BENEFITS OF FOREX TRADING

Why so many people are choosing Forex market as a business opportunity

Dear reader,

Before I post my own forex system, I think this article is worth reading especially for beginners.

So,check this out !

Following are reasons why forex trading is right business for you :
1. LEVERAGE:
In Forex trading, a small margin deposit can control a much larger total contract value. Leverage gives the trader the ability to make extraordinary profits and at the same time keep risk capital to a minimum. Some Forex firms offer 200 to 1 leverage, which means that a $50 dollar margin deposit would enable a trader to buy or sell $10,000 worth of currencies. Similarly, with $500 dollars, one could trade with $100,000 dollars and so on.

2. LIQUIDITY:
Because the Forex Market is so large, it is also extremely liquid.
This means that with a click of a mouse you can instantaneously buy and sell at will. You are never 'stuck' in a trade. You can even set the online trading platform to automatically close your position at your desired profit level (limit order), and/or close a trade if a trade is going against you (stop order).

3. PROFIT IN BOTH 'RISING' AND 'FALLING' MARKETS:
On the stock markets, you can only make money if shares are rising, but in economic recession and falling 'bear' markets, there is little chance of making big money.
Forex is different. One of the most exciting advantages of FX trading is the ability to generate profits whether a currency pair is 'up' or 'down'. A trader can profit by taking a 'long' position, (buying the currency pair at one price and selling it later at a higher price), or a 'short' position, (selling the currency pair and buying it back at a lower price). For example, if you think the US dollar will increase in value vs. the Japanese Yen then you will buy Dollars and sell Yen (go long). If you think the Yen will increase in value against the Dollar then you will sell Dollars and buy yen (go short). As long as the trader picks the right direction, a potential for profit always exists.

4. 24 HOURS:
From Sunday evening to Friday Afternoon EST the Forex market never sleeps. This is very desirable for those who want to trade on a part-time basis, because you can choose when you want to trade--morning, noon or night.

5. FREE 'DEMO' ACCOUNTS, NEWS, CHARTS AND ANALYSIS:
Most Online Forex firms offer free 'Demo' accounts to practice trading, along with breaking Forex news and charting services. These are very valuable resources for traders who would like to hone their trading skills with 'virtual' money before opening a live trading account.

6.'MINI' TRADING:
One might think that getting started as a currency trader would cost a lot of money. The fact is, it doesn't. Online Forex Firms now offer 'mini' trading accounts with a minimum account deposit of only $200-$500 with no commission trading. This makes Forex much more accessible to the average individual, without large, start-up capital.

See you in this forex system blog !

Fear in trading

How do you define fear?

"A strong emotion caused by anticipation or awareness of danger, it implies anxiety and usually the loss of courage." This definition of fear is useful in helping define the issues that traders face when coping with fear. The reality is that all traders feel fear at some level, but the key is how we prepare to address our concerns related to taking on risk as a trader.

Mark Douglas, in his book, ‘Trading in the Zone’, says that most investors believe they know what is going to happen next. This causes traders to put too much weight on the outcome of the current trade, while not assessing their performance as "a probability game" that they are playing over time. This manifests itself in investors getting too high and too low and causes them to react emotionally, with excessive fear or greed after a series of losses or wins.

All traders will encounter fear at some stage, no matter whether you are a professional or a novice trader, this seems inevitable, and to succeed and fight fear, traders will have to work through this positively. Winning traders manage their fear, while losers are controlled by it. Winners take positive action in spite of their fears.

Two of the greatest fears that a trader will encounter can be,
1. Fear of Loss
2. Fear of letting a profit turn into a loss

Fear of a Loss

No matter how skilled you may be in your technical analysis, or your study of fundament and analysis, or your having devised some brilliant trading strategies – but you may still face roadblocks on becoming a successful and a profitable trader. Why? – Overcoming fear of losing money. I have never met a trader who really likes losing money – at the same time I have never come across any trader who has NEVER lost any money. I know of one leading “guru” on charts and technical analysis in UK, who regularly lectures at seminars, once admitted that despite being brilliant in his study of technical analysis, he has failed miserably in his trading, having blown his account many times – now he just concentrates on teaching trading to others!

Fear of losing is not a problem, but it is how you handle the loss. A trader, who is relaxed, can look forward to another trade. Your success or failure in trading depends on your attitudes towards your gain as well as losses – and how you handle them.
The market does not know that you, the traders exists, you or for that matter any trader cannot do anything to change the market or influence it. Only YOU can control your behavior.

Whether it is a big drawdown on an account, or a good profitable trade, a professional trade ruse his head to stay calm and will look for his new trade. Only a novice trader will become excited and depressed. You are simply wasting your precious nervous energy!
The primary difference between a professional trader and a novice trader is how they handle a loss.
One of the greatest reasons for a lack of success in trading is because most traders played it safe, they are so afraid of losing that they simply do not pull the trigger, even when they have a great trade!, winning means being unafraid to lose.fearImagine how many times did you fall down, before you finally learnt to ride a bike? Or how many times did the baby fall down before the child went from crawling to walking to running?

