2Bull Forex Blog

I constantly read articles about the advantages of forex trading but these are actually disadvantages for most traders and that’s why 95% of traders lose all their equity quickly and here we will look at the two specific reasons, most forex traders lose…

1. Leverage

Today, you can leverage your investment with an online forex broker by 200, or even 400 to 1 and this creates tremendous profit potential – but it’s a fact that most traders actually over leverage and lose.

With leverage you need to be very accurate with the execution of your trading signals and very careful with your stop loss protection. When trading on leverage if you are not careful, a quick equity spike will wipe your position.

In stock trading you can buy and hold and you only risk what you have paid for the stock and so long as it comes back you make a profit and you can wait.

In forex trading its different – you have losses that are open ended and they pile up quickly. You can’t just sit back – you need to take action.

As most traders lack discipline, they very often hope a position turns around and don’t have a get out point. A small loss soon ends up being a big loss and their equity is gone. Most traders hate admitting their wrong – they want the big profit potential leverage gives them but don’t think about the downside.

2. Volatility

Forex prices are volatile and make big moves everyday – combine this with leverage and you have a powerful tool for profits which of course can also cause losses.

Most traders have no idea about how volatility affects their trading and how to deal with it. Most forex traders have never heard of, let alone understand “standard deviation of price” yet it’s an essential part of any traders forex education.

You have to know what is normal volatility and what isn’t, to have any hope of succeeding with your forex trading strategy.

Most traders make the error of placing stops to close to their entry point and they get taken out by normal volatility and this is because they are normally over leveraged.

Most traders try so hard to avoid risk they actually create it for themselves.

The way to make money in forex trading is:

Use low leverage and stops outside of normal volatility – NOT high leverage and stops within normal volatility.

In forex trading seeing the longer term trends on a forex chart is easy – making money from them is anything but. The correct execution of trading signals, in line with the odds and placing of sensible stops is what separates the winners who pile up big profits from the rest.

Forex trading is high risk / high reward – the bigger the risk the bigger the reward – period. You need to be aware that you need to manage risk and build your own set of rules within your forex trading system to combat it.

REMEMBER

The advantages of currency trading can be disadvantages as we have seen and you need to think lower leverage wider stops rather than higher leverage closer stops. Most traders do the latter and get wiped out quickly don’t make the same mistake.

Today, we have more news than ever and its delivered in the click of a mouse and many traders want to trade it and make profits – after all it’s the fundamental supply and demand situation that drives forex prices…

No it isn’t!

Supply and demand fundamentals are not important by themselves – it’s how they are perceived that determines price.

Here is a simple equation for market movement to illustrate the above:

Supply and Demand (facts and news) + Investor Perception = Price

From the above you can see that it is investors who determine price.

We all have the same facts to look at but we don’t all draw the same conclusions from what we see and this is the problem when trading news stories.

If you could win by trading the news, with today’s quality of it and lightening communications, the percentage of traders who would win would be far greater but the fact is:

The same amount of people who lost in forex trading 50 years ago lose today and this statistic won’t change because you can’t trade news stories in isolation.

The problems with trading news stories are greater today than they have ever been.

Why?

Because we all get the information quickly and it’s instantly discounted by the market, we all have the information at the same time in any corner of the globe online and no one has an advantage of getting it first before the herd.

The problem that is always present and has been since markets started trading is:

You don’t know how the traders are going to view the news because their all driven by their individual motivations and emotions furthermore, the news always reflects the views of the crowd and the crowd is always wrong.

Will Rogers once said:

“I only believe what I read in the papers”

He was joking of course, but it’s surprising how many people read a paper or see a view on CNBC and think they can trade it and win – they can’t.

FACT:

Markets collapse and turn when they are most bullish and rally when they are most bearish – this is nothing to do with the facts but how the investors perceive them.

News stories can be used but it’s not in the way you may think.

