beginners forex trading Information

Online FOREX Trading - To Be Successful Don't Listen To The News!

The online forex trader today has a vast amount of news at his fingertips due to growth of the web and many investors think the more news they study and act on the more likely they are to win, however the exact opposite is true:

Pay to much attention to the news and you will lose.

The reason for this may not be obvious, so let?s look at this question in more detail and see why.

Will Rogers once said:

?I only believe what I Read in the papers?

He was joking but the majority of new online forex traders think they can use the news to their advantage, but they can?t here?s why:

Markets discount

Let?s face it, we see stories all the time from news wires that are full of convincing reasons why a currency will rise and fall, but in most cases there simply good stories and the currency often moves in the opposite direction.

The markets however don?t move on supply and demand fundamentals and opinions nor do they move logically.

Currency prices move to the following equation:

Supply and demand fundamentals + Investor psychology = Market movement.

Investors are in the equation and it is how they view the news that is so important, not the news itself.

Investors are driven by emotions greed fear and hope and it is they that determine the price.

Markets discount news instantly in today?s world of lightening fast communications, so it is almost impossible for most traders to trade off news stories.

Throw in the unpredictably of human nature and trading news for most investors means losses.

Discipline

If you pay to much attention to the news, your emotions can well come into play.

You will hold positions you should not, simply because the ?experts? are saying they are right in the press.

Don?t forget these experts are selling stories and are not traders.

If you pay to much attention to the news you will simply let your emotions get in the way and discipline will go out the window.

It?s a fact, that:

Major market tops are formed on bullish news and major market bottoms are formed on bearish news.

A compelling conclusion

For small traders the best way to trade fore markets is with a disciplined technical system.

Why? Because it takes the news into account anyway.

All it assumes is that fundamentals are instantly discounted and will show up in price action.

Not only does technical analysis take into account the fundamentals and news, it also takes into account investor psychology.

Taking into account investor psychology is critical, as investors determine the price of anything.

Human nature never changes.

Repetitive price patterns can be seen in charts that reflect human psychology and can be traded for profit.

That is the opportunity, if you trade with a technical system and ignore the news.

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Successful Forex Traders Know The Value Of Paper Trading

When you open your first mini Forex trading account and start foreign exchange trading your first few trades will be purely paper trades while you find your way around and learn how the market works and how to use the various trading tools on offer. Sooner or later however you'll be ready to move on and to put your paper trading days behind you. But is this really a good idea?

Some of the most successful Forex traders, many of whom have been trading for years, have discovered that continuing to trade on paper from time to time can be extremely helpful and, more importantly, very profitable.

The problem comes whenever you find yourself in a losing trade. Despite the fact that losing trades are simply part and parcel of trading life, no matter how hard you try you're always going to be affected by a losing trade and there is often a strong, if subconscious, urge to get back the money you've just lost as quickly as possible. As a result, you invariably get right back into the market with a further trade to recoup your losses but, because you're not really in the right frame of mind, this trade often results in a further loss or a less than spectacular gain.

One answer to this problem which an increasing number of foreign currency traders are now using is to follow a losing trade with a paper trade.

In this case you trade seriously and just as you would normally but simply run the trade on paper. You study the market indicators, open your position, set your stop loss order and then track your trade, moving your stop loss as you go, before closing the position when your market indicators tell you the time has come.

You may make money or lose money on this paper trade but, since the trade is only on paper, this doesn't matter one way or the other. What is important here is that it has cleared your mind and allowed you to put your previous losing trade behind you. Indeed, even if this paper trade also produces a loss the affect is positive because you are happy in the knowledge that you haven't actually lost any money.

Now however you are ready to get back into live trading again and can open a fresh trading position and track your trade in just the right winning frame of mind.

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The FOREX Market- Trade With Your Head Not Your Heart

Sounds simple?right? In actuality, this is the number one reason why day traders lose their shirts. They let their emotions get the best of them and end up doing something real stupid. Trust me I?ve done it.

When trading currency, you need to take yourself away from the platform and look at your trades in actual bills not numerical values on a computer screen. For example, let?s say you short the USD/JPY for a 50 mini-lot right before a data release and it tanks. The USD/JPY goes down about 50 some odd pips and now you?re up $2500 in about thirty seconds.

Now, if you were smart, you would close the position and take your profit, but you?re not and you decide to let it ride. The market goes down about another 10 pips. So, now you?re up $3000 and you still won?t close it. You think that it?s going to keep tanking and that you could make 5-6k on this one trade?wishful thinking.

All of sudden the market retraces and shoots back up 20 pips, your still up about $2000, but now you tell yourself, I?ll wait until it goes back down a few pips and then close it. Too late, the market ignites and now you?re break-even and then you?re negative. In the end you take a $500 loser, which isn?t too bad, but considering you were up $3000 it?s like you lost $3500.

Now, let?s pretend you did this same trade with actual, physical dollar bills. Now or days most people trade from a three wide spread, so let?s say that you gave a trade booker $150 cash to place a short USD/JPY 50 lot. The data is released and this man keeps giving you $50 bills and before you know it you have $3000 in your hands. In order to keep this money all you have to say is close.

You decide to press your luck and wait and the market continues to trend down and now you have $3500 cash. All of sudden, the market begins to retrace and this nice young man starts taking $50 from you each pip it retraces. How many pips does the market have to retrace before you say close? Maybe, ten pips? Once you saw actual dollar bills being taken away from you, you would throw in the towel. So, how does one improve their money management skills?

First of all, realize that you are trading real money. I?m sure you realize that the money you are trading is real money, but do you conceptualize it? When you make a few hundred or a few thousand dollars trading, do you feel like someone just handed you cash? Of course not! Every time you?re trading, no matter if you are profitable or not profitable visualize and grasp the outcome. Don?t just watch your balance and equity fluctuate; you need to relate your loss and gains to every day life.

For example, let?s say you have a 10k account and in the first week you doubled that to 20k. You need to step back and understand what you just accomplished; you just made 10k in one week by sitting in front of your computer and trading currency. Now, let?s take that money and put it to everyday use. If you were handed a free 10k, what would you do with the money?

Would you pay of some debt, by a car, put money down on a home, go on a vacation, put it towards school, I think you get the gist. All I?m saying is that 10k is yours, you own it and there is no reason you have to keep in the FOREX. You are that 10% that succeeded this week, but the law of averages states that you are most likely to be the 90% next week. If not next week then the week after and if not then, eventually you will.

If you invest 10k and your account doubles to 20k, why would you pull out 15k leave in 5k and go for the gusto? If you lose your remaining 5k who cares you still made 5k in a week at your computer. Tell me another investment where I can make 50% on a 10k investment in one week. Turn around the following week pull my initial investment and my profit and still have 5k to play with. If I hadn?t experienced this first hand then I would have never believed it. DO NOT GIVE YOUR WINNINGS BACK TO THE MARKET! It?s not worth it.

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