Emotions are the one of the greatest problems of the Forex traders. Almost every beginning trader, who starts with the demo account, experiences a great success in his trading, but fails to carry this success to the real money account. What’s the problem? Emotions! When we lose we feel frustration and sometimes even despair. Winning can cause us to lose control over our actions and turn our trading into a gambling or cause a serious overtrading. So here are the four easy steps to stop emotions from ruining your Forex trading:
1. Single loss is not your fault. It’s not even the market’s fault. And it’s not your system’s fault. It’s just a loss. No trader or system can guarantee 100% winning rate. So, losses should happen. If you lose then your system works. It may even lose again, but that won’t change the full picture. Trading doesn’t work with a single loss or win; it works with the loss rate and risk-to-reward ratios. So, next time you lose, remember that there is no one to blame, because there is no guilt in losing.
2. If the losses prevail over the winning positions then check your risk-to-reward ratio first. If each of your losses is less than a third of your single winning position then maybe your system is intended to work with 65% of your positions in the red zone? If your risk-to-reward ratio doesn’t compensate your poor loss-to-win ratio, you still don’t have to blame yourself, the market or your system. Probably, it’s just the wrong system for the market you are trading in. Time changes and the old systems stop working, while the new ones are created. Just switch to something else and continue your pursuit of success.
3. Single winning position is not an indicator of your success. The same as with the losses don’t treat a single win as your accomplishment. It’s just a part of the routine process of trading Forex.
4. If your winning rate is high during the long period of time and the risk-to-reward ratio is rather low then I can congratulate you with finding the right strategy that worked fine for the kind of market you were trading on during that period. That’s it! Stick with it until your winning rate declines below the satisfying level. Then look at the number 2.
Wednesday, November 4, 2009
Forex Chart Patterns
Trading with the chart patterns can be easy if you know how to distinguish them and how to place the entry and exit orders correctly. There are many different chart patterns recognized by the expert financial traders. But in my opinion, in Forex trading there are five most important and rather frequently appearing patterns: ascending, descending and symmetrical triangles and rising and falling wedges. Here you will find the models of these patterns and their descriptions:
Ascending Triangle
Generally, it’s a bullish continuation pattern but the breakout in each direction is possible. If you like taking risk you can go long immediately after you spot this pattern. But if you want to be careful it’s recommended to wait until breakout appears in either side. The most important parts of the ascending triangle are the horizontal line and the upwardly sloping line. It’s also important for the price rate to touch each of those lines at least twice before breakout. This rule is vital for all of the 5 Forex chart patterns presented in this article. As you can see on the image, the price has touched the sloping line three times and the horizontal line two times and then broke out through the latter. Stop-loss should be placed slightly below the horizontal line. As the moderate pull-back is possible, consider placing stop loss near 70% level on the way from the sloping line to the horizontal one in place of the breakout. Take-profit should be placed according to the auxiliary sloping line, which runs from triangle’s top-left angle parallel to the main sloping line. Consider placing your target at the auxiliary line’s level in place of the breakout.
Ascending Triangle
Descending Triangle
Generally, it’s a bearish continuation pattern but the breakout in each direction is possible. As with the previous pattern you can go short immediately after you spot it. Wait for breakout in either side to enter a high-probability position. The most important parts of the descending triangle are the horizontal line and the downwardly sloping line. The price rate should touch each of those lines at least twice before breakout. As the image shows, the price has touched the sloping line three times and the horizontal line two times and then broke out down. Stop-loss and take-profit levels are placed using the same principles as with the ascending triangle.
Descending Triangle
Symmetrical Triangle
Generally, it’s a continuation pattern that breaks out in the direction of the previous trend, but in practice breakout in every direction is possible. As always, you may decide to open a position in the direction of the previous trend immediately as you spot this triangle. If you wait for breakout then you have better chances of success. The most important parts of the symmetrical triangle are the downwardly and upwardly sloping lines and the horizontal line that bisects the angle created by the first two lines. The last line should be really horizontal (several degrees of error are allowable) or otherwise it’s some kind of a wedge but not a symmetrical triangle. As always, the price should touch each of the main sloping lines at least twice before breakout. Symmetrical triangle, which is shown on the image, breaks out downwardly after touching the bottom line three times and the top line multiple times. Stop-loss should be placed near 70% level on the way from the opposite sloping line to the horizontal line in the basement of the triangle (not the breakout point like before). Take-profit can be set near the auxiliary horizontal line, which runs from the top or bottom base angle (depends on the breakout direction) of the triangle and is parallel to the main horizontal line.
