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Tag Archives: trading

Learn How To Trade Forex Like A Professional Trader

I don’t often share trading statements on my blog, but i have decided to share this one, as it shows not only that i have the skills and market knowledge to be able to teach you how to trade like a professional trader, but it also shows some interesting statistics regarding profit and loss.

To be a successful trader.

To be a successful trader you have to have market knowledge. Knowledge is by far the biggest asset to a successful trader. Many traders say that psychology or discipline are the most important things you have to master. They say that if you are not a disciplined trader, or you do not have the correct mindset then you will not succeed.

Both of these attributes are needed to become successful, but having the correct market knowledge and understanding the forces that drive price, is the most important thing you need to learn. You can have the greatest discipline in the world, but without market knowledge you will not be successful.

The importance of profit and loss.

Profit to loss ratios can sometimes be overshadowed by win to loss ratios, but profit and loss is a key factor to long term profitability. Lots of traders are turned on by a high win to loss ratio, but winning 99% of your trades is no good if the one loser blows out your account.

The statement below shows where you need to be regarding your profit to loss ratios.

best forex system

When i am hitting it out of the park i can have a win to loss ratio of above 95%. Yes that’s pretty impressive i know, but its the profit to loss ratio that really counts. As you can see from the trading statement, the win to loss ratio is 73.98%. Now while that is not particularly high, the profit to loss ratio is very good, with a gross profit of £34,763.81, against a gross loss of £3996.01. Which is a profit to loss ratio of almost 9 to 1.

How do you achieve a high profit to loss ratio?

Cut your losers quickly and let your winners run. I am sure you have heard that statement before, but its probably one of the hardest things to do in trading. No one wants to take a loss, that’s completely natural, but letting your losers run too long will kill your profit to loss ratio.

To achieve a consistently high profit to loss ratio you first have to have a great strategy. When you have developed your trading strategy you have to trade it as mechanically as possible. If the reason for entering a trade has changed, then get out of the trade as quickly as possible.

For example. You enter a trade at a specific price point as you expect the market to go in your favor. As soon as the market does not do what you expect it to do, and the reasons for entering that trade are no longer valid, then exit the trade. There is no point sitting in a losing trade hoping it will come back.

Sitting in losing trades hoping they will come back just grinds you down. It also stops you from looking at other trading opportunities, as you are glued to the chart, watching every move your losing trade is making. Just take the hit and move on. If you have a good strategy then you will soon get back that small loss.

You can see on the statement that the largest profit on a single trade was £427.60, against the largest loss on a single trade of £74.89. So even though the win to loss ratio is not that high, the profit to loss ratio is. So a consistently high profit to loss ratio will always trump a high win to loss ratio. If you can have both then that’s even better.

Learn how to trade like a professional trader.

If you want to be successful in this business you have to trade like a professional. All professional traders have sound market knowledge, and good profit to loss ratios. Forex trading is a cut throat business. This is not a Sunday afternoon kickabout in the park, its a ruthless business where only the best traders will survive.

You have to be on top of your game if you want to mix it with these sharks. If you are not the best you can be, they will eat you for breakfast. Trading at a professional level is something that i believe is almost impossible to learn on your own. Getting educated and mentored by a professional Forex trader is a must as far as i am concerned if you want to trade full time and make it your job.

Yes i would say that, as i offer education and mentoring. But listen, i am a trader first and an education provider second, and that is an important thing to remember. I am not a Forex training school, that offers the same old rubbish you can get on the internet for free. What i teach, you cannot get on the internet, or anywhere, free or paid.

My Forex training course is not cheap, but when you have the market knowledge to enable you to turn £10,000 into over £40,000 in less than 6 months, then i am sure you can see the value in what i am offering. If you cant see that, then i am sorry but i can’t help you.

For more information on my Forex training course please click here.

Thanks for visiting my blog and have a great day. 🙂

Do You Have An Unconscious Trading Bias?

Do you have a trading bias? Or are you a trader that is comfortable on both sides of the market?

opinion

What is a trading bias?

