Issue 9
Forex Trader Magazine Contents 04
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32 Editorial: editor@forextradermagazine.co.uk Advertising: ads@forextradermagazine.co.uk Support: info@forextradermagazine.co.uk
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Success or failure in 2015?
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Forex turbulence as Swiss franc decouples
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Where next for the euro?
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FREE trade plan creator
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Are women better traders than men?
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Psychology & trading
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Forex strategies Forex risk management The dollar trap Day trading Back Issues
03 Hello everyone and welcome to the February / March 2015 edition of Forex Trader Magazine. We have been freshening things up a little and I hope you like the new format. As usual, we have a packed edition for you with lots of news, information and ideas and, as always, they are written by home based traders with a home based traders perspective. We delayed sign-off on this edition by a couple of days to be able to take into account the Greek election results. We were also able to look at the other big trading events of January 2015 in the shape of the decoupling of the Swiss franc from the euro and the commencement of quantitative easing by the European Central Bank. In this edition we are also giving away a fantastic free trading tool that I have used to great effect for several years now. It is a trade forecasting and recording tool that not only records progress but sets goals based on how much trading you want to take on. We have a great review of what happened to the GBPUSD pair over the course of 2015. It was just amazing to look back over time and to see what an “easy” trading year we have just completed – though it definitely did not feel like that at the time! Of course, there is also an update on the outcome of our 2014 live trading experiment. With just 28 trades we turned £1,000 into over £3,800. See exactly how we did it. The live trading experiment is already up and running again for 2015. it was already up 20% at the time of going to press despite the fact that we held off trading for a couple of weeks in January to see what the big news events were doing to the market. So, get set for another great year of trading and be ready to build your skills with us. Best regards for 2015
Managing Editor
Jeff@Forextradermagazine.co.uk
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> Cover Story Success in 2015?
It’s time to choose What happened to the GBPUSD in 2014 and what can we learn from it for 2015?
Why did we only trade on just over 10% of the available days then?
Let’s start by looking at the GBPUSD for 2014 in numbers and graphics. We recorded 261 potential trading days in 2014. However, our trading was very “light touch”, we opened just 28 trades. In fact two of the trades were opened on the same day, therefore we opened trades on 27 days or on 10.34% of the available days. That is not to say that there were not more days with good trades available, there certainly were plenty more opportunities.
First, on some days we already had trades open that took us to our pre-determined capacity. Those that train with us will know that our guideline is that we calculate a maximum trade volume of just 0.06% of the equity available in our account. We started with £1,000 of equity which therefore gave scope for a combined trade volume of just £0.60p per Pip. In fairness we did round that up to start with a volume of £1.00 per Pip. However, we did stay fairly close to the 0.06% limit throughout the year. Our biggest trade was actually £2.00 per Pip even though the equity was up at £3,737.83 a trade volume of 0.054%.
> Cover Story Success in 2015? The first of my personal trading rules, to use only 0.06% of the available equity as an indicator of a maximum combined trading volume does not seem to have caused any issues in 2014. We had a gain of 274% on just 28 trades, with plenty of scope for more trades so I am going to continue with this limit in 2015. Bear in mind though that it is a guideline and not exactly a hard and fast rule. My other big reason for not using more of the available trading days was that I simply did not want to spend a lot of time managing trades and staring at the screen. In other years I have taken a different view and have used as many as 2,000 trades. How much to trade, within the limits we set for ourselves is a personal decision.
06 Into the buy zone on 8th August 2014 and it stayed there for the rest of the year. With so little time spent in the white (buy or sell) zone I effectively only sold for seven months and only bought for five months. All went well until October. Until then 11 consecutive trades had gone smoothly. It was only at this point that I had to start using defensive trades to prevent major problems. The issue was caused by a dramatic price move. Having peaked at around 1.72 the GBPUSD fell for seven straight months down to around 1.50 losing almost 13% of its value.
It should also be said that psychology is probably playing a part in my decision. After all, every trade is being announced as it is made and no-one wants to look foolish!
I use a tool that I personally developed, the rule of thirds, to help me to decide whether I should be opening buy trades or sell trades. This tool simply puts some metrics around the old adage of buy low and sell high. Colour coding on my trading screen lets me know if I am in a buy area, a sell area or even a price area where either buying or selling may be appropriate. In 2014 the price action spent 51% of the year in the sell zone, just 12.35% in the buy or sell zone and 36.65% of the year in the buy zone. Amazingly, the price first moved
As shown above, during the second half of 2014 the GBPUS price fell sharply from the sell only area to the buy only area and to a 19 month low. This caught us out and we had to protect a trade with an equal and opposite trade (protecting a volume 2 buy trade with a volume 2 sell trade). We are confident that, given time, we could have got out of both of these trades in profit. However, as it is a one year experiment we closed both the buy and the sell trade and took a loss.
> Cover Story Success in 2015? This was our ONLY loss of 2014. Still, the question remains; can we learn from that loss? I am certain that we can. So far we have not developed even a guideline on how far below a failing trade we should take defensive action. If we defend too early we give ourselves a lot of work getting out of the protective trade and if we defend too late then we end up with a lot of work being required to get out of both of the trades and carrying a large loss in the meantime. To date we have always said defend at the same level that you, in conventional trading, set a stop loss order. This is simply not good enough and we must set some sort of guideline even if it is only for our own use.
07 extended period of time before making it anything like firm. Another of our tools to check out the performance of is Jeff’s Lines. These are horizontal lines drawn onto trading platforms at levels which are commonly used as pivot points alongside whole number price points and previous levels of support and resistance. Every day, throughout 2014, we looked at the performance of Jeff’s Lines and gave it a score of one, two or three. If the tool worked well we scored it as a one, if it worked reasonably we scored it as two and if it did not really work at all we scored it as a three.
The guideline should be to set the defence a given number of Pips away from the original trade rather than setting it at a level that represents a particular monetary value. This is because the guideline needs to be able to be scaled to match the value of any account. The guideline that we have provisionally settled upon for 2015 is to set defensive trades in place at approximately 75 Pips away from the trade being defended. The reason for the word “approximate” is that we need to take into account factors such as the proximity of Jeff’s Lines, whole number price points and previous levels of support and resistance. We will monitor this guideline over an
Here are Jeff’s Lines in place. The scores came out very well indeed with one being scored on 214/261 days (82%) two on 43/261 days (16.5%) and three on only 4/261 days (1.5%). Given this performance we will certainly be continuing with the use of Jeff’s Lines going into 2015 as it is their best ever performance.
