Forex Trading Tips - Top 3 Money Management Rules to Succeed in Forex Trading

Most of the people whom I have met are only interested in searching for a great forex trading system but neglected on the money management part. You could find yourself in dead end if there is a lack of discipline in following the money management rules even if you know how to trade forex successfully.

Money management is what full time and professional forex traders seen as one of the most important factor to succeed in forex trading. Below are the 3 proven techniques that forex trading experts ALWAYS practice:

1. Only Risk Maximum Of 5% of capital Per Trade

Capital Preservations are very important, it can determine whether you are able to survive in the long run in the forex market. The reason for risking only maximum of 5% is that you still have ample capital to trade even if you loose a few trades. I risk only 1% of my capital per trade.

Never put all the eggs in one basket. Although you might have forex trading signals which gives you good probability trades, but this #1 rule should form a general part of your trading system, so that you don’t risk too much on a trade.

2. Have a Healthy Risk to Reward Ratio

A lot of forex traders only care about making profits in the market. Some don’t mind making small profits although their risk for that particular trade is higher. This is a huge mistake. Never risk more than what you can potentially make. For example, you should have a reward of at least 60 pips when you risk 30 pips, this is a healthy risk to reward ratio of 1:2.

This rule ensures you to be profitable, winning more than you loose. So let’s say out of 5 trades, if you loose 3, which is total of 90 pips (30 pips lost per trade), you win the other 2 trades (60 pips per trade), you will still make 30 pips net(120 pips - 90 pips).

3. Do Not Open Multiple Positions Until First Trade Is In Profits

You may be confident that the first forex trade that you opened will be profitable, but do not open a second position until you see the profits from the first trade. This helps you to keep calm if the first position is in loss, and you don’t have another burden from the second trade.

Those above may seem simple but actually require much discipline in real fact. That is what makes the difference between professional traders and retail traders, you need the right forex education. But give yourself a chance by getting forex tips, tutorials and trading system from my FREE ebook, to learn how to trade forex successfully like the professionals.

Increase your Forex Pips When the Market is Down

The 14 week ATR (Average True Rate) for the Euro has hit an all time low in the last 21 years. This clearly indicates that the trading ranges between currencies especially Euro and USD have shrunk considerably and this does not augur well for the forex trading market at all. However, the investors should not lose heart as this current situation is just temporary and, I’m pretty sure that things will look up after some time. After all, this is just a part and parcel of online forex trading and the investors have to be a bit patient till the currency trading market sees through this period.

I’d like to advice the investors to be a bit more watchful and defensive in their approach this time around because of such low daily movements. However, they should remember that this volatility is somewhat cyclical and this could also go up in the near future. In the same breath, I would say that the possibility of a U-turn in the existing forex trading signal trend can not be ruled out either. In fact, if there were no movements in the FX trading market, then it would be quite difficult for the investors to make profits, right?

However, now the major question that could be playing in your mind is whether and for how long the weakness of the USD against the Euro will linger. The dollar once again has registered a record low and this has set off a lot of questions in the minds of the currency trading investors. This has largely been the reasons why the volatility has gone down drastically in the currency market this time around.

Though this quite sounds like blowing my own trumpet, I would say that the investors using my online forex trading broker system are in the safe zone even during this bleak phase. The forex trading system developed by me offers precise, clear and accurate forex day trading signals to the investors enabling them to make right moves. Let me tell you why it has been so successful in the currency trading market. My forex trading system has been developed after exhaustive technical research, rigorous testing and years of live trading for major currencies in the market. Many subscribers of my system were quite novice about forex trading when they started off trading, but most of them have already improved their forex pips ever since they began using my system. But, I would rather you visit my site (www.forex618.net) and hear from some of my satisfied clients before taking my words for granted. Remember - they say seeing is believing!



