Real Forex Traders Learn to Like Losses

As a forex trader you have to learn how to take losses. Period. Don't be a crybaby. Learn how to take losses.

Learning how to take losses is one of the most important lessons you must learn if you want to survive as a trader. Nobody is 100% right all the time.

Losses are inevitable. Even Michael Jordan and Tiger Woods lose sometimes and they're considered the best in their field.

There will be trading streaks where you'll have a number of successful consecutive trades, but that will eventually come to an end you will take a loss.

As that point it's very important not to lose your head, you must remain in control of yourself. Don't have a cow man.

Take a break. Calm down and relax. Take a chill pill dude.

Until you've regained a clear mind and an ability to think logically again, stay out of the market.

Don't whine about your loss and never carry a prejudice against a loss.

The key to manage losses is to cut them quickly before a small loss becomes a large one.

I repeat. The key to manage losses is to cut them quickly before a small loss becomes a large one.

Never ever think that you will never lose. That's just ludicrous. Losses are just like profits, it's all part of the trader's universe.

Losses are unavoidable. Get over the loss and move on to the next trade.

by Scottie Pippin

BabyPips.com

5 Things You Must Do If You Want To Attain Financial Freedom Through Forex Trading

With the amazing growth of the forex market, you are going to see an astounding amount of traders lose all their money. Unfortunately, they haven't followed the simple steps I have laid out for you. Go through these steps and give yourself the greatest opportunity to achieve your goals.

1. Have Faith In Yourself

To reach the level of elite forex trader, you must trust in yourself and your forex trading education. You must be willing to make all your trading decisions, instead of relying on someone else's thoughts or ability (or lack of). Of course, you will prepare yourself fully before every risking any money.

2. Accept Your Learning Curve

Unless you are a veteran trader, you will lose money trading the Forex market. This is a near certainty. I don't say this to talk you out of trading. In fact, quite the opposite. You will be trading against others that fall to this reality day in and day out. You, however, will not risk a dime until you have learned the skills you need to make money trading the forex.

3. Decide What Type of Trader You Are

There are many ways to trade the forex. They range from very active to very patient. You must decide which style suits you best. The best time to learn this about yourself is while you are trading a demo account. There is no need to allow your learning curve to cost you money.

4. Get Educated

Education is the shortest path to elite forex trading. Regardless of your ultimate goals, you will reach them quicker with a great forex trading education. Take some time to review different options before deciding on who to trust with your forex trading education needs. A forex seminar will help shorten your learning curve drastically.

5. Continue to Get Educated

In order to achieve and retain elite forex trading skills, you must constantly be adding to you knowledge base. Your education should never end. In fact, one of the key points to look for in an elite forex trading course is ongoing education. It's nice to have an ongoing relationship with the person/people helping you to achieve your goals.

What separates an elite forex trader from all others is their desire and ability to be independent. Many traders are willing to follow signals, systems, strategies, or anything else you may call them. By taking this approach, however, these traders are only as good as the people they follow.

An elite forex trader will lead. Their decisions will be calculated and analyzed to near perfection. They will make decisions with no hesitation, and handle the growth of their account in a predetermined, intelligent fashion. Take your trading to their level and you will never look back.

by Eddie Yakubovich

elite-forex-trading.com

eddiey@elite-forex-trading.com

Main Drawbacks of Forex Traders

Why is it that very few traders succeed in the Forex trading environment while the grand majority of traders fail to achieve success? There is no hard answer to this question, there are a few things that will put you one step ahead and will definitely put the odds in your favor.

The main purpose of this article is to guide you through some important aspects of Forex trading. But in a different way, instead of telling you what to do or the best way to do it, it will tell you what to avoid. Sometimes it is better to identify the main drawbacks on a discipline and then isolate them so we have the best results at a certain level of development.
The Holy Grail

Many traders spend years and years trying to find the Holy Grail of trading. That magic indicator or set of indicators, only known by a few traders, that will make them rich in a short period of time.