> Cover Story Success in 2015? At Forex Trader Magazine we record many aspects of the daily movements of the GBPUSD price. Here are some more interesting metrics: 2014 had an opening price of 1.65647 and a high of 1.71905. The low was 1.54852 (already well beaten in 2015). The closing price for 2014 was 1.55800. The average daily price movements were 42 Pips (open to high) and -44 Pips (open to low) and just -3 Pips (open to close). The average daily range was 86 Pips.
You may also be interested to know that 2014 saw 78 (29.8) trading days on which the overall price movement was downwards. That left 184 (70.2%) trading days when the overall price movement was upwards. There were no days that did not see at least a small movement in one direction or the other.
08 As well as examining the GBPUSD chart over the last year it is also interesting to go back further. The chart below goes back over the last seven years to the financial crisis of 2008. The crisis stands out in sharp relief! The high, back in 2008 was actually 2.11610. The low, also in 2008 was 1.35030. The range in 2008 was therefore more than 76 cents compared to the 17 cents of 2014. There is no scope to think of any recent year as being one of difficult trading conditions – although it is all relative!
I am not in the business of making public predictions of price movements in respect of any trading instrument. However, I can’t help noticing that, since the great fall of 2008, there has been a very slow upward trend. Although we are currently in danger of breaking the trend this has not happened yet. Technically speaking we may therefore see a 2015 which ends with upward movement.
> Cover Story Success in 2015?
09 We estimate that we spent around five hours trading and checking the screen over the whole 12 months. As you have read there were 28 trades in 2014 including some defensive equal and opposite trades. Of these 27 (96.43%) were profitable.
Several references have been made in this article to the Forex Trader Magazine 2014 Live Trading Experiment. In January 2014 we decided to showcase our trading techniques, tools and training by setting up a live trading experiment. The idea was to start with £1,000 of equity and to use only the trading methods that we explain in our training to generate a profit over the course of 2014. Our internal target was to double the £1,000 without aggressive trading and to take a low risk approach. After all, if it went wrong our reputation was at risk. To allow followers to both follow our trades and to verify them we reported on all trades as soon as they were opened or closed. That reporting was within the Forex Trader Magazine website at: http://forextradermagazine.co.uk The record of our 2014 trades remains in place for scrutiny. We are also recording the trades of our 2015 experiment there if you want to check them out or indeed to follow along with the trades.
The outcome was a profit of £2,747.82 (274.78%). The early trades were of volume 1 (£1.00 per Pip) and this increased to no higher than volume 2 (£2.00 per Pip) as the equity increased. The profit averaged out at £98.13 per trade and the average Pips gained was 49 per trade. A later article in this edition discusses our trade plan creator and gives more details of the 2014 Live Trading Experiment.
> FX Turmoil Brokers Strife
Stop Press - - - Stop Press - - - Stop Press - - - Stop Press - - - Stop Press - - - Stop Press
many of whom will not be able to respond to the resulting margin calls. On its website Alpari said “the recent move has resulted in exceptional volatility and extreme lack of liquidity”. “This has resulted in the majority of clients sustaining losses which has exceeded their account equity”.
Traders were caught out by the SNB’s decision to abandon the ceiling it had placed on the Swiss franc's value, causing many traders to take severe losses with many trading accounts being wiped out. This left brokers such as Alpari being owed huge sums by vast numbers of traders,
Alpari has now entered insolvency as a result. Thankfully, the broker has assured all retail clients funds are segregated in accordance with Financial Conduct Authority rules. At its height the franc was as up 30pc against the euro on Thursday and it closed 18pc up, after the ceiling on the currency was removed. The Swiss franc is now floating freely for the first time since September 2011.
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> FX Turmoil Brokers Strife trading began the following day.
Spread betting companies CMC Markets, GKFX, ETX Capital and City Index told clients that they had not suffered as severely as their peers. GKFX maintain that they are not affected by the issue.
Alpari are major sponsors of UK soccer club West Ham's team shirt in a deal estimated to be worth £3m. A spokesman for the London-based club said that it was "saddened by today's news". The club does not expect the demise of Alpari to impact on its future. The sponsorship deal was set to run until the end of the 2015/16 season. West Ham reported that it "is already in advanced discussions with potential new shirt sponsors for next year".
"CMC Markets sustained some losses" the group said, but had not been "materially impacted ... it's business as usual", a statement read, while GKFX, ETX and City Index all described their financial position as "unaffected". Here is the currency chart showing how the value of the Swiss franc moved against the euro on Thursday 15 January 2015.
IG Group declared that it could take a £30m hit as a result of the SNB's decision. FXCM, America's biggest foreign-exchange broker, said that it could now "be in breach of some regulatory capital requirements", after clients collectively lost around $225M. Investors took fright at the news and sent the shares crashing 86pc in pre-market on Wall Street. However, FXCM has since announced a rescue deal with the investment bank Jeffries injecting $300M. London Capital Group said that the total impact would be "dependent on the company's ability to recover client debts, but in total it will not exceed £1.7m". Its Share price fell by as much as 14.5pc as
Here is the take of FX daily on the issue:
http://youtu.be/ BdVPNw-gkes
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> The euro Perfect storm?
Euro woes are combining with the wider economic system issues to cause trouble
I took the decision to do so because of what I saw as a perfect economic and political storm brewing in what I see as being the lumbering, dysfunctional and badly managed eurozone. There is great uncertainty in the eurozone: decisions on quantitative easing, the Greek election outcome and a long term failure to properly manage the euro as a currency amongst them. Collectively these concerns made me decide to let things settle before entering any new trades. I have several basic problems with the euro which I see as a basket of mismatched currencies with disparate interest rate
requirements and differing needs to revalue all with an inability to make necessary adjustments. I see currencies that should never have been allowed to join the euro, which got in as a result of the misguided dream of fools. I see power being exercised by the stronger members at the expense of the weak and no agile decision making or action being taken when it is needed. Any of these factors may bring the currency down and we are seeing an increasingly strong likelihood of this. However, the euro could be brought down in the end by a factor which is only indirectly related to its management. That factor is the inequality that is growing within states both inside and outside of the eurozone. Here is my current analysis of what is happening in the eurozone.
> The euro Perfect storm?
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The eurozone, via the European Central Bank (ECB) is to start effectively, if not actually, printing money at the rate of €60bn per month in a quantitative easing (QE) programme. This is an attempt to halt deflation and low-growth by lowering the value of the euro. ECB president Mario Draghi announced a programme of €60bn in bond purchases lasting until September 2016 aimed at increasing inflation to the ECB's two per cent target. Most commentators seem to agree that this is worth doing but probably too little, too late. Stock market reactions to the news were mixed, initially rising and then falling back. The euro dropped against the dollar and the pound. Supporters of the decision say QE will pump money into the eurozone economy keeping borrowing costs low for troubled member nations while encouraging business and consumer lending and keeping the euro low against other currencies. Critics say that money-printing will let irresponsible economies that borrowed too much in the boom years off the hook - and allow them to avoid necessary austerity measures to get their finances in order. As though to confirm our concerns about over powerful leaders in the eurozone Germany objected to the move and is believed to have voted in its own narrow interests. It managed to influence the decision in its own favour while reducing its effectiveness for less strong members.
