Fat Forex Profits – The secrets of successful trading

Trading money in the global markets can be great way to make more of it, it can also be a lesson in how to lose money quickly. More than $1 trillion is traded every day on the foreign currency exchange (Forex), and yet no centralized headquarters or formal regulatory body exists for this form of trade. Foreign currency exchange is regulated through a patchwork of international agreements between countries, most of which have some type of regulatory agency that controls what goes on within their respective borders. Thus, the foreign currency exchange actually is a worldwide network of traders who are connected by telephone and computer screens.

Although more international policing of money trading has occurred in recent years, authorities have had some successes exposing scams and frauds that victimize traders, especially newer ones. So if you want to try this wild world of trading, you need to be wary and not depend entirely on experts. Sure, experts can help you in explaining the working of foreign exchange markets and how the language of the Forex and its risks are unique, but you need a lot more training before you even consider entering this extremely risky trading arena.

If you have ever traveled outside the United States, you have probably traded in a foreign currency. Every time you travel outside your home country, you have to exchange your country’s currency for the currency used in the country you are visiting. If you are a US citizen shopping in England and you see a sweater that you want for 100 pounds (the pound is the name of the basic unit of currency in Great Britain), you would need to know the exchange rate. And that’s the way foreign currency exchange is used by the average shopper, but foreign currency traders trade much larger sums of money thousands of times a day.

Bollinger bands will help you to predict big trending moves, act on big trend reversals and finally, time trading positions with greater accuracy for bigger profits.

Here we have related Bollinger bands to the currency markets (as it is here that they are most useful) – but they are useful in all financial markets.

What are Bollinger Bands?

Developed by John Bollinger, Bollinger bands are volatility bands drawn around a simple moving average.

You calculate Bollinger bands using the standard deviation of price over the same period as moving averages and plotted as lines above and below the moving average.

As moving averages have been traditionally used to identify the underlying trend, Bollinger bands combine this with the volatility of the individual market (or the standard deviation) – to plot a trading envelope.

The distance between upper and lower Bollinger bands reflects the volatility of the market traded.

As prices force themselves away from the longer-term average, the standard deviation rises – and thus the bands will fluctuate in varying amounts, away from the average.

Why Bollinger Bands Work

In any market, the value of currency traded tends to rise slowly over the longer term.

Prices may spike short term, but will normally dip back to the longer term moving average (the centre band) – which represents realistic value.

The volatility of the outer bands therefore gives us an indication of how volatile prices are – and how far away price is from longer-term value.

Most price spikes are caused as much by trader psychology, as the supply and demand backdrop – and this scenario is reflected in the concept of Bollinger bands.

Why are Bollinger Bands so useful?

Bollinger bands perform three major functions for traders:

1. Spotting a Breakout and New Trend

Markets move between low volatility trading ranges, to high volatility trending moves.

When a market makes trades in a narrow range, the Bollinger bands will narrow together and this shows a market with extremely low volatility – however this is a warning that a high volatility trending move is likely to follow.

When prices break above or below the upper or lower band, it is an indication that a breakout and trend is about to develop – traders will then take a position in the direction of the breakout, and try to ride the trend.

2. Timing Entry Levels in a Trend

We all know long term currency trends last for months or years – but we need to get in at the best risk / reward level.

Bollinger bands will help get you in to the trend and time your entry.

All you do is watch for dips toward the centre band – and enter in the direction of the trend – it really is that simple!

To time your entries with greater accuracy, and filter out “false” breaks we recommend using a momentum indicator – such as stochastics, to confirm the move.

3. Spotting Market Reversals

When the price touches the top of the band, a sell is generated, and prices should revert back to mean, or the middle moving average band.

If the price touches the bottom of the band, traders can buy a currency, assuming that it is oversold, and will rally back towards the top of the band.

The spacing, or width of the band, is dependent on the volatility of the market, but gives traders a clear indication of where prices will go, and when to enter.

A Word of Caution!

Bollinger bands are a useful tool – but need combining with other indicators, as with any single indicator, they should not be used in isolation.

We personally feel Bollinger bands should be used with basic charting, to get the big picture – and the best timing indicator is the stochastic as stated, to filter out “false” signals

If you want to make big profits from currency trading, you need to lock into and follow the longer-term trends.

