Online FOREX Trading - To
Be A Success Don't Pay Attention To The News!
Can studying the news help you make profits in online FOREX trading? The answer
for most traders is a no.
In fact, paying attention to the news in online FOREX
Trading will lose money. Why? Read on and let’s find out.
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How and why prices move
In online FOREX trading (and any financial market for that
matter) prices move based upon the following equation
Which is most important? In today’s markets definitely the
latter – Why?
Quite simply, markets discount fundamentals quickly and with
the internet it's done in seconds.
In all corners of the globe the internet delivers
information quickly and it’s immediately discounted in the market price.
This means traders make opinions on what will happen in the
FUTURE and it is their psychology that is the key to future price direction.
Sure, the papers and news wires are great at telling you why
things DID happened and their normally wrong about WHAT will happen.
Traders get deluded by the experts in online FOREX trading
and fail to see their wrong most of the time.
Will Rogers once say?
“I only believe what I read in the papers”
Now, he was joking, but most traders take news services as
gospel.
Reuters and Bloomberg stories agree with them, so they must
be right, is the view of most online FOREX traders. Don’t think so, in fact we
know so, based upon the facts and the so called experts past performance.
It’s easy to be wise in hindsight, but looking into the
future is much more difficult!
They write stories for a living they DONT trade, traders
that are interested in making profits should not be following news stories or
media hype.
It’s a fact: Most important market tops and bottoms and
formed when the news is most bullish or bearish. When the trends change of
course, news wires have an explanation but that does not help you trade!
In the 1987 crash they were bullish in the tech stock boom
they were bullish and these are just two examples of media experts being wrong
and there are many others.
Understand the past and look to the future
This is the key to successful online FOREX trading. Quite
simply the fundamentals are digested in seconds and reflected in the price.
Its trader psychology that’s important as they look at the
future and how they determine the supply and demand situation is reflected in
price changes.
Human psychology has remained constant over time and that's
why many price patterns are so reliable and point to important market tops and
bottoms when the market is either very bullish or bearish.
Of course, prices then go the other way! Confounding the so
called media experts.
Technical analysis of markets
The only way you can win in online FOREX Trading is to use a
technical analysis system that focuses on price.
Why use a technical system in online FOREX trading?
There are two main reasons
1. You will not be distracted by media stories and news hype
and will keep your emotions in check.
2. If you are involved in online FOREX trading you can look
at charts and see long term trends that last for months or years and many of
them (in fact most of them!) run against what the papers and the so called
experts say!
To be a success in online FOREX trading all you need to do
is focus on these trends and forget the news and media, media experts don’t get
paid to trade, they get paid to write stories.
Focus on the reality of the price, not the media hype and
you can make big profits in online Forex trading.
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widening your knowledge and trading experience, you can easily joinForexGenonline academy and start develop your own
way in handling Forex trade.
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Have you ever seen things like these on a website or in a review?
"I followed those trading signals, and my account dropped 70% in 3
days."
"I tried this method and got margin called in less than a week."
Let me put this simply. It doesn't matter if some trading method, trading room,
signals service, or anything else has a perfect reviews and a 5 year history
showing that it never had a single losing trade. No matter what
"proof" is offered, no matter how well endorsed it is, no matter what
the guarantee is, DO NOT EVER RISK TOO MUCH OF YOUR ACCOUNT ON ANY ONE TRADE.
No human, no computer, no "perfect" signals or other trading method
can be right 100% of the time. It's possible to back test and optimize
something so that its "perfect" with old data, but the forex market
is an unpredictable beast. Good systems and signals can be right much of the
time, but NOTHING will ever be right 100% of the time if you let it run long
enough.
Risk Management is the concept of having a plan that sets a maximum amount of
risk that you will place on any one trade. How much risk is "too
much" risk is the subject of much debate. I've seen numbers ranging from
1/2% to 5%. Some of this will depend on the forward tested success rate of your
system, and some will depend on what you consider to be an acceptable level of
risk.
"But if I don't risk much, I can't make much." is a common complaint
against risk management. To some extent, this is true. On the other hand, if
you have nothing in your forex account to trade with, you won't make any money
at all. If you risk too much and there's a big gap in price (or your broker
gives you too much slippage), you can not only lose all the money in your
account, but you can possibly even end up OWING money to your broker.
