2Bull Forex Blog

The really big profits come from catching and holding the big long term currency trends which can last for weeks, months or years and this article is all about turning these trends into triple digit profits…

If you look at any forex chart, you will see long term trends and here is a simple forex trading strategy for turning them into profits.

Learn How to Use Breakouts

The first point is most new trends and continuations, start from new market highs.

If you want to make money then you need to buy breakouts.

Most traders make the mistake of waiting for prices to pullback to get in at a better “price” but the move doesn’t in most instances it continues, so you must learn to buy breakouts - if you want to get on the side of the big trends.

Valid Breakouts

Not all breakouts have the same odds of success and you need to be selective in your choice to catch the best ones.

Generally, a breakout is valid if the breakout point, has been tested several times
(the more times the better) and if this has occurred in different time frames which are spaced wide apart, that adds to the validity of the resistance.

You are generally looking levels the market participants consider important and when the level breaks look to go with the breakout. You don’t just buy though, you need to check momentum.

Confirmation

Momentum indicators are discussed in our other articles but they simply allow you to gauge the strength of momentum and if its rising then chances are the breakout is valid and will continue. You only need one or two to confirm and our favourites are the RSI and stochastic. There visual indicators and easy to learn and apply.

Applying the Stop

Applying the stop is easy it’s under the breakout as the previous resistance broken will now act as support.

The Key to Making Triple Digit Gains!

Is how you trail your stop remember if you have had a valid breakout chances are it will last a long time weeks or months and you need to stay in the trend. Most traders get so excited when they have a profit; they want to lock it in and protect it and move their stop up to quickly. They then get knocked out of the trade by random volatility, get a marginal profit next, then they see the trend sail on over the horizon, piling up thousands of dollars in profit and their not in!

Keep your stop back and trail it slowly.

You need to give the market room to breathe and accept drawdown in the short term and keep your eyes on the bigger long term prize, when you bank.

A good way to do this is by using key moving averages.

Generally dips to the 20 day are areas you can load up more trades in the direction of the trend and the 40 day MA, is a good area to have your stop in line with nearby trend line support as its outside of random volatility and will keep you in the trend.

Sure you give a bit back at the end but if you got 50% of every major trend you would be very rich.

A Simple, Time Efficient Way to make Triple Digit Profits

The above is a simple way to make money from long term trends and I know traders who make 100% annual gains doing the above. Another advantage of this type of trading is it takes less than 30 minutes a day. You also don’t have to worry about watching prices all the time and you don’t have to trade often.

Long term trend following can be very profitable if you follow the above tips and there easy to do.

There are lot of forex robots for sale but most will soon wipe your equity out but there is a tiny minority Forex Robots - A Checklist to Follow to Find the Small Minority That Win which win and we will look at a checklist you should follow, to find them and get the right one for you…

Here is your checklist for finding the best forex robots.

1. Get a Real Track Record

Most of the forex trading systems online fail on this basic point - they don’t have one! All they have is back tested simulations on data and of course we can all make money doing this. You will normally see the words “simulated”, “hypothetical” and in “hindsight”. Lets be clear you are buying a trading system on the basis that it will make you money and if has never been traded why would you trust it?

If you pass by the simulated systems you already have got rid of 90% +. When looking for a real time track record two or three years is the minimum period you should consider remember, anyone can fluke a few weeks or a month and this time period means nothing.

2. Risk Tolerance

You will normally find that a system will lose for weeks on end, that’s just the way forex trading is so make sure you prepared for this and look at the biggest loss and time to recovery - i.e. if you joined the system on the worst possible day.

3. You Need to Know The Logic

Never by a system which doesn’t have the logic disclosed. Ideally, it should tell you the exact rules and parameters used and the logic behind them. This will give you the confidence to keep executing the trading system through periods of losses until you hit a home run.

You need to maintain discipline of execution and make sure the trades are placed exactly as the system dictates. If you can’t do this with confidence and discipline you don’t have a system.

