Good Forex Trades Need Great Context

On your path to becoming a profitable trader, you will test many different methods for entering and exiting trades. At some point you may find a method which works pretty well for you and which you feel comfortable using. You may take a lot of great trades using this method, only to find that one day your method just stops working. What happened? Did your system break? Will you have to start all over?

Sometimes the answer to questions like this is simpler than you might expect. A lot of traders pay attention to entry triggers like moving average crossovers, price action patterns, and other indicators lining up on their charts, but don’t pay as much attention to what the market is doing on a given day. The market does slowly transform, and like any other living system it will evolve with time. Some things about Forex will never likely change, but others are sure to do so. The “mood” of the market can change considerably as the years go by, and a system which worked great in one context may fail in another—or simply need an adjustment to keep working.
If you are in a situation like this and your system has abruptly “failed,” you may want to ask yourself if this is what has happened to you. Has the economic climate changed substantially since you were last profitable? If so, then perhaps the context around your trades has stopped being quite as optimal as it once was. You may have been placing trades in an excellent context before without even knowing it or attempting it by complete coincidence. And now that the context isn’t as great, your trades aren’t working out.

Here are some questions to consider. Ask yourself, “Am I trading against the trend?” This can often work against you. “Am I trading in a choppy market?” Choppiness kills a lot of traders. If there are a lot of fake outs, sometimes you need to take a break and wait for the market to even out a bit before you come back in. “But I’ll have to wait forever,” you might say. If this is the case, then look at more currency pairs. If you only trade a couple of pairs, and great setups are coming half as often in the current market climate, then think about looking at twice as many pairs each day. This phase of the market, like all others, will pass. It doesn’t mean your system is broken, it just means that right now it’s a little harder to make it work than usual. All traders face this sometimes. Once in a while you may indeed find you need to go back to the drawing board, but more often than not it’s a waste of time to start all over. If what you have makes sense and it works often enough, than you probably should just adapt to the market conditions and stick with what you’ve got.

Develop a technique to find the best setups in the best locations. Great Forex traders point out that finding excellent setups is like using a rifle, not a shotgun. They’re right—good trades don’t take good setups, they take great setups.

Trading in Real Life: Why You Need to Demo Test

Have you backtested a fantastic system over hundreds or even thousands of trades, and achieved a high win percentage and otherwise excellent statistics? If so, you may be tempted to go live. Some traders struggle to bring themselves to actually take their Forex systems live, but for others it is impatience and not trepidation which is the enemy. If you are thinking of taking this great system which you’ve backtested live without demo testing, think again. Backtesting and trading in real life are completely different, and you may have quite a bit of work ahead of you to achieve the same kind of results in real time as you did backtesting.

The first thing a lot of us discover while demo testing is that we completely forgot that in real life we do stuff like work, eat, and sleep. Something which worked fine in backtesting may be impossible to fit into our real life schedules, or take some very serious workarounds. You may need to learn to trade using a cell phone if you are at work during trading hours for example. Or what if your Forex trades tend to fall in the dead of night? You’ll need to trade in your sleep, and that means setting a lot of price alerts. Those alerts will have to wake you up at useful times though, and even figuring that out can be like designing an entirely new system. The wrong system of alerts can cause you to lose the same trades you’d have won while demo testing!
Another difference you’ll discover quickly is the role which time plays in your trading psychology.
When you move the Forex charts forward a candle at a time and make trading decisions in a few seconds or minutes while backtesting, you don’t have a lot of time to second guess yourself. The same trades though, spread out over a time period of hours, days, or even weeks, can cause a lot of traders to experience a wide range of conflicting emotions. Many times we ask ourselves “What decision would I have made backtesting?” only to discover that we don’t know anymore! It takes a lot of practice to find out how timing is impacting your trading. You may find you need to trade on a different timeframe, or just get a grip on your emotions.

While all this may again sound simple in theory, most traders discover Forex demo testing presents a lot of unexpected situations which need resolution before they can go live. We highly recommend that you demo test until you are profitable for at least 2-4 consecutive months before you go live with your system. There is no reason for you to lose a dime in this business unnecessarily since you can demo test for as long as it takes for you to master your trading, completely free! Your drawdown live should reflect your backtesting figures, but it won’t unless you invest some time and effort demo testing and finding out how to integrate trading into your real life first.

