Online Forex Trading changed all of that!

One of the great advances brought about by the internet has been the rise of Online Forex Trading. No longer do you need a broker to trade for you – you can now quickly and easily trade yourself, anywhere in the world, any time you like – and with greatly reduced fees! It’s also a lot easier to learn forex trading now thanks to the wide variety of easily available support tools and information out there.

The ability to trade forex online has put the power in the hands of the everyday investor, now anyone can learn how to trade forex effectively. Various tools from Forex Demo Accounts, Automated Forex Trading Systems, Managed Accounts and training guides put control of your financial freedom squarely in the hands of the everyday user. The single biggest barrier to success in Forex Trading is no longer start up costs or lack of information it’s now fear of the unknown!

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If you are predicting the future you are simply hoping or guessing – know one knows what will happen.

Let’s look at a common example in currency trading.

A trader sees a support level and wants to buy a dip into support so he waits for the price to dip to the level and executes his trading signal.

What he is doing is doing what many currency traders do – buying a dip but he is simply hoping the level will hold.

The professional forex trader knows that predicting is a waste of time and money and acts on confirmation only.

Use Momentum To CONFIRM

Rather than buying into a support level and hoping it holds they wait for proof that it has held by watching momentum indicators – when the prices turn up above support they enter.

They are not predicting they are trading the reality of price change and this is what you must do to if you want to win with your forex trading strategy.

Great momentum indicators to put in your Forex trading strategy are: The Relative Strength Index and the Stochastic. If you don’t know how they work look them up.

Scientific Theories

A common myth in currency trading is that you can predict the future. Step forward all the scientific theories that predict such as WD Gann and Elliot wave.

They don’t work and the reason is pretty obvious – if prices could be predicted we would all know the price in advance and there would be no market. It is the uncertainty and different opinions that make a market.

When you are trading currency markets you can’t predict as although human nature is constant it is also un predictable and this makes trading an odds game.

If you are trading the odds then you need to act on the reality of confirmation NOT Hope or guess.

So if you have been simply buying dips to support and not getting proof that it will hold before trading look up how momentum indicators work now!

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What is your trading edge?

THIS MEANS:

Why will you win when 95% of traders lose all their money quickly?

What separates you out from the majority of losers and means you are going to succeed?

If the answer is – I have bought a system for a couple of hundred bucks, or I like to trade off the news or on recommendations of others – kiss goodbye to your equity.

The fact is most traders in forex do not get decent Forex education!

They think it’s easy to win and believe the hype they read, or treat it as gambling and the market takes their equity.

A trading edge is the edge you have over the losing majority – for example, if I was to describe my trading edge it would be:

My use of sentiment and momentum indicators, to isolate high probability contrary trades and the ability to load these trades and remain disciplined.

I know I am good at hitting these trades and have a track record of doing it over 15 years. This is not meant to sound arrogant, it’s what makes me a good trader and I know it and you must get one to, if you want to win.

Know Your Edge and Know Yourself

Now your edge might be something different but that’s not the important point – the most important thing is you have an edge you have worked on and you know it gives you a head start on the majority.

An edge is something that comes from within and is a combination of method and the mindset, to make it work with discipline in the markets.

NO FREE LUNCH TODAY

Or any day in the Forex markets – it’s a brutal world where only the strong survive and you can only rely on yourself no one else can help you – you’re all on your own.

If you don’t like the above and like to blame everyone else for your losses – from your system, to your broker, do yourself a favour and don’t trade Forex – it’s not for you.

If you are ready to stand alone apply yourself and get the right knowledge, you can acquire the correct Forex education, get an edge and win.

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First let’s start with a simple equation which in forex trading gives us price

Fundamentals + Investor Psychology = Price

Let’s look at this simple equation in more detail

In forex trading prices move in line with the long term fundamentals over time – that’s why you see currencies trend for months or years, as they ultimately reflect the underlying health of the economy.

You can’t trade these though in isolation.

Why?

Because humans ultimately determine the price of anything and decide the price and they don’t act logically, their dominated by their emotions. In bull markets when greed dominates, they push prices too far to the upside. Conversely, when prices are falling fear, means that prices get pushed to far to the downside.

When a market has been pushed to far up or down by these emotions, the price eventually recoils beck to be in line with the longer term fundamentals.

FACT:

Most markets collapse when they are most bullish and rally when their most bearish – this is a reaction to traders pushing prices too far.

These price spikes are easy to see on a forex chart.

