Forex for a trader
Having the ability to stick through drop forex

Having the ability to stick through drop forexForex Tutorial: How To Trade & Open A Forex Account. So, you think you are ready to trade? Make sure you read this section to learn how you can go about setting up a forex account so that you can start trading currencies. We'll also mention other factors that you should be aware of before you take this step. We will then discuss how to trade forex and the different types of orders that can be placed. Opening A Forex Brokerage Account Trading forex is similar to the equity market because individuals interested in trading need to open up a trading account. Like the equity market, each forex account and the services it provides differ, so it is important that you find the right one. Below we will talk about some of the factors that should be considered when selecting a forex account. Leverage Leverage is basically the ability to control large amounts of capital, using very little of your own capital; the higher the leverage, the higher the level of risk. The amount of leverage on an account differs depending on the account itself, but most use a factor of at least 50:1, with some being as high as 250:1. A leverage factor of 50:1 means that for every dollar you have in your account you control up to $50. For example, if a trader has $1,000 in his or her account, the broker will lend that person $50,000 to trade in the market. This leverage also makes your margin, or the amount you have to have in the account to trade a certain amount, very low. In equities, margin is usually at least 50%, while the leverage of 50:1 is equivalent to 2%. Leverage is seen as a major benefit of forex trading, as it allows you to make large gains with a small investment. However, leverage can also be an extreme negative if a trade moves against you because your losses also are amplified by the leverage. With this kind of leverage, there is the real possibility that you can lose more than you invested - although most firms have protective stops preventing an account from going negative. For this reason, it is vital that you remember this when opening an account and that when you determine your desired leverage you understand the risks involved. Commissions and Fees Another major benefit of forex accounts is that trading within them is done on a commission-free basis. This is unlike equity accounts, in which you pay the broker a fee for each trade. The reason for this is that you are dealing directly with market makers and do not have to go through other parties like brokers.

This may sound too good to be true, but rest assured that market makers are still making money each time you trade. Remember the bid and ask from the previous section? Each time a trade is made, it is the market makers that capture the spread between these two. Therefore, if the bidask for a foreign currency is 1.520050, the market maker captures the difference (50 basis points). If you are planning on opening a forex account, it is important to know that each firm has different spreads on foreign currency pairs traded through them. While they will often differ by only a few pips (0.0001), this can be meaningful if you trade a lot over time. So when opening an account make sure to find out the pip spread that it has on foreign currency pairs you are looking to trade. Other Factors There are a lot of differences between each forex firm and the accounts they offer, so it is important to review each before making a commitment. Each company will offer different levels of services and programs along with fees above and beyond actual trading costs. Also, due to the less regulated nature of the forex market, it is important to go with a reputable company. (For more information on what to look for when opening an account, read Wading Into The Currency Market . If you are not ready to open a "real money" account but want to try your hand at forex trading, read Demo Before You Dive In .) How to Trade Forex Now that you know some important factors to be aware of when opening a forex account, we will take a look at what exactly you can trade within that account. The two main ways to trade in the foreign currency market is the simple buying and selling of currency pairs, where you go long one currency and short another.

The second way is through the purchasing of derivatives that track the movements of a specific currency pair. Both of these techniques are highly similar to techniques in the equities market. The most common way is to simply buy and sell currency pairs, much in the same way most individuals buy and sell stocks. In this case, you are hoping the value of the pair itself changes in a favorable manner. If you go long a currency pair, you are hoping that the value of the pair increases. For example, let's say that you took a long position in the USDCAD pair - you will make money if the value of this pair goes up, and lose money if it falls. This pair rises when the U. S. dollar increases in value against the Canadian dollar, so it is a bet on the U. S. dollar. The other option is to use derivative products, such as options and futures, to profit from changes in the value of currencies. If you buy an option on a currency pair, you are gaining the right to purchase a currency pair at a set rate before a set point in time. A futures contract, on the other hand, creates the obligation to buy the currency at a set point in time. Both of these trading techniques are usually only used by more advanced traders, but it is important to at least be familiar with them.

(For more on this, try Getting Started in Forex Options and our tutorials, Option Spread Strategies and Options Basics Tutorial .) Types of Orders A trader looking to open a new position will likely use either a market order or a limit order. The incorporation of these order types remains the same as when they are used in the equity markets. A market order gives a forex trader the ability to obtain the currency at whatever exchange rate it is currently trading at in the market, while a limit order allows the trader to specify a certain entry price. (For a brief refresher of these orders, see The Basics of Order Entry .) Forex traders who already hold an open position may want to consider using a take-profit order to lock in a profit. Say, for example, that a trader is confident that the GBPUSD rate will reach 1.7800, but is not as sure that the rate could climb any higher. A trader could use a take-profit order, which would automatically close his or her position when the rate reaches 1.7800, locking in their profits. Another tool that can be used when traders hold open positions is the stop-loss order. This order allows traders to determine how much the rate can decline before the position is closed and further losses are accumulated. Therefore, if the GBPUSD rate begins to drop, an investor can place a stop-loss that will close the position (for example at 1.7787), in order to prevent any further losses. As you can see, the type of orders that you can enter in your forex trading account are similar to those found in equity accounts. Having a good understanding of these orders is critical before placing your first trade.

