Beginners Forex Education Forex Basics

Addicted to Forex? Us Too. Here’s 5 Reasons Why We Just Can’t Get Enough!

Forex can be exciting, it can be exhilarating, it can be amazing but it can also be devastating, no matter what it is doing, there is one thing that will remain true, we are absolutely addicted to it. For whatever reason, once we started trading we just could not stop, and there are a lot of other people out there too that have the exact same feelings. We are going to be looking at some of the reasons why we are completely addicted to trading, as well as some of the reasons that have been given by those of you on various websites around the internet.

The Profits

Let’s be honest, a lot of you probably started trading because of the potential profits that you could make, and then as soon as you started making them you simply did not want to stop. This is a perfectly natural reaction and thankfully, it has a positive outcome to it. When those profits start rolling in you will do what you can to make more, to keep it consistent, and to ensure that you continuously earn those big bucks. When you achieve what it is that you set out to do it can give you a great feeling and so we will want to continue to feel that, hence why these profits keep us coming back for more.

The Highs…And Lows

Forex is full of highs and lows, and it is mainly those highs that give us the adrenaline, it gives us the feeling that we can do anything, that we are invincible, and that we can make a lot of money. However, with forex, there are also those lows, when things aren’t quite going right for us, when we have made mistakes and even losses. However, the next trade, we could be on a high again, this is a rollercoaster, trading and forex is a rollercoaster, and it is a rollercoaster that we do not want to get off. When your feelings and emotions are up and down rapidly, it gives you a real yearning, it makes you want more. Those highs that we experience can be similar to those that you experience when traveling 100 mph on a rollercoaster, those coasters are popular, and so is trading.

It Gives Us a Feeling of Belonging

Forex traders often act as a community due to this it can actually give you a sense of belonging, to be a part of a group. Many traders sit at home by themselves, it can be lonely, loved ones may not understand things and neither do your friends or maybe you don’t have friends, either way, it is a pretty lonely thing to do. However, there are a lot of trading communities out there, communities where traders come together to help each other, to share ideas, and to simply meet one another. These sorts of communities can give us a new home, somewhere where we can talk to like-minded people about things that we enjoy, we can get ideas from them, new trades, test our analysis on people and more, these communities are fantastic and the sense of belonging can be addicting all by itself.

Hitting Milestones

Milestones are little goals that we set ourselves, if you are setting them properly then they will be set up in a way that will make them easy to achieve and also in set increments, increments that work with one another to lead us to the next one. When set up in this way we feel that we are always achieving something, this helps us to motivate ourselves and to push us to continue. Each time we achieve one we feel great, we feel that we want to continue, to push to the next one, and with each milestone being hit we get a little more addicted to trying to hit the next one, not to mention that fact that with each milestone we are being a little more successful and we are making a little bit more money, the main reason why so many of us started trading in the first place.

It Gives Us A Better Life

This kind of takes in a lot of the other things that we mentioned above, when we trade, we make a bit of money, that money can then be used on the sweeter things in life, to allow us to treat ourselves and to give us a little more financial freedom than we otherwise would have had, heck, it even lets us treat our significant other. Of course, it can have the opposite, cause us to lose things, but when it comes to our love of trading, we of course think about the good things it brings us and the improvements that it allows us to make to our everyday life.

Those are some of the things that make us addicted to trading, we love it, it gives us highs, it gives us profits and it gives us a community to be a part of, things that make it worthwhile for us, even though those losses and lows that come with it.

While trading is great, and we speak about how we love doing it, we do have to mention one thing though, those with an actual addiction, not just a real fondness of trading should try and seek help. Being addicted to something can actually ruin lives and when it comes to anything that involves finances, from gambling to forex trading, it can devastate lives. If you think that you or someone that you know is actually addicted to trading, then you should do what you can to try and seek help for them, try to do this as soon as you can, the earlier to catch it, the earlier that you can help that person get out of it.

Trading addiction can cause you to spend all your money, to use the money you cannot afford to use, so do what you can to get out of it, and most importantly, do not be afraid to ask for help, help is out there, and waiting for you.

Beginners Forex Education Forex Basics

Top 5 Qualities the Best Forex Traders Tend to Have

If you want to make it to the top as one of the forex industry’s most successful traders, you’ll need to learn to act like one. While being educated is one of the most important steps on the road to success, possessing certain qualities is yet another crucial requirement that can make or break your trading career. If you’re wondering if you have what it takes, take a look at our list below – and don’t worry if you’re missing any of these qualities because we’re here with tips and tricks just in case.

