Trading tips for new traders/ classic

This is just an addition to my blog Forex tips for Newbies. (originally posted 5/9/08)

I want to tell you some addition things I am learning as I trade Forex.

First I want to say Forex is very hard work and please respect that, and start off small and slow, if you don't, unless you are a super genius, you will be humbled very fast; and like the rest of us that got our butts handed to us, you will either learn how to trade or quit. With that said here are some additional tips. Thanks for stopping in.

Forex is not Vegas, it is not a place to gamble, it is a place that you must have skills if you are going to enjoy any measure of success.

Unlike the stock market (unless you are a seasoned pro) this is not buy and hold game in the short term. Short term price bounces and retraces often. You can lose everything if you invest in Forex like you do in the stock market unless you are a longer term trader with the capital and patience to sustain you.

This is a tough game, Trader to Trader, winner takes all, it is not personal, it's forex.

If you feel like the trade is always going against you STOP, and take a LOOK at your strategy, and learn from other taders. Don't sweat it, we all felt that way in the beginning, except for the few gifted ones.

Keep in mind that whenever you open a position it will always put you in the negative, because you have purchased the right to hold a position. So don't panic

I just want to share what I feel are some pretty safe tips. REMEMBER!!!! ALL TRADES have the potential of being losing trades: and no strategy is fool proof, sometimes you will miss it. Now with that disclaimer in mind, here we go.

Come to your platform with a plan and a clear head. If you are pissed, stressed, panicked or in any other series of negative emotions, you will lose your money to the clear thinking, well seasoned, rested, calm trading pro who is ready to eat your lunch.

Look at your price chart on a longer term chart than you trade in. Tell yourself aloud which way the major trend is running, so that you can align yourself with that trend in your thinking and trade accordingly.

Draw your trend lines, if they are not already up, so that you won't forget your trend direction when you are bombarded by the noise of the market.

If potential corrections are fundamental to your trading, draw Fibonacci lines to determine possible pivot levels.

You may also check pivot levels. The forex strategist employed by your company can usually provide these for you. Use all tools and indicators along with your common sense, because tools DON'T ALWAYS WORK!!!!!!!! I no longer use these indicators as they are lagging data, but I am really simple in my trading approach. There are super pros who ace this stuff. Just learn common sense rules to these things if you are going to use them. If you do not, you will be squashed count on it!

I never listen to the news, it usually affects my trading decisions, so I just trade what the charts tell me. If you are a short term trader, Stay out of the market during major economic news on your currencies if you can.

Wait a while after major economic news, let price settle and determine a direction before jumping aboard. Please for the sake of your capital learn all of your major economic news on the currencies you trade, and know when it is released. You don't have to listen to it, but it is wise to know when it occurs so that you can stay out of the market during that time. This is critical. Being in the market at the wrong time can break you within a matter of minutes.

IT COULD COST YOU EVERYTHING!!!!!!!!!!!!

Just know that for every trade you make, there is another trader trying to out trade, and wait you out. Try not to panic, but it gets easier with time. Also know that price never, ever goes straight up or down, because you have traders fighting at every level. This is why it is a good idea to trade small initially, and PRACTICE, DRILL AND REHEARSE on a practice account, so that you can become comfortable with the price dance.

Take note of the highs/lows on a larger time frame than you are trading, so that you have an idea what trading strategy to employ. If the market is trending down, selling the highs is usually a good safe way to make profits. It doesn't always work, some news, speech or price spike/dip in oil or other important news things could effect your trade. If the market is trending up, then you want to buy dips. Your spikes or dips usually occur around your trend lines or MA(moving averages) when you see a reversal in your candlesticks formations. Don't try to pick top/bottoms yourself, this will also get you squashed. You need valid confirmations for tops/bottoms and the more confirmations the better.

Patience is paramount. It is hard to watch the market for a while to establish the ranges, without wanting to jump right in, but if you are going to be a safe trader, it is wise; also keep a practice account so that when you can't wait, you can get that itch out of your system by trading on your on your practice account.

I also don't buy near the highs or sell near the lows. I have been there and been burned there. It is dangerous.

Then there are times when price is going like a mad freight train and all you can do is jump on-board and enjoy the ride for a minute. Jump on during corrections if you can, otherwise, unless you have a good risk appetite, wait for a less risky time to trade.

This is also critical, have another source of income while you are learning to trade Forex, because the pressure to have to earn X number of dollars to pay your rent, utilities and other major bills will cause you to make critical trading errors, and lose a substantial amount of money. If you want to learn. ****** PLEASE, start slow and find a broker who will allow you to learn with pennies instead of dollars. I still trade pennies and use my practice account.

AS ALWAYS:---- IF YOU WANT TO BE GOOD, PRACTICE, DRILL AND REHEARSE!!!!!!!

PLEASE REMEMBER THAT THE MARKET IS NEW, AND FRESH EVERYDAY, BUT HAS HISTORY IN YESTERDAY!!!!!!!!!!!!

If you have lost in Forex, especially if it is a substantial amount. Take a break to conquer those fear ghost that might be housed in your head. Start reprogramming your mind to make this work for you. If any other human being can successfully trade, you can too!

LASTLY, NEVER, EVER, EVER, EVER TRY TO PREDICT A TOP OR BOTTOM ON A TREND; THIS IS THE BEST WAY TO BECOME ROAD KILL FAST! LET OTHERS STEP IN FRONT OF THAT VEHICLE. YOU STAY SAFELY ON THE SIDELINES, UNTIL YOU HAVE A PROVEN TOP OR BOTTOM!!!!!!!!!!!!*******************



Happy trading my FRIEND!!




