It’s no secret that I couldn’t possibly market my Forex products on my own, and I partner with a fantastic marketing and advertising firm that takes care of everything, including when I get a wild idea to do a members’ survey. I can’t share all the results with you, but over the next week, I’ll be updating you with some of the results and pertinent information we learned about traders and trading from them. Have a look at this: Of the traders we surveyed (and there were a lot!) over 50% trade every day, with another 44.57% trading a few times a week. That’s both fantastic and potentially really, really bad. Let me explain. I’ll give you a specific example. At the end of last week, the U.S. released its new NFP (non-farm payroll) figures. This is a monthly report of how many new non-agricultural jobs employers added in the United States. Financial analysts make a lot of money “guessing,” based on a lot of factors, what that number might be. If you listened to them, and traded that “information,” you probably lost some money. If you traded, especially the USD, in the day or two leading up to that report, and the day of it, you probably lost some money. Why? It was a great report that far outstripped expectations and showed 225,000 jobs added in a month. For the U.S. government and those 225,000 newly employed people it was a good day. For traders, news events like this are kryptonite! One of the biggest, most important lessons I harp on, every day, with my members is to know and even embrace “non-tradeable conditions.” In fact, I think of things like NFP report days as Trader’s Holidays. Everyone knows when the NFP report is coming out. Just like everyone knows when the Fed meets, when the IMF issues its regular reports, and when the Euro Zone updates its monthly and yearly figures. And whenever one of these “news days,” is on the horizon, the markets go flat while everyone holds their breath. So in the days leading up to one of these regularly scheduled reports, I take a Trader’s Holiday. What other profession in the world lets you take a three or four-day weekend a couple of times a month? It’s really fantastic. Sometimes I put all the kids in the car and head to a bit of the forest for a camping trip, and sometimes, like this NFP report holiday, I just enjoy sleeping in, cooking pancakes for breakfast, and being the Dad taxi. I’m not losing any money because the market is flat and there’s little to nothing to be made. If I did trade, it would be for tiny movements and very little money, and it would cost me more to manage the trades than to just go dark for a couple of days. Monday, when the markets open up, fresh and happy (or sad, depending on the news), the trend is well-established and the canaries have already died in the coal mine by trading too soon, so the garbage is already out of the way. Now, I get it, truly I do, that it’s hard to walk away from your charts for even one day, let alone three or four, and there is technology available, some of it I’ve even developed myself, that will let you keep your trading with you and manage it all from your smartphone… But if you do not see a good trade, it’s probably best to just put the thing on silent and enjoy your life for a few days. The market will be there, waiting and flush with cash, whenever you come back to it. You can learn more about my philosophy on non-tradeable conditions in my book, How to Make a Fortune Trading Forex.
Get Back in the Box! Tips for Newer Traders
“Trading is the best profession in the entire world.” I really believe that, at least for me, and if you’re reading this you probably think it might be a great one for you too. When you do it right, it’s profitable, consistent, and most importantly for me, flexible. To be able to design the life I want instead of carving a small existence out on the edges of a J-O-B, means everything to me and to my family. Here’s the thing that nobody believes, though. Trading is not rocket science! Once you learn the basics, it’s actually pretty simple and a whole lot of fun! It’s true that you have to care about the numbers and being able to see patterns doesn’t hurt, but really if you can count to five and tell up from down, you could trade. The key to trading profitably (and I’m talking Forex, here, my bread and butter), is to get into a potentially profitable trade as early as possible. Every second you’re trading a profitable trend is more money in your account. To get those up-to-the-second entries you have to have clear and concise entry signals, and you need to have a system where all your indicators give you a “blink of an eye” snapshot of everything you need to see. If you have to hunt and peck through charts before you place a trade, you are costing yourself precious money. I’ve spent 16 years developing the indicators and systems I use, and I am still always on the lookout for another edge to get me into the money faster. You can use whatever indicators float your boat, just as long as they actually do the job. For instance, I know I have a tendency to get distracted by kids, or just life, so an indicator that gives me the time remaining on any chart cycle is essential in any system I trade. When a pro trader develops or finds indicators that they can group together that work best for their style of trading, that’s their trading “system.” And when traders bring you systems we’ve developed – if the trader is legit – what we’re showing you are the indicators that allow you to trade like we do (and hopefully see similar profits). Some are developed for scaplers (traders who prefer the lower 1, 5, and 15M charts and skim pips off short market moves for consistent profits, while others are developed for the longer-haul 1H, daily, or weekly charts that could provide bigger individual paydays. It’s all in where you as a trader want to “live.” Identify your trading home and find they best way to trade that space. There are plenty of “freebies” out there. Heck, I’ve given a number of minis (1-2 indicator systems) away that new traders could use to be up and running on an MT4 platform within an hour or two… However, you need to ask yourself about the track record of anyone offering you a “free” system. Are they successful traders? Or, did they scour public forums to grab some cheap and easy indicators, throw them together, and call it a system? And are their indicators based on sound trading principles? It’s all well and good to “think outside the box,” but as traders, the box of trading fundamentals really needs to be home. I wrote a bit about this in my recent book, Tips and Tricks to Making a Fortune Trading Forex. You have heard, over and over again, that 95% of all traders fail. You have also most likely heard that if 95% of traders fail you probably shouldn’t be doing what they do. You are then encouraged to “think outside the box.” This is a statement that is commonly used by system vendors. Think outside the box: Don’t do as other traders are doing, do it differently! The trouble with this statement is that the 95% of the traders who are failing are doing everything outside the box! In order to get back onto the road to profitability, you must get back in the box! All the answers are there. All the secrets are in the box. Forex basics, the rules of the trading road, are in the box. That’s why brand new traders often get far better results with a strong system than long-time traders. Newbies are terrified of stepping a pinky toe outside the box, so they follow the “rules of engagement” and often they make better percentage returns on investment than “journeyman” traders. So if you’re serious about getting into “the best profession in the world:” Find a system that gives you the tightest entry signals you can. Find a system whose indicators allow you to trade in your own “style.” Stay in the box! Like I said, it’s not rocket science. If I can do this (and I have been, quite profitably for over 16 years), anyone could.
Do not be Seduced by ‘Bots!
There are tons of so-called trading gurus out there promising people the world at the touch of a button. They are lying to you. We can automate huge parts of your trading, with indicators and algorithms to more accurately predict trends, and to even ping your smartphone when a candle peaks or plummets to meet an optimal condition for you to trade, but what no one can yet do with any long-term, realistic accuracy is create technology to trade for you. TAs v. ‘Bots: A Common Misconception A Trading Assistant (TA) is just that. It is designed to assist you in best knowing when and how to place or exit trades. But a trading robot is another thing entirely. Earlier this year, a big story broke about how one fund was using actual Artificial Intelligence (AI) to trade. Of course, it’s reported as a huge technological breakthrough, and I know some professional traders who developed their own versions and met with some success. Here’s what I know. Even if you create a fully functional, practically Skynet capable learning machine, it cannot accurately predict everything. Heck, even humans going blind on charts 24 hours a day can’t do that, but a ‘bot can only sort previously recorded data and make deductive decisions based on that previous input. What it cannot do is IMAGINE. Let me tell you a story. It’s kind of famous inside the trading world, so you may have heard it before. A well-known Forex trader developed a robot that he thoroughly and completely back-tested, and verified its results over months of testing. After he was satisfied that it could meet or beat human traders, he released it to the world for purchase, and to prove its mettle, he put up a live feed on his site to show the ‘bot in action. The results were impressive. Consistent and sometimes huge wins, minimal losses, and fantastic risk management. People were raving, and I would be too, except for what happened next… The now-famous creator of the robot went on a trip. He was gone precisely six days.. And his robot ate his account in a series of horrendous trades. Seriously, he went from unprecedented gains to almost wiped out (in that one account) and doing damage control. The popular live feed went dark and never came back. Why? Was he managing these trades behind the scenes, backing up his ‘bot with human adjustments? Or, did the ‘bot get a bad piece of data or a bug that took it down? We will never know. But either way, it convinced me, and plenty of other traders, that the trading world was not ready for AI in an unmanaged setting. TAs on the other hand are programmable to your preset take profit and stop loss levels, and send you alerts so that you make the decision about whether to trade or not. I find TAs to be particularly helpful in a situation where you could choose to trail a stop loss because you don’t have to keep eyes on your charts for hours or days and you can potentially pick up lots of extra pips this way. But what about ETFs? ETFs (exchange traded funds) have become a stock portfolio staple. But they are misleading because while the fund manager does rely on algorithms to make predictive trading decisions, he also manages those decisions. He watches trends, checks the performance, and basically backs up the automation with human reasoning. There’s been some talk lately about an apparent robot that’s been taking the options market to the cleaners this spring, but no one, and I mean no one, has actual proof that it is a robot at all! They are just assuming based on anecdotal evidence of seeming speed that it has to be electronic. However, as is pointed out in Slate, the biggest hub-bub over it turned out to be a human trader who’d placed his order 19 seconds before the market-driving story broke! See? The power of human imagination and instinct, when well-educated, just cannot be beat! Imagination doesn’t mean dreaming up pie in the sky scenarios here. What I mean is humans have an ability that no robot can match—the ability to consider outcomes beyond preset parameters—to “think outside the box.” It’s the kind of thinking that led to the real-life success of Dr. Michael Burry, the genius behind Scion Capital who made billions because he identified the housing market bubble before anyone, or anything, else did. If you haven’t seen the film The Big Short, a real-life drama based in part on Dr. Burry’s discovery, you really need to! It is a mind-bending testament to how the markets turn in large part on institutional assumptions. Those of us who have the imagination to trade on those assumptions can seriously make out! So the next time someone tells you that a machine will trade for you instead of help you to trade better, for now at least, be very skeptical.
