2Bull Forex Blog

If you want to get rich, no matter how inexperienced you are in investment, then one of the best places to start is with the book the Zurich Axioms and here we will look at some that you can apply to forex trading to supercharge your gains…

In this article we are just going to focus on the risk element of the Zurich Axioms and how it relates to forex trading although the book gives you loss more great investment advice and is one of the greatest books on speculation ever written.

Love Risk!

The 12 major and 16 minor Zurich Axioms contained in the book are a set of principles providing you with realistic management of risk, which can be followed successfully by anyone, not merely ‘experts’. When dealing with risk, you have to see it as opportunity manage it and love it, as its your route to trading success

The book teaches you to take risks and meaningful ones at the right time which is what you have to do to make money in forex. You have to manage risk and the Axioms, will show you how.

Several of the Axioms do not conform to traditional wisdom but don’t let that worry you, most forex traders lose, yet the Swiss speculators who devised them became rich and the proof as they say is in the results.

Let’s look at the major Axiom on risk and how its view is very different to what most so called experts teach.

Axiom 1: On Risk

“Worry is not a sickness but a sign of health. If you are not worried, you are not risking enough. Put your money at risk. Don’t be afraid to get hurt a little… Worry is the hot and tart sauce of life. Once you get used to it, you enjoy it”.

Most people are so afraid of risk they actually create it in forex trading. They end up having stops so close their bound to get stopped out or think they can make a regular income etc and then they get the reality check.

Related to the above Major Axiom are two minor ones which most forex traders would be wise to learn

Minor Axiom I

“Always play for meaningful stakes”.

How many times do you hear experts tell you to risk 2% of your equity? All the time but for a forex trader with a small account the reward isn’t going to be much say you have $1,000 and risk 2% that’s $20 bucks!

If your stop is that close. Then you are going to lose quickly.

My own view has always been look to risk 10 – 20% of your equity. If the opportunity looks good hit it hard and go for a meaningful gain. This isn’t being rash it’s how to win and if you don’t like doing this then forex may not be for you.

Minor Axiom II

“Resist the allure of diversification”

Diversification is another word for diluting your gains and if you diversify on a small account you will end of getting no where. Why on earth, would you want to simply diversify when you have a great high odds trade?

All you will do will see your great trade diluted by one that’s probably an also ran. Forget diversifying and hit the high odds trades with all you have and concentrate your effort on that trade. You don’t need to trade often be patient and wait for the high odds trades.

Sure most experts don’t agree with the above and it’s not conventional wisdom but how many traders are so frightened of risk they never take enough risk and get stopped out by volatility, or listen by so called experts, who tell them forex trading isn’t risky, when of course it is by its very nature.

The truth is forex trading is risky and if you learn to love risk, play for meaningful stakes and hit the high odds trades hard, you can win and make triple digit profits.

If you are thinking about trading, you need to consider that 95% of traders lose and if you want to win, check that your forex trading strategy contains all the elements below, if it doesn’t you will end up with the vast majority of losers…

1. Your System

Most traders think they can simply take someone else’s system and follow it blindly and don’t question the logic and here are 3 sure fire ways to lose doing this.

a. Following a Forex robot with a simulated track record
b. Following a day trading or forex scalping system
c. Following a scientific system or one that is supposed to predict prices

The above are what the majority of new traders do and they lose.

Your system means one that you understand from top to bottom and can have confidence in and one that you can follow with discipline. You need a system based on sound logic you understand.

Sure you can take elements of other peoples systems but you must understand why it gives you a trading edge.

2. What Edge Does Your System Give You?

Ask yourself this question:

Why should I succeed when 95% of traders lose?

If you can’t give a good reason of why your system, gives you an edge over 95% of losing traders, you simply don’t have one, so continue your forex education until you do.

3. Money Management Rules

Most people think money management is simply placing a stop but it isn’t.

If you believe it is, you are going to lose. If you don’t get your money management right in your strategy you are gong to lose.

You need to have money management strategy for the whole account, you also need to deal with standard deviation of price or volatility, you also need to have reasonable equity to start with and decide leverage on the account.

How many traders start with couple of hundred of bucks, leverage up 100:1 or so and get blown out the water?

The majority, they think money management looks after itself and it doesn’t.