This is not in any way intended to be a solicitation to trade in the forex market. I am only posting this for those who decide to trade and are looking for opinions of other traders!!!!!!


Risk Disclosure: Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to invest in foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you need for living expenses and cannot afford to lose.

Classic tips

Originally posted 3/2/08


WOW!!!!!.....

.......so you decided to trade Forex. Good for you! Forex can be profitable, but you can also lose everything before you have time to blink. I know, I have been there, and there is no adrenaline rush in the world like watching a half a years salary go up in smoke in a matter of minutes. It will arrest you and leave you picking up your jaw from the floor two minutes later.

I just want to offer some TIPS, that I hope will be helpful in your trading experience.

1. Never trade against the trend if you are new. Learn the market like your own name first before trying such stunts. Use 4 hour, daily charts or longer to identify a true trend. Anything less may give you a false reading of the overall trend. KNOW THE PREVAILING TREND BEFORE YOU START TO TRADE.

2. Never trade on impulse. Impulse trading will KILL YOU. Never trade tired; tired trading create costly mistakes. Never do angry/revenge trading. That is when you trade in anger to try to get your money back when a position goes against you. It rarely ever works. Pay attention to what you are trading and how much. An accidental wrong click can be as costly an any other trading mistake.

3. Find a Forex company without a dealing desk, because they are always trading against you, waiting for you to make mistakes that they can pounce on. Forex companies like that stack the odds so far against you, that it makes it almost impossible to win. They will give you just enough knowledge to hang your self.

4. Don't trade with a Forex company that doesn't display your free margin, because most of these companies hide your free margin in your Margin Balance, so that you are fooled into thinking you have all of your balance as a free trading balance, but they will liquidate you. Remember, they are dealing against you, they are not your FRIEND, and they are not there to help you prosper. If they do accidentally liquidate your position, they will still keep ALL OF THE MONEY THAT THEY HAVE LIQUIDATED, then they put you back in at the position that they liquidated you from, even though it was their error, and try to tell you that the position they put you back into is the same because your marginal balance is the same as what it was when they liquidated you, but all of your real money that they stole, is gone, and you are left with a vulnerable open position praying that you can recover your money, which they well know that you probably won't do, that is why they will not give you a refund. THEY ARE CROOKS, SO BUYER BEWARE.

5. If you trade with a company that offers their opinions with the news, ignore the postings, it will scare you to death and often times cause you to lose out on good profit potential or take an unnecessary loss. Just be careful!

*Remember price action is everything and the longer term trend is your friend. Only the charts tell the whole truth. Learn to read them like a master musician reads sheet music.

6. Don't hold on to losers to long, it will eat you alive. If you are in a losing position wait until you recover some before you sell, or sell small lots of the position at a time. Ex: if you have an open position of $100,000USD, and the market has gone against you in a big way, you may want to sell $20,000USD when the market goes back in your favor some instead of the whole $100,000 lot.

7. Be very careful of advice you find on the internet! There is some good stuff out there. Do your own homework, and DO YOUR OWN HOMEWORK, and DO YOUR OWN HOMEWORK. The market will not reward your lazy attempts.

8. Realize and respect that it takes hard work to be successful in Forex.

9. Do not gamble with the market, make good calculated pre-planned entries.

10. When you are borrowing money from family, friends and credit cards for Forex, it is time to step back; look for new/better strategies and make sure that this is what you want to do.

11. THIS IS BUSINESS, ALWAYS RESPECT THAT FACT. YOU ARE HERE TO MAKE MONEY!

12. Never lower your margin with an open position, it could liquidate that position, be sure all of your positions are closed before you lower your margin.

(Allow me to explain margins a bit. I am going to try to make this as simple as possible, it is when your broker lends you $50.00, $100.00, $200.00 and even $250.00 on every $1.00 that you have, (50:1, 100:1, 200:1, 250:1) This is a great deal that can help you be more profitable(because it allows you to hold a bigger position in the market), but it can cause you to over leverage yourself, and if the market goes against you in a big enough way, it will drown you quickly, taking all of your hard earned money in the process.

13. Learn all of the major reports for your currency pair, and try to avoid being in the market before or during those releases, because the market can become so violently volatile that you can be liquidated in less than two minutes.

14. Maintaining your trading capital is more important than making a profit. Sometimes you just gotta save your butt. Minimize losses and your profit will take care of you!

15. Practice on a realistic size Forex demo account. if your initial investment is $250USD, then don't practice on a $50,000 demo account, it will give you a false confidence, and cause you to get your butt handed to you. Use a practice account that will allow you to trade as close to the actual amount you plan to trade as possible.

16. Please don't over leverage yourself, over leveraging will kill you quickly. Invest only 2-5% of your capital Maximum, Even when a trade looks really promising; something can happen to turn a trade against you quickly, and you want the room to ride the wave if you decide to ride, or of course you can get out, (which in a lot of cases is just wiser).

17. When you are looking for a good Forex trading platform, the NFA (Nation Futures Association), FCM (Futures Commission Merchant), (CFTC) Commodity Futures Trading Commission and all of other organizations designated to oversee these markets are good places to begin, but if you really want to find a good Forex Broker, Google "Reputable Forex Broker" and see how other real people feel about different brokers. You will be surprised at how forthcoming they are. You will be glad that you did. Also one of the reason people don't file complaints against these companies is because some of the companies designed to protect you, charge you a hefty fee just to file the complaint, so most people avoid the headache all together. Be wary, and look out for those unscrupulous Forex Brokers. With that said there are a few really good brokers out there! What you are looking for is a broker who is TRANSPARENT, and DOESN'T HAVE A DEALING DESK!

