Why Forex Trading Should Not Be Viewed As An Income Opportunity

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The ways you see Forex trading systems and courses advertised these days you would think that trading Forex is the greatest thing since sliced bread. Everywhere you look there seems to be some young, successful-looking person standing next to either a mansion or an expensive exotic car. You’re supposed to think that the super-successful person acquired these things using their extreme Forex trading acumen.

Okay, now that I sound like I’m such a Forex trading pessimist let’s do a little myth busting if you don’t mind. When you think of income opportunity, what comes to mind? If you ask me I would think of something like selling Amway or maybe Avon or Tupperware or perhaps Mary Kay. If I’m not mistaken each of these requires a modest capital investment and has real, tangible products to sell. This isn’t to say that an income opportunity can’t be service-oriented, these are just some common examples.

So how did Forex trading come to be thought of as an income opportunity in the first place? Is it the fact that you can start trading Forex with as little as $25? This small amount money would certainly not be a huge barrier to entry and is also something that most anyone can afford. The fact that it doesn’t cost much to become involved in Forex trading may have a lot to do with the high level of appeal that it has. Along with this we would have to include the almost bottomless pit of hype surrounding Forex trading. Basically, everywhere you look it appears that people are getting rich and making their financial dreams come true simply by trading Forex. Does this happen for some people? Absolutely, I’ll be the first one to acknowledge that some people do extremely well in Forex trading…but let’s dig a little deeper into what Forex trading really is.

I’m not here to discourage anyone or to burst anyone’s bubble about Forex trading, not in the least. I may sound like I am against Forex trading I most certainly am not. In fact I love trading Forex, always have and always will. So what exactly am I here to say? Good question! I’m here to say unequivocally that Forex trading should not be viewed simply as an income opportunity. This skews expectation levels of beginning traders to the point that they believe they can simply place money in account and instantly become a successful Forex trader. Let me set the record straight. Forex trading is speculation. Merriam-Webster defines the speculation as “assumption of unusual business risks in hopes of commensurate return”. The key word in that definition is “unusual”. In the world of global financial market speculation we can translate the word “unusual” to basically mean “high”. In other words, Forex trading is a high-risk venture any way you slice it. This is evidenced by the extremely high percentage of individuals who enter into Forex trading, but lose money by doing so.

So your expectation level should be that Forex trading is high risk. For those who trade without the proper training and skill level trading is not only high risk it is a virtual impossibility for them to make money.

Now that you have your expectation level adjusted the prospect of Forex trading may even be a little bit scary to you. Actually, that’s a good thing, because if you are scared or nervous it simply means that you are unprepared for the risks of Forex trading. If you feel unprepared then you have two choices; 1 – either prepare yourself or 2 – don’t trade Forex. If you decide to take the first option then it’s time for you to start to learn how to trade Forex. By learning to trade Forex you will increase your probability of success simply by increasing your level of preparation.

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Forex Trading Signals

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Forex trading signals may come in several different forms.

The first type of Forex trading signal is known as an “alert” and essentially alerts the trader to prepare to take a specific action. Such a signal might tell a trader to “Prepare to buy 1 EURUSD on the next bar”.

The second type of Forex signal actually tells the trader to take an action. So rather than telling the trader to prepare to take an action this signal would tell the trader to take the action. Such a signal might tell a trader to “Buy 1 EURUSD at the market”.

Forex trading signals are generated by Forex trading systems and can either be manual or automatic signals. For instance, a trader watching a chart might decided that when the price of the EURUSD moves above a certain moving average that they will buy. When that signal occurs the trader then manually places their order.

Forex trading signals can also be triggered automatically by a trading system. In automated Forex trading a computerized trading system generates a signal. The signal is then taken and will automatically place the trade for the Forex trader.

Every Forex trading signal should tell you the following:

  • What to trade
  • When to get in
  • When to get out
  • How much to risk
  • How many contracts to trade

Forex trading signals generated by a mechanical Forex trading system are very helpful to traders. They help to eliminate guesswork and subjectivity that might otherwise cloud a trader judgment.

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Forex Trading Plan

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If you are new to Forex trading then you probably haven’t formulated a Forex trading plan. You may not have been told that you absolutely must have one if you are to be a successful trader, but the reality is that you absolutely must have one.