“The art of contrary” thinking is one of the most powerful tools a trader can use, and is a trait with which all true great traders are familiar with.

What is the Art of Contrary Thinking?

Humphrey Neill’s book, “the art of contrary thinking,” the best known work on the subject, is based on a simple powerful idea that:

“When everybody thinks alike, everybody is likely to be wrong”

“The art of contrary” thinking consists in training your mind to ruminate in directions opposite to general public opinions; but basing your opinion in the light of current events and human behavior”.

Why Contrary Trading Works

By spotting situations when the consensus of a currency is either extremely bullish or bearish, means that a trend change is imminent, as it is likely the emotions of greed and fear have pushed prices too far away from true value.

If you can step aside from the crowd and take a contrary view at these turning points, you can make big currency trading profits. Contrary thinking can be used in any market and is highly effective in currencies.

Contrary thinking can be used to make really big currency trading profits and if used selectively, when markets are extremely over bought or oversold, you can be in right at the start of the trend for maximum profitability.

In any currency you look at – The Yen, Euro, British Pound Swiss Franc Canadian or Australian dollar and many others, there are always occasions where a currency trend in the news is forecast to continue, due to overwhelming evidence in its favor and it then promptly collapses!

Big profits from currency trading can therefore be made by using the art of contrary thinking when the market is extremely bullish or bearish.

Why? Because everyone who has bought has taken positions and there are no buyers left. Prices have moved away from fair value. When there is no more buying to enter the market, a trend change is imminent.

It is clear that to succeed and make big profits in currency trading you need to think independently of the majority at important market turning points.

You can make big profits in currency trading from trend following, but you can with a little practice spot potential turning points in currencies as well which will help you bank profits, tighten stops or open new trades right on the turn, for maximum profitability.

Contrary trading will not only make you big profits in currency trading but in ANY market and has worked for centuries, as human nature never changes.

We’re focusing on technical analysis in this article with a description of some of the important indicators.

We could say, all wealthy traders use technical analysis but not all technical analysis traders are wealthy although T.A. is the most precise way of trading the Forex market. It’s also useful note that fundamentals play their part in indicating whether a price will move up or down. It gives you the edge over other traders.

Technical Analysis is so powerful because of a few reasons

1)    it represents numbers. All information and its impact on the market and traders is represented in a currency’s price.
2)    It helps to predict trends and the foreign exchange market is very ‘trendy’.
3)    Certain chart patterns are consistent, reliable and repeat themselves. T.A. helps us to see them.

Here’s one way of putting technical analsysis into perspective (wish I had a dollar each time I said ‘technical analysis’). We all know that prices move in trends. Research has shown that those that trade ‘with the trend’ greatly improve their chances of making a profitable trade.

Trends help you become aware of the overall market direction and often rescue us from less then profitable entry points. I attended a 2 day course costing me over $2500 AUD and the biggest thing I learned from it was the need for discipline and emotional control. The content was so basic that within the next 3 or 4 articles, I would have covered all of it. So learning the ‘tools of the trade’ the technical indicators and their applications will help you to diagnose what the market is doing but even then you need to expect ups and down and trade with emotional control.

Stay with the trend, follow the price.

Find the price of the currency pair. If EUR/USD is 1.4224 and moves to 1.4180 then 1.4090 then the market is in a down trend. Concern yourself only with what the market IS doing not what it might do. Listen to the markets and the indicators will backup what they are telling you.

Moving Averages.
Tell you the price at a given point of time over a defined period of intervals. They are called moving because they give you the latest price while calculating the average based on the selected time measure.

They lag the market so to give you an indication of a change in trend, use a shorter average such as a 5 or 10 day moving average. By combining a shorter term and longer term M.A. you can detect a buy signal when the shorter term crosses the longer term moving average in the upward direction. Or a sell signal if it crosses in a downward direction. For example, you could use a 5 day versus a 20 day moving average or a 40 day versus a 200 day moving average.
There are simple moving averages, linearly weighted which gives more importance to the recent prices or exponentially weighted. The latter is a favourite because it considers all prices in a time period but emphasizes the importance of the most recent price changes.

