When it Comes to Forex Trading Systems Don't Think Mechanically

It's only reasonable that the majority of traders are looking for the best forex trading systems. But you need to think about that word "system". I think traders would be better off getting an education in forex instead of a "system".

The word system sounds very mechanical to me. The term instantly makes me think of a chart that is piled with one indicator on top of another, and the trader could only buy and sell when all the indicators are lined up. To give you an example, you could only sell when the MACD indicator shows bearish price divergence, moving averages cross each other downwardly, stochastics are overbought, etc.....

You need to ask yourself, "what in the world does this have to do with trading?" Everything is so random and arbitrary.

I suppose this is what bothers me the most about the concept of forex trading systems. It's kind of like shutting your brain off, and just follow the indicators blindly as if a robot was trading. You have to understand that the forex market cannot be looked in such a mechanical manner. If that was the case, everybody who traded the market would be rich. The only thing traders would have to do would be pull up a few generic indicators, and all of a sudden the money would start rolling in.

Obviously this is just not realistic, especially when you consider how many newbie traders approach the markets with that kind of mindset. You have to accept the fact that if you are going to trade the forex market, you have to use discretion.

How to Trade Forex - Key Facts You Need to Know to Enjoy Success

Forex trading success can be achieved by anyone, as it's totally a learned skill but it is a fact that 95% of Forex traders lose money and only 5% win. If you understand the 4 facts enclosed in this article, you will know how to trade Forex correctly and be able to enjoy Forex trading success - let's take a look at them.

The first fact is you need to avoid the myths and get yourself the right education lets look at some myths which are simply not true.

Cheap Forex Software will Make You Money with no Effort

How many people buy cheap software packages and expect an income for life with no effort? A huge amount and they all lose money. If Forex trading was as easy as the vendors claim, 95% of traders wouldn't lose! These packages are so cheap because they don't make money.

Markets Move to Science and Maths

This is another misconception on how to trade Forex but the fact is markets move to the odds and cannot be predicted in advance, if you want to win forget prediction which is hoping or guessing and trade the reality of price change. If markets could be predicted, there would actually be no market as we would all know the price in advance.

You don't Need to Work Hard to Win

When you trade an odds based market, a simple system will out perform a complex one, as it's more robust and has fewer elements to break. Anyone can learn a successful Forex trading strategy in a few weeks or less. Now, while learning a system is easy enough and requires no college education or above average intelligence, the hard part of Forex trading is trading with discipline.

A Disciplined Mindset is Essential

You will face losses when trading any Forex trading system and how you deal with these losses will determine whether you enjoy success or not. Most traders have a problem taking losses but this is part of trading! You can't win every time but so long as you take your losses and keep them small, you can make money and that's what Forex trading is all about.

It's the right mindset that separates winners from losers and you need to be disciplined to win, its as simple as that. If you get angry frustrated and change strategies constantly you simply won't win.

If you want to know how to trade Forex correctly, hopefully this article has pointed you in the right direction. The best traders are humble, take their losses and run their profits and if you can do this you can win. So get a simple, logical, Forex trading strategy and trade it with discipline and you can enjoy currency trading success.

Forex Price Movement - 4 Myths About Price Movement Which Cause Losses

There are 4 myths that traders believe about Forex price movement which traders believe get them wiped out. If you want to make money at Forex trading, you need to know how prices really move and avoid the myths and that's what this article is all about.

Let's look at the myths in no particular order of importance; they're all important. Here they are:

You Can Predict Prices in Advance

Many traders think that prices can be predicted in advance but this is just hoping and guessing, there is no hidden order to price movement because if there was, we would all know the price in advance and there would be no market.

When trading Forex, you are playing the odds and that's it. This doesn't mean you can't win, you can but you must trade the reality of price change and cut your losses and run your profits.

Complex Mathematical Equations can Give You an Edge

There has been a massive rise in the number of cheap automated Forex software packages which claim they use mathematics, to help you make a regular income but they all lose money and the more complex a system is the more likely it is to fail.

Simple systems work best in an odds based market, as they have fewer elements to break. This is actually good news, as it means that anyone can achieve Forex trading success, so keep your Forex strategy simple and don't complicate your trading.

Markets Move to the Fundamentals

Markets don't move to the news, they move to what people think of the news and its a fact that markets always collapse when the news is most bullish and rally when its most bearish.

The facts are unimportant, its what people think of them that is and that's why the best way to trade Forex is to use Forex charts. The chartist doesn't care why prices are moving they just want to make money when they do and lock into trends.

