Essential Elements of a Successful Trader

Courage Under Stressful Conditions When the Outcome is Uncertain

All the foreign exchange trading knowledge in the world is not going to help, unless you have the nerve to buy and sell currencies and put your money at risk. As with the lottery “You gotta be in it to win it”. Trust me when I say that the simple task of hitting the buy or sell key is extremely difficult to do when your own real money is put at risk.

You will feel anxiety, even fear. Here lies the moment of truth. Do you have the courage to be afraid and act anyway? When a fireman runs into a burning building I assume he is afraid but he does it anyway and achieves the desired result. Unless you can overcome or accept your fear and do it anyway, you will not be a successful trader.

However, once you learn to control your fear, it gets easier and easier and in time there is no fear. The opposite reaction can become an issue – you’re overconfident and not focused enough on the risk you're taking.

Both the inability to initiate a trade, or close a losing trade can create serious psychological issues for a trader going forward. By calling attention to these potential stumbling blocks beforehand, you can properly prepare prior to your first real trade and develop good trading habits from day one.

Start by analyzing yourself. Are you the type of person that can control their emotions and flawlessly execute trades, oftentimes under extremely stressful conditions? Are you the type of person who’s overconfident and prone to take more risk than they should? Before your first real trade you need to look inside yourself and get the answers. We can correct any deficiencies before they result in paralysis (not pulling the trigger) or a huge loss (overconfidence). A huge loss can prematurely end your trading career, or prolong your success until you can raise additional capital.

The difficulty doesn’t end with “pulling the trigger”. In fact what comes next is equally or perhaps more difficult. Once you are in the trade the next hurdle is staying in the trade. When trading foreign exchange you exit the trade as soon as possible after entry when it is not working. Most people who have been successful in non-trading ventures find this concept difficult to implement.

For example, real estate tycoons make their fortune riding out the bad times and selling during the boom periods. The problem with trying to adapt a 'hold on until it comes back' strategy in foreign exchange is that most of the time the currencies are in long-term persistent, directional trends and your equity will be wiped out before the currency comes back.

The other side of the coin is staying in a trade that is working. The most common pitfall is closing out a winning position without a valid reason. Once again, fear is the culprit. Your subconscious demons will be scaring you non-stop with questions like “what if news comes out and you wind up with a loss”. The reality is if news comes out in a currency that is going up, the news has a higher probability of being positive than negative (more on why that is so in a later article).

So your fear is just a baseless annoyance. Don’t try and fight the fear. Accept it. Have a laugh about it and then move on to the task at hand, which is determining an exit strategy based on actual price movement. As Garth says in Waynesworld “Live in the now man”. Worrying about what could be is irrational. Studying your chart and determining an objective exit point is reality based and rational.

Another common pitfall is closing a winning position because you are bored with it; its not moving. In Football, after a star running back breaks free for a 50-yard gain, he comes out of the game temporarily for a breather. When he reenters the game he is a serious threat to gain more yards – this is indisputable. So when your position takes a breather after a winning move, the next likely event is further gains – so why close it?

If you can be courageous under fire and strategically patient, foreign exchange trading may be for you. If you’re a natural gunslinger and reckless you will need to tone your act down a notch or two and we can help you make the necessary adjustments. If putting your money at risk makes you a nervous wreck its because you lack the knowledge base to be confident in your decision making.

Patience to Gain Knowledge through Study and Focus

Many new traders believe all you need to profitably trade foreign currencies are charts, technical indicators and a small bankroll. Most of them blow up (lose all their money) within a few weeks or months; some are initially successful and it takes as long as a year before they blow up. A tiny minority with good money management skills, patience, and a market niche go on to be successful traders. Armed with charts, technical indicators, and a small bankroll, the chance of succeeding is probably 500 to 1.

To increase your chances of success to near certainty requires knowledge; acquiring knowledge takes hard work, study, dedication and focus. Compile your knowledge base without taking any shortcuts, thereby assuring a solid foundation to build upon.