Based on Draghi’s announcement the ECB will deliver €1.2trillion of bond-buying within the programme. However, he also said that the programme would continue until there was a meaningful change in the path of inflation towards the two per cent target. There is no guarantee that this will work. It has been said that QE is like spraying vast quantities of oil onto a broken engine to keep it running. It does not fix the root cause of the problem; it just buys time for other actions to work. The main concern over eurozone QE is that it is too little too late - and that it will allow weak economies to backslide on much-needed reforms. This is reflected in the influence that Germany had over the structure of the programme. It was not prepared to stand shoulder to shoulder with other members by bearing the risk of such backsliding or of the programme not working. No-one blames them for this but it does highlight the folly of unequal economies sharing a currency. As a result of Germany’s opposition the ECB will only take the risk on 20% of the debt being bought, the rest will be held by national banks.
> The euro Perfect storm? There appear to be even more rocks in the road ahead for the euro as weaker nations elect governments that reject the ECB regime. On 25 June Greece saw the extreme, left wing Syriza party led by Alexis Tsipras sweep to victory on an anti-austerity manifesto finishing eight points clear of the incumbent conservatives, New Democracy
14 austerity has to end, has been chosen. The alliance will not be an easy one.
Syriza promises to renegotiate the international bailout that imposed austerity on Greece. They pledged that they will roll back austerity and renegotiate Greece’s mammoth debt. They were just two seats short of an absolute majority with 36.3% of the votes while New Democracy had 28%. Tsipras will lead the first eurozone government to openly oppose bailout conditions imposed by the European Union and International Monetary Fund. This will undoubtedly set Athens at odds with Brussels and Berlin. The result had “made the Troika [the EU, IMF and European Central Bank] history,” said 40 year old Tsipras. Unprecedented spending cuts and soaring unemployment saw 3.1 million people, or a third of the population, lose their social security and health insurance. Almost one third of Greece’s population now lives below the poverty line, while 18% are unable to afford basic food needs. However, to get its programme through Syriza needs a coalition partner and its choices were limited. Right wing, Nazi inspired, Golden Dawn was not an option and the Communist party refused to cooperate with Syriza. The right wing, populist Independent Greeks, who agree with Syriza on almost nothing except that
The prospect of a Syriza victory spooked creditors who worry that Athens will seek a write-off of at least part of its €320bn debt. Some analysts fear that a tough Syriza approach to negotiations could push Greece out of the eurozone, although Germany’s Chancellor, Angela Merkel, insisted on Friday that this was not what she wanted. Tsiaris’s line has softened in recent weeks. However, several EU capitals remain alarmed by Greek promises to cancel the most draconian budget cuts imposed as part of the country’s €240bn bailout package. This election could herald a tide of political change across the eurozone that throws the whole euro project into disarray. Even in the larger and more stable nations such as Italy and Spain, some people already question the merits of the euro, as
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> The euro Perfect storm? the union has prevented them from allowing their currency to slide in value to improve competitiveness, as they have done in the past.
There seems to be a perfect storm brewing in the eurozone. When economic times seemed good, as debt fuelled growth, everything was fine. Now in the midst of a long downswing that looks as though it could become permanent, things are different. We have: • The inability of eurozone members to adjust interest rates and currency values to match the needs of their economies.
the euro we also have growing, now stark, inequality within just about all of the member nations at a national level. The rich are getting much richer, the poor are getting poorer and the middle classes are being squeezed up or down into what increasingly look like hour glass economies. The outcome of this alone could be political destabilisation and an increasing number of fringe political parties coming forward threatening the established order and its recipe for overcoming economic woes. Surely, we do live in interesting times and face a perfect economic and political storm? We wait and watch.
• Members who should never have been allowed to join and that now have economic conditions too far removed from the leaders to be able to live with the fiscal conditions that suit the stronger nations. • Stronger members, such as Germany, that can’t bring themselves to give enough support to the weaker members or even to accept fiscal measures that would suite an “average” member. • A slow to act, weak central bank that seems to be incapable of prompt strong action due to internal division based on members self-interest. • Growing disparity in living standards between the member nations as the strong get what they need and the weak get austerity conditions imposed by the strong. As if all of this is not enough to destabilise
Alexis Tsipras
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> Tools FTM Trade Plan Creator
Plan & record your trading outcomes Set your trading goals for 2015 and track your progress against them this free tool
actual progress in black as well as three forecasts that we made at the start of the year. The forecasts were termed cautious, shown as a yellow line, realistic shown as a blue line and ambitious shown as a red line. Users have the ability to set their own forecast levels and also to change the forecasts as the year progresses – though some may consider that to be cheating! The Trade Plan Creator (TPC) was developed in Microsoft Excel but it is also available as a “Numbers” file for Mac and as a Google “Sheets” document which does not involve buying any software. Get in touch if you need help with getting hold of the tool. The image on this page shows one of the outputs of the spreadsheet. It shows our
> Tools FTM Trade Plan Creator
Our next task is to create the forecasts. The sheet shown above is what we have termed the cautious forecast. Your thinking and inputs are required to complete this. As with all coloured sections of the TPC inputs go into the clear, white cells. The first of these asks for a forecast of how many trades are anticipated in each month. Remember to take vacations into account and to make the numbers appropriate for the nature of the forecast (cautious, realistic, ambitious). This does require some hard work in thinking about how much of the limited trade volume capacity is expected to be used and whether there may be periods when this results in no new trades being available. In the final analysis though, this is only a forecast!
Next we add any deposits of new equity that may be planned putting them into the
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month or months that they are expected in. This can be particularly useful if you plan to add regular amounts to your equity and it does make calculating returns a lot easier in the event that multiple cash injections have been made. Next we add in the compounding percentage trading return that is to be forecast. Note that the actual return in the live trading experiment was well over 4% so the 0.75% used in this cautious forecast is, for me at least, very cautious! Finally, and this is best done last, forecast any withdrawals that you would like to make in the event that your forecast is actually achieved. All that remains is to repeat this forecasting exercise for the realistic and ambitious forecasts. Here are the forecasts that we used for 2014.
