2Bull Forex Blog

Forex scalping systems are more popular than ever and they all come with great track records, which have unbelievable gains and their very tempting for novice traders but what they need to be aware of is - curve fitting which ensures that most scalping systems lose money.

Curve fitting is when a vendor bends his system to fit the data.

When the vendor can’t get the system to work, he keeps adding more rules and parameters in until it does, by bending the system to fit the data or curve fitting. He then has a track record he is satisfied with or more to the point gives him a great track record he can sell.

What happens next?

No two periods of data are going to exactly replicate themselves and the system simply collapses and loses in real time trading.

LOOK FOR THIS DISCLAIMER!

The buyer scratches his head and wonders why - but if he looked for this on the track record he can find out if its curve fitted. Look for the disclaimer below (or similar) on any system you buy - this is standard CFTC one.

“CFTC RULE 4.41 - Hypothetical or simulated performance results have certain limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not been executed, the results may have under-or-over compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profit or losses similar to those shown”.

If you are looking at buying a forex scalping system from a vendor, beware there all curve fitted.

You will NEVER find one with a real time track record, as forex scalping simply doesn’t work by the very nature of the logic its based upon.

The time period is simply to short.

All volatility in daily or hourly time frames is random - support and resistance is meaningless and prices can and do go anywhere in a day. It’s impossible to get the odds in your favor and forex day traders always lose long term.

Of course it makes a good story and naive and greedy traders buy it and vendors know this.

They simply tell the story add a simulated track record and appeal to their greed - it’s a big industry.

If you want to trade forget forex, forget scalping systems or day trading and trade longer time periods, where you can get the odds in your favor.

Leave forex scalping systems to the dreamers and greedy traders, get the right forex education and enjoy currency trading success by using longer time frames and valid data.

So you want to win at forex trading? Well here is one simple question you must answer correctly with no hesitation - if you can you could be a winner if not forget forex trading. Here is your question:

My trading edge (the reason I will win when 95% of traders lose) is then define it:

Now a trading edge is essential and it’s something you MUST have, understand what and why it gives you an edge, so you have confidence in it, to lead you to success.

Trading edges come from within and their personal and their based upon this:

Understanding = Confidence = Discipline = Forex success

A TRADING EDGE IS NOT

- Following expert news stories
- Day trading or scalping
- Following a system from a vendor blindly
- Buying low and selling high
- Predicting price moves in advance
- Believing markets move to a scientific theory
- Believing forex trading is easy
- The more knowledge you have the better
- The more complicated your forex trading system the better

If you think any of the above will lead you to currency trading success - your wrong and need to continue your fore education. The above are common myths there are many more but the above are believed by the bulk of losers and their the majority 95%

Consider the figure 95% it’s a lot!

So how do you win?

There are no secrets to forex trading and anyone can learn currency exchange for profit but it involves seeing through the myths and working smart and seeing the reality.

The reality is that you need a simple method you understand can have confidence in and can apply with discipline.

Forex trading is actually quite simple when you understand what you need to do but most traders fail to get past first base of getting a logical method and more fail at the nest hurdles which is having confidence and few ever have the discipline to follow their forex trading strategy to success.

If you want to win at forex trading keep in mind it’s based upon applying a method with discipline for that you need confidence and if you don’t have these traits you won’t have discipline and end up falling prey to your emotions and losing

The Good News Is:

For those traders prepared to work smart and do their homework a life changing income can be had and anyone can do it - but its up to you.

If you understand the above you will realize that forex trading requires certain skills and you need to learn and apply them and they are not what most forex traders think they are.

Learn the above, digest it get a trading edge and then you can enjoy currency trading success.

Most novice traders think building their own trading currency trading system is hard but it’s a lot easier than you think and here we will look at how to put one together that will win in 3 simple steps.

Most novice traders make the mistake of buying a currency trading system from a vendor which is normally an equation that has a simulated track record and lose.

Lets face it most systems sold online are junk but there are a few good ones and traders still manage to lose with these.

Why?