By: JamesdeWet

Malaysia's Current Economic Situation, Central Bank Rates

Malaysia March CPI hit a 13-month high of 2.8% y/y as compared to a 2.7% rise in February, and slightly lower than the median f/c of 3.0%. S/adj, the CPI for March was unchanged from Feb. The increase in March prices was mainly due to steeper prices of food and nonalcoholic drinks, which rose 4.9% y/y, for alcoholic beverages and tobacco prices rose 9.0% y/y.

Housing, water, electricity and fuels, which is the second-largest component in the CPI, rose a modest 1.3% y/y. Malaysian inflation has crept up since late last year but remains among the lowest in South East Asia, thanks largely to price controls on essential goods such as flour and cooking oil. Core inflation also looks reasonably stable on the month, at just over 2% thus allowing the central bank to leave rates unchanged at 3.5% next week.

Railways will create a subsidiary to manage terminal and warehouse complex

Board of JSC RZD on Aug. 27 approved a draft concept for reforming the directorates to manage terminal and warehouse complex (TSC) of railways - subsidiaries of the company. Reforming the TSC control is carried out in the strategy of building a corporate holding Railways and corresponds to the program of structural reform of the railways of Russia in terms of allocation of potentially competitive activities. The Board considered two options for separating the TSC: the form of the Directorate for Management of the TSC - the branch of JSC RZD, and in the form of a subsidiary company based on the 17 directorates in the management terminal andwarehouse complex (DTSK). Comprehensive analysis of variants showed the expediency of separating the TSC in a single economic unit of business by removing DTSK from the railroads - the branches of JSC RZD, says the official statement of the company.

Posted on Friday, August 28, 2009 12:09 at http://cbed-stmbtelkom.com

Current Situations In The Forex Market

The fizz has gone out of forex land over the past month. Currencies have traded a range, reflecting the overall view on either an appetite for, or an aversion to, risk. One thing’s for sure, this phoney war won’t last.

What’s going on in the currency markets? For the first time in ages I’m struggling to find an angle. I’d find it easier writing a piece on True Statements By Gordon Brown or The Cultural Importance Of Eurovision.

Frankly, it’s not happening down Forex Street. You want a view on the Dollar? OK, are equities going up or down? The Yen? Same answer. The Euro and Sterling? OK, there’s a bigger ‘catastrophe element to the UK, but if risk appetite is back on the menu you’d be brave betting against those two.

The same goes for the Canadian and Aussie Dollars, whose fates are tied to the illusion of recovery and rising commodity prices.

But the currency markets don’t rest for long so it’s well worth having a poke around to see if there are any clues in the charts.

What’s The Dollar Been Up To?

Let’s start by checking out the Dollar trade-weighted index:

Last month the index looked to be breaking free of its recent downtrend. Technically it happened, but the party never really fired up and we settled for a month of mediocrity. Now, if I’m really looking for clues, there’s a trace of blue below the uptrend line, suggesting a further fall in the greenback is on the cards.

Does Heat Affect The Dollar?

The seasonal chart, supplied by seasonal-charts.com shows a tendency for the Dollar to fall in July and then recover in August before selling off during the autumn.

This chart shows the EURUSD price (taking the DM as a proxy before the Euro was born), but the pattern is the same for the GBPUSD rate and is supported by the Dollar TWI, which shows a seasonal weakness in July.

GBPUSD
Yes, I’ve flip-flopped from being bullish to bearish and back again on this one, but I’ve not been alone. Check out the chart of indecision over the past month. If I was feeling charitable I’d credit it with a generous 600-pip trading range, but it hasn’t always been that straightforward.

To be fair, trading this pair has kept my kids in cider and salmon fillets for the month so I can’t complain too much. But I felt more at home trading May’s more obvious trend than the random movements of the past few weeks.

There’re a few bullish signs at the moment. For starters, there was a decisive bounce off the twin support of the 50-day MAV and the trendline dating back to April. Yesterday’s move broke and closed above the flattish 21-day MAV and the RSI is a healthy 55. Often a break and close through the 21-day MAV leads to an extended move to the Bollinger band, which would suggest another attempt at $1.66.