So for most novice traders, the reason they do not win in their trading is because the pain of losing money is far greater than the joy of being a winning trader, on the other hand losing inspires a professional trader, for he will look at that as a way to learn from that loss and he will always ask the question, how can I profit the next time?
The winning trader will have a trading journal, where he records his trade; he will pull out the chart, and study it carefully, why the trade made a loss. A professional Trader is more concerned about avoiding a big loss and less concerned about small losses.

One trader that I had recently coached had an overall winning trade of 80%, yet his overall monetary record is of having a massive loss. He likes trading stock futures, particularly the stock Google, had many, many successful trades on the long side, but finally he went short at $179 and at the time of writing this book, he was still short with the price at $198. He had many opportunities to come out with a small loss, but “he did not want to take a loss”.

This position has stopped him focusing on new opportunities.
The longer you can stay in the game with a sound trading plan, the more likely you will start to experience a better run of trades that will always serve you well in times of temporary trading slumps. Being a cricket follower, I see that even a world-class cricketer goes through a lean patch, be it Botham, Tendulkar or Richards – But they all come back with a bang, so it should not be different for a trader.

What is important is how well you execute your trading plan, and stay focused with ruthless discipline. With a good trading plan you should be able to have an entry and exit strategies, which you will action decisively and not hesitantly.

Fear of letting a profit turn into a loss

I am often asked when I take my profit. - I simply say, “Go with the trend! – Let the profits run, and cut the losses short” But what do most Traders do? They SNATCH PROFITS and let the losses run! Too many traders want to lock in a quick profit to guarantee that they feel like a winner.

So when do you take profits? For example I tend to break my trade into 2 lots, or 4 lots, depending on what time frame I am trading. So let’s say if I am trading a shorter term time frame, I break my trade in 2 lots, so that as soon as I am say 30 points in profit, I close 50% of my trade and then for the remaining, I move my stop to break even. This way I am guaranteed that I will not lose! I will let the second lot run and I am seeking to ride the position with a trailing stop on the remaining portion of the position. Quite often I get stopped out, but imagine if only 2 out 10 trades you catch are a “big move” – what would that do to your bank balance! – The key is patience.

If however, I were trading a longer-term time frame, I would break the trade in 4 parts, taking 25% profits gradually, and at the same time trying to catch the big move. This strategy has given me the most confidence.

See you in this forex trading system blog !

Trade Terminology

 TRADING TERMINOLOGY

Ask – the price at which a trader will buy from the dealer the
price at which a trader will buy from the dealer
Bid – the price at which a trader will sell to the dealer the price
at which a trader will sell to the dealer
Open Position – an active trade in the market an active trade in
the market
Open Order – an order to buy or sell at a specific price that an
order to buy or sell at a specific price that has not
yet been filled has not yet been filled.
Buy/Sell Order – an order to buy or sell into the market at a an
order to buy or sell into the market at a specific price
Market Order - an order to buy or sell into the market at the an
order to buy or sell into the market at the current price
Stop (Loss) Order – an order to get out of an open position an
order to get out of an open position at a specific price if
the trade goes against you at a specific price if the trade
goes against you
Stop/Limit Order - an order to get out of an open position at an
order to get out of an open position at a specific price in
order to take profits a specific price in order to take
profits
Trailing Stop – moving your Stop (Loss) Order to follow moving your
Stop (Loss) Order to follow behind the market movement so as
to begin locking in behind the market movement so as to begin
locking in profits
Trend – sustained price movement in a single direction sustained
price movement in a single direction
Resistance - a level where the market is unable to penetrate a
level where the market is unable to penetrate further up
Support – a level where the market is unable to penetrate a level
where the market is unable to penetrate further down
Band/Range/Bracketing – tight price action, moving within tight
price action, moving within a limited price range for a
sustained period of time a limited price range for a
sustained period of time
Breakout – when prices suddenly move away from the when prices
suddenly move away from the persistent price range

Why most of forex traders fail ?

Know why they failed so you could avoid it

Hi all,
Before you get any single system or strategy to be used, I think you should aware what are factors you must avoid to be successful.

90% of traders fail, and many very quickly give up.
Why?

When I went through a phase of losing trades I treated it as a temporary setback and went back to the drawing board. I analysed the reasons of my failure and I sought the guidance of Top Traders,
Mentors and Coaches to put me back on the path of success and profitability.
In my opinion the high rate of failure for a new trader can be related to

the six major obstacles that a trader faces

which are summarised as follows -
1. Poor Skills
2. Lack of adequate capital
3. Setting unrealistic targets and goals
4. Lack of Patience
5. Lack of discipline
6. High risk aversion.
If we look at the list, it becomes apparent that the failure is as a result of trading without having
in place a proper Trading System and a Trading Plan– One that includes mind training, quality Forex education and strategies and sound money management rules.
So what are the Characteristics of a Successful Trader? All we have to do is to reframe the liabilities listed above;

1. Adequate trading knowledge and understanding. You should seek services of good quality mentors and a trading coach.
2. Adequate capitalisation – Don’t be fooled that you can earn thousands every week from a starting capital of $500
3. Realistic Goals – don’t expect 100% profit each month, it simply is not possible.
4. Have patience – don’t trade if you don’t have to. You should wait for a set-up according to your trading plan and system.
5. Have Discipline to follow your rules
6. Understanding and Managing Risk
7. And lastly the most important is having a Trading System and a Trading Plan.

See you in my next post.