Symmetrical Triangle
Rising Wedge
Usually, this chart pattern signals a reversal from the previous trend, but both upward and downward breakouts are possible. You can enter a risky trade immediately when you see this pattern. Wait for a clear breakout to enter a more probable trade. The crucial parts of the rising wedge are the two upwardly sloped lines that form a wedge. The price should touch each of them at least twice before breakout. On the image below you can see that the price touched top line two times and the bottom line multiple times. The downward breakout is shown. Stop-loss can be set at the auxiliary line that bisects the angle of wedge; set it near the level of the auxiliary line at the breakout. Take-profit is set near the auxiliary line (not shown on the image) that runs from the top or bottom base angle (depending on the breakout direction) of the wedge and is parallel to the opposite sloping line. E.g. in the picture’s example wedge the line should start at the bottom angle of the wedge and be parallel to the top sloping line. Take-profit should be placed near the level of that auxiliary line at breakout.
Rising Wedge
Falling Wedge
As its rising cousin, this chart pattern often signals a reversal from the previous trend, but both upward and downward breakouts are still possible. To enter a risky trade, open it immediately as you see this chart pattern. Wait for a clear breakout to enter a more probable trade. The main parts of the falling wedge are two downwardly sloped lines that form a wedge. The price should touch each of them at least twice before breakout. On the image you can see that the price touched the bottom line two times and the top line multiple times. Upward breakout is shown. Stop-loss and take-profit levels are set using the same principles as with the rising wedge.
Falling Wedge
If you have your own opinion or questions about Forex chart patterns, feel free to leave it in a comment to this post.
Ascending Triangle
Generally, it’s a bullish continuation pattern but the breakout in each direction is possible. If you like taking risk you can go long immediately after you spot this pattern. But if you want to be careful it’s recommended to wait until breakout appears in either side. The most important parts of the ascending triangle are the horizontal line and the upwardly sloping line. It’s also important for the price rate to touch each of those lines at least twice before breakout. This rule is vital for all of the 5 Forex chart patterns presented in this article. As you can see on the image, the price has touched the sloping line three times and the horizontal line two times and then broke out through the latter. Stop-loss should be placed slightly below the horizontal line. As the moderate pull-back is possible, consider placing stop loss near 70% level on the way from the sloping line to the horizontal one in place of the breakout. Take-profit should be placed according to the auxiliary sloping line, which runs from triangle’s top-left angle parallel to the main sloping line. Consider placing your target at the auxiliary line’s level in place of the breakout.
Ascending Triangle
Descending Triangle
Generally, it’s a bearish continuation pattern but the breakout in each direction is possible. As with the previous pattern you can go short immediately after you spot it. Wait for breakout in either side to enter a high-probability position. The most important parts of the descending triangle are the horizontal line and the downwardly sloping line. The price rate should touch each of those lines at least twice before breakout. As the image shows, the price has touched the sloping line three times and the horizontal line two times and then broke out down. Stop-loss and take-profit levels are placed using the same principles as with the ascending triangle.
Descending Triangle
Symmetrical Triangle
Generally, it’s a continuation pattern that breaks out in the direction of the previous trend, but in practice breakout in every direction is possible. As always, you may decide to open a position in the direction of the previous trend immediately as you spot this triangle. If you wait for breakout then you have better chances of success. The most important parts of the symmetrical triangle are the downwardly and upwardly sloping lines and the horizontal line that bisects the angle created by the first two lines. The last line should be really horizontal (several degrees of error are allowable) or otherwise it’s some kind of a wedge but not a symmetrical triangle. As always, the price should touch each of the main sloping lines at least twice before breakout. Symmetrical triangle, which is shown on the image, breaks out downwardly after touching the bottom line three times and the top line multiple times. Stop-loss should be placed near 70% level on the way from the opposite sloping line to the horizontal line in the basement of the triangle (not the breakout point like before). Take-profit can be set near the auxiliary horizontal line, which runs from the top or bottom base angle (depends on the breakout direction) of the triangle and is parallel to the main horizontal line.
