2Bull Forex Blog

It’s a fact that today is forex news sources are better than ever and its delivered quicker yet the ratio of losers to winners in forex trading remains the same as it did 50 years ago 95% lose and only 5% lose. The news can be useful but you need to know how to use it.

First let’s look at a simple equation:

Forex Fundamentals (supply and demand news) + Investor Psychology = Price

The facts are there for all of us to see but assessing the impact of the news is hard because humans (millions of them) all motivated differently see the facts but they all draw their own personal conclusions from them and that’s the price.

If it were easy to trade by following the news then there would be a lot more winners than there actually are. Will Rogers once said:

“I only believe what I see in the papers”

Of course he was making a joke but I am amazed by how many traders think that because a story appears on Reuters or another newswire, they can trade it - you can’t.

The fact is that humans always push prices top far up or down, as their emotions come into play and most major tops are formed when the news is most bullish and vice versa in a bear market.

It’s a fact that prices generally move in line with the long term fundamentals but prices spike to far from fair value up or down along the way and history shows us these spikes don’t last.

You can spot them easily on a forex chart and trade them for profit.

There is a well know saying:

“If you can hold onto your head when everyone around you is losing theirs, you probably haven’t heard the news”

In forex trading this means you sit back in a detached fashion and look at your forex charts and when you see a price spike you start to question the news.

For example - the euro spiked to 1.50 recently and everyone said that the dollar was finished - yet its rallied and will probably rally further.

Why?

Because all the news stories have been discounted: Interest rate cuts, the sub prime mortgage crisis, the US will slip into recession etc and things can only get better and people also didn’t pay attention to GDP which is robust.

The dollar was simply oversold and rallied, when the news was at its most bearish.

This doesn’t just happen in forex, it happens in any market.

I read a great story about oil going to $160.00 dollars a barrel and that $100.00 a barrel was sustainable.

Well - there is no shortage of oil.

Global demand is actually falling and the true value of oil is in the $70 - 80 region. When people said $100 a barrel was a forgone conclusion - it was time to sell.

The fact is we are not creatures of logic, we are creatures of emotion.

Humans are also pack animals, we like to be with the crowd and the news reflects this.

The facts are the crowd never wins.

If you look at a forex chart and you see a piece of bullish news that fails to rally a market or a bearish piece of news that doesn’t cause a market to fall - that is telling you to look at your charts and look for a contrary trade.

Forex news can be useful - but not in the way that many traders think.

The above are just a couple of examples, of how you can use forex news ( or any market news) to generate contrary trades, enjoy currency trading success and join the elite winning minority.

It always amazes me that people say that you need to learn lots of knowledge to enjoy currency trading success and its simply not true - you have to get the right knowledge and forex education and that should only take A week or so. Here we will look at the education you need.

Currency trading is essentially simple - anyone can learn to be a trader, but the fact is 95% of traders lose - so why is it that if everyone can learn currency trading don’t most succeed?

Most traders fail to understand this equation:

Robust Method + Traded with discipline = Currency Trading Success

Let’s look at this equation in more detail…

It’s a fact that simple systems beat complicated ones, as they are more robust in the face of ever changing market conditions.

A complicated one simply has too many elements and they break.

Keep It Simple!

People make the mistake of thinking the harder they work, the more money they will make - but you don’t get paid for hours of input. In currency trading, you get paid for being RIGHT with your currency trading signal and that’s it.

Simple systems also have the benefit of being easier to understand and from understanding comes in and this means they are easier to apply with discipline.

If you don’t have the confidence to apply your system with discipline, you have no currency trading system at all!

Its discipline which most traders lack and this comes from sometimes working to hard or just as bad following someone else’s trading system without understanding it.

Today we like to think we can simply follow an expert or throw knowledge at a problem to solve it but in forex trading this is not the way to succeed.

An Illustration

A story that always influenced my trading was when I read about the turtle experiment which took place in 1983.

The essence of the experiment was to prove that anyone could learn to trade and legendary trader Richard Dennis gathered a group of traders together from all walks of life of all ages and educational levels and taught them to trade in just 14 days

The result?

These traders went on to make Richard Dennis $100 million and become some of the most famous traders of all time.

This experiment proved that anyone could learn and the system was essentially simple - the key to its success was the rigid money management discipline that the traders used.

Currency trading is essentially simple and anyone can do it but most traders choose not to learn the right forex education or follow others.

If you want to enjoy currency trading success, keep in mind that it comes from understanding and self belief which give you the all important traits of confidence and discipline.

Is it really that simple?

It’s a simple concept and totally correct and if you have the desire to enjoy currency trading success, you will learn the right education and win.

Electronic check conversion is becoming more popular these days and consumers should know what it is and how it can affect them. The last thing anyone wants is to bounce a check or to have a clerk deny a sale because of a lack of funds in your account.

So what is electronic check conversion?

