Turning Rules into Good Habits

In trading, greed can sometimes get the best of you. In your journey to be a consistently profitable trader, the urge to bag those extra pips can be too irresistible. As a result, you sometimes force your trades.

During losing streaks, your frustration and need to enter more trades to earn lost money can overwhelm rational thinking. This line of thinking may actually make a lot of sense to you because it’s not like you can make money if you don’t have a trade on, right? Instead of being patient by waiting for the best setups and letting the market come to you, you… well, force a trade.

Take a look at Paolo, an intermediate trader from MeetPips.com, who lost a trade by forcing it.

Right off the bat he realized that he lost because he forced trades. He took trades that didn’t follow the rules of his system and got burned for it.
There’s also Ikori. In his post, Ikori touches upon how the perils of impatience has affected his trading, resulting in a blown account.

Fortunately, there is a way to overcome these destructive urges. It requires discipline and dedication in the beginning, but it definitely pays off in the end. A way to get over the impulse of forcing trades is by making your trading rules your habits.

Just like how your mom made you put your dirty clothes in the laundry basket to keep your room clean, you start forming good habits by consciously repeating an action. Whether it is by saying “no” to that second doughnut, going to the gym twice a week, or something as simple as eating breakfast in the morning, habits start with deliberate repetition until the act becomes a part of you that you no longer need to be reminded of the rules.

In trading, consciously sticking to your trading rules is a solid step towards forming good trading habits. After practicing your trading rules over and over, you will notice that you have more control over your trading. You may still experience anxiety over price action, but you will control your decisions better because you stress less over it.

Here are a few things you can do to help turn rules into habits:


1. Make a list of rules and write them down.
The first thing you should do is to make a list of trading rules. These rules will govern how you trade, where you will enter, exit, and how much you will risk. It also isn’t enough to just have these rules in your head – you should write them down. Writing down your rules solidifies and reinforces them as you will always be reminded what they are.

2. Visualization
Imagine that you have an open position. Think of all the different price action scenarios you could encounter and imagine how you would adjust your position in these situations. Visualize yourself following your rules. The more you practice and repeat this process, the more natural it becomes for you to follow your rules and turn them into habits in a real trade.

3. Review your trading
At the end of each trading day, take some time to review your trading. Ask yourself, “Did I follow all my trading rules?” Grade yourself and make it a point to work on your weaknesses. By reviewing your trading, you can see whether your rules are effective and whether you are really following them or just fooling yourself.
Always remember that good trading decisions begin with good trading habits. Doing something well once doesn’t automatically make you a good trader. It is the constant repetition of the act that will play a major factor in making you a better trader.

As the wise Aristotle once said, “We are what we repeatedly do. Excellence, then, is not an act, but a habit.”

Article source: babypips.com

Concentrate

You can be super motivated to trade, filled with deep optimism, have millions of trading capital available, and a solid trading strategy, but if you don’t devote your full concentration to the trade that you have on at the moment, you will lose money.

It’s essential that you learn to concentrate while executing a trade and scrupulously monitor the market action during a trade

Why is concentration difficult? While in school did you have trouble studying in a noisy library? It’s easy to concentrate when we are in a quiet room and when we are calm and at ease. But trading is often chaotic and full of stress.

It’s easy to become shaken and lose your ability to concentrate. When you aren’t fully focused on your ongoing experience, it’s easy for self-doubts to creep into your consciousness. You may start having second thoughts and may want to sabotage your trading efforts.

The more you can stay focused on your ongoing experience, the more you can trade effortlessly and skillfully. But how can you concentrate more easily?
First, it’s useful to remember that concentration takes psychological energy, and your supply of psychological energy has limits. If you want to maintain your focus, you must be rested and relaxed.

 Get proper sleep and nutrition. If you’re tried or hungry, you won’t be able to keep your mind focused on trading.

Second, it’s important to control your stress levels. Stress depletes psychological energy. Even when you are excited rather than agitated by stress, your psychological energy is depleted a little bit each time you encounter an event that gets your adrenalin pumping. The best way to limit stress is through risk management. If you know that you are doing your best to keep potential losses to a minimum, you’ll feel more comfortable and can focus most of your psychological attention on trading.

Concentration is essential for profitable trading. The more you concentrate, the more you feel you are in control. And when you feel your body and mind are synchronized with the market, you’ll trade profitably.

Article source: babypips.com

How To Read Forex Charts: 5 Things You Must Know

Learning the basic skills in Forex, such as how to read Forex charts, is really important.
This is because once you have this vital skill under your belt, it will be a lot easier and quicker when the time comes for you to learn and practice an actual Forex trading system.
By the time you finish this article, you'll learn how to read Forex charts, as well as know the pitfalls that can occur when reading them, especially if you haven't traded Forex before.
Firstly, let's revise the basics of a Forex trading as this relates directly to how to read Forex charts.

Each currency pair is always quoted in the same way. For example, the EURUSD currency pair is always as EURUSD, with the EUR being the base currency, and the USD being the terms currency, not the other way round with the USD first. Therefore if the chart of the EURUSD shows that the current price is fluctuating around 1.2155, this means that 1 EURO will buy around 1.2155 US dollars.

And your trade size (face value) is the amount of base currency that you're trading. In this example, if you want to buy 100 000 EURUSD, you're buying 100 000 EUROs.