Symmetrical Triangle
Rising Wedge
Usually, this chart pattern signals a reversal from the previous trend, but both upward and downward breakouts are possible. You can enter a risky trade immediately when you see this pattern. Wait for a clear breakout to enter a more probable trade. The crucial parts of the rising wedge are the two upwardly sloped lines that form a wedge. The price should touch each of them at least twice before breakout. On the image below you can see that the price touched top line two times and the bottom line multiple times. The downward breakout is shown. Stop-loss can be set at the auxiliary line that bisects the angle of wedge; set it near the level of the auxiliary line at the breakout. Take-profit is set near the auxiliary line (not shown on the image) that runs from the top or bottom base angle (depending on the breakout direction) of the wedge and is parallel to the opposite sloping line. E.g. in the picture’s example wedge the line should start at the bottom angle of the wedge and be parallel to the top sloping line. Take-profit should be placed near the level of that auxiliary line at breakout.
Rising Wedge
Falling Wedge
As its rising cousin, this chart pattern often signals a reversal from the previous trend, but both upward and downward breakouts are still possible. To enter a risky trade, open it immediately as you see this chart pattern. Wait for a clear breakout to enter a more probable trade. The main parts of the falling wedge are two downwardly sloped lines that form a wedge. The price should touch each of them at least twice before breakout. On the image you can see that the price touched the bottom line two times and the top line multiple times. Upward breakout is shown. Stop-loss and take-profit levels are set using the same principles as with the rising wedge.
Falling Wedge
If you have your own opinion or questions about Forex chart patterns, feel free to leave it in a comment to this post.
Point-and-Figure Charting Explained
Point-and-figure charts (P&F) is another way to represent the price charts that can be used in Forex trading. Conventional charts display the price as the linear function of time, which results in a demonstrative picture of how the market behaved during certain periods of time. But the problem is that the trader often doesn’t need to know how price depended on time, all he needs is to know what the prevailing force on the market is at the moment — bulls or bears, demand or supply. That’s where P&F charts come handy. They show the price changes graphically, independently on the time during which the changes have occurred.
For example, the simple point-and-figure chart could look like this:
The green X’s are the price increases (by some certain value) and the red O’s are the price decreases. A column of X’s represent an uptrend, while the column of O’s represents a downtrend. In each given column there can be only X’s or O’s. When one trend ends a new column starts. As you see, there is no time scale in this chart. Each column can last an indefinite period of time.
So, how are these point-and-figure charts drawn? To start drawing a point-and-figure chart you should first set two important parameter values of the chart — the box size and the reversal distance.
The box size is the height of each of the O’s and X’s in pips. For example, if you sent a box size to 10 pips, each X will mean an upward movement by 10 pips, so a column of 6 X’s is an upward movement by 60 pips. The same would be correct for the O’s.
The reversal distance is the amount of boxes that should be passed by a price in a reverse direction for a trend to reverse (to start a new column). The most common reversal distance is 3. That means that on a rising trend (a column of X’s) a price has to go down by the amount of pips in three boxes for a new column (this time — of O’s) to start. For example, if you use a box size of 10 and a reversal distance of 3: the price goes up by 60 pips, you draw 6 X’s, then the prices goes down by 30 pips (that’s more than 3 × 10), you draw 3 O’s down starting a new column from the level below the last X. If the price would go down by less than 30 pips you wouldn’t have to draw anything new. Basically, after drawing an X or O you just wait for the price to continue going in the direction for a box size of pips or in a reverse direction for a reversal distance * box size of pips.
If we consider 10 pips box size and reversal distance of 3 for the image above then we can say that first the price goes up by 50 pips during the first uptrend, then it goes down by about 50 pips, then goes an uptrend for 70 pips, then go two equal bearish and bullish trends for 30 pips (exactly the reversal distance). Then a price declines by 50 pips, then goes up by 30 pips and finally falls by 40 pips. It ends at +10 pips (if you sum up all the values) and, as you see on the picture, the ceiling of the final O is 10 pips above the bottom of the first X. That’s exactly +10 pips. The «effective price» is located at the bottoms of the X’s and at the tops of the O’s.
Using the point-and-figure charts is simple. Almost all chart patterns and analysis techniques that work with the classic time-based charts work with the point-and-figure charts too. The trends are very easy to visualize in the P&F charts because the square dimensions of the boxes (X’s and O’s) form nice 45-degree angle trendlines. Look at the example:
Apart from the chart pattern analysis, P&F charts offer a sort of trading signals. When the trend direction changes, a new position can be opened in this new direction with a stop-loss equal to the reversal distance. But such trading technique requires some thorough optimization of the box size and the reversal distance for the given currency pair and the market conditions.
