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OK, in our last installment I showed you how a sample of a Forex trading system with a high percentage of winning trades could still be a losing system overall.

The whole point of the exercise was to get you to take a closer look at the performance results of trading systems that you are interested in pursuing. Now that you know that it is possible to lose money trading a system with over 90% winners, you?ll be able to look at the next advertisement for a Forex trading system much more objectively.

Let?s take another look at our example:

Trading System A Performance

Number of trades = 1000
% of Winning trades = 92%
% of Losing trades = 8%
Average Winning trade = $180
Average Losing Trade = -$2100

A few quick calculations tells us that this trading system had Total Net Profit of -$2,400

The Total Net Profit is an important factor in any trading system although it doesn?t tell the full story.

Here?s how the Total Net Profit is calculated:

Total Net Profit = Gross Profit ? Gross Loss

In our example above these figures would be:

$165,600 ? $168,000 = -$2,400

As stated above the Total Net Profit for this trading system is negative. This is important to note. As you can see, if the only information you originally had Read more…

As you ponder how to balance your forex portfolio, it is important to map out sure-fire strategies beforehand.

With your plan, you optimize your reward with respect to the expected risk, and tweak probabilities to your favor. Forex strategies must be disciplined and limit risk; simultaneously, it positions you at the most favorable advantage in the market.

A beginner?s strategy is the fundamental Moving Away Average, which is draws predictions from technical study over 12 periods, with each period 15 minutes in length. Trading decisions based on the MAA technique considers historical data to arrive at relatively safe predictions.

We use a simple algorithm for MAA. When currency price crosses above the twelfth period, simply move away it is a signal to stop and reverse. In this way a long position will be liquidated and a short position will be established, both using market orders. This system keeps trades constantly active in the market, with either a short position or a long position after the first signal. Risk is minimized.

Intermediate level strategy calls for analysis of support and resistance levels. The market likes to trade above support levels and trade below resistance levels. If either a support or a resistance level is broken, then the market follows through in the direction given. These breakpoints can be determined by analysis of the chart and assessment of where the chart has encountered unbroken support or resistance in times past. Identify these critical points and you can ascertain periods when you plan to open or close a position.

An advanced tactic that many consider exotic is the balloon strategy. The Balloon is an option that balloons, or increases in size when triggers are breached. Take the case of an investor who predicts that the dollar will gain strength against the Euro in the near future and is currently trading at one hundred, the investor will see one hundred ten as having strong resistance, but he also believes it will be broken.

Now, rather than buying straight US dollars at one hundred for the next six months the investor will purchase at ?at the money? balloon call with a One Hundred Ten trigger and multiple of two. The investor then acquires a One Hundred Ten call in USD110mm. However if the dollar and Euro ever trade at or above one hundred ten, the 110 call will double to USD 20mm.

A day trader at heart? The Double Bottom is definitely for you. Significant to the short term trader, the double bottoms indicate a possible major change in currency sentiment and indicates a shifting trend. The pattern is used on all times frames, and many compelling intraday and long term bull markets are identified Read more…

In the first part of our series ? Choosing A Forex Trading System ? Part1 we covered a few quick tips to get you a few steps closer to choosing the Forex trading system that?s right for you.

In Part2 we will take a look at a few other do?s and don?ts for choosing a Forex trading system. With that in mind here is ?don?t? number 1.

1) Don?t be overly impressed by a high percentage of winning trades

Often times you will see Forex trading systems advertising a high winning trade percentage. The ad might contain information a line like the following:
?Over 90% Winning Trades?

You might look at that and say, ?Wow, with numbers like that I?ll be rich in no time!?
Before you stop reading the ad to call your local real estate broker about buying that private island just realize that this one figure does not tell the whole story.

The fact is that most successful traders the world over have made their money with far smaller percentages of winners than many of the trading systems you will see advertised.

I would suspect that the reason the high winning percentages are advertised is to attract as many customers as possible. Many buyers believe that the closer the winning percentage is to 100% the closer the trading system is to being a ?sure thing?. In Read more…

In our last installment we discussed the super-important performance measure called maximum drawdown. Today I have another measure who?s importance may not be immediately obvious to you. That measure is the actual length of time over which the trading systems results were achieved. Some of you may identify this as the length of the trading system?s track record.

Why is this so important? The main reason that this is so important is that the shorter the track record of the trading system is the less significant the track record may be. A trading system with a short track record may be only cherry picking and displaying the best possible period of trading. Don?t be impressed by some wording like ?made 10% return this month??so what. In my personal best month of trading I made hundreds of times more than the above example of 10%…again, so what. In trading, as in life, there are many things that are a flash in the pan?trading systems, get-rich-quick traders, etc.