Why you need a trading plan is really simple….for the same reason that you need a map when travelling into uncharted territory. It never ceases to amaze me how many would-be traders randomly start trading without the proper preparation. Don’t worry though, it is not completely the fault of new traders. Many new traders have had their expectation levels skewed by the many unqualified purveyors of Forex trading products, including book, seminars, software, etc. We are seeing more and more vendors of Forex products touting 90% winning trades and above. In all of my years of trading I’ve never heard of any truly successful trader with a winning percentage that high.

OK, now back to the topic at hand…the Forex trading plan. I wanted to cover a bit about expectation level because you will need to include some realistic goals in your trading plan. Setting good goals is essential for success in any field, not just Forex trading. One of the reasons that goals are so important is that good goals can really motivate you to achieve them, whereas unrealistic goals will leaving you constatnly feeling discouraged because they are difficult or simply impossible to achieve.

One of the most key components of your trading plan will be the Forex strategies that you use. A thoroughly researched and tested strategy will help you to profit in the Forex market. Needless to say, your strategy must have a positive rate of return in order for your equity to grow. Many people skip the important step of developing their own robust trading strategy and opt for some push-button, shortcut, get-rich-quick solution. Yes, it is true that developing your own strategy takes time and effort, but doesn’t everything that’s worth having take time and effort?

Our basic coverage here of a Forex trading plan is designed to get you thinking about being as prepared as you can be BEFORE you start trading Forex.

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The Psychology of a Winning Forex Trader

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The psychology of a winning Forex trader is very different from that of a non-winning Forex trader. Believe it or not, your trading mindset can mean the difference between success and failure in Forex . That is why it is extremely important for you to have the right mindset.

Please don’t take this point too lightly. I know how easy it is to dismiss this as some feel good, motivation mumbo jumbo. The truth is there is no successful trader in the world who does not have the right mindset.

So what is the right mindset for successful Forex trading? Good question, now here’s the answer.

The right mindset for successful Forex trading involves discipline.

The discipline to follow the instructions of his Forex trading system
The discipline to do so without hesitation
The discipline to not second guess the trading system

Discipline comes into play when combating fear and greed. Fear is typically based upon a fear of loss. No one really wants to lose money in the market.

Trading psychology is so important because in trading can be a very emotional business. As we all know if trading did not have it’s challenges everyone who traded would be rich.

Trading psychology is so important because there is so much emotion in many of us that is linked to money.

Fear of loss and fear of a further loss makes traders scared. Scared traders are very typically not profitable traders. Your objective is to be a profitable trader.

Fear in many situations is triggered by not knowing what is going to happen next, basically this may be fear of the unknown. We feel much more confident when walked down a familiar street in our neighborhood than if we walked down an unfamiliar dark alley in a strange place.

We can eliminate or minimize a great deal of fear by becoming more familiar with exactly what we are to expect. In other words, we need to have a plan basically a trading roadmap so that we can know what we are to do each and every day and also what the likely outcomes of those actions may be each and every day. In this way, will be met with far fewer surprises, and unknowns, which may trigger the fear.This roadmap is what MajorFX provides for you. You have at your disposal thoroughly researched and tested Forex trading systems designed for you to profit.

What do you expect from your Forex trading? It is your expectation level that will dictate your satisfaction with your progress. Expecting a consistent return of 1000% per month will have you abandoning your trading very, very quickly. Having realistic expectations about the returns of your trading system and it’s ups and downs, it’s good days and bad days will really help you to maintain discipline in the long run.

While most difficult things for trader to do is to continue to trade his trading system when it is going through drawdown. Simply put, a drawdown is a period in which a trading system goes through a series of losses that causes a dip in the trader’s equity. A drawdown is a tough period of time for many, many traders, especially those who are unprepared or unwilling to accept the fact that all trading systems and methodologies have drawdowns.

The key thing to remember is that even the very best trading systems all have drawdowns. If they did not your equity would continue to go straight up without ever experiencing a dip.
A good trading system will come out of the inevitable drawdowns it experiences and move on to new equity highs.

A practice account setup at your Forex broker is the perfect way to execise your discipline. This account will help you develop your trading skill as well as familiarize you with your chosen broker’s trading platform prior to having real money in your account. You want to make sure that you will pull the trigger without hesitation when the time comes. This will help you develop the necessary confidence to do what is necessary when the time comes.