10 Tips for your success in Forex trading

1. Implement a trading plan.

“If you fail to plan, you plan to fail”. A trading plan is especially crucial in Forex trading to stay ‘in-control’ against the emotional stress in speculative situation.

Often, your emotions will blind and lead you to the negative sides: greed causes you to over-ride on a win while fear causes you to cut short in your profits. Hence, a well organized operation has to be predetermined and strictly followed.

2. Trade within your means

If you cannot afford to lose, you cannot afford to win. Losing is a not a must but it is the natural in any trading market. Trading should be always done using excess money in your savings.

Before you start to trade in Forex, we suggest you to put aside some of your income to set up your own investment funds and trade only using that funds.

3. Avoid emotion trading

If you do not have a trading plan, make one. If you have a trading plan, follows it strictly! Never ever attempt to hold your weakened position and hope the market will turn back in your favor direction. You might end up losing all your capital if you keep holding. Move on, stay within your trading plan, and admit your mistakes if things do not turn as you want.

4. Ride on a win and cut your losses

Forex trader should always ride till the market turns around whenever a profit is show; while during losing, never hesitate to admit your mistakes and exit the market. It is human nature to stay long on loses and satisfy with small profits – this is why as we mentioned earlier that a strictly followed trading plan is a must-have.

5. Love the trends

Trends are your friends. Although currency values fluctuate but from the big picture it normally goes in a steady direction. If you are not sure on certain moves, the long term trend is always your primary reference. In long run, trading with the trends improves your odds in the Forex market.

6. Stop looking for leading indicators

There aren't any in the Forex market. While some firms make a lot of money selling software that predicts the future, the reality is that if those products really worked, they wouldn't be giving the secret away.

7. Avoid trading in a thin market

Trade on popular currency pairs and avoid thin market. The lack of public participation will cause difficulties in liquidate your positions. If you are beginners, we suggest the big five: USD/EUR, USD/JPY, USD/GBD, USD/CHF, and EUR/JPY.

8. Avoid trading in too many markets

Do not confuse yourself by overtrading in too many markets especially if you are a beginner. Go for the major currency pairs and drill down your studies in it.

9. Implement a proper trading system

There is hundreds of trading systems available on line. Pick one that you are most comfortable with and stick with it. Stay organized in your trades and fully utilized stop-loss or limit functions in your trades.

10. Keep learning

The best investment is always the investment on your brain. Without a doubt, Forex trading needs much more than just a few guidelines or tips to be successful. Experience, knowledge, capital, fortitude, and even some help of luck are all crucial in one’s success in the FX market. if you lose in a trade, do not lose the experience in it. Learn from your mistakes and regain your position in the next trade.

How currency exchange (FOREX) market works

I bet you are well aware of the existent of Forex trading nowadays. Forex market exists wherever one currency is traded for another. Forex, or Foreign Exchange Market, is generally works as an international currency exchange market. Investors and speculators are allowed to trade currencies from all around the world thru Forex trading.

Forex is a very unique type of trading where traders are buying and selling 'money' in the same time. The trades are done in pairs, such as Euro/JPY, USD/CHF, and CAD/USD. It is the world largest trading market where an average of $1.9 trillion trades is done on a daily basis. The turnover rates in FOREX are nearly 30 times larger than the total volume of equity trades in United States.

Despite its large volume of trades done daily, Forex is relative new to the publics nonetheless. It is only made available to publics in year 1998 where big sized inter-bank units are sliced into smaller pieces and offered to individual traders like you and me. Before that, Forex is a game only for banks, multi national cooperation, and big currency dealers. Only those with large business size and strong financial background were permitted to trade foreign currencies.

Facts about Forex market

As a matter of fact, large international banks are still the major traders in currency exchange market. Deutsche Bank is one of the top currency traders; along with other major banks like UBS, Citi Group, HSBC, Barclays, J. P. Morgan Chase, Coldman Sachs, ABN Amro, Morgan Stanley, and Merril Lynch; these banks are said to be responsible for more than 70% trades in currency market.

