Well, I obviously understood, you sort of gamble about a pair of currencies’ ratio – “would the dollar outperform the euro?”, but is this really gambling, meaning, is it completely random? what’s my edge here?

I certainly didn’t know how to explain (though I admittedly heard about) leverages, technical analysis strategies, hedging strategies. let alone did I know anything about spot or forward deals etc’.

Going back to those days, I realized it’s far more important to teach these concepts and explain them, before I could send you off to scout for your perfect broker and start trading or even just compare brokers, before you understand the foundations.

I hereby declare the opening of my pet project – the guide4fx.com online forex trading school.

I think it’s far an important topic to be left here on our blog, so we will add such a category to the site, for your reference, and my personal enjoyment.

most important to point out: even after you read this school’s curriculum, you’d probably have to do some homework about practical trading issues such as broker’s interests, software usage etc’. we believe to cover that in our site, so it will stay out of the scope of the school.

hope you’ll find it useful.

Trading is a business and you would be best to treat it like nothing less than a business. The more time, energy and persistence you put into your trading, the more successful you will be. It is common for new traders to treat trading like the lottery and not like a business. In part it isn’t completely their fault. Some companies play on the emotions of traders and promote trading a simple and easy solution to getting rich quickly. The sad truth is that if you treat trading like the lottery, you will quickly discover that the markets are very unforgiving and will quickly slash its way through you trading capital until the balance reaches zero. So, just what can you do if you are starting out as a trader? Think of it as a business. Rome wasn’t built in a day. Make your decision with a long term approach in mind and not with a short term get rich mentality. This is one thing any new traders can do to prepare themselves for a path to successful trading.

Beyond treating trading like a business, you should also ensure that you try to distance yourself emotionally from all money used. Emotions can devastate any trading career and quickly cause you to suffer a string of losses and give up completely with swing trading and trading in general. Don’t make the mistake of trading with your emotions. This is much easier said than done. Perhaps the most difficult thing a person can do is detach themselves emotionally from their trading capital. The idea of a win or loss excites many new traders and this has an enormous impact on their decision making process. It typically causes new traders to make brash and uninformed trading decisions. They place trades that they wouldn’t or shouldn’t have if they had been following their trading plan. Detaching yourself from any money you use for trading is something that will take some time, but it is essential if you wish to survive as a trader.

If you swing trade with the correct psychological foundations in place, you will discover how and why swing trading offers any trader in any market around the world a true trading edge. If you neglect trading in general and do not approach it as a business which will reward you with handsome profits based on how much time and energy you devote to it, you will quickly see why many new traders give up on their trading career. A swing trading strategy provides you with all the essential tools to be successful, whether or not you are successful depend on how you implement them.

>> Trading Psychology Matters
Learn the effects of psychology on trading. There are several excellent books on this subject that are must reads. Traders react to currency price movements emotionally. They get excited (greedy) when the price moves in their direction and they get fearful when the price moves against them. Awareness of this dynamic is extremely important in your trading. Once you’re aware of the circumstances that cause these emotional responses, you can put measures in place to adapt to the situation and stick to your trading rules.
>> Understand money management and risk management as it applies to forex trading. You need money management rules in place to ensure you have enough money to ride through the eventual losing streaks. Your rules should include how much initial capital is required (most people start undercapitalized and lose all their money quickly), and how much to risk per trade. Many traders risk too much on low percentage trades and lose their money over a short period of time. The idea is to trade high percentage setups without risking too much of your trading capital on each trade. Stay away from low probability, high risk trades.
>> Get some experience by forex trading online. Actual online trading will let you test your strategies under real conditions. Begin by trading a free demo account so you can make some mistakes before risking real money. Then move to forex currency trading in a “live” forex account. Again, start slowly and don’t risk too much money until you understand how you react emotionally to winning and losing.
Finally a summary of what to do and what not to do:-
• Find a mentor/coach to help you along the way. They can help you avoid many of the common currency trading pitfalls.
• Don’t underestimate the importance of the “softer skills” (psychology and risk/money management). Understanding these areas is critical to your success.
So, hope you understand what we are pointing towards. And till then happy trading and have a great time!

When you can’t seem to follow your plan, try looking at the little things that may interfere. Perhaps you didn’t get enough sleep or maybe you are hungry. Don’t believe me? Try sleeping extra time just for a week. Decide to miss part of the trading day for a week, and see what a difference it makes. Extra sleep can increase your ability to stay alert and will give you the extra energy you need to focus on your plan. You may need to change your life around and get to sleep earlier so that your biological clock is in a different time zone. Get the sleep you need, no matter what it takes.

