How To Increase Forex Profits 100% in 10 Minutes

This simple exercise will increase Forex profits 100% and works for 99% of all short-term FX traders - stop trading so much - widen out your stops - widen out your profit targets - and only trade in the direction of the trend indicated by 4 hour chart.

1) Stop trading so much

Sure there are no commissions but the spreads are HUGE and believe it or not (well you'll believe it after you do the simple exercise below) the spreads are reducing your profits 100%!

2) Widen out your stops

Initial stop loss should be a minimum of 23 points; I use between 23 and 35 point stop losses for short-term trading.

3) Widen out your profit targets

Unless you think a trade can make you 100 points or more don't do it.

4) Only trade in the direction of the 4 hour chart

The real money is made in the direction of the trend

Simple exercise

1) Download all your trades for the year into an excel spreadsheet (if you don't know how to do this ask your broker for help).

2) Determine the dollar value of the spread for each trade.

3) Sum up the total dollar value of all spreads for all trades and add this number it to your current account balance; this is your spread adjusted account balance.

4) Take your spread adjusted current account balance and divide it by your opening balance at beginning of year; the result will be a percentage change.

5) Take your actual current account balance and divide it by your opening balance at beginning of year; the result will be a percentage change.

6) Subtract your spread adjusted year to date percentage change from your actual year to date percentage change.

7) That number should be 100% or more

8) Take the necessary steps as outlined above (1 to 4) and improve your results 100%

Jimmy Young - EURUSDTrader

Trade Using News: Helpful Hints

RefcoFX has compiled a list of the most common questions regarding trading on news. Here is what our trading specialists had to say...

Why are economic events important to currency traders?

A currency is a proxy for the country it represents, therefore the economic health of that country is priced into the currency. Economic indicators measure the health of an economy. The challenge is keeping track of each particular country's economic health.

Know when indicators are due to be released. It is important to keep an eye on the future and knowing which news releases the market deems most important.

Why are some indicators more important than others?

Current market conditions will influence which news the market deems most important. Know which economic indicators are capturing most of the market's attention. When the US is incurring large trade deficits, the market will focus on Trade Balance data. Its news release can catalyze large volume and price movements. Moreover, during an US economic boom with high employment, the market will not focus on unemployment.

Economic conditions can change. Large US Trade Deficits can weaken the US Dollar over time. When the US Dollar is weak the market will shift its focus to inflation. Market watchers will shift focus to CPI and FOMC Interest Rate Decisions in the news.

What is the significance of "actual versus consensus"?

The data itself is not as important as whether or not it falls within market expectations. Know when the data is released in addition to what market forecasters are expecting for each indicator.

Once you know the market expectation for the economic indicator, pay attention if the consensus number is met. A drastic difference between the consensus and actual results can cause price movement.

The consequences of an unexpected monthly rise of 0.3% in the Consumer Price Index, the Actual, is not nearly as important to your short-term trading decisions as it is to know that this month the market was looking for CPI to fall by 0.1%, the Consensus.

Wait until after you've taken advantage of the short term trading opportunities presented by the data, typically within the first thirty minutes following the release, to analyze the longer-term ramifications of an unexpected monthly rise in consumer prices.

Remember that market expectations for all economic releases are published on our economic calendar.

Why should technical traders pay attention to news releases?

Technical analysis will not work when fundamental factors or economic data becomes the main focus of the market as participants become sensitive to any developments. With speculation mounting on the possible outcomes, fundamental news releases like US non-farm payrolls have created situations in the market that do not adhere to technical analysis as volume and volatility spikes. Although the aftermath more than not will once again adhere, the mass speculation that ensues makes sure that traders are scrapping for the best price available in filling their positions rather than applying your everyday moving average or price oscillator.

Trade currency without risking capital - with a FREE practice account with RefcoFX

The Foreign Exchange Market Fact Sheet

The foreign exchange market enables companies, fund managers and banks to buy and sell foreign currencies, if necessary in large amounts. The motivations behind this demand for foreign currency include capital flows arising from trade in goods and services, cross-border investment and loans and speculation on the future level of exchange rates. The sums involved are very large: estimated global turnover in all currencies in April 1998 was $1,490 billion, an increase of 26 percent over the past three years. Deals are typically for amounts between $3 million and $10 million, though much larger transactions are often done.

Foreign exchange trading may be for spot or forward delivery. Generally, spot transactions are undertaken for an actual exchange of currencies (delivery or settlement) two business days later (the value date). Forward transactions involve a delivery date further into the future, possibly as far as a year or more ahead. By buying or selling in the forward market a bank can, on its own behalf or that of a customer, protect the value of anticipated flows of foreign currency, in terms of its domestic currency, from exchange rate volatility.

Unlike some financial markets, the foreign exchange market has no single location - foreign exchange is not dealt across a trading floor. Instead, trading is via telephone and computer links between dealers in different centres and, indeed, different continents. London is the world?s largest foreign exchange centre: average daily turnover is $637 billion. This is approximately the same as the combined level of trading in the United States, Japan and Singapore.

