Forex Course: Key Factors To Consider Before Choosing One

Posted on June 2, 2011 by tradingrebel7

It should be self-evident that in order to successfully trade the forex markets, a trader needs to commit to the very best training, which generally means studying at least one forex course. That said, surprisingly few traders actually do so, which probably goes a long way to explaining why 95% of traders lose money in the markets.

We would contend that the best form of forex course training, that gives the maximum chance of profitable trading…

…is to master technical analysis – the art and science of studying forex price charts. This sort of forex course teaches you to understand market price action, forecast where the market is most likely to go, and even determine repeating price patterns and setups that you can then create forex trading systems around.

By Masur – R.N. Elliott, “The Basis of the Wave Principle,” October 1940., CC BY 2.5,

This sort of forex course requires that you master the basic concepts of trend, support and resistance, trendlines, oscillators, Fibonacci levels, price patterns, and ultimately Elliott Wave and Gann analysis as well.

Certainly, there can be some limited value in learning some basic fundamental economic analysis if you really wish, but its ultimate application in the foreign currency markets is limited to perhaps timing sudden price movements based on the release of key economic data that the market focuses on. Ultimately, you can do the exact same thing with a calendar, and hence have really little need for extensive forex training involving Economics!

Above and beyond all of this though, the most important forex course training that you can possibly engage in is to actually train in becoming an excellent trader, i.e. in the process of trading itself. No amount of head knowledge of economics or technical analysis makes an excellent trader. You become an excellent profitable trader by actually trading, over and over again, making note of successful strategies, and taking heed of mistakes you made. The very best way to do this initially is to either paper trade, or else trade a very small amount indeed. In the beginning, the key to successful trading is simply… to STAY in the game!

Overall then, the subject of forex courses is a broad one, and as complex as the markets themselves. Hence, you should take time in mastering the various areas involved and be patient with yourself as you participate and gradually improve as a forex trader in the currency markets.

Make sure you read the free report The 7 Deadly Mistakes Of Forex Trading which is a full and detailed free forex course in itself, packed with solid tips for increasing your foreign exchange trading profit.

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Psychology Of Trading

Posted on May 27, 2011 by tradingrebel7

Profitable trading is very dependent on ONE single frequently overlooked factor. It is actually NOT the specific market you might choose to trade; be that forex trading, stock trading, bond futures trading, or options on any other for that matter. It is NOT the timeframe  – i.e. short-term day trading vs. much longer-term investment time horizons – that you choose to trade. It most certainly is NOT how much cash you happen to have in your brokerage account. Strangely enough, profitable trading is NOT critically dependent how good your trading information is, be that technical charting methods or macroeconomic fundamentals, or a combination of both.

All of these assuredly have their role to play in your overall trading success, and that is indisputable. Nevertheless, this ONE factor is what my good friend, the late Robert Krausz (featured in Jack Schwager’s “New Market Wizards” book) continually stated was responsible for 70% or even more of a top trader’s success.

So what is that factor, you may ask? It is Psychology!

At first glance, this may seem very strange. Surely, you will argue, when I trade a fixed rules trading system, what possible role could my psychological profile play? If you trade by analyzing the markets via in-depth technical analysis charting, then isn’t your success dependent upon THAT, and not your psychology?

Sadly, it would seem not. Indeed, more than virtually any other skill or profession, in Trading your psychology is so critical that it actually overrides pretty well all else.

In Sport, you could argue that physical fitness and talent are key. In business, you might claim that creating excellent systems approaches and processes, combined with maintenance of top quality relationships and employee management are paramount. However, in online trading it is just YOU, your computer, and the markets.

Hence, whatever you choose to do or not do is ultimately down to your private psychology. Hence, even if you have a proven forex trading system that you purchased for big money, for example, it is still your psychology which determines if you stay with that system when times get tough, or whether you abandon it for some other method. If a sequence of losing trades leave you feeling worthless and sad, and you decide to overtrade so as to make back your losses, thus creating an even worse result than before, it is your trading psychology that was the culprit and that caused you to make those decisions.

