How flexible are you in your everyday life? When you are in a new city, do you worry about getting lost or do you just go your own way and assume that somehow and someway you'll eventually get back to your hotel? Do you get upset when you are told you are wrong, or do you welcome criticism or an opposing opinion? The ability to be open and flexible often makes the difference between winning and losing in the trading business
Trading is a scary business. When your money is on the line, you naturally feel defensive. The more uncertain you are, the more rigid and defensive you become. It's a natural, biological response. When humans are threatened, it is often in their best interests to choose a specific course of action and stick with it. Imagine that you are changing lanes in rush hour traffic. If you commit to a lane change, it's essential to stick with your course of action. If you waver, you'll confuse other drivers and may end up causing an accident. When we are in potential danger, our mind focuses on executing a specific course of action; other alternatives are completely ignored. At times, this can be a good strategy when trading the markets. If you are executing a scalp trade, for example, you must commit to a specific course of action, get in and get out, and make a profit. It would do you little good to waver at a critical moment when you should take decisive action. That said, when it comes to longer term trading, it's vital to be open-minded and flexible.
When making long term trades, market conditions can change, and you may need to make midcourse corrections. You have to look at a trade from different angles and willingly explore every possibility. Many traders are stubborn, however. They have their money on the line, and they are afraid their trading strategy may not pan out. Unfortunately, their stubbornness restricts them from freely examining their options. Eventually, they end up losing money when they miss a critical market change.
How can you increase the odds of becoming flexible? First, don't place a lot of psychological significance on a trading plan. A trade is just a trade. It reveals nothing about your intelligence, talent, or true inner-worth. It's merely a business transaction, so treat it as nothing more. Second, minimize risk. Again, when you feel that your well being is at risk, you feel threatened and defend your ego by acting inflexibly. If you limit the amount you risk on a trade, you will feel naturally relaxed, and thus, more open and flexible to possibilities. If you feel extreme stress, you might even want to close out a position and reevaluate it. If it is a longer term trade, you have the luxury of exiting and reevaluating your trading plan while feeling safe, and thus, relaxed. Third, you can ask a trusted friend or coach to play devil's advocate and help you see alternative perspectives.
Don't be afraid to admit that you may be wrong. The willingness to admit you are wrong gives you power and freedom. When you are willing to admit you are wrong, you won't be defensive, but you'll feel so free that you will trade creatively and profitable.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
By: Robert Williams
Source: http://www.articlecube.com
--------------------------------------------------------
Saturday, June 30, 2007
Thursday, June 28, 2007
How To Increase Forex Profits 100% in 10 Minutes
This simple exercise will increase Forex profits 100% and works for 99% of all short-term FX traders - stop trading so much - widen out your stops - widen out your profit targets - and only trade in the direction of the trend indicated by 4 hour chart.
1) Stop trading so much
Sure there are no commissions but the spreads are HUGE and believe it or not (well you'll believe it after you do the simple exercise below) the spreads are reducing your profits 100%!
2) Widen out your stops
Initial stop loss should be a minimum of 23 points; I use between 23 and 35 point stop losses for short-term trading.
3) Widen out your profit targets
Unless you think a trade can make you 100 points or more don't do it.
4) Only trade in the direction of the 4 hour chart
The real money is made in the direction of the trend
Simple exercise
1) Download all your trades for the year into an excel spreadsheet (if you don't know how to do this ask your broker for help).
2) Determine the dollar value of the spread for each trade.
3) Sum up the total dollar value of all spreads for all trades and add this number it to your current account balance; this is your spread adjusted account balance.
4) Take your spread adjusted current account balance and divide it by your opening balance at beginning of year; the result will be a percentage change.
5) Take your actual current account balance and divide it by your opening balance at beginning of year; the result will be a percentage change.
6) Subtract your spread adjusted year to date percentage change from your actual year to date percentage change.
7) That number should be 100% or more
8) Take the necessary steps as outlined above (1 to 4) and improve your results 100%
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
by Jimmy Young
- EURUSDTrader
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
1) Stop trading so much
Sure there are no commissions but the spreads are HUGE and believe it or not (well you'll believe it after you do the simple exercise below) the spreads are reducing your profits 100%!