Short term price spikes never last long and if you learn to trade them, you can make money from other trader’s greed and fear.

It’s not enough to spot a market ruled by greed and fear and sell or buy IT – you need to find out when the turning point is coming, this is the hard part!

The key here is to look at price momentum and support and resistance.

Firstly, watch for prices to form a top or bottom in some shape or form, then watch momentum oscillators to time your entry.

If you are unfamiliar with using momentum, you need to make it an essential part of your forex education.

Three good oscilators to start with are:

The stochastic, the average directional movement and relative strength index.

All of these gauge the momentum of price when they wane at important resistance or support levels from over-bought readings a turning point is near.

The trick is to wait for CONFIRMATION.

Don’t guess a top or bottom, wait for resistance or support to form and a change in price momentum and then its time to execute your trading signal.

The beauty of looking at a forex chart is that it takes into advantage the fundamentals (it simply assumes that in today’s world of instant communications they show up in price action instantly) – but more importantly it shows you the reality of how investors perceive the price. You therefore see:

The truth – the price as it is and act on the reality.

No hoping guessing or listening to opinions – you see the facts and can take advantage of them, to buy or sell, with great odds and profit potential.

Many traders like to listen to the news or opinions – but if you do you will join the losing majority.

Forex charts will keep you detached and focused on the reality of price so you can take a step back and see things clearly with no emotions involved.

This may sound simple and it is.

You just need to keep your emotions out of your trading and watch price action – if you learn to do this and stand alone you will win.

At turning points, the more traders who disagree with you the better – only the minority of traders (who make the big profits catch them) so you’re in good company. If you want to win big at forex trading learn to stand alone – buy fear and sell greed and you can pile up some huge profits.

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Once you decide to start to day trading, don’t expect to learn everything about it in an instant. You will surely need to learn for some time, and you need to exert a lot of effort. Practice makes perfect, and forex trading requires a lot of it.

Before using real money, you can practice through simulated trading and do a paper trade. Here you can incorporate all your trading techniques and see if they actually work.

Don’t be a scared to lose a certain amount of money, because any trade involves a lot of it. But it doesn’t mean that you should not limit your losses, you can make use of stop orders. And most importantly, you should learn from your past losses.

A good trader by day should be disciplined. Make discipline a habit in order to make sound decisions, and act in accord with trading systems/strategies. This way, you can do your trade in a consistent and reliable manner. Certain situations require an individual to make decisions based on their pre-set criteria and parameters.

You should make it a point to habitually follow your trading system/plan; this way you can effectively evaluate the results of your plan. If your expectations are not met, perhaps its time that you make certain adjustments and fine tuning, so that your plan will still be of good use in the future.

Don’t let your emotions rule you, especially when you’re making trading decisions. A day trader should always be disciplined, and once you attain your objective, leave the market first. Oftentimes people plunge in deeper because they are influenced by greed and fear.

There are also day traders who are quite reluctant to lose money. For instance your stock goes down, and you’re still hoping that after some time it will rise again. And to your surprise, the share price goes further down. If only you were not reluctant to lose money, you could have sold it the first time its price went down, and prevent further loss.

A day trader should leave no room for fear and greed to take over; otherwise, this will be the key to your losses.

If you’re serious with your day trading, you can also do it at home. You would need hardware and software requirements to put a sufficient platform at home for online trading.

For your hardware requirement, you would need a computer with a Windows XP operating system or the like. The monitor should not be less than nineteen inches.

You must have a fast internet connection because day traders need to make fast executions and confirmations of the trade. They also need to receive and deliver quotes, news, and other pertinent market data. A fast internet connection allows you to make your day trading in a timely fashion.

Execution services are available online, and it comes in two types: the internet-based discount brokers and the online systems or the EDAT. The first type varies on how customer orders are executed, reviewed, and confirmed. This causes delay in completing a trade. On the other hand, the EDAT enables the trader to contact specialists directly. This results to a much quicker execution and confirmation of the orders.

Software platforms that are especially designed for day traders are often used by the more serious ones because real time data are usually provided like stock ticker and quotes, market indices and averages, charting, market stories, and price alerts. However, you would need to make monthly payments because this type of software usually charges fees.

Becoming a day trader is easy, but only if you are quite serious with this kind of endeavors. Like any type of trade, it requires dedication, time and effort. If you are able to put all of these things together, then you will reap profits that you’ve never imagined.

Remember that trading Forex is risky and you can lose as well as gain money. Good Forex software will help you.

