Is There Really a Safe Way to Trade Forex?

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To answer the question, “is there really a safe way to trade Forex” you will have to define “safe”. Keep in mind that the word “safe” is highly subjective. What may seem extremely safe to one trader may appear extremely risky to another.

First, we must remember that trading Forex is a speculative activity. That simply means that it is risky in comparison to other types of investments. What does that mean to someone that wants to trade Forex? It means that it should only be done with money that you can afford to lose. Money you can afford to lose is defined as “money that if lost will not affect your current lifestyle”. This is also known as your risk capital.

Let’s look at a “safe” Forex trading in another way. Safe can be defined based upon risk versus reward. Here are some examples. If you risk 1 to 3% of your Forex trading account for trade that could be considered conservative and safe. Risking 50% of your account on each trade is considered extremely unsafe. So the meaning of “safe” Forex trading is extremely subjective. Clearly how you trade Forex determines its level of safety.

The only safe way to trade Forex is through the use of a dependable Forex trading system. The bad news is that the vast majority of inexperienced Forex traders do not have a dependable Forex trading system. That leaves the beginning Forex traders with two choices. The first choice is to purchase a commercially available trading system and the second choice is to develop your own trading system. Whichever route you choose it is important to learn Forex trading and get as much Forex education under your belt as you possibly can. By doing your homework and educating yourself you begin to increase your probability for success. Effectively the better you become at Forex trading the “safer” you will feel.

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An Overview of Forex Entry Strategies

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There are as many Forex entry strategies as there are Forex traders… if not more. An entry strategy is a set of rules that are used to enter a Forex trade. Entry strategies are extremely important as they have much to do with the amount of profit you can make on a trade. If you enter too soon you may have received a false signal and end up with a losing trade. If you enter too late to trade could be much less profitable or you could have missed your potential profits altogether.

Here is an overview of a number of popular Forex entry strategies:

Trend following — trend following strategies have been and always will be very popular and effective. Trend following strategies are used by both beginners and experienced traders alike. The moving average is one of the most commonly used trend following indicators. The basic use of the moving average is as follows:

Buy when the price moves above your chosen moving average

Sell when the price moves below your chosen moving average

Using price breakouts or another popular trend following strategy. Price breakouts basically worked as follows:

Buy when the price moves above the highest high of the last X periods

Sell when the price moves below the lowest level of the last X periods

In the above example “X periods” can be any timeframe the trader desires. In a 10 day break out system “X periods” equals 10 days.

Countertrend traders could use a system similar to the breakouts system except that countertrend traders would trade against the trend. Here are some examples of a buy and sell countertrend trade.

Buy when the price reaches the lowest low of the last X periods

Sell when the price reaches the highest high of the last X periods

Using Forex entry strategies as well as Forex exit strategies is also known as market timing. Entering and exiting the market at the right times can mean the difference between a winning trade, a breakeven trade, and a losing trade. As always, in order to be successful you will need to test and evaluate your Forex entry strategies to make certain they have a high probability of success

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Should You Use an Autopilot Forex Trading System?

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An autopilot Forex trading system performs two different tasks. First, it functions as a trading system and uses its built in software logic to make trading decisions. The second function is the unattended placing of trades for the Forex trader. Autopilot Forex trading systems are also called Forex robots. They are also called Forex expert advisors as well.

Autopilot Forex trading systems can only automatically place trades if you’re broker’s trading platform supports it. The most commonly used software for auto trading is called MetaTrader. MetaTrader is free to download and install which no doubt lends to its popularity. If your broker supports auto trading through MetaTrader you can use an automatic Forex trading system through that broker.

Here’s a quick look at how Forex auto trading works. The trader first has to have MetaTrader installed on their computer. Then the trader must install their autopilot Forex trading system inside of MetaTrader. Once the system is installed properly it will begin to place trades automatically. Traders can alternatively use what is known as VPS or virtual private server. A virtual Private server can run the trader’s autopilot Forex trading system without interruption. This server is in a remote location and will continue to place trades for the trader even when the trader’s computer is turned off.

