2Bull Forex Blog

It sounds great — you can invest a certain way and beat the market. Many investment experts are selling guaranteed systems that allow you to beat the market. However, is this something you should really aim for in your investing?

The market isn’t really the overall stock market. The market is usually referring to a certain index. The vast majority consider “the market” to be the S&P 500 Index. So when you hear market, you should really hear “this index.” Remember, not all indexes will give the same returns. And there are weaknesses to all indexes. For example, the S&P 500 is heavily weighted with large cap stocks.

If you are comparing the results of a small cap group of stocks, the S&P would be like comparing apples and oranges. Large cap stocks and small cap stocks do not move to the same influences.

If your goal is long-term growth, the investments that will benefit your portfolio may not be those that beat the market every quarter. Companies that really work on building shareholder value for the long run make decisions based on this goal. These decisions often effect short-term earnings. However, in the end they add value to your portfolio.

Companies do take losses in some years in order to position themselves for a better future. Don’t think that only those that beat the market will make you money.

If you are the type of investor that aims to beat the market, you probably should be investing in companies that are looking to meet short-term goals. The risks are usually higher with these companies as they give up stability in order to pull in the instant gratification. You probably will find that many of your investments are quite short term.

So perhaps you need to ask yourself whether you are an investor or a trader. Investors buy companies. Traders focus on just the stock. Most traders hold their stocks for the short term. Investors usually buy with the intent of holding the stock for a long time.

You are probably a trader if you:
*Purchase a stock because you suspect an upward price movement in the future.
*Are interested in making a quick profit. Buy low, sell high and do it again.
*You don’t care about the company. Your interest is in the stock and what it is doing right now.

You are most likely an investor if you:
*Have performed a thorough analysis of the company and see long-term growth potential.
*Understand the company and its market position.
*Know why the price has dropped and recognize it as rather a short-term situation or a long-term situation.

The investor tends to look into the stock further than the trader. They consider more than just the price. Instead, they look at the entire picture. For example, if the price drops, the investor will not panic. He will reassess the company and the market, asking if something has changed. What was the reason? Will the stock recover?

It is okay to be a trader. And it is perfectly fine to be an investor. Where the trouble begins is when people try to be both. Find an investment strategy that fits your investment goals and stick with it. Jumping around will result in unwise decisions.

Why Learn Forex trading?

The forex market is by far the largest market in the world. It is estimated that around $1.5 TRILLION is traded every single day. By far more then all the stock, bond and futures markets of the entire world combined! Forex or currency exchange is the term used to describe the trading of world currencies. A trade occurs when a trader simultaneously buy of one currency and sell of another one. E.g., to buy British pounds with US dollars. The currency combination used in a trade is called a pair.

What does a forex trader do?

Simple, buy a currency at a low value and sell it at a higher value, and in the process profit from it! For example, buy Great British Pounds with US Dollars, wait for the Pound rate to go up and make money! This can be done several times a day if the forex trader is a day trader or several times a week or month if the trader is a forex swing trader.

What are the main benefits of trading in the forex market?

Many currency pairs are very volatile. Volatility means that they move a lot during the day, from side to side, allowing traders to capture sometimes 5-6 price swings per day, each one potentially allowing the trader to make impressive profits.

5-7 currency pairs to monitor (instead of over 10,000 stocks!), no commission trading, guaranteed fills for stop losses and limit orders, impressive leverage.

The forex market is a 24 hour market. Never stops. This means that as a forex trader you can chose exactly when to trade. Some traders have day jobs and do not have the necessary time to trade during the day so they can trade at night. People who make their living as forex traders can chose to trade any time of the day or night. The point being, a 24 hour market allows the trader a lot of flexibility.

What are the Exclusive benefits offered by forex trading?

An incredible benefit of the forex industry is that today all forex brokers allow traders to open free demo accounts. This demo account has the full capabilities of a “real” account including live market rates, access to real-time market analysis, and the ability to execute trades off streaming prices. This means that the trader can test his or her strategies without risking a single dollar! No other business opportunity allows you to see if it works before you spend money!

Making a living as a forex trader allows you to be truly free! No office, no workers, no inventory, no marketing worries, no advertising, no selling.

Learning the right forex trading system allows the forex trader to trade by just following simple rules. If A happens and B happens then do C. This is called mechanical trading. It requires absolutely no discretion, interpretation or thinking from the trader.

