Good Advice For New and Old Traders
Here are some trading guidelines and they are not mine. I hope you'll find the contents helpful. Trading is not without risk - nor is walking across the road.
It makes my blood boil when all people think about is being safe! There is no such luxury so grow up! There is risk management and I suggest you employ risk management for the safety of your capital. Protect your capital sure..by getting the right education. How do you know what's best? That's the tricky part!
Just because someone succeeded with program X does not mean that if you buy it you will achieve the same result. So when you hear of people making millions just remember you are not them! You may not achieve those results.
Of importance here is forex robots. Who the hell knows whether you will double your money? You must suck it and see..you could fail miserably, lose all your money and become destitute.
From now on check what people are saying. If they tell you you will double your money run away!
■Keys to a Good Trading Method p1
■Keys to a Good Trading Method p2
■Risk Management
■Technical Analysis
If you are reading as I type then patience - I'm typing as fast as I can. You'll soon see the links above.
Now at the moment I've been looking at Bob's Forex Classroom and "Flexible Forex" Method.
Bob is not only a forex expert he is also a financial commentator. Is he any good? God knows! He tells us he started as a truck driver! Now he not only trades financial markets he also is a commentator.
Look, this is the way I see it..suck it and see. If you have doubts put it to the test. Take personal responsibility for your success and mistakes. There are no easy answers and why would I tell you one is better than the other?
Bob offers the personal mentor approach - if you like that then try that out. You see when money is at stake it's very hard for me to tell you to do it - that has to come from you.
Forex Trading Methods: What makes a trading method "good"?(Part 1.)
Today I want to take a few minutes to talk about Forex trading methods, because we are constantly bombarded with new methods or systems almost daily, and I believe traders have little chance of being able to identify the right ones to use, the best performing or the most educational. With so many methods, systems and automated programs, how do you select the one that is best for you, or the one that gives you the best opportuntity for Forex trading success?
I've developed a simple set of rules to follow when evaluating a Forex Trading method, course, system or program and today I want to share them with you.
First and foremost, any Forex trading method you consider must be complete. By complete, I mean the Forex trading method must teach you the following:
1. The precise conditions under which you can consider a Forex trade to be entered into. These are known as the "setup" conditions and refer to the technical indications (usually) that a Forex trade possibility exists.
2. The exact point at which you would enter into a Forex trade (price). This refers to the Entry Point (or Entry Rules) and means the price at which a Forex trade would be executed.
3. Rules for establishing initial and ongoing Stop loss marks for an open Forex trade. As part of Risk Management, it is imperative, especially in Forex, to have Stop Losses ALWAYS in place. If a Forex trading method or Forex trading system does not teach or define these, you should abandon it -- without effective stop loss management you can be easily wiped out in a single Forex trade should the Forex market move against you.
4. The exact points and an effective strategy for exiting a Forex trade. Unlike stocks, you will rarely, if ever, find yourself holding a Forex pair position in the Forex markets for extended periods of time. Therefore, it is also important that a method teach you a strategy for exiting a Forex trade once that trade has become profitable.
Combined, these four elements will help you to eliminate chance by streamlining your Forex trading decision making process. Without any of these, no forex trading method, system or program should be considered because in each individual case, forex traders will be exposed to steep losses or taking poor Forex positions. Keep in mind, not every setup will execute into a Forex trade, nor should every Forex trade be taken. Combined, these rules will help to protect you both in evaluating a method for its use and in executing the method when trading Forex.
Forex Trading Methods: More Keys to a good method (Part 2.)
Forex trading is littered with methods, systems and automated programs -- the challenge is finding the right one for you. IN our recent series we covered several of the keys to idenitfying a good trading method. Today, we want to expand on that list.
First, a good trading method will avoid using too many technical indicators, or, avoid using the wrong technical indicators. The importance here is simplicity. Any method that weighs a forex trader down with too many indicators is more likely to confuse the forex trader, or, create conflicting trade potential.
So one key to a good method is the use of a few indicators which together can identify a strong trade opportunity. We have found it rarely requires more than 3 or 4 indicators working together to accomplish this. If a forex trading method is using more than that, forex traders should be cautious.