If a bullish piece of news fails to push market higher, or bearish news fails to push a market lower, then you may have a trend change at hand.

You need to check and to do this, look at a forex chart and see the technical view of price only. Here you are seeing the reality or the truth in black and white.

This gives you a detached non emotional view of price and you can decide which way to trade. Using the news in this contrary fashion is a great way to spot situations which you can time entry with your technical indicators.

There is an old saying:

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

In the above instance you have – but you’re not taking the view of the majority.

If you use news in the above way and combine it with forex charts to time your trading signal, then you have a powerful combination for bigger forex profits.

Many traders want to learn currency trading and the obvious place to start is with a currency trading course and there are many that are sold online – but how do you choose one? Here are some important points to consider.

1. Are The Vendors Traders?

I would say most the currency trading courses sold online are not traders and are simply marketing companies. Ignore any course that promotes itself in the following way:

- You can earn a living forex trading with no effort

- You can make a regular income

- Forex day trading or scalping works

- They will reveal secrets that no one else knows

All the above is simply hype used to sell a course and none of it has any basis in reality.

2. Track Records

The next point to look at is the track record.

If your currency trading course does present one then look for the following disclaimer if you see it – don’t buy it! Here it is:

“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“.

Well if you have read that you will see a vendor can make up anything he likes in hindsight to make his currency trading course more attractive – don’t be fooled its not real.

3. Guarantee

Do not ever buy a currency trading course without a guarantee of what you are getting most reputable currency courses will give you your money back if they don’t deliver what they say, so make sure you have the comfort of one before buying.

4. Be Realistic and Remember

A currency trading course should not be seen as someone giving you profits but someone giving you the tools you need to apply for profits.

Vendor can only give you the tools and show you how to use them the rest is up to you and you must accept responsibility for your actions – ONLY you can give yourself success.

It’s a bit like teaching someone to do anything, there will always be those that fail, those that achieve success and those that achieve massive success. The good news is – everything about learning currency trading can be specifically learned and applied, by those with the desire to succeed and a willingness to learn.

You are not restricted by body or mind only certain people can become successful sprinters and rocket scientists but currency trading is different. You don’t need to be fit and you don’t need intelligence – currency trading is essentially simple and does not rely on an innate gift from god.

You are going to say if that’s true why 95% of currency traders fail do.

Well it’s not for the above reasons, it’s due to the fact they either get the wrong forex education or have the wrong mindset – but they could learn the correct one if they want to – we will cover this area more in the next article in this series.

For now all I want to stress is – if you get the right currency trading course it can help you get and apply the right tools for currency trading success – IF you use the above points as a guide to getting a good one.

There are lots of forex signal services to choose from and the idea is appealing, no real work, just follow the signals generated by the forex trading system software or vendor and get big profits longer term. To choose the right forex trading signal service however you need to consider two key points.

1. Track Records

Ok let’s get the junk ones out the way first and that’s 95% of all services and its easy to do – look for the disclaimer below that proves the system track record has been made up – 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“.

Never trust a vendor if they show you a track record with the above written on it.

The trading signal service hasn’t been traded. Think about it – if the vendor was confident in his product why hasn’t he traded it? If he hasn’t why should you.

OK that gets rid of 95% of the trading signals services but what about the good ones with real track records? Well even if they are good, you need to do one thing that won’t take very long:

2. Understand the Logic and Have confidence in It

A forex trading signal service may make money but you have to apply it.

If you don’t have confidence in it (when it hits a few losses) then your discipline can go out the window. If you don’t have discipline to apply your trading signals, then you are going to lose.

Discipline comes from confidence and understanding of how and why the system there based on works, so take time to learn it.

If the system does not reveal the logic to you pass it by.

Forex trading signals can make you money and lead you to currency trading success – but you must keep the above points in mind when choosing, to get one of the small minority of good services.

The above tips are straightforward and will help you get the forex trading signal service that’s right for you.