151 . wrayjustin Trading Pennies for Dollars FXMarketMaker Professional Trader Hot_Biscuits_ Models and Bottles spicy_pasta RichJG Financial Astrologer El_Huachinango MOD finance_student Prop Trader AutoModerator » the front page of the internet. and subscribe to one of thousands of communities. 1 , * nancmu. Want to add to the discussion? – deleted 3 4 5 1 (1 ) – deleted 2 3 4 1 (3 ) –nancmu S 0 1 2 1 (2 ) – deleted 1 2 3 1 (1 ) –nancmu S 0 1 2 1 (0 ) –keikor 2 3 4 1 (1 ) –nancmu S 0 1 2 1 (0 ) – deleted 1 2 3 1 (7 ) –Tride5 1 2 3 1 (3 ) –Tride5 1 2 3 1 (1 ) –nancmu S 0 1 2 1 (0 ) –nancmu S 0 1 2 1 (2 ) –Tride5 1 2 3 1 (1 ) –nancmu S 0 1 2 1 (0 ) –nancmu S 0 1 2 1 (0 ) – deleted 0 1 2 1 * (0 ) –thedreamed Live Trader 0 1 2 1 (2 ) –nancmu S 0 1 2 1 (1 ) –thedreamed Live Trader 0 1 2 1 (0 ) Reddit for iPhone Reddit for Android mobile website. , . © 2018 reddit . . REDDIT and the ALIEN Logo are registered trademarks of reddit inc. ? Rendered by PID 12683 on r2-app-000b824df88a82165 at 2018-08-26 01:12:18.629542+00:00 running b1939d2 country code: UA. How Gold Affects Currencies. Ah, the enduring appeal – and influence – of gold. Even though it is no longer used as a primary form of currency in developed nations, the yellow metal continues to have a strong impact on the value of those currencies.

Moreover, there is a strong correlation between its value and the strength of currencies trading on foreign exchanges. (For a quick primer, see "Gold: The Other Currency.") TUTORIAL: Commodities Introduction. To help illustrate this relationship between gold and foreign exchange trading, consider these five important features of the yellow stuff: 1. Gold was once used to back up fiat currencies. As early as the Byzantine Empire, gold was used to support fiat currencies – that is, those considered legal tender in their nation of origin. Gold was also used as the world reserve currency up through most of the 20 th century; the United States used the gold standard until 1971 when President Nixon discontinued it. (For more, see "The Gold Standard Revisited.") Until the gold standard was abandoned, countries couldn't simply print their fiat currencies ad nauseam; the paper money had to be backed up by equal amount of gold in their reserves (then, as now, countries kept supplies of gold bullion on hand). Although the gold standard has long fallen out of in the developed world, some economists feel we should return to it due to the volatility of the U. S. dollar and other currencies; they like that it limited the amount of money nations were allowed to print. 2. Gold is used to hedge against inflation. Investors typically buy large quantities of gold when their country is experiencing high levels of inflation.

The demand for gold increases during inflationary times due to its inherent value and limited supply. As it cannot be diluted, gold is able to retain value much better than other forms of currency. (For related reading, see "The Great Inflation of the 1970s.") For example, in April 2011, investors feared declining values of fiat currency and drove the price of gold to a staggering $1,500 an ounce. This indicates there was little confidence in the currencies on the world market and that expectations of future economic stability were grim. 3. The price of gold affects countries that import and export it. The value of a nation's currency is strongly tied to the value of its imports and exports. When a country imports more than it exports, the value of its currency will decline. On the other hand, the value of its currency will increase when a country is a net exporter. Thus, a country that exports gold or has access to gold reserves will see an increase in the strength of its currency when gold prices increase, since this increases the value of the country's total exports. (For related reading, see "What Is Wrong With Gold?

") In other words, an increase in the price of gold can create a trade surplus or help offset a trade deficit. Conversely, countries that are large importers of gold will inevitably end up having a weaker currency when the price of gold rises. For example, countries that specialize in producing products made with gold, but lack their own reserves, will be large importers of gold. Thus, they will be particularly susceptible to increases in the price of gold. 4. Gold purchases tend to reduce the value of the currency used to purchase it. When central banks purchase gold, it affects the supply and demand of the domestic currency and may result in inflation. This is largely due to the fact that banks rely on printing more money to buy gold, and thereby create an excess supply of the fiat currency. (The metal's rich history stems from its ability to maintain value over the long term. For more, see "8 Reasons to Own Gold.") 5. Gold prices are often used to measure the value of a local currency. Many people mistakenly use gold as a definitive proxy for valuing a country's currency. Although there is undoubtedly a relationship between gold prices and the value of a fiat currency, it is not always an inverse relationship as many people assume. For example, if there is high demand from an industry that requires gold for production, it will cause gold prices to rise. But this will say nothing about the local currency, which may very well be highly valued at the same time.

