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Forex Day Trading Strategy- A Major Flaw Identified

Thursday, December 9th, 2010

It can be said that successful trading is the sum of two parts:

A solid and reliable Forex day trading strategy A strict, disciplined mental attitude

Often the first part is undone by a failure in the second area. You may have a great Forex day trading strategy but time and again it can be neutralized by one major flaw in part two. What is it?

COMPULSION TO TRADE

Any trader who is enveloped with a compulsion to trade will soon undo any profits a reliable Forex day trading strategy can produce.

Exactly what does it mean?

Here is a typical scenario:

The day trader approaches the trading session with enthusiasm and optimism and goes through habitual preparation steps which may include:

Consulting the daily calendar for upcoming economic reports Reviewing major news items from the financial markets Preparing charts by inserting pivot points, drawing trendlines, marking key support and resistance levels, using the Fibonacci tool Doing a multiple time frame analysis starting with the daily chart, then moving down to the 4 hour, 1 hour, and perhaps 15 minute charts

Now, as the new session opens and progresses market conditions are flat. Price is for the most part in consolidation.

A Typical Scenario

The trader starts getting bored, or a little frustrated. Hours pass, nothing happens. The desire to trade starts getting stronger and stronger until it reaches compulsion level.

Now the trader starts looking at the charts through different eyes. His reliable Forex day trading strategy now takes a secondary position in his mind and number one is the need to find a trade!

Result?

The trader enters a low probability trade, the market then picks up steam and goes in a direction the trader did not expect and takes out the stop. The first trade of the day has been a loser.

What happens next can have more serious repercussions. Unless the trader employs strict mental discipline, there is now an even greater feeling of compulsion to trade in order to get back what was just lost.

As the mind is now in free fall, the stable, reliable Forex day trading strategy that works well when employed in a calm, analytical manner, now is cast aside and the trader is in the grip of powerful emotions.

What has just been described is a major flaw in many aspiring traders.

The question is: Do you have the honesty to recognize it in yourself? Or are you in a state of denial reasoning that this doesn’t happen to you.

You may be an exception! On the other hand, many traders will relate to the scenario just described.

What is the solution?

During the trading session there is a need to constantly monitor not only candlestick movements on the computer screen in front of you, but also your own mental state and emotional level.

Discipline yourself to recognize when COMPULSION TO TRADE is beginning to build up. Stop. Walk away from the computer. Read a good motivational article on Forex trading disciplines, and return with a fresh viewpoint to the trading station.

Employing this mental/emotional self-check whenever COMPULSION TO TRADE rears its ugly head will help ensure your stable, reliable Forex day trading strategy has chance to succeed!

By: Michael A Jones

About the Author:

For a free pivot point calculator, Fibonacci calculator and the best free economic calendars click here:

http://www.vitalstop.com/Forex/tools.html

The powerful 200 EMA strategy – easy for developing traders:

http://www.vitalstop.com/Forex/Advisor/200EMA-forex-strategy.htm

Learn how the MACD indicator can help you avoid much anxiety:

http://www.vitalstop.com/Forex/Advisor/forex-strategy-MACD-save-anxiety.htm

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Tags: Mental Attitude, Mental Discipline, Typical Scenario
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Benefits of Online Currency Trading Tutorials

Monday, October 4th, 2010

Due to rapid advances in technology and the ever-changing economic scenarios all over the world, keeping a tab on the dips and escalations of currency rates is essential. Besides, the profit one makes from currency trading depends on the vital decisions taken. Each decision made while being a part of the foreign currency trading market could be profitable or a reason for instant loss. All decisions made depend on the reliability of the information they are based on. You need to have reliable information that could affect the foreign exchange market as soon as possible.

Today, you not only lose and gain on currency trading but also end up becoming either very wealthy or you join the ranks of all the losing traders. Since the Forex market is open for trading 24 hours a day and 5 days a week, a trader can access his or her forex trading account at any given time. Besides, the speed of currency transactions is one of the most impressive advancements. You can conduct foreign currency trading in seconds with the help of traditional forex broker.

Advantages of Online Currency Trading Tutorials

Online Currency Trading Tutorials teach you the basics, and give you additional knowledge if you have been in the game for quite some time. Don’t forget, the Forex market is considerably complicated and mastering it could take time. In the past, it was impossible to get someone who would offer any sort of tutoring or training in Forex as trading was restricted only to large businesses and corporations. Today, with the Internet boom, individual traders are swarming towards currency trading, thus leading to a huge rise in the number of tutorials and courses available.

Training sessions could be conducted in a classroom or over the Internet, depending on an individual’s preference and location. Since classroom learning is different because of the involvement of traveling great distances, you can opt for the learn at home’ courses. A person learning through the online currency tutorial can study at his or her own pace. However, they are devoid of the explanation and discussions with the teacher. Some online currency trading tutorials have a money-back guarantee if the individual does not like the course. Individuals should stay away from courses that guarantee profit. Moreover, since it is difficult to distinguish between the fraudulent and authentic courses, every course ought to be treated with skepticism.