Also, note how the Bollinger bands have tightened recently. It’s not magic, it’s just reflecting the reduced volatility, but tight bands are followed by a widening as the price breaks out. If I had to put money on a move (and I often do) I’d back a move higher. However, the massive caveat is ‘depending on the stockmarkets’.

EURUSD
It’s not surprising that this chart has many similarities to the GBPUSD chart. The price was well supported by the 50-day MAV/ trendline combo and recent interest has taken the RSI up to 55. Yesterday’s trade saw the price ‘gap’above the 21-day MAV and shake hands with the upper Bollinger band.

The Bollingers demonstrate a similar trait, tightening over the past month with a breakout favouring the upside. First though, the price has to deal with a downtrend line, which is pretty much where it ran out of steam last night. After that there’s a sticky patch around $1.4180 and then a retest of June’s high at $1.4330.

GBPJPY
Here’s another chart I’m watching. Once again it incorporates a view on the stockmarkets. In his Balls Of Steel blog yesterday Flash said that he was running long of the carry trades (he’s bullish on risk appetite so has been selling the Yen to buy an assortment of Sterling, Euro and Aussie).

Given my more bearish tendencies I ought to be looking to sell GBPJPY, and I must say that I’m looking for clues to put the trade on. However, I trade equities and forex differently (the forex is more successful!).

For starters I rarely take a fundamental view on currencies; I rely far more on the technical signs. Furthermore, whilst I’m (reasonably) relaxed with running a losing position in equities, I’m far tighter on my forex risk. I’ve seen the speed and scale of the moves and don’t fancy being on the wrong side of them too often. So I’m not going to jump the gun on this trade; I’ll watch the chart for clues.

And at the moment the chart’s throwing up some interesting points. The trend support line is now acting as resistance. The price broke through the 50-day MAV barrier, but couldn’t take out the downward-sloping 21-day MAV. Yesterday’s bullish candle is reversing this morning, falling back below the 50-day MAV.

How Am I Trading It?
I’m trading very cautiously at the moment; I’m not trading the forex markets much, and when I am I’m using smaller bets and tighter stops until I can recognise a stronger trend.

This morning saw a retracement in GBPUSD back below $1.64, and an early test of the 21-day MAV. This held firm and now, following JP Morgan’s results, the price is pushing on $1.6450. This shows why it’s so tough to take an independent view just at the moment.

The GBPJPY pair is often a big win/ big lose trade so I’m not going to pre-empt the next move. A close below Y153.11 will engulf yesterday’s green candle giving a bearish sign; a close above the 21-day MAV at Y155.30 will get me looking at a buy trade.

By FT on July 16, 2009 in www.dailymarkets.com

Forex Investors and Current Market Psychology

Forex investors are some of the more daring investors in the current slew of investment platforms all over the world, and this is because they are dealing with some of the most volatile and dynamic markets in the world. They have to deal with a market that can change in a flip of a coin, and to look at the kind of factors that can affect the market, we can look at the global situation. For one thing, looking at the political situation, you need to understand that when governments are removed or they come into power, the shake the pillars of confidence or they can strengthen it. Such incidents can have a major impact on the values of the different currencies involved.

Political coups and situations of unrest also can be a factor when it comes to looking at these policies. Then you might want to look at emerging government policies, new power relations between the markets and politics and how governments are using their resources. War is also a problem because they involve countries and governments as well. Moving on to the economic situations that can affect this as well, you might need to look at the overall economic situation of the world.

You might want to look at the behaviour and the policies of the market makers, which are those who have access to large amounts of currencies. These would include financial coalitions, hedge banks and governments. They are the market makers in the sense that they have the power to turn the tide of the market whenever they feel that a certain currency or economic situation might be at danger.

You also might want to look at the situation of world trade, the growing prices of commodities attached to the countries, the behaviour of hedge and investment funds, the level of inflation and so many more. The scary thing about this is that this I only the tip of the iceberg, because while fundamental analysis has barely been covered here, we have not touched on how important technical analysis is as well.