MACD
Based on moving averages, a MACD plots the difference between a 26 exponential moving average and a 12 day exponential moving average, with a 9 day used as a trigger line. If a MACD turns positive when the market is still plummeting it could be a strong buy signal. The converse also works.

Bollinger Bands (sounds like an elastic band)
Prices tend to stay between the upper and lower bands. They widen and become more narrow depending on the volatility of the market at the time. A sell signal would be when the moving average is above the Bollinger bands and vice versa for a buy signal. Some traders use it in conjunction with RSI, MACD, CCI and Rate of Change.

Fibonacci Retracement
Describe cycles found throughout nature and when applied to technical analysis can find shifts in the market trends.  After a climb prices often retrace a large portion sometimes all of the original move. Support and resitance levels often occur near the Fibonacci retracement levels.

RSI
Relative Strength Index measures the market activity to see whether it’s overbought or oversold. This is a leading indicator so helps to indicate what the market is going to do (awesome!). Ahigher RSI number indicates overbought (so expect a bearish shift) and a lower number indicates oversold.

Successful traders will generally use 3 or 4 signals to provide a more conculsive signal before entering a trade.

Always remember, “If in doubt, stay out!” . Technical analysis doesn’t factor in political news, a country’s economic profile or fundamental supply and demand.

Technical Analysis helps us figure out how much money to risk on a trade. How and when to enter the market and how to exit the trade for profit or to minimize loss.

I sincerely hope you found this article useful.

Below you will find the six common beliefs followed by the bulk of traders – and if you believe these myths as well, then they will restrict your chances of making significant currency trading profits.

Ninety percent of currency traders believe at least one or more of these myths – which explains why ninety percent of traders don’t make much profit by trading currencies!

1. You should always be in the Market in Case you Miss a Move

Traders love excitement, and their view is, if they are in the market they may catch the big move. Well they may – but chances are they won’t.

The big trends only come a few times a year in each currency – and you should stay out the market until they come, otherwise you will take losses, and run up commissions that will deplete your account.

Wait for the big trades – patience is a virtue in trading.

2. Diversification Reduces Risk, and Increases Profit Potential

Diversification simply dilutes your profits.

You hit a big move, and your other trades that lose, or give you only marginal profits, eat up all your currency-trading profits.

You need to have confidence to go for the big moves, when they occur, and load up these trades.

Currency trading is about calculated risks – if the trade looks good, hit it hard for big profits.

3. Day Trading is Better than Long Term Trend Following, as it’s Less Risky.

Many brokers spread this myth – and why not? – They make more commission if you believe it!

You will end up having more losses than profits in your trading. You will never make enough money in a day to cover your inevitable losses. When you add in commission and slippage, it’s inevitable that you will lose.

You need to hold longer-term trends, as these yield the big profits to cover your smaller losses.

4. Timing the Market is the Correct Way to Make Profits

Timing the market means you are trying to PREDICT where prices are going to top and bottom – this is not a good way to trade and the odds are against you.

A better way to trade is to wait for the market to CONFIRM a trend is under way, and jump on board. You may not buy the bottom or sell the high, but you can catch the major chunk in between – and with currency trends lasting for many months or years, you can still get plenty of profits from the trend.

5. Markets are the Same Today as they Were Hundreds of Years Ago

Rubbish! Trends now are much more volatile than they were even 50 years ago. Why? Today, with the Internet, price information reaches every corner of the globe in a split second. This increases volatility as everyone has the same information at once – and everyone tries to enter the market at the same time.

This was not the case even 50 years ago – the trends are still there, but volatility is much higher – traders get the direction of the trend right, but they find themselves stopped out by the volatility. How often has this happened to you? – It happens to all traders. Look at using options to give you staying power.

6. You can use a Black Box System to Make Money

You can buy a system from a vendor for a few thousand dollars – and it can make 50 to 100% profit per annum.

These systems normally have a hypothetical track record – and use price information where the results are already known, and of course, the logic of the system remains hidden from you – as it’s unlikely to have a sound basis.

Have you ever wondered why these vendors sell systems, when they could simply get a bank loan and trade their own systems?

Enough said on this one!

How about some Positive Advice?