The most important thing to consider with any autopilot Forex trading system is its reliability. Many beginning Forex traders become too impressed by automation and overlook the all important bottom-line performance of the system. The objective of any Forex trading system should be to build equity over time.

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How to Master Forex Trading

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Many beginners enter into trading wanting to know how to master Forex trading. Here are some quick tips to help you become a master Forex trader.

Always have a trading plan — successful Forex trading is similar to success in any other business in one distinct aspect…Both Forex trading and other businesses use a plan to be successful. Your Forex trading plan is a lot like a road map to guide you from where you are currently to where you want to be with your Forex trading.

Use a reliable trading system — a reliable trading system is so important that it can’t be stressed enough. While it may seem obvious that you want to use a reliable trading system, many inexperienced traders make the mistake of jumping the gun and trading using an unproven and untested system.

Be realistic about your expected returns — having the wrong expectation level has killed many dreams for what would otherwise have been good Forex traders. Inexperienced traders may find themselves disappointed because their actual returns do not mirror the outlandish returns they see advertised by the latest new shiny Forex trading strategy. This disappointment can cause many to give up on a perfectly good trading system and simply hop from system to system without ever making progress.

Stay focused and disciplined — unlike many other areas of business endeavor Forex trading is an unforgiving. This means that you have to pay attention and stay focused and disciplined in order to succeed. Keep in mind that in Forex trading there is no makeup test or consolation prizes. Every mistake that you make will come directly out of your pocket. That’s why it’s important that you take trading seriously. All successful trader’s take trading seriously.

The most important factors in learning how to master Forex trading is risk control. Without risk control is only a matter of time before you will find yourself losing money. By controlling a risk you increase your chances of success. This is because proper risk control keeps any one or two losing trades from emptying your account.

As you can see how to master Forex trading requires dedication on your part. This dedication, however, will be handsomely rewarded when you become a confident and successful Forex trader.

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Evaluating Forex Trading Systems

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Evaluating Forex trading systems is essential to your Forex trading success. Trading systems evaluation is important whether you develop your own trading system or plan to purchase or lease a commercially available Forex trading system.

Here are some of the things to look for to effectively evaluate Forex trading systems:

Capital requirements — you actually must know how much money you will need to successfully trade any Forex system. For instance, some systems may require that you trade 10 or more currency pairs in a portfolio. All other things being equal portfolio trading systems have larger capital requirements than single currency pair trading systems.

The action is clearly defined — there should be no subjectivity involved. A trading systems strength lies in its ability to remove subjectivity so that there is no guesswork required on the part of the trader. The trading system tells you such things as when to get into a trade, how much to risk on each trade, which currency pair to trade, etc..

Properly evaluating Forex trading systems takes time to master. If there were more objective Forex trading systems reviews this would be simpler. Unfortunately many Forex EA software reviews are simply additional ads for the Forex trading software in question. What this means to you is that most reviews simply cannot be relied upon. Properly evaluating Forex trading systems will not only help you to survive in Forex trading but to thrive and ultimately to be successful.

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Is Forex Trading Really a Good Idea?

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To answer the question, “is Forex trading really a good idea” requires you to consider a number of factors.

First you should realize that no matter what you read Forex trading is speculative. This means that Forex trading is a risky proposition no matter how safe someone may tell you that it is.

Even though Forex trading is speculation it can be extremely profitable when done correctly. To further explore the possibilities of profitable Forex trading it is a good idea to consider the following:

Forex trading is a good idea if:

You know what you are doing — if you don’t know what you are doing you’re throwing your money away. The smartest thing for you to do that this point would be to learn Forex trading prior to risking any real money.

You have sufficient risk capital available — if you cannot afford to lose the money you plan to put into a Forex account then you shouldn’t trade. An inexperienced trader should simply not count on profits from Forex trading to pay next month’s mortgage.

You have a trading plan and a trading system — all successful businesses have good business plans and Forex trading is most certainly no exception. Successful Forex traders also rely on the use of Forex trading systems that they have evaluated as profitable. Trading Forex without a plan and without a Forex trading system is simply the equivalent of flying blind.