The Best Traders are Disciplined 

Self-discipline is a major must-have for forex traders. The fact that you get to be your own boss is just the start, considering that you have to make the choice to get up and get online every single day when you could be sleeping in with nobody to answer to but yourself. Self-discipline also comes in when you want to deviate from your trading plan by making mistakes like risking more money than your plan allows, entering a trade without solid evidence you should do so, overtrading, and so on. Traders need to be able to stay focused and follow their trading plan at all times, or else they put themselves at risk of losing money. 

TIP: Here are some of the top tips for practicing self-discipline:

  • Set realistic goals and make a plan to meet them
  • Practice healthy trading habits
  • Hold yourself accountable if you don’t stick to your plan
  • Set a schedule around your most productive times
  • Figure out what your weaknesses are and find ways to overcome them

Patience is Key

There are a lot of ways that patience can benefit forex traders. To start, you’ll need patience when you’re learning to trade. It’s important that you don’t rush out there and open a trading account too quickly, or else you may not be prepared and you could lose a lot of money. Learning everything step-by-step can be a long process and creating a detailed trading plan can take quite a while as well. Once you start trading, patience can help you to avoid making emotion-based decisions, to wait for the right market setups, entering and exiting positions at the proper time, and so on. Many people have claimed that they feel that trading can be boring, therefore, patience comes in handy when things are moving slowly. 

TIP: If you’re generally an impatient person, the first step is realizing that and dealing with some of that anxiety so that it doesn’t spill over into your trading decisions. Try relaxing activities before you trade, like yoga, listening to music, going for a jog, or whatever helps you relax. You can also commit to your trading plan and promise yourself that you will not make trading decisions that don’t fit, even if you’re feeling overly anxious or don’t feel like waiting for the right market setup. 

Being Well-Educated

You can’t become a successful trader without pursuing a well-rounded education of everything that has to do with the forex market. Only learning beginner concepts like terminology, simple facts about the market, and how to use a trading platform just aren’t going to cut it. The best traders invest a lot of time into research and education, even those that have been trading for decades. Some of this time is spent researching more complicated strategies and techniques, watching videos, and participating in discussions with traders that have alternative views, and so on. It’s also important to stay up to date on important news that might affect the market, otherwise, you could be left behind. Successful traders always make time to do these things and never assume that they know everything there is to know about trading. 

TIP: If you want to get a good trading education, you’ll need to be willing to invest time into research. Fortunately, the internet offers a wide variety of educational websites and content like YouTube videos that focus on all types of trading subjects, from beginner materials to trading psychology, strategies, news, and other important material. 

Thinking Realistically 

You can’t expect to take up forex trading with little knowledge of the market and become a millionaire in a week. Having unrealistic goals and expectations can be a huge downfall for beginners because many of them get an idea of the results they want to see and feel discouraged or disinterested once they realize how much time they actually need to put into trading to reach those goals. Successful traders set realistic goals and think rationally when trading decisions need to be made.

TIP: The best way to get yourself into this mindset is to set reachable goals that focus on improving your trading abilities, rather than trying to reach a certain dollar amount. Here are a few examples of realistic goals for beginning traders:

  • To spend a certain amount of time each day learning about forex topics
  • To practice trading on a demo account x hours per week
  • To keep a detailed trading journal and review it often

These are just a few examples of positive goals traders can have that will help with self-improvement. If you set your mind to accomplishing these kinds of goals, you will see increases in the amount of profit you bring home because you’ll be a smarter trader at the end of the day. 

The Ability to Let Losses Go

The unpredictability of the forex market makes it impossible to avoid losing money every now and then. Even the best forex traders lose money at times. Some traders handle these losses much better than others because they understand that it is unavoidable, but other traders have a hard time letting this go. They might feel like they’ve taken a hit to their ego and try to blame others, they may become depressed, or they might begin to risk even more money in an attempt to gain back what they’ve lost. Meanwhile, professional traders aren’t losing any sleep over their losses and they are able to stay level-headed without deviating from their trading plan when this occurs. 

TIP: It’s understandably difficult to lose money, but there are some things you can do if you’re having trouble coping with forex losses. Here are a few ideas that could help:

  • Never risk more money than you’re willing to lose so that losses don’t seem like such a big deal
  • Remember that coming out with some type of profit is still worth celebrating.
  • Review what happened when you lose money and try to diagnose the problem. If it was your fault, think of it as a learning opportunity rather than a personal failure.
  • Don’t beat yourself up over losses. Remind yourself that this happens to every trader in the world.
  • Never succumb to revenge trading – which is the act of risking larger amounts of money to win back money you’ve just lost. 
  • If you feel upset every time you lose money, try risking less on each trade.
Beginners Forex Education Forex Basics

The Top 3 Richest Traders in the World and What We Can Learn from Them

Whether it be forex trading or virtually any other topic, we often turn to the experts when learning how to do something with success. Those who have come before us and become masters of their craft have a lot to share with the world. We need only know who to mimic when working to become masters ourselves. The following three individuals are, at present, the richest traders in the world. Let’s see what we can learn from them.