If you want to make big currency trading profits, you need to do it for yourself.

Get a plan you have confidence in, and execute the plan with discipline – and have the courage to trade for large gains when they occur.

Good luck!

How Currencies are quoted and what moves individual currencies?

ONE of the best advantages in FOREX Trading is

The amount of money you need to place a trade (known as “margin”) is all that can be lost !

You have to know, that despite the super-high leverage offered by some Forex brokers up to (400:1); meaning if you put up $ 1000 the broker will allow you to trade like you really have $400.000).

Forex trading is still less riskier than Stock or Futures Trading, where you can loose more than you have deposited in your account.

This type of LEVERAGE does NOT EXIST in the equities or futures market

In the Equities or Futures markets, very often, sudden and dramatic moves occur, against which you can’t protect yourself, even by having placed your protective stops.

Your position may be liquidated at a loss, and you’ll be liable for any resulting deficit in the account.

But because of the FX market’s deep liquidity and 24-hour, continuous trading, dangerous trading gaps and limit moves are almost eliminated.

Orders are executed quickly, without slippage or partial fills. And finally, there are no margin calls. For your protection, the broker will automatically close out some or all of your open positions if your account equity falls below the level required to hold the positions.

Think of this as a final, automatic stop, always working on your behalf to prevent a debit balance.

Currencies are traded in dollar amounts called “ LOTS”

In Forex trading, with most Brokers, you have the choice between 2 different lot sizes.

Standard Lots or Mini Lots.

One Standard lot is equal to $100,000 in currency. The margin requirements, using a 400:1 Leverage, would be US$ 250, in other word you control $100,000 worth of currency for only 250 US dollars.

You mean, depositing $250 with a broker, I could trade 100,000$ worth of currency ???

NO, be aware, that your account size has to be more than the required margin of US 250. For example, if you place an order to buy 1 Standard lot ( @100,000) of USD/JPY and USD/JPY is quoted as 112.10/112.13, you buy USD/JPY at 112.13.

Your account balance would be $220, because you paid 3 pips or $ 30 for this trade.

If you would close this trade immediately, you have to sell it at 112.10 (the bid price) , for a loss of $ 30.

In fact you could not get executed on this trade, as the brokers trading platform would reject your order, for the reason of having insufficient funds in your account).

So, your account balance has to be minimum $280. $250 for margin and $30 for the trade.

BUT….IF, after you have initiated the trade to buy USD/JPY at 112.13, and the USD/JPY falls the next second 1 pip ( approx. $8), your position would be closed automatically, because of margin deficit.

I will explain later about having an adequate account size to trade the Forex Market.

Currencies are always traded in pairs in the FOREX. The pairs have a unique notation that expresses what currencies are being traded.

The symbol for a currency pair will always be in the form ABC/DEF. ABC/DEF is not a real currency pair, it is an example of a symbol for a currency pair. In this example ABC is the symbol for one countries currency and DEF is the symbol for another countries currency.

Some of the most common symbols used in Forex are:

USD – The US Dollar
EUR – The currency of the European Union “EURO”
GBP – The British Pound or cable
JPY – The Japanese Yen
CHF – The Swiss Franc
AUD – The Australian Dollar
CAD – The Canadian Dollar

There are symbols for other currencies as well, but these are the most commonly traded ones.

A currency can never be traded by itself. So you can not ever trade the USD by itself. You always need to BUY one currency and SELL another currency to make a trade possible.

Some of the most traded currency pairs are:

EUR/USD Euro against US Dollar

USD/JPY US Dollar against Japanese Yen

GBP/USD British Pound against US Dollar

USD/CAD US Dollar against Canadian Dollar

AUD/USD Australian Dollar against US Dollar

USD/CHF US Dollar against Swiss Franc

EUR/JPY Euro against Japanese Yen

The currency left of the / is called the base currency.

The currency right of the / is called the counter currency.

When you place an order to buy the EUR/USD, for instance, you are actually buying the EUR and selling the USD.

If you were to sell the pair, you would be selling the EUR and buying the USD. So if you buy or sell a currency PAIR, you are buying/selling the base currency.

The best way to remember is, by just thinking of the entire currency pair as one item.