Money management is the base on which your success is built and needs plenty of attention.

4. What Losing Period are You Expecting and Can You be Disciplined?

To win you are going to have to cope with losing periods and forget the rubbish you read online, that these periods don’t last long or you can trade with 90% accuracy – its fantasy.

Even the best systems will lose for weeks on end and you have to have the discipline to keep going, through the losing period until you hit a home run.

Most traders simple cannot do this, throw in the towel early and if they would have hung on they would have been rewarded with profits.

Understand this – if you want to win at forex trading you need to lose to win.

If you cant take execute a trading system with discipline, you don’t have one!

A Road Map to Success

Most traders lose at forex trading because they think its easy or are to lazy to do the basics and the fact is, forex trading is not easy as most traders lose.

Of course for the trader prepared to put effort in to their forex trading strategy, the rewards can be huge or even life changing.

You need a simple system, you can have confidence in and trade with money management and discipline and this is the cornerstone of your success.

f you understand the above you could soon be making big profits in the worlds most exciting and lucrative business opportunity. Work smart, keep it simple and adopt the mindset to win and currency trading success can be yours.

The Zurich Axioms by Max Gunther isn’t a book just about forex trading it’s a book that puts you in the mood to make money and lots of it! Here I have selected some of my favorite wisdom from the book which if you follow, can turn average gains into extraordinary gains…

Max Gunther starts with statement about Switzerland that sets the tone of the book.

“Consider the puzzle of Switzerland. This ancestral home of mine is a rocky little place about half the size of Maine. It has not one inch of seacoast. It is one of the most mineral-poor lands on earth. It possesses not a drop of oil to call its own, barely a bucket of coal. As for farming, its climate and topography are inhospitable to just about everything”.

Yet the Swiss are among the most affluent people in the world. How do the Swiss do it?

Quite simply over the years Switzerland has produced some of the world’s greatest speculators and some of them wrote the Axioms. Some of the views are against the majority opinion as the book states but you need to:

“Disregard the majority opinion. It is probably wrong”.

Of course it is very few traders get rich and many of the so called wisdoms you accept wont help you get rich and let’s start with the first one.

“Worry is not a sickness but a sign of health. If you are not worried, you are not risking enough”

There is nothing wrong with being a bit worried, as it means you are playing for:

“Meaningful stakes – if an amount is so small that its loss won’t make any significant difference, then it isn’t likely to bring any significant gains either”

How true – how often do you hear you should only risk 2% on a trade? – well that won’t make you much.

You can risk 10 – 20% or more, if you have the odds in your favor.

Just be patient and wait for the right opportunities. This isn’t being rash this is waiting and taking calculated risks at the right time and hitting them hard.

I know traders who trade less than one a month but make triple digit gains – How?

There patient, wait for the high odds trades and hit them hard.

“Resist the allure of diversification”

Another well known wisdom but wont help you make a lot of money. You have a good trade so why dilute it with low odds trades that can cut your profits? If you are trading a small FX account focus on one area and hit it as hard as you can when the opportunity arises

“Human behavior cannot be predicted. Distrust anyone who claims to know the future, however dimly”.

True – but how many traders don’t have the guts to do their own trading and trust guru’s, mentors and scientific theories of market behavior and worthless forex robots and get beat – the vast majority.

What the Zurich Axioms teaches you and why its such a great book is:

It persuades you not to be frightened of risk – but to love it.

You take risks at the right time to make a lot of money and that’s a fact.

It’s a fact in forex trading that most traders hate risk and try and restrict it so much they have no chance of winning and all they do is take small loss after loss until their wiped out.

It also encourages you to take charge of your own destiny and be alert for opportunities and investment traps.

Many will scoff at the above and say its not accepted wisdom maybe not but the people who devised the Axioms got very rich using them and you can to – simply get hold of a copy of this book and be prepared to amused, as well as inspired, to start taking calculated risks, at the right time and hitting them hard.

Forex involves risk and it’s the way you manage risk, which will determine the destiny of your account.

Of course, you can run with the losing pack or you can take a different, more exciting and more rewarding route to currency trading success.

Most traders see forex money management as little more than placing a stop but it’s a lot more than that here we will look at money management mistakes and how to avoid them.