Fact: Well, there is no magic indicator, nor a set of indicators that will make anyone rich in a short period of time. The main reason of this is because market changes, every single moment is unique. Every Forex trading system will fail from time to time. Our work here is to find a Forex trading system that fits our personality as traders, otherwise the trader will find it hard to follow it.
Looking for Easy Money

Unfortunately most traders are attracted to the Forex market for this reason. Mainly because of the publicity showing or rather trying to show how easy is to trade and make money in the Forex market.

Fact: Yes, it is very easy to trade, anyone can do it. It is as hard as one click. But the second part of it isn’t that easy. Making money or achieving consistent profitable results is hard. It requires lots of education, patience, discipline, commitment, and this list could go to infinite. In a few words, it is possible to have consistent profitable results, but definitely it is not easy.
Looking for Excitement

Some other traders are attracted to the Forex market or any other financial market because they think it is exciting to be a trader.

Fact: Yes, it is very exciting to trade the Forex market. But if this is the main reason you are still trading the Forex market, sooner or later you will discover the most expensive adventure you have ever known. Do some thinking on it.
Not Using Money Management

Most traders forget about this important aspect of trading. They think they shouldn’t be using money management until they achieve consistent profitable results. They totally forget about the risk side of trading.

Fact: Money management allows your profits to increase geometrically, but also limits your risk on every single trade. Money management tells you how much to risk on each trade. Using money management is a must if you want to achieve your trading goals. By using money management you make sure you are going to be able to trade tomorrow, the next week, month and the following years.
Not Being Psychology Tuned

This is one of the most underestimated subjects when it comes to trading. One of the main principles of financial markets is that the price of each instrument is based on the perception of each individual participant “the crowd.” In other words the price of each instrument is determined by the fear, greed, ego and hope of all traders.

Fact: Being aware of all psychological issues that affect the decisions made by traders will definitely put the odds in your favor.
Lack of Education

Education is the base of knowledge on every discipline. As lawyers and doctors require several years of college until they get their degree, Forex traders also require long years of study. It is better to have someone experienced to guide you through your trading, since some information could take you in the wrong path.

Fact: The market teaches us invaluable lessons on every single trade made. The process of education for a Forex trader could take for ever. That’s right, we never stop learning. We should be humble about the markets and our knowledge; otherwise the market will prove us wrong.

These are some of the most important barriers every trader faces when trying to trade successfully.

Trading successfully the Forex markets is no easy task, it requires a lot of hard work to do it right, but with the right education, you will put yourself closer to your trading goals.

How To Read Forex Charts: 5 Things You Must Know

Learning the basic skills in forex, such as how to read forex charts, is really important.

This is because once you have this vital skill under your belt, it will be a lot easier and quicker when the time comes for you to learn and practice an actual forex trading system.

By the time you finish this article, you'll learn how to read forex charts, as well as know the pitfalls that can occur when reading them, especially if you haven't traded forex before.

Firstly, let's revise the basics of a forex trading as this relates directly to how to reade forex charts.

Each currency pair is always quoted in the same way. For example, the EURUSD currency pair is always as EURUSD, with the EUR being the base currency, and the USD being the terms currency, not the other way round with the USD first. Therefore if the chart of the EURUSD shows that the current price is fluctuating around 1.2155, this means that 1 EURO will buy around 1.2155 US dollars.

And your trade size (face value) is the amount of base currency that you're trading. In this example, if you want to buy 100 000 EURUSD, you're buying 100 000 EUROs.

Now let's have a look at the 5 important steps on how to read a forex chart:

1. If you buy the currency pair, that is, you're long the position, realise that you're looking for the chart of that currency pair to go up, to make a profit on the trade. That is, you want the base currency to strengthen against the terms currency.

On the other hand if you sell the currency pair to short the position, then you're looking for the chart of that currency pair to go down, to make a profit. That is, you want the base currency to weaken against the terms currency.

Pretty simple so far.

2. Always check the time frame displayed. Many trading systems will use multiple time frames to determine the entry of a trade. For example, a system may use a 4 hour and a 30 minute chart to determine the overall trend of the currency pair by using indicators such as MACD, momentum, or support and resistance lines, and then a 5 minute chart to look for a rise from a temporary dip to determine the actual entry.