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> Tools FTM Trade Plan Creator
combined trade volume. The TPC is very easy to use and the video at the end of this article will walk you through an example. However, in basic terms its use starts with completing the opening data input at the top of the spreadsheet.
The panel will also keep track of the number of trades that you undertake and your return rate as well as the closing equity for each month.
First though, save the spreadsheet as a template and then as a new document with a new name. This will allow you to use it for other trading accounts, for future years or even so that you can use it to make forecasts covering more than one year.
You will note that the spreadsheet also records a figure for your compound gain. We particularly like this as it shows the compound rate of return that you have achieved over the months of trading that have elapsed to date.
All that is needed is to give the forecast a name, a start date and to add the amount of equity that you are starting with. The rest is automatic apart from inputting your forecast and actual performance of course.
All that remains for this part of the spreadsheet is to revisit it at the end of each month to input the number of trades undertaken, the equity level in the account and any additions to or withdrawals from equity that have been made. The calculations will take these into account when calculating the rates of return achieved.
The top panel will show calculation outputs such as the maximum trade volume recommendation. This is based on 0.06% of equity which is our chosen maximum
> Tools FTM Trade Plan Creator
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> Tools FTM Trade Plan Creator The video below was actually produced in September 2012. The spreadsheet is almost identical and is actually identical in respect of its functionality. However, in one respect we now tend to use the spreadsheet in a slightly different way. The change is in terms of a switch from having previously recorded the number of trading days in each month to the actual number of trades opened in the month. Both approaches are equally valid. The change came about because back in 2012 I was sitting at my computer and trading
for around eight hours of each working day. Nowadays I don’t undertake anywhere near as many trades. The live trading experiment is a better reflection of my current style with its 28 trades in a 12 month period. You should therefore feel free to use either working day eight hour equivalents or the actual numbers of trades that you open each month. As long as you consistently use one or the other everything will be fine.
http://youtu.be/-CedQHDyWHo
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> Feature Women traders
The research and my experience say yes! In general, women seem to make better traders due to psychological factors – why?
Whether it is because of these times of austerity and recession or just the way of the world I don’t know, however it was recently reported that, although still in the minority, apparently 25pc of home based traders are women, compared to virtually zero some 26 years ago. The report went on to say: "Think like a woman to succeed in trading.“ I was instantly intrigued as this does reflect my gut feeling. Apparently, research confirms five possible reasons why women generally do better at trading, those being: - Men hate to be wrong and take longer to admit that they have made an error;
- Women are better in a crisis and less emotional because, contrary to popular belief, female traders are more disciplined and less likely to panic; - Women can more easily say no and sometimes the best trades are the ones you do not make; - Women read the manual, stick to a strategy and question things that they are uncertain of; and, - finally, women are measured as opposed to jumping in head first which men are apparently prone to doing. All of this is supported by a seminal piece of research on the topic by the distinguished behavioural economists Terrence Odean and Brad Barber. ' Boys Will Be Boys: Gender, Overconfidence and Commons Stock Investment .'
> Feature Women traders In their 2001 study, they analysed account data for more 35,000 households at a large discount brokerage between February 1991 to January 1997. They discovered that on average, men traded 45pc more frequently than women and that this hyperactive trading reduced their net returns by 2.65pc a year, compared to 1.72pc for women. Their explanation for the high levels of counterproductive trading in financial markets was overconfidence. Men trade more than women - and thereby reduce their returns. In his book ' Why Smart People Make Big Money Mistakes and How to Correct Them Gary Belsky looked at the effect of emotions on decision making, noting that “the less you do, the more likely
23 you are as a trader to do well for a bunch of reasons�. These include "some sociological, some cultural, some maybe biological reasons. Women are more deliberate than men, and therefore less active as traders, which the research seems to pretty strongly suggest makes them better traders.“ The data is clear. The gender stereotype that women are less confident than men or, as Belsky says, "that women are less overconfident than men" - is, for once, a useful trait. There is a strong argument that women, by their very nature, do indeed make better traders and better returns.
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> Feature Trading Psychology
How are we affected by psychology? All traders have experienced psychology affecting their trading so how does it work?
then work on it accordingly.
Most traders spend days, months and even years trying to find the right system. But having a system is just part of the game. Of course it is very important to have a system and a trading plan but it is as important to understand all psychology barriers that may affect trading decisions. In order to succeed in this business, there must be equilibrium between all important aspects of trading. In the trading environment, when we lose a trade, what is the first idea that pops up in our mind? It is probably, "There must be something wrong with my system", or "I knew it, I shouldn't have taken this trade" (even when your system signalled it). But sometimes we need to dig a little deeper in order to see the nature of our mistake, and
When it comes to trading the Forex market, as well as other markets, only a small number, maybe 5%, of traders achieve the ultimate goal: to be consistent in profits. What is interesting though is that there is just a tiny difference between this 5% of traders and the rest of them. The top 5% grow from mistakes; mistakes are a learning experience, they learn an invaluable lesson on every single mistake made. Deep in their minds, a mistake is one more chance to try harder and to do it better the next time, because they know they might not get a chance the next time. And at the end, this tiny difference becomes THE big difference.
> Feature Trading Psychology We all like to read about and study the subjects of strategy and analysis and Forex trading. For many traders, that is the familiar, understandable, and easier part of trading. By contrast, emotional control and money management belong to the more arcane category of knowledge in currency trading. On news channels, the websites of brokers and online and visual sources of news and analysis, you often find the various market movements and strategies based on them debated heatedly and with passion, but commentators who are often not traders themselves do not feel so inclined to discuss the psychological aspect of trading in their presentations.
The fact, however, is that the vast majority of online traders fail, and that the main cause of the failure is lack of emotional control and mental discipline. In many cases, the trader does not even reach a stage where a good knowledge of economic data and statistics can support his trading to generate better results. Instead, many accounts get wiped out early, as traders act like scared rabbits in the tense and emotionally charged atmosphere of the markets. Clearly,
25 seekers of success in trading must devote a lot more energy to perfecting their skills of psychological control. What are we seeking in trading? We seek money, profits. Does money, and the market action that creates it respond to our joy, pride, sorrow, or despair? Are the markets crueller on us when we are sad, or more gentle when we feel invincible? Are we more successful when we trade on baseless optimism, or panicky pessimism? Which is the better way to manage our emotions? The better way of managing our feelings in trading is to isolate and exclude them while we are dealing with the markets. Prices move according to emotional responses in the short term, and economic dynamics in longer periods. But they can only be evaluated by logic, as that is the only tool possessed by human beings. And some will rise and say, perhaps justifiably, that the markets move on emotions, and that by isolating and excluding them from our decisions we are losing the chance to understand the markets. In response we say that human beings understand and analyse through reason only, and as emotions cannot be predicted through reason, there is almost no benefit in trying to trade the markets emotional responses. Emotions are unpredictable, we all know that much. What is the point of trying to predict or evaluate market action on the basis of something which is itself unknowable, and unpredictable?