4. Curve Fitting

The reason most simulated trading systems fail is because they are curve fitted. This means the rules are bent to fit the data. As no two pieces of data ever come around in the same price sequence again the system collapses in real time trading. Even proven systems get curve fitted. The system makes money, so the vendor offers new improved rules but don’t fall for this, use the original ones, curve fitting sees systems fail.

5. Best Time Periods

The idea of an automated trading system is to save time and you should really use a swing trading or long term trend following system - never a day trading system. Day trading is based on logic that doesn’t work and anyway, you will never find a real track record so steer clear.

Follow the above 5 points and you will find the best forex robots and then you can choose one that fits your risk criteria. Forex robots do work but don’t forget they will lose for long periods to so you must have the confidence and the discipline to take these loses, until profits come.

There are some good automated forex trading systems and the above information will help you to find one which will lead you to currency trading success.

There are lots of forex trading systems online and all promise to make you a lot of money, some can but most don’t. This article is all about finding the best currency trading system for you…

Lets look at the points to consider in no particular order of importance, they ALL are!

1. Mechanical or Human Input

Some traders like a completely automated forex trading system, others like to have some manual input on the trading signals - the one you choose will simply depend on your trading personality.

2. Do You like Action or - are You More Patient?

If you are a patient trader, then a long term forex trading system will suit you. If you like short term trading, then you will be more attracted to swing trading - again this is simply personal preference.

3. Is the Track Record Realistic?

The first question you need to ask yourself is the track record real?

By this we mean has it been traded. 99% of forex trading systems we see on the net have not and simply make the track record up in hindsight and use this warning:

“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”.

The system may work - but most simulations fail and really you best off with a real time track record.

4. Can You Stand the Peak to Valley Drawdown?

A track record can make profits but it will have drawdown so assume that you join on the worst possible day and check the worst drawdown.

Can you stand it in terms of size and time to recovery?

Always assume your worst drawdown is ahead of you.

5. Do You Have Confidence in the Logic?

You will never have the discipline to apply any currency trading system unless you understand and have confidence in the logic. Keep in mind, any forex trading system has loses, so you need the discipline to ride them out.

Make sure you take the time to learn the logic and have confidence in it, as without the discipline to follow your trading system - you don’t have one!

The Myth and Reality

The above are basic questions you need to ask when considering buying any trading system.

There is a huge industry in forex robots and vendors promising you huge riches based upon a simulated track record but they normally always fail.

Be sensible and be realistic in terms of seeking out a trading system that’s right for you in terms of - your personality, your tolerance of risk, your objectives and your understanding.

Spending some time and keeping your feet on the ground, will enable you to find a forex trading system that’s just right for you and can lead you to currency trading success.

Forex price movement what makes the price a simple question? Yes but most traders get it wrong, they either think its supply and demand fundamentals or prices move to some higher god on charts - neither is true.

Prices move based upon the sentiment of the people trading - they all come together to make a price so the equation for price movement is:

Supply and demand Fundamentals + Investor Perception of them = Price

Lets look at why technical analysis and fundamental analysis have limitations and two great sentiment indicators you can use to add to help you judge sentiment and make bigger profits.

You can’t trade the fundamentals in isolation. Why?

Because all the facts are there for people to see - but we all draw different conclusions from what they mean colored by our emotions. You can’t trade them we all have the information now in a split second and it depends on sentiment toward them which way they go.

Charts don’t move to a scientific theory that many people believe.

You will find many chartists claim that because human nature is constant, there is a scientific formula for market movement - but that’s rubbish!

If there were, we would all know the price in advance and there would be no market!

Charts are useful however in showing sentiment as short time price spikes never last for long and prices always correct back to fair value, this is easy to see on a chart looking backwards - but how do you judge sentiment to back up what you see on a chart?

Answer:

Use sentiment indicators and here are 2 that if you use them, will help you spot market tops and bottoms and improve your market timing.

% Bullish

Been around for decades and is simply a poll but a very useful one.

