How Your Obsession to Win Can Make You Lose Money

Forex trading is one of the great money making opportunities available these days. People from many walks of life, men and women, decide to join the Forex trading world everyday looking for the great style of life a profitable Forex trader can achieve.

But Forex trading is also a war where you can lose your money and confidence if you are not wise enough in your battles against the market, a wise, often formidable and even brutal enemy.

Sun Tzu: “the obsession for victory is a state of mind that benefits the enemy”

There is an old saying by the Chinese military genius, Sun Tzu that says, “the obsession for victory is a state of mind that benefits the enemy”. And these wise words apply without any doubt to the world of Forex trading. In the war with the markets nothing is more damaging to a trader than “the obsession with victory”.

There are many new traders that think they must never close a trade until it will turn into a profitable one; or think their predictions based on a particular indicator and technical analysis will always be right and the Forex market will start behaving in the way they had predicted in any moment, no matter if the charts clearly indicate that it’s not doing it and the margin of the account is getting depleted.

This is, in no way, a wise Forex trading strategy; it is not a wise war strategy. With that behavior you will only be giving free money to the markets, i.e., you will be defeated by your own obsession with being profitable even if everything is going against you indicating you must close the trade or tighten your stops.

So, never fall for obsession when trading the Forex markets; nothing good can result from this behavior. You must always place your stops according to your tolerance level and be wise with your indicators. Remember they can fail you. They mostly tell probabilities and when dealing with probabilities there is always room for strange behaviors that won’t agree with what you were expecting.

My recommendation; be wise, use your criteria and never ever obsess with a trade.

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10 Good Reasons Why YOU Should Jump Into Trading FOREX

Foreign Exchange Market is a market where traders buy and sell currencies with the hope of making a profit when the values of the currencies change in their favor. People are making vast amounts of money from Forex trading. The Forex Market has a big potential for everyone, ranging from large corporate firms to ordinary, everyday people like you and me.

It is a very exciting trade with a huge money-making potential. Just imagine yourself sitting comfortably in your pajamas at your computer… you turn on the internet and make a few quick transactions and by the time that you get up to get a cup of coffee, you are several hundred dollars richer! Would you like that? I would!!

I can hear you say, “Wait a minute!!  This sounds just like another one of those confusing markets like stocks, options or traditional futures, so what makes this market any different?”

Aaah! Good question! So, in answer to your question, here are 10 good (if not great) reasons to enter the Forex Trade:

  1. First and foremost, Forex trading allows for small investments. You do not have to be able to invest thousands of dollars to get started with this trade. You can start trading Forex with as little as $300 to $350 and could be well on your way to earning more than that on your first day.

 

  1. The Forex markets are always open! You can trade anytime and from anywhere in the world. No waiting for the stock exchange to open. The market is ongoing, with generally only minor breaks on the weekends.

 

  1. The funds that you invest are liquid; you can cash them anytime you want. No waiting for days to get your stocks converted into hard cash.

The FX market is much larger than more common investments.

  1. The value of the Forex Trading market is COLOSSAL: it is 30 times larger than all of the US equity markets combined. It is the largest market in the world with daily reported volume of $5 trillion dollars. This massive value makes it a lucrative and desirable trade to invest in.

 

  1. It is a highly stable trade and offers greater strength over other markets. Countries and people are ALWAYS going to need currency. Although the value of different currencies goes up and down, the fluctuations are not as dramatic as stock prices and generally follow a predictable trend.

 

  1. You do not have to worry about commissions, exchange fees nor any hidden charges when you trade Forex. Forex brokers make only a small percentage of the bid and there are very respectable and free brokers available as well. Isn’t that great?

 

  1. You make profits no matter which way the currency is going. You will not worry about a falling currency value if you know what to do with it and make good gains.

 

  1. Forex is a very transparent market. Unlike equity markets, where analysts have an unfair advantage over the layman because of their insider knowledge, the relevant information for Forex is equally available to everyone through international news. Therefore, all Forex traders are able to make pertinent decisions according to the current market situations.

 

  1. Forex market is extremely quick! It takes not more than 1 to 2 seconds to complete your transactions because it is all done electronically, online and in Real Time.