In conclusion, Learning forex trading provides all level of investors with a lot of opportunities that many markets and industries do not provide. The reason many people have not heard of this opportunity until recently is that until not long ago trading currencies was reserved to the big dogs (banks, institutions, companies etc). Today with the help of the internet anyone can take advantage of on-line currency trading that was once reserved to an exclusive group.

If you want to make big consistent profits then there are plenty of good FOREX Courses that can help you, but you need to choose the right one.

The checklist below will help you do this and help you make bigger FOREX profits.

1. Only Buy Courses That Give Specifics

You don’t need to buy basic information on indicators how to place orders or how the markets work there is plenty of this information provided free on the net.

Get specific tools and methods only that can help you improve profitability.

2. Is the seller a trader or a writer?

The bulk of courses are not sold by traders they are sold to make money from books sales with convincing copy. Find out some background and the best way is covered in the next point:

3. Does the Course Have a track record?

You will see many FOREX courses sold that claim to be 90% accurate or have hypothetical track records, but you want one that’s real and has been verified.

The acid test of a FOREX trading course is if it has made some money and you have proof from the vendor.

Keep in mind when you buy a course you want profit potential and a past track record is a good indication of what it may do in the future.

4. Money back guarantee

Any reputable FOREX Trading course will give you a money back guarantee.

This means you can see if the hype matches the reality when you study it.

5. Is the method revealed

You need to know how the methods logic.

If you do not you won’t have the confidence to trade with discipline.

Never buy systems or methods you don’t understand, signals you follow blindly or black box automated systems where the logic is not revealed.

6. Ignore day trading courses

They don’t make money. Trading within a daily time span sounds good but does not work and is a mugs game.

The key to making profits with a FOREX Trading system is to cut losses and run profits.

In day trading you can’t run your profits to cover your inevitable losses.

Add in transaction costs and you have a recipe for losses.

Final words

Getting a good FOREX Trading course is really common sense and the above tips will help you weed out the minority of FOREX Trading courses that can help you increase your trading profits.

The investor that keeps a steady pace for the long term is more likely to achieve his or her goals than the investor that follows the quick profits.

It is true, time can be your best friend. Time gives compounding time to work. The interest on your money turns is added to your principal and earns you even more interest. But if you wait too long, time can’t help you as much.

For example, Let’s look at three investors, aged 25, 35 and 45. All are saving for retirement. Each invests $2,000 each year and earns 8% annually.

At age 65, the investor who started at age 25 will have over $585,000. The investor who started at age 35 will have just over $250,000. The investor who waited until 45 to start investing will have $98,900. Waiting 20 years to begin investing cost the investor $486,100. In fact, only $40,000 of that would have come directly out of the investor’s pocket — $446,100 of that is lost interest.

Wow. Starting 10 years earlier can even make a significant difference. The investor who starts at the age of 45 will earn three times as much as the investor who starts at the age of 55.

Let’s look at this a different way. How much would an investor need to invest to accumulate $750,000 by the age of 65. They earn 8% annually and there are no taxes or inflation in our examples.

The investor who starts at 25 will need to invest $215 per month. The investor who starts at age 35 will need to invest $500 per month. The investor who waits until 45 will have to invest $1,650. And the investor who waits until 55 will have to invest $4,072 every month!

You can see why starting early actually saves you money out of your monthly budget. If you think that you will have a hard time affording it now, imagine trying to afford that much more in decade.

The earlier you start, the less you will have to invest out of your pocket in order to reach your goal.

These examples are to prove a point. The true reality is that you probably won’t earn a flat 8% annually. Some years will be better than others. Sometimes you will lose and sometimes you will win.

If you invest for the long term, you have the time to correct your mistakes. You don’t have to hit a true win every time in order to hit your goal. You have room to maneuver. Short-term investors who make the wrong move can be financially hurt in a big way. Long-term investors can absorb some loss.

This is especially true if you have a diversified portfolio that takes into account your investment goals and your risk tolerance. If the market goes down — which is likely over thirty years — you will probably still be able to reach your goals.

But if you are an investor with only 10 years until retirement, a market downturn can be a disaster. There is no longer any room for error. Time isn’t smoothing things out for you any more. The market will go up and it will go down. If you start early, you will have a better chance of coming out on top.