> Feature Trading Psychology In summary, emotions have no place in a successful trading career. There should be no joy in profit, and no pain or sorrow in a loss. We can enjoy the fruits of our profits with friends and family later, but if we try to enjoy them while trading, our joy will quickly turn to sorrow. Until you absorb this piece of Forex wisdom, do not spend much of your time screening the Forex broker list seeking the best choice for you. The first step to success in Forex trading is emotional control. Without it, no broker or mentor will help you much. Most of us relate a trading mistake to the outcome (in terms of money) of any given trade. The truth is, a mistake has nothing to do with it, mistakes are made when certain guidelines are not followed. When the rules you trade by are violated. Take for instance the following scenarios: First scenario: The system signals a trade. 1. Signal taken and trade turns out to be a profitable trade. Outcome of the trade: Positive, made money. Experience gained: It’s good to follow the system, if I do this consistently the odds will turn in my favour. Confidence is gained in both the trader and the system. Mistake made: None. 2. Signal taken and trade turns out to be a losing trade. Outcome of the trade: Negative, lost money. Experience gained: It is impossible to win every single trade, a losing trade is just part of the business; our raw material, we know we can't get them all right. Even with this lost trade, the trader is proud about himself for following the system. Confidence in the trader is gained. Mistake made: None.
26 3. Signal not taken and trade turns out to be a profitable trade. Outcome of the trade: Neutral. Experience gained: Frustration, the trader always seems to get into trades that turn out to be losing trades and lets the profitable trade opportunities pass. Confidence is lost by the trader. Mistake made: Not taking a trade when the system signalled it. 4. Signal not taken and trade turns out to be a losing trade. Outcome of the trade: Neutral. Experience gained: The trader will start to think "hey, I'm better than my system". Even if the trader doesn't think on it consciously, the trader will rationalize on every signal given by the system because deep in his or her mind, his or her "feeling" is more intelligent than the system itself. From this point on, the trader will try to outguess the system. This mistake has catastrophic effects on our confidence in the system. The confidence of the trader turns into overconfidence. Mistake made: Not taking a trade when the system signalled it.
Second Scenario: System does not signal a trade. 1. No trade is taken Outcome of the trade: Neutral Experience gained: Good discipline,
> Feature Trading Psychology we only need to take trades when the odds are in our favour, only when the system signals it. Self confidence is gained by the trader and confidence in the system grows. Mistake made: None
2. A trade is taken, and turns out to be a profitable trade. Outcome of the trade: Positive, money is made. Experience gained: This mistake has the most catastrophic effect on the trader, the system and most importantly on the trader's trading career. They start to think that no system is needed, that they know better than them all. From this point on, they will start to trade based on what they think. Confidence in the system is totally lost. Self confidence turns into overconfidence. Mistake made: Take a trade when there was no signal from the system.
3. A trade is taken, turned out to be a losing trade. Outcome of the trade: negative, lost money. Experience gained: The trader will rethink his strategy. The next time, the trader will think twice before getting in a trade when the system does not signal it. The trader will go "Ok, it
27 is better to get in the market when my system signals it, only those trades have a higher probability of success". Confidence is gained in the system. Mistake made: Take a trade when there was no signal from the system As you can see, there is absolutely no correlation between the outcome of the trade and a mistake. The most catastrophic mistake even has a positive trade outcome, made money, but this could be the beginning of the end of the trader's career. As we have already stated, mistakes must only be related to the violation of rules a trader trades by. All these mistakes were directly related to the signals given by a system, but the same is applied when getting out of a trade. There are also mistakes related to following a trading plan. For example, risking more money on a given trade than the amount the trader should have risked and many more.
Most mistakes can be avoided by first having a trading plan. A trading plan includes the system: the criteria we use to get in and out the market, the money management plan: how much we will risk on any given trade, and many other points. Secondly, and most importantly, we need to have the discipline to follow strictly our plan. We created our plan when no trade was on, thus no psychological barriers were in play. So, the only thing we are certain about is that if we follow our plan, the decision taken is in our best interests, and in the long run,
> Feature Trading Psychology these decisions will help us have better results. We don't have to worry about isolated events, or trades that could have given us better results at first, but then have gone on to give catastrophic results in the long term. There are many possible ways to properly manage mistakes. We will suggest the one that works better for us. Step one: Belief change. Every mistake is a learning experience. They all have something valuable to offer. Try to counteract the natural tendency of feeling frustrated and approach mistakes in a positive manner. Instead of yelling to everyone around and feeling disappointed, say to yourself “Ok, I did something wrong, what happened? What is it?� Step two: Identify the mistake made. Define the mistake, find out what caused the mistake, and try as hard as you can to effectively see the nature of that mistake. Finding the mistakes nature will prevent you from making the same mistake again. More often than not you will find the answer where you least expect it. Take for instance a trader that doesn't follow the system. The reason behind this could be that the trader is afraid of losing. But then, why is he or she afraid? It could be that the trader is using a system that does not fit him or her, and finds difficult to follow every signal. In this case, as you can see, the nature of the mistake is not on the surface. You need to try as hard as you can to find the real reason of any given mistake. Step three: Measure the consequences of the mistake. List the consequences of making that particular mistake, both good
28 and bad. Good consequences are those that make us better traders after dealing with the mistake. Think of all the possible things you can learn from what happened. For the same example above, what are the consequences of making the mistake? Well, if you don't follow the system, you will gradually lose confidence in it, and this, in the end, will put you into trades that you don't really want to be in, and out of trades that you should be in. Step four: Take action. Taking proper action is the last and most important step. In order to learn, you need to change your behaviour. Make sure that whatever you do, you become "this-mistake-proof". By taking action we turn every single mistake into a small part of success in our trading career. Continuing with the same example, redefining the system would be the trader's final step. The trader would put a system that perfectly fits him or her, so the trader doesn't find any trouble following it in future signals.
Understanding the fact that the outcome of any trade has nothing to do with a mistake will open your mind to other possibilities, where you will be able to understand the nature of every mistake made. This at the same time will open the doors for your trading career as you work and take proper action on every mistake made. The process of becoming successful is slow, and in many cases it is attributable to repeated mistakes made and learned from and from the constant struggle to get past those mistakes. How we deal with mistakes will shape our future as a trader, and as a person.