18. Don't panic trade, when you feel that antsy, desperate feeling that makes your mouth dry, turn off the computer and do something else until you are your best self. Trading requires confidence and a good clear head.

19. PRACTICE, PRACTICE, PRACTICE , PRACTICE, PRACTICE, PRACTICE ON YOUR DEMO ACCOUNT,.......... EVEN THAT WON'T BE QUITE ENOUGH,....... BUT GET AS MANY SCREW UPS AND BAD HABITS OUT OF YOUR SYSTEM AS POSSIBLE!!!!!!!


The biggest challenge in Forex is having the confidence that you are doing the right thing, and the discipline to see it through. As you watch those numbers dance in front of your eyes along with your profits, it gets though. It can make you down right panicky, learn the market, and if you pray, ( learn to trust that feeling of peace no matter what the market is doing). The news and the market will make you crazy, but what does your gut tell you in the mist of all of that noise?

20. Lastly if you are stressed, irrational and ready to throw the computer, turn off the screen, breathe and go do something that you really enjoy. (Just breathe, it will be ok, this too shall pass. Live in peace!

HAPPY TRADING

Remember to be thankful, be humble, be kind. I hope that this help. Thank you for visiting my blog. Wishing you every blessing of health, wealth, happiness, prosperity and peace for your life. (SMILE)


This blog is not in anyway an enticement or solicitation to trade in the Forex Market. These tips are for informational purposes only and are not to be substituted for legal advice or council. I have written this blog in hopes that it will help you to avoid some of the terrifying pitfalls I had in the Forex Market before I learned better.

Say Goodbye to Wall Street

Must-See, Must-Hear

WHEN TRENDS TURN

As you have probably already read, I love trends; but what happens when a trend turns. No matter what time period you trade your trend will eventually turn. It is essential to the well being of your successful long term trading life that you can recognize the beginning of a trend turn.

The first sign of a trend turn usually come in the form of a candlestick reversal formation. Then you will eventually get a trendline break. That is why it is essential that you learn to read candlesticks like a master musician learns to read sheet music.

Things you want to look for in a valid trend turn are:

1. Price that has really been in a trend for a while, and a valid candlestick reversal signal). (Except on a smaller time frame, those trends can change rapidly)

2. A treadline break is usually a good sign. On the trendline break, be sure to wait for the candle to close. If it closes outside of the line you may want to confirm the validity of the breakout with an indicator such as a MA. I am not a huge fan of indicators because they are lagging data, but in this case, it would be wise to use one, which ever one best suits you. In a valid trend break your MA will usually be broken too.

3. I think the most important piece in a valid reversal is if price surpassed the previous relevant high/low.

Many times a good buy signal comes when a candlestick closes above the trendline, in a downtrend, though not always. A good sell signal could come from the close of a candle below the trendline , in an uptrend. This is where either patience, indicators or a combination of both come in handy.

If the trendline break is not valid (meaning it broke trend only temporarily), then you can redraw your trendline, or add another one to include the new high/low.

Very important if you trade against a long term established trend, expect it to be a short term ride. Get in and get out. The shorter the time frame the faster you'd better get out after you see that you have lost your advantage  No matter what time frame you made your counter trend trade, just know that it will eventually turn to continue to follow the major trend. A counter trend trade is like a river temporarily diverted, the trend will eventually resume it's course. There are always trends within trends or hiccups/retracement, price never move straight up or straight down. It is essential that you know your major trend direction.

A breakout from trend can also be a valid exit signal to close out your profits.

Trend reversals are important because most traders want to buy near the bottom when price begins to move up and sell near the top when price begins to decline, and that means waiting for a proper confirmation before jumping in and getting your butt handed to you.

A reversal signal can be good for 0pips- 1100pips depending on your chart time frame and your patience level. For example the 5 min chart will give you many trading opportunities, but they are less reliable; whereas the monthly chart is much more likely to provide more accurate signals, so far this year it has provided 4 really good bounces for the USD/YEN pair. Longer term traders were able to capitalize on those opportunities, but they are a whole league unto themselves.

Remember, though trends tend to continue, nothing goes on forever and if you are going to be a successful trader, you are going to have to remind yourself that neither price nor trend heads in the same direction perpetually. In order to trade successfully you have got to be flexible. If you, like me, have been bearish all of 2009, you have got to know when to become bullish when there's a bounce in the market. Know when to hold em' know when to fold em, know when to walk away and know when to grab your profits and run.
As it stands; I don't plan to do a blog on candlestick formations, but you are welcome to go to my youtube channel where I have downloaded videos that I think are very helpful to new or a fresher for the more experienced traders. Please copy and paste the link:

http://www.youtube.com/user/TRADERSFRIEND.For a more in-dept look at candles read any of Steve Nison's Japanese Candle Trading books available on-line or at your local library. If you are going to purchase it, ebay is usually an excellent source for on-line trading materials.

Remember a consistently profitable trader spends more time waiting for valid entry signal than actually trading and that is a whole discipline unto itself(BIG SMILE)

HAPPY TRADING!!!!

Get 10 Trading Lessons FREE Click HereThis blog is not in anyway an enticement or solicitation to trade in the Forex Market. These tips are for informational purposes only and are not to be substituted for legal advice or council. I have written this blog in hopes that it will help you to avoid some of the terrifying pitfalls I had in the Forex Market before I learned better.

G20 Open Forum

A Question on China

Trend lines

Now we are about to embark on what is almost sacred territory for me, 'trendlines'. Ahhhh..... What a most glorious word. Trendlines are one of my favor trading tools. If there is a pot of gold at the end of the rainbow in trading for me, I would have say that it is trendlines.

