Tip 8. Not trading or standing aside is a position.

When in doubt — stay out. If it is not clear where the market will move — don’t trade. In this case saving present capital is and absolutely better choice than risking and losing money.

Tip 9. Learn to use protective stops. Respect them and don’t move.

Hoping that market will turn in your direction is a very delusive hope. By moving a stop loss further a trader increases his chances to end up with much bigger loss.

When holding to a losing trade too long, and even if funds permit, traders as a rule are very reluctant to accept big losses, thus often continue “hoping for best”. In the mean time invested money is stuck in the open trade for unknown period of time (weeks and even months) and cannot be used for opening new positions. Not working money — dead money. Also this will result in constant interest payments for holding open positions.

Tip 10. “Keep it simple, stupid” — applies to indicators, signals and trading strategies.

Too much information will create a controversial picture of where to trade and when not to. To avoid lots of confusion create a simple but working method of trading Forex.

Tip 11. Think about risk/reward ratio before entering each trade.
How much money can you lose in this trade? How much can you gain? Now, make a decision if the trade is worth entering.
Example: if trader is looking for possible 35 pips gain and possible 25 pips of loss, such conditions are not worth trading. Compare it with the situation when a trader has 100-120 pips of potential gain and only 10-20 pips of possible loss. This is the trade to open!

Tip 12. Never add positions to a losing trade. Do add positions when the trade has proven to be profitable.

Don’t allow a couple of losing trades in a row become a snowball of losing trades. When it is obviously not a good day, turn the monitor off. Often not trading for one day can help to break a chain of consecutive losses. Trying to get revenge can often make things worse.

Tip 1. Gamblers go to casino. All unproved, spontaneous actions in Forex trading — are a part of pure gambling.

Any attempt to trade without analysis and studying the market is equal to a game. Game is fun except when you are losing real money…

Tip 2. Never invest money into a real Forex account until you practice on a Forex Demo account!
Allow at least 2 month for demo trading. Consider this: 90% of beginners fail to succeed in the real money market only because of lack of knowledge, practice and discipline. Those remaining 10% of successful traders had been sharpening and shaping their skills on demo accounts for years before entering the real market.

Tip 3. Go with the trend!
Trend is your friend. Trade with the trend to maximize your chances to succeed. Trading against the trend won’t “kill” a trader, but will definitely require more attention, nerves and sharp skills to rich trading goals.

Tip 4. Always take a look at the time frame bigger than the one you’ve chosen to trade in.
It gives the bigger picture of market price movements and so helps to clearly define the trend. For example, when trading in 15 minute time frame, take a look at 1 hour chart; trading hourly would require obtaining a picture of daily, weekly price movements.

If a trend is hard to spot — choose a bigger time frame. Up and down market patterns are always present. Always make sure you know the dominant trend, unless you are a scalper. Scalpers have no need to spend their time studying big trends, what’s happening in the market here and now (during 5-10 minute time frame) should be of only importance to a Forex scalper.

Tip 5. Never risk more than 2-3% of the total trading account.
One important difference between a successful and an unsuccessful trader is that the first is able to survive under unfavorable conditions on the market, while an unsuccessful trader will blow up his account after 5-10 unprofitable trades in the row.

Even with the same trading system 2 traders can get opposite results in the long run. The difference will be again in money management approach. To introduce you to money management, let’s get one fact: losing 50% of total account requires making 100% return from the rest of money just to restore the original balance.

Tip 6. Put emotions down. Trade calm.
Don’t try to revenge after losing the trade. Don’t be greedy by adding lots of positions when winning.
Overreaction blocks clear thinking and as a result will cost you money. Overtrading can shake your money management and dramatically increase trading risks.

Tip 7. Choose the time frame that is right for you.
Choosing wise means that you are comfortable and have time enough to analyze the market, place and close orders etc. Some people can’t wait for hours for the price to make a move, they like action and therefore prefer smaller time frames. On the contrary, for others 10-15 minutes is a hustle to be able to make the right decision.