Now let's have a look at the 5 important steps on how to read a Forex chart:


1. If you buy the currency pair, that is, you're long the position, realize that you're looking for the chart of that currency pair to go up, to make a profit on the trade. That is, you want the base currency to strengthen against the terms currency.

On the other hand if you sell the currency pair to short the position, then you're looking for the chart of that currency pair to go down, to make a profit. That is, you want the base currency to weaken against the terms currency.
Pretty simple so far.


2. Always check the time frame displayed. Many trading systems will use multiple time frames to determine the entry of a trade. For example, a system may use a 4 hour and a 30 minute chart to determine the overall trend of the currency pair by using indicators such as MACD, momentum, or support and resistance lines, and then a 5 minute chart to look for a rise from a temporary dip to determine the actual entry.

So ensure that the chart you're looking at has the correct time frame for your analysis. The best way to do this is to set up your charts with the correct time frames and indicators on them for the system you're trading, and to save and reuse this layout.


3. On most Forex charts, it is the BID price rather than the ask price that's displayed on the chart. Remember that a price is always quoted with a bid and an ask (or offer). For example, the current price of EURUSD may be 1.2055 bid and 1.2058 ask (or offer). When you buy, you buy at the ask, which is the higher of the 2 prices in the spread, and when you sell, you sell at the bid, which is the lower of the two prices.

If you use the chart price to determine an entry or exit, realize that when you place an order to sell when the chart price is say 1.330, then this is the price that you'll sell at assuming no slippage.

If on the other hand, you place an order to buy when the chart price is the same price, then you'll actually buy at 1.3333. A Forex system will often determine whether your orders will be placed simply according to the chart price or whether you need to add a buffer when buying or selling.

Also note that on many platforms, when you're placing stop orders (to buy if the price rises above a certain price, or sell when the price falls below a certain price) you can select either "stop if bid" or "stop if offered".


4. Realize that the times shown on the bottom of Forex charts are set to the particular time zone that the Forex provider's charts are set to, be it GMT, New York time, or other time zones.
It's handy to have a world clock available on your computer desktop in order to convert the different time zones. This is important when you're trading major economic announcements.
You'll need to convert the time of an announcement to your local time, and the chart time, so you'll know when the announcement is going to happen, and therefore when you need to trade.


5. Finally, check whether the times on your Forex charts corresponds to when the candle opens or when the candle closes. Your charting software may be different to someone else's in this way.

The reason I mention this, is that if you need to trade major economic announcements, either by entering a trade based on the movements that happen after the announcement, or to exit a trade before the announcement in avoid getting stopped out during it, then you need to be precise (to the minute!) as these trades are performed according to what happens at the 1 minute immediately after the announcement, not the candle afterwards!
So there you have it.

You now have the 5 essential keys to how to properly read Forex charts, which will help you to avoid the common mistakes which many Forex beginners make when looking at charts, and which will speed up your progress when you're looking at Forex charting packages, and Forex trading systems that you want to trade!

Now that you know this, practice looking at Forex charts with each of these 5 points in mind.
So get to it!

by Mark Hamburg
http://www.theforextrader.net/forex-charting-software.php

What's Fibonacci Forex Trading?

Fibonacci forex trading is the basis of many forex trading systems used by a great number of professional forex brokers around the globe, and many billions of dollars are profitable traded every year based on these trading techniques.

Fibonacci was an Italian mathematician and he is best remembered by his world famous Fibonacci sequence, the definition of this sequence is that it's formed by a series of numbers where each number is the sum of the two preceding numbers; 1, 1, 2, 3, 5, 8, 13 ...But in the case of currency trading what is more important for the forex trader is the Fibonacci ratios derived from this sequence of numbers, i.e. .236, .50, .382, .618, etc.

These ratios are mathematical proportions prevalent in many places and structures in nature, as well as in many man made creations.
Forex trading can greatly benefit form this mathematical proportions due to the fact that the oscillations observed in forex charts, where prices are visibly changing in an oscillatory pattern, follow Fibonacci ratios very closely as indicators of resistance and support levels; maybe not to the last cent, but so close as to be really amazing.

Fibonacci price points, or levels, for any forex currency pair can be calculated in advance so that the trader will know when to enter or exit the market if the prediction given by the Fibonacci forex day trading system he uses fulfills its predictions.

Many people tries to make this analysis overly complicated scaring away many new forex traders that are just beginning to understand how the forex market works and how to make a profit in it. But this is not how it has to be.
I can't say it's a simple concept but it is quite understandable for any trader once he or she has grasped the basics and has had some practice trading using Fibonacci levels along with other secondary indicators that will help to improve the accuracy of the entry and exit point for every particular trade.

Free chapters of a forex day trading system can be downloaded at http://www.1-forex.com in case you are interested in learning more about Fibonacci forex trading.

By: Adrian Pablo

How To Choose A FOREX Broker

Most investors who trade Forex stocks use a broker. A broker is an individual or a company, who buys and sells stocks according to the investor's wishes. Brokers earn money by collecting commissions or fees for their services.

You should check that a broker is registered as a Futures Commission Merchant (FCM) with the Commodity Futures Trading Commission (CFTC) as protection against fraud or abusive trade practices.
A Forex broker also needs to be associated with a financial institution, such as a bank in order to provide funds for margin trading.

Picking the right Forex broker for you will take some work on your part. There are brokers who charge a flat fee and some that charge commission. It may be a good idea to talk with friends and business associates about their brokers.