Thus, while the price of gold can often be used as a reflection of the value of the U. S. dollar, or any currency, conditions need to be analyzed to determine if an inverse relationship is indeed appropriate. Gold has a profound impact on the value of world currencies. Even though the gold standard has been abandoned, gold as a commodity can act as a substitute for fiat currencies and be used as an effective hedge against inflation. There is no doubt that gold will continue to play an integral role in the foreign exchange markets. Therefore, it is an important metal to follow and analyze for its unique ability to represent the health of both local and international economies. How to access Hidden Resolution Options on the Fire TV. The Amazon Fire TV voice remote has some undocumented tricks up its sleeve. If you aren’t aware, holding SELECT and PLAY for 10 seconds causes the Fire TV to restart. Similarly, holding RIGHT and BACK for 10 seconds triggers a prompt to factory reset the Fire TV. These hidden options seem to be designed to help you get back to a usable state if, for whatever reason, you are unable to access the Fire TV’s menus. Yesterday I stumbled on some new hidden resolution options triggered from the voice remote. If you hold BACK and REVERSE and RIGHT and SELECT simultaneously for 10 seconds, the Fire TV will begin to cycle through various resolution settings. It will stop at each setting for 10 seconds and cycle to the next option if you do not press SELECT. Pressing SELECT will save the current display setting. This can be useful if somehow your Fire TV is set to a resolution that your TV doesn’t support. Interestingly, using this hidden option allows you to select 480p even though the option is not available in the Video Resolution options found in the Settings menu. When 480p is selected, it will appear as the current setting, but it will remain missing from the available resolution options in the settings menu.

One thing worth mentioning is that I believe the Fire TV is always rendering at a resolution of 1920 by 1080 regardless of what resolution is selected and just downscaling the video output. I think this is the case because taking a screenshot of the Fire TV results in a 1920 by 1080 file no matter what resolution is selected in the options menu. For the final version of Fire OS 5, the button combination to bring up resolution cycling has been changed to holding REVERSE and UP. 5 Things You NEED to Know Before Trading Forex Live. You just hit another nice winner on your demo account ….it’s been about 3 months now and you feel confident that your ready to make the jump to trading a real live account. You feel ready to try your hand at live trading, yet questions and doubts still linger in your mind…. From all the emails I answer every week, I know for a fact that most traders begin trading live well before they are ready, and there’s a good chance you are guilty of this too (I know I was back when I started). But how can you know “for sure” if you’re ready to start risking real money in the markets or not? Well, unfortunately there is no 100% sure-fire way to know if you are ready to trade live or not, but there are some things that you can do to be prepared for live-account trading and there are definitely some things you NEED to know before trading live… We tell ourselves all kinds of things that convince us it’s OK to start risking our money in the markets; it’s pretty easy to justify something to yourself if you really want it bad enough. There’s a fine line between logic and emotion that causes many traders to trade live before they are truly ready. Today’s lesson is going to discuss 5 logic-based things you REALLY need to know before you start risking your hard-earned money in the markets, I hope what you read below will save you money, time and stress: Be aware of your biology. Humans are wired to be less risk averse after winning and more risk averse after losing; in other words, we are basically wired by evolution to be bad at trading.

In reality, how risky you feel the market is should not change very much from one trade to the next. For example, after wining 5 trades in a row most people will feel quite a bit more “numb” to the fact that the next trade could be a loser. Conversely, if you lose 5 trades in a row your perception of risk on the next trade is typically going to be a lot higher than it should be , so much so that you might risk a lot less than normal or possibly even be too afraid to enter a perfectly good setup. What you have to realize is that for any given trading strategy or system there’s a random distribution of winners and losers. If you have found over time that you can win 55% of the time with your trading strategy, that means you’re going to lose 45% of the time…and you never know which trade is going to be a winner and which will be a loser…because they are randomly distributed. So, whilst you might have an entry method in the market that gives you the ability to profit over a series of trades , you cannot fall into the trap of thinking that you “know for sure” what is going to happen on your next trade . It’s this mentality that causes traders to become too confident after a few winners and risk more than they normally would and then….bam!; they hit a loser whilst their risk is ratcheted up to 2 or 3 times its normal amount. It doesn’t take too much to see how this can affect your trading…you hit a loser while risking too much because you were over-confident, then you get angry that you lost more than you normally do so you try to “make it back” and you dive right back in even though your entry strategy is not present… until you’ve blown your trading account. What’s the fix? The fix for our evolution-generated trading “handicaps”, is to first just accept that we were born pre-wired to be less concerned with risk after winning and over-concerned with risk after losing. If you don’t believe me about this “wiring” problem then check out this video and article by John Coates who is a former Wall Street trader, Deutsche bank trader and an author : Is Biology to Blame?

Once you’ve accepted your biological trading faults, you can start to work on overcoming them simply by being realistic, logical and disciplined . But, it’s CRITICAL that you are aware of your biological trading issues before you start trading live, because it’s very hard to detect them whilst trading live and especially if no one has informed you of them. It really just comes down to you being consciously aware of what you are doing in the markets all the time, always ask yourself if what you are about to do is an emotion-based decision or a logic-based decision. Make sure you want to be a trader because you really love trading. On the surface, trading seems deceptively easy, but it really takes someone with a strong passion and interest to excel at it. You’ve got to be able to become immune to losing and be able to be disciplined and patient…many people simply cannot do these things very easily. Before you start risking your hard-earned money in the markets, you have to sit down and honestly ask yourself how well you think you will operate in a world of constant temptation? Are you someone who can look temptation in the eye and ignore it? If not, you might have trouble with over-trading and risking too much per trade. Do you have patience enough to wait for your trading strategy to show itself before you trade? Are you disciplined? These things are not impossible for you to attain, but some people have an easier time with them than others. If you have enough passion and desire to become a successful trader you can work through whatever psychological traits you have working against you. However, if you’re just looking for some “easy money” and you don’t want to fix whatever psychological mental problems you have that are interfering with your trading, you should probably forget about trading and move on to something else. All brokers (and charting platforms) are not created equal. Unfortunately, all brokers are not created equal in the Forex world.