More tips to come…

Day trader can be defined as any trader who makes several trades in a day, which includes selling, buying, entering and closing out a trade in the same day. In simple words we can say that a day trader makes trading in the market wherein the trader sells, buys scripts in a day. Forex day trading is the same thing; the only change comes where in Forex currencies replaces the stock. The commodity changes when it comes to the Forex which is currency.

Forex day trading differs with trading in stocks in the sense that, in Forex day trading we cannot buy currencies for a longer period of time like our children or grandchildren get benefit from them because it will not grow as the exchange rates fluctuate too quickly, whereas in stock trading, the shares are purchased for a longer period of time where our children or grand children get the benefit from them. This type of investment requires good amount of time as well as money. Time is required to educate the investor who is making investment in the Forex market.

We can compare Forex day trading with the trading in the futures market, the only difference between the two markets is, in Forex, the liquidity is higher than the futures market and trading costs are lower. The people who involved in the day trading are professionals who are not only intelligent and well educated but they also understand the market trends and charts which help them in making forecasting possible.

In short, we can say that Forex day trading is risky business which can be profitable and can end up putting you in losses, it can be exciting or frustrating but one thing is for sure about Forex market that it can never, never be boring.

Making money with forex is not easy. You have to have a system and set of rules to succeed in this harsh market. I have been trading forex for 7 months and was not successful until I found Forex Killer.

Over last few weeks there has been an acceleration in USD sell I lost 4 accounts and thousands of dollars before I found Forex Killer and since then I have never had one single losing week. Its a revolutionary system which gives you exact entry and exit points with stop loss and target profit. I have been averaging 1800 pips per month since I started using Forex Killer.

Before venturing into your trading journey there are some things you need to be aware of, otherwise you could succeed on your trading adventure, and we don’t want that to happen, do we? This Forex training guide will help you track the most costly mistakes Forex traders do.

First of all, make sure you don’t have a trading system. Having a trading system might increase the odds of your success. If you have a system, you will have an objective way to get in and out the market. When traders create their trading systems they think objectively since there is no position to be taken at the moment. If there is no position to be taken, there is also no money at risk, if there is no money at risk, we do think objectively and are open to every possibility, thus we are able to find low risk trading opportunities. So make sure you don’t have a system and trade based on a randomly approach.

If you have already created your system, then don’t follow it, be undisciplined. If you follow your system, there is a possibility that you can profit from the Forex market based on the trading opportunities you have found. If you want to fail on your trading, be sure to be undisciplined.

Don’t get educated. Most successful traders are very well educated in the market they trade (stocks, Forex, futures, etc.) If you get educated, you might acquire the knowledge and experience you require to master the Forex market. Don’t read about the Forex market, don’t enroll into Forex training programs and don’t even look at historical charts.

Don’t use any money management technique. The purpose of money management is to avoid the risk of ruin, but at the same time it helps you boost your profits, allowing them to grow geometrically. For instance, by using no money management techniques, there is a possibility that in loosing 10 trades in a row you could empty your trading account. On the other hand, by applying simple money management techniques you can avoid it. So make sure, if you want to fail, don’t even consider money management.

Forget about psychological issues. You need to get every trade to win. Successful traders know that they don’t need to win every trade in order to profit from the market. This is one characteristic that is hard to understand and really apply. Why? Because we are taught, since kids, that any number below 70% is a bad number. In the Forex trading environment, this is not true.

Don’t even consider using a Risk-reward (RR) ratio greater than 1-1. If you use a RR ratio of 1-2 (willing to make twice the amount risked in one trade) then you only need a system that is right around 50% to make money. If you use a RR ratio of 1-3 (willing to make three times the amount risked in one trade) then you will need a system that is right around 40% of the time to make money. So make sure to use a RR ratio below 1-1.

By applying every point outlined in this Forex training guide, you will almost assure your failure in your Forex trading journey. Do the opposite, and you will have the possibility to achieve what every trader is looking for: consistent profitable results.

