There are a lot of Forex trading courses online that promise to teach you everything you need to know to jump into the market with confidence. If you are new to Forex, though, how can you tell which ones will truly provide you with the solid Forex trading education you need?
A reputable course should training material on all the fundamental concepts for beginners, including:
*Exchange rates *Fixed rates versus floating rates *Currency pairs *Bid Prices versus Ask Prices *Spreads *Lot Sizes *Margins, Margin Calls and Leverage *Pips Values and their role in calculating profit and loss *How to evaluate leading economic indicators *How to read Forex signals and charts
This is just the bare minimum. A really good course should also walk you through a variety of trading examples, and show you how to perform 'test trades' yourself using a demo account with a reputable broker.
Another thing you can do to help speed your learning process is to immerse yourself in the literature of the market. There are scores of books and magazines available on the subject both online and off. You might want to have a look at the free, online magazine called Currency Trader (http://www.currencytradermag.com/).
Finally, consider enhancing your knowledge of other financial marketplaces. You'll find some concepts and terms repeated when reading about how to trade on the Stock Market, or how things like interest rates fluctuate for bonds, bills and other instruments.
This is especially useful if you feel more comfortable in one area of financial knowledge than other because you'll be able to see some related concepts from Forex in a context with which you are already familiar.
Thursday, December 16, 2010
Forex Trading Education - 2 Simple Tips To Start Winning
In this article I'm going to share with you 2 uncommon tips that most losing traders don't know about. Try demo trading with these tips in mind, and chances are you'll find that you'll become a better trader.
Tip #1 - Trade Less
This doesn't mean that you should pay less attention to your trading charts. What I mean is that you should enter into fewer trades which have a higher probability of winning.
Many new traders make the mistake of entering into every single "decent" trade setup that they see. The problem with this approach is that these traders are concentrating too much on maximizing their chances of winning (more trades, more chance to win right?), without considering that they are actually increasing their chances of losing too! Generally speaking, the more trades you enter into, the more risk you are taking.
Forex trading is a risky business, so try not to increase the amount of risk that you're already taking. When you enter into trades less frequently, you'll naturally choose those with a higher probability of winning, and NOT enter into trades with a lower probability of winning.
Remember, in Forex trading, it's not about how many times you win, but how MUCH you win. Even if you only have one successful trade each month, it's enough for you to be rich if you can be consistent about it.
Tip #2 - Put Your Eggs In One Basket
I'm sure you've heard of the phrase, "Never put all your eggs in one basket" which refers to the diversification of your funds. Generally, this is good advice.
However, in the Forex market, a better piece of advice would be "Only put SOME of your eggs in one basket".
Similarly to Tip #1, placing too many trades at the same time will dramatically increase your risk of losing. Trading too many currency pairs at the same time, is a tactic used by many inexperienced (and often losing) traders. They think that by diversifying their trades, they can better limit their potential losses.
This is a big mistake unless you have a large capital pool to trade with.
If you only have $2,000 of capital to trade with, for example, your stop loss levels are going to be very tight if you have too many trades open at the same time.
This often results in most of your stop losses being triggered, causing you to immediately lose in your trades.
Tip #1 - Trade Less
This doesn't mean that you should pay less attention to your trading charts. What I mean is that you should enter into fewer trades which have a higher probability of winning.
Many new traders make the mistake of entering into every single "decent" trade setup that they see. The problem with this approach is that these traders are concentrating too much on maximizing their chances of winning (more trades, more chance to win right?), without considering that they are actually increasing their chances of losing too! Generally speaking, the more trades you enter into, the more risk you are taking.
Forex trading is a risky business, so try not to increase the amount of risk that you're already taking. When you enter into trades less frequently, you'll naturally choose those with a higher probability of winning, and NOT enter into trades with a lower probability of winning.
Remember, in Forex trading, it's not about how many times you win, but how MUCH you win. Even if you only have one successful trade each month, it's enough for you to be rich if you can be consistent about it.
Tip #2 - Put Your Eggs In One Basket
I'm sure you've heard of the phrase, "Never put all your eggs in one basket" which refers to the diversification of your funds. Generally, this is good advice.
However, in the Forex market, a better piece of advice would be "Only put SOME of your eggs in one basket".
Similarly to Tip #1, placing too many trades at the same time will dramatically increase your risk of losing. Trading too many currency pairs at the same time, is a tactic used by many inexperienced (and often losing) traders. They think that by diversifying their trades, they can better limit their potential losses.
This is a big mistake unless you have a large capital pool to trade with.
If you only have $2,000 of capital to trade with, for example, your stop loss levels are going to be very tight if you have too many trades open at the same time.
This often results in most of your stop losses being triggered, causing you to immediately lose in your trades.
Forex Day Trading For Novices
Most newbie forex traders go for forex day trading as a basis for their forex trading strategy, as they see it as a low risk way to trade and an opportunity to make small regular profits. This article is all about day trading for novices and what they need to know.
The rise of online forex trading, tighter spreads and lower minimums has led to an influx of day traders and there are plenty of vendors offering day trading or scalping systems which claim to make big profits but there is a problem.