London?s leading position arises partly from the large volume of international financial business generated here - insurance, bonds, shipping, equities, commodities and banking. London also benefits from its geographical location which enables firms located here to trade not only with each other and with firms based in Europe throughout the day, but also with the US and the Far East, whereas their time difference makes it difficult for firms in those two centres to trade with each other. When banks in London begin trading at 8 am they can deal with banks in Tokyo, Hong Kong or Singapore whose trading day is just ending. From about 1 pm onwards, London banks can trade with banks in New York; before they close at 4 pm their counterparties may be in Los Angeles or San Francisco. This is important because the foreign exchange market trades 24 hours a day: 66 percent of trades involving a firm in London are transacted with a counterparty located abroad.

Down full document here.

Source: Bank of England

Fibonacci Forex Trading

How to make money in Foreign Currencies using Fibonacci Retracements and Fibonacci Profit Targets.

How to Handle a Losing Streak

A trader emailed me a while back, asking for some advice on a good money manager for him. He said he was a "lousy trader" and tired of losing money.

I doubt there is one non-rookie trader reading this story who has not experienced at least a small run of poor performance in trading futures. I've said before that most successful veteran traders have more losing trades than winning trades in any given year. The key is maximizing profits on the winning trades and minimizing losses on the losers.

I will also argue that at one point or another in most traders' experiences, they, too, have felt like "lousy traders." I certainly have. (Those who say they have never had a run of poor trading performance or felt "lousy" about a trade or trades are likely either lying or completely out of touch with futures trading reality.)

So what's a trader to do when losses start to pile up and winners become scarce. Here are a few tips that I've picked up over the years from some of the very best traders in the business:

Don't overtrade. If you are trading several markets and not having any success, cut back to trading one or two markets. You can follow fewer trades more closely and document your success or failures more easily. Plus, your trading account won't be drawn down so quickly.

Keep a detailed trading diary. If you keep a good trading diary, you can go back and see if there is a common thread among your losers--and your winners, and possibly make the proper adjustments.

If you are not trading that many markets and still racking up losers, take a break from trading for a while. Gather your thoughts. You may want to "paper trade" for a while to get your confidence back. Then, if you are still losing on paper, you will want to look for other trading methods.

If you are losing money trading, DO NOT (I REPEAT) DO NOT try to make a big home-run-type trade that will get you back to even or the plus side in a hurry. In fact, do just the opposite. Make smaller trades that risk less capital, until your performance starts to turn around and you can resume your normal asset allowances for trades. Successful traders survive the rough waters by hunkering down and being conservative.

Exhibit patience and discipline. I've preached about this before. Are you following a trading plan that you devised before you put on the trade? If not, you should be. You are not shooting from the hip (no exit strategy in place) once a trade gets initiated, are you? If so, that could be part of your problem. On the patience issue, are you impatient? I've talked to successful position traders who may only trade a few times a year, because they wait for what they feel is that "perfect set-up" to occur. If you are a position trader (as opposed to a day trader), you don't have to be "in the market" all the time. Wait for the good trades to develop and don't chase markets.

Be confident. Have faith in your trading methods. And if you don't have faith in your methodology, why don't you? If your methods are really not successful, find something else. Read some of the many books out there by the successful traders, and how they have traded successfully. But be cautious of the person who wants to sell you some so-called successful trading method for big bucks. (See the next item on hard work.)

Work harder. Don't expect to produce winning trades if you are not working very hard at trading. Do you know well the fundamentals of the markets you are trading? Even if you know technicals well, you should have at least a good understanding of a market's fundamentals. Here's an example: Let's say the charts and technical indicators look bullish for corn and it's the day before a major USDA report. Smart traders likely won't initiate a trading position in corn the day before a big government report is out.

In case you're wondering what I told the reader who emailed me and told me was a "lousy" trader, here's what I said: Don't give up just yet. The fact that he admitted he needed some help (before he lost all of his trading assets) is a positive first step. I then told him I would write this feature because there were likely many traders who feel the same way, at times, that he feels, and that there are steps to take on the road to recovery and eventual successful trading.

Jim Wyckoff
TradingEducation.com

Forex Education - Forex Discipline the Key to Winning Is Hard To Achieve

The first point you need to understand as part of you forex education is your success will not just depend on your method but your discipline to execute it. Most traders can't and lose and this is because they don't understand that discipline can only be acquired, if you take on traits that are not acceptable in normal society.

Discipline in forex trading means - you have to accept that you are going to need to act in a way that would normally be seen as acceptable in everyday life. People find this hard to do and some explanation will make this clearer.

1. Be a Loner

Man is a pack animal and since stone age times we have sought safety in groups - they make us feel safe, wanted and accepted. In forex trading however if you run with the pack you are going to lose, as 95% of traders do and thats a fact.

When man gets in a group he runs with the herd and the herd is always wrong in forex trading, as you are infleunced by the emotions of the crowd.