Some Frank Talk About “The Easy Button”
I recently received a question on social media that got me thinking. The guy wanted to know a 12-month “performance record” on my accounts trading my new system. While it would be easy to spew numbers at him, we’re traders and we know how easily numbers can be manipulated. I hide nothing from my students. All the trades and accounts shown on my system website are the real deal. What this obviously educated guy wants is a guarantee that no matter what he does, the system will make him money. Here’s my response, just as I posted it to him: I agree, a 500 pip stop and a 5 pip target is going to give you a really nice win rate. Robots do this a lot of the time, until they fail and chew through your account. You alluded to the videos. Watch any of the videos and you know that that’s not how we do it. The stops are very clearly defined, the targets are very clearly defined, and you also see the trade management that is in place as well to reduce the risk on every trade we take. I am a firm believer in teaching the student to trade. You can’t be a real trader by pushing a button when a system tells you to do so, no matter how good the system is. Trading blind is the height of irresponsibility when it comes to your hard-earned trading account. This is where the 95% of traders fail though, they want to trade with zero responsibility and that ALWYAS leads to trouble. The successful few are the few that take trading seriously enough to learn to trade. I will teach you sound trading principles, things like the best times to trade and more importantly, when to avoid taking a trade. There are 3 pillars to trading success: Having a reliable and trusted trading system. Having a good educational platform to provide the proper understanding. This can be a mentor or a very well written document. The mentor is the best way to go. YOU. The student must be willing to learn and take on the responsibilities of being a trader. Without number 3, nothing else will work. I can provide numbers 1 and 2, but I expect the student who invests with me to bring their A-Game. Otherwise it’s just a waste of everyone’s time. Generally speaking, wanna-be traders never planned on having to put in any effort to make a million bucks. A good system could definitely cut the effort significantly, but without you: your plan, your decisions, your trades, why bother? You asked about a return over a 12-month period. I can guarantee that my return will be very different of that of a person pretending to be a trader. If you want to be a trader and get consistent returns with limited risk, I can show you how. If you want an easy button to push, although this system will do well for you, you will eventually move onto another system, and then another one, and then another one. My guess is that you have come here from a long line of previous systems, every one of them failing to live up to your expectations. I would like that to stop today. I want you to learn to trade properly so you never need to buy another system ever again. If you will bring you’re a-Game and responsibility for your own actions, I will bring the rest.
How Moving Averages Can Help You “Be The Lion” When You Trade
If you think Moving Averages (MAs) are boring, you may be using them wrong. To make really profitable trades we have to trade with the momentum of the trend and the best way to see the trend is to watch your MAs. You can calculate an MA on your own, but after you’ve done it once or twice, why would you want to? They aren’t complicated, but how much time do you have to spend calculating averages? To calculate a simple MA, you go back over, say, the last 50 days of closing prices for a currency pair, add them all together, and divide them by the number of sessions/periods (in this case, 50). To confirm your trend, often you want to calculate that MA out as far as 200 or 250 days, and that can get messy. This is exactly why I think MAs get a bad rap. They are time consuming and can be boring to do by hand. You can do that for all your charts, but that is a whole lot of math you don’t need to do. Traders have to lay in wait. You have to be like the lion, the ultimate trade hunter, to know when to pounce on your prey. But our lives are a lot more complicated than hanging out in the long grass of the savannah stalking gazelle. I don’t know about you, but even though I make my living through trading; staring at charts all day, every day gets mind numbing. Plus, when we spend too much time in front of our charts, we start throwing our emotions into the equation and looking at tiny market shifts as something to act on, just because we become desperate for something to happen. What happens when the lion shows himself before he’s in striking range of his prey? The prey has plenty of time to turn tail and run. The lion then has to expend huge energy if he still wants to take it down. The same thing goes for trading. If you act too soon, the market can turn on you in a heartbeat, leaving you to make the tough call to get out fast and manage the loss, or stay in and potentially make a big mistake, bigger. That’s why automation, especially software indicators, could help you get better returns. How many hours a day does a lion spend sleeping? Up to 20 hours a day! That is a big clue about how much energy this magnificent hunter expends to take down its prey. He has to sleep 83% of the time to have the energy to make the kill and protect his pride. He sleeps because when he does act, it’s with singular intention and a laser focus. He never has to doubt his next move because he’s at peak performance, ready to strike. That’s what using MA indicators could help you do. Now, there are as many variations on MT4 indicators (MetaTrader4 – a popular chart platform for traders) as there are traders, so knowing which ones are worth the trouble becomes an important factor. I wish I had time to vet every indicator out there for you. However, when you’ve been at this as long as I have, you can see at a glance if something is going to work or is just a bunch of pretty colors, signifying nothing. So using something like a MarCo indicator may seem like a yawn, but it can be a valuable asset, particularly when it comes to verifying higher time frames on trades. The MarCo is the 50-day moving average, and I use it all the time to track market momentum. In fact, I recently gave a system away that uses a MarCo indicator its backbone. Why use something so simple? Because it is bedrock, a solid way to assess trend momentum, and no matter what other bells and whistles you have on your MT4, if you aren’t trading with a strong foundation, you’re throwing money away.
Get My Forex Master Control System Here…
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Forex Yin and Yang
I’ve said it before and it bears repeating… “With everything good in Forex comes something bad.” I swear I’m going to put it on a poster someday. It’s true in life too, but Forex makes it really apparent. But like in life, knowing how to guard against the bad (risk) to smooth out the good (gains) in a consistent upward motion, is what progress is all about. The Trend Is Your Friend So, we talk a lot, and I mean A LOT, about the “trend” in Forex. Why? Because Forex is about statistics and probability. Seeing the trend, verifying the trend, and understanding what pullbacks (small reversals in direction) mean on your charts determine how and when to take (or to NOT take) a trade. Anyone can set up a MACD and watch the candles rise and fall, right? Sure, you can bare-knuckle it with a super-basic chart, if you like counting the same things over and over… You’d better like it a whole lot, though, because you will be locked on your charts all day long. A solid set of indicators can save you a whole lot of time an energy. That said, a basic kind of Forex 101 tip is not to only trade the one time frame you’re on. You may be thinking, “What the heck, Russ? Of course I want to trade the 15m, 5m, or 1m. That’s where I’m comfortable.” You can trade on any time frame you like, but a smart trader knows to check the next higher time frame to verify the current trend. Why do we check the higher time frame? CONFIRMATION. The trend may be our friend, but the market doesn’t often make huge short-term swings, so if you want to trade the shorter time frames, you’re looking for small, consistent pip collection from trading those pullbacks. Your much larger motion occurs in the greater trend (the one you confirm in the higher time frame). You almost never get a quick short-term trade signal for a long-term trade, and you could trade both sides of the trend, but understand you are taking on a lot more risk when you are trading short-term pullbacks. Brute force and bare knuckles can get the job done, if you’re a fan of doing a lot of hard work. A great system with indicators designed to find the pullbacks v. the larger trend lets you minimize risk and increase potential profits because at the end of the day, all successful Forex trades come from reading probability well.
$4500 in One Trade = A Good Day
$4500 in One Trade = A Good Day.
30% a Month Returns
Are 30% a month returns really “doable” in Forex? This is a question I get a lot, especially in light of the fact that a standard S&P 500 “traditional” investment yields around 7% annually. A picture is worth a thousand words, right? So, here’s my answer to that question, that I recorded a few months ago for some of my students.