The other thing that you need to know I that within the Forex market, there is this line called ‘sell the sizzle, not the steak.’ This means that within the context of the Forex market, market psychology can be affected by the potential of events happening, usually driven by the inert hype of the media, and this can go as far as moving a market towards a particular direction before anything even happens.

As you can see, the breed of Forex investors is one that has to be in the knowledge and facts of market possibilities at all times, and this is something that can be hard to maintain. Looking at the current market psychology, things are only set to get much more complicated in the sense that the market has become much more flighty than it has ever been in the past ten years. When thinking about joining the Forex investor collective, you need to understand how complex and dynamic the market can be.

Stabilize Your Current Situation Before You Invest

Before you consider investing in any type of market, you should really take a long hard look at your current situation. Investing in the future is a good thing, but clearing up bad – or potentially bad – situations in the present is more important.

Pull ur credit report You should do this once each year. It is important to know what is on your report, and to clear up any negative items on your credit report as soon as possible. If you’ve set aside $25,000 to invest, but you have $25,000 worth of bad credit, you are better off cleaning up the credit first!

Next, look at what you are paying out each month, and get rid of expenses that are not necessary. For instance, high interest credit cards are not necessary. Pay them off and get rid of them. If you have high interest outstanding loans, pay them off as well.

If nothing else, exchange the high interest credit card for one with lower interest and refinance high interest loans with loans that are lower interest. You may have to use some of your investment funds to take care of these matters, but in the long run, you will see that this is the wisest course of action.

Get yourself into good financial shape – and then enhance your financial situation with sound investments.

It doesn’t make sense to start investing funds if your bank balance is always running low or if you are struggling to pay your monthly bills. Your investment dollars will be better spent to rectify adverse financial issues that affect you each day.

While you are in the process of clearing up your present financial situation, make it a point to educate yourself about the various types of investments.

This way, when you are in a financially sound situation, you will be armed with the knowledge that you need to make equally sound investments in your future.

Foreign Exchange Markets

The forex market is a non-stop cash market where currencies of nations are traded, typically via brokers. Foreign currencies are constantly and simultaneously bought and sold across local and global markets, hence investments appreciate or depreciate in value based upon currency movements. Foreign exchange market conditions can change at any time in response to real-time events.

The main enticements of currency dealing to private investors and attractions for short-term forex trading are:

• 24-hour trading, 5 days a week with access to global forex dealers
• An enormous liquid market making it easy to trade most currencies
• Volatile markets offering profit opportunities
• Standard instruments for controlling risk exposure
• The ability to profit in rising or falling markets
• Leveraged trading with low margin requirements
• Many options for zero commission trading

Forex trading
The investor's goal in forex trading is to profit from foreign currency movements. Forex trading is always done in currency pairs. When trading currencies, trade only when you expect the currency you are buying to increase in value relative to the currency you are selling. If the currency you are buying does increase in value, you must sell back the other currency in order to lock in a profit. An open trade (also called an open position) is a trade in which a trader has bought or sold a particular currency pair and has not yet sold or bought back the equivalent amount to close the position.

Private investors can trade in forex directly or indirectly through:

• The spot market
• Forwards and futures
• Options
• Contracts for difference
• Spread betting

It is estimated that anywhere from 70% to 90% of the forex market is speculative. In other words, the person or institution that bought or sold the currency has no plan to actually take delivery of the currency in the end; rather, they were solely speculating on the movement of that particular currency.

Exchange rate
Currencies are traded in pairs and exchanged one against the other when traded, so the rate at which they are exchanged is called the exchange rate. The majority of the currencies are traded against the US dollar (USD). The four next-most traded currencies are the euro (EUR), the Japanese yen (JPY), the British pound sterling (GBP) and the Swiss franc (CHF). These five currencies make up the majority of the market and are called the major currencies or "the majors". Some sources also include the Australian dollar (AUD) within the group of major currencies.

