“Weird” Events Are Frustrating Forex Traders

Frequent guest blogger, Bill Poulos, presents his latest article below which looks deep into a number of major issues within the Forex markets, as well as provides a number of excellent tips for you to use on a daily basis. Bill has recently released part 1 (of 3) of his new Forex training videos which focus on training you to succeed. As always he’s excited to read and respond to your comments so let’s not let him down.
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Recent events have brought the dollar back into focus – both as it continues to slide, and as it made an unusual, event-related rebound last week. Because of that, many traders, my students included asked me for my take on why Forex traders are struggling right now.
I believe there are three reasons that are deeply affecting traders of foreign currencies. They are:
• Overexposure on trades
• Little or no attention to risk management
• Stuck in a black hole cycle of dependency
Let me elaborate:
Overexposure on trades
Too many forex traders frequently turn a profit into a loss, or worse yet, a small loss into a bigger loss.
How does this happen?
I believe first that traders right now are desperate for profits. The markets (whether currencies or equities) are still unsettled and acting in unorthodox (or uncharted) ways. Consider the dollar’s surprise rebound upon the news of the Dubai debt collapse on Friday. Or, that market pros are still unable to explain the continued rise in the Dow and S&P despite the lack of strengthening fundamental data.
Combined, these ‘weird’ events are wreaking havoc with many traders, especially in the currency markets.
That desperation is causing many traders to stay in trades LONGER than they should. Thus they are overexposing themselves on their trades. This is true of both day traders and end of day traders – they’re hoping for a move to go in their favor, rather than trusting their trading rules to tell them what to do. And that is a recipe for trading disaster.
Forex Tip #1: If a trade moves against you, get out of the trade. Whatever the original premise for that particular trade event was, it no longer exists, and therefore, you are no longer in a valid trade setup.
The most difficult step to take as a trader is to accept that loss and move on – I know, because I’ve done it, too. No trader is immune to that reaction.
But the longer you hold a loser, the greater your loss will likely become – and that’s a bad thing.
Risk Management
For the past ten years, I’ve consistently reminded my students of the importance of risk management and recently began teaching a concept I call a ‘Free Trade Strategy’. At its simplest, the concept is to move your stop loss to BREAK EVEN as soon as you can. This does require some learning and timing, but once many of my students began to practice it, they instantly had a stronger feel for ‘when’ to do that.
Why is this important?
Aside from accepting a small loss, traders will, I believe, frequently have an opportunity to either get out of a trade at break even or slightly better with more aggressive risk management tactics when the markets move against their position.
The sheer volume of the foreign currency markets demands that higher aggressiveness – more traders, more money, and more volatility are controlling the markets today. Trends can change too fast and if traders aren’t taking simple steps to protect themselves, they’ll too often end up on the losing side of a trade.
Day traders especially must walk a fine line balanced between profit-hunting and risk protection – it’s not an easy task. So while the idea may not be new, I just don’t see enough traders taking action to protect themselves in this way.
Here’s a quick example:
If you’ve entered the EUR/USD at (for simplicity) 1.4000, on a long position, with an initial stop loss at 1.3980 which of the following steps would you take if the market moved UP 20 pips to 1.4020:
- No action, let the market run
- Sell out and take the 20 pips gain
- Sell half the position at 1.4020, move the stop loss to 1.4010 and let the remainder run
- Move the stop loss to 1.4010, let the market run
Do you know what most of the traders I talk to do?
Nothing. They let the market run. Any of the last three options locks in a profit – and that’s a GOOD thing. Is it a small profit? Yes. But if a trader selected option 1, and the market turned and hit their stop loss, they’ve now lost 20 pips, versus these results:
- Option 2: 20 pip gain
- Option 3: 30 pip gain
- Option 4: 10 pip gain
(I’m assuming spreads in these gains for mathematical simplicity; it’s more important to draw the point at this juncture).
As you can see, it’s far better to grab a gain than to let a trade turn into a loss. Now, here’s the critical part – I get a lot of feedback about how ‘easy’ that looks…and a lot of admissions that traders just don’t do it.
Folks, these markets are too quick for many of us – if you don’t have the time to dedicate to managing your trades in this way, you shouldn’t be in the markets. If you’re serious about improving your Forex trading, however, learn to accept smaller gains from time to time. They are far better than constant losses, or once-winning trades that turned into losing trades. It’s your choice what to do.
The Black Hole
I’ve stumbled onto this concept only recently and it was a real eye-opener. It’s one of those things that you ‘sense’ is out there, but can’t quite put your finger on it. Not until now that is.
I believe most of the forex market components, be they system sellers, brokers, news outlets are creating a cycle of dependency for traders. That is, traders come to believe they cannot function without these things.