 You may get some good leads, and you're certain to hear who to stay away from. There is nothing like word of mouth advertising. If you are thinking of investing online, you could choose several online brokers and contact their help desks.  Seeing how quickly they respond to your questions could be key in how they will respond to their customers needs. If you don't get a speedy reply and a satisfactory answer to your question you certainly wouldn't want to trust them with your business.
 Just be aware that as in other types of businesses, pre sales service might be better than after sales service. Before you choose an online broker get a copy of their online demo account. What features are included? Is the software reliable? Does it offer automatic trading? Are there extra software features that cost more?  

Before setting up an account with a Forex broker you will need to do further investigation. How quickly will these brokers execute your buy/sell orders? What is their policy on slippage? What are the transaction fees? What is the spread, fixed or variable? What are the margin requirements and how are they calculated? Does the margin change with currency traded? Is it the same for mini accounts and standard accounts? Don't forget to ask about minimum account balances and interest payments on account balances. Make sure that your funds will be insured.   

By: Mark Freeman

How To Get Started In FOREX Trading

The foreign exchange market (Forex) offers many advantages to investors. But you need to know where to begin. 
 
This short guide will give you the Forex basics, so you can quickly start participating in this fast growing market. In the past, foreign exchange trading was limited to large players such as national banks and multi-national corporations. In the 1980's the rules were changed to allow smaller investors to participate using margin accounts. Margin accounts are the reason why Forex trading has become so popular.

With a 100:1 margin account, you can control $100,000 with a $1,000 investment.   


A Learning Curve  
Forex is not simple, though, so you'll need some knowledge to make wise investment decisions. Although it is relatively easy to start trading on the Forex, there are risks involved. Your first move as a beginner should be to find out as much as possible about the market before risking a dime. 


 Find A Broker  
Forex traders usually require a broker to handle transactions. Most brokers are reputable and are associated with large financial institutions such as banks. A reputable broker will be registered as a Futures Commission Merchant (FCM) with the Commodity Futures Trading Commission (CFTC) as protection against fraud and abusive trade practices.   


 Open an Account  
Opening a Forex account is as simple as filling out a form and providing the necessary identification. The form includes a margin agreement which states that the broker may interfere with any trade deemed to be too risky. This is to protect the interests of the broker, since most trades are done using the broker's money.  

Once your account has been established, you can fund it and begin trading. Many brokers offer a variety of accounts to suit the needs of individual investors. Mini accounts allow you to get involved in Forex trading for as little as $250. Standard accounts may have a minimum deposit of $1000 to $2500, depending on the broker.

The amount of leverage (how much borrowed money you can use) varies with account type. High leverage accounts give you more money to trade for a given investment.  Trades are commission-free, meaning that you can make many trades in one day without worrying about incurring high brokerage fees. Brokers make their money on the 'spread': the difference between bid and ask prices. 

Your FOREX Trading Philosophy

"Easy money" is the allure that captivates many beginning Forex traders. Forex websites offer "risk-free" trading, "high returns", "low investment." These claims have a grain of truth in them, but the reality of Forex is a bit more complex. 
 
Mistakes Of The Beginning Trader There are 2 common mistakes that many beginner traders make: trading without a strategy and letting emotions rule their decisions. After opening a Forex account it may be tempting to dive right in and start trading. Watching the movements of EUR/USD for example, you may feel that you are letting an opportunity pass you by if you don't enter the market immediately.

You buy and watch the market move against you. You panic and sell, only to see the market recover.   This kind of undisciplined approach to Forex is guaranteed to lose money. Forex traders must have a rational trading strategy and not make trading decisions in the heat of the moment. 


Understanding Market Movements 
  To make rational trading decisions, the Forex trader must be well educated in market movements. He must be able to apply technical studies to charts and plot out entry and exit points. He must take advantage of the various types of orders to minimize his risk and maximize his profit. The first step in becoming a successful Forex trader is to understand the market and the forces behind it.
Who trades Forex and why? This will allow you to identify successful trading strategies and use them.   


Accountability  
    There are 5 major groups of investors who participate in Forex: governments, banks, corporations, investment funds, and traders. Each group has its own objectives, but 1 thing all groups except traders have in common is external control. Every organization has rules and guidelines for trading currencies and can be held accountable for their trading decisions. Individual traders, on the other hand, are accountable only to themselves. Large organizations and educated traders approach the Forex with strategies, and if you hope to succeed as a Forex trader you must follow suit.   


Money Management
   Money management is an integral part of any trading strategy. Besides knowing which currencies to trade and how to recognize entry and exit signals, the successful trader has to manage his resources and integrate money management into his trading plan. There are various strategies for money management. Many rely on the calculation of core equity -- your starting balance minus the money used in open positions.



Core Equity And Limited Risk  
        When entering a position try to limit your risk to 1% to 3% of each trade. This means that if you are trading a standard Forex lot of $100,000 you should limit your risk to $1,000 to $3,000. You do this with a stop loss order 100 pips (1 pip = $10) above or below your entry position.   As your core equity rises or falls, adjust the dollar amount of your risk.

With a starting balance of $10,000 and 1 open position, your core equity is $9000. If you wish to add a second open position, your core equity would fall to $8000 and you should limit your risk to $900. Risk in a third position should be limited to $800.  