You are the one pulling the trigger
As a Forex trader, you are the one that will ultimately be pulling the trigger. That sounds like a given, but when it comes down to it, the decision to place a trade is yours. That being said, the responsibility also becomes yours. You become responsible for the losing trades, and of course, for the winning trades. Once you choose to execute that trade, there are no gurus, no TV new channels, no signal services, no husbands or wives, and no trading systems that can take responsibility. That now lies in your hands. This shift of responsibility makes you a more calculating trader, and in doing so will make you a more profitable trader. Let’s say you have built a wonderful trading system, one that wins 70% of the time. Even so, there will be times when your personal judgment will have to override any signal your system generates. You know what I am talking about, you have been there already. You placed a trade based on your system, but the time of day was unfavorable. The time of year was bad, like the Christmas holidays. Maybe there was a news release on the verge of coming out. If you choose to take these trades at these times, which are fine if you are familiar with these situations, you must take responsibility for the outcome. The same goes for trusting a recommendation from your favorite guru, or the guy you see on the TV telling you to go long the USD. If you take these trades blindly, the fault for the outcome is yours and not theirs. The responsibility is always yours, for you are the one pulling the trigger. You are the last line of defense. Be responsible with your choices and the market will reward you handsomely for it. Best regards Russ
Your Forex Belief System
As a Forex trader, you have all important trading system and the more important money management system. There is one more system that you have to have in place to be truly successful, and that would be your belief system. Trading Forex is one of those ventures that can bring you a better than average income. For some people it can be millions of dollars, for some even more. You are getting into Forex trading usually to be one of the successful traders and make millions, not to just get by. Granted there are several traders who only want to pay the bills, but most are looking to participate in the “big show”. This is where most traders come into difficulties. Wanting something like a million dollar trading account and believing that you can build it are 2 different things. Chances are that you don’t know anyone that has a million dollar account, so this being the case, why would you be the exception? Why are you better than the traders around you? You do hear of those million dollar traders, but its’ likely that you think they have an inside track or some kind of secret weapon that you don’t have. It’s this kind of internal belief system that will cause you to fail as a trader. You want these things but you truly believe that it’s impossible for you. No matter how badly you want it, if you don’t honestly believe that it’s possible, it will never be possible. Too many traders have experienced getting close to what they consider a huge trading account only to find they start making stupid mistakes. They end up sabotaging themselves. You may have been there yourself. You take a trader who is familiar with growing an account to a million bucks and start him out with a $1000 micro account. You will see that he will effortlessly be able to launch that 1k into 100k and then to over a million. For that trader, earning a million dollars is not only possible, it’s a no-brainer. He’s been there before so he has all the reason in the world to believe he can do it again. It’s only a matter of time. There will be no self sabotage, no limiting behaviors and no reason to doubt that it’s possible. If your belief system is not in place, the other trading “systems” you have won’t count for much. Once you know that it is possible to be in the top 1%, you will see magic start to happen. All of a sudden things work and you no longer make the bad decisions you made before. Believe and you WILL achieve! Best regards Russ
Where will you be in 5 years?
Often, the time it takes to become a hugely successful trader seems like it’s too much. Learning to trade and applying what you learn to generating a respectable monthly return will only take you 5 years, maybe less. The first few years are very slow and can be quite frustrating. This will pass as you become more proficient and more consistent. Too many new traders-to-be want to become hugely successful as Forex traders, but they do a lot of the wrong things. Too much time is wasted on futile endeavors, too much money is lost in live accounts that are being traded prematurely. These are normal to do in the beginning, but continuing on with these novice mistakes is like spinning your wheels in the mud. New traders take so much of their valuable time looking for the Holy Grail. I think that some time should be devoted to this quest initially, but only in the sense that you prove to yourself that is doesn’t exist. Once you have realized that, and you will at some point realize it, it’s then time to focus on the core principles that build a trader into a success. Perhaps you have been in this game for the last 5 years already and there is a strong likelihood that you are not much further ahead than when you started. If this is the case, what will the next 5 years look like for you? Are you going to decide to get focused and learn the fundamentals? You need to learn the basics, about money management, about preserving capital, about letting your winners run, about taking your losses as they happen, about patience. You need to learn about greed, about fear, about hesitation and how to conquer these things. I want you to promise me that over the next 2 years you will focus less on hocus-pocus and more on trading. Learn about a trading system you are comfortable with. I don’t care if it’s mine or not, just learn a good system and stick to it. Learn the ins and outs of your system. Become familiar with the win to loss ratio, the risk to reward ratios, become intimately familiar with everything about your trading system. This will give you the courage and confidence to trade through the bad stretches as you will know that they are temporary as it has been proven to you. The following 3 years will include the final tweaking of your emotional hang-ups and some consistent gains. At the end of year 5 you should be on the verge of your Forex dreams come true if they haven’t already happened. Best regards Russ
Things I learned from Forex
Trading the Forex markets takes a very strict set of disciplines in order to be successful. These disciplines can be learned over time, as they need to be if you plan on trading over the long haul. These lessons that Forex offers can be implemented in your day to day life and make you a better person overall. Here is a list of some of the things I learned in Forex. 1. Patience is a virtue. Trading the markets is a patient person’s game. Patience is so important when dealing with people, learning new things, and virtually anything that life throws your way. You will have that stick-to-it-ive-ness that gets things done. You will not be quick to quit. You will be able to live your life without stressing over the small things. You won’t find you get upset or angry as often if you have learned patience. Patience will make your life go a lot smoother. 2. Never assume anything. Just because you think the markets are going to do something, waiting for the signal is important to your financial survival. Assuming that the market will do this or that will make your account suffer. Assuming anything in life will never do well for you. Just because you think it’s going to be a way doesn’t mean it will. Never assume anything, wait for the full story before you act. 3. Greed is a killer. Hanging on to a winning trade too long because you want to get more out of it will usually end up badly. You will hurt yourself and in life you can hurt others as well. Greed is an attribute nobody is attracted to and it isolates you from your friends. In the end, that “need it now” attitude will be your downfall. 4. Cut your losses short. When you’re wrong you’re wrong, so what, it’s not a problem in trading or in life. Not admitting you’re wrong or making excuses for being wrong is where the problem lies. Are you the kind of person that stands tall and admits to their mistakes and learns from them, or are you the person that whines, complains and blames everyone else for your mistakes. We know a few of those people, they aren’t very nice to be around. 5. Let your profits run. When you are on a roll, why not keep riding it? There is a difference between being greedy and taking what’s coming to you. You got into the trade and as it delivers you should be there to take it. You can receive and be honourable at the same time. Once the flow is coming to you, you don’t need to step on anyone to receive it. You have set yourself up to succeed, don’t be afraid of reaping the rewards. 6. Discipline, Discipline, Discipline. This is what gets you everything you want. Your discipline allows you to achieve incredible things. Those who do not have discipline fall short on almost everything they attempt. You can use the umbrella of discipline to encompass everything else, for without discipline, nothing else will be possible. As you continue trading the Forex markets you will find you are able to develop these traits. You may have many of these already and that give you the edge when you begin. If you do not have these attributes, you will learn to develop them, the Forex markets will see to that. Best regards Russ
Trading is a 5 year plan
Now you have begun the journey on your trading career. You have high hopes and loft expectations. What is realistic as far as expectations? What is possible to achieve? The possibility to achieve the stars is very real. You can make more money than you ever thought was possible. The gains can be incredible. A good trader can make more in a day than most can make in a month. Some traders make more every day than the average person will hope to make in a year! The potential is huge. So, now that you know it can be done, how long will take until you can reach these upper levels of excellence? I like to think that a good student who is willing to learn what they need to know can do this in around 5 years. You can look at trading for a living as a 5 year plan. This might put a lot of potential big money traders off. “That takes too long, I want to make this money right now”! If that is your thinking, then you will be best served by doing something else. Riches are not going to happen right away, and the road to it will be bumpy and at times incredibly frustrating. The First Year: This is when you will start your journey. At first you will be all over the place, there will be no focus and you think you can learn to trade over night. You will buy many trading systems, join many forums and read everything you can. During this period you are convinced that there is such a thing as a Holy Grail and you are determined to find it. You will compose your own trading systems and explore every indicator ever made. You pay close attention you the trades that were winners but overlook any losing trades. The Second Year: Around this time you have blown a couple of trading accounts, possibly a large one. Some traders will go on to lose their savings or a huge amount of borrowed money. In the second year things fall apart. This is when most traders will give up because it’s just too hard. The challenge to become a successful trader is just too overwhelming. You have discovered that you are not as smart as you think you are and that you are going to need some education. If you are going to make in the 5 year timeframe, this is when you realize that YOU are the problem, not the market and for the most part, not even the trading systems you are using. The Third Year: You have gone back to hitting the books after a little time off. You needed a break in order to get your head together. Now that you are back you are approaching the market from a different angle. In this phase you have your Eureka moment. It can be anything, perhaps that you can still take losses and be successful, perhaps you don’t have to trade the farm every time you take a position. Whatever it is, you will have been aware of it before, but now it makes sense. You have found a system you like and you are sticking with it. You learned how it works and you accept the losses it takes. The Fourth Year: You have battled past your personal issues with trading. You have come to terms with your fears and your shortcomings as a trader, and as a person. You have adapted and adjusted your methods. In the fourth year you are actually making money. Your losses are under some kind of control and there is truly light at the end of the tunnel. At this point you may even be considering quitting your full time job and trading for a living. You are honing your skills and trading is becoming relatively easy. The Fifth Year: You are a machine. You are at ease in front of your charts, you are patiently waiting for the right setups, and there is no rush to get in or to get out of a trade. You can sleep at night without worrying about open positions. Taking a loss is just part of your trading, you know you will make it back. Your losses are cut short and your winners are allowed to run. Trading has almost become boring. The gains are consistent and your profits are growing every month. You have enough money in your account to draw from and your gains are more than you need to live. There is always more left in your account than you need to take out, so you can see your account is growing every month. Congratulations, you have made it to where your account growth can be amazing. Your monthly returns are in the 10s of thousands and every month is more than the month before. At the end of year 5 you will start to see months that equal a year’s worth of income in your previous job. This 5 year scenario applies to those traders who are willing to take their lumps, learn from them and keep moving forward. Some traders never leave year 2, they can’t admit that they are the problem and they are locked in the eternal quest for the Holy Grail. They are stuck system hopping and Guru switching, never moving forward. This is just my opinion based on what I have seen over the years, others may disagree. As far as I’m concerned, 5 years to be a successful trader is a reasonable expectation. Best regards Russ
