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Losing trades when using your forex trading system

Why shouldn’t be scared of losing trades when using your forex trading system

This article looks at the reasons why you shouldn’t chop and change your forex trading system just because of a few losing trades.

You may have heard it so many times, or read it over and over and still ignored it, but you really have to believe it. Trading and losing are simply inseparable. You can’t do anything about it. In fact if you do not know how to lose money in the right way, you may never be a consistent trader. There are a few reasons why people quickly dump their forex  system after a few losses and some of them are:

  • They traders have simply refused to come to terms with the fact that a trader can lose 60 out of 100 trades and still end up profitable.
  • They simply hate seeing negatives in their trading journal or account history.
  • The positions they took were not in line with their money management rules and this caused an increase in their stress levels and lead to huge emotional swings.

For the rest of the article, we will look at how you can deal with this problem and make yourself a trader that believes whole heartedly in his trading system.

Channel the ‘fear’ emotion to something positive instead of changing your forex trading system

In many areas of life, the fear of losing money is a positive emotion to have. If this emotion wasn’t present you may not be here trading forex as the economy and markets would be in chaos. We are all protective of our finances because we went through a lot to earn what we have. In trading however, this natural emotion to be on the defensive once our money is on the line has to be channelled into a different state of mental awareness.

So instead of being fearful about losing your funds during trading, be happy that in line with your forex trading system, you are fully in control of how much you stand to lose on each trade.  If your forex system is any good, you should have stop losses, position size etc. properly sorted out. So once you get into a trade and the fear creeps in, remind yourself that you are in control and tell yourself “the worst that could happen is that I lose 5% of my account” or something along those lines.

A test to determine if you still have the fear of losing

Here is simple test if you simply cannot stop thinking about the trades you have on. If you are glued to your computer screen for far too long, instead of being in bed or watching something on TV (my two main activities maybe not yours), you are scared of losing. This means you are either scared of your stop loss level getting hit or you do not have confidence in the position you just took. If you are also in the habit of modifying and looking all over the web for a new forex trading system after every losing trade, you are trading with fear.

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Tips for trading: Forex UK

Tips for a forex UK trader

If you are a forex UK trader then this article is for you.

Forex trading is a simple way to make money; but the problem is that it is in no way easy.  This may look contradictory in a way but it is not.  How do you explain a scenario where someone makes 10,000 pounds in 5 minutes only to lose everything and even more in the next 2 hours? If you are a forex UK trader here are a few tips that will make your trading a lot more pleasurable and profitable.

Tips to keep in mind as a forex UK trader 

  • Open a spread betting account if you are a forex uk trader that relies heavily on profits from your trading. This is because forex profits made through the everyday forex broker are taxable while profits made through a spread betting account are not taxable. So this way, you won’t have to share your hard earned profits with the tax man.
  • Drop the gambling habits if you want to make money trading the forex markets. You may have made quite a bit of money gambling but coming into forex trading with the same habits is a recipe for disaster. For example, some people thrive on using the martingale style while gambling and it works for them quite well as one profit made is enough to take care of all the past losses. In forex trading however, this only brings closer your margin call.
  • Learn to protect your trading capital. This is very important. Before entering a trade always make sure you have your stop loss automatically placed to limit the losses from any negative occurrences. When you are in doubt, do not enter any trades. It is possible to be in doubt even when your trading system is saying you should take the trade. This could be due to being wary of a news release scheduled to happen in the coming minutes. In this scenario, you are not disobeying your trading strategy, rather you are being sensible.
  • Do not go beyond 5% of your account regardless of what you are seeing on the charts and how sure you are about the trade. Always keep in mind that your chance of closing that trade in profit is the same as your chances of closing it in a loss. There is nothing like a home banker in forex trading! With 5% of you money at  risk, you have to be wrong over 30 times in a row to blow the trading account. Even a trading strategy that is only right 40% of the time could be profitable with the right stop losses.
  • Treat you forex trading as you would treat a normal business. The only difference between forex trading and your bricks and mortar business is that you only need a computer and internet connection to trade forex while you need an office space and staff to run your offline business. So just as you would have goals, objectives, projections etc., treat your business in that same manner.