#1: Ray Dalio

Ray Dalio wasn’t always the richest trader in the world, but he has recently surpassed billionaire traders Carl Icahn and George Soros with a net worth of $18 billion as of 2020. Dalio is the founder of investment firm Bridgewater Associates, was ranked #4 on the 2017 hedge fund managers list in Institutional Investor Magazine, and was ranked as the 67th richest person in the world in Forbes a few years ago. Dalio became interested in trading at the age of 12 as the people that he worked for often spoke about stock trading. He credited meditation and an early success buying $300 worth of stock in an airline for helping to get him off to a good start.

Dalio took an interest in trading commodities in the 1970s before it was considered to be a lucrative investment. He then created his own investment firm Bridgewater Associates after being fired as a director at another firm. By 2011, his firm was the largest hedge fund in the world. Dalio also became famous after he predicted the global financial crisis in 2007.

Ray Dalio is obviously a genius investor that really understands how the stock market works. Young traders should take note of how young he got started and consider looking into a career at an investment firm or similar business. The investor has actually released a 15-minute YouTube video that explains “How the Economic Machine Works” and published a book titled Principles, which tells his life story and covers his money-management principles. If you want to learn more about how he did it, you should consider reading his book.

#2: Carl Icahn

With a net worth of $14.3 billion, Carl Icahn has currently traded his position as the richest trader in the world for second place. Before becoming a broker, he acquired a philosophy degree at Princeton and went through three years of medical school. The wealthy investor then decided to become a broker and options manager for two separate companies.

Carl Icahn amassed his fortune as a corporate raider by purchasing large stakes and either manipulating his targeted company’s decisions to increase their shareholder value or forcing them to buy back their stock at premium prices. This tactic was very popular in the 1980s and it helped many traders to become rich. He also used the green mailing tactic, where he would threaten to overtake certain companies so that they would buy their shares at premium prices to remove that threat.

Corporate raiders have to acquire a massive portion of their targeted company shares, which would obviously require a large amount of capital to invest. While this puts the strategy out of many trader’s reach, one could consider looking for investors to help get things off the ground. You would then look at taking over companies that are run poorly and that don’t share enough of their profits with their investors. When the time is right, you can then sell those shares at a huge profit if you follow the strategy. Of course, the need for a large investment might serve as a roadblock for many traders.

#3: George Soros

In his 40+ years of trading, George Soros has amassed a net worth of $8.3 billion, is the hedge manager of the flagship Quantum Fund, was named the “world’s greatest money manager” by Institutional Investor Magazine back in 1981, and has been nicknamed “the man who broke the bank of England.”

Soros is known for making massive, highly leveraged bets on the way the market will move. He takes macroeconomic analysis into account when making trading decisions. Macroeconomics studies the economy as a whole while focusing on national output, unemployment, and inflation rates. Soros does not believe in traditional ideas about an equilibrium-based marketplace and instead believes that traders cause booms and busts which are directly influenced by their irrational behavior. This presents opportunities to invest, according to Soros’ belief.

So, what can traders learn from this trading legend? In order to mimic his strategy, you’d need to have millions in your trading account to copy his massive bets and you’d also need a lot of knowledge about leverage, otherwise, you’d probably lose everything when making highly-leveraged trades due to how risky it can be. Those that don’t have the means to do this can still take a lesson from the way that Soros believes the market is influenced and should really look into macroeconomics and take that into account when making decisions.

Forex Psychology

Understand People and You’ll Understand the Markets

Every day the markets are more complex, more international, more liquid, with more people and robots operating in them. All this makes the current markets difficult to understand and above all, they are changing, but the people, the mass, and their way of acting change in a much slower way than the market.

A while ago and from this statement I thought that the best way to operate in the market would be to understand as much as possible people, if I achieved this I would be able to understand the market for a longer period than with any indicator. Today I want to show you some examples of how to understand people to understand the market, I do not say that this is the absolute truth, but it helps me a lot to understand the functioning of the market.

I have once told you about the volume and how to interpret it along with the price to discover how people move, today I want to take one more step and talk about how to create a stand or a resistance.