Why?????? Because using trend lines properly will put you on the right side of the trade most of the time. I personally use trendlines in all of my trading. Now for those of you who have used trendlines and it hasn't worked out for you. Please remember that the shorter the time frame you trade, the more your trend is likely to change. My advice is to find the prevailing trend and trade in harmony with it. Example, if the trend is bullish (going up) on the 30min charts and you trade the five minute chart. If the trend is bearish (going down) on the five minute chart, don't take that trade. It is much more likely that the trend will reverse on you than if you wait for a trade that is in harmony with the bullish trend.

Please allow me to elaborate. If you are trading that five minute chart and price has dropped 30pips, you need to wait for a good candlestick reversal confirmation and a trendline break, before going long. Candlesticks are very often the first sign of a trend reversal. The break of the trendline is just further confirmation. If you trade the five minute chart, you want to get in and get out fast!!! Remember on the five minute the direction of the trend is going to change frequently. The shorter your time frame the less reliable your trend, or your candlestick confirmation. On the smaller time frames, snatch your money and go!!!!!!!!!

Ok........What is a trend? A trend is the tendency for price to move (overall) in one direction for a period of time. I say overall, because you get price retracements and corrections. That is when price temporary takes a pause or temporarily reverses from the major trend.

It is essential that if you chose to use trendlines as part of your trading strategy that you determine the direction of price on a larger time frame, so that you know how to best trade your strategy and for how long.

For example if you are in the mist of a bullish price trend on the daily chart and it is bearish on the monthly chart, then you need to be aware that price will reverse in the direction of the major trend at some point, sometimes in as little as 2days. However if you are bullish on the both the daily and the monthly chart, you stand a much greater chance at a longer more successful bullish run.

The reason to determine your trend before you begin trading is because when you sit in front of the monitor all day with price pullbacks and spikes, it is hard to determine the primary trend.

When I first started to trade, I would sit up and watch price move for about 15-30 mins and some times longer, because I wanted to make sure that I was on the right side of the trade before I committed my hard earned money. I would wait just long enough until the end of a rally or dip and I'd find myself on the wrong side of the trade and couldn't figure out why. It was almost as if the broker was just waiting for me to put in my order before price went the other way against me. My early trading life was extremely frustrating and eventually I went broke. I was staying up most of the 24 hours trading and traded all three markets; studying my butt of in between. I stretched my brains with all of the complex theories, and learned all of the indicators, and was still getting killed in the market. After all of that, I had to find what worked for me. Price action.........that is it and I use trendlines and candlestick formations to help me maximize my trading strategies.

Your trendline is diagonal support or resistance, it is that barrier that price is least likely to break. The longer the time frame the more reliable your trendlines. Though trends eventually break.

Traders Whiteboard #1 Traders White Board #1

Drawing trendlines.

To determine if you are in a bearish or bullish trend you will need to draw trendlines...........

For a bearish trend ( a trend in which price is making a series of lower highs) you want to draw your trendline connecting two relevant/major highs, then your trendline should project itself from there.
This is a picture of a downtrend with a bullish break at the end.

Video Lesson: Trading a Downward Trending Market Click Here

For a bullish trend ( a trend in which price is making higher lows) you want to draw your trendline below price, connecting relevant lows, then your line will project itself from there.

This is an uptrend with a 20period moving average.

How to find the Trend and How to TRADE the Trend Video Lesson Click Here

Lastly I want to touch on a trend channel. A trend channel can be bullish or bearish; but in a trend channel you want to connect both the relevant highs and the relevant lows to form a price channel that forms diagonal support/resistance.

An example of a bearish channel. This is a longer term channel, but I included enough of it so that you can see how price bounced off of support and resistance clearly defining buy/sell zones.

I do want to warn you that price will not always fit perfectly in your trend projections, it can be quite naughty sometimes, but we will discuss that in a later blog "When trends turn"

Until we meet again my Friend.

Happy Trading!

For any questions you may contact me at TradersFriend@yahoo.com

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This blog is not in anyway an enticement or solicitation to trade in the Forex Market. These tips are for informational purposes only and are not to be substituted for legal advice or council. I have written this blog in hopes that it will help you to avoid some of the terrifying pitfalls I had in the Forex Market before I learned better.

Shake the Disease

Patience

The biggest challenge to trading once you learn what you are doing is the waiting. The waiting makes you itchy. You have got to trade or bust. Staying out the market is probably the hardest discipline you will have to learn to master as a trader. Itchy is dangerous. It is that horrible nagging feeling(almost a compulsion) that you are going to miss out on something. Every nerve in your body is screaming at you to jump on this opportunity NOW before it is too late and you miss out.If you have been trading any length of time, you know what I am talking about; and there are a few times that you can remember missing out, then you begin to chastise yourself for not getting in at the most opportune time. That missed out recording is still playing in your head. Now I want you to remember more accurately all of the time that you followed that itch because you were so sure of the market's direction and got your butt handed to you. Then you cursed Forex, your broker, and kicked your little dog Mike. You went around all day in a funk because of your lost, and if you continued to trade trying to make your money back, you only dug a dipper hole.

I know these things, because I too have been there, except I don't have a little dog(smile). As a recovering 'type A' personality, it was and sometimes is to hard to wait for the market to do what it is I want it to do. The best thing to do so that you don't over-trade is to turn off your monitor, do something else, and wait for a valid reversal signal on a larger time frame chart and then trade.

When you know better psychologically but, you just have to get in or bust, a practice account comes in handy. That way you can play, test your strategies and instinct without getting killed. Trading emotion without logic will get you killed.

When you are not the most patient, times of deliberation and congestion are the worst. That time is designed to work on your nerves, make you antsy, distract and confuse you and cause you to make big mistakes. It is a very successful deterrent and works on most traders, we get caught up, then we have made a commitment with our money that we usually soon regret. Trading isn't hard because it takes a rocket scientist to do it, active trading is hard because in order to trade successfully, you must master and conquer YOU.