The lure of the huge potential profits of Forex trading can be too strong to resist the times. We’ve all seen the ads promising financial freedom without the need for any knowledge or training. One thing is for certain if you’re lazy or undisciplined you will not be a successful Forex trader. Keep in mind that excellence in any field of endeavor is achieved through study, hard work, and discipline.

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Forex EA Software Reviews — Which Review Can You Trust?

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Ideally a good Forex EA software review should give you an objective view. The very best reviews are those by people who have actually tested the Forex robot and can show you the results of their testing.

Here are some of the things to look for in a Forex EA software review:

Actual proof that the software has been used — you need to see that the reviewer has actually used the software rather than just talking about using the software or what the potential results might be. Any inexperienced person sitting at a computer keyboard can give their opinion about a product that they have never tried. Such information is completely useless to Forex traders.

Cons as well as pros — Forex EA software reviews without actually testing our as we stated before are really just opinions. These opinions could be more valid if the reviewer is actually a trader as well. Someone who does not trade Forex really isn’t qualified to write a review of a Forex trading system. For instance, a reviewer who trades Forex would probably never praise a Forex robot that makes outlandish claims. You may have seen some of the many Forex EA software reviews that claim the Forex robot has 100% winning trades. Rest assured that anyone who sings the praises of such a bogus product has no idea what they’re talking about.

For a Forex EA software review to be of any benefit to any of us it must point out the shortcomings of the Forex robot as well as its good points. It is probably safe to assume that all Forex robots will have shortcomings as there is no such thing as a perfect Forex trading system. Simply remember to carefully evaluate any reviews and avoid those where the reviewer is obviously biased.

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What Is the Most Powerful Way to Trade Forex?

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Traders are looking for the most powerful way to trade Forex are typically looking for the most profitable way to trade Forex. In reality traders are looking for not only profit, but comfort level as well. Although many traders will not admit that comfort level is important to them experienced traders will tell you that comfort level is important when choosing the best way to trade.

You see a trading method that is not comfortable for you is one that you will not stick with. Treading a system that you will not stick with me is eventually you will stop following in trading that system consistently. Assuming that this is a good trading system to begin with not following it consistently is simply a recipe for disaster. Let’s dig into this a little further for some clarification.

There are some excellent trading systems available that do not have a high percentage of winning trades. But we’re talking about here is a winning percentage in the 40-60% range. For many beginning traders the success ratio might be uncomfortable for them. What many traders starting out and I understand that it is not the percentage of winning trades that makes a Forex trading system good, but its ability to profit over the long haul.

Whereas the percentage of winning trades may make some traders uncomfortable the frequency of trading may make them uncomfortable as well. Some traders simply have the need for high energy, fast paced action each and every day. It may be difficult for them to stick with a trading system that only takes one trade every three months.

We’ve seen a couple of examples of some of the types of things which may make certain trading systems uncomfortable for some Forex traders. Now let’s touch upon some factors of the most powerful way to trade Forex for you.

The capital requirements of the trading system is extremely important. Each of us has different amounts of money to invest in Forex trading. This means that we need to either locate or create Forex trading systems that work well within our own personal capital requirements. For example, a trading system which trades a portfolio of 12 different currency pairs is most likely not well-suited to someone without a well-financed trading account.

Along with the capital requirements the risk level of the system will also help us decide whether or not it is ideal for us. The systems maximum drawdown, which is a measure of the largest peak equity to Valley equity drop in a trading system’s history is a key factor. If we have our eyes on it trading system with a maximum drawdown of $25,000 we already know ahead of time that opening an account with $25,000 is not going to cut it.

As we can see the most powerful way to trade Forex depends on a number of factors each of which may be different for different traders. The most successful Forex traders either find or develop Forex trading systems which suit both of their personality as well as their bank account.