Technical analysts rely a lot on supports and resistances, but 95% have never thought about what these formations are or why they occur. Skeptics take the opportunity to say that seeing how the price bounces 4 times at the same level is the result of chance, if we apply statistics we will see that it can not be the result of chance, it is as if you play the lottery 4 times in a week, And so week after week, it can’t be a coincidence.

What Is a Stand or Resistance?

Visually it is the price range where the chart has trouble to pass, if you struggle to cross up we talk about price resistance and if you struggle to cross down we talk about price support.

Further deepening the resistance is that price range where we find a lot of offers, preventing the price from going up. Support is the area where there is a lot of demand, preventing the price from falling.

Why is a level of support or resistance generated? I will explain the logic that I find in these movements.

In the areas of resistance we find different interests:

  • The trader wants to sell because he believes there is a resistance and expects a price drop.
  • The trader who had bought below and arrived at the resistance decides to sell their purchases.
  • Traders unrelated to all this buy/sell for other reasons.

So roughly we have two groups willing to sell and another that we don’t know if will buy or sell. People who operate knowing the resistances and supports will never buy right under one, will always expect their break.

After 3 attempts to break the resistance we see how in the fourth attempt it succeeds, the price quickly crosses the resistance zone with many purchases, now we have the following groups of traders:

  • Traders who sold and put their Stop Loss right on top of the resistance (I remember in this case the Stop Loss is a buy!!!)
  • Traders who sold and hold a negative position are distressed and feel cheated by the market.
  • Traders who had their purchases up the resistance and have now entered the market.
  • A minority that sells for some obscure reason unknown to me.

In this new price zone, most want to buy and few want to sell, this creates the effect of a very fast price rise when resistance is broken. As you can see it is not a coincidence that happens, if we think about the different traders it is logical that breaking one of these zones will trigger the price so much.

Finally, there are the pull-backs, when the price returns to the resistance and uses support. At this time we have the following traders:

  • Distressed traders who sold and now see the opportunity to exit the market with 0 pips, make purchases and turn resistance into support.
  • Traders who know that there was resistance there and now take advantage of it as a support. They make more purchases.
  • Traders who want to sell would do so in case they break the new support, for now, they do not act.
  • As always there is a group of traders who buy/sell for other reasons and are foreign to the whole party.

From this moment on you can apply the same rules for the following levels of support and resistance. I hope it will help you to understand a little more that is the price, why it moves and so you can take advantage of the market.

Forex Basics

Things That Successful Forex Traders Would NEVER Say

We see all sorts of advice printed all over the internet about what successful traders do and what new traders do. With there being so many different sources of information it is very easy for some of it to get muddled up and confused with each other, this is just a natural thing to happen. We have seen quotes thrown about from so-called successful and profitable traders that make us think twice, they seem a little out of place. So we have come up with a list of things that you simply won’t hear a successful person saying, if they do, then we would question how successful they are and also their honesty and integrity in what they are saying. So let’s just in and look at some of the things that successful traders simply would not say…

“I never lose!”

If anyone tells you that they never lose, then I would question them as a person. Either they have the perfect strategy, they are incredibly lucky or they are simply outright lying. Losing is a major part of trading, the majority of profitable traders may even lose more taxes than they win, but due to their strategies and plans in place, they are still profitable. There is no holy grail strategy, there is no way to simply win every trade, a good trader will be able to admit that as they are happy with their strategy, they are not there to try and impress others. The markets move up and down, they jump about and they are unpredictable, no one can predict it 100% of the time, if they could they would be the richest person in the world right now. People like to try and exaggerate their success stories, but if you see someone stating that they never lose, they are most likely not that successful, a successful trader will admit their losses and even embrace them.

“You should be trading every day.”

Something that a lot of newer traders are told, you need to practice and trade every day if you want to become successful, at the very beginning this may be the case, there is so much to learn that you simply need to in order to take it all in. As you progress and become more used to the markets and get a better understanding of them, you will soon begin to realise that you do not need to trade quite as much. In fact, you will find yourself taking entire days or even a week away from trading. Certain aspects of your life such as your mental wellbeing need to take priority at times, if you are beginning to get stressed, take a break, you do not need to be there every day. One way that successful traders remain consistent is knowing when to take breaks and knowing that they do not need to take every opportunity that comes up. Patience is another virtue that successful traders use, knowing when to take a trade and knowing when to simply sit back and watch. Not doing anything can sometimes be the better option and a successful trader will not shy away from admitting that.

