2Bull Forex Blog

If you want to make big profits in forex trading you need to decide the time frame you wish to tradhere we will compare forex day trading with forex trend following and the clear winner is…

Forex trend following

It’s really a no contest because day trading doesn’t work. Before we compare the two lets get rid of the myth day traders make money. You have seen all those fantastic track records - but they all have a problem and it’s this disclaimer:

“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 there you have it - the track records are made up and that’s why you see a winning track record. Of course if you have read the above doing a track record looking backwards is easy, doing it real time is hard.

Let’s compare the two methods of trading:

Validity of Data

Of course if you want to trade you need data and this data needs to be reliable.

Forex day trading data simply is not. Why?

All volatility within a day or a few hours is random. You can’t trade it no matter how good your system is. Support and resistance in short periods is not valid and daily price moves can go anywhere.

Once you move to trend following the data is over long enough periods to trade the odds and that’s exactly what you need, to have a chance of currency trading success.

Cutting losses

You can cut losses in both but due to the nature of day trading your going to have a lot of them. There is no real difference between the two discipline here they can both keep losses small. Now we need to look at profits - you need these to cover your inevitable losses as the old saying goes so lets see which method is best.

Running Profits

The day trader has huge amount of losing trades and will get lucky and win now and again however what do day traders do? Cut them! So they have small losses (a ton of them) and an occasional profit which is small.

What does this mean?

An eventual wipeout of equity.

The trend follower has a distinct advantage he can keep his losses small and run his profits and they can be huge. The big forex trends can last for weeks or months and if these are held, profits can easily cover losses and make a big long term gain.

I know people who trend follow and lose 80% of the time - but they make triple digit annual gains because they run their profits.

Finally…

There is a huge industry in online trading that promotes day trading as an easy way to riches - just follow the simulated, back tested track record and win but no one does long term.

Day trading is promoted as low risk but its actually high risk.

Forex trend following if done correctly, can help you achieve currency trading success and really there is no contest between the two - if you want to make money, try forex trend following and forget day trading.

If you get the right forex education and a simple robust long term trading system you can enjoy trading success.

Enclosed you will find 6 common mistakes, made by the vast majority of forex traders -make anyone of them and you will join the vast majority who lose money, so here they are avoid them…

1. Trading Expert Opinion

All the forex news you see looks so convincing and today, we have TV channels and lots of resources on the net but there only opinions. They won’t help you win. If they did, more traders would win than they did 50 years ago and this is simply not the case - the ratio remains the same. Sure, the news sounds convincing but chances are its wrong, as it reflects the views of the majority who lose.

News is discounted instantly by the market and its how it is perceived that determines the course of events. It’s a fact that - most bear trends end when the fundamentals and news is at its most bearish and markets crash, when the news is at its most bullish.

2. Trading a Forex Robot with a Simulated Track Record

You can buy these online and they tell you that you can get rich for a few hundred bucks, you won’t be surprised to learn - you can’t. Most of these robots have great track records, the problem is there simulated over past data and won’t help you make money - there not worth the paper there written on, we can all be rich if we know what happened and could trade it!

Get the right forex education and learn a forex trading strategy yourself to lead you to success. Leave these cheap, losing robots, to dreamers and lazy traders.

3. Trying to Predict Forex Prices In Advance

Prediction is another word for hoping or guessing and that won’t get you far in forex trading. You can’t predict forex prices in advance so don’t try. Act on the reality of price change and trade the truth.

Many gurus sell scientific systems that claim they have found the formula for market movement and all you need do is follow them. If however markets did move to a scientific theory, we would all know the price in advance and there would be no market. Prices move because markets are uncertain not certain!

4. Day Trading or Scalping

A fantastic way to lose money quickly - it doesn’t work and the reason is obvious:

It’s impossible to predict what millions of traders are going to do, in a few hours. Because of this, all volatility is random and you will lose - period.

Ever seen a day trading system on the net with a real time track record? Neither have I - But I have seen lots of simulated ones!

5. Placing Stops Within In Random Volatility

Another common mistake is placing stops where there almost guaranteed to get you stopped out, as there within random volatility. If you want to avoid this, make learning about standard deviation of price, part of your essential forex education.

Forex trading is all about taking calculated risks at the right time and taking a risk. If you try to restrict risk to much, you actually create it and guarantee yourself to be stopped out.

6. Over Leveraging a Small Account

You can get up to 400:1 leverage with many forex brokers and most traders think the more they leverage they use the better - but they get stopped out quickly and their accounts are soon wiped out.

If you have a small account treat leverage with respect and don’t use too much - if you do, you will soon be in the 95% of losing traders.

The above are all common forex trading mistakes and if you make them, you will lose but there easy to avoid and if you learn digest and avoid them, you can get on the road to constructing a forex trading strategy, for long term currency trading success.

How should a trader feel about losses? Is a trader supposed to love losses?

The worst aspect of losing is that it tends to create pessi¬mism. Traders should feel bad when they lose money only if they fought the market trend, or violated their own trading strate¬gies. The best traders have a healthy “so what, big deal!” atti¬tude that maintains a sense of humor about losses. There is no reason to feel bad about losses, if the trading discipline was correctly used. On the other hand, there is no reason to learn to love them either.