A trading bias can be an opinion about the market, or a certain currency pair, but it could also be an unconscious behavioural pattern that is affecting your profitability in the market.

Many traders do not realize they have an unconscious trading bias, but recognizing that you have one, and understanding how it can impact your trading performance, is something that you may need to do in order to make yourself a better trader.

Trader psychology does play an important role in trading, fear and greed are the most common problems that traders have to deal with on a daily basis, but if you have been trading for a while, as I have, there are some interesting characteristics that you may be applying to your trading behaviour, without actually realizing it.

When I first started trading.

I have been trading for almost 25 years. I first started trading equities in the early 90’s. When I started out on my trading career all those years ago, I did not have all the sophisticated charting software that we have today. I remember having to plot my charts on graph paper that I purchased from WH Smiths.

I first started out as a retail investor rather than a trader, plotting my charts by hand with end of the day prices taken from the Financial Times. My strategy was to buy and hold, buying value on dips, and following the long term trend. I had never heard of shorting, and with the limited resources available to me, I only really had the option to buy stock. So my brain was conditioned to only look for buying opportunities.

This early learned behaviour pattern has unconsciously been carried with me all my trading career. Even now when I am trading, I always feel more comfortable when buying rather than selling. These early trading experiences have shaped my trading psychology to this day, and there will be others in the same mindset.

Did you start your trading career buying equities?

If you started out in equities as I did, there is a good chance you will be more comfortable with long positions, rather than short positions, as I am. This bias does not stop me from taking short trades, but it just feels a little more normal when I am long.

start trading careerIf you keep a trading diary as most traders do, it would be a good idea to look back at the trades you have taken, and compare your long trades against your short trades. Are you taking more longs than shorts, or vice versa? Also look at the profitability of your longs verses your shorts.

An unconscious trading bias can also affect the length of time you stay in trades, so check that too. Are you mostly staying in long trades or short trades?

Knowledge is the biggest asset to trading profitability in my opinion, but it will help your trading if you can understand your trading behaviour, and recognize any trading bias that you may have, that could be affecting your profitability in the market.

If you enjoyed this article, and think it would benefit other traders, please like it on Facebook, tweet it on Twitter, or bookmark it using one of the social bookmarking buttons below.

Thanks for stopping by, and have a great day. 🙂

3 Critical Tips For Choosing A Forex Broker

The importance of choosing the right forex broker is often underestimated. New traders with dreams of getting rich quick often look for features that are not important, and can even do more harm than good. In this article, we describe the three most important things to look for when choosing a forex broker.

1. Choose a broker who is subject to strong forex regulation.

The importance of this cannot be understated. Unregulated forex brokers are able to take advantage of you in ways you do not even realize. A prime example is slippage. Slippage is the difference between the price your trade is executed at, verses the price that was quoted when you placed the order. Slippage is a normal part of trading, because prices fluctuate all the time, and can easily move in the short time between when you place an order, and when it executes. However, unregulated brokers can pass the unfavorable slippage on to you, but keep the favorable slippage for themselves. This increases your transactions costs, and the effect can be significant over time, especially if you are a scalper.

The CFTC & NFA have arguably the strictest forex regulation in the world, and they audit their brokers regularly to make sure that slippage practices are neutral. This is just one of many ways that forex regulation can protect you as a trader.

2. Choose a broker who obeys the law.

This may seem obvious. However, it may surprise you to know that as of May 2015 there are only two forex brokers left in the United States who have never been fined by the regulators. The rest have been fined or banned from doing further business. Even in the face of strong regulation and regular audits, forex brokers still try to get away with cheating their clients. Do you want this kind of broker handling your money? Of course not. If you screen for United States forex brokers from this broker review page, you can easily see which brokers have been fined, and which have a clean regulatory record.