Many brokers do not offer the most pertinent charts for you to make your trading decisions from. For many beginning traders, the fact that they might be looking at charts that aren’t as accurate or relevant as they could be does not even occur to them. Again, this is something that you NEED to know before trading live but that you won’t read on most other trading websites. So, that’s why I’m telling you…you NEED a broker who offers New York close charts that have 5 daily bars per week instead of 6, here’s why: The New York close coincides with the end of the current Forex trading day and the start of the new one which occurs at 5pm NY time as New Zealand Australia and Asia trading gets underway. The New York close charts also reflect the close of the 2nd heaviest Forex trading session which is the New York session. Closing prices are the most important in any market, as they reflect who won the battle between the bulls and bears that day, and because daily chart trading strategies are so critical for all beginning traders to learn, we need to see the most accurate and relevant daily chart closing price. Also, it’s important to have 5-daily bars, not 6, as the Sunday bar should be included with the Monday bar since there is no actual “Sunday” trading at any of the world’s major financial centers. Learn To Use The Trading Platform First. Another important part about trading platforms is that BEFORE you trade live you NEED to demo trade the platform you will use to trade live with.

You need to get familiar with how the platform functions, how to execute trades and how to set up the charts for your analysis etc…you don’t want to lose money simply because you didn’t take the time to learn how your trading platform works. For those of you who need help with setting up your MT4 platform correctly, you can read the detailed tutorial I wrote recently: How to set up your MT4 charts. Successful trading is not about being “right” or having high winning percentages. Many beginning traders think that they have to try and win every trade to be profitable. However, this really could not be farther from the truth. For some traders it becomes an ego thing in regards to losing trades; they think they are “smarter” or “better” than most other traders or that they have some special ability to analyze the markets that no one else has. This causes them to get too concerned with winning percentages and they try to have as few losing trades as possible. The key to success in the market is not about having a small amount of losing trades, it’s about minimizing the losing trades you do have; keeping them contained. Trading success depends more on capital preservation and risk management skills than anything else: if you can manage to maintain all your losers at 1R (see previous “risk management” link if you don’t know what “1R” means) or less and only trade when your entry technique is really present, you will be putting yourself ahead of many traders. All you need to do then is combine your risk management ability with a high-probability trading strategy like my price action strategies, and trade it with discipline, and you’ll have a recipe for success. Once you begin to focus on controlling your risk and on maintaining your losses instead of avoiding them, you will truly be on the road to trading success. This is called being a “risk manager” and this is a much more useful way to think of yourself instead of a “trader” or “speculator”. The underlying point here is that you don’t need to be “right” or have a high winning percentage to make money as a trader, to see the math behind this checkout last week’s article on how to remove fear from your trading .

If you can’t easily explain your trading strategy to a ten year old, it’s too complicated. Before you start trading live you need to make sure that you know what you’re doing. Before I sign off today, I’m going to leave you guys with some “must haves” before trading live. If you do not have the following things then I STRONGLY suggest you stay on demo until you do: 1) A trading strategy that’s not too complicated and that you can easily explain to a 10 year old kid. Price action trading obviously fits the bill here, I’ve been trading with price action strategies for years and it really is the most stress-free way to trade. If someone asks me about my trading strategy I can easily explain it to them by just explaining simple price dynamics in the market; I don’t need to talk about indicators, trading software, complicated math, Elliot waves or anything else that’s too complicated for its own good. 2) A trading plan you’ve built from the trading strategy you’ve mastered. I know it’s cliche and I know you might be thinking you don’t really need a written out or typed out trading plan, but you do. Even if your trading plan is to do a weekly or daily market commentary like I do, that is a lot better than many traders who have no plan whatsoever. You need to consolidate your thoughts and overall trading strategy into a daily guide of sorts, that way you are prepared and this helps you to trade off logic rather than emotion. 3) A trading journal to track your progress. A simple spread sheet journal is fine; it doesn’t have to be complicated. You just need a journal to track your progress over time, if you need a template for one then see this link on trading journals. A journal will help to show you how discipline and patience pay off over time and this will reinforce positive trading habits. It’s also a must to have an accurate track record if you want anyone to give you funds to trade with down the road.