When you are trading Forex with currency dealer, the Forex quotes might look a bit different from our previous example. Often, a two-sided quote, consisting of 'bid' and 'ask' price, is listed when dealing with currency brokers. For example, EUR/USD 1.2385/1.2390: 1.2385 is known as the 'bid' price while 1.2390 is commonly known as the 'ask' or 'buy' price. The 'bid' is the price at which you can sell the base currency; while the 'ask' is the price at which you can buy the base currency. As you study the numbers, you might realize that the two-sided currency price is quoted against you.

Traders are forced to buy the currency in a higher price than the selling one. This is done because FOREX trades are done without any commission chargers. Thru quoting currency 'bid & ask' price differently in this way, the currency brokers are manage to make profit without charging their client commission fees directly. Learn more on Forex quotes.

Fundamental analysis and Technical analysis in Forex

Fundamental Analysis refers to the study of the core underlying elements that influence the economy of a particular entity. As in Forex trading, government policies, bank policies, natural disasters, and speculators mood are some of the fundamentals considered to predict the currency market trends. Fundamental FOREX traders will review a country economy's situation base on these fundamental elements and respond accordingly. To gain max, fundamentalists often apply precise method to convert study's results into accurate entry/exit price indicator.

Technical Analysis, on the other hand, is a completely different story. Instead of reviewing on the fundamental issues, traders from the technical side define market movement according to data purely generated from the market. The term 'Technical' is applied in all trading fields, from commodity stocks exchange to option trading, from Forex to futures.

Generally, the purpose of technical analysis is to find potential price reversal or pivotal points. These points basically refer the change of market trends, which then indicates when to enter or exit from the market. It is important to know that as with any other techniques in your trading system, these technical analysis indicators could be used alone or with other indicators. Traders are always recommended to learn more different technical methods to analyze different market data because none of these techniques are 100% accurate and 100% foolproof. Taking example of the 'price' data and the 'time' data, which are widely used by FOREX trader.

There are some techniques consider solely on the 'price' factor, while some solely rely on the 'time' factor. The fact is if you know both technical methods, you can take both price and time into consideration during estimating market future trends. This will of course then reduce the risks of losing money in Forex market. Also, it would be wise if traders combine both technical and fundamental techniques when trading Forex, as a country currency value depends a lot on fundamental variables such as war, change of national leaders, terrorism attacks, as well as natural disasters.

Conclusion

Without a doubt, Forex is gaining its popularity fast against other kind of trading. No limited market access, no liquidity issues-after market hours, zero commission fees, low capital requirements with high leverage rates, and no restrictions on short selling -- Forex can be very beneficial to a variety of people. Like any other trading business, if you are new to it, best advice you can get is to learn and practice more before you test your 'wings'. Seminars, eBooks, Internet, papers, video courses - all these are helpful to raise your confidence level before you trade with your real hard-earn dollars.

Why trade in foreign currency exchange market?

Why trade Forex instead of stocks, futures, commodities, or options? Why more and more people nowadays started trading Forex at home? Perhaps the list of advantages in Forex trading has the answer.

Advantages in Forex currency trading

Equal Prospective in Rising or Falling Market Trend

There is no structural bias to the market and there are no restrictions on short selling in FX market. Trading in Forex gives you an equal prospective in rising and falling market.

As trades are always done in pair of currency pairs, Forex traders can always find chance to make money in anytime, regardless on the fall or rise period of one single country currency.

Trade Forex 24 hours a day

Forex market never sleeps. In Forex trading, you do not need to wait the market to open, you can always response to world latest movement and news immediately.

Every Sunday 5.00pm in New York, Forex market starts its week from Sydney, followed by Tokyo, Singapore, Hong Kong, London, and New York. In Forex tradng, you can always response to the market trend a lot faster than in any other trading market.

Also, with the flexibility of Forex market trading time, you can work on your trade in Forex during your free time. This means you can start small and work as part time trader before going full time on FX trading.

High Leverage Margin

Forex brokers offer trade margin of 50, 100, 150, or even 200 to 1 of trade margin.

Forex traders often find themselves controlling a huge sum of money with little cash outlay on the table. For example, a $1,000 in a 150:1 Forex account will gives you the purchase power of $150,000 in the currency market.