3. Choose a broker with low transaction costs.

Transaction costs are a lot lower than they used to be, and you may think this does not matter much to your trading anymore. If so, you are mistaken, and the following example illustrates why:
Say your starting account balance is $20,000. You have a simple trading system with a 30 pip stop loss and a 30 pip take profit level. You leverage 10:1 and you win 55% of your trades. Broker A offers a spread + commission of 2.5 pips, and Broker B offers a spread + commissions on only 0.7 pips. You make 450 roundtrip trades per year, which is just under two trades per day. The following chart shows the results after one year:

tips for chosing a Forex broker

The chart shows that with Broker A:
• 83% of your gross profits get lost to transaction costs
• Your net profit for the year would be $4,500 or 22%
With Broker B:
• Only 23% of your gross profits get lost to transaction costs
• Your net profit for the year would be $20,700, or 104%

In this example, you are clearly better off with Broker B. The difference in transaction costs will have the greatest impact to your trading if you trade frequently, or have a narrow trading edge.

This article was kindly provided by Forex Scam Alerts, who provide advice about the risks of forex trading and how to avoid scams.

If you enjoyed this article, and think it would benefit other traders, please like it on Facebook, tweet it on Twitter, or bookmark it using one of the social bookmarking buttons below.

Thanks for stopping by, and have a great day. 🙂

Volume Spread Analysis (VSA)

This article was kindly provided by Leonardo Barata of analyticalvsa.com who is an active VSA trader. VSA is a trading method that is favored by many traders. I do not trade VSA myself but you may find it interesting. If you like this article please share it. This article is for entertainment value only, and is not a recommendation to trade VSA.

What is volume spread analysis?

Volume Spread Analysis is a methodology originated in early 1900s, by Richard D. Wyckoff (1873-1934), a successful Wall Street trader and later known as the man who made a fortune in the 1929 market crash. Other very successful traders such as Richard Ney would use this methodology as well, only under a different name. This methodology, which is also called the Wyckoff method, was put in more modern terms by Tom Williams, a former syndicate trader based in London, in the 1960s. For the deep insights on the markets that it provides, and the fact that it can be applied to virtually any liquid market, VSA made a name for itself in trading communities.

Understanding VSA.

To understand what VSA is about, we must first understand who are the people who are making money in the markets, and how are they doing it. Like in any other business, there are specialists: some traders specialize in energy futures, others may specialize in the Japanese Yen pairs, others day-trading forex or stocks, and so on. And who are them? These are institutional traders, pit traders, syndicate traders and market-makers, which make a living speculating on the markets. If only we could know what those specialists are doing, then we could trade almost anything without having to do all the fundamental analysis and without looking at all the factors that influence the prices. Well, it turns out we can, and this was exactly Wyckoff’s breakthrough!

The role of volume.

The quantity that represents the activity in the market and is widely available (though not widely used impressively) is the volume. And one thing about the traders who consistently make money in the markets over the years, is that they’ve been able to accumulate a lot of it, and will make large trades to earn a significant amount of money for them. So the volume is the starting point of our analysis, and will show if there is a significant activity (or lack of) in the market, which will be very important to determine what the professionals (smart money) are doing.

Spread’s importance.

But Volume Spread Analysis as the name implies, not only uses volume but also the spread (bar’s high – low). The bar’s spread gives clues as to what type of activity is happening: for example, a low-spread up bar with high volume, indicates there was a lot of selling by the professionals and buying by the public: they prevented the price from going upper by dumping their positions in the market, which the public was happy to absorb. Another example: if there was an widespread down bar with high volume, and the next bars are up, it means there was actually buying on that down bar. Why would the prices go up if that was true selling? The smart money uses the public euphoria to dump or to open their positions, as not to turn the prices against themselves.

Charts examples:

accumulation

The end of the 2008 stocks bear market: Right before the bear market ended, there was accumulation (professional buying) evident in Dow Jones Industrial Average and other indexes. Signals of distribution were also evident before the bear market started in 2008.

The gold top: right before the bear market in gold, and after all the buying euphoria by the public, gold finally collapsed after signs of heavy distribution.

distribution

Learn more and get VSA indicators on our volume spread analysis website.

About the author: Leonardo Barata is a forex and stocks VSA trader and developer.