4) Take points 1 to 3 and demo trade with them until you’re confident and seeing consistent profits on your demo account. Some people will only need a month of demo trading, some might need 6 months; every trader is different. The point is that you are taking your trading strategy and practicing it on a demo account before you go live. It always amazes me how so many traders just ignore demo trading and begin trading live as soon as they feel like they know a thing or two about the markets. Don’t be fooled, if you aren’t prepared you WILL lose money, and losing money is equal to losing time, and time is precious as we all know, so do what you can to avoid losing it unnecessarily. You will have losing trades no matter what, but the goal of trading is to minimize them; not to avoid them. You minimize them by being prepared. Maybe you realized after reading today’s lesson that you shouldn’t be trading live, in which case, stop now and go back to demo. Maybe you haven’t yet traded live and you are still getting prepared, in that case I trust this article helped you a lot too. Whatever the case, leave your comments below, I want to hear your thoughts . If you enjoyed this lesson and want to learn more about developing the strategies and skills required to trade live with confidence, checkout my Forex trading course here. If you have any questions, feel free to contact me here. 6 Powerful Trading Psychology Quotes from Mark Douglas. Updated: September 22, 2017.

Any Forex trader with even the smallest amount of trading experience will understand how much of a crucial role trading psychology plays in your trading success. Forex trading is one of the toughest, if not THE toughest mental challenge you will ever face in life. You can get two traders, give them the same set of rules and they will produce totally different results. You wouldn’t even believe they were trading the same system. It all comes to their mental integrity, and ability to stick by the rules under pressure. Nobody is perfect, even the best traders will ‘color outside the lines’ from time to time, and need some good psychological mentoring to regain their focus. One of my go-to guys for inspiration on Forex psychology, is Mark Douglas. He wrote the book which is famous among the trading community “Trading in the Zone”. We can all learn something from Mark – he has dedicated his life to help people mentally and emotionally with their trading. In today’s article I wanted to share some of my favorite quotes from Mark Douglas, quotes that helped me a lot in my trading on a psychological level and hopefully will have the same impact on yours. Disclaimer. You DON’T need to be smart to trade. “I haven’t seen much correlation between good trading and intelligence.

Some outstanding traders are quite intelligent, but a few aren’t. Many outstanding intelligent people are horrible traders. Average intelligence is enough. Beyond that, emotional makeup is more important.” – Mark Douglas. Mark basically highlights one of the misconceptions that people have about Forex trading. A lot people (including myself at one stage) thought to be an active trader on any financial market, you needed to go through the motions of: university degrees, being in sync with political events and have the means of receiving ‘up to the minute’ news before others did. This is far from the truth and just a fictional stereotype. It takes hardly any effort to set yourself up as a Forex trader. Thanks to the advances in technology we can download the required software and setup up an account literally in minutes. Mark’s quote states that intelligence has little effect on trading performance. Would either Einstein or Isaac Newton have made good traders? Maybe not. The Forex market is filled with ‘average’ everyday people. Obviously you need some level of common sense, but that’s true with every profession. At the end of the day, it doesn’t matter what degrees or qualifications you hold, they won’t help you in the markets. The high school dropout could potentially reign supreme in the Forex market. Checkpoint.

The Disadvantages of Fundamental analysis. “Fundamental analysis creates what I call a “reality gap” between “what should be” and “what is.” The reality gap makes it extremely difficult to make anything but very long-term predictions that can be difficult to exploit, even if they are correct.” – Mark Douglas. Here Mark talks about the practicality of following the fundamentals that contribute to price movements. I am going to take a swing at you here, and assume at one stage in your trading career you pulled up the news calendar, frantically hit the refresh button, waiting for that economic data to be printed on your screen so you could place a trade in response. When the data is printed, you sell if it’s worse than expected figures, or buy the news if the results are better than expected. A buy on green, sell on red kind of arrangement. The data comes out bad, it’s red, and you quickly move to open a sell position. By the time you scurry over to your trading software and initiate a sell order, you find the market has moved significantly before you even had a chance to place an order. Two problems with this … You can’t trade these economic releases from the calendar – the market reacts 10 times faster than your hand movements. It’s not really ‘fundamental analysis’, it’s just using the economic data calendar to be a cowboy. True fundamental analysis is done on a much larger scale. Real fundamental analysis is the study of economic situations of different countries and making an educated speculation whether that countries currency is undervalued or overvalued based all the economic and political data you have. As Mark Douglas pointed out, fundamental analysis is only effective at making long term predictions on a given market.

Most traders wouldn’t have the discipline, or patience to ride out such moves. Trades like this would need to span over months, even a year. Lucky for us, today’s markets are dominated by the technicals – at least in the shortmedium term. Using data from the charts themselves, you can anticipate future price movements without the hassle of sifting through mountains of economic data. This is why price action trading is so popular – it’s a straight to the point technical trading methodology that is relatively stress free. Checkpoint. Most people are fixated on being right all the time. “Why do you think unsuccessful traders are obsessed with market analysis? They crave the sense of certainty that analysis appears to give them.

Although few would admit it, the truth is that the typical trader wants to be right on every single trade. He is desperately trying to create certainty where it just doesn’t exist.” – Mark Douglas. Mark Douglas makes a very good point here. How many times have you seen the ‘perfect’ trade setup, and entered thinking “it’s a perfect setup, it’s definitely going to work out”. You’ve done all your market analysis and everything is pointing in your favor, it’s a going to be a definite win! What happens next? The trade doesn’t work out and you’re absolutely gutted. You feel like you’ve been betrayed by the market and the ‘tragedy’ has eaten part of your soul away. Next time you take a trade, think about it like this… If you rolled a dice, and you ‘won’ whenever you’re rolled the number 4. Your chances of rolling a 4 on only one roll are very low, 1 out of 6 actually. You wouldn’t go ‘all in’ if you were only allowed to roll the dice once – the probabilities are too far stacked against you. Your success rate of rolling a 4 increases each time you throw the dice. So each roll of the dice should be viewed as one attempt out of a series of dice rolls to score the number 4. The point here is – you should not put so much emphasis onto one trade.