 Greater Profit, Greater Risk You should also raise your risk level as your core equity rises. After $5,000 profit, your core equity is now $15,000. You could raise your risk to $1,500 per transaction. Alternatively, you could risk more from the profit than from the original starting balance. Some traders may risk up to 5% against their realized profits ($5,000 on a $100,000 lot) for greater profit potential. These are the kinds of strategic tactics that allow a beginner to get a foothold on profitable trading in Forex. 

by Ron King 
http://www.forex4u-now.com

5 Things You’ll Learn Becoming a Successful Trader

Everyone knows the main reward of becoming a successful trader is money. But you will be rewarded with a lot more than just money if you become a successful trader, in fact, money is arguably the least valuable reward you will receive from achieving consistent success in the markets.
The most valuable rewards of becoming a successful trader are the less tangible ones; self-discovery, self-improvement, true personal freedom and the real meaning behind virtues like patience and discipline.

These are the things that will stick with you forever and that will improve and enhance your life as well as your relationships with other people, much more so than just money alone can…

 

 

1. What freedom actually feels like

In my opinion, the single biggest reward of being a successful trader is obtaining true personal freedom from jobs and the 9 to 5 rat race. Trading provides you with the tools and the ability to escape what I call modern-day ‘slavery’.
It won’t be easy, it may not happen at all for you, but for me, I am extremely happy that by learning to trade, we can potentially earn our own freedom and escape the ‘matrix’ that is working constantly. Like it or not, in today’s society, the game is money, and you either play the game or you live a mediocre existence, at best. I was never the type of person to settle for that or to just accept I had to spend my whole life working for some company and give them the best years of my life in return for money, and far less than what I was actually worth.
So, for me, learning what true freedom feels like is the greatest reward of becoming a successful trader. All the money in the world doesn’t mean a thing if you don’t have any time to enjoy it, and trading the way that I do; swing trading with a focus on higher time frames and a ‘set and forget’ approach, allows me to have and enjoy the most valuable commodity; time.

2. How to evaluate the risk vs. reward of anything

If you make it to the point of being a consistently successful trader, you will also most certainly be a master of determining the risk to reward of any situation, service or product. The mindset of a successful trader is one that is constantly gauging risk and simultaneously figuring out what the potential reward might be, to ultimately make a decision. This of course is necessary for trading, but it’s also a great skill to be able to employ in just about any other situation in your life.
For example, let’s say you need to get a different car. If you are thinking about the purchase from the mindset of a trader, you will carefully consider the risk vs. reward of buying a new car or buying a used car. Through that process, you will probably come to the conclusion that the risk of losing approximately 11% of a new car’s value as soon as you drive it off the lot, is probably not worth the reward of having the car when you can probably find the same car a little used and effectively get a 11% discount on it. Not everyone thinks like this about every situation, but successful trading will ingrain this type of thinking into you, and that’s almost always a very good thing.

Top 10 Myths About Forex

Forex is a market where exchange of one currency with another currency takes place. It’s the market which provides accessibility and liquidity to the traders to buy and sell one foreign currency in exchange of another.
Forex traders seek profit in buying currencies low and selling them high. This kind of trading became more popular with the widespread of the on-line Forex brokers. There is a lot of information available about Forex on the web. However there also many myths surrounding the foreign exchange market:

1. Forex trading is easy. Many people that want to dive into the world of the foreign exchange market believe that the Forex trading is easy — you just read a book or two and then you will be able to earn daily profits with just 2-3 hours trading daily. Others think that they can buy a profitable strategy and it will make them rich in Forex. In reality that’s just a myth. Succeeding in Forex isn’t easier than mastering any other profession — it takes time, money and a lot of practice.
2. "I will make money in Forex, if I can trade stocks successfully." Success in stock market doesn’t imply that you will get success in Forex market — there are many differences between trading stocks and the spot currencies. First of all, Forex market requires a lot of hard work and dedication as this market is open for 24 hours a day. You cannot just sit in front of your computer for the whole day and night, so the best way is that you should find the most suitable time periods for trading. Second, “buy&hold„ strategy simply won’t work in Forex market. Third, you don’t have that much information about currencies as you can get from the companies’ reports and statistics.
3. "I can make profit whenever I want if Forex market is open 24 hours a day." Once again, you won’t be sitting in front of your PC for the whole day to be able to trade 24 hours. You’ll have to develop automated trading software to get the advantage of 24 hours a day working schedule.
4. "I can be a successful Forex trader just following someone else’s signals." Many beginning traders get burned by the blind signal-following. That’s like putting away the whole responsibility for your actions to someone else. That may sound cool, but in reality you end up with the huge losses. Learn to rely on your own knowledge and skills. Remember that there were no great signal-followers in any financial market.
5. No commission is to be paid in Forex market. You only have to pay the spread, but you don’t have to pay the commission. And what’s spread? It is the difference between the buy and sell price of the currency pair at the same moment. You may end up with the major part of your profits in the broker’s hands if you plan to rely on the short-term trading.
6. Forex is a scam. Some skeptics and disappointed traders think that Forex is just some new fad to scam people for their hard earned money. Although there are many scams that are hiding behind the "brand" of Forex, that doesn’t mean that the Forex itself is a scam. There are many institutional Forex brokers, regulated Forex account managers and other solid companies in the market to whom you can trust.
7. "I need to exactly predict the market outcome to be profitable in Forex." There is no scientific method to know something in advance in the market with a 100% certainty. There would be no Forex market if you could know the exact currency rates beforehand. Trading is not the game of certainties; it’s a game of odds. One of the first things that new traders learn is to think in the terms of probabilities and risk-to-reward ratios.
8. "I need to use a very complex strategy to be successful in Forex." It’s a popular myth, in which many on-line sellers would want you to believe. The main requirement to be successful in Forex is a self-discipline and money management. There are many traders that make consistent profits with rather simple and old strategies.
9. "I need to have a lot of starting capital to get profit in Forex." Big capital investment won’t help you in Forex. You don’t need a lot of money to diversify in currencies and you can’t move the currency rates with your trading orders (you’d need billions of dollars to do that). Actually you can trade with a very a little capital, because Forex trading is almost always leveraged with the broker’s money.
10. Forex is gambling because it’s completely random. Although there is no certainty in Forex (as in any financial market) it doesn’t mean that it’s completely random. And it’s certainly not a gambling, since your success in this market depends mostly on your skills and experience, not on your luck.

