Online Forex Trading

With the help of modern marketing of trading products, internet, abundance of market information and forex brokers is is natural to assume that every piece of information can help you reach the top aim. But this is wrong. None of internet brokers do so. Using too much of Forex trading systems, internet and ideas won’t help you to reach what you want.

Forex traders too often try to find solutions, working hard to perceive minor details of the trading process, instead of focusing on the whole picture. First they study the graphs and ask themselves whether these would help. Before analyzing the most significant fluctuations players invent exotic strategies which will help them to get to Forbes cover. In other words, forex traders try to maximize their profits before they actually get them. There is no template and there is no starting point, however. The faster the better is a serious blunder on the market. Speed won’t make you the best or the worst, it will just distinguish what you have already done. If you trade with a system which has no success and consistent scheme, fast and elaborate tools, as well as bright colors won’t help you to succeed, they will speed up your collapse. You should look for internet brokers and learn from them.

Another widespread mistake among beginner forex traders is changing the time frames when the trades are unsuccessful. During the day your position lost $500, and you decide to let the position hand around open a bit, not wishing to take such bitter fail. Or a contrary example: you established a two week term for the trades, but as soon as the quotation rises for tens of points, you started feeling nervous and made the sale. The solution to this problem is organize time frames in such a way that long term investments are separated from short term ones.

Attention is the key.

The key moment is to focus on a separate system, strategy or approach, on the one which can be used in many situations. The leading forex traders of the world are known because of their working methods. For newbies the best option should be understanding the basic trading schemes and choose the most appropriate ones.

Moreover, it’s a lifestyle, not weekend plans. Understanding graphs and using them allows estimating reality objectively, this is better than reacting subjectively to rises and slumps in everyday trading. It is not important whether it is $1 per month, the point is that you don’t lose. You may grow together with the progressing curve. The trader who knows how to minimize losses and keeps to one approach solves a most complicated problem of succeeding with building his or her own plan and keeping to it.

Many Forex traders know that often one or two unsuccesful trades can destroy all the previous profits made during the cirrent day, month or year. It is natural to hear things like: «I made $10,000 in the previous month, but I had two unsuccessful trades where I lost twice as much».

The reasons for increased losses are different, but the most general is the fact that the Forex traders don’t want to admit that in the chosen position they are wrong. Indeed, a couple of successful deals can make your month, while a couple of less successful deals may destroy the success not only of this month, but also of the previous one.

One of the tactical schemes which changed the activities of many Forex traders dramatically is the practice of accepting the losses with the purpose of decreasing total damage. Many traders doing this and preparing themselves to the fact that they will lose are actually starting to earn.

The practice of incurring losses requires an attitude totally different from the dream about large incomes. You don’t get stuck with the thought how much you would earn or how you would feel. You just mechanically focus on the practice of incurring losses, proving for yourself that you can take losses easily, which occur when “stop loss” works. You concentrate on working without keeping the score of losses and profits.

An effective technique which works with any time frames is moving your “stop loss” to make-out to keep the profits. In other words, move your “stop loss” to the starting point just as fast as your position will become profitable. This will protect you from losing money in this position, and while the position changes in your direction, move “stop loss” to protect half of your profit. If the profit increases to a certain extent and then decreases more than by half, close this position. Many techniques can be used, but the key is a system which cuts down losses.

This system is similar to insurance. Though the price is high, there is a reason – a mistake can cost you everything.

Attempts to forecast the Forex market behavior are becoming more and more elaborate, the most modern mathematic methods are employed, methods of mathematical statistics, all kinds of filters, the price graph is found the logarithm of, differentiated, all this is normalized with something, a correlation is calculated, and so on and so forth. So, I, candidate of technical sciences, start to understand that I’m lag behind dramatically. Forex traders, seeming to be common guys, easily operate with such most complicated notions as linear and non-linear regression, their statements swarm with indicator names which I haven’t even heard of. Reading further, you start to understand that these are developers of mechanical trading systems (MTS). And everything now is in its place. An unrealizable dream of creating software which will trade and make huge money for you attracts many traders like a flame attracts moth. And large quantities of resources are spent!

When I had to work in the dealing hall (now I work only at home), I clearly saw a group of analyzers, as I called them. They had their aims substituted, so their aim was not to earn money but to analyze and forecast the market behavior. This was their drug. These guys must have left for the field of MTS design, and the very process of creating these systems is the ultimate satisfaction for them.

By no means I’d like to say that here’s me, the clever guy, and they mess around. They will probably invent something, they are pure fanatics and in many cases most educated specialists. Like chemistry was born from alchemy, their efforts will probably give birth to something new and useful. This is the way they chose. But I value time too much and I’ll better earn in the ways I can.

Forex trading is not a gift, it is a skill which can be acquired in the course of study and practice. Every skill, be it golf playing, piano or trading, can be trained. Regrettably, beginner traders often ignore the concept of Forex trading being a skill and the reality of studying the curve, because the glistening gold makes them try to earn money before they understand what they are doing.

It is surprising but the teaching curve of a trader does not depend on the system chosen. It makes no difference, whether you are day trader, positional trader or an investor. If you will be learning from professionals by their books or listen to them at conferences, you will find out that they use different trading systems which distinctly differ from one another. But their teaching curves and experience are similar.

