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By Kelly Price 

If you are new to Forex trading you may consider day trading but beware of the fact that day traders ALWAYS lose for the following reason:

All short-term price volatility is random

There are countless millions of traders each day that trade trillions of dollars worth of currency and to say that you can measure what they will do in a few hours or a day is the biggest myth of currency trading.

THE PROOF

You may say that you have seen forex trading systems that claim profits and what they do is claim and NEVER produce a real track record.

You normally get the following:

1. Outrageous Claims

Advertising copy pure and simple, with no substantiation – designed to appeal to the greed and naivety of the buyer.

2. A Hypothetical Track Record

Let me explain what this is, for those of you who don’t know:

It’s a hypothetical track record done in hindsight KNOWING the closing prices! How hard is that?

Anyone can do it and there not worth the paper they’re written on. The fact so many traders don’t question them or don’t ask for a real track record, means they lose and wonder why.

Anyone can make money knowing the closing prices but in Forex Trading you don’t get that luxury – its what makes forex trading so hard.

The reason you don’t get a real time day trading track record is simple – day trading DOESN’T work.

If it did you would see a day trader with a real track record but of course if you try and find one you’re in for a long search.

Day Traders don’t make money – PERIOD.

If you want to make money with forex technical analysis you need to trade in time frames where the data can help you get the odds on your side and this means normally data of a few weeks minimum, not a few hours.

Think about it – if you have random volatility that can and do take prices anywhere in a day, its impossible to apply any technical tools to it. The tools maybe good but the data is unreliable and that’s why day traders lose.

The proof is a real time track record and you wont get one in day trading – try asking one of the vendors who try and sell day trading systems for one and get ready for a long search.

Day trading does not work and never has and it’s one of the biggest myths of trading that forex traders fall for – dont fall into the trap or you will lose to.

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By Kelly Price 

There is one mistake made more often by novice traders than any other. If you make this mistake you will never win and never achieve currency trading success, lets take a closer look at it.

The mistake that most novice Forex traders make is:

They think that they must predict price direction in advance to make money – It’s a fatal error for the following reason:

If you predict you are hoping or guessing that the market goes your way. If you hope or guess, you are going to lose and lose quickly. You can win without predicting but let’s first look at why this mistake is made by so many fore traders.

The Myth Of Prediction

The myth of prediction is common and as vendors selling forex trading systems use it all the time – to appeal to the greed and naivety of traders and the main culprits are those that say markets move to scientific theory.

King of them is Elliot wave and Fibonacci numbers but there are many more who will tell you that you can predict market tops and bottoms with accuracy. Of course, if markets were scientific we would all know the price in advance and there would be no market. Markets move because of opinions and thats a fact and no one can predict these opinions with scientific accuracy.

If the people selling these systems had discovered how to do what they claim they wouldn’t need to bother you – they would be making to much money!

So How Do You Trade?

You don’t predict – you CONFRIM price momentum is going your way then trade. For example – You see prices moving to support, but you don’t just jump in and hope – you wait for price momentum to turn up above support and then execute your trading signal.

If you trade with price momentum on your side you are shifting the odds in your favour.

Two great indicators for doing this are the stochastic and Relative Strength Index – Look them up in our other articles if are not familiar with them. These are not only good for entering trades but also for exiting them as well and you need to use momentum indicators if you want to win at forex trading.

The biggest error a trader can make is trying to predict – always confirm and you will have the odds on your side, which will ultimately lead you to currency trading success.

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By Monica Hendrix 

If you want to trade forex you need a forex trading strategy, which will allow you to enter the elite 5% of traders who make money and avoid the 95% who lose all their money. Let’s look at a forex trading strategy for success.

1. Basics

Many people think they can buy success from a vendor on the net but you can’t – most of the advice sold is junk and you can get better info for free. Any one who promises to give you success for a few hundred bucks is lying – success comes from within only you will make yourself rich, no one else your on your own.

Educate yourself from the great free resources on the net as the basis of your forex trading strategy. Use a technical approach it’s far easier than fundamental analysis. The latter, will get your emotions involved and with news instantly discounted, its impossible to trade it so don’t try.

Your Forex Trading System

If you educate yourself on technical analysis then you need a system and here is what you need to look at:

1. Learn about breakout methodology (see our other articles) its easy to understand and apply and works.

2. A fatal mistake made by most traders in their forex trading strategy is they try to predict where prices will go.If you do you will lose. You are relying on hope and if you rely on hope like in any venture your are going to lose.

3. Trade the odds and this means price momentum should support your view and confirm the trade before you enter. Two great momentum indicators are – the stochastic and the Relative Strength Index – look them up and use them.

4. Money management is essential and you need to protect what you have – with a breakout methodology that’s easy, your stop will be close behind the breakout when it occurs.

If you follow the above 4 steps in constructing your forex trading strategy, you will have the basics of a system that’s easy to understand apply and makes big profits.

3. The Key To Success

The key to success is to have confidence and discipline

The above system will give you that.

Confidence is essential as it leads to discipline and if you don’t have the discipline to follow your system you have no trading system in the first place.

The other key is to work smart not hard – You get no rewards for effort just for the success of your forex trading signals, so trade infrequently.

Using a breakout system and only trading the best trends means that you can learn everything in about a week and your forex trading strategy will take around 30 minutes a day to apply.

If you base your forex trading strategy on the above 3 points you will have the ingredients needed to enjoy currency trading success.