2) Widen out your stops
Initial stop loss should be a minimum of 23 points; I use between 23 and 35 point stop losses for short-term trading.
3) Widen out your profit targets
Unless you think a trade can make you 100 points or more don't do it.
4) Only trade in the direction of the 4 hour chart
The real money is made in the direction of the trend
Simple exercise
1) Download all your trades for the year into an excel spreadsheet (if you don't know how to do this ask your broker for help).
2) Determine the dollar value of the spread for each trade.
3) Sum up the total dollar value of all spreads for all trades and add this number it to your current account balance; this is your spread adjusted account balance.
4) Take your spread adjusted current account balance and divide it by your opening balance at beginning of year; the result will be a percentage change.
5) Take your actual current account balance and divide it by your opening balance at beginning of year; the result will be a percentage change.
6) Subtract your spread adjusted year to date percentage change from your actual year to date percentage change.
7) That number should be 100% or more
8) Take the necessary steps as outlined above (1 to 4) and improve your results 100%
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
by Jimmy Young
- EURUSDTrader
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
Forex Trading Systems
Mechanical vs. Discretionary Systems
There are basically two types of Forex trading systems, mechanical and discretionary systems. The trading signals that come out of mechanical systems are mainly based off technical analysis applied in a systematic way. On the other hand, discretionary systems use experience, intuition or judgment on entries and exits. But which one produces better results? Or more importantly, which one fits better your trading style? These are the answers we will try to answer on this article.
We will first analyze the pros and cons about each system approach.
Mechanical systems
Advantages
This kind of system can be automated and backtested efficiently.
It has very rigid rules. Either, there is a trade or there isn’t.
Mechanical traders are less susceptible to emotions than discretionary traders.
Disadvantages
Most traders backtest Forex trading systems incorrectly. In order to produce accurate results you need tick data.
The Forex market is always changing. The Forex market (and all markets) has a random component. The market conditions may look similar, but they are never the same.
A system that worked successfully the past year doesn’t necessary mean it will work this year.
Discretionary systems
Advantages
Discretionary systems are easily adaptable to new market conditions.
Trading decisions are based on experience. Traders learn to see which trading signals have higher probability of success.
Disadvantages
They cannot be backtested or automated, since there is always a thought decision to be made.
It takes time to develop the experience required to trade successfully and track trades in a discretionary way. At early stages this can be dangerous.
Conclusion
Now, which approach is better for Forex traders? The one that fits better your personality. For instance, if you are a trader that finds it hard to follow your trading signals, then you are better off using a mechanical system, where your judgment won’t play an important role in your system. You only take the trades that your system signals.
If the psychological barriers that affect every trader (fear, greed, anger, etc.) puts you in unwanted scenarios, you are also better off trading mechanical systems, because you only need to follow what your system is telling you, go short, go long, close a trade. No other decision has to be made.
On the other hand, if you are a disciplined trader, then you are better off using a discretionary system, because discretionary systems adapt to the market conditions and you are able to change your trading conditions as the market changes. For instance, you have a target of 60 pips on a long trade. But the market suddenly starts trending up pretty strongly, then you could move your target to say 100 pips.
Does it mean that trading a discretionary system has no rules? This is absolutely incorrect. Trading discretionary systems means that once a trader finds his/her setup, the trader then decides what to do. But every trader still needs certain rules that need to be followed, such as the size of the position, conditions that have to be met before thinking to get in the market, and so on.
I am a discretionary trader. The main reason I chose a discretionary system is that my trades are based on price behavior, and as you already know, the price behaves similar to the past, but it is never identical, therefore the outcome of every trade is unknown. However, I do have rigid rules on my system, certain conditions have to be met before I even think in getting in a trade. This keeps me out of trouble, once my setup is present and in accordance with the rules I have set, then I closely watch the price behavior and finally decide whether it is a good opportunity or not.
Whether you choose to be a discretionary or a mechanical trader there are some important points you should take in consideration:
1. You need to make sure the Forex trading system you are using totally fits your
personality. Otherwise you will find yourself outguessing your system.
