When To Cut Your Future Trade Losses Short

These Simple Rules Can Make A Huge Difference To Your Next Future Trade

This is actually the sister rule to the one mentioned above, and is usually just as difficult to do (even if it is very easy to define). In the same way that profitability comes from a few large winning future trades, capital preservation so comes from avoiding the few large losers that the market will see fit to send you each year.

Setting a maximum loss point before you enter the future trade so you know ahead of time approximately how much you are risking on this position is pretty straight up.

You just have to have an exit price that tells you that your future trade is a losing one you should exit before it gets any bigger. Because of gaps at the open, or limit moves in futures we can never be 100% sure that we can get out with our maximum loss, but simply having the rules, and always sticking to them will save us from the nasty future trades that just keep on going against our position until we have lost more than many winning future trades can make back.

If you have a losing position that is at your maximum loss point, you should just get out of the future trade right away. You can’t hope that it will turn around for, as it isn’t common sense.

Being that future trades are either winners or losers, and this one is shouting ‘Loser’ at you, the chances that it will turn around and become a large winner is decidedly small.

Why would you want to risk any more money on a future trade that has already shown itself to be a loser when you could simply close it out (accept the loss) and move on. This will leave you in a much better place financially and mentally, than holding on to your future trade and hoping it will go back your way.

Even if it did do this, the mental energy and negative feelings from holding the losing future trade are just not worth it. This is why you should always stick to your rules and exit a future trade if it hits your stop point.

Never Add To A Losing Future Trade
One of the few future trade management rules that you should never break is ‘Never add to a losing future trade’. Trades are split into winners and losers, and if a future trade is a loser, the chances of it turning right around and becoming a winner are too small for you to want to risk more money on. If it actually is a winner disguised as a loser, why not wait until it shows it is a winner before you add to it.

If you do this you will notice that nearly every time the future trade ends up hitting your stop loss and does not change direction. Sometimes the future trade turns around before it hits your stop and becomes a winner and you can count yourself very lucky if it does.

Sometimes the future trade hits your stop loss and then turns around and becomes a winner and you can count yourself unlucky. Whatever happens, it is never worth adding to a loser, hoping that it will eventually be a winner. The odds of success are just too low to risk more capital in addition to the initial risk.

How To be successful

The Right Moves To Ensure You Succeed In Forex Trading

FX trading is always priced in pairs between two different types of currencies. When you make a trade, you have to buy one forex and sell another at the same time. If you want to exit the trade, you must buy/sell the opposite position. For example, when you think the price of the Euro is going to rise against the US Dollar. In order for you to enter FX trading, you will have to buy Euros and sell US Dollars.

If you want to leave FX trading, you will have to sell Euros and buy back US Dollars. You will be hoping that you were right in your guess and that the exchange rate for EU/USD has actually risen, which means that you will get more Euros back than when you bought them, which is how you will make a profit from FX trading.

These days just about every FX trading broker is claiming to have the tightest spreads in the industry. But marketing does have the ability to be deceiving. The topic of spreads in the FX trading spot market is very complicated and often not easy to understand. However, nothing affects your FX trading profitability more.

First of all in order to understand the FX trading spread, you need to know what it is. A spread is the difference between the ask price (the price you buy at) and the bid price (the price you sell at) that is quoted in the pips. If the quote between EUR/USD at a given moment is 1.2222/4, then the spread equals 2 pips. If the quote is 1.22225/40, then the FX trading spread is going to equal 1.5 pips.

The FX trading spread is how brokers make their money. Wider FX trading spreads will result in a higher asking price and a lower bid price. The consequence to this is that you have to pay more when you buy and get less when you sell, which makes it more difficult to realize a profit.

FX trading Brokers generally don’t earn the full spread, especially when they hedge client positions. The FX trading spread helps to compensate for the market maker for taking on risk from the time it starts a client trade to when the broker's net exposure is hedged (which could possibly be at a different price).

FX trading Spreads are important because they affect the return on your FX trading strategy in a big way. As a trader, your sole interest is buying low and selling high (like futures and commodities trading). Wider spreads means buying higher and having to sell lower. A half-pip lower spread doesn't necessarily sound like much, but it can easily mean the difference between a profitable FX trading strategy and one that isn’t profitable.