The 5 Phases of a Forex Trader
I did not write this article, but I like it so much that I have to post it on the My First Pips blog. These 5 phases are true and if you have been trading for a while you will identify with these phases. If you are new to trading, these phases will give you an idea of what’s ahead. Step One: Unconscious Incompetence. This is the first step you take when starting to look into trading. You know that it’s a good way of making money because you’ve heard so many things about it and heard of so many millionaires. Unfortunately, just like when you first desire to drive a car you think it will be easy – after all, how hard can it be? Price either moves up or down – what’s the big secret to that then – let’s get cracking! Unfortunately, just as when you first take your place in front of a steering wheel you find very quickly that you haven’t got the first clue about what you’re trying to do. You take lots of trades and lots of risks. When you enter a trade it turns against you so you reverse and it turns again… and again, and again. You may have initial success, and that’s even worse – because it tells your brain that this really is simple and you start to risk more money. You try to turn around your losses by doubling up every time you trade. Sometimes you’ll get away with it but more often than not you will come away scathed and bruised You are totally oblivious to your incompetence at trading. This step can last for a week or two of trading but the market is usually swift and you move onto the next stage. Step Two – Conscious Incompetence. Step two is where you realize that there is more work involved in trading and that you might actually have to work a few things out. You consciously realize that you are an incompetent trader – you don’t have the skills or the insight to turn a regular profit. You now set about buying systems and e-books galore, read websites based everywhere from USA to the Ukraine and begin your search for the holy grail. During this time you will be a system nomad – you will flick from method to method day by day and week by week never sticking with one long enough to actually see if it does work. Every time you come upon a new indicator you’ll be ecstatic that this is the one that will make all the difference. You will test out automated systems on Metatrader, you’ll play with moving averages, Fibonacci lines, support & resistance, Pivots, Fractals, Divergence, DMI, ADX, and a hundred other things all in the vein hope that your ‘magic system’ starts today. You’ll be a top and bottom picker, trying to find the exact point of reversal with your indicators and you’ll find yourself chasing losing trades and even adding to them because you are so sure you are right. You’ll get on forums and live chat rooms and see other traders making pips and you want to know why it’s not you – you’ll ask a million questions, some of which are so dumb that looking back you feel a bit silly. You’ll then reach the point where you think all the ones who are calling pips after pips are liars – they can’t be making that amount because you’ve studied and you don’t make that, you know as much as they do and they must be lying. But they’re in there day after day and their account just grows whilst yours falls. You will be like a teenager – the traders that make money will freely give you advice but you’re stubborn and think that you know best – you take no notice and overtrade your account even though everyone says you are mad to – but you know better. You’ll consider following the calls that others make but even then it won’t work so you try paying for signals from someone else – they don’t work for you either. You might even approach a ‘guru’ or someone on a chat board who promises to make you into a trader (usually for a fee of course). Whether the guru is good or not you won’t win because there is no replacement for screen time and you still think you know best. This step can last ages and ages – in fact in reality talking with other traders as well as personal experience confirms that it can easily last well over a year and more nearer 3 years. This is also the step when you are most likely to give up through sheer frustration. Around 60% of new traders die out in the first 3 months – they give up and this is good – think about it – if trading was easy we would all be millionaires. Another 20% keep going for a year and then in desperation take risks guaranteed to blow their account which of course it does. What may surprise you is that of the remaining 20% all of them will last around 3 years – and they will think they are safe in the water – but even at 3 years only a further 5-10% will continue and go on to actually make money consistently. By the way – they are real figures, not just some I’ve picked out of my head – so when you get to 3 years in the game don’t think it’s plain sailing from there. I’ve had many people argue with me about these timescales – funny enough none of them have been trading for more than 3 years – if you think you know better then ask on a board for someone who’s been trading 5 years and ask them how long it takes to become fully 100% proficient. Sure I guess there will be exceptions to the rule – but I haven’t met any yet. Eventually you do begin to come out of this phase. You’ve probably committed more time and money than you ever thought you would, lost 2 or 3 loaded accounts and all but given up maybe 3 or 4 times but now it’s in your blood One day – in a split second moment you will enter stage 3. Step 3 – The Eureka Moment. Towards the end of stage two you begin to realize that it’s not the system that is making the difference. You realize that it’s actually possible to make money with a simple moving average and nothing else IF you can get your head and money management right. You start to read books on the psychology of trading and identify with the characters portrayed in those books and finally comes the eureka moment. The eureka moment causes a new connection to be made in your brain. You suddenly realize that neither you, nor anyone else can accurately predict what the market will do in the next ten seconds, never mind the next 20 minutes. Because of this revelation you stop taking any notice of what anyone thinks – what this news item will do, and what that event will do to the markets. You become an individual with your own method of trading You start to work just one system that you mold to your own way of trading, you’re starting to get happy and you define your risk threshold. You start to take every trade that your ‘edge’ shows has a good probability of winning with. When the trade turns bad you don’t get angry because you know in your head that as you couldn’t possibly predict it, it isn’t your fault – as soon as you realize that the trade is bad you close it. The next trade or the one after it or the one after that will have higher odds of success because you know your system works. You stop looking at trading results from a trade-to-trade perspective and start to look at weekly figures knowing that one bad trade does not make a poor system. You have realized in an instant that the trading game is about one thing – consistency of your ‘edge’ and your discipline to take all the trades no matter what as you know the probabilities stack in your favour. You learn about proper money management and leverage – risk of account etc – and this time it actually soaks in and you think back to those who advised the same thing a year ago with a smile. You weren’t ready then, but you are now. The eureka moment came the moment that you truly accepted that you cannot predict the market. Step 4 – Conscious Competence. You are making trades whenever your system tells you to. You take losses just as easily as you take wins You now let your winners run to their conclusion fully accepting the risk and knowing that your system makes more money than it loses and when you’re on a loser you close it swiftly with little pain to your account You are now at a point where you break even most of the time – day in day out, you will have weeks where you make 100 pips and weeks where you lose 100 pips – generally you are breaking even and not losing money. You are now conscious of the fact that you are making calls that are generally good and you are getting respect from other traders as you chat the day away. You still have to work at it and think about your trades but as this continues you begin to make more money than you lose consistently. You’ll start the day on a 20 pip win, take a 35 pip loss and have no feelings that you’ve given those pips back because you know that it will come back again. You will now begin to make consistent pips week in and week out 25 pips one week, 50 the next and so on. This lasts about 6 months Step Five – Unconscious Competence. Now we’re cooking – just like driving a car, every day you get in your seat and trade – you do everything now on an unconscious level. You are running on autopilot. You start to pick the really big trades and getting 200 pips in a day doesn’t make you any more excited that getting 1 pips. You see the newbie’s in the forum shouting ‘go dollar go’ as if they are urging on a horse to win in the grand national and you see yourself – but many years ago now. This is trading utopia – you have mastered your emotions and you are now a trader with a rapidly growing account. You’re a star in the trading chat room and people listen to what you say. You recognize yourself in their questions from about two years ago. You pass on your advice but you know most of it is futile because they’re teenagers – some of them will get to where you are – some will do it fast and others will be slower – literally dozens and dozens will never get past stage two, but a few will. Trading is no longer exciting – in fact it’s probably boring you to bits – like everything in life when you get good at it or do it for your job – it gets boring – you’re doing your job and that’s that. Finally you grow out of the chat rooms and find a few choice people who you converse with about the markets without being influenced at all. All the time, you are honing your methods to extract the maximum profit from the market without increasing risk. Your method of trading doesn’t change – it just gets better – you now have what women call ‘intuition’ You can now say with your head held high “I’m a currency trader” but to be honest you don’t even bother telling anyone – it’s a job like any other. . . . I hope you’ve enjoyed reading this journey into a traders mind and that hopefully you’ve identified with some points in here. Remember that only 5% will actually make it – but the reason for that isn’t ability, its staying power and the ability to change your perceptions and paradigms as new information comes available. The losers are those who wanted to ‘get rich quick’ but approached the market and within 6 months put on a pair of blinders so they couldn’t see the obvious – a kind of “this is the way I see it and that’s that” scenario – refusing to assimilate new information that changes that perception. I’m happy to tell you that the reason I started trading was because of the “get rich quick” mindset. Just that now I see it as “get rich slow.”’ If you’re thinking about giving up I have one piece of advice for you…. Ask yourself the question “how many years would you go to college if you knew for a fact that there was a million dollars a year job at the end of it? —————- I don’t know who wrote this article, but it is well written and right on the money. Thanks to the author. Best regards Russ
What If there Were Only 1 Trading System?