It is your beliefs about Money that decide whether you will or will not draw a serious quantity of it into your life. Most human beings have an upper threshold on how much they believe they can earn. This threshold works in exactly the same way as a thermostat. This same phenomenon is present in trading the markets too. If you have a psychological upper limit on what your net worth can be, you will thus make it impossible to make more than that figure from your trading. It will be like an invisible barrier that you cannot break. Every time you hit this barrier, you start to lose in the markets without fail until you are once again returned to your mental comfort level. Once there, you will then discover that your trading miraculously improves once more… until you collide against that barrier yet again. This kind of cyclical behavior is extremely common not only with market traders, but with commission salespeople too.

Psychology also affects your trading SIZE, or rather your trading size affects your psychology and hence your trading. People who have only ever traded two soybean futures contracts in their lives will find that their psychological comfort level, and consequently their trading performance,  is altogether different if they are asked to trade two hundred; same market, same price movements, different trade size and hence different psychology and consequent performance.

If you are a fundamentally negative person with poor self-esteem, the natural result is that you will always tend to take market price action personally, especially when you lose. You will tend to think that the universe/market/broker is conspiring against you to ensure that you fail. This is actually a very common feeling that a LOT of traders share.

However, if you are a person with a positive outlook who follows a disciplined trading approach, your attitude to losses will be completely different. You will see them as an essential part of trading, much as breathing out is an essential part of breathing, and you will not be the least bothered by them.

It all ultimately comes down to your psychology. In addition, despite the term  “trading psychology” being used, it is actually your overall psychological approach to life as a whole that is under examination here. Whatever approach you have to life in general is the approach you will invariably bring to your trading.

The most important aspects of this are (a) your attitude to money, (b) whether your approach to life is basically optimistic or pessimistic, and (c) whether you possess high self-esteem and self-confidence. All of these psychological approaches were largely implanted into you at an extremely early age by your parents and environment. You literally absorbed them without discrimination, at an age when you were simply too young to distinguish between what was true and false. Moreover, without a substantial amount of inner work, this psychological inheritance is extremely hard to change for the better.

A number of methods are available. You may wish to study up on self-hypnosis. General self-help personal development material is definitely valuable in assisting you to unlock the psychological damage of the past. There even exist an increasing number of experts – “Trading Shrinks” if you will – who specialize in helping traders at all levels with the psychology of trading.

It is beyond the scope of this discussion to give you a total solution on how to improve your psychology, and your trading psychology in particular. The first step to change and overcome something like this is to know that it needs changing in the first place! Now that you do know, it is up to you to seek out exactly what you need most in order to make the transformations that will turbo-charge your trading.

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Forex Course – What To Look For Successful Trading In Forex

Posted on May 2, 2011 by tradingrebel7

With the enormous potential profits available in the financial markets and the Forex markets in particular, the forex course has become an information product in great demand, at least judging by the number of them being produced these days!

Newcomers seeking an education in how to trade would do best to seek out a forex course that actually teaches you how to be a better trader.

Not every forex course even pretends to do this. Many are in the business of selling “the dream”; the kind of bizop fantasy whereby you just push a button, everything is done for you and the money just comes rolling in. This is the land of the so-called “forex robot”.

Sadly for those caught in this fantasy, life is not really like that.

A real forex course needs to provide you with a sound grounding in understanding the markets you are going to be dealing with, combined with a proven strategy for trading in forex and  making consistent profits in those markets. You need to take the attitude that you are in this for the long-term, so be determined to master your craft.

Moreover, “proven” does not just mean that a bunch of customers have written glowing testimonials. That is marketing. While it might be good evidence, it is not proof as such.

Proof means numbers – a scientific objective backtest. You want to see a track record of real trades in the markets. Here is where many people get caught out with forex courses. A lot of them are marketed with “hypothetical” results, i.e. the creator of the forex course just takes back history and runs his trading system through it automatically.

Such backtests can be done at the push of a button. Invariably, these do not include commissions and slippage, both of which are crucial in a meaningful backtest of a trading strategy.

Also, any forex course that you propose to trade needs…

to be compatible with your personality and lifestyle. If you like a lot of action, then intraday forex trading might be your style and hence a system that only trades once a month will do nothing but frustrate you. If you are risk averse, then learning from a forex course where large swings in your P/L are the norm will prove disastrous.

Image via Wikipedia

A good forex course will give you a thorough grounding in forex indicators and technical analysis. Forget the products that are heavily oriented towards economic fundamentals. You cannot trade economics. You need TECHNICAL indicators that are proven to work in the market you propose to trade. Your forex course should provide you a sound grounding in technical analysis overall – MACD, moving averages, oscillators, Stochastics, RSI etc. –  plus even a few high-performance proprietary indicators that the course creator has invented himself.