So ensure that the chart you're looking at has the correct time frame for your analysis. The best way to do this is to set up your charts with the correct time frames and indicators on them for the system you're trading, and to save and reuse this layout.

3. On most forex charts, it is the BID price rather than the ask price that's displayed on the chart. Remember that a price is always quoted with a bid and an ask (or offer). For example, the current price of EURUSD may be 1.2055 bid and 1.2058 ask (or offer). When you buy, you buy at the ask, which is the higher of the 2 prices in the spread, and when you sell, you sell at the bid, which is the lower of the two prices.

If you use the chart price to determine an entry or exit, realise that when you place an order to sell when the chart price is say 1.330, then this is the price that you'll sell at assuming no slippage.

If on the other hand, you place an order to buy when the chart price is the same price, then you'll actually buy at 1.3333. A forex system will often determine whether your orders will be placed simply according to the chart price or whether you need to add a buffer when buying or selling.

Also note that on many platforms, when you're placing stop orders (to buy if the price rises above a certain price, or sell when the price falls below a certain price) you can select either "stop if bid" or "stop if offered".

4. Realise that the times shown on the bottom of forex charts are set to the particular time zone that the forex provider's charts are set to, be it GMT, New York time, or other time zones.

It's handy to have a world clock available on your computer desktop in order to convert the different time zones. This is important when you're trading major economic announcements.

You'll need to convert the time of an announcement to your local time, and the chart time, so you'll know when the announcement is going to happen, and therefore when you need to trade.

5. Finally, check whether the times on your forex charts corresponds to when the candle opens or when the candle closes. Your charting software may be different to someone else's in this way.

The reason I mention this, is that if you need to trade major economic announcements, either by entering a trade based on the movements that happen after the announcement, or to exit a trade before the announcement in avoid getting stopped out during it, then you need to be precise (to the minute!) as these trades are performed according to what happens at the 1 minute immediately after the announcement, not the candle afterwards!

So there you have it.

You now have the 5 essential keys to how to properly read forex charts, which will help you to avoid the common mistakes which many forex beginners make when looking at charts, and which will speed up your progress when you're looking at forex charting packages, and forex trading systems that you want to trade!

Now that you know this, practice looking at forex charts with each of these 5 points in mind.

So get to it!

by Mark Hamburg
http://www.theforextrader.net/forex-charting-software.php

How To Make Money In Foreign Exchange

The forex (foreign exchange) market is the world's largest trading market in which world currencies can be purchased and sold and, while it has been in existence for many years, the market we see nowadays has been born out of significant changes in the 1970s when floating currencies and free exchange rates came in.

The forex market has no 'home' and trading can be made from just about anywhere in the world, not least using your own personal home computer. The trading market is effectively open day and night because as the market in one country is closing the market in another country on the other side of the globe is opening. In other words you can trade at whatever time suits you whether that is during the normal working day or in the middle of the night. There will always be someone somewhere who is willing to do business with you.

The secret when it comes to making money in foreign exchange trading is to begin by learning the ropes of the business and this means locating a good training course. It is not all that hard to make money with foreign exchange, but you will surely lose your shirt if you do not know exactly what you are doing. So, you have to take the time to learn the business before you begin and then have to make sure that you spend a little of time working with a dummy trading account before you begin to trade with your own money.

When you do start live trading begin slowly and steer clear of day trading until you are sure of your ground as this particular area of the market can be very volatile and is influenced by several outside factors. Also, set yourself strict trading limits and do not go outside them under any circumstances. Essentially, never trade with money that you cannot afford to lose because, while you will unquestionably make money, you will also have your fair share of losing trades while you are getting the hang of things.

Finally, ensure that you are using the best forex trading software you can afford and do not be afraid to ask for help when you get stuck!

What is day trading?

We often hear the term 'day trading' today but just what is day trading?

In very simple terms a day trader buys and sells with a very short investment horizon which is typically measured in minutes with trading positions being opened and closed within the same trading day. Day trading is particularly suited to high volume, volatile markets such as the forex but is certainly not limited to currency trading. It is for example very commonly seen in the equity markets, although it tends to be seen on the more volatile exchanges such as the NASDAQ, rather than the NYSE or AMEX.