One of the advantages we have trading Forex on the internet is the access to so many different trading systems and so many different indicators. There are over 1000 indicators to choose from and there are more systems than there are traders! We have access to many of these systems both freely and commercially. What a great advantage we have as traders! Or is it an advantage? What if we lived in a world where, if we wanted to trade the Forex market, we were given only 1 system? This system was worked on only 1 timeframe and included 2 indicators and a couple of moving averages. We learned about support and resistance and trend lines and that was it! No choice to alternate indicators, averages or timeframes. How awful would that be, we would be a total disadvantage. Or would we? This might surprise you, but I believe that if we as traders were only able to use a single trading system, would be so much better off. You would see more Forex millionaires, exponentially more year after year. We would be forced to learn the trading system inside and out. We would become familiar with its win loss ratio and how many consecutive losses it regularly sees. We would understand that if we continued trading after a loss that the likelihood of a winner is very strong. We would come to trust the system implicitly. After a length of time trading the same system, we would come to an understanding of how we work as traders. We would have to come to grips with our emotions and accept our weaknesses. We would have to get past out limiting behaviours and learn how to trade. We would quickly learn the win loss ratios and therefore have our money management skills honed to a tee. Our risk would be watched and we would rarely make stupid emotional mistakes. Trading only one system would make us the best traders we could be. The options we have are what kill us as traders. There is too much in the way of system hopping. Once we lose a trade or two, we are off to the next system in hope that it is a better system. We explore as many indicators we can find looking for the “best” indicator out there. We spend so much time searching for the better system because of our downfalls as individuals. We have plenty of opportunity to blame the system we are trading that we never get to learn how to trade. When you come across a trading system you like, stick to it. You won’t find the best system ever, but what you will find the best trader ever. Sticking to a good system through the thick and the thin is how you will succeed as a trader. You will know everything you need to know in order to consistently make money in the markets. You can leave all those “system hoppers” in the dust and make you trading dreams a reality. Best regards Russ
What timeframe makes you the most money?
There is a wide range of timeframes to choose from when you are going trade the Forex markets. What determines the timeframe you choose often has to do with what kind of time you can devote to trading on a daily basis, or what your appetite for market “action” is. If you have several hours a day to devote to trading, you may choose to trade the 15 minute or the 1 hour charts. If you have only a few minutes a day, the daily charts might be better suited to you. Perhaps you are a buy individual but can tear away to check your charts once in a while, the 4 hour might be best suited to you. On the other end of the spectrum, you might be one of those people who love the action of a quick market and the thrill of the trade. Getting in and out in a matter of minutes might be just what the doctor ordered. Placing several trades in your personal trading session might be ideal, in this case, you would be best suited to scalping the market on a 1 minute or 5 minute chart. Perhaps you are in need of a slower pace. You might need more time to consider your trade and to properly evaluate the market conditions. You like to take your time and calculate your stops and your profit levels. You might want to come back to your charts several times over the course of a day and continually move your stops, monitoring the trade as it goes. This is the case where you would want to trade anything from the 1 hour to the daily timeframes. So, this begs the question, if you could trade any timeframe at all, which timeframe would be the one that makes you the most money? In a nutshell, the smaller the timeframe, the more opportunity you have to make more money. Let’s break this down. Let’s say you are using a 2% risk on each of your trades, long term or short term. On a daily chart, your stop loss might be 200 pips and you have figured out how many lots you need to trade to only risk 2% if you get stopped out. You place your trade and it takes 10 candles to mature and hit your take profit which is double your stop, 4% gain. Those 10 candles equal 10 trading days, or 2 weeks (5 days a week). It took you 10 trading days to earn your 4% gain. Not bad for 10 days of work. Next, let’s look at a 1 hour timeframe. You find a trade and you calculate your stop loss is 25 pips. Again, you find the number of lots you need to trade to risk 2% on the trade, so if you get stopped out you will only lose 2% of your total trading capital. You take your trade and this one also takes 10 candles to mature and hit your take profit level which was double your stop at 50 pips. This time it took you 10 hours to make 4%. On the 1 hour chart this is a trade that you can make once a day, or 5 times a week. So far, it took you 10 trading days to make 4% on a daily timeframe. On the 1 hour timeframe you could have made 10 trades in the same 10 trading days, each potentially gaining you 4% for a total of 4% x 10 days = 40% What happens when you drop down to a 5 minute chart? You can make 2 or 3 of these trade a day, each earning you a potential of 4% each, or 8% to 12% a day. I will leave the scalping trades out of this, these are a whole different beast so we won’t touch on them, but there too is the opportunity to earn a substantial daily return. What it comes down to is frequency. The more you can place a trade, the more opportunity there is for gains repeated. The smaller the timeframe, the bigger the potential becomes to make the most money. Best regards Russ
Why Do You Want To Trade?