Knowledge is power — so it’s better for you to learn distinguishing some stereotypical myths from the real thing. Don’t fall for the promises of getting some easy profits in Forex, but don’t be afraid of the market just because some people think it’s not possible to earn there. Be rational — this quality will help you either if you are going to trade in Forex or not.

5 Common Mistakes When Trading The Pin Bar Strategy

The pin bar is perhaps the most powerful price action signal that has ever existed. If I could pick only one price action pattern to trade with for the rest of my life, I would probably pick the pin bar. However, despite its simple structure, the pin bar can be very tricky to trade if you don’t know how to distinguish a good pin bar from a bad one.
I see many traders making the same mistakes over and over with pin bars; they trade every pin they see, they give no consideration to the market context the pin bar formed within, they constantly try trading counter-trend pin bars and many other mistakes.
The fact of the matter, is that there
are many subtleties to trading pin bars that you must understand if you ever hope to trade them successfully. So, without further ado, let’s some of the biggest mistakes traders make with pin bars…

1. Not learning to trade pin bars in trending markets first

The first thing I tell my students to do in regards to pin bar trading, is to learn how to trade pin bars in trending markets. The simple reason for this, is that any price action setup or signal is going to have a better chance of working out with the power and momentum of a market trend behind it.
There are numerous reasons why markets trend, but the exact reasons don’t really matter. All we care about is that a market is (or isn’t) trending and whether or not we can jump aboard that trend to take advantage of the power of it. To ignore the power and ‘weight’ behind a trend and think that you will begin making money trading pin bars against the trend before you’ve learned to trade with the trend, is simply ignorant. To this day, I still look for pin bars with the trend first, and those are the pin bar signals that I prefer as option number one.

2. Not learning to trade pin bars on the daily charts first

If you can’t trade pin bars successfully on the daily chart time frames, you won’t be able to trade them successfully on any lower time frame either. For reasons you can read here, the daily chart is simply the best time frame to trade, and I don’t believe that to be a subjective view point either, I see it is a fact of trading.
Generally speaking, the lower in time frame you go, the lesser chance any given price action signal (or other signal) has of working out. This is due to market noise or random price fluctuations that simply mean nothing, and within this market noise there inevitably arises pin bar setups that may look good to the untrained eye, but in reality they are meaningless.
Thus, a pin bar on the daily chart time frame has a much better chance of being meaningful, simply because it’s on the daily chart where there’s less random market fluctuations. The daily chart shows the most pertinent view of a market, including what has happened in it, what is happening and what might happen next. As you go down in time frame, this view becomes hazier and less meaningful, as does any price action signal.

3. Not trading pin bars with confluence – market context.

A pin bar is a very powerful price action signal, but only if it occurs at the right place on the chart and at the right time. As I teach my students in my trading courses, the best pin bar signals typically occur at a confluent level or area on the chart. Essentially, there are many pin bars that you might spot on any given price chart, but they are not all equal, and it’s the type and amount of confluence that makes one pin bar better (or worse) than another.
I like to tell my students that a good pin bar signal should “make sense” in the context of the current market conditions that are occurring on the daily chart. That goes for a 1 hour or 4 hour pin bar too; if it doesn’t “make sense” with either the trend, key chart levels or both, on the daily chart time frame, it’s probably not a good pin bar to trade.

4. Putting your stop loss too close to entry

Another big mistake I see traders making with the pin bar reversal strategy, is putting their stop losses too close to their entry. As I discussed in a recent article, good trades often take longer to play out than we expect, and with that comes the fact that markets fluctuate across time, often meaninglessly, and so you don’t want to get stopped out of a good pin bar trade prematurely just because your stop loss was too close.
What you want to do, is find the most logical point on the chart that will invalidate your pin bar trade if price moves beyond it. Often, this point or level is further away than most people want it to be or think it should be. The difficult thing about having wider stop losses, is that if you want to manage risk properly, it means you have to reduce your position size down as your stop loss distance grows. This isn’t something you should view as ‘slowing’ your trading progress or as a ‘hindrance’, because in the long-run it will lead to more gains / profits because you will be trading properly and building proper trading habits.
Check out this lesson for insight into how to achieve safe stop losses on pin bar trades.

5. You’re not actually trading a pin bar.

Many times traders think they are trading a pin bar setup and it’s actually not even a pin bar. This is a mistake that people make typically from not being properly trained on how to trade pin bars or exactly what makes a good pin bar, and it’s something that’s easy to fix. Through proper pin bar trading education and training you will quickly learn what a high-quality pin bar setup actually looks like, how to identify them and how to trade them properly.

