2Bull Forex Blog

There all over the net currency trading systems promising you huge gains but very few deliver anything but losses. The track record looks great but the real results don’t live up to the hype - Why? The answer lies in curve fitting, understand it or lose.

First of all most of the track records you see on the net are simply simulations done in hindsight KNOWING The closing prices and you can check by looking for the disclaimer below or similar one - read it carefully:

“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”.

So vendors can make up anything they want providing they put this or similar disclaimer on the currency trading system their promoting.

When system traders do these simulations when their initial rules don’t work, they start to bend them to fit the data - until they do. A trader I once knew said this was like taking shots at a barn door and afterwards drawing circles around them to make everyone a bulls-eye.

As no two pieces of data are exactly alike the system collapses in real time trading.

If you are buying a currency trading system then if you can look for a real time track record - if you want to buy a simulation you can but just check if its curve fitted here’s how:

Clues to curve fitted system are:

- To many rules i.e a trading system that’s simply to complicated.
- Has unique rules for different currencies.
- Has unique rules for different trading conditions.
- Huge profits with little or no drawdown.

You can buy a simulation but make sure you know the logic the system is based on and the rules are fully disclosed.

Buying a currency trading system is really common sense and if it looks to good then it probably is. Today anyone can sell online and most of the systems sold are simply there to appeal to the naive and greedy trader and vendors know this.

Be careful when buying a currency trading system and look for one that is NOT curve fitted or you will lose.

Will you make money at currency trading? This is a question most traders try and answer by trading a demo account - but the problem with demo accounts is there is no pressure, i.e no money on the line and it proves nothing.

Most traders who make money with demo account lose when they open an account with a forex broker. Now there is a fantastic way for traders to see if they have what it takes. There is a new account called a protected account and it acts as a bridge between a demo and a full trading account. The concept is:

The Protected Account works as a funded demo account in which the client pre-determines their risk level. Among its features are:

- Trade up to 100 times your initial deposit, even with a negative balance.
- Make as many trades as desired, 24 hours a day, using any currency pair.
- At the end of the a set period, (normally two weeks) any positive balance is the clients to keep the broker covers the losses.

This has significant advantages over a demo account, as it simulates the feeling of trading real money on the Foreign Exchange and let’s face it when money is on the line we feel and act differently.

Trading is probably 20&% method and 89% mindset and it’s a fact that most traders fail because they don’t trade with discipline.

To make money you not only need a method but you need the discipline to follow your method when the going gets tough. Its easy to score a penalty goal in your back garden but not so easy when its a huge game and you have to score to win and have 100,000 people watching you!

The Protected Account acts as a bridge between a demo account and a real one, providing an authentic trading experience, but of course the risk is managed and a huge advantage is - even if you go debit on the first day you can still keep trading so you get plenty of trades and plenty of practice.

These accounts are being now provided by forex brokers and they are a fantastic way to get your feet wet, before progressing to a full trading account and will help you determine if you have what it takes to become a successful forex trader.

If you look around the net you will often see the two names Fibonacci and Elliot wave come up as great ways to make you money in forex trading. Here we will look at the merits of both and how useful they are and how they can lead you to currency trading success.

Both theories are based on the scientific theory of market movement lets take a look at them.

1. Fibonacci Numbers

The Fibonacci sequence was devised by Leonardo Fibonacci in 1202. The Fibonacci number sequence was based around the following equation:

How many pairs of rabbits can be generated from one single pair, if each month each pair produces a new pair, which, from the second month, starts producing more rabbits?

The result was a number sequence popular throughout the natural world and the equation is as follows:

If Fn is the nth Fibonacci number, then successive terms are formed by addition of the previous two terms, as Fn+1 = Fn + Fn-1, F1 = 1, F2 =

The ratio of any number to the next larger number is 62%, which is a popular Fibonacci retracement number. The inverse of 62% is 38%, and this 38% The two levels considered the most critical by traders are therefore: 38.2% and 62.8%. Other important percentages are: 75%, 50%, and 33%.

Do they work in trading?

The answer is sometimes - but you can pick any retracement you like and that will work sometimes, but thats not scientific just luck . The number sequence is loved by the far out investment community with its mystical connotations - but its no real use in trading and if Leonardo Fibonacci was around today, he would probably be horrified by the way his theory has been hijacked.

2. Elliot Wave Theory

The theory was named after Elliott himself, who concluded in his book “nature’s law” that: The movement of financial markets could be predicted by observing, and identifying a repetitive pattern of waves and patterns move to a scientific theory.

So Elliot claims to have found the underlying scientific theory of market movement so all you do is follow it and make money? WRONG.

Of course any scientific theory by definition is objective and works all the time - in Elliot wave there is no Objectivity it’s all left to the user to work it out! Well that’s not scientific.

I am going to ignore the fact that Elliot made no money with his theory and simply say - his definition of scientific is different to most peoples and drawing a load of peaks and troughs in any time period you like, is not science and unlikely to make you long term profits.

A Fundamental Error Of Both Theories

Is to assume that markets move to a scientific theory its obvious they don’t because if they did we would all know the price in advance and there would be no market!

This is common sense. Furthermore, prices are determined by humans and they are not logical, when trading markets and certainly not predictable.

If you want to make money trading you need to forget scientific theories and trade the odds - as that’s the best you can do but if you trade the odds, you can make a lot of money. So forget Fibonacci and Elliot wave and use some objective odds based rules in your forex trading strategy and enjoy currency trading success.

Today there are more forex day trading and scalping systems available online than ever before. It’s the dream of many traders to buy one and day trade for a living and make an income by scalping regular profits and here we will look at this in more detail.

Well the theory, says regular profits - the reality is different and is:

All forex day traders and scalpers always lose.

The systems that you see on the net make big claims and track records that look great - but the track records are never real - there simulated.

This is a disclaimer you will see (or similar) read it carefully:

“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”.

Any forex day trading system you see will be simulated and of course anyone can make a profit in hindsight - but in reality we have to trade not knowing the closing price in advance.

So why don’t you ever find a forex day trading system with a real track record?

Quite simply - because forex day trading or scalping doesn’t work.

The reason for this is all volatility in daily time periods is random, support and resistance levels are meaningless and prices can and do go anywhere in a day.

You can’t get the odds on your side and you can’t win - Period.

The proof of course is in the track record and you will never ever see a day trading or scalping system with a real one - try and find one and if you do let me know, I have been looking for 5 years!

HOW TO WIN

If You want to win at forex trading then you are going to need to look at longer time periods, you have a choice:

Forex trading following looking for trends that last for weeks or month or forex swing trading which looks for trends that last for a few days to around a week.

The one you choose is up to you but both allow you to get the odds on your side because they use data over longer periods.

If you want to win leave forex scalping to the dreamers, naive or greedy traders and concentrate on ways to get the odds in your favor and enjoy currency trading success.