As well, any method should not be 100% mechanical. By mechanical, we mean no room for market interpretation. A good trading method will allow the forex trader the flexibility to see the larger picture - for example, is a forex pair in an extended downtrend? If so, is now the right time to buy an uptrend? A mechanical system may 'signal' buy - but a forex trader who doesn't apply the bigger picture or direct interpretation of what's happening in the market may blindly follow such signals and be at risk of significant loss.
A good method should use simple indicators to identify a trending forex pair, and use them in such a way to provide higher probability profit potential and lower risk.
Last, a good forex trading method should provide objective rules that help the forex trader establish trading discipline. On discipline, we're referring to the actions of trading -- buying, selling, setting stops, etc. If too many decisions are left to the forex trader, they are too likely to be indecisive, afraid or unable to pull the trigger on their trading actions. Therefore it is imperative that the rules of a trading method be simple and easy to follow, but allow for some interpretation about entering a trade.
With these additional keys, a forex trading method is more likely to provide a successful trading experience for the forex trader.
Forex Trading Methods: What makes a trading method "good"? Risk Management
I want to continue the discussion on how to find the right trading method for Forex trading. Previously, I shared that for any Forex trading method to be considered, it must be a complete method (insert link to previous article).
Today, I want to add to that by talking about risk management. This is perhaps the area where 95% of Forex traders make mistakes and lose money. Managing risk is about reducing your losses AND about protecting trade capital by employing specific strategies to accomplish each of these simultaneously.
What do I mean by that and why is it important?
First, most Forex traders make simple trading mistakes: they take too large of a position and expose themselves to serious and steep losses should the markets move against them. Second, they fail to protect their ENTIRE account by allowing ONE trade to put their full account balance at risk.
Here's a quick and perhaps extreme example:
Suppose a forex trader has a $10,000 account balance. The forex trader takes a 5 standard lot forex trade on the EUR/USD pair. The forex trader now has at least $5,000 'margin' at risk (or 50% or more of the forex trader's account balance).
For every 1 point that this forex trade moves against the forex trader, the trader loses 1/2% of the total account balance. At first glance, that may not seem like a steep loss. However, should the Forex trade move a total of 50 pips against the Forex trader, and the trader subsequently exits the position, the forex trader's total loss would be an INCREDIBLE $2,500! (25% of the trader's account balance). This is poor risk management and it frequently leads to complete wipeouts of Forex trading accounts.
How did we calculate that loss? 1 pip for the EUR/USD pair is equal to $10 (on a standard lot trade). A 50 pip loss equals a monetary loss of $500; and remember our example forex trader had traded 5 standard lots -- for a whopping loss of $2,500!
Instead, any trading method should teach you very specific guidelines for incorporating money management and risk management into every forex trade you take.
Money Management should involve the distribution of a forex account among the various trades a forex trader takes. For example, forex traders should never trade their entire account on a single trade, and should rarely have more than a few open positions. By utilizing multiple positions, the forex trader distributes the risk among each of the forex trades they have taken.
Risk management should involve the maximum risk in any SINGLE Forex trade, and should limit the impact of a losing Forex trade on the trader's account balance.
Here are two quick examples:
Money Management: A theoretical forex trader takes 4 separate one lot trades on four separate pairs. Assuming here that each of the pairs have a pip value of $10 on a standard lot, then the total amount of the account being margined across all four trades is about 40% (it may be higher depending upon the actual pairs traded. With proper stop loss management, however, in conjunction with risk management, it is UNLIKELY that the forex trader would incur a complete 40% loss.
Carrying forward to risk management: In each of the theoretical forex trades above, the forex trader risks no more than 2% of the trader's total account balance on each forex trade. That means a maximum loss of $200 per forex pair traded if ALL FOUR trades are stopped out. Total loss in this case would be $800 -- a much more recoverable scenario than the $2500 in the first forex trade example.
Furthermore, Risk Management has the capacity to make loss recovery easier. For example, in the first case, where the Forex trader lost $2500, the trader would need a nearly 250% gain on their next trade to recover the lost value on the first trade.
In the second example, however, the forex trader would need only an 8% gain.
A second part of Risk Management not typically discussed in poor trading methods is protecting gains. Though this begins as a discussion on Exit Strategy rules, it is also an element of risk management. Once a forex trade turns profitable, it is imperative that the forex trader manage the gains with smart stop loss management. The worst thing a forex trader can do is allow a profitable position to reverse and become a losing position. Thus, managing risk extends to the protection of gains on a forex trade, just as it does protecting against deep losses on a forex trade.