You’ve decided that you want to trade Forex. Why? This may sound like a weird question, but the answer to this can literally make or break you. It’s the “why” that can make you successful. Of course you are trading to make money, but depending on what that money is for can make all the difference. If you want to become a successful, superstar trader, it’s time to decide what the final goal of your trading is. Here are some examples of why other successful traders are trading. 1. To fund a retirement account 2. To earn enough to go on a vacation of a lifetime 3. To make enough to send their kids to college 4. To pay off the house 5. To pay off the credit cards and get out of debt 6. To pay the mortgage month after month 7. To make “mad money”. Extra cash to spend on niceties or trinkets 8. To pay for Mom and Dad’s retirement home costs 9. To quit the 9 to 5 job and live without the rat race 10. To elevate their quality of life 11. To provide better quality things for their kids 12. To move to a safer neighborhood Having this kind of goal in mind every time you trade will help you in all kinds of ways. The mistakes you are making today will go away tomorrow once you have a strong defined reason to trade successfully. You will no longer be willing to take trades that are not in line with your system, your risk will be limited and you won’t be reckless. No longer will you want to trade every mediocre signal, you will wait to take the highest probability trades and you will profit greatly from it. Having a strong “why” can and will improve your trading 100% instantly. Once you find that reason that drives you to trade well, you will be unstoppable! Every hugely successful trader has this reason, and that reason varies from trader to trader. It can be something as simple as making money for your retirement, or it can be something more obscure that only you can fathom. You might need a day or more to come up with a suitable “why” that will drive you forward. Once you have discovered it, post a reminder of it near your trading terminal. Make sure it’s something you can see when you go to place a trade. It has to strike a chord with you every time you see it. This reminder can be an image you found on the internet or something as simple as a sticky note with bold letters on it. Trading just for money works for a few people but not for most, emotions get in the way every time and the end result is less than desirable. Collecting a large account is too generic of a reason. There is no driving factor and no good reason that your mind can latch onto to make it work. If your mind is not in the game, neither is your brain. If your mind, your brain, your ego and your beliefs are all in agreement, you can accomplish truly amazing things! Best regards Russ
Scalper, Intraday, Swing, and Position traders
There are different ways to trade the market, specifically, there are different lengths of time to hold onto a trade. You could call these different trading styles. Some traders like to be in and out in a few minutes capturing 3 – 10 pips, while others like to hang onto a trade for days, weeks even. There is a good fit for every trader, but that fit is different from trader to trader. Here are the 4 different kinds of traders with a brief explanation. Scalper: A scalper is looking to make a lot of small trades during their trading session. These small trades are aiming for 3 – 15 pip gains. Scalping is not for the inexperienced trader. A scalper is using charts to find trades and will be using very small timeframes, the 1 minute or the 5 minute charts. Scalpers have a couple of requirements. First, you have to find a broker that allows scalping as not every broker will let you scalp. The other is a very tight spread. The goal is to make very small gains, so a small spread means you can get your gains faster and with a higher probability. Finding a broker that offers a 1 pip spread, or less, is ideal. Intraday: An intraday trader can also be called a Day Trader. The positions taken are meant to be closed out within a very short period, anywhere from an hour to 2 days. Profits from 15 – 150 pips are in the range of a day trader. The charts used by a day trader range from the 5 minute to the 4 hour charts, but the most commonly used timeframes are 15 minute and 1 hour. Most traders fall into this intraday trader category. It’s a good middle ground as there are many trades to be had but the pace is manageable and won’t make you have to act too quickly. Swing: The Swing trader uses timeframes of 4 hour to 1 day. Swing traders goal is to gain from 100 – 250 pips per trade, each trade lasting anywhere from 2 days to 5 days. Most Swing traders are using technical analysis like the Intraday and scalpers are using. Position: Position traders are the longest term traders. Position traders hold a position from 1 week to several months, looking for gains up to 1000 to 1500 pips. The timeframes traded are likely 1 day to even the weekly charts. Position traders are using technical analysis, but there is now room for traders to be using fundamental analysis as well. There is an even longer term trader than a Position trader known as the Long Term Trader. The time a trade is held can range from a couple of months to several years. This is more like an investment trader and at this point I can’t really associate them with the other trading styles. Best regards Russ
What is Bid, Ask and Spread
This is a topic that is very confusing for 99% of all traders. The spread itself is very straight forward, but when you get ask about the Bid and Ask of it, you will get a blank stare. Depending on whom you talk to, the definition of Bid and Ask change, so I will explain how each work and you can make the call yourself. You will understand what I am talking about in a few minutes. The first thing you will hear is the broker you are using will make their money from the spread. What this is is a few pips they take off the top when you enter a trade. If the spread for the EURUSD is 2 pips, you will enter your trade and be instantly down by 2 pips in your trade as the broker has taken them from you right off the top. If the position size you took equates to 10 cents a pip, your broker will take 20 cents as their fees (2 pips) and in doing so you will be -2 pips as you have opened the trade. There are 2 sets of prices on each chart but you only see one. There is a price for when you are selling and there is a price for when you are buying. The difference between the selling price and the buying price is the spread. To keep from getting confused, your charts will display only one of these prices, the other price will be invisible but it’s important to know it’s there. The Spread it there for your broker, that’s how they make money for their efforts. It doesn’t matter to them if you win or lose your trade, only that they get paid for brokering the trade. When you think about economics in the world, you would buy something for a low price and sell it for a higher price, the spread works this way as well. For example, you can buy at 1.5000 or you can sell at 1.5002. The Bid is the price you can BUY at (1.5000) The ASK is the price you can SELL at (1.5002) The BID price is always lower than the ASK price. Your charts will, 99% of the time, show you the BID price When you enter at market, this spread thing won’t make much difference, you will be entered into the market and your spread will be taken off the top, done deal. When you are going to enter at a predetermined price, the spread can cause issues if you are not aware of how it works. The fact that you can only see the BID price on your charts is where the problem arises. Entry Orders and the BID ASK Spread Since you use one price to buy and another price to sell, buying and selling a currency pair while using a chart that only shows you one price can get a little weird. When you are selling, there are no troubles, it’s as straight forward as it can get. You find a price on your chart you like to enter, place your entry order for that exact price and when the chart touches that exact price you get entered into the trade. Your spread is taken from you and because of that you get bumped to the ASK line. When you are buying, however, marking an exact price on the chart and placing your entry order at that price will result in you getting into the trade too early. Remember you will be buying so you are using a different price. What you want is to be looking at the ASK line as your point of reference because when price touches the ASK price you will be entered into the trade, your spread will be removed from you and you will be bumped down to the Bid price. It’s this bumping from one line to the next that has traders confused. You will hear that the BID price is where you buy and you will also hear that the BID price is where you sell. Depending on how you look at it, both can be right. When you are placing a buy entry order, to get in at the price you want on the chart, you have to add the spread to your entry price. If you see on the chart that you want to get into a trade at 1.5000, you will have to add the spread (2 pips in this example) and make your entry at 1.5002. Now, when price on the chart hits 1.5000, you will be entered into the trade. Those last few paragraphs may be very confusing, read it several times, and if you still don’t get it that’s ok. Most traders never understand this aspect. Simply put: Add the spread to your Buy entry orders. Do NOT add the spread to your Sell entry orders. Best regards Russ
Orders to Exit the Market
Just like there are orders that get you into a trade, there are orders that can get you out of a trade. There are 2 kinds of exit orders, they are: 1. Stop Loss order 2. Take Profit order Each of these orders will take you out when you are in a position, and each are something you can change as you are in the trade. Stop Loss order: This is an order that goes behind you in the market. That is to say if you are buying, going up, the Stop Loss order (SL) will be placed under your current position. If you are selling and want the price to go down, your Stop Loss order will go over your position. A Stop Loss will be placed initially in a losing position in order to limit your losses. Once you have decided where you will enter the market you will also determine how much you will risk losing. Your Stop Loss in this case will close the trade once the market has moved against you in the amount you have determined. For example, you have taken a long position at 1.5000 and you have decided to risk 50 pips. Your stop Loss will then be placed at 1.4950. This kind of Stop Loss is referred to as your Initial Stop Loss. What comes next is the moving of your Stop Loss towards your entry level from the negative zone. As soon as you can you want to mover you Stop Loss to the same price as your entry price. If you have entered the market at 1.5000 and the market has moved a ways in your favour, you want to move your Stop Loss to 1.5000. At this point now if the trade moves against you and you get stopped out, you will have lost nothing. You won’t have gained anything but you won’t have lost anything either. Once price has continued on in your favour, you can start to move your stop into profit that is past your entry point to secure, or “lock in” some profit. How you decide to move your stop is up to you and the system you will be using to trade. Many brokers offer the option to use a Trailing Stop. This is a stop loss that follows your trade by so many pips. You can decide to want to follow your trade by 30 pips, so as your trade moves ahead it will essentially drag your stop loss behind it as it were attached to a 30 pip length of rope. If the price reverses, the stop will not move, it will maintain that position until it either gets hit by the price and stops you out or it get pulled along by a forward moving price once again. Your Stop Loss can be one of the most powerful tools you can have in creating Forex wealth if you use it in these manners. Take Profit order: Your Take Profit order (TP) is placed in front of your trade. Your open trade will move towards your Take Profit level. You use this kind of order when you have a predefined level to exit at. For example, you have entered a long trade at 1.5000 and you want to make 100 pips on the trade, you would place your Take Profit at 1.5100. Once the market tags your TP level it will automatically close the trade and bank your profits. Both Stop Loss and Take Profit orders can be placed as you are placing your entry order, or they can be placed after you have already entered a trade. Both orders are something you can alter at any time. If you change your mind at any time you can remove or change your SL and TP orders. There is another way to exit your trades, and that is to simply close the trade you are in. It’s not an “order” so it wasn’t described above, but it will get you out of a trade. You can close a trade if you are in profit and it will bank your earnings. Or, you can close a trade when you are losing and it will finalize the loss. Closing a trade is an instant execution, it will close your trade as soon as you can click the button. Best regards Russ
Orders to Enter the Market