By all means stay out of deliberation/consolidation, where price is in a tight trading range. You are much more likely to have successful trade if you wait for a valid breakout from the tight trading range ( a close of a breakout candle below your support/or above your resistance level), to add to the probability of your success.

Price movement is the next most important behind emotional control. No matter what economic reports or the experts say; the charts always tell the truth. They tell you where the real money is headed. The longer term charts are the most accurate, trading the smaller time frames are more of a gamble.

IF YOU ARE NEW TO FOREX, PLEASE DON'T TRADE THE NEWS, UNLESS YOU HAVE BEEN TAUGHT BY A PRO! NOTHING WILL KILL YOU FASTER THAN THOSE WINDFALL GAMBLES!!!!!!!!!!!!!

ALSO TRY NOT TO HAVE AN OPEN POSITION DURING MAJOR ECONOMIC NEWS BECAUSE OF THE EXTREME VOLATILITY OF THE MARKET

You want to give yourself every possible advantage by trading when the odds are most in your favor. Trading in harmony with the longer term trend will give you a tremendous advantage. When your long term trend is down, you want to sell the highs with a valid trend-line rejection or candlestick reversal confirmation or both. When the trend is up, you want to buy the dips with a proper trend-line rejection or candlestick reversal formation or both. Remember this is not Vegas, it is a business. We don't gamble here.

Develop the discipline of patience, stay out of consolidation,(let the market tell you what it is going to do, don't try to out guess the market, the market is always right), and trade with concrete rules.

A very successful trader once said that he made money not through his thinking, but through his sitting(Patience). (The patience to wait for a proper turn in the market and the patience to ride out the turbulence until he hit his profit target)


HAPPY TRADING, LIVE IN LOVE, HARMONY AND PEACE! STRESS IS A GREAT ENEMY TO SUCCESSFUL TRADING. TAKE A BREAK, BREATHE AND RELAX!

Write me if you need me. You can find me at TradersFriend@yahoo.com

This blog is not in anyway an enticement or solicitation to trade in the Forex Market. These tips are for informational purposes only and are not to be substituted for legal advice or council. I have written this blog in hopes that it will help you to avoid some of the terrifying pitfalls I had in the Forex Market before I learned better.

Margins/Leverage

Well, I am ready to talk about a biggie, the margin. What is margin? A margin is money we put up as collateral to our broker to cover credit risk on the money the broker has lent to us. A margin gives you leverage (magnification). Leverage is an amount of money a broker lends an investor to buy securities, in our case currency.

The thing that makes margins/leverage so attractive is that it can increase your potential returns). In a 50:1 ratio, for every $1.00 you invest your broker is extending $50.00 to increase your buying power. In a 100:1, it is $100.00 for every $1:00 you put up, and so on. Whoo Hoo! Nice broker, huh??????? The thing about leverage is it can either work for or against you. For most traders, it works against them, that is why your broker is willing to give it so freely. The expectation is it will help you deplete your account more quickly.

Forex is a zero sum game, for every penny you lose, someone else gains it, and it is usually the one who has the deepest pockets and can most afford to ride the volatility waves; so brokers can afford to allow you to over leverage because they have much deeper pockets and usually they win.

I have to mention this, there are some brokers that offer up to 750:1 ratios, stay away from them. I would not trade with a broker who offered more than a 400:1 ratio and believe me 400:1 is gamblers stakes. You work too hard for your money to willing give it over to the market.

How do you protect yourself against the downside of leverage???????

Decrease the size of your leverage. It will take away from that ideal wind fall, but it will also keep your account from being depleted fast.

If you are new to Forex, my advice is a 25:1 or 50:1 ratio, and decrease your lot size. Most of us don't start our accounts with $50,000, and if you are fortunate enough to, then you definitely don't want to give it to the market.

Remember leverage ONLY works for you if the market is moving in your favor. If it moves against you, then it magnifies your losses.

Happy trading!


This blog is not in anyway an enticement or solicitation to trade in the Forex Market. These tips are for informational purposes only and are not to be substituted for legal advice or council. I have written this blog in hopes that it will help you to avoid some of the terrifying pitfalls I had in the Forex Market before I learned better.

Gresham's Ghost

PIPS

Pips are percentage in points. In other words it is the smallest amount of a currency, (Kinda like a penny in the US). In this example .8891 the pip is the 1. If you sold a currency at .8891 and it moved to .8861 then you have a gain of 30pips. Or in the dollar/yen pair 108.93 the pip is the 3. The pip is the last number after a series of numbers behind the decimal point making it the smallest amount of the currency.

Why pips? Pips are how traders get paid, it is the way profits and losses are calculated.

How to calculate pips:

If I sold a currency at .8750 and it went up to .8800, then I would subtract the smallest number from the largest number to figure out what my profit or loss was. In this case:

.8800-.8750 =50pips lost

Now if I sold at .8750 and the price fell to .8700 then it looks like:

.8750-8700=50pips gained (then I get paid)

Always subtract the smaller number from the larger number whether you buy or sell.

You can obtain more in-dept information on pips from your broker. This is just a quick overview. Basic information like this from your broker is fine, it is just strategic information that you have to be wary of.

Happy trading, Have a great life!!!!!!!


This blog is not in anyway an enticement or solicitation to trade in the Forex Market. These tips are for informational purposes only and are not to be substituted for legal advice or council. I have written this blog in hopes that it will help you to avoid some of the terrifying pitfalls I had in the Forex Market before I learned better.

What is Forex?????