“I taught myself everything I know.”

The simple response to this is, no you did not, this term basically means that he did not receive any help from anyone else or from any other sauces. This is simply not going to be the case, even the best traders in the world speak to others about their trading in order to ensure they are doing the right things and to get feedback on how they are performing, if someone states that they are not then this is most likely not the case. Many traders go on training courses, join trading communities, or simply speak to others face to face. It is a valuable source of information and feedback and it is something that all successful traders will do. It is near impossible to learn the different strategies and risk management without having some sort of input from the outside world.

“I know everything about trading.”

No, you do not, simple as that. The world of forex and trading is huge, so huge that there are probably things about it that have never actually been written or discovered yet. It is simply not humanly possible to know everything and a successful trader will know this, they will know that you need to be constantly learning. Part of learning to trade is having the understanding that you will be continuing to learn throughout your entire trading career. If someone was to simply state that they know everything, then they are most likely in a position where they do not truly understand how vast the idea of forex and trading is, which in our eyes would make them not quite as much of an expert as they may believe that they are.

“My strategy always works!”

When you first start it you probably created a trading strategy yourself or took an idea from someone else. For many when beginning this is the only strategy that you have. You would have then experienced a market change and this made it so that your strategy was no longer effective within the markets. A successful trader knows that this is the case. Due to this, they understand that the strategy that they are currently using or even their favorite strategy will not work in all market conditions. Instead, a successful trader will have multiple different strategies that they can use depending on the current market conditions. If someone states that their strategy works in all conditions, then they simply have not yet had the markets go against them and their strategy.

“Don’t worry about money management.”

One of the biggest things in trading is your money management, how you will protect your account and your capital. If anyone states that it is not that important then we would discount pretty much everyone else that they say. Money management and risk management is 10% important, it is one of the most important things that you can do, it is there to protect you and can prevent you from losing your account. Any and all successful traders are most likely successful because they have a good plan in place to protect them from their losses.

“Doubling down is good.”

When a trade is going the right way, a lot of traders would add to that trade which is fine as this increases profits, however, when a trade is going the wrong way, why would you want to add to the losing position? The sad thing is that there are actually a lot of different strategies that use this method, most popular is the grid or martingale strategies, both of which can very easily blow your account. A successful trader will not be using these strategies and they certainly won’t be adding to their losing positions, so if you see someone doing this, they are actually playing a very risky game, not something a consistently successful trader would do.

So those are a few of the things that you just won’t hear a successful trader say. Normally those saying them are people who are trying to exaggerate their success or their abilities, a successful trader won’t need to do this as their results will speak for themselves, so if you see people making comments like this, do not take their word for granted, they may be trying to pull your leg.

Forex Psychology

The Supreme Discipline of the Forex Trader

Although the currency market is the largest market in the world, there are still many traders who have no idea how it works. So, the reality is that there’s a fair amount of prejudice against currency trading. Some traders even fear the market. If you’re one of those traders, be sure to read this article carefully.

In it, we will present to you the most important basic concepts of the currency market or Forex trading and show you the possibilities it offers. But even for readers with a lot of experience in this market, this article will be an interesting read, in which they will still be able to learn a little more.

Anyone who has made the decision to prove himself in the supreme discipline of traders must become intensely familiar with the currency market. If you know how the market works and what tools are available, you can optimally plan your operations and succeed.

Which players are represented in the market, how should risk and money be managed, what are the possibilities of analysis, and what are the most proven strategies? In this article, we want to work step by step on the most important points so that you can finally start successfully in the currency market (Forex).

What is Forex?

In the Forex market (currencies), currencies (currencies) are traded on the OTC market (over the counter). In other words, there is no central market but only OTC operations. The foreign exchange market is made up of banks, large companies, central banks, funds, intermediaries, and private investors. The Forex market gives the trader a chance to actively trade in the currencies of different countries, with private traders who can only actively trade in the foreign exchange market since the mid-1990s.

Previously, it was available only to institutions. The special feature of this currency market is that it is open on Sunday afternoons and remains active until Friday evening. During this time, it is open 24 hours a day, with a daily trading volume of around $6,000 billion, much more than any other market. Of course, it has its advantages. For example, you can trade when you have time currency pairs that are actively trading.

For example, suppose you live in Germany and have a window of opportunity from 08:00 to 10:00 when European stock exchanges open. In this case, for example, the currency pairs GBP/USD and EUR/USD could be very interesting. In general, the Forex market is very flexible and is able to create a timeline based on individual criteria.

What Moves the Market?

