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Never Risk More Than 5% Per TradeThis is the most common and yet also the most violated rule in trading and goes a long way towards explaining why most traders lose money. Trading books are littered with stories of traders losing one, two, even five years’ worth of profits in a single trade gone terribly wrong. This is the primary reason why the 5% stop-loss rule can never be violated. No matter how certain the trader may be about a particular outcome, the market, as John Maynard Keynes used to say, “can stay irrational far longer that you can remain solvent.”Most traders begin their trading career, whether consciously or subconsciously, by visualizing “The Big One” - the one trade that will make them millions and allow them to retire young and live carefree for the rest of their lives. In FX, this fantasy is further reinforced by the folklore of the markets. Who can forget the time that George Soros “broke the Bank of England” by shorting the pound and walked away with a cool $1 billion profit in a single day? But the cold hard truth of the markets is that instead of winning the “Big One”, most traders fall victim to a single catastrophic loss that knocks them out of the game forever. Large losses, as the following table demonstrates are extremely difficult to overcome. Just imagine that you started trading with $1,000 and lost 50%, or $500. It now takes a 100% gain, or a profit of $500, to bring you back to breakeven.A loss of 75% of your equity demands a 400% return - an almost impossible feat - just to bring your account back to its initial level. Getting into this kind of trouble as a trader means that, most likely, you have reached the point of no return and are at risk for blowing your account. The best way to avoid such fate is to never suffer a large loss. That is why the 5% rule is so important in trading. Losing only 5% per trade means that you would have to sustain 10 consecutive losing trades in a row to lose 20% of your account. Even if you sustained 20 consecutive losses - and you would have to trade extraordinarily badly to hit such a long losing streak - the total drawdown would still leave you with 60% of your capital intact. While that is certainly not a pleasant position to find yourself in, it means that you only need to earn 80% to get back to breakeven - a tough goal but far better than the 400% target for the trader who lost 75% of his capital.The art of trading is not about winning as much as it is about not losing. By controlling your losses - much like a business that contains its costs - you can withstand the tough market environments and will be ready and able to take advantage of profitable opportunities once they appear. That’s why the 5% rule is the one of the most important rules of trading.Enjoy your trades guys...wish you all a SUCCESS & PROFITABLE trades"LIVE" TRADES VIDEO18th July '0918th June '0915th June '098th June '09Risk Disclosure: Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to invest in foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange trading, and seek advice from an independent financial advisor if you have any doubts. All Technical Analysis and resulting conclusions and observations are based upon historical chart formations and patterns. Therefore, observations are a function of each analyst’s interpretation of the charts. What has happened 75% of the times in the past per a particular chart pattern does not mean it will always recur in the future. It logically follows that historical precedent does not guarantee future results. Conclusions expressed in the technical analysis section are personal opinions of the analysts. -
Finding the Right Trading Style for YouWe’re frequently asked, “What’s the best way to trade the forex market?” That’s a loaded question that seems to imply there’s a right way and a wrong way to trade currencies. Unfortunately, there is no easy answer. Better put, there is no standard answer — one that applies to everyone.The forex market’s trading characteristics have something to offer every trading style (long-term, medium-term, or shortterm) and approach (technical, fundamental, or a blend). So in terms of deciding what style or approach is best suited to currencies, the starting point is not the forex market itself, but your own individual circumstances and way of thinking.Real-world and lifestyle considerationsBefore you can begin to identify the trading style and approach that works best for you, give some serious thought to what resources you have available to support your trading. As with many of life’s endeavors, when it comes to financial-market trading, there are two main resources that people never seem to have enough of: time and money.Deciding how much of each you can devote to currency trading helps to establish how you pursue your trading goals. If you’re a full-time trader, you have lots of time to devote to market analysis and actually trading the market. But because currencies trade around the clock, you still have to be mindful of which session you’re trading, and of the daily peaks and troughs of activity and liquidity.Just because the market is always open doesn’t mean it’s necessarily always a good time to trade. If you have a full-time job, your boss may not appreciate your taking time to catch up on the charts or economic data reports while you’re at work. That means you’ll have to use your free time to do your market research. Be realistic when you think about how much time you’ll be able to devote on a regular basis, keeping in mind family obligations and other personal circumstances.