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The story of a forex UK trader

The story of a forex UK trader 

This article highlights the trading habits of a forex UK trader and how they ended his trading career.

For the purpose of this article we are going to refer to our trader friend as Mr Chris. Mr Chris was an average forex trader in the UK who like everyone else stepping newly into the business had in mind that he was going to make his millions trading the forex market.  After reading books and attending forex training, he went on to demo trade with a 100,000 pounds account and in just a couple of weeks he grew the account to 500,000 pounds. Feeling very good about himself, he funded the account with 5000 pounds hoping that he would quickly turn the money into 30,000 pounds.

On the first day, our forex UK expert friend made 2,000 pounds on the initial balance and he was in ecstasy. By the end of the week, he already had 10,000 pounds in the trading account. All through that weekend, he was busy boasting to everyone that cared to listen about his trading achievements. He was also busy posting screen shots of his account all around different forex forums and telling everyone how good his system was.

Well in the next week, things changed . Mr Chris took a sell trade with 10 lots on the 10,000 pounds account because he had so much faith in the efficacy of his trading system and unfortunately, that trade with the massively increased position became his first losing trade. He wasn’t trading with a stop loss in place so a fundamental release came out and hit his trade on the wrong side. Before he was able to close the trade he already lost 60 pips meaning he had 4,000 pounds left in his trading account. He was so angry with himself.

Seeing that the market was still soaring upwards he quickly jumped in again still with 10 lots in a bid to recover the money lost or at least take his account to break even. Unfortunately, the market retraced a bit and he got a margin call leaving him with just 300 pounds.

Instead of looking at where the problem came from, which was himself, he pulled down the indicator he was using, (that was 90% accurate before the loss) and went in search of a new one.  In a few hours, he found a new indicator and by the next day, he had already funded his account. In just 2 days, he blew the account again. After paying for a few trading systems, he finally gave up on trading and currently trauls forex trading forums in the UK telling other traders why they can never succeed with trading.

So what did we learn from this forex trader in the UK?

Mr Chris, like many forex traders in the UK, started life by gambling on fruit matches and unfortunately, he brought that mentality to trading.  In gambling, most people do not have any plans for money management and some keep getting away with it with a few big wins taking care of the  losses. In forex trading however, the story is different as you will be severely punished without money management.

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Why Foreign Currency Exchange Trading is Popular

Why Foreign Currency Exchange Trading is Popular

Foreign currency exchange is currently the biggest financial business on earth. Trillions of dollars are traded on a daily basis from all corners of the world. The industry is driven by ever-changing currency values. Currency exchange trading originally started out mainly with large banks, corporations, governments and financial institutions being the only players. Today they remain the big players, but the market has opened up to individual investors, and thousands are already regular traders.

Individual traders enter the foreign currency exchange market through forex brokers or banks. There are many forex trading companies that have grown to offer these services to the many investors interested in dabbling with Forex. Forex brokers help their clients in the buying and selling of different foreign currencies. All you have to do is to open an account with a licensed broker and put in a small deposit to start trading. You will then be watching the markets as the currency values fluctuate, and making appropriate trading decisions based on fluctuation patterns.

Participating in currency exchange trading on the internet opens up a 24-hour market to you. Traders can log in and trade anytime of the day or night, and from any place. There is a wide range of currency pairs that traders can choose from, with the most common currencies being the U.S. dollar, British pound and Japanese Yen. During normal trading, currency exchange rates fluctuate by what seems like small margins. The best way to make good profits with such small margins is through leverage. This is an arrangement through which the forex broker allows you to trade with amounts much higher than your investment. Leverage ratios can be as high as 1:100. On such a large scale, slight fluctuations translate into huge profit margins.

With the possibility of great profits also comes great risk. Foreign exchange trading is a risky business, especially for new individual traders. Mistakes can prove to be quite costly, and there is a likelihood of losing all your investment within a very short time. New traders are usually urged to start with small amounts and trade with caution, as they learn and gain experience in the markets. Most forex brokers provide tutorials, advice and technical assistance to their new clients, to help them learn the trade quickly as they make investments.