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> Announcement – New Magazine
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Our new FREE subscription sister title Although known as currency traders our roots have always been in stocks and options
We love currency trading but our hearts, and our pensions, are in the stocks and options markets. We have traded these for at least twice as long as we have currencies and have always had great success. We have now decided that the time is right to let Forex Trader Magazine readers in on our secret. As with forex trading we have developed and use our own trading strategies that make trading stocks really easy, very safe and hugely profitable. Incredibly, we only ever trade one or two stocks at a time and we select them from an unchanging list of just twelve. From these trades we take no fewer than SIX streams of profit. In addition, we take only tiny risks and spend just a few minutes trading each month!
In our very first issue, to be launched in February 2015, we will reveal EXACTLY how we manage to achieve such great results and the stocks that we use. The time is right, learn how to take your trading to another level. Sign up on the page opposite for a FREE subscription to Stocks & Options Magazine.
> Forex Strategies – An introduction
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Forex Strategies An Introduction Once you have the basics tied down it is time to find an effective strategy.
If you have been trading forex for a short time and are ready to explore some strategies, read on. Strategies are about how traders make money at Forex. Let's start by saying that what works for one trader may not necessarily work for another. Trading currencies is risky. That's a fact. But ultimately a few strategies can give novice traders a winning edge. Trading Forex is not as easy as most people think. Today you could be earning a lot and tomorrow you could be losing 40% of your starting capital. Novice traders often make the same mistakes over and over again. Some typical mistakes are discussed below. This is for people who are afraid to lose or are too greedy and want to get rich quick.
Even when it seems so, The Forex Market is not the place to get rich quick. Yes, you can make a lot of money over time and yes you don't have to sell anything, nor create or advertise any products. Still you have to learn a whole lot about what makes this market tick and what moves the price of the currencies plus how to manage your money effectively so you don't lose your shirt. Many novice traders spend a lot of time searching for a perfect strategy that will allow them to always win and to never lose. They want to have guaranteed profits because they can't stand to lose and or they want to make too much (usually millions) too quickly so they can retire fast and buy a mansion in a far distant beautiful tropical island. It doesn't happen, very often at least.
> Forex Strategies – An introduction A trading strategy that allows you to have guaranteed profits does not exist. Trading is risky. That is why it is so profitable. Remember: "no risk, no reward." So, do not try to always win on every trade. It is simply not possible. There is no way to get rid of the fact of uncertainty. What this means is that no matter how effective your trading strategy may be, sometimes it will fail and you have to be ready to face this fact.
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discover by yourself. There is not a hidden secret or magic formula for trading Forex. It is what you do every minute when you are in front of the graphics and checking the news that really counts.
By not trying to find a perfect strategy that turns you into a millionaire fast, you will have saved yourself a lot of time and effort. . Beginners tend not to make this effort. They need a strategy which consists of money management combined with technical analysis and fundamental analysis. Mastering technical analysis is the ability to predict future price movements by analysing past price data and chart patterns. We get data on the currencies then check it using our knowledge of technical analysis and "predict" with a certain degree of accuracy where the market is going. Many brokers allow us to add technical indicators to the charts while we are trading. You can try this on a demo account and see how well you are able to define the future price movement of the currencies you plan to trade. One of those brokers is GKFX (see links at the foot of this article). There are many technical indicators. It’s difficult to tell which one will be more effective for you. Every trader is different. This is something that you will have to
The secret is in your overall knowledge and your decisions. This comes with experience and practice. If you open an account with GKFX you can trade on paper before you trade with real money, so you can learn and practice before you risk any capital. Here are some technical indicators that you can use. You can use the MACD (Moving average convergence divergence), the Bollinger Bands, Pivot Points, RSI, Stochastic, Fibonacci, EMA, Elliot Waves and many others. There are in fact many more technical indicators but these are among the most widely known and used. When you add technical indicators to the charts in the broker’s software they will automatically perform mathematical calculations to reveal interesting facts and patterns about the graphics that you can't readily see without said indicators. You can use the technical indicators to create your own technical systems.
> Forex Strategies – An introduction These systems will never work 100% of the time, but if they work 70% — 80% it may be enough. That's because you can control your risks with money management techniques as I describe bellow.
To further increase your probability of winning and reduce your probability of losing on every trade you can use fundamental analysis. Most traders choose one or the other but many traders use both. Fundamental analysis is to trade the news. What is going on with the countries' economies of the currencies that you are trading? What is the unemployment index? Did something suddenly happen that could drastically affect the price of the currencies? Trading the news is another effective way to "predict" where the market is going. Many online brokers offer a link to financial news feeds. Financial news can also be found on the following websites: • • • • • • • •
www.forexfactory.com www.bloomberg.com www.businessweek.com www.economist.com www.money.cnn.com www.markets.ft.com www.reuters.com www.fxstreet.com
You will need money or risk management techniques. They are what make you or break you. Put it this way, for example, most traders invest far too much of their trading capital on each trade. It is as follows . . . "Expect to make too much and you will make too little, expect to make little and you will make a lot."
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What does it mean? It means that if you try to make a fortune on every trade you will lose your shirt. If you expect to make a little on every trade and you compound your profits, you may make a lot of money over the long run.
The first rule of money or risk management says that you should not risk more than 1% of the money that you have on your account. You control this risk with stop loss and limit orders. When you start trading this may seem to give you very small profits specially if you start with only a small amount of trading capital. On the other hand, if you compound some or all of your profits you may increase your account exponentially over time. The magic of compound interest is amazing! This is the way that most fortunes are created on the financial markets, little by little. If you gamble your money you may lose it fast. Imagine that you open an account with $5,000 and you enter a trade for $1,000. Let's say that the market moves against you and you lose that $1,000. Now you have $4,000 on your account. You think that the price for the currencies is too low, so it should recover. In fact you are pretty sure that it will come back.
> Forex Strategies – An introduction Then you invest $1,500 to recover from the previous loss plus realise a $500 profit. The market moves again against you. It kept going in the same direction, something that you didn't expect. What happens? Now you have $2,500 on your account. That's 50% of your initial trading capital. It will be very hard for you to recover from that loss. On the other hand, if you risk 1% of your money on every trade, you will have $4,900 in your account after that initial loss. It will
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be much easier for you to recover from the losses made on smaller trades. These are the basic techniques that a successful trader should use to generate consistent profits at the Forex Market. This is basic information, but I realise that many people out there don't even know what a forex strategy is, so I didn't want to get into more complex strategies here. You will find information about complex and advanced Forex strategies on our website.
> Risk Management – A trading imperative
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Forex Risk Management Funds, Pips and Volume-Lots We all need to review our risk management practices on a regular basis.