Let's say you have $10,000 in your account. Then you decide to risk $5000 for
the chance to make $5000 (a 1:1 ratio). If the trade goes your way, you have
$15,000. That's great, but what if it goes the other way? Then you only have
$5000. Now, you need to double your $5000 to get back to where you started. If
you risk half your account again and the "99% accurate" system fails
you again, then you only have $2500 left. Now you would have to quadruple your
account to get back to where you started. Fail one more trade like this and you
have only $1250 left. You would have to have more than 5 perfect trades gaining
50% each time to get back to where you started. After 3 losses in a row wiping
out over 85% of your account, would you really want to trust this trading
method to work 5 or 6 times in a row now?
Let's say you feel like using the highest end of typical risk management
recommendations and risk 5% of your $10,000 account on each trade. Once again,
we'll use a 1:1 ratio just to keep the math simple. This means you'll risk $500
on the first trade while hoping to make $500. If the first trade goes bad, you
have $9500 left. You would have to lose many trades in a row to lose half of
your account, and far more to go all the way down to $1250. It is true that you
won't be able to make money as fast, but what good is making huge sums of cash
if you can lose most or all of your hard earned profits from a single bad
trade.
I would NEVER risk more than 1/2 percent of my account per trade on something I
hadn't personally forward tested on a live account for an extended period. If I
have confidence in a system that I have tested live over time, I slowly and
carefully scale up the size of each trade. I’m not going to say exactly what my
personal maximum risk is, since I want you to select your own, not just copy
what I do.
If you want to try something new, first try it with ForexGen demo account, but
remember that demo accounts get filled quicker and have little or no slippage.
A real account is much more likely to have slippage and requotes, thus cutting
into potential profits. If demo testing looks good, then move it to your live
account and trade the smallest amounts possible, just to see how the trading
works with your broker.
The Daily Trading Signals here at the ForexGen are a good example of how
different demo and live accounts can be. It's not that hard to catch a news
spike (or to straddle the price with pending orders) on a demo account. With a
live account, even the best broker won't fill every order perfectly if you try to
catch the news spike. Some brokers even go so far as to prohibit news trading.
This means that if you make a profit trying to catch a news spike, they will
confiscate it. Somehow, they never will give you a refund if you lose money on
a news trade. Since I'm primarily a technical trader, this isn't a problem for
me. If you really want to try to catch news spikes, Felix strongly recommends
MB Trading. I haven’t tried them out for news trading, so I can’t give a
personal opinion on this.
If you are using forex signals or some other system and you have successfully
traded it for long enough to be comfortable with it, ask the signals (or other
product’s) support staff what the maximum risk they recommend is. They should
be more familiar with the product than anyone else. Just remember to start
small on any new system and never to exceed your own personal maximum risk per
trade no matter what anyone else says.
Although a historic record of pip gains for a , trading room, or
trading method is a good thing to consider, the actual results you get will
always be a little different. See where I've been reporting the results of my tests. At the moment due to
pure dumb luck, I've actually been doing a little better in total pips on the
trades I’ve taken than the "official" record for the signals I've
taken from them. Sometimes I've entered a little better, sometimes I've missed
a close signal and something went on and hit the take profit number. If my
schedule had been a little different, this could just as easily gone the other
way and cut into the results.
Setting your risk is easy with most brokers. You just need to set a stop loss
on each trade. Remember that xxxUSD pairs are worth $10 per pip for a full lot,
$1 per pip for a mini lot, 10 cents per pip for a micro lot, and 1 cent per pip
for a nano lots. For other pairs, it's a very good idea to check a pip value
calculator. If you wanted to take a maximum risk of $100 on a trade, then you
can only set the stop loss to a mere 10 pips if you plan to trade a full lot of
a xxxUSD pair. On the other hand, you can trade 5 mini lots and with a 20 pip
stop loss or 1 mini lot and use a 100 pip stop loss. Usually, the stop loss is
determined by your trading method and then you need calculate the maximum lot
size of the trade that you can risk. If the smallest amount your broker will
let you trade would exceed your maximum risk, skip the trade (or find a broker
that lets you trade smaller amounts).
Remember, some brokers are better at closing your order exactly where you set
the stop loss. Others frequently have very bad slippage and will fill your
order at a price that is worse for you. If your broker does this too often,
reduce your total risk per trade to compensate for the potential slippage loss
and look for a better broker.