Analyze losses, then let them go, move on, that’s the best thing to do. Understanding man’s relationship to time is one of life’s most important challenges. When man becomes free of time’s constraints, he lives life to the fullest and achieves goals on his own terms. Pessimism traps traders in the past, destroys their present and robs them of the future. Imagine a world without time where the thought of death is not a finality of existence. If money were not the reason for your work related behavior, then who are you; where are you and what are you doing? Who shares this existence with you? In the philosophical sense, man creates himself and his existence, when he takes responsibility for his actions and his time. Think how any individuals create order, structure and disci¬pline in their lives. How will you allow a trading loss today affect your life five years from today?

Thinking the wrong way can become self-fulfilling. The trouble with self-fulfillment is that many people have a self-destructive streak. Accident-prone drivers keep destroying their cars, and self-destructive traders keep destroying their accounts. Markets offer unlimited opportunities for self-sabotage, as well as for self-fulfillment. Acting out your internal conflicts in the marketplace is a very expensive proposition.

Another thing that bears watching is your tongue. Words are extremely powerful things. Be careful of what you say. If you start saying “I cannot seem to win,” you will most assuredly NOT win. If you say, “I just don’t get it!” you will never get it. It is literally possible to curse yourself by what comes out of your mouth.

Traders who are not at peace with themselves often try to fulfill their contradictory wishes in the market. If you do not know where you are going, you will wind up somewhere you never wanted to be.

Forex scalpers aim to make small regular profits and in time build this up to a large income. Forex scalping is very popular and here we are going to look at how not to lose your money at it.

The best way not to lose money is not to even try it - it doesn’t work, before we explain why you may wonder why you see so many courses and people claiming big gains so here is the answer - the gains are paper gains and not real money. Read the disclaimer below which you will always see or a similar one with any forex scalping system:

“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“.

As you can see if a trading system carries the above it’s of no real use in terms of indicating profitability. We can all make money knowing closing prices and past data - it’s easy. In the real hard world of forex trading, you don’t have this luxury.

So why is forex scalping doomed to failure? The answer lies in the data is not reliable and you cannot (no matter how clever your trading system is) get the odds on your side.

In currencies prices in a few hours can and do go any where volatility is random and support and resistance levels within a day simply cannot be used to get the odds on your side.

As all volatility is random you are destined to lose long term. If you think about this it’s obvious:

Huge numbers of traders make the final price and they all have different motivations, skills and levels of emotion that input into their trading and to say this huge mass can be predicted in short time frames is ridiculous.

Not only do you have the above to contend with but forex scalping breaks a fundamental rule of trading:

Run your profits to cover your inevitable losses.

All trading systems have losses and drawdown periods and you need to run your profits to cover them. Now scalpers do get profits (everyone is lucky some time) but what do they do - Do they run it? Not a chance they bank it!

Of course luck doesn’t last for ever and if you are trading with the odds against you your on borrowed time and will lose eventually it’s just a question of when.
So if you want to keep your equity intact don’t forex scalp - trade longer term and get the odds on your side. Sure, short term trading sounds great but the odds don’t stack up it’s a wonder that sane intelligent people in other walks of life think they can win with a made up track record and a system costing a few hundred bucks.

You can make a lot of money trading but forex scalping is doomed to failure - trade longer term, get the odds on your side and win.

This post is for novice traders and we are going to look at 3 facts which are all you need to know to decide whether day trading is right for you.

Fact 1
All Short Term Volatility is Random

There is no order to short term volatility and prices can and do go anywhere in short time periods - Why?

Quite simply there are huge numbers of traders all with different levels of skills, systems and motivations for trading and you can tell what this mass diverse group of people will do in short periods of time - it’s laughable that traders think you can measure human psychology of millions in just a few hours but they do and they lose for believing it.

Fact 2
Random Volatility = No Odds on Your Side

Forget the far out investment crowd who believe there scientific order and you can predict forex prices you can’t ( if you could there would be no market as we would all know the answer in advance!), so those systems who tell you can make a regular income guaranteed are totally wrong. Forex trading is an odds game and to win you must be able to get the odds on your side. If volatility is random, you can’t get the odds on your side and will lose - period.

Fact 3
Day Trading Breaks a Fundamental Rule of Trading

This is of course run your profits to cover your inevitable losses.

In forex day trading stops are close and losses are small and because you can get the odds on your side, you have a lot of them. Of course sometimes the forex day trader ends up with a profit when he’s lucky - what does the trader do? Run it? Not a chance he cuts it!

It’s pretty obvious that you would have to have luck constantly on your side to win and of course luck doesn’t last forever. Eventually you have small losses and lots of them and the occasional small profit which leads to a decline and final wipe out of equity.

What about all the track records that claim to make money you may ask?

Well they all have the disclaimer / warning repeated below or a similar one and they mean nothing, as there just saying the track record has been made up and simulated on paper in hypothetical trading, 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”.

You will NEVER see a day trading system sold online with a long term audited track record of gains - Why? If you have read this article you will already know the answer it doesn’t work.

If you want to win you need to trade the odds and that means trading longer term.

So instead of day trading make longer term trading part of your forex education and you could enjoy currency trading success.