It’s better to look at each trade as a part of a ‘series of trades’. Don’t risk heavy on one position, you risk bite size amounts spread over a series of trades to increase your probabilities of success. To compound on the increased probabilities, we teach traders to enter a Forex trade using positive geared money management to maximize profit potential on each trade. Even if most of them are losers it doesn’t matter, you can still make good returns. In fact, you should expect most of your trades to fail. A win rate of 50% would be considered very good in Forex trading. Before placing a trade, I already consider it a loss to condition myself mentally. If you accept that the money is already gone, you won’t feel such shame if the trade get stopped out. If the trade turns around to become a winner, great!. I am not suggesting you disrespect your money, all we’re doing here is keeping emotions in check. The ability to accept a loss without feeling guilty, anger, shame or feeling of lesser self-worth is a skill a trader must learn. Checkpoint. Trading requires skills that people aren’t used to learning. “Forex trading requires the learning the type of skills that people just aren’t simply used to learning – Mental Skills.” – Mark Douglas. Mark explains here that ‘learning to trade’ requires you need to learn skills you’ve never learned anywhere else in your life.

Trading is about learning self-mastery. Many Forex traders believe that all you need is a technical system that generates good buy and sell signals – the learning stops there, and the money starts rolling in. Trust me, not even the holy grail trading system will work for you if you don’t commit yourself to learning the mental skills needed to trade. A typical job might require physical skills like strength and stamina, something builders and laborers would need. The typical office job, or engineer will require the use more of your intellect. These skills won’t get you anywhere in Forex trading, the skills you need to learn to be a successful trader are mental skills. This is where the Forex psychology side of trading can be very challenging and may feel counter intuitive. You need to refrain from getting emotionally involved with the market, or run the risk of suffering huge losses – financial and psychological. It sounds easy, but keeping emotions under control is not easy and you will be constantly tested every time you look at a chart. Any display of emotional weakness could tear through your entire trading integrity. Checkpoint. Anything could happen. “You don’t need to know what’s going to happen next to make money. Anything can happen. Every moment is unique, meaning every edge and outcome is truly a unique experience.

The trade either works or it doesn’t.” – Mark Douglas. Mark is reinforcing the point that there is no situation which has a ‘100% certainty rating’ in the markets. Because of this ‘nothing is certain’ variable – you need to work with, and actually build your thought process around probabilities to maximize your chances of success. Price movements are ‘people generated events’. The charts and price movements are really just the collective beliefs of all the market participants on what’s going to happen in the future. No mathematical model can predict human behavior very well. This is one of the reasons I don’t like Forex Indicators. Traders that put too much emphasis on one particular event playing out the way they predict, will learn a harsh lesson. Mark Douglas tells us that “nothing is certain, anything can happen”, so we need to accommodate that uncertainty through a consistent money management plan. Checkpoint.

Walk before you can run. “No man ever reached to excellence in any one art or profession without having passed through the slow and painful process of study and preparation.” – Mark Douglas. Our final quote from Mark Douglas states – even though Forex trading may look easy, it’s not. Someone from the outside looking in might think it’s as simple as setting up a broker account and pressing buy and sell buttons all day long. But we know that doesn’t even scratch the surface. The complicated nature of learning to become a successful Forex trader needs to be respected. Just like anything else you learn in life, learning to trade Forex is a process. It’s not something you can acquire overnight from reading an eBook you downloaded. In the workforce, it’s silly to expect to climb the career ladder and become the manager in less than a week of being accepted into an entry level position. Forex is the same – don’t push yourself to become an ‘expert overnight’. It takes a lot of mental conditioning and commitment from you as the trader before you will see any success. An effective way of shortening your learning curve is to join a Forex community where you can learn how to trade, and get feedbackshare ideas with other like-minded traders. We’ve setup a private membership area for serious Forex traders like yourself, who want to learn the most effective trading strategy in the markets today “price action trading” with powerful money management techniques to maximize your return on investment.

If you’re interested in becoming one of our War Room Trader members, you can find all the information you need on the War Room Information & Sign Up Page. Hopefully these points discussed in today’s review of Mark’s advice, is something that will help change your trading today. If you have any other good tips you think might fit well here, please feel free to drop them in the comments below – I would love to hear them. Buy Mark’s Book – Trading In The Zone. This is one of the first books on trading psychology I read, and it had a huge impact on the way I think about trading. What I’ve talking about here today is only a small fraction of what’s inside the book – it will seriously blow your mind. Stop having mental breakdowns with your trading, get this book. It’s a small investment for a game changing knowledge – you can grab it here on amazon. Forex Training Group. Have you ever been watching a currency pair and seen a familiar pattern but you were not sure how you should approach the trade? That feeling of uncertainty is one that thousands of traders feel every day. Now on the flip side, there are other traders who are more prepared and actually know what their next step should be instinctively.