When trading forex, the trader sometimes needs to make very quick decisions when analyzing the market. A forex tutorial may not be able to teach that. It may be able to teach an individual the principles of currency trading and turn a person into an efficient forex trader, but practical application of the knowledge acquired, and incorporating it in daily trading is something that is achieved only through classroom teaching. Opting for online currency trading tutorials improves speed and decision making ability. In addition, one can also follow the changes in the rates and ascertain when to enter and exit a given trade transaction. If an individual takes time to learn and understand how the forex trading business works, it would be easy for him or her to make the high probability decisions for successful trading. There are also many Forex signal service providers who provide traders information about what trades to take, what price to enter a trade and the recommended take profit and stop loss targets.

Although online currency trading tutorials may not be able to teach you all the intricacies of the trade, it can help you in making decisions quickly and with greater success rate. The trick of the trade, as they say, is all about how one employs the knowledge for making maximum profits.

By: Andrew Daigle

About the Author:

Andrew Daigle is the owner, creator and author of many successful websites including ForexBoost, a free forex training site and a Forex Blog the Novice and Advanced Forex trader.

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Tags: Forex Market, Quite Some Time, Vital Decisions
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Arbitrage Trading or E-currency E-currency?

Wednesday, September 29th, 2010

If you are reading this you most be wondering what way is better to make money E-currency Exchange or Arbitrage Trading?

Lets first look at how both systems work, and if these systems will still be around in 5 years or so.

Arbitrage Trading
Is and unknown way to make money on the Internet. Very few people know little or no information about arbitrage trading. So can you make money? Yes you can. Arbitrage Trading makes money by placing trades on arbs that are created when two different bookies disagree on the same sporting event.

When you get two bookies that disagree on a sporting event this makes and arb. If you where to place money on this arb you would win the trade. This is how arbitrage trading works. This is 100% legal and can be done anywhere in the world.

Now will arbitrage trading be around for a long period of time? Yes arbitrage trading will be around as long as there are sports. Arbitrage Trading will never die and go away.

E-currency Exchange
This is also unknown to many people. E-currency exchange works by investing a small amount of money into the e-currency system. Each day your money is compounded making 3 to 5% each day. People who have started off with and investment of only $200 have be able to turn there small investment into $1000 in just a moths time. Using this system has changed many peoples lives.

Will e-currency be around in 5 years or so? Everyone I asked is unsure of how long e-currency exchange will last. Some say it will be around forever. Right now the system is still running but a little slow. This in my eyes means the system is falling apart. Now I still invested money into e-currency and I have made money from it.

I also invested money into arbitrage trading. If I had to pick between the two systems of making money I would bet on arbitrage trading. Although its newer then e-currency it seems to me that it’s more stable and will be around for years to come. E-currency exchange on the other hand is not looking so hot. One month the system is flying and the next month the system is a running a little slow.

In the end I choose to work with both systems. I have thought about pulling out of e-currency and going solo on arbitrage trading. Well just have to wait it out and see how e-currency does compared to arbitrage trading.

By: Chris Rohrer

About the Author:

I use both e-currency and arbitrage trading to make money working out of my house. Today I can say that these two money making systmes have changed my life for the good. I recommened this programs to anyone and everyone. Visit Arbitrage Trading for more information on e-currency and arbitrage trading.

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Tags: Arb, Bookies, Way To Make Money
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Forex Day Trading Rules- Preserve Your Mental Equity

Friday, September 24th, 2010

If you are looking for day trading rules, pay attention to two key guidelines revealed in this article. Ignoring them can destroy your chances of becoming a successful trader.

On the other hand, adding them to your day trading rules list will greatly increase the probability you will become a highly profitable trader.

Forex day trading rules often revolve around techniques, technical indicators, and equity management. All these are of course important.

Two Kinds Of Equity Management

#1 Account Equity

Without proper equity management new traders are tempted to take risks far out of proportion to the amount of equity they have in their account.

Many seasoned traders recommend not risking more than 2% of your capital on any single trade. Some say 1% or even less. In this way you can have a string of losing trades and still be able to survive to see another day.

#2 Mental Equity

Of equal importance however is proper mental and emotional management. Day trading can be an exhausting business. The day trader can experience the full gamut of human emotions in a very limited time, from the heights of elation to the depths of despair.

As traders grow with experience they learn to keep their emotions in check and maintain a disciplined approach.

This is where mental equity management comes in. A setup may appear that seems just right. We haven’t see much all day and we are anxious to trade. We want a little excitement. True, it isn’t the best entry point but we don’t want to miss the boat so we get in quickly using a market order.