If you buy it…you buy the first currency and sell the second currency. If you sell it…you sell the first currency and buy the second currency.

That means you would to be able to short-sell with no restrictions so you could make money when the market drops as well as when it rises.

The problem with traditional stock market or commodity trading is that the market has to go up for you to make money. With FOREX trading you can make money in all directions.

If you are new to Forex, no doubt you are confused by all of the strange and unfamiliar terminology. For example, what is a pip? Also, you are probably already aware that Forex trading can be risky. How can you limit your loss and best protect your funds? This article briefly covers how currency lots are traded to help you better understand how to plan your trading strategy and manage your funds.

In Foreign Currency Exchange (FOREX), earnings are expressed in “pips”. Pip is short for Price Interest Point, also called points. Whereas the smallest denomination in USD is the penny ($.01), in Currency Exchange, funds can be traded in an even smaller denomination, $0.0001. This means that very small movements in currency prices can create large profits.

So, a PIP is the smallest unit a currency can be traded in. The actual value of a pip is not a set price. If you are trading with a standard account, a pip is worth $10. If you are trading a mini account, a pip is only worth $1.

The value of a pip changes based upon the size of your account, because the size of your account affects how much currency you can leverage. A standard full size trading account is 100,000 units of the base currency. If you are trading in USD, a standard account has a value of $100,000 USD.

A mini lot is 10,000 units of base currency. If you are trading mini lots, you can leverage $10,000. This is why a pip in a mini account is worth less than a pip in a standard full sized account.

While Forex trading allows you to leverage more funds than you actually have, this can be a double edged sword. While you can make profits on funds that you leverage (rather than own), you can also have losses amplified as well. There are several ways, however, to manage your risk when trading Forex. If you are interested in trading Forex, you should have a definite trading strategy. You must educate yourself to know when to enter and exit the market and what kind of movements to anticipate.

You can also place something known as a stop loss order. Stop-loss orders the typical way traders minimize risk when placing an entry order. A stop-loss order to exit your position if the currency price reaches a certain point.

If you are taking a long position, you would place the stop loss order below current market price. For a short position, you would place a stop loss order above current market price. This technique allows you to manage your risk and, just as the name suggests, stop your losses at a certain point.

As you can see, Forex trading can be complex, but once you understand the basic fundamental principals of how lots are traded, its starts to come together for you. Foreign Currency Trading can be quite profitable and and exciting way to invest.

Foreign exchange (forex) currency trading, the largest financial market in the world, requires a minimum of capital to invest and the profits can be substantial. Once you have learned the basics of forex, you’re on the way to making money through the simultaneous buying or selling of currencies. Forex trading is instantaneous; as soon as you click the mouse, it’s done. The most commonly traded currencies, easiest to liquidate, are the U.S. dollar, Japanese yen, British pound, Swiss Franc, the Canadian dollar, Australian dollar, and the Eurodollar.

Unlike the stock market, forex trading has no central exchange. With forex, you can make a profit whether the market is up or down vs. only making money when the stock market is on the rise. By taking the long position with a pair of currencies, the forex trader buys at one price and sells when it reaches a higher price. The other option for the forex trader is to go short by selling currencies, anticipating depreciation, and then buying back when the value falls. The forex trader can pick either direction, long or short, and if correct, he will generate a profit. You can also set up a certain point (limit order) based on the amount of profit you want to earn to automatically limit the order. In the same way, you can stop or close an order to automatically liquidate if the currency trade is going against you.

In general, the strength of a country’s economy determines the value of its currency. Other factors to take into consideration in forex trading are the political and social status of the country, interest and employment rates, and the overall stability of its government. You will learn to see patterns or trends as you become more familiar with the in’s and out’s of forex trading.

The Forex market is a 24-hour trading place, Sunday through Friday, giving you the option of trading at any time of the day or night. Unlike the stock market, it doesn’t close with the ringing of the bell. Forex online firms provide demos, guidance, and market news for the beginning investor. You can practice your skills in forex trading before actually investing real capital. Once you’ve learned the basics, a minimum investment is made, sometimes as low as $200.00. These “mini-trading” accounts are a good way to begin forex trading and often there is no commission attached to your trading. You don’t have to be a seasoned market analyst or economist to learn, enjoy, and make money with forex currency trading.