You need to be a loner and not listen to others - don't share your opinions with others and don't let others influence you. You're on your own - but that's the best place to be in forex trading and could make you a fortune.

2. Break & Make the Rules

You will hear lots of common wisdoms spouted in forex trading and do you know what?

Most of them are wrong.

This again goes with the fact the majority of traders lose.

In life were used to order:

We stop at red lights, don't drop litter, don't drink and drive etc or we know what the consequences will be - our lives are ordered for us.

Forex trading is different we get to make the rules and they will decide our financial destiny, as there are none to start with.

The forex market is chaos, an all powerful force, moving as when it wants and only it can be right and only the trader can be wrong.

You need to create a set of rules to work with it and earn your living.

You're a bit like the captain of a ship - the ocean is all powerful but you can make a living from it.

You can navigate it correctly and make a living or you can drown the choice is yours.

Most traders cannot take responsibility, cannot make their own rules and follow the herd, news wires gurus, or sure fire trading systems and lose.

3. The Work Ethic Doesn't Apply

In most jobs the more hours you put in the more you get out in terms of reward - not so in forex trading, you only get rewarded for being right and that's it.

You can spend 20 minutes a day or 5 hours - but that will not influence how much money you make.

Many traders work hard but they don't work smart they learn lots of information and lose - others work short periods work smart and win.

4. Most Traders Can't Accept Big Gains

This may sound odd but it's true.

Traders hit a trend and then rather than follow it want to snatch the profit.

Why?

Because they think it's too easy, they haven't put enough effort in and it really won't run on - but it does and they snatch it early, before it gets away.

In many instances they can't believe they can make a huge profit for so little effort or they simply don't have inner confidence in their ability and these traders let huge profits get away all the time.

Spotting big trends is easy, holding them requires huge mental discipline.

So if you learn one thing from your forex education, learn that it is not hard to learn a method but it is hard to learn the discipline to execute a method.

Discipline is hard because it sets us against the market on our own and makes us responsible.

Running with the pack, listening to the news or a guru won't help - you're on your own and most traders simply cant accept this fact.

Of course if you accept the above, take responsibility for your actions and understand yourself, you can earn huge rewards.

source

Start Thinking In Terms of Risk-Reward

One of the cardinal rules of good trading is to always have an exit point before you ever enter into a trade. This is your worse case risk for the trade. It's the point at which you would say, "something's wrong with this trade and I need to get out to preserve my capital."

Most sophisticated traders will have some sort of exit criteria that they like. However, if you are a novice and you just don't know, then I'd recommend 75% of your entry price if you are an equity trader. That is, if you buy a stock a $40, then get out if the stock drops to $30 or below. If you are a futures trader, then calculate the average true range over the last ten days and multiple that result by three. If the contract drops to that level, then you must get out of the position.

Your initial stop defines your initial risk. In the example of our $40 stock, your initial risk is $10 per share and I call this risk 1R (where R stands for risk). And if you know your initial risk, then you can express all of your results in terms of your initial risk.

So let's say that your initial risk is $10 per share. If you make a profit of $40 per share, then you have a gain of 4R. If you have a loss of $15 per share, then you have a 1.5R loss. And losses bigger than 1R will occur when you have a sudden big move against you.

Let's look at a few more. What if the stock goes up to $140, what's your profit in terms of R? Your profit is $100 and your initial risk is $10, so you've made a 10R profit.

It's quite interesting because portfolio managers like to talk about 10 baggers. By a 10-bagger, then mean a stock that they bought at $10 per share that goes up to $100 – in other words a stock that goes up in value 10 times. However, I think a 10R gain in much more useful to think about and much easier to attain.

When our 1R loss was $10 per share, then the stock had to go up by $100 to get a 10R gain. But to fit the portfolio manager's definition of a 10 bagger it would have had to go up 10 times the price you bought it for, going from $40 per share to $400. But what would that $460 gain be in terms of R-multiples when your initial risk was $10? That's right, it would be a 36R gain.

What I'd like you to do before next week is to look at all of your closed trades last year and express them as R-multiples. In other words, what was your initial risk? What was your total gain and loss? What's the ratio of each profit/loss to the initial risk? And if you didn't set your initial risk for your trades last year, then use your average loss as a rough estimate of your initial risk.

Let's look at how 10 trades might be expressed as ratios of the initial risk. Here we have three losses $567, $1333, and $454. The average loss is $785.67, so we'll assume that this was the initial risk. Hopefully, you'll know the initial risk, so you won't have to use the average loss. I call the ratios that we calculate, the R-multiples for the trading system. This information is shown in the table below.

Position	Profit or Loss	R-multiple
1	$678	0.86R
2	$3456	4.40R
3	($567)	- 0.72R
4	$342	0.44R
5	$1234	1.57R
6	$888	1.13R
7	($1333)	-1.70R
8	($454)	-0.58R

When you have a complete R-multiple distribution for your trading system, there are a lot of things you can do with it. But we'll save that for next week's topic.

Van K. Tharp, Ph.D.
TradingEducation.com