Forex is short for Foreign Exchange, they took the for in Foreign and the ex from Exchange to created the word forex. Forex is a place to exchange one currency for another. The Forex market is larger than all of the other stock and futures and commodity market of the world combined. According to the Bank for International Settlements, average daily turnover in global foreign exchange markets is estimated at $3.98 trillion.

The Forex market, unlike other markets is an OTC (over the counter market) and has no physical location, which means that the entire forex market is run electronically. It is available 24hours a day Sunday evening to Friday afternoon EST. With a computer, a little capital, and a high speed connection, almost anyone can become a forex trader.

What is the lure of Forex? Lots of actions, and quick gains. It is a fast pace, exciting environment that can keep you glued to the computer monitor for hours.

New World Currency Video New World Currency

As a retail trader the odds are stacked against you, due to limited capital, market manipulation, and just lack of information.

You need to be aware that 90% of all first time traders lose all of their capital.

There are reasons for this:

Lack of information; The stuff given to you by your broker will eventually get you killed, if you don't understand how to properly use it. They only give you enough information to make you confident enough to get your tail handed to you. Get on youtube, where real traders are making videos that can help you better understand what is going on. Or other sites like this one that are made by real traders who want to give something back. You must invest in your own education, otherwise you will be just another sheep to the slaughter.

Over extending on too little capital, is one of the biggest mistakes new traders make. You start a $ 50, 000 practice account where you are trading full lots, then you open an account with $2,000-$5,000 and you continue trading full lots. It is a recipe for suicide. On that little capital, you should only trade mini-lots.

Broker trading against clients. Many broker trade against their customers stacking the odds heavily against their customers for big paydays.

Never add to losing positions thinking that the market will turn around in your favor and you are going to get a windfall. 99% of the time that is a false expectation that will break you real fast!

Happy Trading!!!

If you need me you can write me at:


TradersFriend@yahoo.com




This blog is not in anyway an enticement or solicitation to trade in the Forex Market. These tips are for informational purposes only and are not to be substituted for legal advice or council. I have written this blog in hopes that it will help you to avoid some of the terrifying pitfalls I had in the Forex Market before I learned better.

Risk Disclosure: Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to invest in foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you need for living expenses and cannot afford to lose.

Protecting yourself from World War III: Debtors vs Creditors

Steve Keen is an Australian Post-Keynesian economist credited as having "seen it coming" in this survey of research by economists or financial market commentators. Keen was one of only eleven researchers who qualified, which included Schiff, Roubini, and Shiller.

Steve Keen is a follower of Hyman Minsky’s “Financial Instability Hypothesis”, which he summarises as:

1) Capitalist economies periodically experience financial crises;
2) These are caused by debt-financed speculation on asset prices leading to bubbles in asset prices;
3) These bubbles must eventually burst because they add nothing to productive capacity while increasing the debt-servicing burden;
4) When they burst, asset prices collapse but the debt remains;
5) The attempts by both borrowers and lenders to reduce leverage reduces demand and causes a recession;
6) If the economy survives such a crisis it goes through the same process again, with another boom driving debt up even higher, followed by yet another crash; but
7) This leads to a level of debt that is so great that another revival becomes impossible since no-one is willing to take on any more debt;
8) Then a Depression ensues.

A plausible but dismal explanation. Consider this comment on Steve's latest blog post:

"This is one of the great questions for all of history, how to get out of this. For one thing, one persons debt is another persons asset or in many cases their money. ... It is clear that everyone that has something is going to take a haircut on it. Either by a systematic bankruptcy or by a natural one."

As Steve Keen says:

Some form of price chaos has to be expected though, whatever is done. One side-effect of the bubble has been an enormous dislocation in prices, not just with overvalued financial assets, but also with drastically overinflated incomes for the financial class, and concomitant price distortions all the way through commodities.

How do you protect yourself from this economic World War III? Simply swallow the red pill and step outside the Financial Matrix: bail out of your "has something"s into precious metals and sit by and watch the annihilation as everyone else takes "a haircut".

Trader's friend

So you wanna get paid???? Well Forex is a great way to do it. This site is to try to give you some insight, so that you can avoid many of the pitfalls new traders encounter when they begin trading.

There are two really good ways to learn how to trade.

#1 You can go broke, like I did, or

#2 Learn from someone who knows how.

When you go broke trading, you do one or two things, quit or learn to trade, which is what I did.

When you fall in love with trading, you will find it is as addictive as a drug, but failing in the market repeatedly makes you feel like you are going to die.

Not to worry, you can learn to trade successfully.

#1 You must be disciplined,

#2 You must be patient

#3 You must K.I.S.S. (Keep it simple Sexy)

Trading isn't hard, just tricky, It is tricky because Trading goes against all of your logic and instincts, and makes no common sense, but not to worry, it can be almost mastered, I say almost because there are no fool proof systems of success in the market, all you can do is put the odds in your favor as much as possible.

While I am tempted to tell you everything in this introduction, we will go slowly.

Ok, I can't help it. Just a little advice along the lines of "trading isn't hard, just tricky";


The market never makes common sense to your mind or emotions, which keeps
you thrown off. Wait until you can clearly see an opportunity where you truly have
the odds in your favor and it may only happen twice a day, if that. This is physiological
warfare, a total mindfield(mind game) in which you have to have nerves of steal
and the ability to outwit those who make their living trading against you.

Thank you for visiting, please check back for lessons that can help you trade better.

If you have any Questions, please feel free to write to me at •*¨¨*•-:¦:-•* -

Tradersfriend@yahoo.com.