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1. Be Selective

The first point to keep in mind is that the big trades don’t come around very often so you need to be patient and selective. You don’t get rewarded for trading frequently; you get rewarded for being right.

You can trade less than a dozen times a year and make triple digit gains, if you pick the right trades. So don’t be tempted to get in the market for the sake of it be patient.

2. Watch Breakouts

Forget buying low and selling high – most great trends start from new market highs and you have to be ready to buy these breaks.

If you wait for a pullback you will simply miss the best trends, because when a new trend breaks out – it moves quickly.

The best risk/ reward is offered on the these breaks. Most traders can’t buy breakouts, as they want to buy at a lower better price and wait for a pullback and they never get in and miss the trade.

3. Use a Simple System

To trend follow and catch breakouts you don’t need a complicated system.

All you need to understand are basic trend lines and the concept of support and resistance and that’s it.

A simple forex trading system is best, as it’s easy to understand and easy to apply – if you complicate your system, it will be less robust and will have too many elements which will break in trading.

All the best forex trading systems are simple and yours should be to.

4. Trade Valid Support and resistance only

Keep in mind, you only want to trade breaks that are considered important by the market.

This means that levels have been tested several times, in at least two time frames, preferably a few months.

When these levels are broken, chances are there are stops behind the level wating to be hit and new trend followers waiting to kick in which will accelerate the price trend.

4. Confirm – Confirm – Confirm!

Make sure that any breakout is confirmed by momentum oscillators – this will ensure you filter out false breakouts.

If you are not trading with price momentum, you’re not trading the odds and you won’t win – period.

Only take breakouts confirmed by a rise in price momentum.

We don’t have time to discuss the indicators to use here – but look up: RSI, ADX and the stochastic, as a good place to start.

5. Accept Short Term volatility

Breakout trading can see huge volatility after the initial breakout has occurred, don’t be tempted to move your stop to quickly WAIT.

You’re trying to catch the big trends so accept that you will see counter moves eat into your profits by several thousand a day.

If you want to catch the big trends and make $10, $20, $30,000 or more – accept the drawdowns in the short term and keep your eyes on the bigger prize if you dont you will be stopped out early and miss the big profit you were aiming at.

So there you have it.

A simple, logical system, that can and will pile up huge profits in under an hour a day.

You won’t have to spend much time on this system and you won’t trade very often – but you will make a lot of money and that at the end of the day, is what forex trading is all about.

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One way of doing so is to devise a form of trading which is automated to an extent and eliminates the need for you to make trading decisions yourself. A classic example would be a breakout system where your main job is to identify tight trading ranges. Then you just need to wait until the price moves outside of this range and trade in this direction, hoping it’s the start of a solid breakout and the price will subsequently move away from this range.

Breakout systems are very popular amongst forex traders and are definitely one way which you can trade without too much stress.

Another way of reducing your stress levels when trading forex markets is to stop scalping and placing very short-term trades as this form of trading is arguably the most stressful. Yes you can make big profits within just a few minutes but you can just as easily lose a lot of money as well, particularly when you get spikes in price which immediately takes out your stop loss. So scalping is definitely not for the faint-hearted.

Instead you should focus on longer term trading where you can take your time making trading decisions and have plenty of time to watch the markets and move your stop losses and limit prices as required.

Long term trading also enables you to test the idea of trading for a living whilst still keeping your present job. There’s nothing more stressful than trading knowing that your entire income depends on you making consistent profits, so by taking a longer term view you can trade knowing you have your main job, and therefore another regular income coming in, which reduces stress levels dramatically.

The final method you can use to eliminate stress (which is obviously not for everyone due to the high cost involved) is to devise your own trading robot which places trades for you, depending on certain criteria being met. This is very complex and definitely beyond most people but is one other option you could consider.

Anyway the main point to remember is that although forex trading can be a highly stressful profession, there are ways in which you can make regular profits without consistently being on the edge all the time, and at risk of having a heart attack.

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It’s a fact that long term trends exist in forex trading and they last for months, or even years yet, most traders simply cannot make profits from them. This is not because they don’t have the right forex trading system -but because they don’t have the right mindset.

We all want to make big profits don’t we?

Yes we do, but that’s very different to accepting them. Let’s look at a typical scenario.

A trader spots a trend and gets into it, the trend is still going his way but there are swings back into his open equity, reducing his profit. As his profit gets bigger, the more tempted he is to take it before it gets away and the more the price swings, the more the temptation to bank it.

In the end the trader snatches the profit, or moves his stop too quickly – he is out and the trend continues piling up $1, $5, $10,000 or more.

