2Bull Forex Blog

Day trading in forex and shares is extremely popular, however there is an illusion that day traders fall for that can and does wipe them out.

Are you falling for this chart illusion? Read on and find out..

Successful track records in day trading are normally simulated in back testing over closing data.

The problem is in any form of trading - day trading included, you have to be careful not to “curve fit”. n

People selling day trading systems do this on purpose and traders testing their own system do so without realizing it.

They then get a profitable track record.

Now these track records worked in back testing and never work going forward.

Why?

Because, all day trading volatility is random and you cannot predict, or get the odds in your favour - that is why a day trading system NEVER makes profits in the market in real time.

So what is curve fitting?

Curve fitting is bending the data to fit the price history. If the system doesn’t work you simply optimize it so it does, by bending the system to fit the data.

This is simply like shooting at a barn door and then going and drawing a chalk circle around everyone to show it’s a bulls-eye.

Roulette systems are a bit like day trading, there both games where you cannot predict the future in, but if you look back - there seems to be an order in HINDSIGHT, but of course there is none – its an illusion.

The proof of the above is you will NEVER find a day trading system that makes money in real time; simply ask any vendor to give you one to prove this.

Why Traders curve fit

Vendors curve fit on purpose to catch the mug trader who believes he can get rich day trading.

On the other hand, there are traders who think they can do it and bend the data without realising what their doing - constantly tweaking the system until it works.

Vendors know day trading is a good story and don’t care if the system makes money or not as their selling systems and the trader testing his own system does not realize he is curve fitting.

Of course, if you think about day trading vendors, then if they could make as much as they claim, they would shut up and trade themselves and be millionaires, rather than try and sell you a system for a few hundred bucks.

The Illusion

What works in hindsight does not work in real time and the answer is due to curve fitting.

The Reality

If you have no reliable data you cant make money in real time trading.

Day trading has no reliable data, as all short term volatility is random and prices can and do go anywhere.

The proof of this is you never see a real time track record, the simulation of profits in hindsight is simply an illusion, caused by curve fitting.

I’m here to talk to you about which is the best stock to buy. It’s not like there is a stock out there that will always be the best stock to buy and all you have to do is buy it and that’s it, your rich. No. The best stock to invest in is always changing in time and you have to be aware of the stock markets changes in order to know which one is the best one for that time period.

Also, you will need to buy stocks from more than one company in order to truly succeed in the stock market. Something like “don’t put all your eggs in one basket”. That means that there isn’t only one best stock. There are more, all your have to do is research, research, research. A great tool to use is the Google Finance search engine. There you can see some history of the company and read news about it.

Here is some relevant points of what you need to be looking for to see if it’s a stock worth investing in:

- Generally, when a company is about to launch a new product their stock goes up in the market
- Merges of two big companies
- Acquisition of small or medium company by a big one
- Smart Joint Ventures
- Good company politics

Those are just the first 5 tips that popped into my head that you need to look for if you want to invest in the best stock picks. There are a lot more that you need to be conscious of. That’s what makes it so difficult to invest in the market. However there is something called penny stocks.

These kind of stocks are generally from companies that are just starting out so you won’t have to do so much research on its past as you would need to do with big companies. There is a greater chance to make some money in the short term with penny stocks than there is with normal stocks. Plus if you get a hold of penny stocks from a promising new company, when the company develops into a great leader in its market, those stocks that cost pennies to you will be worth 100 times more!

If you want to turn small amounts of money into large amounts and make money fast, then you need to leverage your cash.

This article is all about using leverage and a way of making leverage work, that anyone can understand and have the opportunity to make money fast.

Let’s look at a way of putting leverage to work in your favor.

Leverage

Leverage simply means investing more money than you have.

If you have $1,000 and you make 30% on your capital $300, then using leverage x 10, the gain would be 300 x 10 = $3,000.

Of course, leverage is a doubled edged sword; it creates big gains, but also creates risk.

You need a method that will put the risk reward in your favour.

Perhaps the best way is to trade global currency markets - Don’t worry if you have never traded before, it’s a lot easier than most people think.

So why trade currencies?

Well the leverage you are granted can be huge. We used an example of 10:1 above but most brokers give 100:1 as standard and 400:1 is offered by many brokers.

The other advantages are:

1. You can open accounts with low minimums

Many brokers accept just a few hundred dollars, which means currency trading is within reach of everyone.

2. There are always opportunities for profit

As one currency rises another must fall, creating constant opportunities for profit.

3. Currencies Trend

This is the significant point!

Currencies offer long term trends that can last for months or years, as they reflect the economic health of the economy of the country they represent.

This means you can lock into these trends and follow them you can make a lot of money.

How do you get the odds in your favor?

By using technical analysis and looking for repetitive chart formations.

If you can read a graph and spot repetitive price patterns, you can enter the currency when the odds are in your favor.

Is it really as simple as that?

Yes it is, but you need to know the right patterns to spot and this does take a little practice.

The basics of currency trading and putting a method together to make long term gains should take no more than a couple of weeks of hard work and the rewards for the effort are more than worth it.

These weeks of work could literally change your life.

It’s up to you.

If you want to put leverage to work then the global currency markets offer you the opportunity to start with small stakes, make money fast and build significant wealth.

Everything about trading is specifically learned - everyone has the same opportunity.

The traders who succeed tend to like risk, do their homework and apply their technical analysis with rigid risk control and discipline.

The opportunity is there for all so work hard and maybe you could make money fast in currency trading.

If you are thinking of trading Forex then try answering the 10 questions below.

Answer them all correctly and you could be a winner!

1. Do you accept that you are totally responsible for your performance?

Most traders cannot accept responsibility for their actions.

