.
While the currency market has long had its share of swindlers, it has become the biggest source of financial fraud since early 2008 with the average victim losing $15,000. According to the North American Securities Administrators Association, "off-exchange forex trading by retail investors is at best extremely risky, and at worst, outright fraud."
Typically, investors are promised thousands of dollars in profits in just a few weeks or months, with an initial investment of only $5,000. Often, the investor’s money is never actually placed in the market through a legitimate dealer at all, but simply stolen. Known as “bucket shops”, your money appears to be invested as you watch the phony platform, but in reality it has never entered the market at all.
The Warning Signs of Forex Scams
1. Avoid opportunities that sound too good to be true. Get-rich-quick schemes tend to be frauds. There is no such thing as a "free lunch", there's always a catch.
2. Stay away from any company that guarantees large profits or promises extremely high performance. Those claims are often false.
3. Avoid companies that promise little or no financial risk, especially in the forex market. Currency markets carry substantial risks and are not the place to invest funds you can't afford to lose. You can lose it all quickly trading foreign currency futures or options.
4. Don't trade on margin unless you understand what it really means. Many currency traders will ask you to give them money for "margin", often in the range of $1,000 - $5,000 which actually controls much larger dollar amounts of trading. It makes you responsible for losses much greater than the amount you deposited.
5. Be wary of sending or transferring cash on the internet and be alert to the dangers of trading on-line. Many of these phony companies are not located in the US and don't display any address or other information identifying their nationality. If you transfer money to them it will be very difficuly or impossible to recover.
6. Get the company's performance track record. Beware of any company who isn't willing to provide you, in writing, complete and verifiable information about the company's performance record on behalf of other clients. Check any information you get regarding the company's or individual's background. If you aren't convinced that it is completely legitimate, avoid it.
Foreign currency trading can be a profitable investment strategy when you take the steps to become well educated in what it is and what it isn't. Do your homework first and protect yourself from the experienced con artists who want to part you from your hard-earned cash.
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