Margin
Banks and/or online trading providers need collateral to ensure that the investor can pay in case of a loss. The collateral is called the margin and is also known as minimum security in forex markets. In practice, it is a deposit to the trader's account that is intended to cover any currency trading losses in the future. Margin enables private investors to trade in markets that have high minimum units of trading by allowing traders to hold a much larger position than their account value.

Leveraged financing
Leveraged financing is the use of credit, such as a trade purchased on a margin. It is very common in forex trading, and results in being able to control $100,000 for as little as $1,000.

Risks
Although Forex trading can lead to very profitable results, there are risks involved: exchange rate risks, interest rate risks, credit risks, and country risks. Approximately 80% of all currency transactions last a period of seven days or less, while more than 40% last fewer than two days. Given the extremely short lifespan of the typical trade, technical indicators heavily influence entry, exit and order placement decisions.

Forex Market Activity Schedules

10 Tips for Online Forex Traders

Without a doubt, trading is more than a few quick tips for success. You need experience, fortitude, capital and, above all, a solid trading system. However, for beginners and those who are perhaps losing their focus amid significant drawdowns, keeping things simple can introduce much-needed focus into your trading.

To that end, here are 10 tips for trading e-forex that can help you get a handle on these exciting markets.

1. For small accounts especially ($25,000 and under), trade with the trend. Many beginners look for trades in any direction. While forex trading easily permits bi-directional trading, trading in the direction of the trend improves your odds over the long run.
   
   
2. Have two accounts. One real account and the other a demo account. Learning doesn't stop when trading real dollars begins. Keep the demo account and use it to test alternative trades, alternative stops, etc. For example, you can shadow your real trades with identical ones in your demo account, but widen your stops in the demo in an effort to see if you're being too conservative.
   
   
3. Stop looking for leading indicators. There aren't any. While some firms make a lot of money selling software that predicts the future, the reality is that if those products really worked, they wouldn't be giving the secret away.
   
   
4. Examine daily charts, four-hour charts and one-hour charts to time your trades. While trading at 30- and 15-minute time increments is doable, it takes a great deal of dexterity.
   
   
5. Don't trade the time frame. Trade the pattern. Reversal patterns, hesitation patterns and breakout patterns appear often. Learn to look for the pattern in any time frame.
   
   
6. If you're properly funded, trading two lots is safer than trading one. Trading three lots is safer than two. Trading is a synthesis of emotions, technical analysis and money management. One lot makes it difficult to weigh these elements in deciding to enter or exit. Two lots is easier and, providing you have the capital, three lots is optimal.
   
   
7. Extreme trading can be the most conservative trading. Trading at the extremes when prices touch or break or bounce off trend, support or resistance lines increases the odds that you have chosen the correct direction.
   
   
8. Scan the Big Five - the dollar/yen, euro/dollar, Swiss franc/dollar, euro/yen and pound/dollar before you decide to take a position in any one of them. There might be something obvious you're missing.
   
   
9. Follow the Upside Down Rule. If you can turn a chart upside down and it looks the same, stay away.
   
   
10. Don't count profits in your first 20 trades. Keep track of the percentage of wins. Once you know you can pick direction, profits can be increased with multi-plot trading and variations in using your stops. In other words, now is the time to get serious about money management.
    

Forex vs Stocks

Investment in various stock exchanges and the forex market has seen a dramatic increase in recent years. Let us look at some of the advantages of trading in forex instead of the the stock market.

A forex trader can make a profit whether the market is bearish or bullish, unlike the capital market. Forex has no strict regulation in speculation, so a profit can be made through a long-term or short-term transaction. Because the forex market is a double-transaction market, forex traders can make profit in both upward and downward trends.

Forex traders can obtain a much larger transaction compared to the stock market, sometimes more than 100 times larger. According to the present US situation, a $1,000 investment in the stock market allows the investor to obtain $2,000 of stock domination property (a proportion of 2:1). It is not unusual for forex traders to execute transactions with a proportion of 100:1.