This is still a major trend that has been taking place in Forex over the past year; a trend which I believe will continue to grow and is only likely to STEAL your money from you.
If you’ve been curious about trading Forex, or if you’ve been attempting to trade Forex with little to no success YOU will be the target of this trend.
What am I talking about?
Forex robots - or - automated trading systems that continue to flood the market right now. You’ve probably seen them or heard about them, and you can easily pick them up for about $97…here are a couple of terrific examples, dedicated to the dependent traders:
The creators of these systems will tell you time and time again they have “cracked” some imaginary Forex code, or they are former “insiders” or they’re going to “reveal” how they “legally rob the big banks”.
And naturally, because they have such big hearts, they want to share these secrets with you.
Now I’d like to share a secret with you:
They don’t work.
Truth is, we’d all like to find that secret program or code that never fails to make money in the markets, whether we’re trading Forex or Stocks or Options, and, we’d want a system that wouldn’t require a single moment of our time — just load it up and watch the deposits rack up in our bank account.
Do you honestly believe this happens?
If you take nothing else away from the recent disaster on Wall Street, learn from this: Major investment houses lost billions of dollars last year — two, Bear Stearns and Lehman Brothers, went belly-up. While it’s true that their demise was caused in the real estate and derivatives markets…don’t you think that if such an amazing, effective and profitable program existed (one that never failed to make money) that they would have been using it?
Major banks around the world trade foreign currencies — how is it that many of them are also recording record losses? Shouldn’t they be profiting mightily from these ‘expert’ programs? Wouldn’t the capital they had to bring to bear have created huge sums of money for them?
In a word: No.
If such a ‘perfect’ never-lose system existed (which in a financial sense is really a cross between the Holy Grail and Utopia) our markets would always move systematically in the same direction; and, everybody would be using it.
Obviously that isn’t the case. The reason is simple: automated systems fail after constant, extended exposure to the Forex markets.
Three key reasons these systems fail:
- Automated systems respond to technical indicators in the market without regard to what drives the markets.
- They are designed for extreme short term trading and are easily wiped out when markets move against them. The best profits are actually made in longer moves (not 10 minute moves).
- Robots are robots and not human beings. Markets are driven by psychological factors more so than any other. Technical and fundamental indicators and their impact on a Forex pair or stock issue (or any other instrument) are NOTHING MORE THAN the psychological RESPONSE to current and future conditions. Robots cannot account for those factors and cannot respond to fast changing emotional indicators or responses (fear and greed).
By the time they do, most traders have been wiped out.
What REALLY happens to traders who buy automated systems is this:
They buy one. It works for a few days or weeks, and then it fails — fails again and fails again and the trader becomes frustrated and jumps to another black box program, which may work for a short period, but it, too, then fails. So the trader again jumps to another automated program … see the pattern? The trader never realizes that the systems are not a fault.
The trader is at fault. And he or she becomes dependent upon such systems and continues to hunt for the elusive Holy Grail — they fall into that Black Hole of dependency.
Let’s take a quick look at something –
If this magical software really could turn $200 into $30K in a week…
…that means the second week it can take that $30K and turn it into $4.5 million. Then in week three it can take that $4.5 million and turn it into a whopping $675 million.
I could choose to let it ride one more week to create numbers so big neither you nor I could even comprehend them… but hey, why be greedy? (Actually at those rates, you could corner the USD market in about 7 weeks.)
Here’s the real ‘insider’s code’ — the true ’secret weapon’ –
Your brain.
Think about this: nobody has yet created a computer that can emulate the human brain (oh, they’ve come close…in chess). We can process an incredible amount of data from multiple sources in ways a computer cannot — AND, we can apply a psychological understanding of our response to that data, which a computer cannot yet do.
That’s why black box systems don’t work over the long haul. Sure, a system can be curve-fitted for back-testing purposes — but as we all know, past performance is not indicative of future returns.
So what does work?
Simply put: I believe Trading Methods work. Automated Systems do not. Methods allow you to pull together a stream of data (from simple to complex) and draw a more robust and complete picture. A trading method allows the trader to remain IN CONTROL of his or her own money at all times. A trading system requires a trader to be OUT OF CONTROL.
If you don’t have control of your money, you are at risk of total loss. Turning your Forex trading over to an automated system means no control.
Learn from different trading methods that teach you how to trade Forex (or any market) — not systems that do it for you. You’ll remain in control of your trading activities, be able to maintain control of your exposure to the markets, manage your risk appropriately and, I believe you’ll be surprised at how quickly you can outperform your own expectations.
Good Trading to all,
Bill Poulos