2. You also need to have some rules and most importantly have the discipline to
follow them.
3. Take your time to build the perfect system for you. It’s not easy and requires
time and hard work, but at the end, if done correctly, it will give you consistent
profitable results.
4. Before going live, try it on a demo account or even on a small account (I will go
for the second option, since psychological barriers will be present)
-------------------------------------------------------------
by Raul Lopez
StraightForex
-------------------------------------------------------------
There are basically two types of Forex trading systems, mechanical and discretionary systems. The trading signals that come out of mechanical systems are mainly based off technical analysis applied in a systematic way. On the other hand, discretionary systems use experience, intuition or judgment on entries and exits. But which one produces better results? Or more importantly, which one fits better your trading style? These are the answers we will try to answer on this article.
We will first analyze the pros and cons about each system approach.
Mechanical systems
Advantages
This kind of system can be automated and backtested efficiently.
It has very rigid rules. Either, there is a trade or there isn’t.
Mechanical traders are less susceptible to emotions than discretionary traders.
Disadvantages
Most traders backtest Forex trading systems incorrectly. In order to produce accurate results you need tick data.
The Forex market is always changing. The Forex market (and all markets) has a random component. The market conditions may look similar, but they are never the same.
A system that worked successfully the past year doesn’t necessary mean it will work this year.
Discretionary systems
Advantages
Discretionary systems are easily adaptable to new market conditions.
Trading decisions are based on experience. Traders learn to see which trading signals have higher probability of success.
Disadvantages
They cannot be backtested or automated, since there is always a thought decision to be made.
It takes time to develop the experience required to trade successfully and track trades in a discretionary way. At early stages this can be dangerous.
Conclusion
Now, which approach is better for Forex traders? The one that fits better your personality. For instance, if you are a trader that finds it hard to follow your trading signals, then you are better off using a mechanical system, where your judgment won’t play an important role in your system. You only take the trades that your system signals.
If the psychological barriers that affect every trader (fear, greed, anger, etc.) puts you in unwanted scenarios, you are also better off trading mechanical systems, because you only need to follow what your system is telling you, go short, go long, close a trade. No other decision has to be made.
On the other hand, if you are a disciplined trader, then you are better off using a discretionary system, because discretionary systems adapt to the market conditions and you are able to change your trading conditions as the market changes. For instance, you have a target of 60 pips on a long trade. But the market suddenly starts trending up pretty strongly, then you could move your target to say 100 pips.
Does it mean that trading a discretionary system has no rules? This is absolutely incorrect. Trading discretionary systems means that once a trader finds his/her setup, the trader then decides what to do. But every trader still needs certain rules that need to be followed, such as the size of the position, conditions that have to be met before thinking to get in the market, and so on.
I am a discretionary trader. The main reason I chose a discretionary system is that my trades are based on price behavior, and as you already know, the price behaves similar to the past, but it is never identical, therefore the outcome of every trade is unknown. However, I do have rigid rules on my system, certain conditions have to be met before I even think in getting in a trade. This keeps me out of trouble, once my setup is present and in accordance with the rules I have set, then I closely watch the price behavior and finally decide whether it is a good opportunity or not.
Whether you choose to be a discretionary or a mechanical trader there are some important points you should take in consideration:
1. You need to make sure the Forex trading system you are using totally fits your
personality. Otherwise you will find yourself outguessing your system.
2. You also need to have some rules and most importantly have the discipline to
follow them.
3. Take your time to build the perfect system for you. It’s not easy and requires
time and hard work, but at the end, if done correctly, it will give you consistent
profitable results.
4. Before going live, try it on a demo account or even on a small account (I will go
for the second option, since psychological barriers will be present)
-------------------------------------------------------------
by Raul Lopez
StraightForex
-------------------------------------------------------------
Wednesday, June 27, 2007
The Elliott Wave Theory Demystified
I've had many readers ask me whether purchasing a trading system for several hundred or even a few thousand dollars is worth the investment. When I say "trading system," I mean some type of mechanical trading system that usually requires one to be "in the market" (either long or short) all or much of the time--or, some specific trading method a trader has devised and deems profitable. My answer to these readers is: While some trading systems or specific methods may (or may not) be useful or profitable, why not spend that kind of money, or less, and attend a quality trading seminar or workshop.