Forex Tricks

Victoria secret is a trick to make profit from bullish market which is nearly close to top levels (saturated levels) in Eur/Usd and Gbp/Usd pairs. I developed the trick at 2005. Some were fails, but most of them are ended with great profit.

I booked profit of 200 pips in Eur/Usd at the last week of January 2006 with using only 1 order and 1 overnight. But unfortunately, I was loss for -35 pips at the first week of January 2006 in Eur/Usd. And I was succeed to take profit of 300 pips in Gbp/Usd in December 2005. Therefore, I strongly recommend you to use stop loss in implementing this trick. I use 35 pips gap from open position for Eur/Usd and 50 pips gap from open position for Gbp/Usd.

When the Dollar is weakening against the Euro and Pounds and enters its saturated levels, then it’s time for us to wait for its correction. Will correction occur (due to economic data impacts or just for technical rebound), usually it will make significant movement. And this is a good opportunity to enter market.

The easiest way to predict saturated levels and find Victoria Secret opportunity is by looking at RSI (14) indicator at time frame of 1D. When bullish market is reaching 65 level (crossing above 65), then it’s time for us to look forward to waiting for Victoria Secret opportunity.

Use candlestick mode on your chart. When RSI (14) at time frame of 1D crosses above 65, take a good look at market price. If market price forms ‘empty candlestick’ (closing price above opening price), then we’ll wait for ‘shaded candlestick’ (closing price below opening price) on the next days.

When you got the ‘shaded candlestick’, then the day after that would be our Victoria Secret day.

So the pattern would be: Empty candlestick-shaded candlestick-victoria secret candlestick

Yup, I know… you might need to be patience to make profit from this trick. But considering its reward, it is worth to wait for the opportunity.

When market price at Victoria Secret candlestick is equal to high level at shaded candlestick, then it’s time to sell. And do not forget to use stop loss.

When market price moves nearly our stop loss, then we’re not going to do anything. If our stop loss is hit, then let it go. It means that this is not our lucky day. But if market price moves downward then we’re so close to big victory.

Its main purpose is to earn big victory and usually the opportunity occurs in low volatile market. Therefore, I named it Victoria Secret trick.

One trick that will make you feels comfortable with your profit and makes you please to ‘see’ it. Just like ‘the other’ Victoria Secret. You know what I mean.

Figures that move Forex

Interest rate
Traditionally, if a country raises its interest rates, its currency will strengthen because investors will shift their assets to that country to gain higher returns.

Employment situation
Decreases in the payroll employment are considered as signs of a weak economic activity that could eventually lead to lower interest rates, which has negative impact on the currency.

Trade balance, budget and treasury budget
A country that has a significant Trade Balance deficit will generally have a weak currency as there will be continuous commercial sellings of its currency.

Gross Domestic Product (GDP)
GDP is reported quarterly and is followed very closely as it is a primary indicator of the strength of economic activity.
A high GDP figure is usually followed by expectations of higher interest rates, which is mostly positive for the currency.

How do traders use all this?

There are few useful tips that can be followed:

1. Keep an economic calendar on hand. Watch for the events when data are due to be released.

2. Know what indicator is gaining the most of attention at any given time as it becomes a catalyst for future price moves. For example, when the U.S. dollar is weak traders will watch closely the inflation indicator.

3. When the difference between the expectations and real results occur, watch for corrections in the market price moves.

4. Pay attention to news revisions if any, the situation on the market can change quickly.

forex trading tips III

Tip 1. Gamblers go to casino. All unproved, spontaneous actions in Forex trading — are a part of pure gambling.
Any attempt to trade without analysis and studying the market is equal to a game. Game is fun except when you are losing real money...

Tip 2. Never invest money into a real Forex account until you practice on a Forex Demo account!
Allow at least 2 month for demo trading. Consider this: 90% of beginners fail to succeed in the real money market only because of lack of knowledge, practice and discipline. Those remaining 10% of successful traders had been sharpening and shaping their skills on demo accounts for years before entering the real market.
A good demo account to start practicing with could be, for example, FXGame from Oanda.

Tip 3. Go with the trend!
Trend is your friend. Trade with the trend to maximize your chances to succeed. Trading against the trend won't "kill" a trader, but will definitely require more attention, nerves and sharp skills to rich trading goals.