Benefits of Foreign Currency Exchange Trading

There are many benefits associated with foreign currency exchange trading if you are willing to be committed and consistent. One of the main reasons why many people are coming into forex trading is the convenience it brings. The internet enables traders and markets all over the world to connect with each other easily and participate in trading. This makes it a 24-hour market, where traders can come in at any time they feel is convenient. This convenience enables even people who are involved in other day jobs or commitments to trade during their free time. The internet also ensures that traders stay connected to the market through their phones, tablets and laptops whenever they are on the move.

The foreign currency exchange market is very liquid. A lot of money changes hands everyday, and investors can access their money very easily. Furthermore, it being a global market means that a trader will not have a hard time finding willing buyers to purchase the currency he wants to sell. Different currencies are brought and sold every minute from all over the world. Industry analysts also point out that the foreign currency exchange market is insulated from recession, making it a safe place to invest. Traders are able to change their market strategies to fit prevailing market conditions without any major losses, since one can trade for or against any currency.

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Why Foreign Exchange Comparison is Necessary

Why Foreign Exchange Comparison is Necessary

The foreign exchange market is huge, and involves a lot of financial activity. Individuals, companies and even governments need foreign currency for many reasons. The foreign exchange market makes it possible to buy and sell any currency that is listed therein. These currencies have different values that keep rising and falling against each other. Therefore, exchanging one currency for another can turn out to be an advantage or a loss, depending on the prevailing values, trend and fluctuations. You, therefore, need exchange comparison to ensure that you get the best possible deal when exchanging one currency type for another.

Who Needs Foreign Exchange Comparison?

Forex trading has emerged as a lucrative way to invest, and many people are now getting into the business. It promises quick profits in a very simple way once you master it. However, it is just as easy to make quick losses if you do not invest the right way. Since your profits or losses are dependent on the ever-changing currency values, you need to do foreign exchange comparison to determine the best possible currency pairings to trade with.

Those individuals and companies involved in business between different countries usually have to exchange one currency for another on a regular basis. There are foreign exchange firms that specialise in providing different currencies to those who need it – like cross-border businesses. These businesses usually need to exchange large sums of money. A slight difference in currency values can be magnified and result in significant losses or gains. These businesses, therefore, need some tool for foreign exchange comparison to ensure they get the best deal possible.

When travelling to another country – whether on holiday or for business – you will need to convert some of your money into the currency of your destination. This involves purchasing the foreign currency at a given rate against your currency. In the spirit of looking for the best possible deal, foreign exchange comparison will be very helpful.

For a long time, the foreign exchange business was a preserve of traditional banks and other financial institutions. With the increasing use of the internet for commerce, most of the foreign exchange transactions are now done online. Many foreign exchange companies have come up that offer various foreign currencies at competitive prices. It has been established that online foreign exchange companies generally offer better foreign exchange rates than traditional banks.

If you decide to trade in foreign exchange online, you have to be careful in selecting which company to deal with. The internet is full of fraudsters who are looking to take advantage of naïve or unsuspecting individuals. Any foreign exchange company you deal with must be registered and licensed by the relevant regulatory authority.

It is prudent to check the different rates offered by various foreign exchange companies before you make your trade. You should also bear in mind that currency rates fluctuate constantly, depending on many events. Therefore, what you saw a day or week before may not be the same now. This means that you need to do exchange comparison every time you intend making a trade.

Foreign Exchange Comparison Sites

Moving from one foreign exchange company’s website to another, comparing values, may prove a bit tedious for some people. Luckily, there are websites that specialise in exactly that. These websites are like one-stop-shops for exchange comparison. They list all the currency values as offered by the leading foreign exchange companies. It is, therefore, much easier to compare values from different companies in a very short time. You can also have the values listed from lowest to highest, or vice-versa. Furthermore, these sites recognise the fluid nature of the foreign exchange market, so changing currency values are updated in real-time.