 

  1. The final good news is that you do not need any formal education, licensing, diploma or degree to trade Forex. All you need is the know-how of how it works, trading strategies and some tips and techniques and you can be on your way to earn big profits.

 

Forex trading online may be the fastest path to financial freedom and an end to all your financial worries. It truly is an excellent, if not THE best home business opportunity for ordinary people. 

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Are You Prepared to Currency Trade?

Currency trading is the most popular way to earn to money and it is without doubt a very profitable market. However, few are familiar with its unpleasant intricacies and most ignore a very important aspect: risk. It is not enough only to be given the chance to invest your money successfully, you have to be careful because Currency trading can be an efficient trading system, or it can ruin you.

Why is Currency trading risky?

  • Currency trading is very unstable. It is the subject of rapid and overwhelming changes. The market is volatile, and it is influenced by political events.
  • One can lose at any time especially when he has just ventured into Currency trading. Experience, information, and attention are necessary.

    Whether or not you’re prepared to currency depends a lot on risk and how well you can tolerate it.

  • Some unexpectedly lose the Risk Capital which sometimes consists of college money, the retirement funds or some other large sum that shouldn’t have been considered as currency trading capital in the first place.
  • Fluctuations in currency prices, discrepancies between interest rates in two different countries, insolvency of financial institutions that take part in transactions and limited flow of exotic currencies will most likely lead to loss.
  • Large profits and minimal losses are impossible to predict with 100% certainty.
  • The Currency trading market has great winning potential, but it also has loss potential.
  • Misinformation and the emotional baggage are most of the time cause of loss. Use facts, not hope or fear, when Currency trading.
  • Sometimes trends can lead to money loss.
  • Huge leverage is available to traders. This leads to dangerous positions that risk too much in comparison with the size of the account.
  • Lack of money management and of back testing plans are the mistakes that currency traders make sometimes.
  • Using brokers is sometimes inefficient because this counterpart can refuse to trade during volatile market conditions affecting the retail trader. They can even widen spreads. However, it is recommended to collaborate with a broker, because he can deal in the interbank market and he surely knows more about Currency trading making it safer from other points of view.
  • Scams were very common years ago when dealing with a broker. However, one can be confident with the person he is working with by checking their background and the Institutions he is associated with (large banks, important insurance companies).

Don’t be frightened! It isn’t all about risks. And don’t start trading in fear! You will lose this way. You must keep in mind all possibilities and avoid unwanted situations only you can get yourself into. All Currency traders have to be very well informed about their activity. They must

Many financial investors, banks, international institutions, and important players make big profits trading currency.

know technical analysis and how to read and interpret charts, they have to develop effective strategies and minimize risk. The financial exposure must be limited, and this can be done in many ways available to currency traders who inform themselves.

So, educate yourself, be prudent, take risks only when you can handle loss and always be prepared for anything.

And think about this: If Currency trading isn’t profitable then why are so many financial investors, banks, international institutions, and important players that obtain huge amounts of cash by simply turning their own money into other currencies?

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Do You Know Your Currency Pairs?

When I thought about some of the first things I learned before trading the Forex market, fundamental analysis came to mind. Fundamental analysis refers to factors that affect the price of a currency pair. It is important not only to perform technical analysis based on your charts and indicators, but to also be aware of the macroeconomic events that can affect a currency pair. What helped me in my Forex education was learning each currency’s characteristics. Whichever pair or pairs you choose to trade, knowing each of their characteristics is extremely valuable because it aids in the accuracy of any trade you perform.

Europe- Euro

EURO/USD pair is the most traded and a favorite of many successful traders.

This currency is rather new. It began trading in 1999; however, the EURO/USD pair is the most traded. Because of this, the EURO/USD is very liquid. The euro is greatly affected by interest rates. If you are trading the EURO/USD pair, you must pay attention to the Euribor (Europe’s three-month interest rate), to watch for any changes in investor reactions when trading the EURO/USD pair since the USD and Euro rates affect each other. The EURO/USD is my personal favorite pair because of the many opportunities it gives for potential trades.

Japan- Japanese Yen

Japan is the largest economy in East Asia; therefore, the yen is used as an alternate for the whole region’s economy. If there is trouble in the surrounding countries, the yen may drop in value. The Bank of Japan is known for intervening in the Forex market to defend the yen’s value. Another factor affecting the yen is the overall strength of its banking sector.