Filed Under: Forex Articles

3 Disadvantages of Using a Forex Robots for Automated Trading

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Even though automated trading using Forex robots has become extremely popular, using them still has certain disadvantages. Let’s explore some of those disadvantages in further detail.

The logic is hidden — Having hidden logic is a definite disadvantage. A trading system which has hidden logic is known as a “black box” system. This simply means that the expert advisor takes in real time Forex data, processes the information using its internal formulas, generates a signal and then trades that signal.

The biggest challenge when using a black box system is that you don’t know if it is working as it should or not. What we mean by that is you can’t tell if it is doing what it is supposed to do if the logic of the system is hidden. What can happen is that the system will continue to trade for you even if the premise upon which the system is based is no longer working.

Most robots simply do not work — Quite naturally, this is the biggest disadvantage. It is unfortunate that most robots are ill-conceived. One reason for this is that it is relatively easy to sell Forex trading software because there are so many people looking to buy. On the flip side is very difficult to create an expert advisor that will work for the long term. Creating a Forex strategy takes a level of skill that most robots creators simply do not have.

They make you lazy — Any time you believe that you can spend $97-$197 for product that will manufacture money for you, you are starting off on the wrong foot. As the old saying goes, “there is no such thing as a free lunch”. This is especially true in the world of Forex trading where we as traders pay for every mistake that we make.

If you buy automated Forex trading software you are essentially telling yourself that you believe that you can make money in the markets without any effort on your part. This “get rich quick and easy” mentality has meant the demise of many a would-be trader. If you’re not willing to put in the work, then how can you realistically expect to be successful? The short answer is you can’t and you shouldn’t. Believe me, if there is some super shortcut or great robot out there I’d be more than happy to share that with you. So far I haven’t found.

So after looking at these disadvantages what is the moral of the story? The moral of the story is that you should work to learn to trade Forex and create your own trading methods and trading style. In the meantime make certain that you avoid any “too good to be true” Forex products currently available in the marketplace.

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How Much Capital Do I Need to Successfully Trade Forex?

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We are just starting to trade Forex is very easy to get confused about how much working capital you’ll need to trade Forex successfully. Forex brokers advertise a number of different amounts required to open an account depending on the type of account you wish to open. Many beginning traders see this minimum opening account requirement and believe that that is what they need to comfortably trade Forex.

The minimum capital requirement from your Forex broker actually has nothing to do with what it takes to trade Forex successfully. The amount of capital you need is determined by your trading plan. Your trading plan should outline your goals for your Forex trading as well as include your Forex trading system. Let’s dig into this a little further.

If you wish to trade Forex for a living then you will quite logically need more money to work with than somone interested in trading Forex as a hobby. For instance let’s say you want to replace a $50,000 per year income by trading Forex. In our example we will assume that your Forex trading system will produce a 100% yearly return. In order to replace your $50,000 per year job you will need to start with $50,000 in working capital and get a 100% return on your money. Please take note that in this simplified example we are not taking other factor such as employer-funded plans such as insurance or retirement.

So as you can see having the proper amount of working capital is crucial in Foex trading as it is in any business. Do not make the common mistake of underfunding your Forex trading account.

Filed Under: Forex Articles

Forex Strategy Secrets – The Ten Commandments of Trading

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Just like any other business Forex trading has rules that must be adhered to in order for you to be successful. What follows is a list of important, “must do’s” for profitable Forex trading.

Controlling your risk is without a doubt one of the most important things you can do in order to become a profitable trader. It’s pretty obvious that without risk control it doesn’t take much time for your account balance to go to zero. Risk control should be designed to keep you in the game during those particularly difficult times when your chosen Forex strategy is not reading the market in exactly the way that it should.

Understand the mechanics of trading. It really doesn’t matter whether you are a manual trader or one who uses an automated Forex trading robot. You need to understand how things work and how trades are placed. This is important because you need to minimize your mistakes as any mistake could be potentially costly.

Instantly correct any mistake you make. We’re all human and we are subject to make mistakes from time to time. If you happen to click on the “buy” button in your trading platform, but meant to click on the “sell” button, get out of the incorrect long trade immediately. Many beginning traders will make the fatal mistake of waiting to see what the trade does rather than correcting the mistake and following their system to the letter.

Don’t abandon a strategy that is working. This may seem obvious to you at first glance, but you would be surprised at how many new traders are only happy chasing the latest, greatest Forex strategy.