Tip 4. Always take a look at the time frame bigger than the one you've chosen to trade in.
It gives the bigger picture of market price movements and so helps to clearly define the trend. For example, when trading in 15 minute time frame, take a look at 1 hour chart; trading hourly would require obtaining a picture of daily, weekly price movements.

If a trend is hard to spot — choose a bigger time frame. Up and down market patterns are always present. Always make sure you know the dominant trend, unless you are a scalper. Scalpers have no need to spend their time studying big trends, what's happening in the market here and now (during 5-10 minute time frame) should be of only importance to a Forex scalper.

Tip 5. Never risk more than 2-3% of the total trading account.
One important difference between a successful and an unsuccessful trader is that the first is able to survive under unfavorable conditions on the market, while an unsuccessful trader will blow up his account after 5-10 unprofitable trades in the row.

Even with the same trading system 2 traders can get opposite results in the long run. The difference will be again in money management approach. To introduce you to money management, let's get one fact: losing 50% of total account requires making 100% return from the rest of money just to restore the original balance.

Tip 6. Put emotions down. Trade calm.
Don't try to revenge after losing the trade. Don't be greedy by adding lots of positions when winning.
Overreaction blocks clear thinking and as a result will cost you money. Overtrading can shake your money management and dramatically increase trading risks.

Tip 7. Choose the time frame that is right for you.
Choosing wise means that you are comfortable and have time enough to analyze the market, place and close orders etc. Some people can't wait for hours for the price to make a move, they like action and therefore prefer smaller time frames. On the contrary, for others 10-15 minutes is a hustle to be able to make the right decision.

forex trading tips II

TIP 1 Read both the books by Mark Douglas which cover trading psychology BEFORE you read or do anything else. If you don’t, I’ll say I told you so when you hit a failure barrier and don’t know why.

TIP 2 Stop loss policy - you MUST have one and practice, more practice and even more practice at sticking to it. It will not be easy but it is an essential discipline to profitable trading.

TIP 3 Trading plan / system. Again, you MUST have one! Then you must practice sticking to it. Do not try and second guess or trade against your indicators - wait until they give you a concise signal before acting on it.

TIP 4 TRADE WITH THE TREND. DO NOT trade against the hourly trend of the market unless you are VERY certain the market has turned. Check this by watching a long term moving average (say 80 SMA on 15 minute chart)

TIP 5 Learn to sit on your hands and not trade! It’s better to wait for good quality trades than take a mediocre one and loose money. A day of no trades is better than a day with one loosing one. If you don’t like the market, just walk away. It will always be there later.

TIP 6 Don’t set yourself false targets and expectations. Trading is not an EXACT science and if you do you will only become frustrated by your failure to meet them. Take what the market gives and be satisfied. Greed will kill you as a trader, both mentally and monetarily.

TIP 7 The market is rarely your friend in a trade that goes against you. Cut your losses quickly and accept them as an inherent part of trading. You will not be able to trade without some loosing positions. Manage them well!

TIP 8 Try hard not to get out of profitable trades too early. Try operating a trailing stoploss of say 15 to 20 pips behind the trade (on 5 minute timeframe) and maximise your good trades by letting them run. Be patient!

TIP 9 Ensure you fully understand how to generate and use pivot points and camarilla points on your trading platform. These are crucial decision points for daily trading and you will struggle without them.

TIP 10 DO NOT overtrade your account. Read up on money management in trading to make sure you fully understand why this is important and develop a strategy which fits with your personal trading capital. NEVER risk wiping out your account because believe me, it can happen. I’ve done it twice myself!

TIP 11 Learn about FIBONACCI levels and how to apply them to your charts.

TIP 12 Keep your trading system simple. Do not have too much information on your trading screen. It is unnecessary and will only cause you to be confused and delay you making your trading decisions.

TIP 13 Always think in terms of probabilities. Trading is all about thinking in probabilities NOT certainties. You can make all the “right” decisions and the trade still goes against you. This does not make it a “wrong” trade, just one of the many trades you will take which, through probability, are on the “loosing” side of your trading plan. Don’t expect not to have negative trades - they are a necessary part of the plan and cannot be avoided.

TIP 14 Ensure that the candle is fully formed on the timeframe you are trading BEFORE you enter your trade. Trade what you see, not what you would like to see.