An order is how you get into a trade and there are 2 ways to place an order to enter the market with your Forex broker. You can place an order that gets you in the market instantly or there is an order that gets you in when the market gets to a specific price that is not the price it is at currently. It’s important to know the difference between these orders as it will save you a lot of frustrations and time when you go to place an order. There are the Forex traders’ generic terms and there are the MT4 terms, I will give you both. An order to get you in the market right away is called a “Market Order”. MT4 calls this “Instant Execution”. An order to get you in at a different price is called an “Entry Order”. MT4 calls this a “Pending Order”. Now, there are different kinds of Entry Orders. There are Buy and Sell orders, each have 2 variations… BUY ENTRY ORDERS A Buy Order with the entry price higher than the current price is called a Buy Stop order. A Buy Order with the entry price lower than the current price is called a Buy Limit order. SELL ENTRY ORDERS A Sell Order with the entry price lower than that current price is called a Sell Stop order. A Sell Order with the entry price higher than the current price is called a Sell Limit order. Here is another description of each of the orders: Buy Market = enters you into a buy trade at the current price Sell Market = enters you into a sell trade at the current price Buy Stop = place order above price to take a long position Sell Stop = place order below price to take a short position Buy Limit = place order below price to take a long position Sell Limit = place order above price to that a short position Best regards Russ
What is Margin
Margin goes hand in hand with leverage. Leverage is the amount you can magnify your position, margin is the amount of money you have to put up to trade a position. Currently in the US, brokers can offer you 50:1 leverage and that equates to 2% margin. With 50:1 leverage you can trade $1000 by putting up $20 of your own money. $20 times the 50:1 leverage equals the $1000 you can trade. The $20 that you have put up is the margin required to hold the $1000 position. $20 out of the $1000 equals 2%, so the margin is 2%. 50:1 leverage = 2% margin 100:1 leverage = 1% margin 200:1 leverage = 0.5% margin 400:1 leverage = 0.25% margin The less margin required, the higher leverage you have. An account that uses leverage is known as a Margin Account. The money you deposit in that account is your margin, and based on the money in your account, you can “borrow” as much as the leverage allows you to. 50 times, 100 times, maybe more, it depends on the leverage offered to you. Once you place a trade, your broker has secured your margin as part of the trade. That money is no longer available until you close the trade and you then get your margin back. If you were to open a losing trade and your losses amounted to the remaining amount you have in your account, your trade(s) will automatically be closed. This is called a Margin Call. When you get a margin call, your losses are not the markets gain, but you do get the money you used as margin to open the trades back. If you used $50 margin to open a trade and you get a margin call, you still get the $50 returned to you as part of the trade being closed. Use margin/leverage wisely, increased leverage and smaller required margin can be a double edged sword. What can gain you a lot of money can also lose you a lot of money if it goes the wrong way. Best regards Russ
What is Leverage
One of the biggest attractions to the Forex markets is the leverage FX brokers are able to provide. Traders are leaving Stocks and Futures to trade Forex because the leverage is so attractive. So what is leverage? Leverage is a magnifier. It takes the money you want to put up to trade and magnifies its value. Trading currencies means you are buying and selling with the expectation that the exchange rate changes in your favour. These changes are 100ths of a cent so they don’t amount to much, but with the power of leverage you can make a small change magnify into a larger change. Right now in the US, brokers are able to offer you leverage of 50:1 What this means is your buying power is magnified 50 times. If you want to trade $1000 worth of currency (1 micro lot), you only need to trade with $20 of your own money (margin). This $1000 of currency equates to roughly 10 cents per pip of movement. With the power of leverage you can really make a trade worth something. Outside of the US, brokers are able to offer you up to 500:1 leverage!! This means to control the same $1000, all you need is $2! They call it “lending” or “borrowing” from your broker, but there isn’t any money that really gets borrowed or lent. Beware! Leverage works great when a trade goes your way, but it’s equally as powerful when the market moves against you. If you can gain 10 cents a pip, you can lose 10 cents a pip. The more you read about Forex, you will find many sites call leverage a “ Double Edged Sword” and this really is the case. Leverage is what can make trading currencies so profitable, but please, use its power wisely! Best regards Russ
Meaning of Long and Short
There are several Forex terms you will hear over the next little while, but the ones you will hear the most refer to the ups and downs of the market. Terms that relate to the markets going up: Buy – to enter a trade with the expectation that the value rises, or the chart goes up. Long – as to take a Long position, you can go Long. Bull – as in a Bull market, the Bulls have taken control, currently you are Bullish on the Euro. Terms that relate to the market going down: Sell – to enter a trade with the expectation that the value falls, or the chart goes down. Short – as to take a Short position, go Short the market, Shorting the Pound. Bear – as in a Bear market, the Bears have taken control, you can be Bearish the dollar. The terms Long and Short come from when you could only make money when the markets went up. It was said that it took a long time to make money, but a short time to lose it. With all fairness, we can’t leave out the sideways markets, after all, sideways is a direction too. Some terms that relate to a sideways market are: Consolidation Rangebound Lamb So there you have it, the longs and shorts, the buys and sells and of course the bulls and the bears. Best regards Russ
Fundamental and Technical Analysis
There are 2 major ways to analyze the markets to make our decisions to enter a trade. They are: 1. Fundamental analysis 2. Technical analysis There is nothing saying that you have to analyze the markets in only one of these ways, you can combine the 2 and get a better overall feel for what the markets will do. Let’s talk a little about each kind of market analysis. Fundamental Analysis This way of evaluating market movement is based on what is going on in the world. Taking a look at the economic, political and social forces will give you a good idea how the market will move. As a country’s employment numbers drop, the value of their currency will also drop. If a country has a record month in regards to exports, that county’s currency will rise in value. Weighing all the different economic factors give you an impression of the strength or weakness of a currency. In a nutshell, fundamental analysis is a way of analyzing a currency through the strength or weakness of that country’s economy. There are regular new releases that are marked on Forex financial calendars, in fact there are websites devoted just to these fundamental economic new releases. It’s good to be aware of these upcoming news releases before you trade. They are scheduled and shouldn’t be a surprise when they happen. Some of these news releases can make the markets react very quickly as opposed to the longer term economic data that move the markets slowly and over a longer period of time. One of my favorite places to go for these regularly scheduled fundamental news releases is Forex Factory. http://www.forexfactory.com/calendar.php The tell you when the release will happen, what country it comes from (US news will affect the US dollar) and what significance the report will have on the markets behaviour (ranging from a strong influence to no influence). Technical Analysis Technical analysis is the study if the markets past price. This is usually done on a chart. Looking at historical price data can give you an idea of where price is likely to move in the future. Viewing a chart shows you where price has been and using chart analysis, you can determine where price is going. You can see where the market had a tough time moving, or where the market turned around. You can see if the market is currently trending or if it is undecided and just bouncing up and down. Using this information, trades have developed methods to interpret future price movements and profit from it. In the above example, you can see where price was having a hard time getting any higher. If we connected the tops, we would have a “trendline”. This is a common tool in technical analysis. As the price broke through the line, there is a good chance the price would continue to go farther. Some good technical analysis there! Technical analysis is preferred by almost all traders. It’s instant and it works on all timeframes. If you want to be in and out of the market within a day for short term gains, technical analysis is the only good way to do that. The tools at the disposal of a technical trader are called “indicators” and they are out there by the thousands. More isn’t always good, especially when it comes to technical analysis, but that is a topic for another blog post. Best regards Russ
What is the Order, or Ranking, of the major Currencies?
Have you noticed that when you see a currency pair, it is always in the same order? I mean the base currency is always the base currency and the quote currency is always the quote currency for that pair, never switched around. Also, you may have noticed that the USD is not always the base currency either. Sometimes it is, but other times it’s the quote currency. Each currency is abbreviated with a 3 letter code as established by the International Organization for Standardization (the ISO). The ISO 4217 code list is the established norm in banking and business all over the world for defining different currencies. The rules for putting together a currency pair come from the established priority each currency pair is given. The higher the priority a currency has in a pair, that currency becomes the base while the other currency is the quote. Historically, the different currencies were ranked according to their relative values to one another. This is no longer the case, but the ranks have been established and so they remain. In 1999 the Euro was born, and out of sheer determination, they are ranked with the highest priority. The priorities, or ranks, are as follows: Euro Zone Euro (EUR) Great British Pound (GBP) Australian Dollar (AUD) New Zealand Dollar (NZD) United States Dollar (USD) Canadian Dollar (CAD) Swiss Franc (CHF) Japanese Yen (JPY) When making a pair, whichever is higher on the above list becomes the base currency. For example, you may want to trade the Canadian Dollar against the Great Britain Pound. Since the Pound is higher on the list, it becomes the Base currency and the Cad becomes the quote currency. You will end up with the GBP/CAD. Best regards Russ
What is a Currency Pair?
In order to trade in the Forex markets we need something that increases or decreases in value. Pairing 2 currencies together gives us this market value fluctuation we are looking for. Each currency can be exchanged for another currency, and this rate of exchange changes on a per second basis. The changes are very small, only 100ths of a cent, but that is all we need to make money trading the Forex markets. When two currencies are paired together, we are looking for the rate of exchange to change in comparison with one another. As one gets stronger, the other one weakens in comparison. As they say, it’s all relative. It’s a kind of tug of war between the currencies that are paired together. Let’s use the US dollar against the Canadian Dollar as an example. The US dollar is denoted as USD and the Canadian Dollar is denoted CAD. Paired together it looks like this: USD/CAD. The first currency is called the Base Currency. The second currency is called the Quote Currency When you have a price associated with a currency pair, the Base Currency is always valued at 1 and the quote currency is the price. For example, the pair USD/JPY is at the price of 82.23. What that means is 1 US dollar will buy you 82.23 Japanese Yen. Currently, the GBP/USD is 1.6113. This means that 1 Great Britain Pound will buy you 1.6113 US Dollars. These values are the current rate of exchange, or exchange rate, or price. There are Major pairs and Cross pairs. The major pars, or “Majors”, all include the USD. Often, a major currency pair will be referred to as the currency without the US Dollar. If the price quote for the Euro is x.xxxx, that will, be default, mean the EUR/USD. Currency pairs that do not include the US Dollar are known as Cross Currencies. Some examples are the EUR/GBP. The GBP/JPY, and the AUD/CAD. Best regards Russ
What is a Pip?