Foreign currency exchange trading can be very rewarding, but can also be very intimidating to a beginner.  To get started, you will need to know some basics:

1. What is foreign currency exchange?
2. How is it traded?
3. What are the benefits?
4. What are the risks?
5. How can I get started?

What is Foreign Currency Exchange?

The Foreign currency exchange (FOREX) market is a cash (or “spot”) market for currency.  Unlike the stock exchange, the FOREX market is not located on a trading floor or centralized on an exchange.  Instead, it is entirely electronic within a network of banks and runs 24 hours per day Sunday evening (5:00 pm EST) through Friday evening (4:00 pm EST), excluding some holidays.  The fact that it is all electronic means that you can tap into it from your computer.

How is it traded?

FOREX is traded in currency pairs, for example EUR/USD is the Euro base currency and the US dollar counter (or quote) currency.  There are six major pairs: EUR/USD, GBP/USD (Great Britian pound vs. US dollar), USD/JPY (US dollar vs. Japanese yen), USD/CAD (US dollar vs. Canadian dollar), AUD/USD (Australian dollar vs. US dollar), and USD/CHF (US dollar vs. Swiss Franc).

Currencies are traded in dollar amounts called lots.  For a “standard” account, one lot (called a standard lot) is $1,000 and controls $100,000 in currency.  For example, when you place an order to buy one lot of EUR/USD, you are buying the EUR and simultaneously selling the USD.  The margin you must put up to place the order is $1000 (for a standard lot).  You are going long the EUR and expecting it to strengthen against the USD.  For every increase of $0.0001 in the EUR, you make one “pip” (price interest point) equivalent to $10 per lot traded.

Similarly, for a “mini-account” when you place an order to sell one mini-lot (one-tenth of a standard lot) of EUR/USD, you are selling the EUR and simultaneously buying the USD.  You are going short the EUR and expecting it to weaken against the USD.  The margin requirement is $100.00 per mini-lot.  For every decrease in the EUR of $0.0001 you make one pip equivalent to $1 per mini-lot traded.

Note that unlike trading stocks, there are absolutely no restrictions on short-selling in FOREX.  Short-selling is exactly like buying – except that you’re selling of course.

The pip value and amount per pip per lot differs when the USD is not the counter or quote currency.  For example, when buying the USD/JPY pair with a ask price of 109.00 (meaning 1 USD equals 109.00 yen), a change in the Japanese yen of 0.01 yen is equivalent to 1 pip or $9.17 per pip per lot traded ($9.17 = $100,000 x 0.01 / 109.00).

The broker makes money off the spread which is the difference in the quotation ask and bid prices.  You buy the base currency at the ask price and sell it at the bid price.  Generally, the major currency pairs have relatively low spreads.  The EUR/USD is commonly two to three pips and the GPD/USD is commonly four to five pips.  For example, the current bid/ask price for EUR/USD is quoted at 1.2322/1.2324.  This means that you can buy 1 EUR (the base currency) for $1.2324 USD (the counter-currency).  You buy at the ask price.  You can sell 1 EUR for $1.2322 USD (you sell at the bid price). You will pay the broker the spread or $1.2324 – $1.2322 = $0.0002 = 2 pips. For a standard lot, the broker fee (in this example) is $10 x 2 pips = $20 per standard lot for a roundtrip trade (1 buy and matching sell or 1 sell and matching buy).  For a mini-lot, the fee would be $1 x 2 pips = $2 per mini-lot for a roundtrip trade. The broker fee is automatically deducted from your account.

Obviously, if you buy (go long) a currency pair, you expect the base currency to increase in price.  Your objective is to sell later at a price higher than you purchased and make a profit.  On the flip side, if you sell (go short) a currency pair, you expect the base currency to decrease in price.  Your objective is to buy later at a price that is lower than the price you originally sold, and thus make a profit off the difference.

There’s more to it than can be explained in this overview, but you should get the basic idea.

What are the benefits?

1. With FOREX trading, there is no inventory, no employees, and no customers.  Your overhead can be as minimal as a home computer with internet access.