When it comes to money, we can’t stress enough that trading capital has to be risk capital and that you should never risk any money that you can’t afford to lose. The standard definition of risk capital is money that, if lost, will not materially affect your standard of living. It goes without saying that borrowed money is not risk capital — you should never use borrowed money for speculative trading.When you determine how much risk capital you have available for trading, you’ll have a better idea of what size account you can trade and what position size you can handle. Most online trading platforms typically offer generous leverage ratios that allow you to control a larger position with less required margin. But just because they offer high leverage doesn’t mean you have to fully utilize it.Enjoy your trades guys...wish you all a SUCCESS & PROFITABLE trades"LIVE" TRADES VIDEO18th July '0918th June '0915th June '098th June '09Risk Disclosure: Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to invest in foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange trading, and seek advice from an independent financial advisor if you have any doubts. All Technical Analysis and resulting conclusions and observations are based upon historical chart formations and patterns. Therefore, observations are a function of each analyst’s interpretation of the charts. What has happened 75% of the times in the past per a particular chart pattern does not mean it will always recur in the future. It logically follows that historical precedent does not guarantee future results. Conclusions expressed in the technical analysis section are personal opinions of the analysts. -
Trading In Forex Market Volatility
The markets don’t always behave the way we’d like them to Geopolitical turmoil, natural disasters, interest rates and world events can have a profound effect on market movements. If recent market volatility has you concerned about the economy, you are not alone; this is a confusing time for manyinvestors.An increase in market volatility often leads traders to find a lot more trading opportunities. The opportunities to catch and profit from price movement, especially if it is the HUGE one. The huge market usually swings lots of potential for gain, but also for loss, especially if traders do not take the necessary precautions.During times of volatility, traders need to adjust their strategy to compensate for erratic market. The FX Markets also provides a great section on their site showing traders which currency pairs are experiencing the most and least volatility that day.
1. Decrease in LeverageDuring times of extreme volatility, losses may seem traumatic. With the average daily pip movement increased in volatile times, traders should be considering how their leverage will affect their trades. At a one percent or even a half percent margin, investors should be mindful of how much leverage, or even the size position being traded, can affect their portfolio.In normal market conditions, placing a 2 lot position is fine when you are looking to make about 50-100 pips. During a more volatile time, when the potential loss is 100-200 pips, it stops being an effective risk to reward ratio.To compensate, traders should look to taking on smaller trading positions, in this case only one lot as opposed to the average 2 lot position.2. Use Tighter StopsMany traders are hesitant to use tighter stops in volatile markets because they see the large swings increases the likelihood that the position will be taken out. Having tighter stops can also provide great risk managers in times of extreme volatility. For example, on a EUR/USD trade, rather than setting an 80 pip stop to protect your position, consider placing a 50-60 pip stop. This will insure the protection of your currency position and if the stop isbroken, there is a higher likelihood that the trend will continue lower and the stop took you out before you could potentially lose more money.The width of the stop being set does depend on the currency pair being traded, as some pairs have wider ranges. In a Yen cross like the GBP/JPY or AUD/JPY, traders may be more likely to have wider stops as their average daily range is 50% more than that of the EUR/USD. With that said, stops during volatile market conditions should not be as wide as before. Instead of a stop of 100 pips below entry, traders may consider a 25 pip reduction and have a 75 pip stop.3. Be Selective with TradesIn volatile market conditions, traders are often tempted to place an increase in trades as the market is going wild and they want to take advantage of all the trading opportunities. It is important to remember that in volatile times, losses are likely to be big. Before placing a trade, assess risk tolerance levels. How much risk is acceptable for the trader both psychologically and financially? It may be a good idea for a trader to shift their interest somewhere else until things settle down, instead of trading a violent pair.4. Increase Discipline When TradingDuring all market conditions, traders should follow their predetermined trading strategy. During volatile market conditions, it is important to use that same level of restraint and self discipline. Any set stops, contingency plans or risk management benchmarks must be adhered to without hesitation. This will help in defining how much risk is taken and should price action be uncontrollable.5. Know Before You GoIt also helps a trader to know what is causing the current spate of volatility in the markets in order to be prepared for the unexpected. As such, an investor can accommodate their strategy to the market environment and not just the currency pair being traded. The first of these considerations is accounting for emotions in a market: is fear currently driving the market lower? Or is it buyer’s mania that is keeping the bullish tone alive? Traders’ overreaction and emotion tend to push markets to overextended targets. This fact alone creates volatility through simple supply and demand.Volatility can also, and more than likely will, be sparked by economic events. In this instance, market participants may interpret fundamental data differently and not as cut and dry as the more novice trader. A perfect example of this is usually monthly manufacturing reports that are released in pretty much all industrial economies.The classic scenario has the market honed in on a particular number for the month. However, traders young and old will sometimes wonder why the market sold off if manufacturing showed positive growth. The answer is simple. The market had a different interpretation and positions were violently reshaped and shifted. These tend to create great opportunities for some and horrible memories for others.