How to Win at Forex Trading

If you want to win at Forex trading you can, because as we have just seen you only need a simple strategy and furthermore, its obvious that prices trend for long periods. So by locking into these trends, with a simple robust Forex trading strategy, anyone can achieve Forex trading success.

Become a Forex Trader From Home - What You Need to Do to Win

If you want to become a Forex trader from home you can, but be aware that the vast majority of traders lose. They don't lose because they can't win - anyone can - but they get the wrong education. Here we will look at how to learn Forex trading the right way.

The first point to keep in mind is only 5% of traders win yet, there are numerous new traders who think they can win with no effort by buying a cheap piece of get rich quick software and making no effort but they don't work. If they did, 95% of traders wouldn't lose their money. If you want to win you need to spend some time, make some effort and learn skills but the good news is that for the amount of time you have to spend learning the potential for gains is enormous.

Forex trading is an area where simple systems will beat complex ones and you only need to spend a few weeks and you can learn all you need to know and this really is so easy anyone can do it, no college education is required and intelligence is not an issue. The question you might be asking is if it's so easy to learn a Forex trading strategy why do so many traders lose?

The answer to this question is they come into Forex trading with the wrong mindset. They don't think they will lose (but all traders face long periods of losses) and they simply have an ego which means they fail to keep these losses small. The way you deal with your losses will determine how successful you are, if you do what most traders do and run losses and hope they turn around or deviate from your trading plan you will get wiped out.

Most traders want to be perfect and win all the time but the market won't let you do this so you have to decide if you want to be clever and right all the time or make money because the market won't all low you both options.

The professional trader takes his losses and keeps them small and then runs his profits and you will find many traders who lose far more trades than they win but still make triple digit annual profits.

If you understand this article you will see why anyone can win but so many lose and its not because they can't learn a trading strategy, it's because they cannot trade with discipline. If you get the right education, have confidence in what your doing and adopt the right mindset you win and become a successful Forex trader from home.

Forex Trading - A Simple Strategy Anyone Can Use For Big Gains

Here we will give you a simple Forex trading strategy which you can learn in around a week and then seek triple digit profits with, in around 30 minutes a day. Lets take a look at it.

This strategy is based on two simple facts which are obvious, if you look at any chart of any Forex pair.

Firstly, currencies trend for long periods up or down and secondly, any currency which is bullish, will start its trend by breaking to new market highs and continue its trend by breaking to new highs.

So our strategy is simple - we will lock into long term trends, by buying important breakouts of resistance.

Most traders never use this strategy, as they are obsessed with buying the exact low of any move and when breakouts occurs, they want to wait for the pull back but it never comes; they sit and wait and miss the move. The smart trader, buys the break and sure he has missed the first part of the move but the odds favour the move will continue and he has plenty of profit ahead of him.

So what should you look for in a breakout?

The number of tests is important, its the more the better and you should really look for at least six tests before the breakout occurs and the wider these tests are apart in terms of time the better.

When any breakout occurs, it has higher odds of success if volatility in increasing and momentum is on the rise.

To check if this is happening, learn some momentum indicators and two of the best are the RSI and stochastic. We have covered these in other articles, they only take a few hours to learn so make them part of your essential Forex education.

Breakout trading in terms of risk control is easy - you put your stop under the breakout point and on good breakouts, this will give you low risk and the possibility of a high return.

Each month you will spot a couple of really good breakout trades to take and you can easily make triple digit gains with this simple Forex trading strategy.

You trade the reality of price, with no prediction needed and as long as Forex markets trend this strategy will make money. So trade the breakout and make yourself a great second or even life changing income.

Forex Broker Scams

Have you ever wondered why the ads of '400-1 leverage' are shown all over the broker sites? Or have you jumped at them and looked to sign up for a Free Demo Account? Well the problem that most novice traders don’t see is that these brokers are selling you the supposed ‘benefit’ when in turn; the only ‘benefit’ is theirs. Let’s explain this. Dealing Desk forex brokers make their own markets - they make the bid-offer price to their clients. They work on the probability assumption that as most highly leveraged speculators lose then its good business to take the opposite position to them.

This is done automatically, so when a client buys Dollars against the Yen, the broker sells short the Dollar. When the client covers the position (either for a profit or loss) the broker is taken out also. If the client wins the broker loses and vice-versa. If the brokers stand to gain when a client loses, what is the best way to make sure that the clients lose big time? Easy, let them trade huge positions on a limited amount of capital so that the odds even for the best and most talented traders are pretty much – ZERO. This is how the leverage game is played.

Understanding how leverage works is also cruicial in deciding which broker to choose for your trading. The question here is does your forex broker immediately offset positions with their clearing house or do they actively take positions on the other side of their clients' trades? The purpose you should focus on here is to find a forex broker that is looking after your own interests not theirs.