Good luck!

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By Kelly Price

Today we have better news resources than ever before to help Forex traders but the fact is most traders fail to use it correctly and lose.

Let’s look at Forex fundamental analysis in more detail

What is Forex Fundamental analysis?

Quite simply it studies all the facts in relation to the supply and demand situation of the currency and these are numerous and include:

Political factors

Interest rates

Economic health of the country

Economic policy

And many more

These are the facts and all traders see them but they draw different conclusions from what they see – this is the problem for any Forex trader.

The major problem is working out how traders view the facts and how much they have been discounted.

A simple equation for market movement is

Economic Fundamentals + Human perception = market movement

Firstly, in today’s world of lightening communications the fundamentals are discounted in seconds so trying to trade off news stories is doomed to failure.

Secondly humans are not creatures of logic – they are ruled by greed and fear – these emotions push prices to far in either direction – up or down. Ever wonder why a market collapses in the midst of very bullish fundamentals, or rallies when the news could not be more bearish?

This is human psychology at work and the emotions of greed and fear taking control of markets.

In Forex fundamental analysis the facts are their for all to see but the way they are perceived makes trading fundamentals hard, if not impossible for most traders.

The facts are there for all to see but as humans are not logical they are emotional beings and trying to trade facts is hard especially when they are discounted in seconds.

Is there a better way?

The best way to trade for Forex traders is not Forex fundamental analysis but technical analysis.

Forex technical analysis simply assumes all fundamentals will show up in price action as they are discounted in seconds – the technical analyst knows that human nature is constant and this will show up in repetitive price action.

The trader using Forex charts does not care why prices move he just wants to make profits when they do and looks for the right formations.

While technical analysis may seem simple its logic is sound, as it takes into account both parts of the equation for price movement – human psychology and the economic reality.

If you are considering Forex fundamental analysis then beware of the pitfalls and try technical analysis instead

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By Adnan Kaleemi

If you want any success in trading, you will have to control your risk exposure. Money management simply means how much you are putting in each trade you are taking in terms of risk exposure and dollar amount. The standardization process of your trades comes from money management. Standardization does not mean that you will have every trade similar because every trade is different due to its nature or entry, exit and pattern used as a criterion. What standardization does is that it effectively keeps your risk level within the same parameters for every trade you take. If you want any progress in your trading, you will have to control your risk exposure.

How do you feel when you take a position of 10K lot with 100 pips of stop in EURUSD? The loss is 100 in dollar amount. What will your feelings be and how would you handle a position of 100K lot when your stop loss is 50 pips. In this case the dollar loss amount is 500. Of course there is more exposure to risk in the markets and a greater emotional response. In the second case, the stop in pips is half but just by increasing the position size, the dollar amount of loss increased five times. Now let’s see how can these two trades be standardize. This can be done only by position sizing. Use the money management calculator provided to you to do these calculations. Here is how you do it. Suppose the portfolio size is 5,000 dollars.

Your risk in each trade you take is 2%. In the account size box put the dollar amount of your total equity in the account which in this case is 5,000. In the risk per trade box put the 2 in the %age of my total account size. Entry let’s say is 1.1500 and stop is 1.1600 and the stop is 100 pips. This gives you a maximum loss of 100 dollars in the trade. This gives you a calculation of one mini lot size of your position for this trade. To use the second example, we will now use the stop of 50 pips. Entry will be same 1.1500 and stop will be 1.1550. If you are taking a position of 100K lot, by using the money management calculator, you can see you are risking 10% of your account size in this trade. This is very high.

To take a position of single 100K lot you have to bring the risk level down to 2%. This can be done in two ways. One, your stop should be 10 pips instead of 50 pips or if you can not change your stop size, then you have to wait till your account size increases to 25,000 if you want to keep the stop to 50 pips. At this point you have understood the importance of position size and lot size calculation. By keeping the risk exposure to 2%, you are standardizing every trade you are taking and regardless of how big the position is or the stop loss level, if you use these powerful techniques used by top traders, you will have a geometric growth in your account with controlled risk exposure and emotional response.

Martingale type of strategies state that as the value of an account is decreasing, the size of the following trades increase. As the account suffers losses, the trading size increase in order to cover the losses.

This type of money management strategy is practiced in gambling where the systems or the games are negative expectancy. No type of money management can change the odds of the game or change the expectancy of the system. A simple example is a coin flip.

You can bet on heads or tails. If you win you win 1$ and if you lose, you lose 2$. This is negative expectancy. If after 100 flips, you have 60 heads and 40 tails, you will win 60$ and lose 80$ netting a loss of 20$.

Although you won 60% of the times, your wins were half the size of your losses. However, by practicing martingale, you can increase your bet size after every loss to 2$ to win 2$, in this case if a streak of wins start, you can manage to come up as a break even player.

This type of money management is highly dependent on streak of consecutive wins. Classically, the gamblers or traders try to take advantage of the streaks in the game. However, this is not going to change the negative expectation of the game. Any losing streak lasting for long enough will chew up the capital.

The theory behind doubling of size of the bet is that eventually the losing streak has to come to an end. I do not recommend this method of money management in forex, stocks, options or any other type of trading. The risks are too great and there is a good chance that 4-6 or more losing trades will ruin the account.

There are other better money management techniques which are antimartingale in nature. This will be discussed further in my other articles on money management techniques here on ezine articles.

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