Therefore, in considering any trading method for use in your Forex trading, you must ensure that risk management is not only discussed, but clearly explained in conjunction with the use of the trading method. If risk management is not present, unclear, or not specific to the trading method, you should avoid using that trading method.
Forex Trading Methods: What makes a trading method "good"? Technical Analysis
In my last articles, I shared that for any Forex trading method to be considered, it must be first, a complete method (insert link to previous article) and second, it must teach specific risk management rules. Today's article on how to find the right trading method for Forex trading revolves around Technical Analysis. I believe the best Forex trading methods are based on technical analysis, without being 100% mechanical or automated.
As you already are aware, there are two primary forces acting in the Forex markets: fundamental data, which include such indicators as balance of trade data, money supply, interest rates, economic and financial reports, etc.; and technical data, which include such indicators as moving averages, average directional movement, stochastics, etc.
So, why should a forex trading method be focused on technical indicators?
First, attempting to trade on fundamental data requires you to be available on a real-time bases at whatever hour of the day or night that the news impacts the markets, and, you must be able to act on that news before (predictive) or at the instant thousands of other forex traders do (reactive), otherwise, you will have missed your opportunity.
Trading on fundamentals, as well, is less about the actual data itself and more about the market's reaction to that data.
Technical analysis, however, allows the trader more time to make a smart decision. Utilizing technical indicators means the fundamentals are already reflected in the price of the market at any given instant.
While this means you are working more often with slightly lagging indicators, the advantages to using a forex trading method based on technical analysis mean that you spend less time identifying potential trades and when you have identified a trend and look to enter a trade, you have much more data to support the trend's existence than if you are simply trading on the 'news'.
Furthermore, by using technical analysis and applying it through a trading method, you can trade the markets on your own terms, when you want to trade and how you want to trade them, without needing to grasp the minute details of what fundamental reports 'really' mean.
MATERIAL CONNECTION DISCLOSURE
You should assume that "Make Serious Money Trading" has an affiliate relationship and/or another material connection to the providers of goods and services mentioned on this website and may be compensated when you purchase from a provider. You should always perform due diligence before buying goods or services from anyone via the Internet or offline.
It makes my blood boil when all people think about is being safe! There is no such luxury so grow up! There is risk management and I suggest you employ risk management for the safety of your capital. Protect your capital sure..by getting the right education. How do you know what's best? That's the tricky part!
Just because someone succeeded with program X does not mean that if you buy it you will achieve the same result. So when you hear of people making millions just remember you are not them! You may not achieve those results.
Of importance here is forex robots. Who the hell knows whether you will double your money? You must suck it and see..you could fail miserably, lose all your money and become destitute.
From now on check what people are saying. If they tell you you will double your money run away!
■Keys to a Good Trading Method p1
■Keys to a Good Trading Method p2
■Risk Management
■Technical Analysis
If you are reading as I type then patience - I'm typing as fast as I can. You'll soon see the links above.
Now at the moment I've been looking at Bob's Forex Classroom and "Flexible Forex" Method.
Bob is not only a forex expert he is also a financial commentator. Is he any good? God knows! He tells us he started as a truck driver! Now he not only trades financial markets he also is a commentator.
Look, this is the way I see it..suck it and see. If you have doubts put it to the test. Take personal responsibility for your success and mistakes. There are no easy answers and why would I tell you one is better than the other?
Bob offers the personal mentor approach - if you like that then try that out. You see when money is at stake it's very hard for me to tell you to do it - that has to come from you.
Forex Trading Methods: What makes a trading method "good"?(Part 1.)
Today I want to take a few minutes to talk about Forex trading methods, because we are constantly bombarded with new methods or systems almost daily, and I believe traders have little chance of being able to identify the right ones to use, the best performing or the most educational. With so many methods, systems and automated programs, how do you select the one that is best for you, or the one that gives you the best opportuntity for Forex trading success?
I've developed a simple set of rules to follow when evaluating a Forex Trading method, course, system or program and today I want to share them with you.
First and foremost, any Forex trading method you consider must be complete. By complete, I mean the Forex trading method must teach you the following:
1. The precise conditions under which you can consider a Forex trade to be entered into. These are known as the "setup" conditions and refer to the technical indications (usually) that a Forex trade possibility exists.