United Kingdom- British Pound

This currency is important to watch because the U.K. is one of the largest economies in the world. The pound is affected by energy and oil prices. As they rise, the pound should strengthen.

Switzerland- Swiss Franc

The Swiss Franc is known as an investor’s haven in times of crisis and uncertainty. Since Switzerland’s banks controls much of the world’s wealth, any reports of bank mergers and/or poor earnings directly affect the value of the franc.

“The Commodity currencies” as they are called refer to the Canadian, Australian, and New Zealand dollars. Since commodities consist of most Canada’s exports, the currency will strength or weaken depending on these prices. Usually the USD and CAD will normally trend in the same direction because most of Canada’s exports are shipped to the U.S.

Australia- Australian Dollar

The Australian dollar is most connected to gold prices. The interest rate differential is monitored because it can guide the long-term trend.

New Zealand- New Zealand Dollar

The New Zealand dollar is linked to commodity prices. It is also closely related to the Australian dollar, meaning they can act as alternatives for each other.

How to Use Bollinger Bands to Make Massive Profits

In an earlier article about Forex indicators, we touched on Bollinger bands. Bollinger bands will help you to predict big trending moves, act on big trend reversals and finally, time trading positions with greater accuracy for bigger profits.

John A. Bollinger (born 1950) is an American author, financial analyst, contributor to the field of technical analysis and the developer of Bollinger Bands.

Here we have related Bollinger bands to the currency markets (as it is here that they are most useful) – but they are useful in all financial markets.

What are Bollinger Bands?

Developed by John Bollinger, Bollinger bands are volatility bands drawn around a simple moving average.

You calculate Bollinger bands using the standard deviation of price over the same period as moving averages and plotted as lines above and below the moving average.

As moving averages have been traditionally used to find the underlying trend, Bollinger bands combine this with the volatility of the individual market (or the standard deviation) – to plot a trading envelope.

The distance between upper and lower Bollinger bands reflects the volatility of the market traded.

As prices force themselves away from the longer-term average, the standard deviation rises – and thus the bands will fluctuate in varying amounts, away from the average.

Why Bollinger Bands Work

In any market, the value of currency traded tends to rise slowly over the longer term.

This chart shows a volatility spike, followed by a return to the mean.

Prices may spike short term but will normally dip back to the longer term moving average (the center band) – which represents realistic value.

The volatility of the outer bands therefore gives us a sign of how volatile prices are – and how far away price is from longer-term value.

Most price spikes are caused as much by trader psychology, as the supply and demand backdrop – and this scenario is reflected in the concept of Bollinger bands.

Why are Bollinger Bands so useful?

Bollinger bands perform three major functions for traders:

1. Spotting a Breakout and New Trend

Markets move between low volatility trading ranges, to high volatility trending moves.

When a market makes trades in a narrow range, the Bollinger bands will narrow together, and this shows a market with extremely low volatility – however this is a warning that a high volatility trending move is likely to follow.

When prices break above or below the upper or lower band, it is an indication that a breakout and trend is about to develop – traders will then take a position in the direction of the breakout and try to ride the trend.

2. Timing Entry Levels in a Trend

We all know long term currency trends last for months or years – but we need to get in at the best risk / reward level.

Bollinger bands will help get you in to the trend and time your entry.

All you do is watch for dips toward the center band – and enter in the direction of the trend – it really is that simple!

To time your entries with greater accuracy and filter out “false” breaks we recommend using a momentum indicator – such as stochastics, to confirm the move.

3. Spotting Market Reversals

When the price touches the top of the band, a sell is generated, and prices should revert to mean, or the middle moving average band.

If the price touches the bottom of the band, traders can buy a currency, if it is oversold, and will rally back towards the top of the band.

The spacing, or width of the band, is dependent on the volatility of the market, but gives traders a clear sign of where prices will go, and when to enter.

A Word of Caution!

Bollinger bands are a useful tool – but need combining with other indicators, as with any single indicator, they should not be used in isolation.

We personally feel Bollinger bands should be used with basic charting, to get the big picture – and the best timing indicator is the stochastic as stated, to filter out “false” signals.

For more great Forex trading tips, check out our new book “The Ultimate Guide to Forex Profits“.