I trust from this lesson you’ve learned about some of the most common mistakes traders make when trading pin bars and some steps to make sure you avoid them. If you want to learn about all the subtleties of pin bar trading, check out my price action trading course for more information.

By: Nial Fuller

FOREX: Starting your own trading

The presented article is intended for those who just turned their eyes toward Forex. Beginning traders who are still learning the basics of the foreign exchange market may also find something of interest here. While experienced traders won't gain anything worth their time reading this article.

Basically there are 4 steps which can be defined as "must do" for those who wish to start trading Forex. Though, their order is not particularly important, the more important part is their content, to which the great attention and responsibility must be paid.

First step is finding a right Forex broker which will be your main tool in trading. You can have a great strategy, good technical analysis skills or an outstanding intuition but you will eventually fail if you choose a bad broker.

 A good Forex broker is one that will not still your money, will be doing real trading with your positions, supports your preferred deposit/withdraw methods and has fast and helpful user support service. It is nice if a broker is registered with some sort of governmental financial commission.

One of the most important aspects of the broker is it's trading platform — but for a new trader this part is not so important as for expert traders. Still you'll probably want to trade with some powerful and informative platform as a Meta Trader or its analogs.

For new traders the more important is a demo account which can be used to trade virtual money while you are training your Forex skills. If you are new trader, start only with the demo account! Don't lose your money on your first mistakes!

 
Second step is learning the basics of Forex trading. If you already found your Forex broker, you will easily get all information from its website or user support. There are many articles and websites dedicated to Forex basics in the World Wide Web. All you need to do is just google for "forex trading basics" and you'll find everything you wanted and even more. This step shouldn't be underestimated, because trying to trade without even understanding how the market works is not only very risky, it will also become boring very soon.  

Third step is about education. Forex trading education is not similar to any other education you probably have got in your life. Forex market is very chaotic, so is the education — there are no fixed rules and all time laws, it is unstable and dynamical. So, to be on the top you must learn new things about Forex regularly and constantly. Try to read as many books, articles other traders' opinions as you can. The more you learn, the more educated you will be. And with good Forex education you will be able to create very sophisticated and effective trading strategies.

Fourth step is a final one; at least I consider it to be a final one. To achieve the successful results in the Forex market you need to develop your own strategies. While you are learning you'll be satisfied with known strategies and probably even Forex signals. But true goal which leads to successful Forex trading is to develop your own strategies. Not one strategy, but to follow the market day by day, developing new strategies and improving those which began to fail. And this comes not only to the trading strategy (this part is obvious), but also to the money management strategy (this part is often underestimated). While you gain experience in trading you'll inevitably build such strategies that will fit your trading style, you character and your life as best as they can. And after that, trading will become a real pleasure, which will eventually lead to your financial freedom. 

Article by: Andrey Moraru
http://www.earnforex.com

3 FX Takeaways From Yellen’s Testimony

By Kathy Lien, Managing Director of FX Strategy for BK Asset Management.

According to Janet Yellen, no decisions have been made about raising interest rates in March. But don’t be mistaken – the odds of tightening next month is declining rapidly. Given the sharp sell-off in global equities, the strong dollar and a continued drop in oil prices, the Fed Chair’s back was against the wall and she had no choice but to acknowledge the new pressures on the U.S. economy. According to her testimony, the central bank is no longer looking to raise rates 3 to 4 more times this year -- as December's dot plot suggests -- because we’re now looking at only 1 and, at best, 2 rate hikes in 2016. With that in mind, Yellen hasn’t completely given up on the idea of raising rates in March. She stuck to her guns and reminded everyone about the strength in the labor market and the benefit that higher wage gains should have on incomes and spending.


Investors initially bought dollars after Yellen’s testimony because she hadn’t cooed loud enough but by the end of the NY session, they realized that chances are the Fed won’t be pulling the trigger next month. They wanted the Fed Chair to confirm that rates won’t be rising in March and while she implied that, she stopped short of being specific because there’s no sense pre-committing to a decision before the next NFP report. We are not looking for an interest-rate hike next month, but with 5 more weeks to go before the Fed meeting, we cannot rule out dollar short covering in the weeks ahead -- especially after such a strong move. Keep an eye on the markets because in her testimony before the House Financial Services Committee, Yellen said “U.S. financial conditions have become less supportive” and these strains if persistent, “could weigh on the outlook.” She also noted that economic developments abroad pose risk to U.S. growth and that inflation expectations are at the low end of the spectrum. However the improvements in the labor market can go a long way in supporting the economy and according to Yellen, the “economy is in many ways close to normal” and there’s “good reason to think inflation will rise over time.”

3 Takeaways From Yellen’s Testimony

1. Fed hasn’t made up its mind about March but chances are they won’t
2. They are very worried about financial market volatility, strong dollar, wider credit spreads and low oil prices
3. But they are optimistic about the labor market and the impact that wage gains will have on spending

The euro took a beating Wednesday because the same concerns that trouble the Fed have been haunting the ECB for weeks. Year to date, European stocks are down anywhere between 8% to 20% compared to 7% to 14% in U.S. indices. Spanish, Italian, Portuguese and Greek bond yields spiked, leading to higher borrowing costs for nations that can barely afford to service current debt. Add to that global market volatility or low oil prices and we can understand why rumors abound that the ECB could buy bank stocks as part of an expanded QE program. The ECB was serious about the possibility of increasing stimulus in January and with conditions worsening since then, its resolve will have increased over the past few weeks. EUR/USD should be trading much lower but the attack on the U.S. dollar needs to ease first.