The Exhausting Scenario

The trade doesn’t even get into profit. For the next couple of hours it fluctuates in a range, but we are on the wrong side of the range. We watch the trading platform show -4 pips, -10 pips, -7 pips, -13 pips and so on.

What is happening to our mental and emotional state? If we are not very disciplined it starts to get drained. If you repeat this scenario frequently when you trade your mental bank will be so exhausted you will not be able to give trading the concentration it needs.

The Ideal Scenario

On the other hand, after patiently waiting for price to reach the optimum entry point you had calculated, your trade is taken in and again goes into a dealing range. But now as you watch the trading platform it shows 2 pips, 8 pips, 4 pips, 11 pips. Now how do you feel? Much more relaxed, your mental capital is preserved.

On top of that, how are you affected when you see your account balance go down after 1 trade? Now imagine how you will feel if you have 10 losing trades in a row? When you look at your account balance then how will you feel about your next trade? Nervous? Obviously.

Rule 1

That’s why equity management is so crucial – risk no more than 2% on any trade. It’s also crucial because of the effect it can have on your mental bank account. Make the 2% level one of your day trading rules.

Rule 2

Additionally, if you are compiling your own day trading rules list, make sure you add this one: Never enter a trade once it has passed the optimum entry point. Sit on your hands and wait for the next time because it will surely come.

By: Michael A Jones

About the Author:

Learn how the MACD indicator can help you avoid much anxiety:

http://www.vitalstop.com/Forex/Advisor/forex-strategy-MACD-save-anxiety.htm

For the best free economic calendars plus a free pivot point calculator click here:

http://www.vitalstop.com/Forex/tools.html

How do you trade the non-farm payroll report? Read this:

http://www.vitalstop.com/Forex/Advisor/forex-strategy-non-farm-payroll.htm

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Tags: Equity Management, Human Emotions, Proportion
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Forex Day Trading- Two Step Trend Analysis

Friday, March 26th, 2010

If you approach forex day trading by just looking at the 5 minute and 15 minute charts there is a strong possibility your account will evaporate sooner rather than later.

In order to get a feel for the market and an indication of the current trend it is necessary to do an analysis by looking at multiple charts on different time frames starting with higher level charts first.

Rather than having the charts cluttered with numerous indicators and signals which can cause signal paralysis, I recommend just two:

1. MACD (with default settings)

2. 200 EMA (Exponential Moving Average)

Now examine your charts using a top down approach:

Daily 4 Hour 1 Hour

As you check each chart take note of these two factors:

Has MACD crossed down or up and is it above or below the water line? Is price above or below the 200 EMA?

While it is not crucial to have them all lined up on these three time frames for successful forex day trading, if you want to be a cautious trader and go for high probability trades then certainly MACD on the 4 hour chart and 1 hour chart should be in agreement as also should price in relation to the 200 EMA.

The daily chart can be useful in seeing the larger picture and for noting key levels of support and resistance. They stand out on a daily chart so if price is within 100 pips of a crucial level of support or resistance as seen on the daily chart, make a note of the figure.

Then scale down to the lower time frames and see if this level matches with other indicators such as pivot points or Fibonacci levels.

Once you have done this groundwork, NOW you can look at the 15 minute and 5 minute charts for a suitable entry point.

Remember, for successful Forex day trading you need to adhere to the No. 1 commandment: Buy The Dips and Sell the Rallies!

So avoid chasing the market and going with the flow. Instead, wait for price to come the level you want, set your entry order, and let price pull you into the trade.

The Danger With Lower Time Frames

Just concentrating on the 15 minute and 5 minute charts will not give you the bigger picture. You could see what looks like a perfectly good trade and set your stops and limits only to find you get blown out within a few minutes.

By looking at the higher time frame you would probably have seen you were close to a key support or resistance level and either not gone into the trade or adjusted your stops and limits accordingly.

For the novice, Forex day trading can involve a huge learning curve. Include this simple daily top down analysis approach to your trading and protect yourself against making trades you wish you didn’t!

By: Michael A Jones

About the Author:

Click here to learn how to use the 200 EMA in a simple yet powerful way:

http://www.vitalstop.com/Forex/Advisor/200EMA-forex-strategy.htm

For a free candle & chart pattern recognition reference tool click here:

http://www.vitalstop.com/Forex/Candle-Chart-Patterns

For the best free economic calendars plus a free pivot point calculator and Fibonacci calculator click here:

http://www.vitalstop.com/Forex/tools.html

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Tags: Different Time, Exponential Moving Average, Fibonacci Levels
Posted in Investing | No Comments »

Forex Trading Systems Blog

Archive for the ‘Investing’ Category

Forex Day Trading Strategy- A Major Flaw Identified

Benefits of Online Currency Trading Tutorials

Arbitrage Trading or E-currency E-currency?

Forex Day Trading Rules- Preserve Your Mental Equity

Forex Day Trading- Two Step Trend Analysis

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