For years now we have been witnessing, and even participating in, an unprecedented weakness of American Dollar. Since 2001 EUR went from about 0.8200 to 1.5900 last week against USD. That is, Euro almost doubled its value, or Dollar lost about half. This is truly a stunning development, since we are talking about world’s two largest currencies. This is not something that happens all the time.

Euro is not the only beneficiary, of course. Not that long ago CAD made a very decisive all time high, as did the other “commodities currencies”, NZD and AUD. Japanese Yen has just made 20 year high. The most telling, perhaps is the level to which Swiss Franc has risen. For the first time ever CHF is at parity with USD, bringing Dollar to as low as 0.9630 few days ago.

Over last few weeks there has been an acceleration in USD sell off. Mainstream press has attributed it to countless factors. Some name credit crunch, stock market plunge, housing market crises, recession, war, federal deficit…. On and on it goes. Most recently there were renewed calls for even farther dollar plunge, based on FED facilitating Bear Stern’s bailout, and cutting rates by another 0.75%. Seems like everybody is ready to dump USD by the truckload.

Is there any good news? Well, seemingly not. However, the luck of good news might be encouraging in itself. Extreme price highs/lows are established well BEFORE there is any change in market sentiment. This is true for any market. In our example, one should expect to see Dollar low before there is any wide spread optimism. Just like right now, as of this writing on 03.21.2008.

Here are few reasons for a possible USD bottom against EUR and CHF. On monthly and weekly charts, for both pairs, most recent price moves have met or exceeded prior swings Fibonacci extension target. For EUR-USD a 100% extension level has been passed, while for USD-CHF same level has been almost reached. This in itself is very rare and is indicative of a possible trend reversal.

Last Sunday, 03.16.2008, FED announced Bear Stearns bail out. Forex markets responded forcefully. USD lost about 300 pips against both EUR and CHF. That happened in a few short hours, before major market centers, like Europe and USD where even opened for business. The strongest move in years, Then, just as swiftly, moves reversed. We witnessed a POSSIBLE blowout/exhaustion moves for the pairs we are discussing.

Another clue came on Tuesday, 03.18.2008. FED cut interest rates once again, this time by 0.75%. Large, large cut. Lately, rates cuts were met with dollar sell offs. Not this time. USD not only has not lost ground, but strengthened considerably. This continued for the rest of the week.

Catching precise tops and bottoms is a tricky business, but the sooner one recognizes major trend change, the more profitable one becomes. We don’t know if the multi year trends are coming to an end here or not. Rather, large corrections are probable here. Just how large? Well, chances are we will see EUR-USD at 1.3500 within a year and USD-CHF at 1.2000 during the same time span. In other terms, US Dollar is more likely to GAIN about 2000 pips than to slide that much against both EUR and CHF over next 12-15 months.

You might look at the stock prices at the bottom of your television screen or, if you are trading currencies in the forex market, you might look at the exchange rates go up and down your computer screen.

Prices move and you wonder whether their behaviour means something.

Could the market be sending out signals that you can use to make your decisions? How, exactly, are you going to study the market?

For anybody to make money from the market, they must have a way of studying it. There are predominantly two approaches: fundamental and technical.

Fundamental analysis focuses on value but this is the subject of another article. Technical analysis, on the other hand, focuses on price and its movement.

The movement of price has the following properties which traders can study to aid in their decisions:

1. Trend - its persistence to move in one direction,
2. Volatility - the magnitude of its fluctuations on a periodic basis,
3. Momentum - the rate of its acceleration and deceleration,
4. Cycle - its tendency to move in cyclical patterns, most especially in the futures market,
5. Market Strength - the number of transactions supporting its movements,
6. Support and Resistance - its tendency to rise or fall to a certain level and then reverse, repeatedly.

Analysts, using the technical approach of analysing the markets, have developed their own set of indicators, different to those used by fundamental analysts. These indicators are used to measure the properties of price movement. Fortunately for modern-day traders like you, you do not have to devise your own tools. You just need to learn how they work and how to use them.