When they are asked what they want to get from the Forex market, many traders say they want to make money. But to start with, the primary aim of a Forex trader is to learn being consistent. Whether he makes money in the first place is not so important for a long-term career, as making a pattern for correct trading which can be rebuilt and improved with time. Creating such a pattern should be the primary aim.

Psychology of human behavior is a key to understanding the things that happen on financial markets. All the usual everyday feelings and aspirations show on harsh market battles like a chemical solution shows on litmus paper. All the sensations typical of us, like fear, greed, hope etc sometimes have deciding influence on Forex trader’s behavior in the fast pace of exchange trade. Weak and self-confident, greedy and slow, all these people are doomed to become the victims of market. Knowing one’s skills and preferences, positive and negative traits will help to avoid bankruptcy. If you add also the ability to evaluate psychological state adequately and understanding of the market crowd’s behavior, your success is guaranteed.

Greed
Greed is the driving force which makes us work on speculative Forex markets. If your greed is insignificant, you will be arranging few deals, missing on many positive moments. In this case the recommendation will be to try other kinds of business, less frantic. But if your greed is boundless, you will be seeking to arrange lots of deals, exposing yourself to risk of unclear prospects. You’d better play in casinos in this case, it is closer to your nature and cheaper in terms of money. The result of greed will be motivation to arrange deals.

Let’s point out two types of motivation:

To find out whether you play because of greedy heat or not is possible with the help of the following signals. If a Forex traders asks others what they think about, tells about his open positions, if he or she has no working plan made up before arranging deals, this tells that this person works most likely under the influence of heat but not rational mind. The best cure against this heat is making a plan of arranging deals (a financial plan of activities).

Hopes and expectations
The next factor which makes a trader arrange deals is hope to earn profit. Naturally, the essence of any work is in earning money. Though, if hope prevails over rationality, you take the risk of overestimating your abilities during situation analysis and making a mountain of dream out of a molehill of reality. Hope must be subordinated to rationality and greed. It is hope that brings beginner traders to bankruptcy.

Hope defines the behavior of a trader in two main cases:

Fear
Fear appears when you face losses. Some a paralyzed by fear, they can’t stop when it’s necessary and lose everything. Fear makes others move and arrange at times mutually exclusive deals, which also usually makes bankruptcy closer. In the critical moment it is better to do something instead of sitting around twiddling your thumbs and watch your dreams about beautiful feature fly away as the rates change. Still, oppose rational and planned steps to make your way out of the crisis to convulsive actions of a nervous choleric – don’t panic. Act in strict accordance with the plan made up before the position was open (and before fear appeared).

There is a popular opinion that in order to work on a Forex market you need to have higher education, preferably with economic specialization, basic knowledge of higher mathematics and probability theory, knowledge of world economy, good computer skills, an analytic mind and ability to think logically, as well as experience with technical and fundamental analysis.

I date say that it’s not just obligatory, but in fact harmful for efficient Forex trading. Some of the skills listed are good to have, but not obligatory. Most of them are really harmful, as they give ungrounded confidence in the trading decisions taken. The market is random and there is no way to predict its behavior. I think these methods are unlikely to appear unless people invent a way to travel in time. Of course, you will need reading and writing skills, as well as basic skills in arithmetic, but the main things are ability to think, ability to wait patiently and CAST-IRON SELF-DISCIPLINE. Nobody will guide you here or give you orders. If you will want to destroy your deposit, you will do it easily and in no time at all, and nobody will stand in your way. If you want to earn money, lots of money, you will be able to do that, and again, nobody will stand in your way. There is nobody who has power over a trader, apart from the spouse, if any, and God. The trader does not have to obey anyone else. This makes self-control and self-discipline crucially important. Every person, along with the instinct of self-preservation has the instinct of self-destruction. The reason for all the trader’s failures is not the market, not the “wrong” behavior of currency exchange rates, not bad weather, nothing like that, but the trader him/herself. This is why the will, self-discipline are critical aspects which define the success of work. An amateur trader becomes a professional trader and then a master, perfecting not so much his skills as his volition. This is the very thing which takes years of labor, of self-overcoming and self-subordination.

By the way, let me say some words about education. A person who has studied economy, may explain things very well, read lectures, consult, but not use the skills in practical life. Interesting is the fact that this is the norm of such kinds of things.

Knowledge does not influence human behavior. In the actions a person reflects his or her skills, habits, stereotypes, patterns, but not knowledge. This is why books lack influence in changing a person. A person changes because of the situations where one experiences the circumstances deeply. Situations where a person is not an observer or a reader, but an active participant who has no change his or her stereotypes to solve the problem. In order for a new pattern to appear a person has to discover, to experience the truth in his or her life. Reading about it won’t help here. To learn trading you have to trade! Pay attention how people from a number of oriental countries are successful in trade. They don’t study trading, they do trade, get the profit, expand their business. When they lose everything, they don’t hurry to start writing books or cleaning the streets, but they start trading again and win success on a higher level.

The second and the last quality which defines a trader success is his or her confidence in oneself and in powers he or she has.