Fortunately, you and I realize that success in trading is a marathon and not a sprint as so many would love for it to be. Your trading system needs to be one that at least displays the ability to weather the long-term storm. As Read more…

Of the many trading methods available out there there is one that has been recently realized and that is amazingly simple and uses the forex trading platform of your choice. This trading method will show you how to build your own indicator suite based on the author’s recommendation, but this method is not only colored screenshots, it will allow you to make a profit very often, in fact more often than you think.

It is important to mention that the author doesn?t recommend The Rubber Band Method in a fast 5, 10, or 15 min timeframe, he says 30 min to 4 hours is the optimum time frame for his forex trading system. However, some traders who like fast trading can do it in a 10 min chart, and even in the 15 min chart. It is beyond question that in a chart faster than 10 min, you will be trading “market noise”, and your pips will be limited.
His stop loss/limit ratio for money management is really good. By using RBM formula for setting stops and limit orders for profit targets, you can even lose 1/2 of your trades and still come out way ahead in profit.
You will learn alot from this simple method. It only uses his RBM custom indicator and one other technical indicator making Read more…

Forex trading has one goal: to make money. Unfortunately, like any speculative venture, there is a potential for loosing money. The same holds true with the stock market the commodities market, and the money market. Any investment that entices of great gain poses a certain level of risk. As a forex trader you want to minimize your chance of risk. Observe the following Best Practices:

? Stay informed. Peruse the current events magazines and political journals. Know how the global political and social landscapes have been shifting.

? Brush up on economics. A college refresher course can keep you out of the red. Journals by economists like John Maynard Keyes, Kenneth Galbraith and Walter Williams can help you guesstimate potential forex uptrends.

? Read periodicals like the Asian Wall Street Journal and Business Investors Daily.

? Fire up a practice demo account and get a feel of the game before jumping into the market.

? Befriend a broker you trust.

? Cultivate friendships with other traders into active trading.

? Understand historical trends and their impact on the charts.

? Take a short course on forex trading to get your skills up to speed.
These cost under $200 and can help you avoid $20000 losses

? Research forex on the Internet. Forums provide great sources of information

? And Read more…

You can develop into a better and more profitable trader by applying some of the more important forex currency trading rules consistently with a suitable amount of discipline. The following are a few principles that can help improve your chances of success if they are understood, practiced, and implemented in your trading on a regular basis.

These rules have been learned in the trenches, mostly through testing and observing the common mistakes nearly every trader makes when starting out in the forex currency trading business.

Set Up and Implement Specific Goals/Objectives

Very few things are more important to your trading success than setting specific goals and objectives for what you are trying to achieve. The majority of forex traders who often find themselves on the losing end of a trade make the same common and recurring mistakes. Many of the missteps, by and large, are not directly related to the mechanics of trading.

As a matter of fact, most forex traders don’t have a clear direction, never take the time to develop a sound business plan and lack a formal written strategy for putting a well thought out plan in place.

In order for any business to be successful it must have measurable goals that are both realistic and attainable. In forex currency trading, the primary goal is obviously to make money, but it’s important to have goals that are not strictly money related as well.

Never lose sight of the fact that risk and reward are part-and-parcel to forex currency trading and high returns come with a price so don’t expect them without the willingness to plan for minor draw-downs in trading capital.

Your personal objectives and goals should be very specific to you, but they should also include Read more…

Test-driving an online forex demo account is the preferred method of potential traders to minimize risk. A demo account readily allows a cautious person to go online and observe exactly how a paid account would work. Think of it like playing the popular wargame Command and Conquer: you send in the troops (gobs of fictitious money), make a few tactical maneuvers (invest in speculative exchanges) and conquer territories (reap profit).

It can be addictive. Without investing and risking any real money, the investor plays with ghost money in an account and initiates buys and sells the same way it would be done in reality. The software used for these demo accounts parallels what the real trading platform does. Real figures are pulled from exchanges, trend charts are generated, and profits are calculated from buy/sell maneuvers., A trader sees at the end of the day the net loss or gain should real money had been used in the transactions.

Even a novice can trade. Let?s assume an investor pretends to open a margin account with ten thousand dollars. He watches trends in the currency markets and believes that the dollar will go up in value against the British pound. The demo software empowers him to purchase at a ten to one margin; he then authorizes a buy of one hundred thousand dollars of dollars and sells one hundred thousand dollars of Pounds. There will be a spread, or difference, which accumulates to the gains, or ?profit?.

Why invest time with demo accounts? Simple. It?s safe to learn the currency trade without having real money to lose.

Think of it like crashing your car in driving simulators or doing crazy rolls in an F-14 – on a Playstation. You stretch your creativity, test your reflexes and build your skills all behind the safety of a highly immersive computer screen. Your mind gets a full reflex workout without incurring damage to property and incurring lawsuits!