The principle is simply to spot an opportunity and then profit from it quickly getting in and out of the market with just enough time to make your profit and too little time to risk the market turning against you. For example, you might open a position at 11:00 am and close it out just a few minutes later at 11:07 am to take a small but quick profit and repeat this process as many as a hundred times in a single trading session.

Today this traditional definition has been widened somewhat and we now also refer to the practice of trading from home through an online broker as day trading. And, just to complicate matters, the term 'swing trading' has also started to appear recently to refer to traders with a slightly longer investment horizon of anywhere from one to five days.

Day trading in its truest form (buying and selling with a very short investment horizon) is a risky business and is not something which you should try unless you know exactly what you are doing as, while it can be very profitable, it can also produce very large losses very quickly.

Although we talk about 'investment horizons' it also needs to be understood that day trading is not the same as investing and you will be working to very short timeframes during which you will need to be glued to your computer screen jumping onto the wave of a trade as it gains momentum and the jumping off as it crests in order to ride the next wave. Spotting the waves as they roll in and knowing just when to jump on and jump off requires both skill and practice.

For those who enjoy the excitement of the roller coaster ride then day trading can be both exciting and profitable but it is not something for the novice forex trader and should only be contemplated once you have cut your teeth in the world of currency trading and gained a fair amount of experience.

Forex Trading Strategies Are The Key To Successful Trading

Before venturing into the world of Forex trading it is vitally important that you stop and think carefully about the trading strategy that you are going to adopt, because forex trading strategies are the key to success in currency trading. There is no single strategy when it comes to trading in the foreign currency markets and every Forex trader has to develop his own strategy. It is important however to have a clearly defined plan from the very outset.

Some Forex traders choose to use a technical approach when it comes to trading while others are more at home with a fundamental approach. Both approaches are of course sound, but in reality most successful traders use a combination of the two to give them both an overview of the foreign exchange market and to permit them to plot specific entry and exit points for each currency trade.

The idea behind technical analysis is simply that prices rise and fall according to well established trends and that the currency market possesses clearly identifiable patterns which can be seen as long as you know what to look for. Knowledge and experience come into play here, but it is also a question of using the numerous analytical tools that are available and this means having a sound working knowledge not just the patterns of price movement but also of the tools at your disposal.

Many traders also rely on what are known as support and resistance levels. Here 'support' refers to a low price which is repeatedly seen as being the bottom of the market and from which there is a tendency for prices to rise. A 'resistance level is a high price beyond which a currency is rarely traded.

The principle here is that, should a currency break through either its support or resistance level, its price is likely to continue in that direction. So, if the price of a currency rises above its resistance level it is considered to be bullish and the price can frequently be expected continue to rise.

Another commonly used tool in foreign currency trading is that of moving averages. A simple moving average (SMA) shows the average price in a given time period (say 7 or 10 days) when the price is plotted out over a longer time period. Forex traders use moving averages to eliminate short term fluctuations in price and to provide a clearer picture of the movements in currency prices. A SMA can be plotted to indicate when prices are displaying a tendency to rise or fall. Prices which rise above the average will frequently continue to rise and, similarly, prices which fall below the average will often continue to fall.

These are just two of the many trading tools that can be used either in isolation or in combination and it is recommended that traders make use of several trading tools to analyze the market. If you are relying on just a single trading tool then trading can often be risky but, if the results from several different tools show that the market is moving in a particular direction then trading can be conducted with a fair degree of confidence.

Many traders will base their trading upon a fundamental analysis of the market and thus base their trading on such things as economic and political events, trade figures, inflations figures, unemployment rates and a host of other similar forms of data.

Fundamental analysis can be very powerful but it is perhaps at its most powerful when it is used alongside technical analysis, particularly as a tool to reinforce the indications derived from technical analysis.

In many ways it does not matter what trading strategy you adopt as long as you are happy that it can provide you with clear expectations about movements in the market and indicate to you just where you should be trading and when you should enter and exit individual trades.