I will do my best to help

Get 10 Trading Lessons FREE Click Here


This blog is not in anyway an enticement or solicitation to trade in the Forex Market. These tips are for informational purposes only and are not to be substituted for legal advice or council. I have written this blog in hopes that it will help you to avoid some of the terrifying pitfalls I had in the Forex Market before I learned better.

Risk Disclosure: Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to invest in foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you need for living expenses and cannot afford to lose.

Scotiabank Certificates

The article Scotiabank and the Real Silver prompted me to have a closer look at their 2008 Annual Report. Two interesting quotes (note all dollars are Canadian):

“In Scotia Capital, revenue declined by 25%, due mainly to charges relating to the Lehman Brothers bankruptcy, valuation adjustments and generally weak capital markets. These were partially offset by record foreign exchange and precious metals trading revenues, and strong growth in corporate lending.” (p28)
and
“Precious metals trading revenue was a record $160 million, an increase of $44 million or 38% over last year, with higher revenues recorded in each of our major centres.” (p30).

Not surprising to see strong precious metal results from Oct 2007 to Oct 2008 (Scotiabank's reporting year). What I did find interesting is the observation by ispeakofpeak that Scotia's gold and silver certificates declined from $5,986m to $5,619m (p122), a 6.1% drop. This drop would reflect both changes in precious metal prices as well as changes in ounces held.

Unforunately, Scotia do not provide a breakdown of how many gold or silver ounces made up the certificate dollar total. But we do know that Canadian dollar gold prices were up 18% from 1 Nov 07 to 31 Oct 08 and that silver was down 14%.

If you think about it, assuming all the certificates were gold, then if the price was up 18% but Scotia's value dropped 6.1%, they must have lost a lot of ounces. On the other hand, if it was all silver, then as the silver price dropped 14% yet Scotia's value dropped only 6.1%, then they must have had an increase in ounces of silver.

Either of these would not be correct - there must be a mix of gold and silver. For sake of example and to put some numbers to it, lets assume for every $1000, $500 was gold and the other $500 silver. This is not unreasonable, I have seen many clients make this sort of "portfolio allocation" when buying precious metals. A 50:50 split by value works out as:

Gold Oz 2007: 3,996,336
Gold Oz 2008: 3,179,160
Change: -817,176

Silver Oz 2007: 220,173,903
Silver Oz 2008: 240,380,913
Change: 20,207,010

First off, some pretty impressive ounce totals, that would put them up there in my gold and silver league tables, if they were prepared to publish their actual ounce numbers.

What I do find interesting is that they lost gold at a time when everyone else (ETFs, GoldMoney, etc) were gaining. And it does not matter what you assume the split at. If you chose 75:25 gold:silver, or 25:75 it may change the amounts of gold and silver, but it still results in a loss of gold and a gain of silver.

Another interesting observation is that on their balance sheet they list Precious Metals at only $2,426m ($4,046m for 2007, p106). So dollar value precious metal liabilities only down $365m, but precious metal assets down $1,620m. This means that in 2007 they had 68% of their liabilities covered by physical but in 2008 only 43% cover.

If we look to their derivatives, p150 shows that “Foreign exchange and gold contracts, futures” with 1 year or less maturity were $2,602m out of a total of $4,239m. Gap between 2008 precious metal liabilities and physical assets was $3,193m. Conclusion: remaining 57% covered by COMEX futures and/or over-the-counter forwards.

Michael Pascoe - Gold Hater

Hat tip to Justin - Gold drops 25%! by Michael Pascoe:

So much for the rampant gold bugs wetting themselves about chart levels and such, never mind the overtime being worked in the mini-industry that exists around promoting gold.

As gold sceptics know, the yellow stuff occasionally has a day in the sun when there's fear and loathing in the financial system ...

But don't try to tell hard-core bugs that – they've long been inured to Shakespeare's warning that all that glisters is not gold.

I've created a new label called "Gold Haters" so I can keep track of them for future reference.

Alan Kohler - Gold Hater

One to bookmark and shove in his face when gold is $5000. From Gold fever looks incurable by Alan Kohler:

But underlying demand is weak and getting weaker, and supply is on the rise – big time.

Gold is the commodity of craziness.

... gold investors are that unique breed of incurable optimists who don’t want to be paid any income on their capital

... it is not a currency. I can’t go into JB Hi-Fi with a lump of it and buy a TV.

It’s just a commodity they [central banks] got stuck with because it used to be a currency a long time ago and will never be again.

So gold is also the commodity of confusion: is it an investment safe haven or just a commodity? Answer: it’s whatever everyone thinks it is, and right now it’s a haven.

Evolution!

To roll or not to roll, that is the central bank's question

Yesterday I was dismissive of the recall of Hong Kong's gold as significant, but it is another bit of evidence of a shift in central bank attitudes towards gold. Far more significant indicators include (see this MineWeb article):

* China's announcement that it had moved 454 tonnes of gold into its reserves since 2003
* Central Bank Gold Agreement (CBGA) quota being reduced from 500t to 400t a year
* Russia's Prime Minister stating that it should hold 10% of its reserve assets in gold

It points to a renewed appreciation of the role of gold in turbulent times. Recalls of gold like Hong Kong may also indicate a reassessment of counterparty risk. Moves to return gold are eminently sensible, of course: what is the point of a country having its gold out of its immediate physical control if everything goes to hell. That is really the whole point of having gold reserves. In a time of war (not that I'm suggesting that is where we are heading) you ain't going to be able to buy guns or food from another country with your funny paper money.

Some have claimed that repatriation of gold by other central bankers following Hong Kong's lead will translate into higher gold prices. However, this depends on the extent to which that gold is actually sitting in a vault somewhere or has been lent out to bullion banks. If the former, then obviously there is no effect on the price – the gold is just changing location. If the latter, then it could be potentially explosive if Frank Veneroso's estimates of leased gold of between 10,000 and 16,000 tonnes are correct.