Forex traders can profit from the ordinary news, such as changes in interest rates. The forex market is highly-sensitive to the political, financial and cultural developments of various countries, and this volatility creates numerous opportunities for investors.

The stock market can only be traded on during daytime at a specific time, generally from 9:30am to 4:00pm. With a full-time job, it becomes difficult to take advantage of numerous trading opportunities. The forex market can be traded on 24 hours a day for 5 days of the week, so forex traders are free to trade during their free time after working hours.

Technical analysis plays a very important role in the forex market, due to the enormous daily trading volume (in excess of US$ 190 billion) - such a large market easily digests any forex trader's transaction cash. Under this situation, the accuracy of technical analysis is better than in any other financial market, and the chances of using technical analysis to make profit is also much higher.

In the stock market, there are hundreds of different kinds of stocks, which makes choosing a stock itself a very difficult decision. The forex market has a limited number of currency combinations; this enables forex traders to better concentrate on their investment, and calculate the return on alternate invesments (other currency combinations).

Day Trading, Forex Or Currencies Back Testing — A Way To Improve Your Trading Score

You can draw some useful parallels between running a business and Day Trading, Forex or Currencies trading. For instance, most successful businesses keep statistics on everything from their conversion rate, to their average dollar sale, to the number of people that come in the door. Businesses do this to keep on top of how they are doing on a day to day basis and businesses must first take score before begining to improve on that score. Using a Day Trading, Forex or Currencies back testing plan in your trading works exactly the same way.

Now that you`re looking at Day Trading, Forex or Currencies trading as a business, you need to learn some valuable statistics about your system so you can improve it`s performance. You would use a Day Trading, Forex or Currencies back testing method. You can`t improve your system unless you have something to measure it against. How could you expect to improve your trading unless you knew what it was you were looking to improve? You can discover these measurements and other valuable information about your trading system, by using a Day Trading, Forex or Currencies back testing plan.

There are two ways that you can use a Day Trading, Forex or Currencies back testing plan to back test a system. You can do it manually, which can be a drawn out and labour intensive process, or you can do it with the aid of some software packages. Unfortunately, I recommend you do it by hand when you first start out. You`ll get a much better feel for your system, and you`ll understand exactly how using a Day Trading, Forex or Currencies back testing plan works in all its intricacies. Once you have the Day Trading, Forex or Currencies back testing plan and the in depth knowledge, you could look at finding a software package that does it for you.

There are a few major statistics on your Day Trading, Forex or Currencies back testing plan that you need that you will uncover through back testing. The first statistic you need to become familiar with is the R multiple principal. R stands for risk, the risk you take on any trade when you enter the market. The R multiple of a trade is the ratio of the profit or loss compared to the amount of money risked to make the profit or loss.

Therefore, if you risk $200 dollars in your initial purchase, and you make a profit of $1,000, you have made five times the amount you risked in the trade. You have an R multiple of five. This statistic gives you a good idea of the relative size of your profits to your losses. You can compare the average size of your winning trades with the average size of your losing trades.

The next statistic you`ll find useful is your win to loss ratio. This is how many times you get a winning trade in proportion to how many times you get a losing trade. For example, if you had ten trades, four of those trades were winners, and six were losers, your win to loss ratio is simply four to six. This is your hit rate; you`ll get 40% of your trades correct.

With these two simple statistics, you can calculate the average size of your profits and of your losses, multiply these figures with your win to loss ratio, and calculate on average how much money you make with every dollar you risk.
Using a Day Trading, Forex or Currencies back testing plan, will help you to understand what works and what doesn`t. It will give you the statistics to gauge the effectiveness of your trades. It fills in your scorecard, and allows you to make improvements. But, you shouldn`t simply believe everything I`ve told you. Instead, you need to prove it to yourself by using some Day Trading, Forex or Currencies back testing plans and back test your system.