There is a lot of hype out there and so you need to be aware of this and be skeptical at all times. Check out the credentials of the person selling the forex course. Is this a person of deep experience, who has been trading for years, or better still, is even a market professional? Or is it an ex-bartender who took to forex trading six months ago and now has a product to sell you out on how to do it?

In summary, beware of the hype when you approach the subject of forex education. There are a lot of good products out there and also a lot of very very bad ones. Invest in yourself by first choosing the right forex course for you, one that follows as many of the principles as possible discussed in this article, and you give yourself the best chance of success in the foreign currency markets.

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Options Trading – As Risky As The Reputation?…

Posted on April 20, 2011 by tradingrebel7

Options Trading has a reputation for being extremely risky…

…but this reputation is in large part undeserved. True, option trades ARE extremely risky – even dangerous if you have no idea what you are doing. However, that is true of all forms of offline or online trading, and trading in options is no exception.

While options trading has this reputation among laymen, it is often considered to be a form of risk limitation with professional traders. After all, in what other form of investment can you guarantee the maximum loss you can suffer right at the point where you enter the trade?

Options are contracts that give the purchaser the right to buy or sell an underlying security, such as a stock, a bond or a commodity, at a fixed price and for a fixed time period only. You can find options on underlying securities such as stocks, mutual funds, bonds, commodities, and more.

Options trading gives you the chance to exploit a whole range of  market opportunities…

Option trading has its risks, but also gives many additional opportunities

that are unavailable with conventional online stock or forex trading. For example, one class of option trade allows you as the buyer to make money if you expect the market to move strongly in one direction or the other, but you are not sure in which. If you are the seller of position, by contrast, you are betting that the market either goes nowhere directionally and/or the volatility declines.

Actually, options trading can actually lower your risk. For example, whenever you buy an underlying stock, there is always the extremely small, but non-zero, risk that the company can go bust and the stock price can first be suspended and then go to zero. That means that your potential loss is the point difference between the price you entered the stock trade and zero, multiplied by the number of shares you own! If you had done the corresponding option trade by contrast, i.e. buying call options on the stock, your loss would be simply the price you paid for the options.

Where options ARE very risky is where untrained traders go “naked short”, as it is called. In one common example, they sell put options on a stock index future and collect the option premium as payment. This gives the buyer the right to sell the stock index future back to the put option seller at a fixed price, called the strike price. This is fine as long as the underlying index continues to rally and the strike price is basically never reached. However, in one famous example, one hapless options trading punter, who had been happily selling put options  on the FTSE index futures for years and collecting the cash, got badly caught when the entire stock market crashed in 1987, and the option buyers exercised their right to sell their positions at prices MUCH higher than the current market!

However, such foolishness apart, options trading…

… can be an extremely profitable way to trade in stocks, forex, bonds, currencies or whatever.  When used properly, they can actually limit your risk drastically. Option trading can allow you to create positions and exploit market opportunities not otherwise available via standard stock trading methods. Best of all, if you combine options with the underlying instrument, you get to create a whole range of interesting risk profiles.

The key to success in options trading is, as with anything else in life, to study the subject hard before trying to trade and, if possible, begin by paper trading the market. Once you are satisfied that you know what you are doing and have a valid option trading methodology, then you can begin risking real money. Even then, you only trade very small to start with and with money that you can afford to lose. Once you know what you are doing, and your options trading account size show some nice profits, then you can afford to trade progressively larger size for progressively larger profit.

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Commodity Trading – An Overview

Posted on April 20, 2011 by tradingrebel7

Commodity Trading…

…is strictly speaking the trading of physical commodities  – such as soybeans, wheat, corn, gold, silver, cattle, oil etc. – or their futures contracts on the established commodity exchanges.

Farmers use commodity trading to lock in favorable prices prior to an ensuing harvest. Hence, there are real commercial reasons for trading in commodities. However, they are also traded for pure speculation by private traders seeking to make a commodity trading profit by speculating in the price movement over their chosen time-frame.

Image via Wikipedia

More than any other type of speculation, such as forex or stock trading, commodity markets involve a very high degree of seasonality. Hence, it is important that the trader be very aware of the underlying cycles affecting the market in question.