Attending a trading seminar or trading workshop allows you to hear some of the best traders and trading educators in the world share their knowledge. Furthermore, the smaller trading workshops allow you to not only learn from the trading instructor, but also likely learn something from your peers who are also attending the workshop.
I've attended many trading seminars and workshops over the years. My favorite seminars were the Technical Analysis Group (TAG) seminars. I've heard these TAG seminars are no longer conducted--or at least were not conducted this year. These were annual seminars held each fall at some major city in the U.S. The cost of the TAG seminars was around $700 per person. From 15 to 20 of the most respected traders and trading educators in the world gave lectures at the conference. And, attendees got a big fat notebook filled with all the featured speakers' presentations, in case an attendee could not make it to all of them.
One should never stop striving to learn more about markets and trading. The more knowledge a trader can attain, the better his or her chances for trading success. Last year, my good friend Glen Ring asked me to attend one of his intensive three-day trading workshops. Glen is a trading and trader education master. Glen has taught me much about markets, trading and the psychology of trading. I want to share with you some of the topics the workshop touched upon--without giving away any of the specific trading methods Glen discussed at his workshop.
Here are a couple "nuggets" we discussed at the workshop that I think will be beneficial to you:
---There are several components involved with successful trading. They include spotting the trading opportunity, proper entry and exit strategies and money management. Glen says (and I concur) that the most important of the components I mentioned above are money management and exit strategies. "Anybody can get into the market, but it's the real pros who know when to get out," says Ring. He, too, advocates using fairly tight protective stops when trading futures. He pointed out statistics in our industry that underscore why "survival" in futures trading is so important during a trader's first few months or first couple years of trading. Glen said studies in the futures industry show the average length of time a person stays in the business of trading futures is nine months to one year. What this very likely means is that the vast majority of beginning futures traders start out in this business not using effective money management or protective stops--and end up losing most or all of their trading capital in a few short months. I can't stress enough the survival mentality that all traders--especially those with less experience-need to employ.
---At the workshop we also discussed how Elliott Wave Theory can be a valuable trading tool. However, it is complicated and many traders do not master the theory well enough to ever use it effectively. I'll briefly discuss Elliott Wave Theory, but if you want to learn more I'd suggest reading books dedicated to this theory.
R.N. Elliott discovered the wave theory in the 1930s. Elliott waves describe the basic movement of stock or futures market prices. The principle states that in general there will be five waves in a given direction followed by usually what is termed and A-B-C correction, or three waves in the opposite direction.
In Wave One, the market makes its initial move upward. This is usually caused by a relatively small number of traders that all of a sudden feel the previous price of the market was cheap and therefore worth buying, causing the price to go up. This is where bottom-pickers come into the market.
In Wave Two, the market is considered overvalued. At this point enough people who were in the original wave consider the market overvalued and take profits. This causes the market to go down. However, in general the market will not make it to its previous lows before it is considered cheap again and buyers will re-enter the market.
Wave Three is usually the longest and strongest wave. More traders have found out about the market; more traders want to be long the market and they buy it for a higher and higher price. This wave usually exceeds the tops created at the end of Wave One.
In Wave Four, traders again take profits because the market is again considered expensive. This wave tends to be weak because there are usually more traders that are still bullish the market, and after some profit taking comes Wave Five.
Wave Five is the point most traders get long the market, and the market is now mostly driven by emotion. Traders will come up with lots of reasons to buy the market and won't listen to reasons not to buy it. At this point, contrarian thinkers will probably notice the market has very little negative news and start shorting the market. At this point the market becomes the most overpriced.
At this point in time, the market will move into one of two patterns, either an A-B-C correction or starting over with Wave One. An A-B-C correction is when the market will go down/up/down in preparing for another five-wave cycle.
I am not an Elliott Wave expert, but I do believe there is merit to the tenets of the theory. Importantly, the tenets of the wave show us how much human psychology plays a part in the way traders trade and the way markets move.