Looking for forex trading partner? I recommend Forex Killer.

Trick #1: Verify First, Then Trade
Most people totally ignore me when I talk about testing. When I train people to trade, I focus most of the training on helping them do their testing. I have developed spreadsheets, methodologies, statistical models – all designed to help traders realize that they must verify that a system works before they commit to trading the system with real money.

Don’t ever trade anything you’ve not tested first.

What does it mean to test? It means that you propose some simple rules for trading. Then you go back in time, manually or mechanically, and you find out how those proposed rules would operate over the course of hundreds of trades. That’s right: hundreds of trades.

Think about it for a moment: if you are not confident about your trading, it’s most likely because you have doubts about the outcome of the trades you are taking. And if you are doubtful about the outcome, then you need to do more testing until you have a better sense for what’s going to happen when you open a trade.

Trick #2: Become Obsessed with One Area of Focus.
Discipline yourself to focus. Diversification is good for your portfolio. It is not good for your career.

Let’s look at some examples. Think of the very best attorney or doctor that you know.

Does that person specialize in one area, or does she practice law or medicine across a huge subject area? My guess is that she is known for one type of legal specialty, or as a doctor, she is a cardiologist (hearts), radiologist (treating cancer), or something else.

The highest paid professionals are specialists. Why should that be any different for you?

You are wise to diversify the investments that you can’t watch closely. You don’t want to commit your entire life savings to forex. You might have money saved in the equity in your home, some in a retirement account, some money in a bank savings account, and then some in a forex trading account.

But if you are going to be a forex trader for a living, then it makes sense – with respect to your currency trading, to focus on a currency pair, a system for trading that pair, and a time frame for watching that pair. If you focus on one currency pair to start, you can become as much of an expert as possible in that one area. How does this relate to trend trading? It is the heart of the issue, it is the foundation for you to become successful as a trend trader.

Let’s say that you read my 5/13/62 eBook and you decide that you’re going to focus on that system. Becoming obsessed with one area of focus means that you set aside time every day to test 50 historical trades. And that you only watch one currency pair to start. And that you only watch one time frame. And you become an expert in that system, on that one currency pair, in that one time frame. If you look at 1,000 trades with those parameters, you are going to become an expert. If you become an expert, you are going to trade profitably.

Trick #3: Different Trends on Different Time Frames
The EUR/USD can be trending upwards on the daily chart, but on the 5 minute, it can be trending downward.

Really? Is that possible? Absolutely!

Think about it for a moment – if you have a long term, daily, dominant move upwards on the EUR/USD, it’s possible that in the shorter term we could see a movement in the opposite direction. So remember, if you want to be a trend trader, you can choose to follow the trend on a variety of different time frames.

If you have a full time job, you might look at trends on the daily and weekly charts. These trends take much longer to start and finish – but they are worth a lot of pips – even more than 1,000 pips.

If you are able to trade during the day, you might look at the very short term charts. I have been testing a new trend following system that works even on the 1 minute charts. I don’t trade from the 1 minute charts (at least right now) but I would be willing to follow a trend on just about any time frame. The point is that each time frame can have its own trend.

Trick #4: Trend Trading Requires Courage & Money Smarts
If you want to become a trend-trader, you are going for the big moves. You are NOT going to be trying to get 10 pips on each trade. You’re going to want to get 50 to 500, and maybe even many more pips, when you are trend trading.

To do this you are going to have to commit yourself to a patient process of waiting for a trend to develop, and then to stay in your trades. Most currency traders are focused on the short term – and there are lots of jumps up and down in the short term. Have you ever noticed that after a major economic release, a currency pair will initially move in the direction you expect it to go, but then all of the sudden it will move the opposite way?

Take, for instance, a Non Farm Payroll report where the number is low, or in other words, “bad” for the US Dollar. And then, all of the sudden, the US Dollar grows stronger anyway! This infuriates traders. I get at least 50 emails every time a major economic report comes out, with questions just like this. It’s a great question. And the answer is often that the trend was more dominant than the news.