Tips for Trading Forex at Night

For a lot of us (especially in the US), the best times to trade Forex fall at the worst times of day—either during work hours or while we’re asleep at night. Fortunately for those who trade the dailies in the US, the start of the new candle tends to happen in the afternoon, but that often means that trades will span overnight on this and other timeframes. What do you do if your trading schedule is this inconvenient? Suggestions online usually range from “quit your job” to “move to Europe.” This is hardly feasible for most of us. Most of us are going to be faced with examining an option which is more viable but still challenging: trading Forex at night.

For many people, trading overnight is just a given since position traders who trade longer term charts like weeklies are going to be in trades for many days on end. These timeframes move slowly though and are easier to keep an eye on during the daytime than other trades on faster timeframes. What if you trade the dailies or hourly charts? You could be stuck making critical trading decisions in the dead of night.

Unfortunately many FX traders arrive at the solution, “I’ll just not sleep.” This is the road to disaster though. You cannot function without sleep. You need sleep to be healthy and also to keep your mind sharp and fresh. Trading on a sleep deficit is like trading inebriated. It’s just a really bad idea; it’ll destroy your health and your finances. So you have to sleep. How do you balance sleep with currency trading at night?

The trick is to set up alerts in such a manner that you can maximize your rest, minimize the complexity of your decision-making process, and maximize your returns. You want to only have your alerts wake you up at critical junctures, and you want those junctures to be clear cut. Making difficult, complex decisions in the dead of night will rob you of sleep and also harm your judgment, resulting in losses. The alerts should wake you up in order to make simple, straightforward decisions.

One technique you can use to trade during the night is to set alerts at pivot zones. Different techniques will be appropriate for different Forex systems, but if for example you exit trades partially based on support and resistance, then you will want to identify important pivot areas and set alerts in those areas. Choose a sound to signal when a trade is moving toward profit and another sound to signal when it is moving away. That way if you hear the “good” sound in your sleep you can roll over and go back to sleep (or get up and trail your stop). If you hear the “bad” sound you can get up and choose whether to exit. By letting the sound itself give you information, you can optimize your sleep. Also make sure to have the alert beep at you more than once so you don’t miss it in your sleep the first time.

Trading the foreign exchange market at night is one of the most challenging real life integrations you can do, but with some tweaking you should be able to make it work for you. You don’t have to move to another country or quit your job to trade during the day if you can learn how to trade at night and get adequate sleep!

3 Most Important Forex Fundamental Indicators

There are many fundamental indicators available to the Forex traders today. If you count all of them only for the major currency pairs you’ll get more than a hundred distinct indicators — macroeconomic, monetary, economical, financial, weather-based, etc. For many traders it’s difficult to follow all of them, as it requires time and efforts in addition to the necessity to learn about the effect of all these fundamental indicators on various currency pairs. This article lists 3 most important (in my humble opinion) fundamental indicators that have the highest impact on the currency rates and are quite easy to follow as they are reported not so often.
• GDP or Gross Domestic Product is the main indicator of the macroeconomic strength of the country. The growth of GDP signals a stronger economy and a more competitive currency because the global investors will have to buy this currency in order to invest in this country, and they will want to invest in it because its economy is growing. GDP reports are usually published quarterly but they have three states of revision (advance, preliminary and final) published with the monthly intervals. GDP strongly affects currency pairs both in short-term and long-term. You’ll have a trading opportunity during the time of the release, as the volatility spikes up, and you’ll be able to adapt your long-term positions to the new data after the release.

• Interest Rates are set by the world’s central banks and are the main tools of the monetary regulation. Higher interest rates provide more value to the affected currency, while the lower interest rates decrease the value of the currency. Interest rates are usually revised every month or two during the special monetary policy meetings of the central banks. Interest rate decisions greatly depend on the growth of GDP and other macroeconomic indicators. Currency pairs react with the high volatility to the unexpected interest rate changes. It’s important to monitor the trends in the interest rates to forecast the long-term trends of the traded currencies.