Trading is stressful, and coping with stress requires psychological energy, and psychological energy is more limited than most people think. Getting angry, frustrated, or disappointed, drains our precious psychological energy. Don’t discount the impact of stress on the depletion of psychological energy. After stress depletes psychological energy, you need to replenish it before you can once again concentrate fully. When you are tired, and the market seems to move against you, it’s hard not to want to just take a break. A tired, worn out feeling often lies below the surface of your awareness. You may think you are rested and alert, but you are not. Get rested, and you will be able to focus on sticking with your plan.

Sticking with a trading plan takes practice. Does this seem like an exaggeration? It isn’t. Just like practicing a tennis swing, you have to learn to concentrate. You must practice focusing on your ongoing experience and controlling your emotions, and this takes practice. It isn’t easy. Your money is on the line and a little bit of your ego, so you can’t expect to be able to stay calm, alert, and focused without a lot of practice.

So when you can’t believe you’ve abandoned your plan once again, don’t jump to the conclusion that a secret, unconscious motive for self-sabotage lies at the root of your problem. It may just be a matter of reducing stress levels, getting plenty of sleep, and allowing you to develop the ability to practice following a trading plan.

Setup:
Currency pair: Any. Time frame: Any. Indicator: RSI (14, 70, 30)

Entry rules: Buy when the RSI crosses below its 30 line, forms a bottom, and then crosses back up through 30. Sell when RSI has crosses above 70, forms a peak, and then crosses back down through 70.

Exit rules: Ideally, when the next opposite BUY/SELL condition is
encountered as just defined.

RSI is a very good indicator for identifying Entry and Exit points for both simple and complex trading systems. However, careful monitoring is needed because false signals can occur. There are additional problems to consider such as:

The market will not realize that it may be above 70 or below 30. As a result, further large movements can still happen after these conditions are met without the anticipated reversals occurring. Although these movements may only cause just a few points rise in the RSI value e.g. 71 to 76, the market could surge by another 200 pips or more. If you had set a new SHORT at RSI 71, a violent BULL action could quickly STOP OUT your new trade.

2. Stochastic lines crossover
The Stochastic technical indicator is very effective at determining Entry and Exit points if the Market is following a structured statistical pattern.

Setup:
Currency pair: Any Time frame: Any Indicator: Stochastic (14, 3, 3)

Entry rules: Enter a new trade when the faster-moving Stochastic crosses above or below the slower-moving one.

Exit rules: Exit the trade when the opposite crossovers occur.
The Stochastic provides well defined entry and exit points and
is easy to use. However, the Stochastic is a lagging indicator and, as such, it can create false signals. Traders may need to monitor and even change the indicator’s settings constantly in order to adapt to the ever-evolving Market conditions with the intent of minimizing the number of false signals. Again, there are more problems to consider:

1. In a similar way to the RSI, the Market could surge in the opposite direction of a crossover. This is more of a problem than with the RSI because the Stochastic lags real-time.

2. If the total time between the entry and exit crossovers is quite long, this will leave the trade vulnerable to large spikes in price movement. The Stochastic would respond very slowly to such events and, as a consequence, would fail to advise you quickly enough that you need to consider corrective action promptly.
So now you have understood some benefits and restrictions of the technical indicators in forex trading, hope you will be better used to employ the technical indicators in your forex trading. And till then happy trading!

Personality may be an issue for some traders. Traders with an impulsive temperament may crave the excitement that excessive trading brings. While others may overtrade to cope with a general frustration they feel in their lives. For them, putting on trades is like playing the lottery – every trade brings hope of success and fulfillment.

Dr. Brett Steenbarger in his book “The Psychology of Trading” suggests that overtrading may be the result of daydreaming. Traders want to have a feeling of power and control, but the markets are difficult to control. Daydreams allow a fearful trader to feel powerful. Dreaming that you will make huge winning trades allows them to feel better. But many times, traders start believing their daydreams. And when daydreams start to seem believable, they may wrongly believe that all they have to do is put on trades and they will be profitable in the end. Even though commissions are relatively low these days, you can still end up paying unnecessary commission costs by overtrading. In addition, some of those small, seemingly insignificant trades can become significant if you lose perspective and invest too much money on a trade that is a bad idea.

One of the best solutions to overtrading is to be brutally honest with yourself. Evaluate your trading ideas and make sure that you have sound reasons for putting on a trade. It’s useful to develop and trade very detailed trading plan. You must have a written plan that defines all aspects of your trading, and you must commit to following that plan to the letter.
• Define your criteria for entering and exiting trades as precisely as possible.
• Identify the signals or indicators you will use to monitor the trade, and anticipate which indicators will signal when a trade is going against you.
If you have a trade going against you, the solution is very simple, get out because you can always get back in. Never let a looser get out of hand. As traders, we must accept the fact that losses are to be expected.

If you trade good setups with a union of events, and avoid making trades on impulse, you’ll increase your profits, and feel good about how you are productively using your time to make those profits.