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Info for Newbies to Foreign Currency Trading World

Information for Beginners in the Foreign Currency Trading World

Individuals enter the Forex market for a variety of reasons; the most popular being to earn some extra money. However, others may be looking to diversify their financial portfolio or engage in some activity to fill up their free time. Whatever the reason, these new traders soon learn that the Forex market is a highly competitive and volatile industry  – one that can be difficult to handle if you are not prepared for it. In order to gain some understanding of what to expect, here is an article to provide some insight into this world.

Question No. 1: What is Forex?

The most important piece of knowledge is understanding what Forex is. Forex is an acronym for foreign exchange. An individual who chooses to buy and sell positions on this market is known as a trader, because he engages in foreign currency trading.

Unlike the stock exchange, Forex involves the trading of currency. This currency is traded in pair groups, such as USD/GBP which stands for the US dollar and the GB pound. The currency is bought and sold as per the exchange rate, which is often affected by various political and economic events around the globe and, specifically, in those countries to which those currencies belong.

Question No. 2: Is the Forex Market Different from Other Markets?

The answer to this question is YES! Forex differs from other markets in that it is more liquid than any other trading market in the world. Furthermore, unlike stock markets, Forex has 24-hour trading happening during the week, and is accessible to all traders via online trading platforms. The online trading platforms allow a trader to buy and sell currency from any location with an internet connection. It is due to these advantageous features that the foreign currency exchange market has been heralded as the best option for financial trade.

Question No 3: What about Qualifications?

Although having a formal financial or economic tertiary qualification will be beneficial to your trading, it is not necessary. Many homemakers and school-leavers are successful traders, earning great amounts of money through currency trading. The education you require for this position can be gotten using online eBooks, or by gleaning information from mature traders via Forex trading forums. If one approaches these seasoned traders in the correct manner, it may be possible to attain an internship or ‘shadowing’ position.

Question No. 4: Will I need to Conduct Analysis when Trading?

Yes, analysis is a highly important skill you will learn whilst trading. Knowing how to conduct technical and fundamental analysis are very important when trading, as this will enable you to study economic patterns and trends. Without these skills you will not understand the charts and market movements involved in Forex trading.

In conclusion, it can be seen that the forex market is an enticing one, with its reputation for wealth creation and promise of high returns. However, if you are unwilling to accept the points noted above and take them on-board, it is doubtful that you will be prepared to begin trading Forex with confidence.

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What is Forex Trading Personality?

What is Forex Trading Personality?

If you are not sure of an answer to the question: “what is Forex trading personality?”, then this article will go a long way in clearing up any confusion you may have regarding this aspect of your trading.

In case you did not know this, your trading performance is closely related to your personality as a trader. Every trader is different, and this is why it is not possible to find a one-cap-fits-all method to trading. In this article, we will be looking at some of the trading styles used in the markets, and also at which one fits your trading personality.

What is the Most Popular Trading Style in Forex?

Generally, there are 4 main trading styles in Forex.The first style we are going to look at is scalping.

Scalping simply involves placing some short-term trades that normally do not last more than a few seconds or five minutes at most. This trading style is one that is regarded as very risky, as it entails having to use huge lot sizes to make decent money from a few pips of movement.

The second trading style is swing trading, and this involves holding trades for much longer. It involves long-term planning and analysis.

Position trading is the next trading style in Forex. It is an extended version of swing trading, as it involves holding trades for months instead of days as seen with swing trading.

The most popular trading style in trading Forex, however, is day trading. This involves opening and closing positions within one trading day.

As you are looking to establish your trading personality, you need to consider what type of analysis you are comfortable with.  The two main types are: technical analysis, which involves the use of indicators and charts, and fundamental analysis, which involves using news releases such as employment numbers, etc. to make trading decisions.

What is Forex Impact of Personality?

Pessimistic and regretful traders

Some traders just don’t know how to move on when they lose a single trade. They keep wallowing in regret over how much money they just lost, and this creates a negative atmosphere around their trading. When this happens, the trader’s ability to critically analyse or stick to a trading system flies out the window.

Insatiable expectations

One thing that traders who behave in this manner fail to understand is that when a trader is trying too hard to win all the time, he ends up destroying his trading account.  It is simply not possible to make millions – or even constant profits – from trading without losing. So, if you are the type that would never be happy with 100 pips in profits in a single day, you are better off trading another financial instrument. These types of traders are those who would never touch swing trading with a barge pole.