THE FEAR OF THE UNKNOWN...

I got myself thinking after a conversation i had with someone close to me. In our conversation i realised how many people have missed the road, the person in question inclusive. Not too many possess the required ingrdients to venture into the unknown. Some are bewildered with their past experiences, some never even experienced anything but because their mind is so pre-occupied with so many "ifs", so they fail to take risk.

Well, one sure thing i know's that God himself took the risk to create us in His own image, do we say He didn't know what to become of man after creation, i'm very sure he knows the risks involved.
One thing that continually debare us from reaching our zenith point is fear and will continue to separate us from our glory the more we allow it.
Fear is that thief that steal away from us our self confidence. We loose balance and fail to achieve. Just like i was listening to one of pastor Chris teachings on the impact of the holy spirit on human body, he was talking about faith and made reference to how many have allowed the spirit of fear to dictate their life. It comes under disguise of "IFs"... What if this... What if that... What if what... Stuffs like that.
Fear would only stop us from achieving what we are suppose to, as such unproductive. Fear is seeing failure before action. Fear is doubt. Fear is impossibility.
If Abraham Lincoln was afraid, he wouldn't undertake all what he did despite failling consecutively for many years before eventually becoming the number one citizen of United States.
If the Wright brothers were afraid, we wouldn't have aircrafts today.
If Bill Gate was afraid, we wouldn't have witnessed so much technological advancement we today have.
If skyscrapers builders were afraid of height, they wouldn't have had them built.
If African fathers and heroes were afraid of death, we would still be enslaved by the so-called whites, probably.

Fear doesn't achieve anything but destruction. So build up your courage, be tenacious, say no to that crises staring you in the face. Believe nothing can stop you except yourself through fear. Go into that unknown journey with the mindset of a winner and even if you fail you would still be better off than not trying at all. Give no excuse in your life, take charge of your life be responsible to and for yourself and you will see yourself achieving the extraordinary. Everyone has his/her unique selling point (USP) which gives us no excuse to achieve. Discover this in you and use it to better your lots. Remember you have no reason not to succeed.

13 Quick Tips for Forex Trading Success

#13: Back-test, but be logical.  Back-testing a given strategy can prove priceless when done correctly, but remember to take the results with a grain of salt.  Be especially wary of trade results shown on websites claiming astronomical gains since most of these results simply are not attainable under live market conditions for many reasons.

#12: Always analyze similar pairs in the forex market before placing any trade.  Similar pairs can be defined as any tradable currency pair containing 1 of the 2 currencies you are about to trade.  For example, by looking at no less than 4 US Dollar pairs before trading, one can determine if the pair will be moving based mostly on the US Dollar or the opposing currency.  This can easily be done with the Japanese Yen and others as well.

#11: Be wary of trade ideas coming from other individuals or groups in the many online trading forums, blogs, or chat rooms.  Only evaluate trade recommendations from trusted parties who have a proven track record of success.  Remember this is your business, and to have a consistently profitable business, you need to execute reproducible trades based on your own strategies and ideals.  Don’t build your house on sandy soil; lay a good foundation of continuing education and the rewards will come many times over.

#10: Longer-term charts (ie. monthly, weekly, daily) have logarithmically more importance upon technical analysis than shorter-term charts (ie. 1 minute, 5 minute, 15 minute).  For example, a support or resistance level on a daily chart will hold much more importance than a similar line than a 5 minute chart.  Most reputable traders will recommend trading on longer term charts, especially for those who are new to trading or have limited time to trade due to other commitments. Find your comfort zone and stick with it until you become consistent; even a slight edge in this market can set you free financially.