If you have any questions or comments regarding point-and-figure charting, feel free to reply in the commentaries to this post.
For example, the simple point-and-figure chart could look like this:
The green X’s are the price increases (by some certain value) and the red O’s are the price decreases. A column of X’s represent an uptrend, while the column of O’s represents a downtrend. In each given column there can be only X’s or O’s. When one trend ends a new column starts. As you see, there is no time scale in this chart. Each column can last an indefinite period of time.
So, how are these point-and-figure charts drawn? To start drawing a point-and-figure chart you should first set two important parameter values of the chart — the box size and the reversal distance.
The box size is the height of each of the O’s and X’s in pips. For example, if you sent a box size to 10 pips, each X will mean an upward movement by 10 pips, so a column of 6 X’s is an upward movement by 60 pips. The same would be correct for the O’s.
The reversal distance is the amount of boxes that should be passed by a price in a reverse direction for a trend to reverse (to start a new column). The most common reversal distance is 3. That means that on a rising trend (a column of X’s) a price has to go down by the amount of pips in three boxes for a new column (this time — of O’s) to start. For example, if you use a box size of 10 and a reversal distance of 3: the price goes up by 60 pips, you draw 6 X’s, then the prices goes down by 30 pips (that’s more than 3 × 10), you draw 3 O’s down starting a new column from the level below the last X. If the price would go down by less than 30 pips you wouldn’t have to draw anything new. Basically, after drawing an X or O you just wait for the price to continue going in the direction for a box size of pips or in a reverse direction for a reversal distance * box size of pips.
If we consider 10 pips box size and reversal distance of 3 for the image above then we can say that first the price goes up by 50 pips during the first uptrend, then it goes down by about 50 pips, then goes an uptrend for 70 pips, then go two equal bearish and bullish trends for 30 pips (exactly the reversal distance). Then a price declines by 50 pips, then goes up by 30 pips and finally falls by 40 pips. It ends at +10 pips (if you sum up all the values) and, as you see on the picture, the ceiling of the final O is 10 pips above the bottom of the first X. That’s exactly +10 pips. The «effective price» is located at the bottoms of the X’s and at the tops of the O’s.
Using the point-and-figure charts is simple. Almost all chart patterns and analysis techniques that work with the classic time-based charts work with the point-and-figure charts too. The trends are very easy to visualize in the P&F charts because the square dimensions of the boxes (X’s and O’s) form nice 45-degree angle trendlines. Look at the example:
Apart from the chart pattern analysis, P&F charts offer a sort of trading signals. When the trend direction changes, a new position can be opened in this new direction with a stop-loss equal to the reversal distance. But such trading technique requires some thorough optimization of the box size and the reversal distance for the given currency pair and the market conditions.
If you have any questions or comments regarding point-and-figure charting, feel free to reply in the commentaries to this post.
Forex Trading Tips – 4 Tips You Must Understand to Win at Forex
Here are 4 Forex trading tips that if you understand them, can allow you to enter the elite 5% of winners who make big long term consistent profits. Anyone can learn currency trading and win but these 4 points need to understood – Here they are…1. You are Responsible
If you think you can buy success think again, you can’t. Most traders think Forex trading can be done with no effort buy a junk robot with a simulated track record and think they will make the same gains sorry, it’s not that easy. Forex trading sees 95% of traders lose and is not a walk in the park.
While anyone can learn Forex trading, you need to get the right education and skills but first you need to understand what the Forex market and how prices move, which leads to the next point.
2. Understand Markets are an ODDS Game
Many traders think you can predict prices and believe so called experts, who say it’s possible. Its not and your predictions will be as accurate as your horoscope if you try. Neither do they move to a scientific theory as many claim; if they did we would all know the price in advance and there would be no market!
You need to understand that winning at Forex, is all about trading probabilities not certainties. You need to understand you won’t win every time and will have periods of losses – but if you always trade the odds, you can make a lot of money. Now let’s look at the type of Forex strategy you need.
3. A Simple System is All You Need
Your Forex trading system should be simple, robust and easy to understand.
Don’t believe anyone who tells you complicated methods are better there not, as they have too many elements to break and science (no matter how clever) won’t help you when you’re trading an odds based market.
Get a simple trading system – it’s easy to do and now we will move onto the final point which is the challenge you must overcome and if you can, you can make huge profits.