Risk management techniques deployed to reduce our losses. Why is it so important? In reality, we are in the business of making money, and to be able to do so we need to learn how to manage risk well in order to prevent continuous losses. Ironically, this is one of the most overlooked areas in trading. Many traders are just anxious to get right into trading with no regards to their total account size. They simply determine how much they can lose in a single trade and place the trade without much further thought. As forex traders we have the opportunity to multiply our money, but we also risk heavy losses if we do not manage risk. Deviation from our expected profit average determines risk.
are
It is advisable to place a pending defensive order for every open position. We normally use equal and opposite trade orders for this while others always use a Stop-loss order. Either is placed at a point where the trader decides to act to avoid an unfavourable situation. While in active trades it is obviously a good idea to protect your fund against potential total loss. That is the central purpose of money and risk management. Too often, the inexperienced trader will be overly concerned about incurring losing trades. Such traders therefore let losses mount, with the hope that the market will turn around and the loss will go away!
> Risk Management – A trading imperative Almost all successful trading strategies include a disciplined procedure for limiting losses. When a trader is down on a position, many emotions usually come into play, making it difficult to limit losses at the right level. The best practice is to decide where losses will be limited before a trade is even initiated. This will assure the trader of the maximum amount he or she can expect to lose on the trade.
To manage your invested funds well, it is best to decide before the opening of any position how much of your money you can afford to lose in case the trade goes negative from your projection. For instance, you may decide that for every opened position your “at risk” money will be 3%, 5% or 10% of your total fund. By doing this you have known, prior to the execution of the trade, the highest amount that you can lose on that single trading position. In doing this you have removed all emotion.
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Work out the 2% of $5,000 = $100. This determines that you are only prepared to suffer a loss of $100 before taking action. Next we convert the $100 to a lot size by Dividing $100 by 50 Pips = $2.00. The lot size that this example says would be used is 1 pip to $2. Therefore it will be a lot size of 0.2 lots ($2 divided by $10). Note: A standard lot represents 100,000 units of any currency A one-pip movement for a standard lot corresponds with a $10 change. Most traders make a conscious decision not to be greedy, to be less greedy is to be able to minimise risk. A further tip is to limit the leverage applied to your account as a way to control risk: if your leverage is relatively low it will limit you against opening a trade with high lot size.
The factors needed to work out the limit levels are: • The fund balance in your account. • The number of pips set as your risk limit. • The lot size (volume) traded. For example: Let's say your fund balance is $5,000 and your predetermined risk acceptance is 50 pips (selecting this level as a result of your analytical research) and that you are ready to risk only 2% of your fund for a position before acting. What do you do?
Getting risk management and trade volume right combined with a good defensive strategy is essential to success in trading. A fantastic trading strategy alone is simply not enough. Check out our training to ensure that you are using a simple but comprehensive trading strategy.
> Book Review – The Dollar Trap
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The Dollar Trap How The US Dollar tightened Its Grip on global Finance Written by Eswar S. Prasad
This book examines the world`s love-hate relationship with the US dollar as its dominance seems under threat. The near collapse of the U.S. financial system in 2008-2009, political paralysis that has blocked effective policymaking, and emerging competitors such as the Chinese renminbi have heightened speculation about the dollar's looming displacement as the main reserve currency. Yet, as The Dollar Trap powerfully argues, the financial crisis, a dysfunctional international monetary system, and U.S. policies have paradoxically strengthened the dollar's importance. Eswar Prasad examines how the dollar came to have a central role in the world economy and demonstrates that it will remain the cornerstone of global finance for the foreseeable future. Marshalling a range of arguments and data, and drawing
on the latest research, Prasad shows why it will be difficult to dislodge the dollarcentric system. With vast amounts of foreign financial capital locked up in dollar assets, including U.S. government securities, other countries now have a
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> Book Review – The Dollar Trap strong incentive to prevent a dollar crash. Prasad takes the reader through key contemporary issues in international finance--including the growing economic influence of emerging markets, the currency wars, the complexities of the China-U.S. relationship, and the role of institutions like the International Monetary Fund--and offers new ideas for fixing the flawed monetary system. Readers are also given a rare look into some of the intrigue and backdoor scheming in the corridors of international finance.
The 2008 financial crisis might have been expected to erode the dollar’s global prominence. Instead, Mr Prasad argues, it cemented it. America’s fragility was, paradoxically, a source of strength for its currency.
India, Indonesia, the Dominican Republic and Peru have all made inquiries. The swap lines are good business: the Fed keeps the interest from the foreign central bank’s loans to banks, even though the other central bank bears the credit risk. The Fed earned 6.84% from South Korea’s first swap, for example. But it is not a business the Fed wants to be in. As one official said, “We’re not advertising.” Swap lines would help emerging economies endure the dollar’s reign. But will that reign endure? Mr Prasad thinks so. The dollar’s position is “suboptimal but stable and self-reinforcing,” he writes. Much as Mr Prasad finds America’s privileges distasteful, his book points to the country’s qualifications for the job. America is not only the world’s biggest economy, but also among the most
In the last four months of 2008 America attracted net capital inflows of half a trillion dollars. The dollar was a haven in tumultuous times, even when the tumult originated in America itself. The crisis also “shattered conventional views” about the adequate level of foreign-exchange reserves, prompting emerging economies with large dollar hoards to hoard even more. Finally, America’s slump forced the Fed to ease monetary policy dramatically. In response, central banks in emerging economies bought dollars to stop their own currencies rising too fast. Could Fed swap lines serve as a less costly alternative to rampant reserve accumulation? If central banks could obtain dollars from the Fed whenever the need arose, they would not need to husband their own supplies. The demand is there:
Eswar Prasad is the Tolani Senior Professor of Trade Policy at Cornell University and a Senior Fellow at the Brookings Institution. He is also a Research Associate at the National Bureau of Economic Research.