Economic data, in particular, has a significant impact on the Forex market, especially if a particular message deviates significantly from analysts’ and investors’ expectations. In some cases, however, a central bank could take a completely unexpected step at a certain point, leading to a dramatic price change in the currency market. Therefore, a position that is opened immediately before the central bank meeting is not advisable.

As with any trade, you should always remember to limit your losses through a limit on the Forex market, and consider what can happen when you post a specific message that moves the price directly to your loss limit. The amount lost due to a certain position is the question that must be asked again and again.

Entering the Currency Market

Currency pair trading can be done in different ways. Private investors, by choosing a suitable intermediary, gain access to various products with which they can directly or indirectly implement their trading ideas in the Forex market. In the case of cash trading, the two partners trade foreign currencies among themselves. For example, if Bank A with Bank B exchanges EUR 10 million/USD at an exchange rate of 1.30, Bank A will have to transfer USD 13 million. The A will receive 10 million euros from Bank B. The classic currency transaction is also available in a slightly modified form in private Forex trades under the name Spot Business.

Some brokers also offer trading with Forwards. Both methods are usually transactions based on a margin deposit; that is, with leverage. However, compared to cash trading in the interbank market, the foreign currency is not delivered but is “transferred” until the position is closed with an opposite order.

Costs Incurred 

Since the foreign exchange market is an interbank market and therefore does not incur additional fees to the stock exchange services, its trading is relatively cheap. Therefore, depending on the broker model, the trader only has to pay the differential or a combination of fork and commission. The tighter the hairpin, the better for the trader.

Since the currency market is very liquid, the odds of tight ranges are usually quite good. At the same time, dispersion is an important criterion when selecting the broker (in combination with commissions). However, traders need to know if the hairpin is fixed or flexible. In turbulent times, it can be a significant disadvantage when it suddenly reaches an expansion.

In addition, there may also be large differences between individual intermediaries in terms of corporate policy. Therefore, make sure that your broker guarantees the execution of the order and the setting of your loss limit. You should also make sure to include redundant systems to protect your hardware and software so that your commands always run, even if the server fails you during an operation. It should be noted that even in the less regulated currency market there are regulators who supervise many intermediaries, for example, the NFA (National Futures Association) in the U.S. The U.S. and the FCA (Financial Conduct Authority) in England.

On their websites, investors receive full information about private currency trading. Operators should be careful if the agent is in a peripheral country.

Trading Practice – Fundamental Analysis

The fundamental analysis analyses the causes that influence supply and demand in a given currency and thus determine the exchange rate. In assessing supply and demand, they consider, inter alia, the economic situation, and developments in the two currency areas included in each currency pair.

The development of factors such as interest rates, inflation, politics, and society, as well as economic growth plays an important role. Using models, it is possible to assess in a long-term context how a change in certain influencing factors affecting a given currency would affect and whether the current exchange rate seems justified. The exchange rate, which results from the models, is however only a theoretical guide.

In fact, prices may deviate from this, as particularly difficult future expectations to measure are included in price formation. Basically, however, it applies to the analysis: if the current price is below the value of the model, there is talk of an undervaluation, in the opposite case of an overvaluation.

Interest Rate Parity

The simplest model is interest rate parity. It requires traders to invest where they can achieve the highest return. Investment opportunities should have a similar level of liquidity and comparable risk. Capital flows between the two countries are based on the interest rate spread between the two currency areas, according to the interest rate parity model. If the interest rate is higher abroad, traders transfer their money there at the current exchange rate.

Later, the money is transferred back to the source at the current exchange rate. Depending on how the exchange rate develops during the investment period, it will have a positive or negative impact on profitability. If there were no exchange rate movements, the return would simply correspond to the foreign interest rate. Then, later, each investor would keep their money in the currency offering the highest interest rates.

Balance of Payments

In contrast to interest parity theory, the balance of payments attempts to explain exchange rates with a holistic approach. The focus is not on the return efforts of investors, but on the flow of goods and capital flows between the respective economies of a currency pair. The balance of payments is a systematic record of economic transactions between private and public households, as well as businesses and banks at home and abroad. It consists mainly of the current account and the capital account. The current account records all transactions in the goods market.

The current account balance is often defined as the “external contribution”. In other words, it’s about the difference between exports and imports of goods and services. If a country has a positive external contribution, domestic capital increases as a result of net capital inflows. If, on the other hand, imports exceed exports, money flows out of the country and domestic assets diminish. The capital account records accounts receivable and household liabilities vis-à-vis other countries. Here, a distinction is made between capital imports and exports.