If you plan to leave an order open after the New York trading session ends on
Friday afternoon, be aware that there might be a gap in price when the Tokyo
market opens (Sunday evening in New York). If price gaps across your stop loss,
you could lose a lot more than you planned. Alternatively, some brokers won't
observe the stop loss under these circumstances and the price could continue to
move against you even more. Until you have a solid understanding of market
dynamics, your broker’s methods, and understand all of the risks involved, you
might want to close all positions on Friday before the market shuts down for
the weekend and then re-open them when the market opens on Sunday.
My personal advice for ANY trading method you are considering would be to start
with a combination of back testing as well as forward testing on a demo
account. Don't base your decision to go live on 1 or 2 trades. Remember, coin
tosses are accurate 1/2 the time, and getting heads or tails 3 or even 4 times
in a row isn't that hard to do. Once you have enough data to feel confident,
trade TINY amounts of money live to make sure that the method can work under
real world market conditions with your broker. If it's still profitable, scale
up at a reasonable pace, but NEVER exceed the maximum amount of risk per trade
that you set for yourself. Even the best system in the world will still have an
occasional losing streak.
Always remember this. You can't make your fortune if you lose most of your
account on a few bad trades. To get rich trading forex, you must first learn
not to go broke.
I can't promise that following this advice will absolutely save you from losing
all of your money, but at least you'll lose it slowly enough that you'll have a
chance to improve your trading technique before blowing your account. Join ForexGen for
more advices.
The Fed has cut the Discount rate by
25 bps in an emergency market to primarily "Reduce the spread between Fed
Funds rate and Discount rate".
The Fed is still likely to cut the headline Fed funds rate by 75 bps on
Tuesday, its scheduled meeting.
ForexGen provides its clients with a full
explained market analysis, fundamental or technical. ForexGen news centre could
be your guide in making your calculations and forecasts for the coming period,
and helps in analyzing fundamentals.
The Federal Reserve on Sunday announced two initiatives designed to bolster
market liquidity and promote orderly market functioning. Liquid,
well-functioning markets are essential for the promotion of economic growth.
First, the Federal Reserve Board voted unanimously to authorize the Federal
Reserve Bank of New York to create a lending facility to improve the ability of
primary dealers to provide financing to participants in securitization markets.
This facility will be available for business on Monday, March 17. It will be in
place for at least six months and may be extended as conditions warrant. Credit
extended to primary dealers under this facility may be collateralized by a
broad range of investment-grade debt securities. The interest rate charged on
such credit will be the same as the primary credit rate, or discount rate, at
the Federal Reserve Bank of New York.
Second, the Federal Reserve Board unanimously approved a request by the Federal
Reserve Bank of New York to decrease the primary credit rate from 3-1/2 percent
to 3-1/4 percent, effective immediately. This step lowers the spread of the
primary credit rate over the Federal Open Market Committee’s target federal
funds rate to 1/4 percentage point. The Board also approved an increase in
the maximum maturity of primary credit loans to 90 days from 30 days.
ForexGen Inviting You
to Read the online free academy online on the website where you can develop
your trading strategy Register Now to get the latest news.
ForexGen studies past
price and volume changes in order to build up simulations on future price
movements. ForexGen analysts mainly make use of charts and financial formulas
to gather enough information used in technical price speculations.
Leonardo of Pisa was an
Italian mathematician who lived between 1170 – 1250, also known as Fibonacc
i.
In his Book of Calculation (Liber Abaci) he presented a modern number sequence
named after him known as the Fibonacci numbers. The Fibonacci numbers looks
like this:
0, 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, etc
a number being the sum of the preceding two numbers. The Fibonacci sequence can
also be found in natu
re, in leaf buds, spiral seeds, sunflowers, and scales on
pineapples, petals on artichokes, daisy petals, fruits, pears, pine cones, pine
needles, and many more natural objects. The sequence is also found in musical
theory; there are 13 notes in an octave with 8 white keys, 13 follows right
after 8 in the sequence.
If we divide one number in the series by the number that follows it, we will
find out that each number is 1.618 times greater than the preceding number. For
example:
The Fibonacci key points used for trading are being calculated as follows:
First ratio: 8/13 = 0.6153 - 61.8% ratio
Second ratio: to obtain it we divide one number by the number found two places
after it.
8/21 = 0.380 - 38.2% ratio
The third ratio: we divide one number by the number found three places after
it.
8/34 = 0.2352 - 23.6% ratio
For unknown reasons, these numbers represents the support and resistance
points, as you can see from the above chart:
There is no logic behind this market behavior, as there is no logic behind the
appearance of the sequence in natural patterns, but most of the times is
happens, that's why traders are using the Fibonacci indicator. I have found one
logical explanation though. Like any other prophecy, we make it happen by
trading according to its prediction. For example if the trend reaches one of
Fibonacci retracement point, everyone will sell/buy thus making the prophecy
happen.