A sound knowledge and understanding of fundamental and technical analysis should be every forgein currency trader's starting point when it comes to building a Forex trading strategy.

The Dangers Of Getting Emotional About A Forex Trade

Anyone who has seen the film Wall Street will undoubtedly remember Michael Douglas telling Martin Sheen not to get emotional about a stock. This is good advice for people trading in the stock market, but it is absolutely vital for people involved in Forex trading.

It is very easy to find yourself caught up in a trade. You open a position because you feel good about it and then you hang in there even if the market starts to move against you because you just know that the market is going to turn back in your favor. From time to time of course it does but, as a general rule, it doesn't.

The problem here is that you allow yourself to become attached to a trade and your decision to stay with it is very much an emotional decision. Also, because you are emotionally attached to a trade you view closing your position as an admission that you were wrong to have opened it in the first place.

Trading within the Forex market has to be driven by the market indicators and your trading decisions must be based on what these indictors are telling you and not on how you are feeling. If you are going to be a successful trader then you have to be ruled by your head and not by your heart.

There will be times when you find that you have an emotional attachment to a specific currency and that the majority of your trading tends to be in that currency. There's nothing wrong with this. You may even feel sometimes that the time is right to buy a particular currency. That's okay too. The mistake is not to follow a feeling about a particular currency but to open a position purely on the basis of this feeling.

If you have a feeling about a currency then begin by checking it out and take a look at the market numbers. If the numbers tell you that the time is right to open a position then do so but, if they tell you that it's not a favorable market then, no matter how you feel about it, you should not get into the market.

Similarly, if you have opened a position and the indicators tell you that the market is moving against you and that it is time to close your position then do so. Your heart may well tell you to 'hang in there' but it is the market and not your heart which pays your bills

In Forex trading you will win on some trades and will lose on others and that's nothing more than the way the market works. It is not a question of whether you are right or you are wrong. The market will frequently move unexpectedly and catch out even the most experienced of traders.

The secret lies in following the market indicators, recognizing that you are going to lose in a trade and getting out as quickly as you can to minimize your loss. You can then move on to your next, hopefully profitable, trade.

How A Forex Trade Works

A Guide For The Forex Currency Trading Beginner

For the Forex currency trading beginner a trade can be a little confusing until you break it down and come to grips with some of the trading terminology.

The purpose of any Forex trade is to swap one currency for another in the belief that the market will move and prices change such that the currency that you buy rises in value in relation to the currency which you sell.

The first important point is that each trade involves two currencies - the currency which you buy and the currency you sell. This gives us our first two important trading terms - the long position and the short position.

You take a long position when you buy a currency in the belief that it will rise in value and that you will able to sell at a profit.

If you sell a currency in the belief that it will fall in value you take a short position and hope to make a profit by buying it back again once the price has fallen.

The next important concept is that of the open and closed position. When you take a long position and buy a currency in the expectation that it will rise in value you open a position. When you later sell that currency to take you profit you close the position. The same is true when you take a short position and open that position by selling a currency in the expectation that it will fall in price and later close the position when you buy the currency back at the lower price.

Note: How does day trading work? You will often hear the term 'day trading' used and this confuses a lot of newcomers to the world of investing. When applied to forex trading, day trading simply means short-term trading effected by opening and closing trading positions within the same trading day, rather than running a trade over an extended period of time.

In Forex trading currencies are referred to by codes (developed by the International Organization for Standardization and known as ISO codes) such as USD for the US Dollar and GBP for the UK Pound. Prices for these currencies are quoted as either USD/GBP or GBP/USD with the first currency appearing in the quote being the base currency and the second currency being the counter or quote currency.

Here's an example quote to make things a bit easier to understand:

USD/GBP = 0.5260

In this case the US Dollar is the base currency and the UK Pound is the counter or quote currency. The base currency is always read as a single unit and so this quote means that it will cost 0.5260 UK Pounds to buy 1 US Dollar. Here's another quote:

GBP/USD = 1.9150

In this case it will cost 1.9150 US Dollars to buy 1 UK Pound.