----------------------------------------------------------------------
Jim Wyckoff
TradingEducation.com
----------------------------------------------------------------------
Attending a trading seminar or trading workshop allows you to hear some of the best traders and trading educators in the world share their knowledge. Furthermore, the smaller trading workshops allow you to not only learn from the trading instructor, but also likely learn something from your peers who are also attending the workshop.
I've attended many trading seminars and workshops over the years. My favorite seminars were the Technical Analysis Group (TAG) seminars. I've heard these TAG seminars are no longer conducted--or at least were not conducted this year. These were annual seminars held each fall at some major city in the U.S. The cost of the TAG seminars was around $700 per person. From 15 to 20 of the most respected traders and trading educators in the world gave lectures at the conference. And, attendees got a big fat notebook filled with all the featured speakers' presentations, in case an attendee could not make it to all of them.
One should never stop striving to learn more about markets and trading. The more knowledge a trader can attain, the better his or her chances for trading success. Last year, my good friend Glen Ring asked me to attend one of his intensive three-day trading workshops. Glen is a trading and trader education master. Glen has taught me much about markets, trading and the psychology of trading. I want to share with you some of the topics the workshop touched upon--without giving away any of the specific trading methods Glen discussed at his workshop.
Here are a couple "nuggets" we discussed at the workshop that I think will be beneficial to you:
---There are several components involved with successful trading. They include spotting the trading opportunity, proper entry and exit strategies and money management. Glen says (and I concur) that the most important of the components I mentioned above are money management and exit strategies. "Anybody can get into the market, but it's the real pros who know when to get out," says Ring. He, too, advocates using fairly tight protective stops when trading futures. He pointed out statistics in our industry that underscore why "survival" in futures trading is so important during a trader's first few months or first couple years of trading. Glen said studies in the futures industry show the average length of time a person stays in the business of trading futures is nine months to one year. What this very likely means is that the vast majority of beginning futures traders start out in this business not using effective money management or protective stops--and end up losing most or all of their trading capital in a few short months. I can't stress enough the survival mentality that all traders--especially those with less experience-need to employ.
---At the workshop we also discussed how Elliott Wave Theory can be a valuable trading tool. However, it is complicated and many traders do not master the theory well enough to ever use it effectively. I'll briefly discuss Elliott Wave Theory, but if you want to learn more I'd suggest reading books dedicated to this theory.
R.N. Elliott discovered the wave theory in the 1930s. Elliott waves describe the basic movement of stock or futures market prices. The principle states that in general there will be five waves in a given direction followed by usually what is termed and A-B-C correction, or three waves in the opposite direction.
In Wave One, the market makes its initial move upward. This is usually caused by a relatively small number of traders that all of a sudden feel the previous price of the market was cheap and therefore worth buying, causing the price to go up. This is where bottom-pickers come into the market.
In Wave Two, the market is considered overvalued. At this point enough people who were in the original wave consider the market overvalued and take profits. This causes the market to go down. However, in general the market will not make it to its previous lows before it is considered cheap again and buyers will re-enter the market.
Wave Three is usually the longest and strongest wave. More traders have found out about the market; more traders want to be long the market and they buy it for a higher and higher price. This wave usually exceeds the tops created at the end of Wave One.
In Wave Four, traders again take profits because the market is again considered expensive. This wave tends to be weak because there are usually more traders that are still bullish the market, and after some profit taking comes Wave Five.
Wave Five is the point most traders get long the market, and the market is now mostly driven by emotion. Traders will come up with lots of reasons to buy the market and won't listen to reasons not to buy it. At this point, contrarian thinkers will probably notice the market has very little negative news and start shorting the market. At this point the market becomes the most overpriced.
At this point in time, the market will move into one of two patterns, either an A-B-C correction or starting over with Wave One. An A-B-C correction is when the market will go down/up/down in preparing for another five-wave cycle.
I am not an Elliott Wave expert, but I do believe there is merit to the tenets of the theory. Importantly, the tenets of the wave show us how much human psychology plays a part in the way traders trade and the way markets move.
----------------------------------------------------------------------
Jim Wyckoff
TradingEducation.com
----------------------------------------------------------------------
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