I know that the time may have passed for you. There is nothing you can do about the time that you have lost. The key is to not lose any more time. The longer you wait, the more risky your investments become, the more you have to contribute and the more stress you have in your life. Start right now investing in your future. Every year that goes by costs you thousands of dollars in the future.

It’s hard to believe that Japanese candlestick charts were almost completely unknown in the West, before being introduced in 1989 by a American called Steve Nison in his book entitled Japanese Candle Charting Techniques. These techniques are now so widely used throughout the financial industry, it is hard to imagine a world without them. What is unique is that a simple candle shape can hold so much information, but because it is graphically and colourfully displayed it allows the mind to absorb information very quickly. Combined with our knowledge of volume, they provide the two elements that will form the basis of your trading. As you will have guessed they are called candles or candlesticks because that is what they look like!

Each Candlestick has FOUR elements as follows, namely an opening price, a low price, a high price and a closing price within the time frame being considered. Where the price has closed up in the time period then these are generally coloured blue, and where the price has closed down they are generally show as red. The reason they are so powerful is because they show instantly and visually the price movements over a certain period. As you will learn later, all aspects of the candle are important, but particularly the size of the body, the length of the wicks ( upper and lower ) and of course whether it is an up or down candle.

Now that you understand the basic formation of a candlestick I am going to discuss timescales in a little more detail. It may surprise you to know that on my currency trading charts I have the following timescales : 5 seconds, 10 seconds, 30 seconds, 1 minute, 5 min, 10 min, 15 min,30 min and onwards to the monthly. The reason I mention it now is firstly to make you aware that you can have candlestick charts in virtually any timeframe you like ( all charting packages are slightly different ), and secondly if you are not careful, you will spend your time like some lost soul endless flicking between timeframes to try to look for confirmation of something you have seen in another timeframe!. Don’t worry, everyone has the same problem when they start, it is part of human nature! Every form of trading has different requirements and in addition this also depends on the length of time you are going to be holding positions open. Let me try to give a silly example, which I hope will make the point.

As I mentioned it above, take the 5 second charts as an example. Imagine you were buying shares as part of your investment portfolio for the next few years. You would not base your decision on a 5 second chart would you! ( no you wouldn’t!! - really you wouldn’t) The timescale of your holding and the timescale of chart you are looking at are completely out of balance with one another. You would look at a daily, weekly or even monthly chart going back several years. The timescales are relevant to one another and you must base your decision on a relevant chart for the time you are likely to be holding the trade.

Now let’s look at another trade using the 5 second chart. In currency trading you have people who trade by what’s called scalping. In the currency markets the prices move around constantly and sometimes very fast indeed. In a few seconds a price may have moved several points. A scalper will trade large amounts of money on small movements, trading in and out of the markets several hundred times a day. There would be little point looking at an hourly or daily chart. Trading would be over by the time you pushed the button. A silly example I know, but I hope you get the point. Scalpers would use anything between 10 second and 5 minutes, and in case you’re wondering, no I am not a scalper nor do I ever look at these timescales. My trades are longer term hours, days and sometimes weeks, so I use hourly and daily charts 95% of the time ( much less stressful)

Finally, let my try to give you four generalizations for the candles themselves ( I’ll call them candles from now on as it it less typing!) which I hope will give you some very basic guidance. Remember there are whole books and websites dedicated to the study and analysis of candle charts and you will have to do lots of reading, study and practice to become expert, but in general the following are true:

1. The longer the body of the candle then the more meaningful the move & the more volume( effort) required.

2. It takes effort to go down as well as up so 1 applies whether it is an up or a down candle.

3. The longer the wick on the candle ( top or bottom ) then the more one can interpret from the candle.

4. When a candle has the open and close price very close together this represents indecision in the market.

5. The same candle can mean different things depending on where it appears in the overall chart

6. You never act on one candle alone, but wait for confirmation in the next few bars.

Now whatever time frame you are trading, you must wait for confirmation. If you are trading shares and are using a daily chart, wait for 2-3 days and see what happens. If you see confirmation then you can open your trade, depending on whether you are trading long or short.

Finally, remember that candlestick analysis is an art not a science, and can be applied to any financial instrument in any time frame. It takes many months and years of practice to interpret them correctly, but once learnt they provide the most powerful analysis of future price movement available. Combine them with a western indicator such as volume, and you start to be able to read the market and correctly predict future price movements.