Which Broker to Choose?
Find a broker where you can trade with low leverage, definitely lower than 300:1 or the ridiculous ratios like 500:1. Our recommended broker discourages high risk trading and prohibits the use of leverage in excess of 50:1.

Those brokers offering high leverage have a business model established primarily for transferring wealth from your account into theirs and are not looking after YOUR interest. Remember also that there is a big difference between the minimum margin required and leverage. If you don't understand these concepts you are at risk.
Nothing a broker offers in terms of technology, charts, news, training, narrow spreads, interest on unused margin or any of the many tricks the marketing wizards play will save you from the peril of too highly geared trading.

Do Some Investigation
It is imperative that you make sure that you are comfortable with the risks associated with your forex broker. You have to make sure you get satisfactory answers to some basic questions:
•Is your forex broker subject to a globally recognized regulator?
•Does the regulator specifically oversee the retail OTC forex
market?
•Does your broker have a registration / license number with the
regulator?
•Does your broker have a disciplinary record with the regulator?

Lastly enquire whether the forex broker is a small independent entrepreneurial firm or is it part of a larger financial group? If the firm is part of a large financial group it is possible that many of the risks associated with a smaller firm do not come into play. It is also possible for your broker in such case to indeed offset all trades with "mothership", thereby limiting the risks of "running stops", which may sometimes be to your disadvantage.

Dealing Desk brokers advertise "zero commission" trading on their websites to promote a supposed benefit when in fact this is not how they make money. They make money through the spreads they charge clients and which (if you have had some experience in the past with them) you would know that they tend to jump unexpectedly in certain times. With a non-dealing desk broker, the fees (commission) they charge are fully transparent and stated upfront. That cost is decidedly less than what you pay trading against a broker who controls pricing, can spike your trades and offer quotes whatever may suit them.

Forex Trading Money Management

You should identify how you would minimize losses and maximize profits.

•What is the maximum position for a single trade, in terms of capital that you will trade? You will not want to expose too much of your capital on a single trade. So for example if your capital was $10,000, how much of this will you want tied down to one trade? For Forex trading, I will commit on average 5% of my equity for one trade. This will determine also your trade size. What percentage you use, depends on your risk profile.

•What is the maximum amount you are willing to lose for a single trade? Many authors tend to quote anything between 0.5% to 2% of your equity. Some books quote more. You must carefully think about this and work on a realistic figure which should be set based on your risk profile. If you haven’t read “Trading for a Living” by Alexander Elder, you really must because this now legendary book amongst traders deals with this topic in a lot of detail.

•When will I take my profits? Generally try to take incremental profits when you can. This is how professional traders run their business. Forex markets trend very well and what can often be seen is that traders snatch their profits when the big trend is just about to start and they miss on the big move. Don’t forget the golden rule: “The trend is your friend”. Let’s get a bit more specific here. Many traders ask the following questions regarding money management:

1. How to determine the optimum money management for a given sized account?

2. How to choose the best money management strategy based on the nature of the entry/exit methodology and back test results?

3. How can I design my own money management system that works for me and my style of trading?

Let’s try to address some of these questions.
You only have to be trading for a short period of time to realize that money management is more important than the method or system. If you tell new traders this, they just look at you blankly. All they want is a system and signals that they can trade the next day.

Money management is really that important. Now, determining what percentage of capital you should risk is actually a function of your hit rate. For example, if you win 80% of your trades consistently, then you could risk more than if you win 50% of your trades consistently. You also need to know the maximum amount you can trade. In order to do that, you need to know your maximum drawdown recovery rate.

Good money management can be summarized in 4 basic principles:

1. Always risk the smallest amount you can, working on the worst case scenario all the time. How much money would I need to stay in the game if I had X number of losses risking the amount I am just about to trade, with X being the maximum number of losses you have ever had trading the system.

2. Protect your capital. You must calculate your potential loss based on where you will place your stop loss.

3. Most traders stop trading because they run out of capital before they learn enough to make money. The main priority should be to live to fight another day and not lose money.

4. Using a stop loss is one of the things you can control. There is no right or wrong place to where you should place a stop loss. It all depends on your trading plan. If you used certain indicators to enter a trade, you will outline that in your trading plan. Similarly, you will outline where you will put your stop loss based on the guidelines you have set out in the trading plan. For example, you might say: “I am going to enter a trade every time indicator X did this”. “As soon as I place my trade, I am going to place my stop at Y”. To determine Y you must have come up with a plan and back tested how many times you made money without Y being hit.