• Unemployment Rates are influential indicators both for currency traders and for the monetary authorities when they set the interest rates. Non-farm payrolls are considered to be the most important of the unemployment indicators in USA and they are released monthly. Major currencies usually react with the short-term tendencies to such releases. Weekly reports on jobless claims can also be considered but they aren’t as influential.

In many cases it’s enough to be up to date with these fundamental indicators to understand the possible market trends in Forex. But, of course, if you wish to get a more detailed picture you shouldn’t limit yourself only with these indicators, especially if you pose yourself as a pure fundamental currency trader

5 Reasons to Use Forex VPS

Installing your trading system on a dedicated server with a full-time connection to the trading server and no need to reboot, restart or be turned off is a great advantage that can seriously enhance your profit results. If you trade with MetaTrader expert advisors there is a great selection of VPS services available for you — starting from as little as $9/month they can guarantee you a 99.9% uptime of your trading robot. This is a list of 5 main reasons to use Forex VPS:
1. Uninterrupted 24/7 run-time of your expert advisor ensures that it uses all the trading signals. You won’t miss any opportunities. Your EA will be also able to close other positions on time and won’t need to store its internal variables in a file to load them after restart — there’s simply no need for it to restart during trading sessions.
2. No need to run the expert advisor from your home or office PC. Now that your expert advisor is trading on a real account from a VPS, you can stop running your MetaTrader platform all the time. You can also safely reboot your PC and turn it off when you don’t use it. And there is no more stress when suddenly you get some critical software error.
3. Because VPS is a dedicated server that runs only your trading platform and EA, it can have a much better performance, processing the incoming data and sending orders much faster than your own PC could do. That can really help to get better quotes, deal with the requotes and use scalping systems.
4. You can choose a VPS, which is located physically close to your Forex broker’s trading server, ensuring even faster connection and order execution. For example, if you trade from New Zealand and your broker is located in United States you’ll always have some network latency due to the distance. But installing your EA on a VPS, which is hosted in U.S., will remove this latency.
5. Usually, VPS can be accessed anywhere from any computer. So, if you travel a lot you won’t need to move your expert advisor from your PC to your notebook or some mobile device. Your EA will always remain on VPS and you will be able to control and monitor it by logging into your VPS control panel from any place with a connection to internet.

Of course, your EA should be a profitable one and your monthly profit should be high enough to cover the cost of the VPS or otherwise there is no point in using it. You can also use VPS hosting for demo testing your EAs but that’s quite an expensive endeavor. If you have any questions or opinions please, use the commentary form below.

Forex PDF

PDF is the popular file format for the electronic books (or e-books) and Forex traders always search for Forex PDF to read about the currency trading from their own PC without having to buy a physical book or installing some additional software for e-book reading. Of course, there are many strictly proprietary e-books that aren’t available in PDF format, but there are also free e-books that allow reading about Forex in PDF format.

There are several sources of the Forex PDF books on-line. Some of them are great and feature tens of interesting and useful e-books; others aren’t that cool but still allow downloading one or two free Forex PDF books:

• Forex E-Books from EarnForex.com list more than 70 free PDF e-books that can be freely downloaded. All the books are divided into 6 thematic categories.

• Trading Naked Library — the site isn’t too visitor-friendly but it has ton of Forex PDF and other financial trading e-books.

• Phildun’s Forex Trading Library is a great source of free Forex PDF books but it lists them without descriptions and the download process isn’t very easy from this website.

• The Forex Village has four categories of free Forex PDF books with a lot of rather rare strategy descriptions.

• FX1618 lists a lot of interesting e-books but, unfortunately, only few of them are about the actual Forex trading.

• Forex-Book.org — the majority of the listed books are paid but there are also several free ones there (not too great).

• Forex Newbies Library - 9 carefully picked newbie-friendly Forex PDF books. Nice choice if you don't want to spend a lot of time to go through the dozens of them to find what you really need.

When you set yourself into a Forex trading, it’s very important to have a good level of knowledge in the markets. Downloading and reading at least some of these e-books can be a good start before your open your real money account and buy some real books on trading.

