2Bull Forex Blog

This applies to any type of business under the sun, especially to property and currency. Staying on the side of value, which is what bookmakers do, ensures that in the long run you are a winner.

There are several tips how to stay on the side of value:

1. Doubling your stakes is madness. Remember if you flip a coin a thousand times and it comes up tails, the odds are still even money that it will come up tails the next time you flip it!

Conclusion: Investing lots of good money just to get back what you are losing plus a little profit, is making the risk is too high and the return too low. You are not on the side of value. Keep away from deals like that, but if involved, cut your losses and stop as soon as you can. It is far better to wait for value when trying to recoup.

To keep on buying falling foreign currency in the belief that it is bound to go up any minute, is a similar kind of example. More chance to recoup will come, when the sentiment is showing signs to support the currency you bought. Value will be knocking on the door.

When it comes to housing, value comes into play again, whether if you are selling or buying. If selling, value is found in investing a little to make the house look that much better. Whatever amount you invest to make the house nicer, it will return back twice as much, and surely help to sell the property quicker. Many sellers think that it is silly to make improvements to a house they no longer want. Yes, but they have to sell it first. If you are buying, the value is better when the prices are down rather than up. Not many lose in the long run on houses bought at sensible prices.

2. When the risk is big and the gain is big, there is no point in getting involved.

3. When the risk is small and the gain is big, in the long run you profit.

4. When there is no risk and the gain is big, beware, unless you are a burglar.

You would think that all you have to do is to follow rule 3 to succeed. Maybe so, but it requires one more thing which is, to have the rare ability to convince yourself to wait for value. Very few people have that, hence they lose money.

If you cannot find value by yourself go to experts who can.

I used to know a fellow, who thought himself a dab hand at being able to always foretell foreign currency exchange trends, but otherwise, he was quite normal. Last time I heard, he married a rich old widow just in time to avoid financial problems. I hope he got value.

There are numerous currency trading systems for sale online but 95% of them are junk. There are some good ones out there and they can make you great profits, so follow the tips below and find the best currency systems.

1. Real Track Records

The first point to make is that you should if possible get a system that has a real track record that means real dollars, real trading and audited.

This may not ensure future profitability but shows the logic is probably soundly based and that the vendor has had the confidence to trade it.

2. Simulated Hypothetical Track Records

Most currency trading systems don’t come with a real track record but with a simulated or hypothetical one and you need to take these for what they are:

Designed in hindsight knowing the closing prices - there is nothing wrong with back testing but you must ensure the testing was done correctly.

This is the subject of the next point:

3. Beware OF Curve Fitting

Of course it’s easy to make profits if you know the forex price data already and many vendors simply make track records up and bend the system to fit the data.

When you see a track record with huge gains and low drawdown the likelihood is the vendor has bent the system rules

It is therefore a good idea to see the system rules - do not try and trade any system you do not know the logic of.

A good currency trading will have simple rules and simple logic.

If they do and the test is realistic then they can work in real time - if their curve fitted they won’t work.

Clues to curve fitted systems are:

Lots of rules, unique rules for various trading conditions and different rules, for different currencies.

Curve fitting is the major reason most forex trading systems lose.

Many traders bend the system to fit the data - without realizing but many vendors do it on purpose. This is done to show track records which are simply too good to be true to appeal to the greed of buyers - these people are not traders their normally marketing organizations.

Keep in mind if you see a track record which looks to good to be true it probably is.

THE KEY TO FOREX SUCCESS…

They key to making money with a trading system is to follow it with discipline.

This means you MUST understand the logic it is based on to have confidence to trade it through inevitable losing periods, so you need to understand and agree with the logic.

If you don’t have the discipline to follow your currency trading system, you don’t have a system.

You will never follow a mechanical trading system unless you have confidence so make learning it part of your forex education.

If you follow the above tips and have realistic expectations from your currency trading system, you check the logic and you’re happy with the performance and draw down then you can trade it for real and enjoy currency trading success for very little effort.

If you have been getting your forex education and you’re ready to trade, you need to find out one key point - can you handle the emotional side of trading? A Demo account won’t help you this new service offered by some forex brokers will…

So you want to become a currency trading and you need to now feel the emotion and there is a new account called a protected account which acts like a bridge between a demo account and fully funded trading account.

It’s a fact that 95% of traders lose as they cannot handle the emotional side of trading.