A pip used to be the smallest increment that a currency pair’s rate of exchange could change. Pip stands for “Percentage In Point”. For example, if a currency pair’s exchange rate is 1.2000 and then changes to 1.2001, we would have a change of 1 pip. A change from 1.2000 to 1.1950 would be a change of 50 pips. It can change up or down, this is not important as we can make money either way. I say a pip USED to be the smallest change, this has changed over the last year. Several brokers are now using something called a “Fractional Pip”, this is another decimal place and is 1/10 of a pip. Until recently, currency quotes were stated with 4 decimal places, as in 1.1234, or 0.8765. The exception was any currency pair that contained a Japanese Yen (JPY). Because the value of the Yen was so small, these pairs (eg. GBP/JPY) were only calculated to 2 decimal places, as in 85.12. The fractional pip has taken the 4 digit quote (4 places after the decimal) to a 5 digit quote, as in 1.12345, for the non JPY pairs. For the pairs containing JPY, the fractional pip has been added to make a 3 digit quote, as in 85.123. Pips are what we as Forex Traders are looking to gain. Pips equate to money in the bank. The value of a pip depends on what lot size you have decided to trade, but that is a topic for another blog post. Best regards Russ
What is Forex?
Now that you have considers trading the Forex markets, it might be a good idea to know what it is you are trading. The word Forex is short for Foreign Exchange. Known as the Forex market, FX, and Currency markets, what you are trading is the exchange rate between 2 currencies. Let’s look at an example of this. Let’s say you are traveling from the US to Canada. While at the airport you decide to change your 100 US dollars to Canadian dollars. In return for your US dollars you receive 100 Canadian dollars (this conveniently occurred when the two currencies are even). You tour Canada and finally it’s time to go back to the US. You forgot that you had the 100 Cad in your pocket as your Canadian host was generous enough to pay your way. While at the airport you exchange your 100 Canadian dollars back to Us dollars, but because the exchange rate has changed while you were away, you now get 101 US dollars back. You made $1 by selling one currency (US dollars) and buying another (CAD dollars), holding on to it as the exchange rate changed, and then buying back your US dollars. You’re a currency trader and didn’t even know it! Buying and selling currencies and waiting for the exchange rates to change between the two is how we make money in the Forex markets. The amount of change is small, we wait for 100ths of a cent change, but this is enough to make big money in the markets. We use leverage to magnify these small changes and we use chart analysis (generally) to determine when to buy or sell. These market changes happen every second. There is always movement in the markets and there is always an opportunity to make money. We can choose from a list of currencies we want to compare, we call these “Currency Pairs”. We can trade the US Dollar against the Great Britain Pound, we would then be trading the USD/GBP. We will get into the details of this in a future post, but for know you have a very good idea what the Forex markets are all about. Best regards Russ
If you are still making up your mind to trading the Forex markets as opposed to stocks or futures or any other tradable market, I can give you a few reasons why I like the Forex markets. 1. 24 hour a day market The Forex markets open on Sunday 4pm EST and are open and tradable 24 hours a day until they close Friday at 4pm EST. You can fit a trading session in when it best suits your schedule. 2. High leverage The Forex markets offer leverage much better than the other markets. The US brokers offer 50 to 1 (50:1) leverage, while brokers outside the US you can find leverage up to 500:1. Stocks offer up to 2:1 leverage and Futures can offer up to 15:1. 3. High volume, no market manipulation The Forex market is by far the biggest market in the world. They are bigger than every other market combined. There are up to 4 trillion dollars a day traded in the Forex markets. Because of this huge daily volume, it is impossible for any entity to take control of the market for any length of time. This provides a more honest and reliable trading environment. 4. High market liquidity, you get in and out at the price you want. Because of the high volume being traded, you are going to get a more precise price in the Forex markets. The price you want to get into the markets will almost always be right on, and same goes for the price you want to exit the market. This is not the case with stocks or any other tradable vehicle. 5. Low starting capital required (as low as $100 to start) In Forex, you can open a live trading account with as little as $100. Some offer a minimum account deposit of $1, but there isn’t much you can do with that. You can trade comfortably with an account of $250 – $500. Compare that to trading Stocks as a Day Trader, you need a minimum deposit of $25,000, that’s a lot to risk if you are not sure of what you are doing. The low FX deposit means to can blow out several accounts without causing you too much financial distress. 6. Fewer pairs to trade There are about 4500 stocks to choose from in the New York Stock Exchange with another 3500 in the Nasdaq, together that is 8000 stocks to choose from, not including the other exchanges. The Forex markets offer you only a few currencies to look at, 8 major currencies. This is a much better use of your trading time. 7. Trends are more frequent There are trends that occur in the Forex markets on a very regular basis. Watching only one currency pair will get you several minor trends in any given month and several major trends over the course of a year. A stock may take several years before it begins to trend, if it ever does. 8. Trades in both directions all the time Forex currency pairs move in both directions. There is no bias to up or down and trading in one direction is as easy as trading on the opposite direction. This doubles your trading opportunities. 9. Free charts and other technical tools You can get real time quotes for currencies for free. You can get professional grade charts for free. You can get indicators for these charts for free. Getting real time live charts for stocks is a paid endeavor. You can get live Forex charts from a variety of places and from a variety of publishers. 10. Hassle free demo trading Most Forex brokers off you free demo trading. You can trade their platforms with a fake account while using real time live charts and it’s as simple as clicking a few buttons and downloading a platform. There is no hassle what so ever. 11. No commissions Most Forex brokers do not charge you any kind of commission on your trades. They do take what is called the spread and that is only the difference between the bid and ask price, which is usually pretty minimal. There you have a few reasons why I like the FX markets. These are a lot of the reasons why traders are leaving their Stocks and Futures to trade Forex, the most exiting market in the world. Best regards Russ
So You Want To Trade Forex
Hello there, I would like to take just a minute to congratulate you on your choice to learn more about trading Forex. The Forex markets are a wild and wonderful place to be, and if you are new to it, it can be also be very frustrating. I hope to help smooth out the bumpy road that lies ahead of you. If you have some experience with trading the Forex markets, you might find these few initial blog posts to be old news to you, but if you are new to trading, these posts will help to familiarize you with the markets. Whatever the reason is that brings you here, you are about to begin a fabulous journey. The Forex markets can be a source of income for many, and for some, it’s a source of incredible riches. I would like for this blog to help get you turn trading into a source of income, and with a little extra work, become a source of incredible riches. There is no reason that trading Forex can’t be how you get “rich”, but it won’t be an easy road to travel. This is a road fraught with frustrations and an occasional sense of “what the hell am I doing here”. If you are willing to but in a little work and a little time, together we will turn you into a successful Forex trader. My goal through this blog is to teach you everything you need to know about trading Forex. You will what to do and what not to do. You will learn how to read the charts and how to take profitable trades. You will learn about money management and how to handle your losses. This is an exciting time, I wish you the best of successes! Best Regards Russ
- Non-tradeable conditions
- Get Back in the Box! Tips for Newer Traders
- Do not be Seduced by ‘Bots!
- Some Frank Talk About “The Easy Button”
- How Moving Averages Can Help You “Be The Lion” When You Trade
- Get My Forex Master Control System Here…
- Forex Yin and Yang
- $4500 in One Trade = A Good Day
- 30% a Month Returns
- You are the one pulling the trigger
- Your Forex Belief System
- Where will you be in 5 years?
- Things I learned from Forex
- Trading is a 5 year plan
- The 5 Phases of a Forex Trader
- What If there Were Only 1 Trading System?
- What timeframe makes you the most money?
- Why Do You Want To Trade?
- Scalper, Intraday, Swing, and Position traders
- What is Bid, Ask and Spread
- Orders to Exit the Market
- Orders to Enter the Market
- What is Margin
- What is Leverage
- Meaning of Long and Short
- Fundamental and Technical Analysis
- What is the Order, or Ranking, of the major Currencies?
- What is a Currency Pair?
- What is a Pip?
- What is Forex?
- Why Forex?
- So You Want To Trade Forex