#9: Do not use any trading robots, expert advisors, or other “black box” automated trading software until you learn how to trade on your own first.  Educating yourself is the key to success; deep roots will equal a tall tree that can weather any storm.

#8: Trade with a friend, group, partner, or mentor when you begin your journey of learning the forex market.  Many of the glamorous ideologies of forex traders showered in riches come from high-risk, difficult to reproduce strategies.  The way to often become most profitable in this market is to have consistency, be disciplined, and to repeat this over and over and over again.  Forex trading, done properly, is not intended to be flashy.

#7: Be sure to use a forex broker with great service and support, along with low spreads.  With the recent regulations we are much more protected against possible broker-related issues, but many traders are still paying much higher spreads than average when placing trades.  Do your research on forex brokers to analyze not only the safe, financially sound companies, but also those that allow the lowest fees.  Paying the bid/ask spread in the forex market is just one of the costs of doing business, but with the extreme level of competition in today’s marketplace there is no need to accept paying even 1 pip more than you should elsewhere.

#6: Have a backup power supply and internet access available at all times when you are trading.  This can be as simple as a battery-powered laptop with a wireless access card.  Don’t rely solely on the phone number of your broker as if there is a company-related trading issue; their lines will likely be slammed busy.  Bottom line: be sure to have some redundancy incorporated into your trading plan; treat this like a true business and it will reward you like one.

#5: Break your trade order into 2 or 3 smaller orders to give yourself more control, both actual and psychological.  As most forex brokers do not charge commissions to trade this market, they earn their fees through the bid/ask spread; you have no extra cost of placing 3 small orders rather than 1 single large one.  Doing this allows you to place tighter stops on some orders, while adjusting the profit taking on others.  Closing part of an order will give the same effect, but by having a few live at the same time, it is easier psychologically to set them and let them run.

#4: Trading profit comes from 1/3 psychology, 1/3 money management, and 1/3 trading strategy.  It’s easy to get caught up in the “next best thing” or the potential of finding a “holy grail” system, but remember that most of your profits come from learning the things that are not quite as exciting.  Trading psychology and money management are critical to any success in the forex market; without them you will be grouped with the 95% of those who lose their capital time and time again.  Money management is the key to unleashing potential for compounding profits; it is an absolute necessity to learn.  Do your research on the most highly coveted trading psychology texts and dig in ASAP.

#3: Be aware of world news releases.  Even if you prefer to not trade news events, be certain to know when the major events are planned to take place.  As a second line of asset protection to your business, a good live news feed is also recommended when you are trading.  Knowing what is going on in the world is one of the most critical keys to forex trading success; without this knowledge, your chances of success are limited.

#2: Always use a well planned stop loss when placing any trade and never, ever, move it further from your entry point for any reason.  Although it is a simple rule to put on paper, it’s often difficult to follow…always follow this rule.

#1: Always trade any new strategy in a demo account before going live in a real money account.  Many traders simply become gamblers by placing trades live without the proper testing and education necessary to place the odds in their favor.  It is also all too common for traders to have excellent results in a demo account or with paper trading, then lose all their capital once they go live in a real money account.  Be realistic and treat your demo trades as real funds; that is the only way for a demo account to work over time.  If you begin to have a winning pattern in the demo account, be 100% certain to follow all the rules exactly in your live account.  Often, a good transition is to begin with a demo account, then go to a live mini or micro account where very little capital is risked before trading your regular sized account.  Many times one can make the transition in trading psychology from demo to live when taking the added step of testing the proven system by trading very small lot sizes first.

Although these few trading “nuggets” are only the tip of the iceberg, I hope that they can pique your interest enough to warrant further research and attention.  I wish you the best in your trading!

forex training video - its NEW

At last myfortunesfx is out with its long overdue training resource, Forex Training Video. This is consequent upon our realization that people are not adequately equipped before they venture into trading. They are provided insufficient information and sometimes inaccurate information so they go in and meet their Waterloo.
We should understand that the level of information at our disposal goes along way in determining our success in this business. That is one of the reasons we have created the blog to give info out freely. Besides, we also want people to learn the tricks of Forex, what the professionals do to claim what they claim. As such, the birth of "THE PIPSOLOGIST". With this package you can learn how to join the 10% successful traders. because all what we discussed in the video are what we do to pick our fortunes - pips

Attempts were made to load the previews here on this blog but was pretty difficult though you can view the previews following this link:

http://www.youtube.com/watch?v=ctyhBQoCM7Q

or you check us out on facebook

If u care to have the video, just contact us via myfortunesfx@yahoo.co.uk or shoggyben2004@yahoo.com or call 2348069586010, 2348029141168

myfortunesfx... trading the art and heart of forex at ease.