The difference is also called the net export of capital. If the performance and financial balance are not the same, an imbalance between the supply and demand of a currency is created. The resulting movement of the exchange rate returns the relation to the equilibrium point. Fixed exchange rate systems may also have long-term imbalances in the balance of payments.

Purchasing Power Parity Theory

The third model, the absolute theory of purchasing power parity (also known as purchasing power parity, PPP), compares the purchasing power of 2 currencies. The key message of the theory is that one currency that has been changed to another in the corresponding country will have the same purchasing power and therefore the same real value.

The external price level after conversion of the exchange rate should correspond to the domestic price level. If the exchange rate deviates significantly from this equilibrium, there should be a tendency to return to equilibrium according to this model, since in principle there is a possibility of a gain.

If, for example, a computer in the U.S. (In Euros) costs less than in the Eurozone, it would be worth buying it in the U.S. and reselling it in Europe. It’s worth it. The difference between the purchase price (converted to euros) and the sale price continues to provide a profit.

However, to purchase a computer in the United States, you will need dollars. The supply of the euro and the demand for the dollar will subsequently lead to an appreciation of the dollar, with the result that purchasing power in both monetary areas is adjusted. A popular example of this model is the so-called Big Mac index. This is a simple-built index of people’s buying power published regularly by The Economist.

The basis for calculating purchasing power is a comprehensive description of the prices of a standardized and readily available product: the Big Mac at a McDonald’s restaurant. For example, if a Big Mac in the U.S. costs $ 5.28 on average, while the price in Germany is $ 3.95, the theoretical exchange rate is $ 5.28 / € 3.95 = 1.34. If the current exchange rate deviates significantly from the theoretically determined value, it would be adjusted to this long-term value according to purchasing power parity. In reality, the purchasing power parity theory considers not only a good but a complete shopping cart. Moreover, not all price differences generate an opportunity for profit, as taxes, transport costs and customs duties must be considered.

Many goods cannot be marketed worldwide, especially services or haircuts which are not transferable. Therefore, the shopping cart should only contain marketable products worldwide.

Technical Analysis

A general topic of controversy is whether the technical analysis in the currency market makes sense. On the one hand, there are so many price adjustments that many patterns can arise. On the other hand, the market is so inefficient that these patterns (theoretically) cannot function sustainably. However, most of the tools provided by Technical Analysis (TA) are well used in foreign exchange trading.

Classic graphics formations, such as trend channels or resistance and support lines, can be used, as well as the most advanced techniques of trend recognition, indicators, and oscillators, as well as candle formations. Due to the trend behaviour of the currencies, a relatively unknown type of graph is offered for the correct exchange rate analysis: the so-called “Graph of points and figures” (P&F – Point and Figure). This is a variant of alternative representation to the bars and candles graphics that are widely used.

In the foreground of the P&F table is no longer the movement of price in temporal terms, but the development of movement. Times when only small price changes (i.e., lateral movements) occur are filtered out of the table. A variant of similar representation, but more visually understandable, are the so-called Renko graphics. Both types of charts work with trend lines, indicators, and formations. When using it, you should always keep in mind that the time axis, unlike the “normal” graphics, is variable. Therefore, it may happen that the chart does not change over a longer period of time, if price fluctuations were too low or if a significant movement has not developed.

Various Time Levels

The methodology of integrating several time windows into the analysis and the resulting trading decisions are mentioned in the trader jargon as multiple time frame analysis. Due to the speed of the Forex market, this technique is particularly suitable. The concept derives mainly from 2 approaches. First, many operators check the situation in the main time window (for example, small time window: minutes chart, main time window: time chart) before entering a new position.

Only when the hourly chart does not have the resistance or support at the same level as the minutes chart and the exchange rate does not move in an opposite trend, will it enter the market. Second, many traders use this approach to enter into a long-term trend.

The smaller window often allows for a better entry time. However, once the entry is made, the operation will be managed in the longer-term chart. However, the danger of over-operation will be threatened. Instead of focusing on the long-term vision, many operators observe the position in the subordinated time frame, even after starting, and take unnecessary risks. If you consider support and resistance, you should start at the highest available time window and advance to the smallest primary unit in time.

Intermarket Analysis

The dollar, of course, is the most important currency in the world’s financial system. Consequently, the dollar index is excellent for analytical purposes. Just look at the index to read the strength or weakness of the dollar against the main currencies: if the index rises, the dollar shows strength against the other currencies. If the dollar index falls, this indicates a weakness against the other major currencies. To measure even how a known currency is developed one compares its value with a basket of 6 coins. Specifically, this is the weighted geometric average of the US currency in euros, Japanese yen, British pounds, Canadian dollars, Swedish krona, and Swiss francs.