Panic and erratic momentum can additionally be found in certain market environments. Not to be confused with fear or greed, panic selling and buying can create very choppy and relatively untraceable markets. These conditions will lead some to flip flop their positions while leaving others gaping at the fact that the position was right, only to be stopped out prematurely. These two common examples will create further panic and volatility as traders abandon their own individual strategy for the possibility of instant profits or stoppage revenge. As a result, a vicious cycle of volatility ensues until a definitive market direction can be established.The simple rules above, and a task of getting to know the current trading environment, can empower every trader through the ranks. Although some relate volatility with difficult and untouchable markets, opportunities continue to remain abound in these less than attractive conditions to those focused and fortunate.By following these five simple steps, trading in volatile market conditions should be a little simpler. Remember to adjust leverage based on volatility, stick to how much risk your trading plan already determines, use tight stops and don’t jump into every trade that looks good.Put volatility to work for you. Do you think of the glass as half empty or half full? Your perspective can affect the investment decision you make during market downturns. Investors who view market volatility negatively can make irrational decisions. A down market can be an opportunity for you to build your portfolio and take advantage of lower unit costs.Enjoy your trades guys...wish you all a SUCCESS & PROFITABLE trades"LIVE" TRADES VIDEO18th July '0918th June '0915th June '098th June '09Risk Disclosure: Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to invest in foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange trading, and seek advice from an independent financial advisor if you have any doubts. All Technical Analysis and resulting conclusions and observations are based upon historical chart formations and patterns. Therefore, observations are a function of each analyst’s interpretation of the charts. What has happened 75% of the times in the past per a particular chart pattern does not mean it will always recur in the future. It logically follows that historical precedent does not guarantee future results. Conclusions expressed in the technical analysis section are personal opinions of the analysts. -
Easy News System
This method will show you exactly how I trade the news while at thesame time side stepping all the common problems that are associated with trading the news.This system enables you to spend very little time trading yet produces fantastic results averaging 150-200 pips every month.If you are new to trading you will be happy to know that you do not need special skills in order to use this system. As long as you can set pending orders in your trading platform you will be fine.Please do not jump straight into the market without demo trading first,this is very important.Ok with all that out of the way let crack on!Let's discuss the news in the forex market before we go any further. In order to use this system you will need to know how to read upcoming news and plan when you will be trading.It is important that you make notes for the upcoming month with exact times each report will be released. You will be preparing to set orders not long afterwards. The most common way to trade the news is to wait for the report to hit and open a trade in the direction the currency pair moves.Brokers widen their spreads as a news report is about to hit because there is very little liquidity in the market, sometimes spreads can get as high as 25 pips!