The same holds true for forex trading. Spending time with a demo account allows the potential trader to gain skills and learn the ins and outs of the game and the market place. A person is then able to see if they truly have the instincts necessary for the market and have sufficient knowledge to ?play with the big boys.?

Almost all online companies involved in forex trading offer demo accounts, sometimes free and sometimes for a small fee. Even if a fee is paid, it is usually worth it because a forex trader can flex his skills and knowledge for vast profits after spending some time practicing with the forex demo software.

Setting up a demo account requires nothing more than a valid email address and your name. Upon activation, you will Read more…

There are several things to consider before getting started in forex currency trading. Initially, you’ll need to selct a broker that is right for you in order to facilitate your trades.

Compare Brokers for Better Profitability

The spread generally referred to as the bid/ask spread is what brokers charge instead commission fees. While comparing brokers you?ll notice that spreads in forex currency trading fluctuate much like in the stock market. Make certain you?re receiving the lowest spread available because it means more profit in your pocket.

Use Qualified and Reputable Firms

Forex brokers are typically associated with large banks due to the large amount of capital that is required to operate in the forex market. Make certain the forex brokers you?re considering are registered with the Futures Commission Merchant (FCM) as well as regulated by the Commodity Futures Trading Commission (CFTC) as a registered National Futures Association (NFA) member.

Evaluate Research Support Services

Forex brokers offer various trading platforms for traders like brokers in other markets do. These trading platforms provide real-time charts, technical analysis tools, real-time news and support for various trading systems.

Prior to committing to any one broker use free trials and practice accounts to compare trading platforms and services.

Keep Your Leverage Options Open

Leverage is a ratio of total capital available to actual capital which is the amount of money a broker will lend you for trading. Take for example the ratio of 10:1, this means that your broker will lend you $10 for every $1 of actual trading capital.

Select a Trading Account That Fits Your Budget

Forex trading brokers offer several accounts. The smallest account you can open is the mini account that only requires as little as $300. The standard forex currency trading requires a minimum of $2,000 initial capital to start and gives you an option to trade with a variety of leverages.

A premium account can require $5,000 ? $10,000 to get started. It offers the same leverage options as the standard as well as additional tools and services. At the end of the day, select the broker that has the right leverage, tools, and services that meet your budget needs as well as your investment goals.

Basic Forex Trading Strategy

Forex trading strategy begins with fundamental and technical analysis. Here?s why each analysis is important for creating a solid forex trading strategy:

Fundamental Analysis

Attempting to value company stock is sometimes difficult. But valuing a country?s currency Read more…

Forex (foreign exchange) pertains to the foreign currency exchange market, the world?s largest financial trading market. It exceeds the trading volume of the equities market a hundred fold.

Want to pass yourself as a forex expert? Know these buzz words:

? Bid ? to buy

? Ask ? to sell

? Liquidity ? financial ease of transaction, i.e. cash

? Trading volume ? the amount traded

? Bid/ask spread ? the difference between the proposed buying price and the actual selling price

? OTC ? over the counter

? Exchange rate ? the difference between currency values; for instance, a Canadian dollar is valued at .86 of a US dollar

? Hedge funds ? large mutual funds companies that control vast amounts of money and are able to manipulate the value of a currency through speculation

? Central bank ? the national bank of a nation, which usually exerts control over the value of that currency

Forex trading is the investment in the currency of one nation. Multinational Corporations doing business across national boundaries find value in keeping their cash reserves in a variety of countries, and holding their funds in a myriad of ways. For example, a UK corporation may hold a percentage of its working capital in UK pounds, but if it does quite a bit of business in USA it may also maintain a percentage of its money in dollars, in US banks. Individual investors over the decades have discovered that there is profit to be made in investment and speculation in the currency markets.

Take the case during the 70?s when the German DM swung rapidly in value. It was worth anywhere from 1.2 marks to the US dollar to 3.5 US marks to the dollar. When the mark was worth 2.5 it was beneficial to spend dollars buying marks, since the mark would buy more goods or services at that rate. As the mark bottomed out 1.7 to the dollar there was less incentive.

Surprisingly, the forex market itself is not unified. One can find many small forex markets specializing in trading various currencies. The most commonly traded currencies in forex speculation are the US dollar, the Australian dollar, the British pound sterling, the Japanese yen, and the European Euro. Currency values vary depending on the market in which an investor is speculating, so there is really no such thing as a single, unified dollar rate, but instead there are multiple dollar rates, which vary according to the market where the trade is occurring.

The major cities in which trades occur include New York, London, and Tokyo. It?s a 24 hour process. When Asian Read more…