I would point out that central banks can't just recall gold mid-lease, they have to wait till it's maturity. Consider also that the leases will have been made over varying terms, from a few months to a few years, and all at different points in time. This means that all of the central bank leases will mature over a number of years. What the term to maturity of this global lease book is, is hard to say. I'll have a stab at most of it being 1 to 2 year leases, but am prepared to stand corrected.

So not all of Mr Veneroso's leases will be recalled immediately, or to be more accurate, declined to be rolled. Plus not all central banks will decline to roll their leases (although that may change depending on how bad things get).

Also, don't fall into the trap of assuming that all of this leased gold has to be bought back from the market to repay the gold loans. This sort of simplistic analysis is based on an ignorant view that “leasing = bad”. The reality is a bit more complex. To explain, I am going to have to be a hypocrite and be simplistic myself. There are three things someone can do with borrowed gold:

1) Manufacture it into jewellery, coins or bars. Sell these for cash. Use cash to buy replacement gold. Hopefully have left over cash = profit. Repeat many times.
2) Sell the gold. Use the cash to build a mine. Extract the gold from the ground. Repay your gold loan. Hopefully have left over gold. Sell this for cash = profit.
3) Sell the gold. Invest the cash to earn interest. Hopefully gold price drops. Use part of your cash to buy gold. Repay your gold loan. Left over cash = profit.

All of the above are ultimately promises to repay gold, but not all of these have the same risk profile. I've ranked them in terms of risk and the first two are materially different to the third. In the first two the gold loan is backed by gold, either in inventory or below the ground.

In the current gold market, one would have to consider the risk of failure low for the coin/bar business – everyone wants the stuff – and I'm sure that central banks, through bullion banks, would not consider these leases high risk and necessitating recall. For jewellery, the increasing gold price equals less sales, so we could expect some business failures, so while these leases are backed by physical it would have to be considered at some risk.

For miners it is a bit more risky. Sure they have it in the ground, but lets not forget Bre-X or Sons of Gwalia. As long as any hedging is modest and loan maturities tied to production, these would also be considered lower risk by central banks.

In the case of the first two it ultimately comes down to the extent that the lease is secured: the first two are not risk free - business ventures do not always turn out as expected. To the extent that they are not secured in some way, central banks would have to be nervous, but not as much as our third category.

In the case of the short sellers, the gold is gone and only cash is left. To the extent that a miner has excessively hedged (did I hear someone say Barrick?), then they are also in this category. The crux of the issue is to what extent have the short sellers put up collateral and more importantly, have the ability to put up more (or the willingness to put up more)?

This collateral issue I will discuss in my next post. My point for the moment is to not get awe struck by the 16,000t figure (or whatever other figure is bandied about) and think it is all going to have to be bought back, and now, and therefore the gold price is going to the moon.

If central bank reassessment of counterparty risk results in requests for leases to be repaid, then it will occur over a number of years as those leases mature. This will manifest itself as a steady stream of short covers, not as a big bang, and be a source of solid "base" demand for gold for a number of years.

Bubble top indicators

The report that Hong Kong requested the return of its 2 tonnes of gold to be stored in its new vaults and its suggestion that other Asian countries do the same and store their gold with them resulted in a wave of uninformed hype.

Statements like “the move deals a significant blow to London's historical role as a global hub” (from the aptly named Fool.com) and this weird non-article from a Marvin Clark that is all questions and no answers or opinions are typical of the new breed of gold commentary.

With reported central bank holdings of 30,000t, how can anyone think 2t is “significant”, even if the whole lot had been short sold by whoever they had it “stored” with? As one wit commented, “I moved my BBQ from my mom's house to my house last week. According to the vague premise of this mysterious 'logic', my BBQ must be going up in price soon!” They are in the running for my quote of the year.

I would also note the similarities between the Hong Kong announcement and this report on Dubai: talk of Dubai a “natural choice” for central banks in the region, Dubai to be home to gold backing an ETF. Well, they can't all be. These attempts at cracking London's fix (pun intended) on gold trading and settlement occurs with some regularity and is met with a yawn from experienced gold players. Every now and then a country tries to become a “bullion centre”: Shanghai, Thailand, India. They never get off the ground because the rest of the world doesn’t trust them, or trusts them less than London.

Unfortunately, I have noticed an increase in gold commentary from people who have no experience in the gold markets, and it shows. I suppose if no one wants to read your opinion on a leverage stock play, what else are you going to do but write about what is hot, even if you know sweet FA about it.

Editor to Journalist: “hey, gold seems to have passed some magic number, go write something on it for tomorrow's paper.” Journalist searches for last newspaper article on gold, does a google search and picks up some third hand commentary which misinterpreted “Gold ETFs allowed for EFP transactions” into “Gold ETFs allowed to settle COMEX futures”, and mashes it all together with some clichés and there you have an article for consumption by the general public who believe that the financial journalist knows what they are talking about.

I am thinking of starting an index of commentaries on gold and more specifically, the number by those who have never commented on gold before. I think it would make a very good bubble top indicator to be used along with the “receiving stock tips from a shoe-shine boy” (today to be substituted with taxi drivers I suppose). The number of Kitco forum posts might also be good, particularly the occurrence of the text “to da moon”.

Open Forum

But when we buy, the price goes up

From China alarmed by US money printing quoting Cheng Siwei, former vice-chairman of the Standing Committee and now head of China's green energy drive:

"Gold is definitely an alternative, but when we buy, the price goes up. We have to do it carefully so as not to stimulate the markets," he added.

This is a strong contender for my quote of the year.