When they lose, they blame the markets, or if they have bought an e-book or course and fail, that gets the blame and it’s never their fault.

If you like to shirk responsibility, then you won’t succeed in online currency trading.

If you want to succeed you will realise that you are totally responsible and the only person who can give you currency trading success is you.

2. Do you think you can buy success?

There are plenty of forex traders who think they can buy a currency trading system or an e-book, for $100 or so and be successful.

The reality is most information sold online is junk.

If it was as good as the marketing copy, the seller wouldn’t be selling it, they would be making to much money to bother.

3. Do you think you can make money day trading?

One of the biggest myths of online currency trading is you can make money at it longer term – you can’t.

All short term volatility is random – so you can’t win.

Great theory but doesn’t work in reality.

If you want proof, ask anyone selling a forex day trading system to give you a real time track record and you won’t get one.

People who buy into the day trading myth get wiped out – PERIOD.

4. Do you believe the markets are scientific?

If you do you are going to lose.

The far out investment crowd love theories such as Elliot wave and cycle trading and think prices move in specific patterns that are scientific and can be predicted.

GET REAL!

If the markets were scientific and we could predict them with scientific accuracy, there would be no markets, as everyone would know the price in advance!

Trading is an odds game and any trader who thinks the markets are scientific should take a look at standard deviation of price – if you don’t know what it is look it up.

5. Do you have a method you have ultimate confidence in?

If you are not prepared to take responsibility for your actions or follow someone else’s theory you probably won’t have total confidence in your method when it hits a losing streak (and trust me every system does).

If you don’t have confidence you won’t have the discipline to follow your trading signals when they lose and still have the confidence to know your going to win longer term.

Discipline is the key to successful trading and most traders simply don’t have it.

6. Do you like taking a risk?

If you don’t enjoy taking risks then forex trading is not for you.

Most traders try so hard to restrict risk they actually create it, by snatching profits and never covering their losses.

If you sweat about the markets or constantly want to check prices, then do yourself a favour trading is not for you.

7. Do you have patience and discipline?

We have already talked about discipline and hand in hand with this trait goes patience.

You need patience to wait for the right opportunities and ride out losing periods - that for most traders can run into several months and not throw in the towel.

8. Do you think knowledge is power in the markets?

If you think that being clever is going to help you think again.

Forex trading attracts some very clever people and a lot of them lose.

They think that if they apply their knowledge and build clever complicated systems they will win. They also tend to be stubborn and never accept their wrong.

Well, a humble trader with a simple system will beat a clever trader with an ego every time.

In Forex Trading the right knowledge is power, not knowledge for knowledge’s sake.

9. Do you know your trading advantage?

That will make you successful while over 90% of traders lose all their money?

If you don’t know what it is, you don’t have one – so get prepared to lose.

10. Do you enjoy the challenge?

If you don’t find risk taking a challenge and fun and you can’t cope with the frustration that currency trading can present at times forget trading.

Finally…

There you have 10 questions.

If you answered all of them correctly, you have a chance of entering the elite 5 – 10% who make big consistent gains in currency trading.

There are lots Forex brokers to choose from when trading currencies online - and finding the right one to work with us critical, if you’re going to maximize your FX trading profits.

Here are 9 points to consider when choosing a Forex broker.

1. Pip Spreads Offered

Spreads between brokers vary dramatically and the difference can be as much as double so first and foremost when trading FX you need a tight spread

Transaction costs mount up - especially if you are trading frequently and impact on your profits and add to your losses. The tighter the spread, the more profits
you will make.

Today, many brokers offer 3 - 5 pips - and this is what you should look for.

2. Deposit Online & ease of account operation

Look for a broker who will take online payments to your Forex account via and secure online payment method. This is great for funding your account quickly - and getting your trading profits back to.

3. Negative Balance Protection

Leverage or gearing is one of the main reasons that people are attracted to online currency trading. Of course, leverage is a double-edged sword - and where there are high rewards, there is high risk.

With this in mind many Forex brokers now offer guaranteed stops and negative balance protection which is a big comfort to those traders who are new to the market or want to have a finite risk.

Fees for the service tend to be quite competitive and their a popular option with many traders

4. Leverage Offered

The leverage brokers will give you varies from broker to broker, but today 100 – 200:1 leverage is common and some brokers will go as high as 400:1 meaning you have the potential to leverage your account for greater FX profits

5. Other Charges & Broker assist accounts

Your only transaction cost should be the currency spread - you should NOT pay other commissions.

Avoid broker assisted accounts where a broker supposedly will help you make money from Forex trading they wont! If brokers were good traders they wouldn’t be brokers!

If you trade in this way you will lose and you will extra commissions to.
You are responsible for your FX profits so accept this fact and go with an execution only broker.

6. Investment Minimum

Today, currency trading is not just the preserve of wealthy individuals and banks - anyone can get involved and minimum deposits have dropped dramatically.

You can open a trading account online with some Forex brokers with as little as $100.00.

This means that novice traders can start off with small amounts.

7. Trading Platform

If you are trading online, you will go through a Forex trading platform.

You want ease of use and reliability – Many brokers offer demo accounts so try them out.

8. FOREX Trading Education

While you should always make your own investment decisions, it’s good to get some freebies that can help you with your Forex trading strategy such as:

• FREE trading guides

• Forex trading seminars

• Trading news and charts

• Trading recommendations & ideas

• Forex trading systems

• Trading books etc

9. Look at the overall package

When choosing a Forex broker you have a lot of choice and the above tips will help you while there are a lot of small brokers around and many are good go for someone who has been around for a while and is established.

Forex brokers are not all the same and some are far better than others in what they offer and if you use the above tips you will find one that will help you maximize your online currency trading profits.