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Evaluating Forex Trading Systems — Lessons Learned from Being in the Trenches

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One of the most important skills that you should develop to be a successful Forex trader is a skill of evaluating Forex trading systems. Why is this skills so valuable? Because all Forex trading systems are not created equal. Some are great, some are good, and some don’t have a snowball’s chance in hell of ever working. As traders we all want to avoid those trading systems which fall into the last category.

Whether you were buying a commercially available Forex trading system or you are developing your own here are some tips that will assist you in evaluating Forex trading systems.

Beware of short track records — when you’re judging a trading system you should always be very skeptical. One of the things that is a serious red flag is a short track record. To clarify the track record is basically an overview of the system’s performance over a certain period of time. Track records of five years or more give a lot more information to work with than something along the lines of a one or two month track record. A one or two month track record is just way too short. If a trading system is good, and I mean really good, then the system developers should want to show you as much data as possible. If that data simply is unavailable then something is wrong.

Beware of “too good to be true” performance claims — even if a commercially available trading system shows you a long-term track record be mindful of the claims being made. The Forex landscape is riddled with Forex trading systems that claim to have never experienced the loss and other such nonsense. The attempts of Forex trading system vendors to undermine the risks involved in Forex trading has been falling under increasing scrutiny from regulatory authorities. This is actually very good news as it should eliminate some of the trash that is being sold today.

One very common feature of many commercially available for extruding systems is that many of them display high percentages of winning trades. It seems each time a new Forex trading system is released it will try to outdo what is currently available. Just keep in mind that it is not necessary to have a super high percentage of winning trades in order to trade Forex successfully.

Always be mindful of the maximum drawdown — the maximum drawdown is a very significant performance measurement for any Forex trading system. The maximum drawdown lets us know the largest peak to valley dip in a trading systems equity over a particular period of time. If you don’t know the maximum drawdown of a commercially available Forex trading system you should not buy that particular trading system.

We’ve had an opportunity to cover just a few tips with regard to evaluating Forex trading systems. By filtering commercially available Forex trading using the scrutiny of these tips you’ll stand a much better chance of finding the trading system or systems that are right for you. By learning to evaluate Forex trading systems you’re placing yourself miles ahead of many who seek to succeed in Forex trading.

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Can You Really Make Money with Forex Simple Systems?

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One of the biggest mistakes that we as traders can make is to make successful Forex trading more complicated than it has to be. Simple Forex systems are more than sufficient enough to make a good long-term profit in Forex trading.

One example of a simple Forex system is a simple moving average system. You’ll hear many say that a simple moving average is an indicator that using indicators is bad for Forex trading. This simply is not true and billions and billions of dollars have been made using moving averages for many many years. In reality billions of dollars will be made in the future using moving averages. The way a simple moving average system works is very straightforward. We buy when the currency pair closes above its moving average and we sell when the currency pair closes below its moving average. In its most simplified form a moving average system functions as a “stop and reverse system”. In a stop or reverse system a buy trade is closed out and a sell trade is immediately entered. Conversely when the sell trade is closed out the buy trade is immediately entered. As such, a stop or reverse trading system is referred to as “always in the market”.

Another Forex simple system is known as a breakout system. In a breakout system a trader selects high and low points of the recent price action. When the price action “breaks out” to the upside the trader then buys the market. When price action breaks out to the downside the trader then sells the market. The theory behind a breakout trading system is very simple. The assumption is that when the price breaks out of a trading range that the current market momentum will cause it to continue in the direction of the breakout.

When correctly used breakout systems can be extremely effective. It typically takes a bit of experimentation to come up with parameters that suit you, but it is always very well worth it.

Another type of simple Forex system is a Forex correlation trade. Correlation trades are made based upon one currency pairs relationship to another currency pair. There is some currency pairs which are negatively correlated. This means that when one currency pair moves upward the other currency pair moves downward by certain amount. The relationships between currency pairs can easily be seen by looking at charts that are all the same timeframe. It is also a good idea to learn the correlation coefficient of the two currency pairs you are studying to give yourself an extra edge in using correlation to trade them.

As you can see there a number of simple Forex systems they can be used to trade effectively. Coupled with good risk control using one or two simple Forex systems can definitely help you trade successfully.

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