2. The exact point at which you would enter into a Forex trade (price). This refers to the Entry Point (or Entry Rules) and means the price at which a Forex trade would be executed.
3. Rules for establishing initial and ongoing Stop loss marks for an open Forex trade. As part of Risk Management, it is imperative, especially in Forex, to have Stop Losses ALWAYS in place. If a Forex trading method or Forex trading system does not teach or define these, you should abandon it -- without effective stop loss management you can be easily wiped out in a single Forex trade should the Forex market move against you.
4. The exact points and an effective strategy for exiting a Forex trade. Unlike stocks, you will rarely, if ever, find yourself holding a Forex pair position in the Forex markets for extended periods of time. Therefore, it is also important that a method teach you a strategy for exiting a Forex trade once that trade has become profitable.
Combined, these four elements will help you to eliminate chance by streamlining your Forex trading decision making process. Without any of these, no forex trading method, system or program should be considered because in each individual case, forex traders will be exposed to steep losses or taking poor Forex positions. Keep in mind, not every setup will execute into a Forex trade, nor should every Forex trade be taken. Combined, these rules will help to protect you both in evaluating a method for its use and in executing the method when trading Forex.
Forex Trading Methods: More Keys to a good method (Part 2.)
Forex trading is littered with methods, systems and automated programs -- the challenge is finding the right one for you. IN our recent series we covered several of the keys to idenitfying a good trading method. Today, we want to expand on that list.
First, a good trading method will avoid using too many technical indicators, or, avoid using the wrong technical indicators. The importance here is simplicity. Any method that weighs a forex trader down with too many indicators is more likely to confuse the forex trader, or, create conflicting trade potential.
So one key to a good method is the use of a few indicators which together can identify a strong trade opportunity. We have found it rarely requires more than 3 or 4 indicators working together to accomplish this. If a forex trading method is using more than that, forex traders should be cautious.
As well, any method should not be 100% mechanical. By mechanical, we mean no room for market interpretation. A good trading method will allow the forex trader the flexibility to see the larger picture - for example, is a forex pair in an extended downtrend? If so, is now the right time to buy an uptrend? A mechanical system may 'signal' buy - but a forex trader who doesn't apply the bigger picture or direct interpretation of what's happening in the market may blindly follow such signals and be at risk of significant loss.
A good method should use simple indicators to identify a trending forex pair, and use them in such a way to provide higher probability profit potential and lower risk.
Last, a good forex trading method should provide objective rules that help the forex trader establish trading discipline. On discipline, we're referring to the actions of trading -- buying, selling, setting stops, etc. If too many decisions are left to the forex trader, they are too likely to be indecisive, afraid or unable to pull the trigger on their trading actions. Therefore it is imperative that the rules of a trading method be simple and easy to follow, but allow for some interpretation about entering a trade.
With these additional keys, a forex trading method is more likely to provide a successful trading experience for the forex trader.
Forex Trading Methods: What makes a trading method "good"? Risk Management
I want to continue the discussion on how to find the right trading method for Forex trading. Previously, I shared that for any Forex trading method to be considered, it must be a complete method (insert link to previous article).
Today, I want to add to that by talking about risk management. This is perhaps the area where 95% of Forex traders make mistakes and lose money. Managing risk is about reducing your losses AND about protecting trade capital by employing specific strategies to accomplish each of these simultaneously.
What do I mean by that and why is it important?
First, most Forex traders make simple trading mistakes: they take too large of a position and expose themselves to serious and steep losses should the markets move against them. Second, they fail to protect their ENTIRE account by allowing ONE trade to put their full account balance at risk.
Here's a quick and perhaps extreme example:
Suppose a forex trader has a $10,000 account balance. The forex trader takes a 5 standard lot forex trade on the EUR/USD pair. The forex trader now has at least $5,000 'margin' at risk (or 50% or more of the forex trader's account balance).
For every 1 point that this forex trade moves against the forex trader, the trader loses 1/2% of the total account balance. At first glance, that may not seem like a steep loss. However, should the Forex trade move a total of 50 pips against the Forex trader, and the trader subsequently exits the position, the forex trader's total loss would be an INCREDIBLE $2,500! (25% of the trader's account balance). This is poor risk management and it frequently leads to complete wipeouts of Forex trading accounts.