Do what your trading system tells you to do. It seems in the world of foreign exchange that following instructions is one of the most difficult thing for beginning traders to do. By not following your system’s instructions you are both leaving money on the table as well is throwing good money away.

Learn to take losses. At first glance this might seem like I’m asking you to, “be a loser”. That is not what I’m saying at all. What I am saying is that since losses are a natural part of trading it’s best not to be freaked out by them. Keep in mind that even the very best strategies will experience losses.

Don’t expect miracles. The world of trading is full of bright-eyed, bushy tail beginners who are unfortunately being led to believe that anyone can get rich just by trading on the foreign exchange. This isn’t meant to sound negative, it’s meant to be realistic… and that is what you must be if you plan to succeed. Remember that there is no such thing as a successful trader with unrealistic expectations.

Remember that the market is always right. You’re setting yourself up for disappointment if you just don’t accept the fact that the price is what the price is. You should never make statements such as, “I can’t believe the market went down when I was long, it should’ve gone up”. Such statements will only lead to more frustration and may even make you give up on a perfectly good Forex strategy.

Take a break from the markets. You don’t have to be glued in front of the screen 24 hours a day to be a successful trader. Taking a break from the markets from time to time is not only helpful, but may help you become a better trader. I’m not talking about taking a break from markets when you should be trading, I’m talking about stepping away from the computer screen and even removing the markets from your mind. This will give you more balance in your life and will help you to keep from getting burned out as a trader.

Never stop learning. If you know anyone who has, “mastered” something you know that their education in their chosen field of study is an ongoing process. Grow your knowledge and skill and you will grow your equity.

What we have just covered are some absolute essentials for anyone looking to become successful in the wonderful world of Forex trading. Look over these from time to time to help keep yourself grounded and focused on your goal of long-term, lasting success.

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Free Forex Trading Signals

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Forex Robot Reviews — Which Forex Robot Review Can You Trust?

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With the great number of Forex robots being sold today finding an unbiased Forex robot review is absolutely essential. It would also appears that there are numerous Forex products reviews available online. So quite naturally question comes to mind, “which review can I trust?

The first place that many people start is with the search and the Google search engine. This is also where I would suggest that you start as well. You’ll instantly notice that there are many reviews of the various Forex expert advisors and software available. Now, I have to admit that I’m using the term review quite lightly. The vast majority of the “reviews” that you will find are basically advertisements. In fact, much of the wording in many of the so-called reviews is copied directly from the vendor’s website.

Here are some tips to help you avoid information which will not assist you in making an intelligent buying decision.

No discussion of performance data – Commentary that doesn’t contain any performance data will not help you make a buying decision.

Best-selling or popular means nothing – How well a Forex products sells or how popular it is has nothing to do with how well it performs. Keep in mind that most of the products are geared towards people that know nothing about trading.

Most of the reviewers have never tested the product – While it is difficult to evaluate such software products without testing it is possible. It is only possible, however, for those who have a great level of skill in trading system performance evaluation. I would venture to say that almost none of the reviewers you will find will possess this level of expertise.

Filed Under: Forex Articles

What Are Some of the Best Forex Trading Tips? Part 2

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This is a continuation of our collection of time-tested Forex trading tips. Here are more invaluable Forex trading tips for you.

Trade only with risk capital — you should only trade Forex with money that you can afford to lose. This means that the money is lost that it will not affect your lifestyle in any way. Trading with money that you cannot afford to lose is also known as trading with “scared money”. When trading was scared money beginning traders find themselves afraid to take losses. Since losses are a natural part of Forex trading this means that they will eventually be afraid to take the trades that they are supposed to.

Maintain your trading discipline — this tip goes hand-in-hand with having the patience necessary to follow your trading system to the letter. Second-guessing yourself and your trading system can easily have a negative effect on your trading performance.

Don’t search for the holy Grail of trading — there is no such thing as a perfect trading system which has 100% winning trades. With this in mind understand that it is a waste of time and energy to seek out such a Forex trading system. The most successful and profitable Forex traders in the world do not have trading systems with 100% winning trades. That in and of itself should tell you something.

The Forex trading tips achieve just saying have truly withstood the test of time. It’s a good idea to review these from time to time to remind yourself to stay on track. By staying on track and maintaining your trading discipline you will be well on your way to successful Forex trading.

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