That said, commodity trading can be done successfully by…

giving a very high degree of emphasis to the price charts alone. The commodities trade extremely well according to technical analysis methods. For example, Fibonacci price retracements and time cycle analysis work extremely well on commodity charts. So too do other technical indicators such as moving averages, price gaps, support and resistance points, trend-lines and so on.

Trading commodities can be an extremely volatile and unpredictable business because these markets are known for their sudden and sustained price surges and collapses. Compare a long-term commodity chart of something like soybeans or oil to any stock index and you will see the difference. Hence, it is vital in commodity trading that you are extremely disciplined in your approach and employ strict money management rules. A good stop loss order, placed in the market at the time you place your trade, is a must.

Traders also play the spreads between commodities, which is an extremely popular form of commodity trading, and which effectively multiplies the range of profit opportunities hugely. Examples of spreads is the wheat-corn spread,  where traders speculate on the relative price of one to the other. Other spread opportunities occur in the price differentials between different delivery months of the same commodities’ futures contracts. Hence, you might buy the contract nearer to expiration and sell the one further out with the expectation that long-term prices of that commodity will fall with respect to near term prices.

Once you also realize that there are active options contracts in all the major instruments, it becomes clear that commodity trading is a very desirable niche within the universe of speculation.

As with all forms of trading, mental and financial discipline are key factors to success  in commodity trading. Given their extreme volatility, it is paramount that you have a proven method before you ever speculate a single dollar in these often unpredictable markets.

You must also remember that these are real physical products involved, and they can literally be delivered if you fail to close out your position before the expiry of the commodity future or option contract. Otherwise, it can result in a truck pulling up outside your house with your delivery of soybeans, live cattle or cocoa – depending on what you have been trading. This has been known to happen!

That said…

The opportunities present in commodity trading are huge and exciting.

These are markets that see some real action. There are fast moves that can make huge profits for you IF you are on the right side of them. There are also sustained long-term trends that can be very profitable for system trading.  You also have the pleasure of knowing that you are trading in real world items, which can give your commodity trading a whole new meaning.

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Online Stock Trading – Is It Right For You?…

Posted on April 20, 2011 by tradingrebel7

Stock trading has exploded in popularity as telephone charges and broker fees have collapsed and internet bandwidth has soared. Combine this with the recent trend away from corporate environments in favor of working from home, and you can see how online trading has become both a viable business and an ideal lifestyle.

Online stock trading

… (or even stock futures trading) follows the same principles as traditional offline trading as far as the basics are concerned. You are still buying or trading the same stock instruments from the exact same stock markets.

Image via Wikipedia

The difference with online stock trading is that you no longer call into your broker to place your trade or for information. Instead, you use your computer (with a fast internet connection) to log on, analyze the markets, view your existing stock portfolio, and make your stock trades totally via the internet. In online trading, there  is NO need to talk to anyone at all, if you don’t wish to.

Here are some of the main advantages of trading stocks online:

  • Pay less in commissions by using a Discount Broker, because you are not paying for telephone trades or unnecessary research.
  • Rapid trade execution.  You do not have to wait for your broker to execute the trade for you. You can buy or sell the stocks directly online with just the click of a mouse.
  • Make smaller share purchases.  This opens up the market to more people who cannot afford to invest in large positions.

As a result of all this, online stock trading does not require a large financial stake to be able to participate in the stock market. These are just some of the advantages to trading online.

However, there are some disadvantages. Computer breakdown is a real risk, and tends to happen when you can least afford it, i.e. you have an important trade on. The reliability of your phone line is obviously critical too, and these are particularly vulnerable during or after bad weather.

Online Stock Trading: How To Start

The steps to commencing online stock trading differ according to your experience level.  If you have offline trading experience, it is a relatively minor switch to go to online trading. If you are completely new to market speculation then you will have to start from the very beginning.

First of all, you have to decide if online investing is right for you in the first place. Online stock trading  is not for everyone. If you’re a timid person, a poor or slow decision maker, or if you are unsure or lack confidence in yourself, then stock trading is probably not for you, either online or offline.

Then you are going to have to set aside a sum of money to invest into your trading account. You then open a stock trading account with a stock broker online. Check out a number before you do this, in order to compare dealing costs, trading platforms, the specific securities you can trade,  and other such issues that vary widely from broker to broker.