In simple terms, electronic check conversion is a transaction in which your written check is used only as a source of information. The information taken from it includes the check number, your account number, and the number that identifies your financial institution or the routing number. This information about your check is then used to make a one-time electronic payment from your account. This is also known as an electronic funds transfer. The written check itself is not the method of payment, which is the main difference between what we used to know about check payments.

You will know that an electronic check conversion is taking place because, by law, when you provide your check, you must be given notice that information from your check may be used to make an electronic payment from your account.

Consumers should understand that there may be different ways that this information is given to them. For example, a credit card company might put a notice in your monthly bill telling you that if you pay by written check, your check may be used to make an electronic fund transfer from your bank account.

For those who use checks at stores that use electronic check conversion, you will receive notice in two different ways. The first notice is a posted sign, usually located at the register, which states that if you pay by written check you are agreeing to let the store make an electronic fund transfer from your account. The second notification is a copy of the posted notice that you keep for your records. In most cases, this second notice usually appears on your sales receipt.

It is important for all consumers to understand that an electronic transaction may be processed faster than a check. For this reason you want to make sure that you have the money in your account when you make the transaction.

Your bank will not return any checks that are converted, even if you normally receive your original checks or images of those checks with your statement. This is something new to many consumers. In addition, you have different rights with an electronic check conversion transaction than you do with your normal check payments.

With an electronic check conversion, consumers have the legal right to an investigation by bank when an error occurs. Consumers also have the right to receive notice that if they provide a check as payment, information from the check may be used to make an electronic payment from their account. You must also be notified of any fees that the store collects if there is not enough money in your account to cover the transaction.

Consumers should understand that merchants can charge for non-sufficient funds just as they can do with written checks if there is not enough money to cover the purchase. This is the same as with written checks.

The first thing to do is to check last nights closing share price [presuming you have started buying already].

If you were going to sell, has the share price reached or dropped at your pre selected exit point?

If the share price went down, was your stop loss activated? (If you are not familiar with stop losses, please see a previous article on this to clarify.)

If you were buying stock .A TIP for you here do not leave open overnight AT MARKET orders. You will most definitely end up paying more than you bargained for.

Always LIMIT your order to the price you want to pay. Once this is done and you are up to date with your share portfolio then you can progress to you next task.

After the buying and selling of stocks is under control I then start to identify my next trading opportunities.

I select a stock from a list that I have compiled earlier. I scan the stock’s data base; check the bar charts and the trendlines. If everything looks good , and presuming I have capital available to purchase the stock, I proceed to step three.

Firstly I recheck to see what the stock price is. Then how many of them do I want i.e. 5,000. Ascertain is it enough to make a worthwhile profit?

If your funds are limited to $ 500. { MINIMUM ASX PURCHASE} Then depending on your brokerage which on average will be $50.00 [that is for buying and selling] there is 10% you have to make just to break even. With such low capital, 20% profit nets you only $ 50.00 per sale.

After you have purchased your new stock, [at the best price possible of course] set your exit target price goal so you know how much profit you want to make when the stock has been sold. Do not be greedy. Then set your stop loss into place.

Depending on the volatility of the stock keep a watchful eye on them. Try not to have too many irons in the fire when you first start off. One or two stocks are ample when you first start off.

This is only a very rough outline to get you started you will soon work out what suits you best depending on your time commitments etc. Now to look the dangers and risks you will encounter in the stock market.

The Dangers and Types of Risks you will encounter in the Stock market.

Your investment decisions need to take into account several factors.

Your investment objectives risk and return preferences and the time frame involved.
Generally a higher return is subject to a higher risk. Accordingly a low risk portfolio invariably means lower returns.

Below we shall discuss different risks in more detail.

1. Market Risk.

The factors involved here are economic, technological, political or environmental issues. All of these can and will impact on the returns on the investment in the market.

2. Interest Rate Risk.

Interest rate changes will have a direct or indirect impact on your investment or property. Depending on whether they rise or fall.

3. Credit Risk.

Usually this involves the risk of a third party defaulting on their financial obligations. Which of course could have serious ramifications for you especially if their financial contribution impacts on your own financial commitments and the stocks you have invested in?

4. Inflation Risk.

Inflation can cause an investment to lose its purchasing power over a period of time. It will also have a negative effect on cash or fixed interest investments.

5. Currency Risk.

International exchange rates can affect your investments particularly if they are overseas. This applies mainly to managed funds or stock investments which have the majority of their investments in the overseas markets.

6. Liquidity Risk.

If your investments are either in the share market or in cash then liquidity isn’t usually a problem as they can be easily be converted. Unfortunately this does not apply to property investments or term deposits where a financial penalty can be realized through early withdrawal of the funds.

One of the major ways you can minimize risk is to by not having all your eggs in one basket. In other words diversification will ensure that you have maximum exposure to the returns of differently performing assets.
Some of which will rise in value while others will mark time.

This means that your best performing assets will offset the worst performing ones. Which will result in an investment portfolio’s volatility being reduced which in turn delivers a better risk adjusted return.