The adrenaline junkie

Some people simply cannot live a life that is devoid of regular adrenaline moments. These are the individuals that might engage in rock climbing, swim with sharks, jump on the scariest roller coaster rides, jump out of planes with nothing but an umbrella, go bungee jumping with shoelaces, etc. When these traders come in to the Forex market, they cannot deal with trading in a professional manner that would see them treat trading as a business; rather, they are the ones that will go headlong into scalping the markets for a few big gains. Only a handful of traders with this personality make it in Forex, as they need to work on their personality a great deal to avoid crashing numerous trading accounts.

So, now that you know the different trading personalities, it is your duty to make sure that the negative aspects of your personality don’t affect your trading.

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The FX Rate failure of 95%: What is Responsible?

The FX Failure Rate of 95%: What is Responsible?

This article takes a look at why the FX rate trading failure rate is very high.

If you look around you will notice different sources talking about the high FX rate of failure. Each of them has a different reason they give as to why people fail, but in this article, we will be looking at practical scenarios that lead to trading failure.

Scenarios that Cause High FX Rate of Failure

  1. The first scenario is one that has to do with excessive expectations from the market.  When people read about Forex trading, initially, the picture painted is that of a trader sitting on some exotic island in the Pacific sipping cool coconut water while making money from his computer. As soon as he sees this, the average newbie trader is already fantasizing about where he is going to be spending his holiday next summer and what sort of car he is going to purchase. This prompts him to fund a trading account and immediately start looking for the quickest and easiest possible means of growing that account into millions of dollars overnight. Of course, 95% of the time, this doesn’t work, as successful trading only comes through small but consistent gains compounded over time.
  2. The next scenario that causes high FX trading failure rate is the one in which traders fail to study the process of getting a good trading system. They simply download any system they can find on forums that have a decent number of users and, without any form of back test, they simply plug the system blindly into their live trading account. Of course, once the system has one or two losing trades, they will immediately dump it and start looking for the next “big thing”, failing to understand that a trading system always has losing trades, and that the only way to judge a trading system extensively is by making use of it for an extended period of time.  So, you can only judge a trading system after using it judiciously for a month – not just one day or even one week. This way, the trader ends up losing his trading account after a while.
  3. The third scenario is one in which the trader has a profitable trading system but, instead of relying fully on the trading system, he ends up listening to opinions floating about here and there. Of course, this leads to inconsistent trading results. Normally, as a trader who is part of a gathering that involves other traders, you will keep reading contrasting opinions every day. While you are buying, another is selling. So, if you close your buy trade because one or two respected traders said they were selling, you will end up adding to the high FX rate of failure. The trader that made you close your buy trade may have a completely different target from what you are looking to achieve. So, until new traders understand that the Forex market is one where personal opinions (based on trading strategy) should be adhered to strictly, they will keep failing.

All of these scenarios haunt traders who are not even that new to trading – let alone newcomers – so the FX rate of failure will be high side for a while to come. Do not allow this to deter you, though; if you can adequately train yourself to avoid these scenarios, you will be able to avoid being counted as one of the failures in trading.

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Can you be successful by having Forex Signals?

Can you become a Profitable Trader by Signing Up for Forex Signals?

If you are considering relying on forex signals for trading this article may make you have a rethink.

For many traders, forex trading has remained a hard nut to crack.  This is why many people prefer to go with providers of signals, as it will allow them the opportunity of trading and making money without having to bother about generating the trade entries themselves. Now this looks good on the surface, but, like most things in life, there are both advantages and disadvantages.

Advantages of using a forex signals provider

  • The number one reason for using a Forex signals provider is that it helps a losing trader conquer the markets. Instead of constant losses, a good signals provider should be able to help the trader to turn a profit regularly.
  • You no longer have to sit in front of your computer all day trying to look for tradable opportunities. This is because the signals provider normally does all the research, and then sends you the prices at which you can enter and exit the market.
  • There is no longer the element of fear in your trading, as you will be able to take all trades given without any doubts over your decisions.