Currency Trading Forecast

Today there are more services than ever that will claim they can help with currency trading forecasts and there are numerous experts, who try and forecast the future movements of currency markets.

The Dangers of looking to Far Ahead

You will often see currency trading forecasts for months or a year ahead but these need to be treated with caution - as there are lots of variables that can and do change rapidly, so never look to far ahead. To forecast currency prices use the facts you have that are immediately available and use these as a basis for forecasting.

The reason currency trading forecasting is so difficult, is because prices do not just respond to the facts; they move based upon how traders see the facts. Understanding this relationship is an important part of your forex education. Lets look at why.

The Relationship between Value and Sentiment

Humans determine the price of anything and currency markets are no different.

We all have the same facts to look at but we draw our own conclusions individually on what we see. Humans are not logical; they are creatures of emotion and respond to greed and fear.

Throughout history the emotions of greed and fear see traders spike prices away from fair value. These sentiment spikes never last for long and prices eventually fall back to fair value. These spikes are easy to see on a forex chart and can be traded for profit.

If you want to enjoy currency trading success, you need to forecast when these spikes in sentiment are going to change.

As a forex trader the aim of your forex trading system is - to trade anticipate and trade these shifts in sentiment and use them to execute your trading signal at the right time when the odds are in your favor.

Forecasting the Fundamentals

Many traders like to trade forex facts that they see on newswires or in the papers.

While stories based upon the facts sound logical and convincing, as currency trading forecasts there normally convincing, logical and wrong.

The reason for this is the traders who trade these stories are not!

It’s a fact that markets make important tops or bottoms when the markets are at their most bullish or bearish – this is investor psychology at work. Markets become too bullish or bearish and break back towards fair value.

So it’s impossible to trade the supply and demand fundamentals in isolation, as by themselves they give no clues to where prices will go next.

Forecasting With Technical Analysis

Forex technical analysis simply assumes that all known fundamentals will quickly show up in price action (and in our world of instant communications this is truer than ever before) however, it also shows how investors perceive the fundamentals.

A currency trader using forex technical analysis is not concerned with how and why prices move; he simply wants to make forex profits when they do.

Judging Sentiment

The important point to keep in mind is that we can all look at the news and forecast where currency prices may go and we may or may not be right - however, by simply following and acting on price action on a chart we are effectively trading the reality of price change or trade the truth.

We don’t have to make a currency trading forecast, we simply trade the reality.

If you make this the basis of your forex trading strategy then you can enjoy currency trading success.

You will often see news stories that will say a trend will go on for ever and this indicates a bullish or bearish price extreme which is driven by greed and fear and it will exhaust itself. A piece of bullish forex news that does not move currency higher or bearish news that doesn’t push prices lower, is telling you that a change maybe at hand.

There is an old saying:

“If you can hold your head while everyone around them is losing theirs you probably haven’t heard the news”

In FX trading you have - but you have drawn different conclusions and are making a currency trading forecast against the majority. To do this you simply need to look at your forex trading charts for clues to where prices may go next.

If you understand the above relationship between sentiment and the fundamentals
You will have a head start in your quest for profits

You can trade with the trend until an extreme is reached and then look for turning points. You are making a currency trading forecast but you are also not acting on it until you see evidence of a change on a forex chart. You’re trading the confirmation or the truth and if you do this you can enjoy success.

How to Become a Currency Trader

Can anyone become a currency trader from home? The answer is yes, everything about successful currency trading can be specifically learned, by anyone with a desire to succeed but you must avoid common and currency Myths work on getting the right forex education.

Anyone can learn Currency trading here’s the Proof

A graphic illustration of how anyone can learn to trade was provided by legendary trader Richard Dennis - who took a group of people who had never traded before and taught them to trade in just 14 days.

The Result?

They went on to make $100 million dollars in 4 years and many became trading legends. This group Known as the turtles conclusively proved that everything about trading can be specifically learned.

But how do you go about becoming a currency trader and making regular forex profits?

The answer is you don’t need to work hard – but you need to work smart and just as importantly, get the right mindset for success.