Big intraday swings in oil prices continue to drive big moves in USD/CAD. At the start the NY session, oil was lower, then it jumped on inventory data but before long was down once again. The persistent decline in oil prices is bad news for Canada’s economy and combined with labor-market weakness, we should be looking at USD/CAD well above 1.40. In contrast, the Australian and New Zealand dollars traded slightly higher versus the greenback following stronger data. Australian consumer confidence rebounded in February while New Zealand credit card spending ticked higher.

The British pound ended the day unchanged against the greenback after trading sharply higher. U.K. industrial production dropped -1.1% in December, turning negative year over year. The data had a short-lived impact on the currency, which recovered quickly on the back of EUR/GBP selling. However by the end of the NY session, risk aversion erased the gains in sterling. Ultimately, the recent turn in data and risk of Brexit make GBP a less attractive currency.

What to do Before, During and after a Trade

After many years of mentoring and coaching traders, I’ve realized that most beginning traders have the complete wrong mindset throughout the entire lifespan of a trade. From the beginning, middle and after the end of a trade, most people have their mind and focus on the
wrong things.

Today’s lesson is going to be a mini-tutorial on how you should be thinking and what you should be doing before, during and after a trade. Hopefully, this clears up a lot of the confusion and questions you may have been having about what exactly you should do in the market and what your mental and physical trading routine should look like…

Before you enter a trade…

After you spot a high-probability price action trade setup in the market, here are the next steps you need to take and important points to keep in mind and act in accordance with:

• Calculate most logical stop loss placement – Don’t ever place your stop loss based on greed. Meaning, don’t place it too close to your entry just because you want to trade a bigger position size. I discuss the need for wider stop losses in this article. You need to place your stop loss strategically so that the trade has proper room to breathe.

• Accept the potential for loss – You need to mentally accept that any one trade can lose. No matter how good a trade setup looks or how confident you are, it can still end up being a loser. If you truly accept this fact you will not risk more than you’re comfortable with losing on any one trade and you won’t do things to try and ‘avoid’ a loss; like moving stops to breakeven too soon or perhaps even trading without a stop loss.

• Accept that the trade needs time to play out – As I said, ‘accept the loss’ mentally before you take it, then you won’t be trying to avoid it the whole time and you won’t adjust your stop or otherwise interfere with your trade. Just accept that the market is going to fluctuate before (if) it eventually hits your profit target. If you try to react to every little fluctuation in the market, you will be a wreck and so will your trading account. You need to accept that your trade will need time to work itself out before you enter it, so be prepared to do nothing.

During the trade…

During the trade is where most people screw it all up. They sit for hours staring at their trades, watching the charts, etc. This is unhealthy and it’s not part of proper trading nor the proper trading mindset.

• Let the market prove you wrong – Have a predefined level or spot on the chart that will show you your trade idea was wrong if price moves past it, then stick to that level (stop loss level). Your goal is to leave the trade alone and either the market proves your trade idea wrong or right.

• As I mentioned above, there are going to be ebbs and flows for and against your trade, this is normal. But, if you sit there watching every little one, you’re probably going to react by closing the trade early or making some other stupid trading mistake. Once you’ve decided on a trade setup and got all the parameters set, you have to commit to letting it play out, and that means you have to ‘sit on your hands’. The most important thing you can do once your trade is all set up, is nothing.

• Checking in on your trades once or twice a day is normal and you should make a trading routine. Remember though, most of the time you should do nothing. If you find that you’re constantly wanting to adjust profit targets, stop losses or close or add to positions, you are probably over-thinking it and becoming over-involved.

The key thing to remember during a trade, is that if you don’t leave the trade alone and let time pass, your trading edge won’t have a chance to work for you. Whatever reason you had for the trade, let it play-out and trust your pre-trade logic and make the market prove you wrong.

After the trade is over

The first thing to do after a trade, win, lose or draw, is to relax for a while. Forget about the market for a while, take a break, etc.
After your last trade ends, it can be very hard to get back to where you need to be mentally in order to wait for the next high-probability trade without over-trading. I discuss the problem of over-confidence after winning trades in in this article, and it really is a big problem for traders. A winning trade is almost worse than a losing trade due to the fact that it can make us over-confident and even ‘arrogant’ about our trading, which in turn causes us to enter low-quality trades soon after a winning trade.
After a losing a trade, it’s also very tempting to jump back into the market on a low-quality trade setup, or on no setup, because you feel the urge to ‘make back’ the money you just lost. This is wrong though, and it’s not proper trading psychology. You have to really understand and accept that each trade is unique and you can potentially lose on any one trade; and if you accept that beforehand as I discussed above, you won’t be surprised if the outcome of your last trade is a loss. It’s all about eliminated the feeling of being ‘surprised’ by a trades out come, as it’s that feeling of surprise, either a bad or good surprise, that can make us emotional about the outcome of a trade.
The correct thing to do after a winner or loser is to remain disciplined and patient and stick to your trading plan; wait for the next high-probability trade setup. For most people, the easiest way to do this is to remove themselves from the charts until they ‘cool down’ and get back to their ‘baseline’ mental state, i.e., neither overly-confident / excited by a winner or overly-angry / frustrated by a loss.
Remember: if you just made money, don’t lose it – capital preservation is critical to trading success! Take some profit out at month’s end. Withdrawing a portion of your profits each month is a good way to reward yourself for proper trading behaviour and also secures some of your money so that you can’t lose it. After all, making money is THE POINT of trading, so it makes no sense to not withdrawal some of it regularly.