Forex trends always seem to last longer than most traders expect and if you get into one, you need to hold it and this means keeping 3 key points in mind:

1. If the trend is strong and you’re confident it will continue, hold you stop back and trail it outside of normal volatility.

2. Accept that you are going to have short term price swings against you, that’s simply the nature of trading – so get used to losing short term open equity and keep your eyes on the bigger prize.

3. You need to accept that when the trend does change you are going to give back a big chunk as it turns, because you are trailing a wide stop. Keep in mind you are not after perfection, you want to make money. Keep in mind if you caught just 50% of every major forex trend, you would be very, very rich.

Long term trends are always there because they reflect the underlying economic health of a country and these economic cycles last for many months or even years.

If you spot and hold long term trends, you can make triple digit profits and only trade a few times a year!

Many traders make the mistake of trading too frequently and protecting their positions so much with tight or close trailing stops that they end up making no money.

By trying to reduce risk they actually create it.

Don’t make the same mistake – big profits are made trend following the currencies and if you learn to have the discipline to hold trends, take dips in open equity and take calculated risks at the right time, you will enjoy currency trading success and make consistent triple digit profits.

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It’s a fact that long term trends exist in forex trading and they last for months, or even years yet, most traders simply cannot make profits from them. This is not because they don’t have the right forex trading system -but because they don’t have the right mindset.

We all want to make big profits don’t we?

Yes we do, but that’s very different to accepting them. Let’s look at a typical scenario.

A common scenario is:

A trader spots a trend and gets into it, the trend is still going his way but there are swings back into his open equity, reducing his profit. As his profit gets bigger, the more tempted he is to take it before it gets away and the more the price swings, the more the temptation to bank it.

In the end the trader snatches the profit, or moves his stop too quickly – he is out and the trend continues in the direction he thought but hes not in it

Forex trends always seem to last longer than most traders expect and if you get into one, you need to hold it and this means keeping 3 key points in mind:

1. If the trend is strong and you’re confident it will continue, hold you stop back and trail it outside of normal volatility.

2. Accept that you are going to have short term price swings against you, that’s simply the nature of trading – so get used to losing short term open equity and keep your eyes on the bigger prize.

3. You need to accept that when the trend does change you are going to give back a big chunk as it turns, because you are trailing a wide stop. Keep in mind you are not after perfection, you want to make money. Keep in mind if you caught just 50% of every major forex trend, you would make a lot of money.

Long term trends are always there because they reflect the underlying economic health of a country and these economic cycles last for many months or even years. If you spot and hold long term trends, you could make big profits and only trade a few times a year!

Many traders make the mistake of trading too frequently and protecting their positions so much with tight or close trailing stops that they end up making no money.

By trying to reduce risk they actually create it.

Don’t make the same mistake – big profits are made trend following the currencies and if you learn to have the discipline to hold trends, take dips in open equity and take calculated risks at the right time, you will enjoy currency trading success and have the opportunity to enjoy some great profit potential.

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Well to the uneducated person or the inexperienced forex trader, it would appear to be very easy to arrive at this conclusion, particularly if you start watching the chart of any currency pair and observe how it moves in a seemingly random fashion.

However many large financial institutions around the world, and indeed individual traders, make consistent profits from trading forex markets, so you can be pretty sure that they’re not gambling away huge amounts of money every day at random.

There are of course many different ways you can give yourself an edge trading forex. The main way is of course through technical analysis. This is basically the study of charts and technical indicators to identify trading patterns and help you find potentially high probability trading positions.

They work so well because traders all over the world watch the same charts and the same technical indicators and see the same patterns repeating themselves over and over again. This allows them to take positions knowing that the price will most probably behave the same in this instance as before.

For example if the GBP/USD has found support at say 1.9600 three times before, and does so once more on this occasion, then many traders will have also noticed this and will be encouraged to take a long position, and in many ways it becomes a self-fulfilling prophecy.

Furthermore with the advancement of technology these days so many people can quickly and easily track any technical indicators they want thanks to the internet so technical analysis has become an even more valid way of trading forex.

So while it is true that on a very short-term basis, there is an element of randomness in the markets, if you look at the longer-term charts and use technical analysis to analyse the markets and make trading decisions, you can place the odds of winning firmly in your favour.

Therefore to answer the original question I would say that forex trading is definitely not another form of gambling because with a bit of education you can become an accomplished technical analyst and determine high probability trading positions where you win far more than you lose.

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