Currency trading success is based on a sound logical forex trading strategy but also relies on the discipline to apply it, through periods of losses and to enjoy longer term success.

If you don’t have the discipline to apply your method, you simply don’t have one!

The Basics of a Sound Forex Trading Strategy.

• It should be simple – all the best currency trading systems are, as they tend to be more robust than complicated ones which have too many elements to break.
• The simplest and most time efficient way to trade is by using technical analysis and study forex charts. Here you need to isolate and spot important levels of support and resistance and then trade looking for the level to hold or break.
• A Good forex trading strategy will NOT try and predict in advance but will act on the reality of price momentum changes – either looking for these levels to break or hold, by measuring the velocity of price.
• You should never try and predict - you should use some momentum oscillators to confirm the moves and then execute your trading signal. You should keep in mind that some of the best high odds trades come from breakouts of new highs or lows and going with these breaks can yield substantial profits.
• Try and keep the rules of your trading system as objective as possible – if you have too much subjectivity in your system, your emotions can get involved and you will lose.
• Always assume the worst when you place your trade. Calculate your loss and make sure you have a stop in place – never use a mental stop.

The easy bit is getting your currency trading system together it should only take a few weeks study, the hard part is applying it with discipline.

To Win You Must Have This!

Discipline is a hard trait to acquire for most traders.

To acquire discipline, you need to educate yourself and know everything about the currency trading system you are going to use.

Only by having a complete understanding of how and why your system works, will you acquire confidence in its ability to be successful and from this confidence comes discipline.

The reason many traders don’t succeed is they blindly follow experts and systems they don’t understand. As soon as they hit a few losses, their discipline goes because they don’t have confidence in what their doing.

The biggest mental barrier for any trader is executing his trading signals in the face of consecutive losses (all traders will have them and they can last for weeks or months) and it is in these periods that you must stick with your system and not throw in the towel.

It sounds easy to do but is anything but – it’s very hard. If you want to achieve success you need to base your strategy on the right knowledge to obtain confidence and achieve discipline.

Work Smart NOT Hard

If you want to become a currency trader you don’t need to work hard as we have said you need to work smart AND treat it like you would any other business – one where you have to learn the basics and understand what you are doing. While this may sound obvious, it’s surprising how many traders thing forex trading is easy. They think they can follow some mentor blindly, or a story from the news and make money – it’s not that easy and you wouldn’t expect it to be, with the rewards on offer in forex trading.

If you want to become a currency trader from home you can - if you have the desire to succeed and a willingness to work smart and learn the right knowledge.

If you invest time and effort in becoming a currency trader you could enjoy currency trading success and you could set yourself up with an income stream that can create significant wealth. If you want to become a currency trader anyone has the potential but it’s up to you to realize it.

Best Forex Broker

If you want to trade then you need a forex broker and not all brokers are the same, here we are going to look at selecting the best Forex broker to help you maximize your FX trading experience.

A broker is not there to give you advice on trading.Sure, you may need support on the mechanics of trading but all trading signals should be your decision and yours alone.

Here are some points you need to keep in mind when selecting a forex broker to work with.

Trading platform

You can test platforms and you should select one that combines ease of operation with reliability. Most brokers will give you a demo account, so you can give it a test drive - take your time with your testing to see it works for you.

Spreads

This is your cost of doing business - so look for a pip spread that is not going to impact on your profits and losses. If you are a frequent trader, pips can mount up so look for competitive spreads.

Leverage

Most brokers offer good leverage of 100:1 and many now will give you to 400:1 - which enables you to increase your profit potential.

Negative Balance Protection

If you are using high leverage, it can create significant profit potential but it also creates risk. Many brokers for a fee will give you the comfort of negative balance protection. This is an ideal service for new traders who want to restrict risk.

Funding and withdrawals

Make sure that you can get your money back quickly and also there is a facility to fund your account online should you wish to top up quickly. Today, many brokers allow funding by credit cards.

24 Hour Service

You need a broker who has people to assist you online 24 hours a day so make sure this support is available.