How did we calculate that loss? 1 pip for the EUR/USD pair is equal to $10 (on a standard lot trade). A 50 pip loss equals a monetary loss of $500; and remember our example forex trader had traded 5 standard lots -- for a whopping loss of $2,500!
Instead, any trading method should teach you very specific guidelines for incorporating money management and risk management into every forex trade you take.
Money Management should involve the distribution of a forex account among the various trades a forex trader takes. For example, forex traders should never trade their entire account on a single trade, and should rarely have more than a few open positions. By utilizing multiple positions, the forex trader distributes the risk among each of the forex trades they have taken.
Risk management should involve the maximum risk in any SINGLE Forex trade, and should limit the impact of a losing Forex trade on the trader's account balance.
Here are two quick examples:
Money Management: A theoretical forex trader takes 4 separate one lot trades on four separate pairs. Assuming here that each of the pairs have a pip value of $10 on a standard lot, then the total amount of the account being margined across all four trades is about 40% (it may be higher depending upon the actual pairs traded. With proper stop loss management, however, in conjunction with risk management, it is UNLIKELY that the forex trader would incur a complete 40% loss.
Carrying forward to risk management: In each of the theoretical forex trades above, the forex trader risks no more than 2% of the trader's total account balance on each forex trade. That means a maximum loss of $200 per forex pair traded if ALL FOUR trades are stopped out. Total loss in this case would be $800 -- a much more recoverable scenario than the $2500 in the first forex trade example.
Furthermore, Risk Management has the capacity to make loss recovery easier. For example, in the first case, where the Forex trader lost $2500, the trader would need a nearly 250% gain on their next trade to recover the lost value on the first trade.
In the second example, however, the forex trader would need only an 8% gain.
A second part of Risk Management not typically discussed in poor trading methods is protecting gains. Though this begins as a discussion on Exit Strategy rules, it is also an element of risk management. Once a forex trade turns profitable, it is imperative that the forex trader manage the gains with smart stop loss management. The worst thing a forex trader can do is allow a profitable position to reverse and become a losing position. Thus, managing risk extends to the protection of gains on a forex trade, just as it does protecting against deep losses on a forex trade.
Therefore, in considering any trading method for use in your Forex trading, you must ensure that risk management is not only discussed, but clearly explained in conjunction with the use of the trading method. If risk management is not present, unclear, or not specific to the trading method, you should avoid using that trading method.
Forex Trading Methods: What makes a trading method "good"? Technical Analysis
In my last articles, I shared that for any Forex trading method to be considered, it must be first, a complete method (insert link to previous article) and second, it must teach specific risk management rules. Today's article on how to find the right trading method for Forex trading revolves around Technical Analysis. I believe the best Forex trading methods are based on technical analysis, without being 100% mechanical or automated.
As you already are aware, there are two primary forces acting in the Forex markets: fundamental data, which include such indicators as balance of trade data, money supply, interest rates, economic and financial reports, etc.; and technical data, which include such indicators as moving averages, average directional movement, stochastics, etc.
So, why should a forex trading method be focused on technical indicators?
First, attempting to trade on fundamental data requires you to be available on a real-time bases at whatever hour of the day or night that the news impacts the markets, and, you must be able to act on that news before (predictive) or at the instant thousands of other forex traders do (reactive), otherwise, you will have missed your opportunity.
Trading on fundamentals, as well, is less about the actual data itself and more about the market's reaction to that data.
Technical analysis, however, allows the trader more time to make a smart decision. Utilizing technical indicators means the fundamentals are already reflected in the price of the market at any given instant.
While this means you are working more often with slightly lagging indicators, the advantages to using a forex trading method based on technical analysis mean that you spend less time identifying potential trades and when you have identified a trend and look to enter a trade, you have much more data to support the trend's existence than if you are simply trading on the 'news'.
Furthermore, by using technical analysis and applying it through a trading method, you can trade the markets on your own terms, when you want to trade and how you want to trade them, without needing to grasp the minute details of what fundamental reports 'really' mean.
MATERIAL CONNECTION DISCLOSURE
You should assume that "Make Serious Money Trading" has an affiliate relationship and/or another material connection to the providers of goods and services mentioned on this website and may be compensated when you purchase from a provider. You should always perform due diligence before buying goods or services from anyone via the Internet or offline.
posted by Learning Coach | 9:25 PM
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