2. You can get started with a “mini-account” investing as little as $300.

3. Currency prices tend to repeat in relatively predictable cycles creating strong trends. Once you learn how to trade properly, you can compound your money, and potentially turn a little into a lot.

4. You can trade for a few hours per week, or much more if you want to. It’s all up to you.

5. The FOREX market is very liquid, with trillions of dollars traded every day.  On its slowest day, orders can usually be placed within a few seconds if you stay with the major currencies.  Instantaneous execution (1 to 2 seconds) is the norm during normal trade volume days (for the major currencies).

6. You can trade from just about anywhere as long as you have a computer with internet access to your account.

What are the risks?

1. The market can be very volatile, especially during times of major news releases, also known as “fundamental announcements.”  The time of these announcements is usually known in advance.  Many traders simply stay out of the market during these announcements and wait until market volatility has settled back down.

2. If you use too much margin or risk too much on any one trade, your account could suffer badly on a trade that doesn’t go your way.  Proper risk management, including sound placement of stops and not risking more than 2 percent of your account on any one trade, can alleviate this risk.  Do not risk more money than you can afford to lose.

3. A major world event could trigger a huge volatility swing that could wipe out your account (or even more).  However, some brokers limit the loss to the amount in your account.  (Of course, a major world event could also cause the trade to go your way.)

4. Trader psychology (fear and greed) can play a big role in your success or failure as a trader.  Trading education is one of the keys to overcoming these human flaws.

5. You could fail to place a stop loss with your order.  A change in price could force a liquidation of your trade if your account falls below the required margin maintenance.  To alleviate this risk, always set a stop loss when you place an order.

This list is not meant to be inclusive. There are other risks.

How can I get started?

You can easily open an online account by selecting one from many available FOREX brokers.  You can, and should open a demo account to practice (and learn) for several months for free.  The practice account makes simulated trades using real-time data.  This is called “paper trading.” You should not trade your real account until you have proven to yourself that you can be profitable in your demo account.

Once you get started, you can trade currencies from just about anywhere.  About all you need is a computer with internet access to your trading account.  Many brokers also provide free charting software.

Jim McCabe

It is a well documented fact that within the “business” of trading the financial markets, as much as 90 % of the participants lose and continue to lose money. So if 90 % are losing, that therefore means that 10% are gaining each and every time.

In order to improve my own trading record, I deliberately set out to try and discover what it was I had to do to become one of the 10% (The Winners) who are consistently making money from the unfortunate remaining 90%  (The Losers) who don’t.

My research and investigations was to speak to as many successful traders as I could, to read as many articles, publications and books which have been written by successful traders. It wasn’t until I started my research, that I quickly realised just how much has been and no doubt will continue to be written about trading and the psychology of trading. What is even more astounding is the amount that has been written by so called “gurus” who actually haven’t made any significant amounts of money from a business that they are supposed to be experts in. I will tell you about some of my findings relating to these authors in future articles.

It is my intention to publish my findings in a series of articles over the next 3 months and I hope you can learn and improve your own trading from implementing the information which I release.

I personally trade the FOREX market now but I have tried trading stocks, futures, commodities and options. I will be covering the reasons for concentrating on FOREX in a later article but in the meantime let me tell you about one of my many discoveries.

Every one of the successful traders I interviewed, stressed the importance of keeping a journal of their trades. They would record the date, time, what they traded, buy or sell, price, indicators used including levels and/or figures, trends (long, medium and short) and an overall description of why they took the trade. It was also imperative that the journal entry included notes about the trade after the event. If it made money what was the criteria, and if it was a losing trade, why had it turned out to be like this and any contributing factors.

Now comes the interesting part. Everyone of them stated that they regularly reviewed their journal (some weekly and some monthly) but everyone quite categorically looked back over past trades. No doubt learning from their mistakes and to improve and repeat on their successful trades.

Trading is very disciplined  with definite rules for entering and exiting trades. These rules must be adhered to at all times and one of the rules is entering all details about the trade in the journal, making no exceptions.

I hope you will all learn something from this and if you aren’t already maintaining a record of your trades, then please start doing so from now on. Also regularly go back over your records on a regular basis. You will  see a marked improvement in your performance.

http://www.HomeForexTrading.com