As a novice trader you want to feel it but not risk much and have plenty of trades, get the experience on a small deposit and that’s exactly what a protected account does.

The concept Is Simple:

- There is a set period of normally two weeks
- You have set risk
- You have set leverage
- You can make as many trades as you wish in this period even if you are in debit

At the end of the period:

- The broker takes any losses
- You take any profits that you make

A Real Trading Experience

The great thing about these accounts is you have limited risk can trade as much as you wish and you have a target - it’s a hands on experience with real money on the line.

The fact is most traders make money in demo accounts no pressure is not the real world of currency trading and these accounts allow you to feel the trading experience.

So it’s a demo account simply to learn the mechanics of trading a protected account to feel the experience and then on to a full trading account with your forex broker and hopefully long term currency trading success.

If you want to learn currency exchange correctly then you need to understand the formula of market movement. Most forex traders don’t and that’s why they lose money - so here it is:

The equation is simply:

Forex Fundamentals (Supply and Demand) + Investor Interpretation = Price

Now that’s nice and simple - but most people fail to understand how the equation creates price.

If you believe ANY of the following then you will lose:

- You can predict market movement
- You can trade news stories and win
- You can day trade and win

Lets look at the equation more closely and its significance.

Supply and demand fundamentals and the news a relevant but despite the fact that we all have the facts to see - we all draw our own conclusions on what they mean - we are not creatures of logic, we are dominated by our emotions of greed and fear.

It’s a fact that prices tend to spike away from fair value and then return to it - as all spikes based upon human emotion are short lived.

As humans when our emotions get involved, we push prices to far up or down as greed and fear take hold.

Most markets form important market tops, when the news and fundamentals appear most bullish and rally when there most bearish, this is human psychology at work.

So if you try and trade the news you wont win in most instances as - its not only instantly discounted in the price, you also don’t know how the millions of traders will perceive the facts.

Human nature is constant of course and chart patterns that represent this psychology repeat - but don’t be fooled that they do so to a scientific theory - they don’t.

Trading is an odds game not a game of certainties.

You don’t trade and predict you wait and trade the actual event i.e. the reality of price change.

You also have to keep in mind that trader psychology needs to be measured over the long term and you can’t tell what the mass of traders (millions of them) will do within a day

So keep in mind that the best way to trade is to follow price action on a forex chart and ignore the news, forget scientific theories and people who say you should predict and finally forget day trading, as the time period is to short.

If you understand the above bit of forex education and think about the equations significance, you can learn currency exchange the right way and enjoy currency trading success.

There are three main type of indicator representing price movement during any particular time span and the candlestick is probably the most popular. It is the easiest to read and can be tailored to one’s visual preference. Needless to say, its shape resembles a candle and depending on price movement, will show a wick at either or both ends.

The basic candlestick appearance is made up of a rectangular body that has a lines protruding from its top and bottom ends, centrally, just like the wick of a candle. Its usual appearance is that irrespective of the wicks, a solid body represents a rising price during the chosen time span and a hollow body for a price drop. Occasionally you may also see a single horizontal line, this represents no price movement at all.

Sometimes a preference of colour makes a candlestick visually this easier to interpret. I use blue a rising price and red for a drop. You can also use just an outline for the body if you wish. Your charting software will allow full manipulation.

In the case of a price rise, the position of the lower end of the body indicates the price at which the trade opens. The tip of the lower wick, if there is one, indicates the lowest price at any time, the tip of the upper wick, the price at any time of highest price and the upper end of the body, the closing prise. There are several candlestick formations and each has its own message with regard to market sentiment.

In terms of a price drop during the time span for which the candlestick is set, the criteria above is of course reversed. Depending upon how your chart is set up, if you are trading by scalping, you will likely be able to observe the candlestick form changing before your eyes. On a set up showing daily closing prices for instance, you will usually only see the static representation of the summary of the previous day.

A trending market sentiment is usually represented by what could be construed as a normal candlestick that has a body with enough length to look like a body, irrespective of wick length. The length of the body in this sense is a measure of the strength of sentiment.

If the body of the candlestick shrinks to being just a horizontal line, it can often suggest a trend reversal, which depending upon what other indicators are showing may prompt an entry or exit position. It can take on one of three appearances, a cross, a letter T or an inverted letter T.

There are clearly some benefits of opting for candlestick representation of price movement and experimentation on your software will, I believe, justify this. They certainly make trading easier for me.