Because they are following someone else and don’t have confidence to follow the system through periods of drawdown to longer term currency trading success - this is precisely why you should develop your own.

This is the equation for market success:

Logical Robust Method + Discipline to Apply = Forex Trading Success

If you learn and understand your system you will have confidence in it and will be able to follow it with discipline. Discipline comes from understanding and confidence and that’s why you should take time to build your own.

When building a forex trading system there are a few points you need to keep in mind:

Simple Systems are Best

Simple systems are easier to understand, easier to apply and more robust in the face of brutal ever changing market conditions.

Trade Longer Term

Never day trade you will lose as all volatility is random choose currency swing trading if you lack patience or long term trend following if you are more patient.

Three Key Elements To Understand

The easiest way to trade for a novice is to use a breakout system.

It’s a fact that most major moves start from new market highs so you need to be prepared to buy them.

Most traders simply cannot do this and that’s precisely why it works. While you take the break they wait for the pullback that never comes.

Trading breakouts are when the odds are at their best and if the breakout is of an important resistance level a mega trend can often follow which accelerates away and doesn’t pull back and it’s a great feeling when you are on board and the losing herd are not.

Trading breakouts is simple to understand and easy to apply you only need two other elements that you need to understand.

Support and resistance and its validity

The more times a level has been tested the more valid it is and if these tests take place in time frames that are wide apart even better.

And

Confirming the move with 2 or 3 momentum indicators to execute your trading signal. These are simply leading indicators that you can use in forex technical analysis and apply on your forex charts to give an idea of shifts in price momentum and see if velocity of price supports your view.

In part of this post we are going to show you how to put this forex trading strategy and apply it for profits - will it work? The answer is yes and more importantly, as you will understand it you can apply it with discipline for currency trading success.

We need to elaborate on the following points but in next posts we will bring it altogether and give you your currency trading system for profit.

If you want to win at trading currencies correct forex market timing is needed but if you try and be too precise you will lose. This may sound strange at first but if you look at how forex prices move it will become clearer.

1. When novice traders think of market timing they are dominated by two major thoughts: predicting market tops and bottoms.

It’s very tempting to do this as you want to be in at the best possible price with your forex trading strategy but you cannot predict in advance why?

Because if you then you are simply hoping and guessing a level will hold and that wont get you anywhere in life and certainly wont give you currency trading success. Let me give you an example:

A forex trader sees prices moving to a support level and buys just above it hoping it will hold - but instead the price carries on towards support, goes through the level and stops him out.

What he should have done is confirmed that the level was going to hold (we will go through how to do this in a minute) but first lets look at another commonly held belief related to the above.

2. Buy low sell high

You will have heard this is the way to make money in investing - but it’s again relying on hoping and guessing which we know will not help us win and also means you will miss the major forex trends and not get in with your forex trading signal - Why?

It’s a fact that most new trends (and the strongest) develop from new market highs o and you can check this on any forex chart. Traders who wait hoping to get into the market at a better price, simply see the trend disappear over the horizon and they don’t make any profits from it.

The Solution

Is to base your forex trading strategy on confirming if level will hold or break with momentum oscillators. If you don’t know what they are its time to learn.

We don’t have time to cover them here - but they are covered in our other articles and will give you advance warning of changes in velocity of price.

If a price is dropping to support - wait for a turn to be confirmed by these indicators.

You will miss the exact turn but you can’t see that in advance anyway, so there is no point in trying and if you trade with momentum on your side the odds are in your favor.

The same technique is used when a market breakout to new highs or lows - if momentum supports the move execute your trading signal and go with the break.

Trading the Odds

In both of the above examples you have not got in at the lowest or best price but what you have done is, got in at the lowest or best price with the odds on your side and traded the reality.

Perfection and perfect timing is a myth, no one can do it and the best way is to trade the reality when you use a forex trading system and that means confirming ALL moves are going your way before trading.

Keep in mind if you get just 50% of every major trend you would be very rich. If you want to learn currency exchange the right way you will realize perfection is impossible.

Forex trading is about making money not trying to be clever and it’s about trading high odds moves and then means waiting for confirmation.