Calculating Pip Values

Perhaps the first question we need to ask is what does pip mean in forex trading? A pip is the smallest movement that is possible in the price of one currency against another and it is vital to be able to calculate pip values quickly and easily as it is the movement in prices which results in your profit or loss when trading.

A pip is normally, but not always, 0.0001 or 0.01%. In other words, if a currency moves from a price of 1.7650 to 1.7655 it is said to move 5 pips.

The easiest way to understand how to calculate pip values is to start by considering currency pairs which involve the US Dollar and we start by considering the situation when the US Dollar is the quote currency as in the case of JPY/USD, GBP/USD or CHF/USD.

Here calculating a pip value is very easy as a pip will always have a value of $10. So, if while trading JPY/USD the market moves in your favor by 10 pips you will make a profit of $100. Let's see how this works.

Consider a quote of GBP/USD is 1.9730. This means that 1 UK Pound is worth 1.9730 US Dollars. A standard InterBank lot size is 100,000 and which means that 100,000 UK Pounds are worth 197,300 US Dollars. If the market moves 1 pip so that GBP/USD is 1.9731 then 100,000 UK Pounds will now be worth 197,310 US Dollars - a rise of $10.

Now let's turn our attention to what happens when the US Dollar is the base currency and consider a quote of USD/GBP = 0.6439. Here 1 US Dollar is worth 0.6439 UK Pounds and 100,000 US Dollars are worth 64,390 UK Pounds.

If the price moves up 1 pip then USD/GBP = 0.6440 and 1 US Dollar is worth 0.6440 UK Pounds and 100,000 US Dollars is worth 64,400 UK Pounds.

In this case a movement of 1 pip represents a value of 10 UK Pounds which, in US Dollars, gives a pip value of 15.53 US Dollars (10 ÷ 0.6440).

For a standard trading lot with the US Dollar as the quote or counter currency a pip has a value of $10 but, when the US Dollar is the base currency, the pip value will vary with the market price.

5 Reasons For Becoming A World Currency Trader

The foreign currency exchange market offers today's investor many advantages and here are just reasons why you might want to become a world currency trader.

A Market Which Never Closes

Many of the trading markets around the world are situated in fixed locations and operate within strict trading hours, often limited to just five or six hours a day between Monday and Friday. The Forex market however is open 24 hours a day.

This means that traders can not only take advantage of international events and react literally as they happen, but they also have the ability set their own trading hours. If you prefer to work in the mornings then that's fine but, if this doesn't suit you, then you can choose to trade during the afternoon, late evening or even in the middle of the night if you want to.

Low Trading Costs

In many markets, like the equity market, traders not only have to pay a spread (the difference in price between buying and selling a stock) but also have to pay a commission to the broker. On small trades this commission can typically be about $20 and this can rise rapidly to over $100 for larger trades.

Because the foreign currency exchange market is a wholly electronic market many of the traditional trading costs are eliminated and you are in affect reduced to paying nothing more than the spread. In addition, the extremely liquid nature of the global currency exchange market means that spreads are normally much tighter than those seen in other markets.

The Ability To Trade On High Leverage

In most markets where a trader has an opportunity to trade on leverage the leverage offered is often quite low. In the case of equity markets, for example, professional equity day traders will normally operate on a leverage of about ten times their capital. In the Forex market by contrast it is quite common to find that traders are permitted to trade at one hundred to two hundred times their capital.

A downside of high leverage is that it can of course lead to high losses as well as high gains. However, within the foreign currency market, risk management is extremely tightly controlled.

Limited Slippage

In currency trading trades are executed immediately using real-time prices at which firms will buy or sell the currencies quoted. In almost all cases this means that the price you see and the price you pay are the same.

This is not often the case in other markets where there can be often considerable delays between placing an order and that order being executed during which time the price will often move against you.

The Chance To Profit In Both Rising And Falling Markets.

Equity markets follow rising and falling trends (cycling between Bull and Bear markets), but the Forex market does not suffer this cycling which comes from structural bias in the market.

World currency trading always involves two currencies so that if you are down on one currency then you are up on the other. There is therefore always the potential for making a profit whether the market is rising or falling.