They all lose - because day trading by its very nature is bound to fail. If you see a day trading forex track record chances are it has a disclaimer on it like the following one - take a read and you will see its not reality:
"CFTC RULE 4.41 - Hypothetical or simulated performance results have certain limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not been executed, the results may have under-or-over compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profit or losses similar to those shown".
Of course it's simulated knowing what happened and vendors can and do make up track records to sell to greedy naïve traders and the greedy herd all lose.
So why doesn't day trading work then?
It's obvious we have countless millions of traders all with their own different forex trading strategies and views and to say you can predict what they will do in a few hours is totally absurd.
Humans are not predictable in short time frames their the total opposite!
All the volatility in short term time frames is random, daily ranges cannot act as support and resistance and anyone trying to trade the data is wasting their time - its simply not valid.
If you want to win:
Keep in mind you need the odds on your side and that means trading longer term.
If you do, this you're using valid data where you can win and it really is as simple as that. The shame is many day traders work hard (far harder than a lot of the traders who make big gains) but they lose through ignorance of how and why markets really move.
Day trading for novices is simply a quick lesson in how to wipe out account equity - PERIOD.
The rise of online forex trading, tighter spreads and lower minimums has led to an influx of day traders and there are plenty of vendors offering day trading or scalping systems which claim to make big profits but there is a problem.
They all lose - because day trading by its very nature is bound to fail. If you see a day trading forex track record chances are it has a disclaimer on it like the following one - take a read and you will see its not reality:
"CFTC RULE 4.41 - Hypothetical or simulated performance results have certain limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not been executed, the results may have under-or-over compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profit or losses similar to those shown".
Of course it's simulated knowing what happened and vendors can and do make up track records to sell to greedy naïve traders and the greedy herd all lose.
So why doesn't day trading work then?
It's obvious we have countless millions of traders all with their own different forex trading strategies and views and to say you can predict what they will do in a few hours is totally absurd.
Humans are not predictable in short time frames their the total opposite!
All the volatility in short term time frames is random, daily ranges cannot act as support and resistance and anyone trying to trade the data is wasting their time - its simply not valid.
If you want to win:
Keep in mind you need the odds on your side and that means trading longer term.
If you do, this you're using valid data where you can win and it really is as simple as that. The shame is many day traders work hard (far harder than a lot of the traders who make big gains) but they lose through ignorance of how and why markets really move.
Day trading for novices is simply a quick lesson in how to wipe out account equity - PERIOD.
Forex Trading - 3 Profitable Tips
Forex trading is a highly risky activity, and this unfortunately results in a large number of losing traders in the market. In this article I'll give you 3 tips that have helped me become a profitable trader...
Tip #1: Less Is More
Inexperienced traders often make the mistake of thinking that the more complicated a trading system is, the better it is. As much as this "logic" seems reasonable, it's actually not true in the world of Forex trading.
For example: The more technical indicators you use, the more you'll miss out on profitable trades. There are many good trading systems based on trending markets, and they typically use an average of 4 to 5 different technical indicators.
Having a system that's too complex distracts you from obvious market trends and chart pattern formations. The human brain isn't wired to handle too many sources of information at one time, so having a complicated trading system will often take your eyes off the big picture... I've often seen new traders suffer from such short-sightedness which led them into trading against the market trend. It's an obvious mistake, but it's a mistake that many traders still make today
Tip #2: Trading Is Not An Exact Science
Many traders expect market fluctuations to always follow a certain pattern: a pattern that mimics the human weaknesses of greed, fear, pride and impatience.
Although the market does reflect these emotions in price movements, the EXTENT of these movements are rarely similar. A piece of bad economic news may lead to a large, sustained fall in price, while a similar piece of bad news may only lead to a small and temporary sell-off.
You see, the market is subjected to its traders' expectations, and these expectations change and evolve through time. While the emotions associated with trading are always reflected in the market price, WHERE they show themselves will differ. The same people who feel greedy when prices rise today, may not be feeling greedy again tomorrow when prices rise even further!
Tip #1: Less Is More
Inexperienced traders often make the mistake of thinking that the more complicated a trading system is, the better it is. As much as this "logic" seems reasonable, it's actually not true in the world of Forex trading.
For example: The more technical indicators you use, the more you'll miss out on profitable trades. There are many good trading systems based on trending markets, and they typically use an average of 4 to 5 different technical indicators.
Having a system that's too complex distracts you from obvious market trends and chart pattern formations. The human brain isn't wired to handle too many sources of information at one time, so having a complicated trading system will often take your eyes off the big picture... I've often seen new traders suffer from such short-sightedness which led them into trading against the market trend. It's an obvious mistake, but it's a mistake that many traders still make today
Tip #2: Trading Is Not An Exact Science
Many traders expect market fluctuations to always follow a certain pattern: a pattern that mimics the human weaknesses of greed, fear, pride and impatience.
Although the market does reflect these emotions in price movements, the EXTENT of these movements are rarely similar. A piece of bad economic news may lead to a large, sustained fall in price, while a similar piece of bad news may only lead to a small and temporary sell-off.