Many of these latter traders have spent countless hours studying and researching price patterns and movements through backtesting, and are able to execute their trade plan more effortlessly and with a higher level of confidence as a result. So, what is forex backtesting? It’s the process of using a forex strategy tester based on historical price data. You can perform a manual forex backtest by printing out graphs of exchange rates, or looking back through your charts. In addition, you can use sophisticated complex algorithms that perform pattern recognition tasks. Whichever way you decide to backtest your forex strategies, the process itself will help you analyze situations that arise that have shown a propensity to provide a discernable edge in the market. Manual Backtesting Methods. A manual backtesting process can be timely and arduous, but it’s a true and tried method. But some of the drawbacks include, the lack of efficiency, and a greater likelihood for making an error. For example, if you are looking at a chart on a piece of paper, it might be difficult to determine if a currency pair has actually generated a lower low from the previous price point. You can mitigate this issue by working manually online, but nevertheless, the process will still be time consuming. Manual backtesting of a trading strategy will allow you to gauge whether your trade idea might be viable. You can scroll through historical data, looking to see if your ideas will work. Once you have determined the variables that you want to test extensively, an automated process might be better suited and more efficient. The first step in a manual backtesting project is to find charting software that is easy and convenient to use. It’s best if you have five or ten years of data available, especially if you are looking to back test a daily, or weekly strategy.

If you are attempting to find an intra-day strategy, it might be possible to use a couple of years of data to test your ideas. Intra-day time series can encompass a lot data, and finding reliable data in this this area can sometimes be challenging. For example, if you are analyzing minute data points, you will need to evaluate 1,440 points for every day, which is more than 1-million points over a 3-year period. Automated Backtesting Methods. There are a number of ways that you can backtest your ideas. You can use a forex simulator to test the data on your own, or you can use forex backtesting software that allows you to test basic to more sophisticated concepts. There are a plethora of free data providers including Google and Yahoo that will allow you to download historical data. Most of these data points will be daily or weekly open, high, low and close information. You can download this data into a spreadsheet such as excel, which can then be imported into your backtest platform.

If you are looking to test a strategy using intra-day data such as hourly, minute or tick data, you will likely need to purchase the data from a vendor. The benefits of purchasing the data from a vendor is that typically their data has already been filtered and cleaned, removing bad ticks from the time series. Any data that you download should be tested for accuracy. You want to make sure that there are no bad data points, especially if you are relying on high and low points to enter a trade. Bad data points can generate faulty results if the data has inaccurate highs or lows which are used to generate entry or exit points. You have to really understand your strategy and determine if the data will alter the results. For example, if you are looking at daily data, you don’t know if the high of the day occurred before or after the low of the day. This can create problem if your take profit and stop loss are near to your entry level, as your criteria could generate a signal, even if the movement of the price action did not happen in the required sequence. For example, if you enter a trade on the prior days close, and your stop loss and take profit levels are with the next day’s range, the result of the trade will depend on how your system looks at the sequence of events when evaluating stop loss and take profit levels, rather then what actually occurred. Using Back Testing Software. Another way to back test a strategy is to use computer backtesting.

Many trading platforms today have trading wizards which allow the trader to create a trading model that utilizes technical indicators to establish a predefined set of rules. The criteria that is used is based on historical data points, allowing you to see if the strategy worked in the past. Mt4 strategy tester is an example of an automated backtest tool that has a built-in back testing system, in this case it is housed within the Metatrader platform. You can use their language and graphical user interface, which an efficient way to build your system on their platform. You can also use their API (application program interface), and attempt to code a system that is customized. Below is a screenshot of Mt4 strategy tester: Creating an Automated Trading System. There are several ways that you can add a systematic approach to your trading arsenal. You can program the system yourself using your own ideas and strategies, or you can have someone else program an automated system using the strategies you have created. If your trading system uses tools that are common, such as moving averages, or other technical studies, the most efficient approach to back testing will be to find use a platform like MetaTrader or Ninjatrader to back test your strategies. Learning how to use a vendor’s interface with take some time, but these systems are geared to those who have little development experience. Standard strategies such as moving average crossovers, or overbought and oversold conditions are pre-programmed, into most back testing software packages, for your convenience. Most self-coded back testing systems are programmed in an automated trading platform that is geared toward generating a trading strategy that combines entry criteria with risk management. The criteria that is used for decision making is coded in the platform’s proprietary language. Most of these software packages have graphical user interfaces that allow you to simply click on specific variables and criteria in order to generate a strategy.