Disadvantages of using a forex signals provider

  • The major disadvantage to using a Forex signals provider is that you will end up relying heavily on the provider. You do not know how the trades are generated, but you take them hook, line and sinker. When the Forex signals stop working, you will be left in the lurch.
  • Similarly, people jump at the idea of not having to keep staring at the charts to make money, but are you actually able to use the trade signals generated at the time they are sent to you?  You may be on the move, in an interview or even asleep when a text comes in. So, instead of being in control of your trading, someone else is controlling you.
  • Using a Forex signals provider fans the embers of laziness. For anyone that is serious about making money from trading, the emphasis should be on learning the basics of trading and becoming a better trader, and not looking for shortcuts to profits. All short-term methods of making money from the Forex market fail in the long run, and must be totally avoided.
  • Next, how well have you researched the Forex signals provider? They may look interesting for the first month or two, but do you have the confidence that they will keep proving profitable? One negative with some of these services is that when they fail, the fall is usually very heavy. Accounts get destroyed in just a few weeks of trading

Having understood these aspects the best advice to you would be to stop thinking about becoming a truly profitable trader by just relying on a Forex signals provider. If you must be a truly long term profitable trader you have to learn and trade your own strategy – no other ways around this. It is just like trying to become a doctor or lawyer without actually having any intentions of learning all that is required – in the hope that you can always call on another expert to tell you what to do in each situation!

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Bad Forex Trading Habits Exposed

forex

Bad habits. Whether it’s in business, our personal life or forex trading – they limit us from achieving our fullest potential. Unfortunately, bad forex trading habits are not only surprisingly common, they are usually the same ones suffered by most new traders. With this article, we look to examine and pick apart these bad forex trading habits, so that you can identify and eliminate them within your own trading practice.

Bad Forex Trading Habits Exposed

Trading Illogical Positions. Yes, forex trading is part art and part science. However, trading must always follow a carefully defined and practiced logic. Sometimes, traders simply open positions which make no sense. This can happen for a myriad of reasons. One of the strongest is the false notion that new traders sometimes have that they must be in the market at all times. This means they will often get into a trade just for the sake of it – even when that trade clearly hasn’t been prompted by a good sense of logic. Snip off this nasty habit by using a quality forex trading system and following it carefully down to the last T!

Trading In A Contrarian Way. Forex trading is miles apart from stock investing. Many stock investors are contrarians. They will pick up stocks when the market hates them, and wait for an inevitable turnaround. Try doing this too often as a forex trader and you’re liable to have your equity pot smashed to tiny little pieces! It’s incredibly dangerous to trade counter the prevailing forex trend – in this business, it’s all about knowing which way the tide is flowing and letting it take you along for a nice swim.

Not Being Aware Of Price Sensitive News. Many new traders are taught that it can be incredibly risky to trade on forex news. This might be absolutely right, but some traders get into the mindset that it’s ok to ignore news altogether. They therefore get into the habit of not checking when news is due to be released. This can be an equity destroying habit indeed. When news hits a forex pair, it can completely upend its direction and takeout a stoploss. Therefore traders must always know when news is going to hit, so they understand when to be in and out of a position.

Opening Randomly Inconsistent Position Sizes. There is no argument against using varying position sizes in an intelligent way (though some purists would say that depending on your forex system, position sizes must always be uniform). However, randomly setting position sizes that have no connection to the trade strategy or market condition is a bad habit that inconsistent traders often have.

Not Doing The Math Before A Trade. It’s just insane not to measure up potential risks against rewards before pulling the trigger on a trade. By having intelligently deduced stop losses and take profit targets the trader is better able to size up how attractive the trading set-up actually is.

Aborting “The Plan” Too Often. When a forex trader does his or her due diligence, there’s not much more than can be done aside from sitting back and letting the markets deliver a profit (or loss). One bad habit that some traders have is in unwinding their trades too quickly without the take profit or stop loss level being hit. This might happen because the forex trader does not have faith in their own analysis – but it’s not a habit that is likely to deliver prosperous trading in the long run.

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