4. Discipline is the Key
A method by itself is not enough, you must have the discipline to execute it through periods of losses, until you hit profits again and this can be tough. It’s hard to keep executing your trading signals when the market gives you losses and makes you look a fool. Most traders simply let their emotions and ego get involved and lose.
Being disciplined at all times and employing strict money management, is the key to winning longer term and its not easy but it can be done, if you have confidence in what you are doing and have the right forex education.
*******************
It’s Not easy to Win
You can win though, anyone can. The fact it’s not easy to win, means the rewards are huge and you can get your share of them, if you want too.
Forex trading means you have to get the right education have confidence in what you are doing and trade with discipline. Accept this and take responsibility for your actions, and your on your way to Forex trading success.
If you think you can buy success think again, you can’t. Most traders think Forex trading can be done with no effort buy a junk robot with a simulated track record and think they will make the same gains sorry, it’s not that easy. Forex trading sees 95% of traders lose and is not a walk in the park.
While anyone can learn Forex trading, you need to get the right education and skills but first you need to understand what the Forex market and how prices move, which leads to the next point.
2. Understand Markets are an ODDS Game
Many traders think you can predict prices and believe so called experts, who say it’s possible. Its not and your predictions will be as accurate as your horoscope if you try. Neither do they move to a scientific theory as many claim; if they did we would all know the price in advance and there would be no market!
You need to understand that winning at Forex, is all about trading probabilities not certainties. You need to understand you won’t win every time and will have periods of losses – but if you always trade the odds, you can make a lot of money. Now let’s look at the type of Forex strategy you need.
3. A Simple System is All You Need
Your Forex trading system should be simple, robust and easy to understand.
Don’t believe anyone who tells you complicated methods are better there not, as they have too many elements to break and science (no matter how clever) won’t help you when you’re trading an odds based market.
Get a simple trading system – it’s easy to do and now we will move onto the final point which is the challenge you must overcome and if you can, you can make huge profits.
4. Discipline is the Key
A method by itself is not enough, you must have the discipline to execute it through periods of losses, until you hit profits again and this can be tough. It’s hard to keep executing your trading signals when the market gives you losses and makes you look a fool. Most traders simply let their emotions and ego get involved and lose.
Being disciplined at all times and employing strict money management, is the key to winning longer term and its not easy but it can be done, if you have confidence in what you are doing and have the right forex education.
*******************
It’s Not easy to Win
You can win though, anyone can. The fact it’s not easy to win, means the rewards are huge and you can get your share of them, if you want too.
Forex trading means you have to get the right education have confidence in what you are doing and trade with discipline. Accept this and take responsibility for your actions, and your on your way to Forex trading success.
Sunday, November 1, 2009
Forex trading Tips
Many Oof The Forexx trading products sold over the Internet claim you don't need any experience in the Forex market to earn money. Don't be fooled. They're simply trying to make a quick and easy buck of their product from the unwary.
To succeed in the Forex market, requires more than the computer software they promise will mechanically buy and sell currency contracts for you 24 hours a day, 7 days a week.
Place that hyped up Forex advertisement aside and pull yourself back into reality. Do you really think earning money in the markets is obtainable without first obtaining an education? If it were as effortless as these Forex advertisers say it is, then why haven't you heard your friends talk about it.
Did you get the occupation or the position you have now without any education or training? Why would you think it would be any different for being successful in the Forex market?
You don't need to go back to college for a finance degree, but the minimum you can do is borrow a decent book on the fundamental principles of Forex trading. It will provide you some practical knowledge to at least judge those Forex trading products with a little intelligence.
Forex trading isn't a game. There's money to be earned but there are also risks of losing your starting capital that these Forex trading advertisements barely note
To succeed in the Forex market, requires more than the computer software they promise will mechanically buy and sell currency contracts for you 24 hours a day, 7 days a week.
Place that hyped up Forex advertisement aside and pull yourself back into reality. Do you really think earning money in the markets is obtainable without first obtaining an education? If it were as effortless as these Forex advertisers say it is, then why haven't you heard your friends talk about it.
Did you get the occupation or the position you have now without any education or training? Why would you think it would be any different for being successful in the Forex market?
You don't need to go back to college for a finance degree, but the minimum you can do is borrow a decent book on the fundamental principles of Forex trading. It will provide you some practical knowledge to at least judge those Forex trading products with a little intelligence.
Forex trading isn't a game. There's money to be earned but there are also risks of losing your starting capital that these Forex trading advertisements barely note
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