15 minutes after the report has been released the current candle will close and we are ready to make our trades.Set two orders one sell order 2 pips below the candle and one buy order 2 pips above the candle. Each trade should be set with a 20 pip stop + spread and have a 20 pip trailing stop in place.Rules of this systemLet's run through the simple rules just to make sure you understand.1. Check the upcoming news reports and plan the times you willbe trading for the USD and GBP.2. On a USD?GBP 15 minute chart be prepared to set yourorders once the first 15 minute candle of the news has closed.3. If the currency pair has moved more than 70 pips before youplace the orders DO NOT TRADE!4. If your broker spreads have still not returned to normal forsome reason after the 15 minutes DO NOT TRADE!5. Set your orders 2 pips above/below the 15 min candle bothwith 20 pip trailing stops.6. Once one of the positions is at break even from the trailingstop remove the other pending position.7. If one of the trades results in being stopped out leave theother pending order to be filled in the opposite direction.8. Once a trade is open do not touch it, let the trailing stop takeyou out of the market.9. Keep records of every report you trade with notes, this willhelp you greatly in the future.This system has proved itself to me through my testing and tweaking, don't be afraid to make it your own once you have got used to it. I am sure there are several more profitable ways to use this system.The beauty of this system is it requires very little time and very littleexperience to trade it.Enjoy your trades guys...wish you all a SUCCESS & PROFITABLE tradesRisk Disclosure: Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to invest in foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange trading, and seek advice from an independent financial advisor if you have any doubts. All Technical Analysis and resulting conclusions and observations are based upon historical chart formations and patterns. Therefore, observations are a function of each analyst’s interpretation of the charts. What has happened 75% of the times in the past per a particular chart pattern does not mean it will always recur in the future. It logically follows that historical precedent does not guarantee future results. Conclusions expressed in the technical analysis section are personal opinions of the analysts. -
Hai everyoneI start this blog is just to share with all of you out there about my trades...I hope you all have the same mindset like me...positive, discipline & cool during trading ...I've just opened a real account early April '09 ...just a small capital.....start from USD500...it's the only amount that I'm willing to spend for this forex matter....after make my 4th withdrawal these recent days my account equity is still increasing.....mmmmm it's cool right.....You can view my statement here.... I'm willing to share it with you....REGISTRATION IS STILL FREE..!!My Basic Trade Methodology:1. Trade with Trend Trading2. Use Stop Loss and always to be winner3. Use Risk ManagementBecome Success & Profitable TraderThere are various personal aspects you need in order to become a forex trader and by that I mean someone who is going to actually make money on the markets. Most of these aspects of course, are mental. The biggest problem of all which exists among traders, is trying to gain instant quick wealth. Forex Trading does not work that way. You need to be patient and only trade when the trade presents itself to you. The amount of times I hear people rushing into trades and ultimately losing out just goes to show how important self discipline is. This system aims to bring you a small, constant profits and NOT a free ride to quick instant wealth.Successful traders are the ones who actually enjoy what they‟re doing. If you do not enjoy forex trading, you should not be reading this right now, because without the passion and drive to want to learn more and want to make money, I can guarantee that you are not going to.
10 Reasons Why You’re Failing to Make Money in Forex Trading.If you’re frustrated with your trading time for money, then you’re going to love what I’m about to share with you. Something I’ve realised over the last year is that being successful forex trader is as much to do with having the correct attitude and mindset as anything else. Like any new venture, there’s a steeplearning curve involved building a profitable trades and it can often be a frustrating experience. Particulary as the daily bombardment of marketing messages about new forex trading systems and new expert advisors tends to make you feel like you’re the only one left not making money. So anyway, I’ve been thinking about why many newbie’s find it difficult to make money in forex trading..Here’s my top ten reasons…1. Spending too much time reading, learning, buying, watching and not enough time DOING your own research.2. Not taking your trading seriously enough. Always keeping a trading diary; by keeping a diary forces you to think through your idea because you have to write it down. Additionally a written trading record provides you with an opportunity to review your thought process so that you can replicate the successful trading ideas and modify the unsuccessful one.3. Not focusing your efforts on a trading system (whether it be day trading, swing trading, scalping trading or whatever) for long enough to see results. You must trust your own trading method. You must have a methodology by which you go about your trading business and you must trust it; otherwise you are not operating in businesslike manner. you will end up chased the crowd.4. Because there are so many forex trading system and forex mechanical system (metatrader expert advisor), it becomes almost impossible to know where to start. So you end up doing nothing.5. Lack of perseverance. You start off thinking earning money in forex trading is easy (because everyone else seems to be doing it) and quickly become disillusioned and give up when it dawns upon you that it actually takes hard work and dedication.6. Directing all your efforts into a trading system or you lack the knowledge to make it profitable.7. Not setting up your trading system or your expert advisor in the right way to be profitable from the outset.8. Lack of a clearly laid out route to success. Always be aware of the bigger picture. A very important factor in having an edge in the market is to be aware of the big picture-where the trend goes and identifying the support and resistance of market that exists.9. A failure to set practical, achievable, specific goals. Lot of newbies set an impossible profit target and set your goal to high. There is no free money in forex trading. Don’t dream it, even your guru themselves set a smaller pips which very profitable through a trading system which almost guarantee make profit every month.