If you decide that programming a system is beyond your technical capabilities or one which requires custom programming, there are freelancer programmers for hire that will help you code a system. Hiring a Freelance Programmer. There are many skilled programmers that you can hire on a freelance basis that understand the nuance of specific trading platforms. You can work with these individuals, and have them show you the results of each data series that they run with your provided strategy. But there can be some downsides to using an outside programmer. Some of the drawbacks include the additional cost you will incur from having someone else program your strategy. This includes the initial system programming, as well as the subsequent debugging process. Since you will likely need to tweak your strategy, you should try to determine how you will pay the programmer each time you ask for a change. You will have to decide whether a flat fee or hourly fee arrangement should be used. Backtesting provides you with a multitude of benefits. You will be able to determine if your strategy meets certain risk criteria and is likely to work in different market environments. Most importantly, you have the ability to see if the methodology shows a positive historical result, prior to risking real capital. This will not guarantee profitable trading results in the future, but can help reduce the probability of potential losses. One of the benefits of programming a strategy yourself is that by doing so, you will gain intimate knowledge of how the system works and how robust your back testing results are. This will provide you more confidence when trading the system live. As we pointed out earlier, the system that you develop, is only as good as the data that you use. If the data is faulty, you will have errors in your results.

Bad quotes or prints, can generate false trading signals. If you download your own data, from a free software provider, you should go through the data to see if there are any prices that look suspicious. While closing values are usually consistent, high and low values can be choppy and lead to faulty results. Purchasing a Trading System. There are dozens of commercial trading systems that are available in the market. Many have been back tested by their developers and some will advertise the spectacular returns of their system. Regarding commercially available trading systems, you should always work on the premise that if a claim is too good to be true, it’s usually too good to be true. Many times these “spectacular” systems are over optimized and curve fitted so they appear to be highly profitably based on historical data, but tend to fall apart when traded in real time. There are reviews of trading systems that you can find throughout the internet, which describe how various systems perform in real time. One reputable resource for reviewing trading systems is Futures Truth. If you cannot find a review, make sure you test the trading system on a demo account before you employ the strategy using real capital. Issues and Pitfalls with Back Testing. As mentioned, one of the issues with back testing, and therefore purchasing a trading strategy that only shows historical results, is that there are techniques that can be used to make the strategy look good on paper but fail in real-time.

By fitting the curve, or over optimizing, you can produce a system that has been back tested and looks very good over a specific historical period. A system designer can slightly alter the criteria that is used to achieve outstanding performance. For example, a designer might back test a trend following strategy optimizing a moving average crossover system for a period of 2-years. Once they find the result that looks good, they test to see if the strategy works over a longer period. Most of the time, the results will be fair at best, over the long term, but they will not tell you this when you purchase your system. You could find out only later than the moving average crossover strategy that returned 100 % over the past 2-years, loses 20 % when you test it over the past 10-years. What you want to be able to do is see how that system performs in a forward test or better yet in a real-time trading environment. In addition, many novice traders sometimes assume that a trading system should have a very high percentage of winning trades. With this in mind, an unscrupulous designer can create parameters that can be adjusted to create an amazing win rate of over 90% for example.

This may seem attractive to the untrained eye, but in the vast majority of cases, this type of system will eventually blow up, because the losses will be many multiples of any winning trade the system generates. Removing Negative Emotions from Your Trading. A system that is backtested helps remove some of the human emotion from a trade. Many investors are calmed by the notion that a trade has worked well in the past. This is especially helpful when a trade is moving against you and you are losing money. You are more likely to hold on and let the trade play out, as opposed to cutting bait, assuming that is what your system calls for doing. An important metric that a backtested trading strategy or system will provide you with is the maximum drawdown. This calculation tells you the largest peak to trough decline in a portfolio. When you back test your strategy you should calculate the maximum drawdown to see the largest drop that the strategy has experienced. Past calculations of maximum drawdown will give you an idea of what you can expect if you experience an adverse market condition, and will allow you to better plan on this experience as the potential worst case scenario.

But in most cases, keep in mind, that your worst drawdown is ahead of you not behind you. If you backtested a system for 10 years where you are investing 10K and your maximum drawdown was $1,500 which is 15%, then you would typically not expect to lose more than 15-20% on your system during the years to follow. If you back tested your system in multiple market environments, this type of analysis will help you determine how carefully you need to monitor your system, when a position starts moving against you in a way that was unexpected. If your system has a new maximum drawdown that is 2-times the prior maximum drawdown, you may need to re-evaluate the backtest history or adjust your risk parameters. While negatively charged emotions can be somewhat minimized when you begin to trade a system that has been back tested, it can still play a role in your decision processes. You need to give a new system the appropriate amount of time to determine if it works. Given the results of your system, you should plan in advance what you are expecting, and what you think you should do if the results in real-time are not as you planned. You should also spend time forward testing your strategy using a practice account as opposed to real capital. Do this for a few weeks or months and make sure that the backtested system is generating the returns you expected before attempting to use real capital with your strategy. If you developed the system yourself, and backtested it, you might become attached to your strategy and fail to pull the plug on it even if it does not perform as planned. Make sure you stick to a game plan and have benchmarks that describe your goals. Backtesting is an excellent was to determine if a trading strategy has the potential to work in the future. Keep in mind, that just because a system’s past results are positive, does not necessarily mean your strategy will work in the future. But it should provide you more confidence in your execution. And that is the best that we as traders can hope for. We are not executing on certainty, we are executing on probabilities.

Make sure the data you use for the backtest is clean, and does not have false highs and lows. Be particularly careful if you are trading a system that relies on intra-day data. Calculate the maximum drawdown so you understand the most you could expect lose from peak to trough, and be sure to test your strategy with demo money before you decide to risk real capital.


  • Having the ability to stick through drop forex