2Bull Forex Blog

If you want to learn currency exchange, you need to avoid the 4 deadly mistakes enclosed in this article; there not the only ones novice forex traders make but there certainly the most common; you make them you will end up a loser so beware of them…

Here are the 4 deadly mistakes that you need to avoid to enjoy forex trading success.

1. The mechanical trading system with the simulated track record

You will find them all over the net and people fall for these and yet they have never been traded and all have this disclaimer read it carefully and you will see why if you buy one you’re destined to lose:

“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 what use is that?

You can make up anything in hindsight. Traders fall for these again and again and wonder why they lose - well they should have checked the above and then they would know - the so called profitable track record was made up.

If you want to learn currency exchange learn this - no one is going to make you rich for a few hundred bucks, life is simply not like that.

2. Predicting Forex Prices

How many traders think they have to predict forex prices to win? Most and if you try it you will lose. Why?

Because a forex trading strategy based on predicting prices is destined to lose, as prediction is simply another word for hoping or guessing and you won’t get far with doing that in life or forex trading!

In forex you don’t predict - you act on the confirmation of price movement.

Forget the scientific methods of such gurus as Gann, Elliot Wave and Fibonacci that claim there is a scientific method to forex price movement to predict forex prices in advance - there isn’t.

If there was a scientific method of forex market movement, we would all know the price in advance and their would be no market - common sense - but huge numbers of people fall for the science and prediction theories.

Trade the reality of price change only and forget prediction or your trading signals will be as accurate as your horoscope!

3. Trading the news and expert opinion

There are a lot of people who think they can trade news stories or listen to so called experts in the media.

The news is quicker and better researched than ever but will it help you win?

Of course not, it’s an opinion that’s all. News tends to reflect the greed and the fear of the majority and the majority always lose, so don’t pay to much attention to it.

Will Rogers once said “I only believe what I read in the papers” he was joking of course - but many forex traders take news stories from CNN or Bloomberg as gospel and lose.

4. Not Knowing What the edge is

Most traders simply try forex trading but have no idea they need a defined edge.

A defined edge is the reason you will win at forex trading when the vast majority over 95% of traders lose - what sets you apart?

Despite the low odds of success and the fact that forex trading is obviously not just a walk in the park, people plunge headlong into it without a well thought out forex trading strategy which can give them a trading edge - Do your homework and don’t make the same mistake.

So there you have 4 of the most common mistakes made by most of the losing majority avoid them get the right forex education, find your trading edge and trade with discipline and you will enjoy currency trading success.

If you use forex charts trading exhaustion gaps can be hugely profitable. There one of the most reliable chart patterns to trade if you know how to take advantage of them. They don’t come around often in forex trading but when they do, there a great formation and you can get some great profits.

What is a gap?

A gap in a chart is exactly as it sounds:

An empty space between one trading period and the previous trading period.

They usually form because of an important an event or in a market that is dominated by greed and fear. They tend to be highly reliable, because they reflect a highly reliable trait in human nature.

Short term price spikes never last for long and prices tend to return to areas of more realistic value.

The above reflects human nature pushing prices too far (as they always do) away from fair value and prices return after greed and fear has run its course.

Exhaustion gaps are marked by high volume, and can offer tremendous fade trade opportunities, with excellent profit potential as the tide turns and momentum shifts quickly.

Fact:

In most cases exhaustion gaps are filled soon after they are formed. These emotional price gaps caused by panic and fear provide some excellent trading opportunities when looking for a reversal. The question now is how do you trade them?

There are several options open to you:

One of the best is to look for over bought oversold indicators and look for extremes - like the stochastic or the Relative Strength Index and hit a downturn from extremes.

You can wait for the gap to be filled (checking of course momentum supports your view) but another way is to top and bottom pick with options.

While forex options are not as popular as they once were, they can be an excellent risk control vehicle, offering you unlimited profit potential combined with limited risk.

All you have to do is trade in the money from the price you buy your option.

So hit it at the money and buy 3 months to expiry and get time on your side and you can ride out any short term volatility - you don’t have to be to fussy about timing your trading signal, so long as you are confident the price spike will fade.

Exhaustion gaps are one of the best if not best chart formation to trade, as they reflect extreme emotions that normally fade within a very short period of time.

You don’t get to many exhaustion gaps in forex, because it’s a 24 hour market and they really only come over the weekend on the open of Far East trading after the weekend.

A Chart Formation for Big Profits

Human nature never changes and short term price spikes will continue to reoccur as greed fear, drive prices. They never last long and if you use gaps and exhaustion gaps in particular, you will have one of the most reliable chart formations to trade.