There ARE risks in Stock Trading!

Remember that real money is at stake – YOUR money! Hence, it is critical that you learn as much about investing as you possibly can. The more you study and learn about the subject in general, the better you will grow at trading online and the more successful you can be.

All that said, one of the key advantages to online trading is that you can trade smaller share sizes. Hence,  there is less risk involved if you begin like this. Then you can work your way up to larger positions as you improve and your account size grows. if you feel that stock trading is outside of your capabilities right now (if for no other reason that the minimum account size permissible is quite substantial), then you could consider Forex Trading instead.

In conclusion, there are strong benefits to online investing. Trading online gives you the chance to work from home, take personal control over your investments, and engage in a fascinating activity, all at the same time. It can be very rewarding to do your own investing and fun to do from the comfort of your own home.  Hence, stock trading is definitely a worthwhile, profitable and  very valid business model.

 

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Forex Trading – Are Currencies The Best Markets For Online Trading?…

Posted on April 19, 2011 by tradingrebel7

Forex Trading is catching on like wildfire…

…amongst private traders, and there are good reasons for it. Forex  is the largest known financial market in the whole world, and the most liquid to trade in. Also, the requirements to open a currency forex trading account are much less stringent than for stock trades.

The term “Forex” is short for Foreign Exchange.  The daily turnover in currency markets is currently $1.9 TRILLION dollars. Amazingly, this is over TEN times the average daily turnover of ALL the global equity markets put together. It’s more than 40 times the daily turnover of all securities on the New York Stock Exchange.

So what is forex trading ?…

In layman’s terms,  Forex trading means the simultaneous buying of one currency and the selling of a second currency. In other words, the currencies are traded in pairs, i.e. one currency traded for another.

Image via Wikipedia

Interestingly, only 5% of the turnover in daily forex currency trades comes from companies and governments buying and selling products and services from foreign countries. These entities then engage in forex trades in order to convert their foreign currency profits back into their respective domestic currencies. Amazingly, the remaining 95% of turnover is pure speculation, i.e. forex trading entirely for profit!

If you’re new to FOREX currency trading, familiarize yourself with the most liquid currencies. These are the most traded, and where you stand your best chance of trading success. They include the US dollar, Euro, Japanese yen, British pound (also nicknamed “Cable”), Canadian dollar, Swiss franc and the Australian dollar.

The good news for small traders is that the Foreign Exchange Markets cannot really be manipulated. Their enormous size and liquidity, as well as the fact that forex markets are not under the jurisdiction of any one country means that no single investor can usually hope to move a major currency market in a serious manner (of course, there are always rare exceptions and George Soros’ famous exploits in taking the British Pound out of the EMS is a famous and extremely rare exception to the rule).

Forex Markets entertain a wide variety of participants with varying goals. Some enter the market with a long term investment goals, while other are day traders acting for the extremely short term only.

Forex trading, involving foreign currencies on an exchange, is not centralized.

It takes place via telecommunications. Also, currency trading is open twenty four hours a day. Currency dealers will quote all the major currencies in every time-zone in the world.

Forex currency trading can be an extremely rewarding business, provided you thoroughly know what you are doing. However, like any other business there are always risks (and potentially disastrous ones) for the novice who foolishly dives in without thorough preparation.

Where there are risks, there are also rewards. The upside potential, with limited downside risk (provided you know how to place trades with discipline and exercise excellent risk management) can be enormous.

Hence, in order to profit from trading in Forex, it is critical that you become an excellent student first and really STUDY forex markets in particular and good online trading principles in general. The Forex markets lend themselves particularly well to Technical Analysis, i.e. forecasting via price charts.

Some general awareness of current events around the globe, be it political or economic, is important in order to understand underlying driving forces. However, don’t get too anal about this  and focus your time on the hot air voiced by self-appointed economic market experts on business and market programs. Most of them know nothing about the process of forex trading itself, and their opinions are often plain wrong.

In conclusion forex trading can be a very attractive and highly profitable business. You can trade currencies very profitably from home and, depending upon your trading knowledge and appetite for risk, the sky’s the limit as to how much you can make. However, be prepared in advance to invest a large amount of time and practice.

Success in forex trading takes time, effort and persistence in order to achieve Mastery and profits on a consistent basis.

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