If over 80% of people polled are bullish, sentiment is at a bullish extreme and a correction is likely and if the figure is below 20%, prices are at a bearish extreme and a rally is likely.

The above represents opinions not action and while it’s useful, it becomes even more useful when used with the Commitment of Traders Report issued by the CFTC which shows action in the market place and allows you to top the worlds best traders.

How would you like to see what some of the smartest traders are doing with a track record of warning of every major top and bottom? Well you can, with this report and it’s FREE.

While it is used in the futures market it’s a great indicator for FX trend changes.

There are 3 groups of investors that are logged.

Commercials - smart money they own the currency and are hedging and know the long term fundamentals.

Big Speculators - Mostly large funds

(The above two groups under law have to report there positions)

Small Speculators - Everyone else.

What you need to do is watch when the commercials are buying or selling heavily and the other two groups are going the opposite way.

The commercials are hedging so only move on big spikes against their position, there not leveraged and only move when price extremes occur.

If you see a big rally and the commercials are selling, while the other two groups are buying and they are at an extreme position against each other - a trend change is at hand.

You can then look for clues too enter on your charts and get confirmation there.

People move markets not by science - but by greed and fear learn to sell extreme greed and buy extreme fear and you can catch every major trend change.

The two services above help you gauge sentiment and allow you to get market timing on your forex charts.

Forex trading is a game of odds and having the sentiment behind the chart movements is a huge advantage in seeing forex price action as it is and where it may go next.

Bollinger bands for forex trading are a great tool. Why? Because they help you deal with a major problem all traders face - dealing with volatility. Knowing how to execute trading signals taking into account high and low volatility is the reason Bollinger Bands are such a great indicator for forex traders.

Introduction

John Bollinger developed the bands and they carry his name and are featured on all standard charting packages. They simply give an indication of volatility and standard deviation of price from the mean and there very easy to use.

What They Show You

They are defined as volatility bands which are shown either side of a simple moving average. You have a trading envelope - with a middle average price and 2 x bands (expanding or contracting all the time) either side that gives you a snapshot of the volatility present in the currency.

How to Use Bollinger Bands

In any market, the value of a currency traded tends to rise slowly over the longer term in line with a long term average.

Of course the price ebbs and flows in the short term, as traders drive prices to far up or down, when greed and fear are to the fore and prices become overbought or oversold.

These short term price spikes characterized by high volatility don’t last long and prices will normally return to the longer term moving average.

The standard deviation of the outer bands (how far they are from the average mean) shows how far prices have moved from the long term moving average or fair value.

Bollinger bands simply tell you how volatile the market is at a glance as you can see how far the outer bands are from the average.

There are various ways a forex trader can use Bollinger Bands.

1. Trading Greed and Fearкомпютри

When the bands are a long way from the mean average price you can use Bollinger bands to exit the market and lock in profits. In certain scenarios they can be used to enter contrary positions to the existing trend - either looking for a swing trade opportunity or new trend

2. Enter Trends in Motion

A strong trend when in motion will tend to have dips back to the mid band and these can be used to enter new positions in line with trend line support and resistance. Look how in any strongly trending currency the mid band provides a low risk buying opportunity.

3. As a Warning

When prices are trading in tight range and volatility is low you can be on the look out for a price breakout. In currencies low volatility tends to be followed by higher volatility and this can be a warning of a new trend.

Therefore a change from low to higher volatility, gives advance warning that this volatility will create a new trend.

Using Them Correctly

Bollinger bands should not be used on there own or to enter trading signals or for market timing - they are used to give you an idea of volatility and indicate value.

Bollinger bands work best when combined with good old fashioned trend lines, with momentum indicators used to confirm the trading signal.

If you want to win at forex trading and make consistent long term profits, you need to deal with volatility and Bollinger Bands can help you do just that by indicating overbought, oversold levels and areas of value.

Make Bollinger Bands an essential part of your forex education and learn how to use them correctly with momentum oscillators and trend lines and they can lead you to greater profits. Simply, a great tool all forex traders should have in their armory.