Let’s take the example of a recent downtrend in the GBP/USD on the 1 hour chart. Move on to the next page and let’s see the example:

Chart:The GBP/USD, on the 1 hour chart, temporarily spiked upwards after a Non Farm Payroll report.

But soon after, the major trend continued.

As you can see in the chart, a small spike upward really didn’t mean anything. It was a temporary moment of market chaos after the U.S. Non Farm Payroll report was released.

Do you see how short term news does not necessarily have a major impact on the trend? I say “necessarily” because I want you to know that it’s possible that the Non Farm Payroll could have started a reversal of the trend. But it did not. Once we saw that the previous trend was going to continue, then we could confidently trade in the direction of the dominant trend.

In the case of the chart above, the smart money stayed with the trend.
The other element, besides courage, is what I like to call “money smarts.” This means that as a trend trader, you’re going to keep your trade size small. To ride out a trend, as in the example in the chart, you have to be able to take a big temporary loss in the GBP/USD before it starts trending in the downward direction again.

Does that make sense? As a trend trader, you’re going to have to watch a currency pair move against you, and you are going to not only require the courage to stay in the trade, but an account balance that can withstand the loss.

Have you ever made a great trade, but you couldn’t stay in it long enough because you took a big loss? Meaning, you made the right call on the direction, but you got stopped out before the big move? The answer to this is that you traded too large. Scale back your position size if you’re going to ride the trend.

Trick #5: TV People are Wrong
Watch out for the news. Be wary of commentators on CNBC or Bloomberg that say things like “the trend on the USD is certainly up,” or “traders would be wise to scale back their long dollar positions because the trend is going to be down.” These people don’t trade your account. They have no idea what chart time frame you are watching or what trading system you follow.

In the past 5 years, I have worked with more than thousand traders from around the world. Most of them, at one time or another, were scared out of a really good trade because they heard something on television, received an email, or were influenced by a friend.

If you watch TV and you see some windbag get fanatical about one trade or another, then run away from your television as fast as you can. It is better to smash your television than it is to base your trade ideas on what you learn there. Keep in mind that I didn’t say that you should NOT watch business news. I just said that we need to be careful about what we allow ourselves to listen to.

Conclusion
You can get rules for entering and exiting trend trades from all over the Web. They’re easy to find. What makes the difference in trend trading is doing the little things right – the stuff that most traders overlook. For me, it’s all about discipline in your testing, in your trading, in your money management.

The Federal Reserve cut its key interest rate another half point, as expected, and sparked a stock market rally by signaling that further rate cuts are possible.  The Fed’s action takes the bellwether federal funds rate target to 3 percent, the lowest since June 2005, and comes just eight days after the central bank made a surprise three-quarters point reduction because of fears the U.S. economy was heading into a recession.
The half-point cut Wednesday followed news that the the U.S. economy grew a weaker than expected 0.6% in the fourth quarter, less than half what had been expected. The report came amid increased concern from several quarters about a possible recession. In a brief statement explaining their decision, Federal Reserve Chairman Ben Bernanke and his colleagues said that “financial markets remain under considerable stress.”The Fed move was approved on a 9 to 1 vote. Richard Fisher, president of the Fed’s Dallas regional bank, dissented, preferring no change in rates.The rate cut marked the fifth time that the Fed has cut the funds rate since it started with a half-point cut on Sept. 18 in response to the severe credit crisis which hit global markets in August.The latest Fed action was expected to be quickly followed by cuts in banks’ prime lending rate, the benchmark rate for millions of consumer and business loans. The Fed’s hope is that by making credit cheaper, it will encourage more borrowing, giving the economy a needed boost.The Fed’s half-point move met expectations of financial markets and was a bolder move than the smaller quarter-point cut that many economists had been expecting.