Tips For Forex Trading

1. Trade pairs, not currencies - Like any relationship, you have to know both sides. Success or failure in forex trading depends upon being right about both currencies and how they impact one another, not just one.
   
2. Knowledge is Power - When starting out trading forex online, it is essential that you understand the basics of this market if you want to make the most of your investments.
   

   The main forex influencer is global news and events. For example, say an ECB statement is released on European interest rates which typically will cause a flurry of activity. Most newcomers react violently to news like this and close their positions and subsequently miss out on some of the best trading opportunities by waiting until the market calms down. The potential in the forex market is in the volatility, not in its tranquility.
   

3. Unambitious trading - Many new traders will place very tight orders in order to take very small profits. This is not a sustainable approach because although you may be profitable in the short run (if you are lucky), you risk losing in the longer term as you have to recover the difference between the bid and the ask price before you can make any profit and this is much more difficult when you make small trades than when you make larger ones.
   
4. Over-cautious trading - Like the trader who tries to take small incremental profits all the time, the trader who places tight stop losses with a retail forex broker is doomed. As we stated above, you have to give your position a fair chance to demonstrate its ability to produce. If you don't place reasonable stop losses that allow your trade to do so, you will always end up undercutting yourself and losing a small piece of your deposit with every trade.
   
5. Independence - If you are new to forex, you will either decide to trade your own money or to have a broker trade it for you. So far, so good. But your risk of losing increases exponentially if you either of these two things:
   

   Interfere with what your broker is doing on your behalf (as his strategy might require a long gestation period);
   

   Seek advice from too many sources - multiple input will only result in multiple losses. Take a position, ride with it and then analyse the outcome - by yourself, for yourself.
   

6. Tiny margins - Margin trading is one of the biggest advantages in trading forex as it allows you to trade amounts far larger than the total of your deposits. However, it can also be dangerous to novice traders as it can appeal to the greed factor that destroys many forex traders. The best guideline is to increase your leverage in line with your experience and success.
   
7. No strategy - The aim of making money is not a trading strategy. A strategy is your map for how you plan to make money. Your strategy details the approach you are going to take, which currencies you are going to trade and how you will manage your risk. Without a strategy, you may become one of the 90% of new traders that lose their money.
   
8. Trading Off-Peak Hours - Professional FX traders, option traders, and hedge funds posses a huge advantage over small retail traders during off-peak hours (between 2200 CET and 1000 CET) as they can hedge their positions and move them around when there is far small trade volume is going through (meaning their risk is smaller). The best advice for trading during off peak hours is simple - don't.
   
9. The only way is up/down - When the market is on its way up, the market is on its way up. When the market is going down, the market is going down. That's it. There are many systems which analyse past trends, but none that can accurately predict the future. But if you acknowledge to yourself that all that is happening at any time is that the market is simply moving, you'll be amazed at how hard it is to blame anyone else.
   
10. Trade on the news - Most of the really big market moves occur around news time. Trading volume is high and the moves are significant; this means there is no better time to trade than when news is released. This is when the big players adjust their positions and prices change resulting in a serious currency flow.
    
11. Exiting Trades - If you place a trade and it's not working out for you, get out. Don't compound your mistake by staying in and hoping for a reversal. If you're in a winning trade, don't talk yourself out of the position because you're bored or want to relieve stress; stress is a natural part of trading; get used to it.
    
12. Don't trade too short-term - If you are aiming to make less than 20 points profit, don't undertake the trade. The spread you are trading on will make the odds against you far too high.
    
13. Don't be smart - The most successful traders I know keep their trading simple. They don't analyse all day or research historical trends and track web logs and their results are excellent.
    
14. Tops and Bottoms - There are no real "bargains" in trading foreign exchange. Trade in the direction the price is going in and you're results will be almost guaranteed to improve.
    
15. Ignoring the technicals- Understanding whether the market is over-extended long or short is a key indicator of price action. Spikes occur in the market when it is moving all one way.
    
16. Emotional Trading - Without that all-important strategy, you're trades essentially are thoughts only and thoughts are emotions and a very poor foundation for trading. When most of us are upset and emotional, we don't tend to make the wisest decisions. Don't let your emotions sway you.
    
17. Confidence - Confidence comes from successful trading. If you lose money early in your trading career it's very difficult to regain it; the trick is not to go off half-cocked; learn the business before you trade. Remember, knowledge is power.