1. Trading invalid Time Frames

It doesn’t matter how good your system is, if the time frame is to short you are trying to trade in – you won’t win. Retail traders think they can cut risk by forex day trading or scalping, the theory is it means low risk.

The reality is it’s the highest risk form of trading because – daily volatility is random and your odds on to lose.

Don’t fall for the myth of people who try and tell you day trading works – it doesn’t sure, you see loads of simulated track records in hindsight from vendors but there is big difference between making money knowing the closing prices and not knowing them.

2. Cut Trading Frequency & Risk More

It’s a fact most traders think the more they trade the more they make however the opposite is true, trade to much and you end up taking risks on marginal trades.

The fact is you can trade less than a dozen times a year and make 100% + gains. You don’t get rewarded for frequency, you get rewarded for being right with your trading signal so, cut back your trading and then do this:

Risk as much as you can afford on the highs odds trades. Your better off risking 10 – 20% of your equity on these than the normal recommended 2 % on lots of marginal trades. Keep in mind if you don’t risk much you won’t make much, you need to take calculated risks at the right time – Now finally, and you need to avoid this:

Diversification! Sure it spreads your risk but in most instances it dilutes your gains to nothing on a small account. If you have a high odds trade you believe in don’t dilute your profit potential.

3. Stops within Random Volatility

Many traders want to restrict risk by locking in profit by trailing a stop – sound theory but the way NOT to do it is to put stops within random volatility. Don’t know what random volatility is? Then you need an understanding of standard deviation of price so make part of your essential forex education.

In essence you need to keep your stop far enough but to keep you in the trade yet close enough to protect you – most traders get this wrong. They trail there stop to close and rather than making a huge profit – they bank a marginal one.

When the big trends come around – you milk them not for hundreds but thousands or tens of thousands. Big trends are there – look at any forex chart your challenge is to turn them into profit.

If you thought this article was going to show you a way to take miniscule risks then you may be disappointed but the reality is:

Forex trading is high risk and your forex money management strategy should be all about taking calculated risks at the right time and making huge gains.

If you want low risk put your money on deposit – if you want to take calculated risks for triple digit gains, the above tips can help you.

Here we will give you three simple steps to making money with forex charts. Anyone can learn forex charting and it represents a time efficient and profitable way of trading.

Here we are going to look at charting the longer term trends that yield the big profits and these trends can last for week’s months or years and can be very profitable.

Avoid trading low odds trades in short time frames and day trading ( the most popular method for novices) is compete waste of time, as you can never get the odds in your favour.

Be patient and wait for the high odds trades and they can’t be forced and don’t come around everyday.

Right, let’s look at forex charting for beginners and how to pile up some big profits quickly, with a simple robust system.

Step 1 – Getting a Robust Forex Trading System

The first think you need to do is construct a simple trading system and it only needs to be a few indicators, combined with support and resistance.

Simple systems work best. There more robust than complicated ones and have fewer elements to break in the brutal, hard world, of real trading.

Start with a breakout system. This is buying new market highs – it’s a fact that most major forex moves start from new market highs NOT market lows.

A breakout should be past at least 2 x tests of resistance and the more the better and wider they are apart the better too.

Most traders hate breakout trading that’s why its so effective – they want to wait for the pullback – but they wait in vain as the price accelerates away and their not in.

Step 2 – Confirming the Trade

Once you have a breakout you need to confirm that price velocity and momentum is going to carry prices forward and here you need to learn about leading momentum indicators.

We have covered these fully in our other articles and they will help you put the odds on your side.

Step 3 – Money Management

With breakout trading money management is simple – your stop goes just below the breakout point and as the trend unfolds you need to lock in profit but be careful!

Most traders make the mistake of locking in profit to quickly and your forex trading strategy must give the market room to breathe. Don’t aim for perfection or trying to second guess the market; act on the reality of price change and trail your stop way behind normal market volatility.

You must learn to do the above and be disciplined or you will never make any real money.

Putting it all Together

The above sounds simple and it is. In fact, anyone can learn to trade forex the hard part is applying your method with discipline. You need to take losses and calculated profits when your charts tell you and ride the trends with discipline.

The method above works and will continue to work as it’s based on sound logic and your challenge to acquire the discipline to apply it to make big forex profits.