By Nial Fuller
Nial Fuller is considered 'The Authority' on Price Action Trading. Since starting this blog in 2008 he has written more than 2000 posts and has taught more than 15,000 students. Read More here

The Truth about Automated Forex Trading Systems and Robots

You may have found yourself landing on a very convincing sales page recently for any one of the many automated Forex trading systems out there on the internet these days. Often referred to as ‘expert advisors’ or ‘trading robots’ when they are applied to the MetaTrader 4 trading platform, these trading robots are extremely marketable because of the pipe dream they give people.

 

The pipe dream of the fully automated expert advisor / trading robot system, goes something like this: “If you buy our system, you will be able to put your trading on autopilot and watch the profits build up in your trading account, nothing is required of you except buying and installing this amazing piece of software into your trading platform”.

Sounds (too) good right? On the surface, of course this type of thing sounds good and as a result, of course it’s easy to sell to unsuspecting newbies in the Forex market. However, as we will discuss in today’s lesson, a little savvy research on your part and a sceptical approach to these robotic trading systems will turnover a whole host of ugly problems that should make you RUN, not walk away from them….

What is an Expert Advisor or trading ‘robot’?

Expert Advisors are programs that allow automation of the analytical and trading processes in the MetaTrader platform. They typically do this via you buying and then downloading a file onto your computer and then installing it into your MetaTrader 4 trading platform as a plugin / add on.

After this, the ‘magic’ (supposedly) happens; the software will determine when to buy and sell various currency pairs (usually you have to only use the pair or pairs suggested by the software seller), it will also typically include a risk management script of some type.

The main attraction here is that there is little to no need for you to do much of anything other than install the software. You can even set the number of lots to be traded, although you can typically over-ride this input, so that essentially eliminates a lot of that “no human emotional errors” advantage that these systems try to sell you on.

In short, trading robots and expert advisors promise to fully automate the trading process with the main marketing attraction being that the human emotion and thus human errors are removed from the process, or so they claim. However, as we alluded to earlier, this is little more than a pipe dream when you dig down into the surface a little further…

Why you should stop falling for robotic trading systems that ‘look’ amazing…

Unfortunately, in the world of Forex trading systems and strategies, there are all sorts of people looking to sell you very expensive trading systems via very convincing sales pages that look and sound very professional. However, if you dig into them a little bit (literally any of them) and do some research, you will quickly find the systems are unsustainable and they are just showing you an ‘ideal’ looking track record over a fixed period of time. It’s also possible to make fake track records that look ‘real’, so take any ‘track record’ you see advertised as ‘proof of performance / results’, with a grain of salt.

 

These system-sellers (notice I didn’t say ‘traders’ because real traders wouldn’t sell these things) aren’t typically explaining to you that you will need very large stop losses on many of these robot expert advisor trading systems, so large that one losing trade will wipe out of much of your account.

When market conditions switch from favourable for the system’s rules to unfavourable (typically trending to non-trending), the system will result in losing trades, and as market conditions are never fully predictable, the only way to truly adapt to changing market conditions effectively, is with the discretionary capability of the human mind trading from the natural price action of the market.

Not only will you lose money on the cost of buying these robotic trading systems (many are $800 or more), once the system fails you, you will probably lose any profits you’ve made. Not only will you lose profits, you will have learned absolutely nothing about trading or how to read a chart’s price action, so you will be left in a frustrated and angry / desperate state of mind which will probably cause you to lose even more money in the market via over-trading / gambling.

Don’t be fooled by the modern day snake oil salesman approach to trading the Forex market; there’s no easy way to make money as a trader, and indeed I might be one of the few trading educators who will tell you that, but it’s the truth. The ‘easiest’ way to make money is by learning a sound and logical trading method that is either purely or mostly dependent on reading the price action in the market, proper trading psychology and proper money management practices. This basic formula has worked since the days of Munehisa Homma; one of the first price action traders, and through proper training and screen time, it can still work today.

Don’t underestimate the power of the discerning human mind

All you need to do is look back at the greatest traders of our time and of generations past. Were they fully dependent on automated trading systems? No. Sure, they may use some type of trading software, but behind any outstanding trading performance is a human being, more importantly to my point, a human mind.

The traders and investors interviewed in the market wizards books largely had a discretionary and discerning approach to the markets. In other words, when you boil it all down, they were making judgement calls in the market, and very good ones at that. They were not using ‘expert advisors’ or automated trading systems, and for good reasons.

The only way any computer program will ever be able to compete with the potential of the human mind in trading, is if (when) we develop true A.I. or artificial intelligence, which by most accounts is quite a ways off. Until then, your best bet is to rely on the best ‘computer’ of them all to make your trading decisions; the one between your shoulders. Your mind is your biggest and most powerful weapon in the market, make sure you develop it properly by getting a solid trading education that will help you build yourself into a skilled and successful price action trader.

By Nial Fuller