While certainly not for everyone, the substantial leverage available from online currency trading firms is a powerful, moneymaking tool. Rather than merely loading up on risk as many people incorrectly assume, leverage is essential in the Forex market.

This is because the average daily percentage move of a major currency is less than 1%, whereas a stock can easily have a 10% price move on any given day.

Table below demostrate how a high trading margin can impact on the trades ROI.

The Power of Leverage
Trading Margin	Capital	Purchase Power	Money value of 1% Profit	ROI of capital
2:1	$1,000	$2,000	$20	2%
10:1	$1,000	$10,000	$100	10%
50:1	$1,000	$50,000	$500	50%
100:1	$1,000	$100,000	$1,000	100%
150:1	$1,000	$150,000	$1,500	150%
200:1	$1,000	$200,000	$2,000	200%

Trade Forex anywhere from the world virtually

A computer with Internet connection plus an active Forex account are sufficient for you to execute a trade in Forex market.

Professional Forex traders have the privilege to travel around the world but yet still connected to the market anytime, anywhere. The freedom of this is something you could not get else where by being an employee of a cooperation.

High Liquidity Market

Turnover value in Forex is $1.9 trillion per day. It is the largest trade market in the world and the liquidity of the market is huge. Traders can easily cash in or cash out their capital in Forex market.

Learning and Investing in Forex trading

Wrapping things up, we believe that Forex trading give a whole new option to individual traders to success financially. Learning Forex and listing Forex trading into one of your financial plans is a must.

China: Pushing Stocks Lower To Move The Dollar Higher

As the financial crisis grew in intensity the big question among economists and investors had to do with the decoupling theory, and specifically whether China would delink from what was going on in the West. The answer of course turned out to be that it wouldn’t; Chinese GDP shrunk to merely 6%, which technically was a contraction because that rate of growth cannot produce the estimated 20 million jobs per month its population requires.

These days, they’re more likely to be pondering the implications that a falling Chinese stock market have for the rest of the world. The Shanghai Composite continued its recent plunge at the start the week because there were more rumors of a planned tightening in bank capital requirements, which naturally will restrict lending and therefore liquidity.

Also hurting stocks there are concerns the government is about to aggressively unwind the fiscal and monetary stimulus measures that have helped re-energize growth. Overall, valuations are about 23% below their peak after a wild 90% surge and the press is all over the idea of a new Chinese bear market.

Things are very different in China than in Western nations in one very important aspect; when the government says lend, banks lend, and the rumors are that much of that government-created excess liquidity had been finding its way into the hands of stock speculators.

When you look closely at things, you’ll see that efforts to reign in what some are calling a bubble probably have more to do with Chinese concerns over where the dollar has been going as global equity markets rebounded this year (down) and relatively little concern about the economy overheating in any way. China has negative inflation while joblessness remains a top concern, which suggests it will be well into 2010 before policy is tightened in a more permanent way.

In the meantime, as seen earlier this year, China is indeed very concerned that the dollar will fall, hurting its huge holdings of U.S. assets as well as weakening its competitive edge on exports. China itself likely helped to weaken the dollar this year as it went on its huge commodity buying spree with its stockpiling of oil, copper and iron ore like there was no tomorrow.

You can always tell when a move in stocks (either way) has legs. The S&P fell 0.81% on Monday as investors dutifully reacted to the Chinese benchmark’s 6.7% plunge. However, most concerning was that the fall came on relatively good news; the Institute for Supply Management-Chicago said today its business barometer increased to 50, the highest level since September 2008 while the employment component increased to 38.7 from 35.3.

Another test will come on Tuesday as the ISM reports on it national manufacturing index, which is expected to show growth for the first time in 19 months. If Chinese markets take another dive overnight and the S&P falls on another good number, the correction many have been waiting for might just take hold. September is historically the worst month for equity markets and it may just be that the slight chill in the air could turn investors’ feet a bit cold towards the March rally (at least temporarily), thereby pushing them into the relative saftey of the good old greenback.