Fibonacci is being also used for identifying Elliot waves, because most of the times
the waves are formed around Fibonacci retracement point.
ForexGen services are all controlled by the
international banking and financial regulatory standards. ForexGen is continuously providing the Forex market's safest
trading terms & conditions. Providing professional currency trading
services that meet our client's expectations is our first priority.
News this morning should show that UK house prices continued to fall sharply, at least on the measures from the Nationwide and Halifax, less so from other mortgage brokers or property agents. And the government's announcement yesterday will do little to alter the path of the housing market. A correction is underway from very high prices in the UK to less high prices - though still overvalued on most metrics.
So this is one reason why the MPC is very unlikely to want to cut rates at today's meeting - it would do little to prevent what they see as a necessary housing market correction from taking place. But the main reason why they will not cut, despite the UK economy coming to a standstill in Q2, is that inflation is too high. Not only is it well above the 2% target, but it is still accelerating. The ECB also meet today and are equally unlikely to cut rates, though the eurozone economy shrank by 0.2% in Q2. In fact, the ECB has raised rates this year (July), even though the economy showed signs of weakening.
In yesterday's Daily Currency Focus, we said that the 1.45 level was significant support in the EUR/USD.A break below that level would have opened the door for a move down to 1.42. Even though the EUR/USD did take out the support to hit an intraday low of 1.4385, what was more impressive was the currency pair's reversal. The close back near today's high reflects strength rather than weakness.
The European Central Bank interest rate decision is the wildcard tomorrow.The recent decline in the Euro suggests that the market is expecting the ECB to be dovish despite their clearly hawkish rhetoric. Traders are looking at the price of oil and the recent Eurozone economic data and drawing the conclusion that the ECB can no longer be stubbornly hawkish.Second quarter growth and retail sales were both weaker than expect.Although service sector PMI was revised higher, it still remains in contractionary territory.
Keeping interest rates on hold at 4.25 percent is a given, but Euro bears may be disappointed by Trichet's press conference.If the ECB is dovish, it would be in line with the recent price action in the Euro, so the risk is hawkishness.The ECB is not a central bank to fade – their job is to stabilize the economy and not to induce volatility.If they say that they are hawkish, there is no reason to doubt them.Recent comments from members of the Governing Council indicate that even though economic growth is slowing, the ECB expects activity to pick up next year.With a strict inflation mandate, they are much more worried about inflation feeding into wage and price setting behavior. Before shifting their stance, they may want to see oil prices remain at current levels for at least another month.
Commodity-price swings will continue to trigger further volatility in the currency, but the Canadian dollar will struggle to extend the near-term recovery beyond the 1.05 level.
The Canadian dollar weakened to lows around 1.0770 against the US dollar ahead of the Bank of Canada interest rate decision on Wednesday which was a 12-month low for the Canadian unit.
There had been some speculation over a cut in rates which pushed the currency weaker, but the bank left rates on hold at 3.0%. The bank also indicated that it was comfortable with the current accommodative stance and suggested that rates would not be cut in the near term. The Finance Ministry was also generally optimistic over the Canadian fundamentals
Following the decision, there was a sharp short-covering rally for the currency which pushed the Canadian dollar stronger to highs beyond the 1.06 level against the US dollar. The Canadian currency retained a firm tone on Thursday with a move towards 1.0550 as the US currency retained a more defensive tone.
The British pound continued to sell off despite an improvement in service sector PMI.The UK economy is weak, but it is encouraging that manufacturing, construction and service sector PMI all improved in the month of August.This suggests that even though growth is continuing to contract, the pace of deterioration may be slowing.
Consumer confidence remains at a 4 year low, but the recent decline in the British pound and the drop in oil prices should help to boost growth.The 12 percent decline in the British pound has put UK firms on a fire sale.We expect M&A activity to pick up, which could help to temporarily stabilize the currency.
The Bank of England is expected to leave interest rates unchanged at 5.00 percent.With the economy slowing and inflationary pressures easing, the next move by the central bank should be a rate cut.The market is currently pricing in 75bp of easing over the next 12 months and because of that, we still expect the GBP/USD to break 1.75.Usually when the BoE leaves rates unchanged, no statement is released, which mean that the action should be in the EUR/USD tomorrow on the heels of Trichet's press conference.