10. You are not using smart money management. You need to know when to cut your losses. Wheter you are fundamental or technical trader, always remember that market conditions change all the time. Most newbies ‘believe’ the market at the end will play out your way, and you end up losing to much money. Perhaps some of those ring true with you? I know I’ve been guilty of most of them at one point or another. So if you do recognize yourself in that list, at least take heart from the fact you’re not alone. And remember, it’s never too late to change bad habits or direction if necessary.Enjoy your trades guys...wish you all a SUCCESS & PROFITABLE tradesMY "LIVE" TRADES VIDEO18th July '0918th June '0915th June '098th June '09Risk Disclosure: Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to invest in foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange trading, and seek advice from an independent financial advisor if you have any doubts. All Technical Analysis and resulting conclusions and observations are based upon historical chart formations and patterns. Therefore, observations are a function of each analyst’s interpretation of the charts. What has happened 75% of the times in the past per a particular chart pattern does not mean it will always recur in the future. It logically follows that historical precedent does not guarantee future results. Conclusions expressed in the technical analysis section are personal opinions of the analysts. -
Hai everyone..The reason I start this blog is just to share with all of you out there about my trades...I hope you all have the same mindset like me...positive, discipline & cool during trading ...I've just opened a real account early April '09 ...just a small capital.....start from USD500...it's the only amount that I'm willing to spend for this forex matter....
Ok.. for the start I wanna share my live....mmmmm not live but recorded live trading sesion from my past few weeks experience..hhmmmmm quit horrible man...when the 1st time I wanna enter the market, when it just negative 10-20 pips I started tosweat......hehehe....after make my 4th withdrawal these recent days my account equity now is at USD7,634.00...and it's still increasing.....mmmmm it's cool right.....You can view my statement here.... I'm willing to share it with you....I've opened a real account at www.FxPro.comIf you wanna know more about how it's work, please register through form below...only registered member that I will entertain ok...REGISTRATION IS STILL FREE..!!Money Management & Trading habitsMaximum 5% risk per pair.Your risk to profit ratio has to be minimum 1:2. That means if you are taking a 5% risk on a trade make sure your profit target would be at least 10%. Always have realistic targets.More trades you take the more you expose your account for losses. No trader in this world can profit from every single market move.
Patience plays a big part in trading. Take the trades only if you are at least 90% sure of profiting from it. If you are not sure stay away from the trade. Staying on the sideline is as good as winning.Always have a trading strategy …make a habit to stick to it doesn’t matter how desperate you are. Always trust your strategy but not bloomberg or some statement from bankers.Your charts are your forex 'GURU'. Everything what you need to know about forex is on your charts. You will learn something new everyday from your charts.Specialize in one or two pairs. Every single pair has it’s own characteristics. No two pairs are the same. Don’t trade all the pairs your broker can offer. If you specialize in one or two pairs very soon you will be able to read the pair like a road map. Stay away from the ranging markets.Enjoy your trades yaaaa...wish you all a SUCCESS & PROFITABLE tradesMY "LIVE" TRADES VIDEO18th June '0915th June '098th June '09Risk Disclosure: Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to invest in foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange trading, and seek advice from an independent financial advisor if you have any doubts. All Technical Analysis and resulting conclusions and observations are based upon historical chart formations and patterns. Therefore, observations are a function of each analyst’s interpretation of the charts. What has happened 75% of the times in the past per a particular chart pattern does not mean it will always recur in the future. It logically follows that historical precedent does not guarantee future results. Conclusions expressed in the technical analysis section are personal opinions of the analysts. -
Hai everyone......
Just call me Viz je...I've just started forex ni...just opened a real account early April '09 ...capital small je.....start from USD500.. it's the only amount that I'm willing to spend for this forex matter...hahaha..okidoki...I start this blog just to share with you all out there about my trades...I hope you all out there have the same mindset like me...positive & discipline when trading wooikey...
Ok.. for the start I wanna share my live....mmmmm not live but recorded live trading sesion from mypast few weeks experience..hhmmmmm quit horrible man...when the1st time I wanna enter the market, when it just negative 10-20 pips I started to sweat......hahaha..but until 21st May '09 my account equity is now at USD7,992.32...and it's still increasing.....mmmmm it's cool right.....You can view my updated statement here.... I'm willing to share it with you...If you wanna know more about how it's work, please register through form below...only registered member that I will entertain ok...REGISTRATION IS STILL FREE..!!You all can monitor my recorded "LIVE" trade at link attached.ooppss I've forgot.....I've opened a real account at www.FxPro.comMoney Management & Trading habits:
Maximum 5% risk per pair.