You see, the market is subjected to its traders' expectations, and these expectations change and evolve through time. While the emotions associated with trading are always reflected in the market price, WHERE they show themselves will differ. The same people who feel greedy when prices rise today, may not be feeling greedy again tomorrow when prices rise even further!
Forex Trading Basics - What You Need to Succeed!
Success in FOREX trading is a matter of having the right knowledge and the right timing of the market. If you can combine these two elements, you have an opportunity to succeed in trading the FOReign EXchange (FX or FOREX) market.
Until very recently, the forex markets had been the trading grounds of the ultra rich and thus out of the reach of the average person. The trading units during that time were just too large for most ordinary investors to handle. Today, though, because there are foreign exchange brokers who have broken down the larger sized inter-bank trading units into smaller units, it allows more people to become involved in trading on the forex.
What follows are a few thoughts on the basics of trading in this specialized market. This section constitutes having the right knowledge element from the above forumla. As it continues, you will see where the right timing aspect comes into play.
Trading on the foreign exchange market involves the trading one currency for another. Each day, due to international trade and business elements or the political or current events in the various countries whose currencies are being watched, any given currency may fluctuate in price. A profit can be had in the FX by knowing when the currency of one country will fluctuate as against the currency of another country, and in which direction.
It is important to note that currencies are always traded and priced in pairs. When trading one foreign currency for another, usually the currency listed first is the stronger of the two. For example, GBP/USD indicates the relative dominance in strength of the British Pound in relation to the US Dollar. For instance, in today's trading the the value of one US dollar to the British pound is: 1 = 1.9534. In other words, one GBP is valued at $1.9534 dollars.
Depending upon which direction the two currencies are expected to go during the course of the day's trading, one could buy a contract on one or the other currency in order to initiate a trade. And then once that currency has made its move, sell that contract back in order to extract the profit from the trade. An open position on the forex is a trade in which a trader has bought or sold a particular currency pair without having made a corresponding trade to buy or sell back the equivalent amount to close the trade position.
Prices are quoted to the fourth decimal point in the forex market. For example, the GBP/USD might be bid at 1.9534 and offered at 1.9537. Profits are recorded in terms of pips or "percentage in point." A pip is the smallest price change in forex trading ï؟½" for most pairs this is equal to .0001 or one one hundredth of one percent, or one basis point. In the above example, we can see that the spread is 3 pips wide.
The only exception to this method of computation is the Japanese Yen (JPY), which is quoted only to the second decimal point. For example, 117.89 in JPY to the US dollar equals one dollar being worth 117.89 yen.
Learning how to trade on the forex market requires a different trading mindset from the traditional mindset of trading on the stock market. In trading the forex, everyone has the same information available to determine the currency fluctuations. In addition, in order to be successful it is helpful to have or be following a system of trading which can help you to choose your trading positions. This can be a system which uses either a fundamental or a technical approach to trading.
Until very recently, the forex markets had been the trading grounds of the ultra rich and thus out of the reach of the average person. The trading units during that time were just too large for most ordinary investors to handle. Today, though, because there are foreign exchange brokers who have broken down the larger sized inter-bank trading units into smaller units, it allows more people to become involved in trading on the forex.
What follows are a few thoughts on the basics of trading in this specialized market. This section constitutes having the right knowledge element from the above forumla. As it continues, you will see where the right timing aspect comes into play.
Trading on the foreign exchange market involves the trading one currency for another. Each day, due to international trade and business elements or the political or current events in the various countries whose currencies are being watched, any given currency may fluctuate in price. A profit can be had in the FX by knowing when the currency of one country will fluctuate as against the currency of another country, and in which direction.
It is important to note that currencies are always traded and priced in pairs. When trading one foreign currency for another, usually the currency listed first is the stronger of the two. For example, GBP/USD indicates the relative dominance in strength of the British Pound in relation to the US Dollar. For instance, in today's trading the the value of one US dollar to the British pound is: 1 = 1.9534. In other words, one GBP is valued at $1.9534 dollars.
Depending upon which direction the two currencies are expected to go during the course of the day's trading, one could buy a contract on one or the other currency in order to initiate a trade. And then once that currency has made its move, sell that contract back in order to extract the profit from the trade. An open position on the forex is a trade in which a trader has bought or sold a particular currency pair without having made a corresponding trade to buy or sell back the equivalent amount to close the trade position.
Prices are quoted to the fourth decimal point in the forex market. For example, the GBP/USD might be bid at 1.9534 and offered at 1.9537. Profits are recorded in terms of pips or "percentage in point." A pip is the smallest price change in forex trading ï؟½" for most pairs this is equal to .0001 or one one hundredth of one percent, or one basis point. In the above example, we can see that the spread is 3 pips wide.
The only exception to this method of computation is the Japanese Yen (JPY), which is quoted only to the second decimal point. For example, 117.89 in JPY to the US dollar equals one dollar being worth 117.89 yen.
Learning how to trade on the forex market requires a different trading mindset from the traditional mindset of trading on the stock market. In trading the forex, everyone has the same information available to determine the currency fluctuations. In addition, in order to be successful it is helpful to have or be following a system of trading which can help you to choose your trading positions. This can be a system which uses either a fundamental or a technical approach to trading.
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