These days, a loss of $7 billion at a major bank is hardly anything to get excited about. It’s all in a days work. But this time it’s different. At Societe General (SG), French’s second-largest bank, a single trader is said to have been responsible for more than $7 billion in fraud. This sounds like a story that will take some time to unpack, because it’s still not totally clear what’s happened. Evidently, he used his knowledge of the bank’s security systems (a little odd) to conceal his actions, which involved a scheme of “elaborate, fictitious transactions”. Though apparently they weren’t so fictitious that they didn’t cost the bank money.

Many investors might view this as a one-off event. Looking at the actual sub-prime related write downs, they aren’t nearly as catastrophic as some U.S. bank levels. The contagion effect has had only a moderate impact on the spreads of other French banks.

Remarkably, SG’s shares were down just 5% on the news, and are off just 6.6% for the year. SG’s size, importance to the French economy, and the country’s long-standing tradition of state meddling suggests that the bank is not going away.

Given the confusion and suffering in the marketplace, the odds favour it. Whether by fraud or by choice, the cast of investment and commercial banks in January, 2008 will not be the same by year end, indeed.

As rates increased, homeowners sought refinancing only to find there was none except at rates they could not afford (lenders suddenly became far more circumspect in their lending policies). The result: a crisis in credit which has now led to massive write-offs by leading financial banks such as Merrill Lynch and Citicorp. Now there is bank crisis deja vu and it’s scary. Those financial institutions that overextended will now pay the piper and some of the smaller ones may be forced into insolvency proceedings (just as many savings and loan institutions were in the 1980s).

As stated in my initial article, demand for housing grew because of favorable mortgage rates leading to a jump in housing construction and values. This in turn encouraged people to use their equity in a profligate way. Everyone across demographic lines got a chance at the “American Dream” of home ownership. For some, it gave them a chance at multiple dreams, as they “flipped” homes within a short period of time. But heck, that just made good sense because homes always increase in value and there would always be willing buyers with ARMs. Sure they do.

Once again, we were abruptly reminded of the age-old lesson to wit: what goes up must come down.

Painful as it is, the plain fact is any struggling borrower or lender who signed a clear, non-fraudulent contract, is responsible for making sure it is paid off. The fact that many borrowers were betting on a never-ending real-estate boom translated to taking out risky loans. The same held true for those who expected their adjustable rate mortgages would stay low forever, given the Fed’s longtime manipulation of artificial interest rates. Still others did not carefully assess the contracts they signed (while, of course, certain lenders loaned money without carefully analyzing the borrower’s finances).

What’s the solution? We hear the phrase “bailout,” but a bailout is nothing more than the Government using its power to force some people to give up their money (or freedom) for the sake of others. Any government “borrower assistance,” i.e., borrower bailout programs, such as a Massachusetts proposal to give struggling homeowners new loans they could not get on the free market, excuse borrowers from the natural consequences of their voluntary risks. By subsidizing the refinancing of sub prime loans for delinquent borrowers, such an approach wrongly absolve individuals of responsibility for their bad decisions and compels those who did nothing wrong to pay the price. The plan also would apply hardball negotiating tactics to lenders, forcing them to accept a financial hit on the mortgages that the state will refinance. The Massachesetts approach, no matter how it might be described, is a bailout pure and simple. Leave it to Massachusetts to lead the way with such an intrusive approach.

As Alex Epstein (an analyst at the AR Institute) asserts, the government is not a necessarily a savvy lender and does not have the expertise to contribute innovative financing strategies or much new knowledge to the mortgage market. The proper response of the government to sub prime problems should be simply to commit to no new interventions in the housing market; as well, it should begin to recede from existing intervention designed to influence home ownership such as artificially low interest rates. What the government should do is protect everyone’s rights by enforcing appropriate laws against theft and fraud, and by protecting the individual’s right to make his or her own decisions and keep his or her own money.

This would send the right message; namely, that individuals are ultimately responsible for the loans they make and for choosing the housing option that are best for them. Any problems they have are their responsibility to remedy–just as any gains borrowers and lenders have made on risky sub prime mortgages are theirs to keep. Most importantly, it would allow the market economy to complete the process of self-correction that has not begun.