Your risk to profit ratio has to be minimum 1:2. That means if you are taking a 5% risk on a trade make sure your profit target would be at least 10%.Always have realistic targets.
More trades you take the more you expose your account for losses. No trader in this world can profit from every single market move.
Patience plays a big part in trading. Take the trades only if you are at least 90% sure of profiting from it. If you are not sure stay away from the trade. Staying on the sideline is as good as winning.
Always have a trading strategy … make a habit to stick to it doesn’t matter how desperate you are. Always trust your strategy but not bloomberg or some statement from citibank.
Your charts are your forex 'GURU'. Everything what you need to know about forex is on your charts. You will learn something new everyday from your charts.
Specialize in one or two pairs. Every single pair has it’s own characteristics. No two pairs are the same. Don’t trade all the pairs your broker can offer. If you specialize in one or two pairs very soon you will be able to read the pair like a road map. Stay away from the ranging markets.
Enjoy your trades yaaaa...wish U all a SUCCESS & PROFITABLE TRADESMY FEATURED "LIVE" RECORDED VIDEO21st May '0918th May '0915th May '09 -
Viz Forex Tips and Advice
Which way is the market moving? How far up or down will it go? And when will it go the other way? These are the basic concerns of the technical analyst. Behind the charts and graphs and mathematical formulas used to analyze market trends are some basic concepts that apply to most of the theories employed by today’s technical analysts.These precepts define the key tools of technical analysis and how to use them to identify buyingand selling opportunities.Money Management & Trading habits:
Maximum 5% risk per pair.Your risk to profit ratio has to be minimum 1:2. That means if you are taking a 5% risk on a trade make sure your profit target would be at least 10%.Always have realistic targets.
More trades you take the more you expose your account for losses. No trader in this world can profit from every single market move.
Patience plays a big part in trading. Take the trades only if you are at least 90% sure of profiting from it. If you are not sure stay away from the trade. Staying on the sideline is as good as winning.
Always have a trading strategy … make a habit to stick to it doesn’t matter how desperate you are. Always trust your strategy but not bloomberg or some statement from citibank.
Your charts are your forex 'GURU'. Everything what you need to know about forex is on your charts. You will learn something new everyday from you charts.
Specialize in one or two pairs. Every single pair has it’s own characteristics. No two pairs are the same. Don’t trade all the pairs your broker can offer. If you specialize in one or two pairs very soon you will be able to read the pair like a road map. Stay away from the ranging markets.
1. Map the TrendsStudy long-term charts. Begin a chart analysis with monthly andweekly charts spanning severalyears. A larger scale map of the market provides more visibility
and a better long-term perspective on a market. Once the long-term has been established, then consult daily and intra-day charts. A short-term market view alone can often be deceptive. Even if you only trade the very short term, you will do better if you’re trading in the same direction as the intermediate and longer term trends.2. Spot the Trend and Go With It
Determine the trend and follow it. Market trends come in many sizes – long-term, intermediate-term and short-term. First, determine which one you’re going to trade and use the appropriate chart. Make sure you trade in the direction of that trend. Buy dips if the trend is up. Sell rallies if the trend is down. If you’re trading the intermediate trend, use daily and weekly charts. If you’re day trading, use daily and intra-day charts. But in each case, let the longer range chart determine the trend, and then use the shorter term chart for timing.
3. Find the Low and High of It
Find support and resistance levels. The best place to buy a market is near support levels. That support is usually a previous reaction low. The best place to sell a market is near resistance levels. Resistance is usually a previous peak. After a resistance peak has been broken, it will usually provide support on subsequent pullbacks. In other words, the old “high” becomes the new low. In the same way, when a support level has been broken, it will usually produce selling on subsequent rallies – the old “low” can become the new “high.”
4. Know How Far to Backtrack
Measure percentage retracements. Market corrections up or down usually retrace a significant portion of the previous trend. You can measure the corrections in an existing trend in simple percentages. A fifty percent retracement of a prior trend is most common. A minimum retracement is usually one-third of the prior trend. The maximum retracement is usually two-thirds. Fibonacci retracements of 38% and 62% are also worth watching. During a pullback in an uptrend, therefore, initial buy points are in the 33-38% retracement area.