> Book Review – The Dollar Trap sophisticated. Size and sophistication do not always go together. In the 1900s the pound was the global reserve currency and Britain’s financial system had the widest reach. But America was the bigger economy. In the 2020s China will probably be the world’s biggest economy, but not the most advanced. America’s sophistication is reflected in the depth of its financial markets. It is unusually good at creating tradable claims on the profits and revenues that its economy generates. In a more primitive system, these spoils would mostly accrue to the state or tycoons; in America, they back a vast range of financial assets. Mr Prasad draws the obvious contrast with China and its currency, the yuan, a “widely hyped” alternative to the dollar. China’s GDP is now over half the size of America’s. But its debt markets are one-eighth as big, and foreigners are permitted to own only a tiny fraction of them. China’s low centralgovernment debt should be a source of strength for its currency. But it also limits the volume of financial instruments on offer. America has a big external balance-sheet, if not an obviously strong one. Its foreign liabilities exceed its overseas assets. But this worrying fact conceals a saving grace: its foreign assets are unusually adventurous and lucrative. Its liabilities, on the other hand, are largely liquid, safe and lowyielding. America therefore earns more on its foreign assets than it pays on its foreign liabilities. Alongside its economic maturity, America also has a greying population. This ageing is a source of economic weakness. But, Mr
40 Prasad argues, it may be another reason for the dollar’s global appeal. America’s pensioners hold a big chunk of the government debt that is not held by foreigners. A formidable political constituency, they will not allow the government to inflate away the value of these claims. Thus America’s powerful pensioners serve to protect the interests of its generous foreign creditors. The dollar’s depreciation over that period is, of course, bad for anyone holding American assets. But the dollar is not merely a store of value. It has also become a popular “funding” currency. Banks and multinational firms borrow in dollars, even as they accumulate assets in other denominations. Since no one wants to borrow in a currency that only goes up, this is not a role that China’s currency could easily play. Moreover, because of its role as a funding currency, the dollar tends to strengthen in times of crisis. That explains why emerging economies feel a “lumpy”, “unpredictable” need for dollars. America’s currency may not hold its value against others. But in times of stress, the appeal of a dollar asset is that it always holds its value against a dollar debt. The dollar is a global hegemon partly because it is also a global hedge.
The Dollar Trap offers a panoramic analysis of the fragile state of global finance and makes a compelling case that, despite all its flaws, the dollar will remain the ultimate safe-haven currency.
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> Announcement – Partners
Strategic Partners Required Join with us and share in our success Digital Publishing is growing exponentially, why not share that growth with us?
We are very keen to grow. Our aim is to dominate the business and finance sections of the Apple iTunes and Google Newsstands in every major industrialised country and to do it quickly! We recognise that we are more likely to achieve our goal if we partner with like minded businesses and individuals around the globe. It is our intention to do this through strategic partnership joint ventures. Whether you are interested in working with us to grow one of our current portfolio of titles or would like to work with us to establish your own title get in touch and talk to us.
We already have expertise in publishing and marketing online publications and would be delighted to share our knowledge. We can train you or your people and can work directly with you to produce a great, profitable publication. To find out more just email us and provide an outline of your thoughts on how we can work together. We are happy to sign a confidentiality agreement as required.
Email me, Jeff Fitzpatrick jeff@digitalpublishingservice.co.uk
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> Day Trading – Is it for you?
Day Trading Funds, Pips and Volume-Lots We all need to review our risk management practices on a regular basis.
of exchange taking place. For instance, Forex or foreign exchange which is trading focused on foreign currencies.
When primitive people invented money, all they had in mind was to find some means to solidly show the actual exchange of goods or services between two persons or groups. Since then, almost all exchanges of goods have been made using money. As time passed by, trading significantly evolved in different industries where money is not the primary agent. Trading became a profitable venture; and created a remarkable spot in the economy. Today, there are many kinds of trading. Every type of trading depends on a kind
Among the many trading types, day trading has slowly etched a name in the industry. With its remarkable turn of profits, day trading has gained a fair to good reputation. Day trading generally stands for a system of selling and buying financial tools such as bonds or stocks throughout the day. In other words, day trading is a series of material exchanges that all happen within a single day. Hence, in day trading, every piece of stock bought has its corresponding sale. The profit or deficit is identified on the discrepancies between the goods and the trade price.
> Day Trading – Is it for you? The main concept of day trading is based on the premise that all of the transactions are carried out within a single day to ensure that there are no changes on the current closing price overnight.
Changes often do take place overnight, where the preceding closing price will be changed depending on the result of the day's trading activities.
43 commission for facilitating the trades, and forex traders should consider these transaction costs when calculating their selling offer when time comes to exit their position, as this will influence their profit margin.
Just as a day trader will closely track stock price movements on the Dow Jones Industrial Average, all over the world forex traders monitor currency fluctuations in a similar fashion. Forex traders have the aim of using the smallest amount of one currency, say the US dollar, to purchase another currency like the British Pound. If supply of the pound lessens in a busy market, it will cost more dollars to buy pounds, and the forex trader hopes to sell their pounds at a higher price than their purchase price. In many respects, this type of trading behaviour is very similar to trading in stocks, where the aim of nearly all traders is to buy low and sell high. The trading process works under a bid/ask system. In the above example, a forex trader might bid 10 dollars in return for 5.7 British pounds, and the seller of the pounds could be asking 11 dollars for the same amount of pounds. If the seller accepts the bid, the trader then hopes the pound continues to increase in price, so that when time comes to sell, they can get in excess of the 10 dollars initially paid. As only registered traders have access to this auction process, most online speculators will trade through a bank or broking house. Such brokerages charge a
The global foreign exchange market can trade in excess of a trillion dollars a day. Sheer market size means there is considerable money to be made, and lost, through miscalculation. It is neither a guaranteed, nor easy path to riches, so traders should be educated in how to play the market. Instructional packages are available, and should be carefully reviewed as they can easily range in quality and price. Day trading may not sound complicated and may not even look perilous to one's financial status. However, trading experts say that more people tend to lose during the day trading. Statistical reports show that nearly 90% of day traders spend more money without gaining something in return.
> Day Trading – Is it for you? For this reason, it is important that every day trader should know how to deal with the matter intelligently. It takes some wits and quick thinking just to overcome any probable loss in day trading.
1. Chop down shortfalls quick The secret is to regain back what you have lost. Try to handle the situation positively and manoeuvre the condition to a constructive one. There is no use to cry over spilled milk. What you need to do is to reduce the losses with quick, sharp moves.
2. Go with the flow Like traffic, taking the counter flow is not advisable in day trading. It would be better if you will just go with the flow. This means that you have to focus on the high-selling stocks and sell those that fall under "shortselling" stocks. This is based on the belief that the development of stocks will continue to rise. Luckily, 8 out of 10 day traders find this strategy effective. 3. Control your emotions Some day traders tend to be emotionally involved with their dealings. In reality, day trading can really create hype. Hence, emotional people tend to act on impulse. Any good news will immediately alert day traders to expect a positive turnover of stocks. Hence, if you are too emotional, you may get excited and act without even evaluating the situation. To avoid trouble, it would be better to control your emotions and analyse each condition first before making a move. If you lost, analyse the situation and identify where you have been wrong.
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Do not take your defeats seriously. Keep in mind that an open mind is important to overcome problems encountered in day trading. This will help you achieve the profits that you want.
> Back Issues – Library
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Our back catalogue contains hugely important features Available from http://forextradermagazine.co.uk