Length of time in business

Forex brokers come and go so make sure that the one you use is an established name and they have been in the business for a while.

Trading Tools

Many brokers offer demo accounts and a range of support that includes:Newsletters, free guides and trading tips and if you are a new trader these tools can be a valuable extra bonus.

Currency Trading Books 10 Of the Best

Below you will find my ten of the best currency trading books and there not just for currency traders they are for any form of trading and apply to all markets. Any list of best currency books is of course subjective and this list is no exception. The list comes from reading thousands of books over the last 25 years.

These books won’t tell you how to trade or execute trading signals – building a currency trading system is a personal affair but they will run you through the concepts of trading and most importantly, the areas that many traders neglect namely – obtaining the right mindset for success, executing a trading plan with discipline and strict money management techniques.It’s a fact that anyone can learn to trade and anyone can build a trading method but the areas that most traders neglect are in the mind. Traders generally fail due to poor money management techniques and lack of discipline.The books below are listed in no order of importance - but these ten books will in my humble opinion help anyone become a better trader. I hope you enjoy them as much as I did.

1.Market Wizards (Jack Schwager)

Schwager interviews 17 trading legends including Richard Dennis, Paul Tudor Jones, Ed Seykota, Marty Schwartz, Tom Baldwin and others. One of the top-selling trading books of all-time and with good reason – if you can’t learn from these guys you can’t learn from anyone!

2. The New Market Wizards (Jack Schwager)

Follows the same format as the original book - another host of trading legends share their insights and knowledge on trading the markets.

3. Extraordinary Popular Delusions and Madness of Crowds – Charles Mackay

Over 100 years old and a timeless lesson for those who think that market behaviour can be predicted. If you ever get the feeling that a market simply can’t go any higher or lower read this book!

4. Trader Vic – Methods of a Wall Street Master (Victor Sperandeo)

Victor Sperandeo is one of those traders who piles up consistent gains year after year and here he shares his insight on everything to do with trading - from psychology, to trend following correctly, to money management.

5. The Disciplined Trader Developing Winning Attitudes (Mark Douglas)

This book was the one that really rammed home to me how important discipline in trading is and how hard it is to achieve in terms of mindset no matter how well prepared you feel you are or how good your trading system is. The ideas and concepts in the book are well presented, if somewhat repetitive. The author examines the psychology of fear that often hinders traders achieve trading success. Traders either love this book or hate it but those who dismiss it have either not read it or have not taken a very close look at themselves.

6. What I Learned Losing a Million Dollars – (Jim Paul Brendan Moynihan)

This books focus is on losing and as it correctly states

There are many different ways to make money but only a few ways to lose it.

Part biography and part a lesson in money management – if you only thought money management was placing a stop you need this book.

One of the most unique books you will ever read. It correctly points out that trading and investing are personal journeys of discovery; about finding out who you are, and then how to manage what you find and use this understanding to trade successfully in the markets. The reason why most traders never make money - it never occurs to them that trading is all about self knowledge not the method they are using.

7. The Way of the Turtle – (Curtis Faith)

While visiting a turtle farm, legendary trader Richard Dennis had a bet with his big pal and trading partner - Bill Eckhardt that great traders didn't have to be born - they could be made. To settle the bet, they recruited a group of individuals from all walks of life, gave them accounts to trade, and trained them for two weeks - hence the Turtle Traders. The Turtles earned more than $100 million in less than four years.

Here the most successful turtle Curtis Faith goes through the experiment in great depth offering his unique perspective on the experience, he explains why the Turtle Way works in today’s markets and how to apply it. He also shares his wisdom on taking risks, choosing your own path, and learning from your trading mistakes.

9. Technical Analysis of Financial Markets – (John Murphy)

A typical book from Murphy, well thought out, well presented and over 500 pages on just about everything you could ever want to know about using technical analysis on forex, or any other financial market.

This is a great reference book for any serious trader’s book library.

10. Currency Trading Fro Dummies – Mark Galant and Brian Dolan

If you have read of the other “for dummies” books you know what to expect. A great introduction and a lot more insight to being a successful trader than you would expect from a beginners book - the perfect book for novice traders.