5. Draw the Line
Draw trend lines. Trend lines are one of the simplest and most effective charting tools. All you need is a straight edge and two points on the chart. Up trend lines are drawn along two successive lows. Down trend lines are drawn along two successive peaks. Prices will often pull back to trend lines before resuming their trend. The breaking of trend lines usually signals a change in trend. A valid trend line should be touched at least three times. The longer a trend line has been in effect, and the more times it has been tested, the more important it becomes.
6. Follow that Average
Follow moving averages. Moving averages provide objective buy and sell signals. They tell you if existing trend is still in motion and help confirm a trend change. Moving averages do not tell you in advance, however, that a trend change is imminent. A combination chart of two moving averages is the most popular way of finding trading signals. Some popular futures combinations are 4- and 9-day moving averages, 9- and 18-day, 5- and 20-day. Signals are given when the shorter average line crosses the longer. Price crossings above and below a 40-day moving average also provide good trading signals. Since moving average chart lines are trend-following indicators, they work best in a trending market.
7. Learn the Turns
Track oscillators. Oscillators help identify overbought and oversold markets. While moving averages offer confirmation of a market trend change, oscillators often help warn us in advance that a market has rallied or fallen too far and will soon turn. Two of the most popular are the Relative Strength Index (RSI) and Stochastics. They both work on a scale of 0 to 100. With the RSI, readings over 70 are overbought while readings below 30 are oversold. The overbought and oversold values for Stochastics are 80 and 20. Most traders use 14-days or weeks for stochastics and either 9 or 14 days or weeks for RSI. Oscillator divergences often warn of market turns. These tools work best in a trading market range. Weekly signals can be used as filters on daily signals. Daily signals can be used as filters for intra-day charts.
8. Know the Warning Signs
Trade MACD. The Moving Average Convergence Divergence (MACD) indicator (developed by Gerald Appel) combines a moving average crossover system with the overbought/oversold elements of an oscillator. A buy signal occurs when the faster line crosses above the slower and both lines are below zero. A sell signal takes place when the faster line crosses below the slower from above the zero line. Weekly signals take precedence over daily signals. An MACD histogram plots the difference between the two lines and gives even earlier warnings of trend changes. It’s called a “histogram” because vertical bars are used to show the difference between the two lines on the chart.
9. Trend or Not a Trend
Use ADX. The Average Directional Movement Index (ADX) line helps determine whether a market is in a trending or a trading phase. It measures the degree of trend or direction in the market. A rising ADX line suggests the presence of a strong trend. A falling ADX line suggests the presence of a trading market and the absence of a trend. A rising ADX line favors moving averages; a falling ADX favors oscillators. By plotting the direction of the ADX line, the trader is able to determine which trading style and which set of indicators are most suitable for the current market environment.
10. Know the Confirming Signs
Include volume and open interest. Volume and open interest are important confirming indicators in futures markets. Volume precedes price. It’s important to ensure that heavier volume is taking place in the direction of the prevailing trend. In an uptrend, heavier volume should be seen on up days. Rising open interest confirms that new money is supporting the prevailing trend. Declining open interest is often a warning that the trend is near completion. A solid price uptrend should be accompanied by rising volume and rising open interest.
“11.”
Technical analysis is a skill that improves with experience and study. Always be a student and keep learning.
- John Murphy
Definitions: Leonardo Fibonacci was a thirteenth century mathematician who “rediscovered” a precise and almost constant relationship between Hindu-Arabic numbers in a sequence (1,1,2,3,5,8,13,21,34,55,89,144,etc. to infinity). The sum of any two consecutive numbers in this sequence equals the next higher number. After the first four, the ratio of any number in the sequence to its next higher number approaches .618. That ratio was known to the ancient Greek and Egyptian mathematicians as the “Golden Mean” which had critical applications in art, architecture and in nature.
Stochastics - an oscillator popularized by George Lane in an article on the subject which appeared in 1984. It is based on the observation that as prices increase, closing prices tend to be closer to the upper end of the price range; conversely, in down trends, closing prices tend to be near the lower end of the range. Stochastics has slightly wider overbought and oversold boundaries than the RSI and is therefore a more volatile indicator. The term “stochastic” refers to the location of a current futures price in relation to its range over a set period of time (usually 14 days).
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