Bollinger Bands 101 – How To Measure Volatility

One reason I prefer technical over fundamental analysis is that it is more visually appealing. By quickly glancing at a stock’s chart, I can tell whether I want to buy it, sell it, or what the price targets are.

I look at stock trading as an art, and like any craft we must constantly tweak and perfect it to achieve the most optimal outcome. As a die-hard user of technical analysis, I am always trying out different indicators, seeing which ones work for my trading strategy, and dropping the ones that do not. I typically like to keep my charts clean; otherwise, I get lost and lose focus.

Note: Before utilizing any new indicators or patterns within your real-time trading strategy, be sure to have tested the signals you generate from this new analysis. You can do this by either using a back-testing software or just simple manual tracking of stock prices based on your analysis.

The analysis tools I want to share with you today are called Bollinger Bands. They are essentially used to measure volatility of a certain security relative towards previous trends. Generally they appear as an overlay to your chart, and trace the current range of the stock.

Bollinger Bands consists of 3 parts (all lines):

• The middle band, which is a simple moving average of a period of you specify. Usually 20
• The upper band, which is your period + N standard deviations. Usually 20 + 2 STD
• The lower band, which is your period – N standard deviations. Usually 20 – 2 STD

Typically the default value is usually a simple moving average period of 20 with a standard deviation of 2. For those none statisticians, 2 standard deviations cover about 95% of the range. Obviously, you can always tweak those numbers to match your trading strategy. Some traders even use exponential moving averages.

Just like any indicator the use of Bollinger Bands can be ambiguous. That is why it is important to test your conclusions before taking them to the real stage; however, the main purpose of these bands are to help you decide when a stock is at the high or low level of its average trading range. That being said, some people interpret the simple signals of selling when the price hits the upper band and buying when hitting the lower band. While that may work, you can probably get more accurate results when you use other indicators and factors (i.e. RSI, patterns) to confirm the move.

The key is to remember that Bollinger Bands measures volatility. During periods of low volatility, bands are narrow, and at periods of high volatility bands are obviously wider. You will also notice that these lines seem to act as support and resistance every now and then.

In the sample chart below, you will notice how the Bollinger Bands are narrow during June and then become wider in July, once the stock spikes higher. Finally, you can see that, in August, the bands are starting to become narrower, which could mean that the price will be flattening out and the previous upward trend push could be over.

So if you are looking for some indicator or overlay to measure the overall volatility of a security, then check our Bollinger Bands. They may seem confusing, but, once you actually see them in action yourself, they can blend very nicely into your trading strategy.

Online Forex Trading

Online FOREX trading is simply a mode of buying of one currency and selling of another. FOREX is just an acronym for foreign exchange. Currency is used to buy another. However, with the introduction of FOREX to the larger Nigerian community, notably four to five years ago, many people had been swindled off their fortunes. this is fabricated via unsophisticated trainings such as a-day training without follow-ups and professional guide, weekend training without proper tools to facilitates this and all kinds of promises which created in the people the notion that forex is a get-rich-quick scheme. we cannot divulge these much reasons why people are beginning to speak ill of this goldmine in day. we could go on and on. some people even promise unrealizable interest over their trading capital. all is nothing but half-baked forex traders/trainers. Ever since myfortunesfx had been given birth to, we have always worked out ways to redeem people who still have interest in the business. Forex is a profession and not untill it is seen as such, we will continue to deceive ourselves dashing the 'oyinbos' our treasures again just as our fore fathers did. Owing to this, those who care to have the nitty-gritty learned, we have a training video recorded from one of our online webinars. This was initially created to be viewed online but because we want you all to trade and be confident the way we are, we are giving you the opportunity to have this video downloaded to your system and you can watch even while offline. As if that wasn't enough, we have this training in a compatible CDs that you can play on any video playing machine apart from your computer system. Watch the intro here and if you like it request for further videos.