Market observers, who are interested in the interactions of different asset classes, know that the United States dollar plays an important role in cross-market analysis. From the historical development of the price, it can be clearly deduced that the global currency has a long-term negative correlation with the commodity market.

You can see how commodities entered a massive bearish trend, as the dollar index had a brilliant rally in mid-2014. For this reason, the United States dollar or the associated concept of the United States dollar index plays an important role in cross-market analysis, which examines the interactions between markets.

Appropriate Strategies – Long-Term

Now that we have learned a lot about currency market theory, we also want to deal with its practical application. To this end, we present two strategies that are interchangeable, on the one hand, in the long term and, on the other hand, in the short term. The carry trade is well known in exchange operations. Behind it is a simple system: funds are generated in a low-interest currency and invested in a high-yield currency. The difference between interest rates and the change in price is most important.

If the exchange rate does not change during the investment period, the return on the carry trade equals the interest rate spread. Also, a rise in the price of high-interest rates versus low-interest rates will lead to a further increase in revenue. In this case, the return on the interest rate advantage is further increased by the favourable development of the exchange rate. On the contrary, a devaluation of the currency in which it is invested leads to a reduction in yield.

If the percentage devaluation is above the interest rate spread, the trader loses money. If there are significant fluctuations in exchange rates to the detriment of the investment currency, the strategy could incur correspondingly high losses.

Carry trade is a popular strategy for hedge funds, as they are suitable for large sums of investment. Fund managers seek to identify macroeconomic developments at an early stage and make cost-effective use of appropriate strategies. In the same context, there is often debate about leveraged carry trades. Only part of the negotiated sum is deposited as collateral, taking advantage of existing capital. A Deutsche Bundesbank study in 2005 based on carry trade in euros against the dollar shows an average yield of 15 %, a multiple of the interest rate spread. A maximum of 71% profit would be possible.

However, annualized yields can vary widely and be markedly negative from month to month. Although carry trade is a long-term currency strategy it represents an interesting trading approach in the past and today. However, due to the high potential for detractions, the risk should not be underestimated. Rapid market movements can wipe out accumulated earnings in months or even years.

Appropriate Strategies – Short-Term

For short-term traders who want to generate profits in the volatile phases of the market, there is the breakup strategy of Maite Krausse. Breakage trading is a strategy used by many professional traders that offer satisfactory results in both swing and intraday trading. The best results are achieved in the volatile market phases or in strong trends, with uncertainty between market participants and continuous sidesteps minimizing the likelihood of successful entries. First, the range is displayed from 24:00 to 08:00 Central European Time (CET) on the 15-minute chart.

At this time, the maxima and minima are determined. Highs up to 8:00 a.m are considered the upper limit or resistance range, and lower prices represent a support level. If the price is now above the minimum marked or below the minimum, a purchase order is placed between 2 and 5 pips above the maximum, a sales order of 2 to 5 pips below the minimum.

This range is only valid during the respective day, after which it must be redefined and is therefore ideal for intraday traders. Orders are still valid until around 21:00. Thereafter, all pending orders are removed and redefined the next day. Once a purchase/sale order is activated, the transaction is carried out throughout the day, with a risk/probability ratio (CRV) of around 2:1 on mostly quiet days and a CRV of 4:1 on economically important days, given that the interest rate is a country’s decision.

For example, the loss limit (SL) can be set between 20 to 30 points. Profit-taking (TP) ranges from 40 to 100 pips, depending on market fluctuations. Therefore, a smaller TP will be chosen in the quiet phases of the market, and a higher estimated TP in days of interest rate decisions and global political events. Trading management is simple and must be set with an automatic limit of approximately 15 to 25 pips. In addition, in the 1-hour chart, you should pay attention to the areas of resistance or support in the area of the alleged inputs.

Therefore, a purchase order above the resistance, and a sale order below the support will be established. The most likely to benefit from this strategy lies mainly in the evolution of macro-influenced prices. Then, it is very useful to have a look at the daily economic calendar, as the greatest fluctuations are accompanied by surprises and new knowledge about the economic situation of a country and, therefore, the respective currency.

Particularly interesting are central bank decisions or protocols that provide directional indications. In those days, sometimes the profit can be generous around 100 or more pips. Inputs can be further improved by including breakdowns of price patterns such as upward and downward triangles, double floor/roof, and head and shoulders formations.

If the price has formed as a pattern, you should be careful and tune your inputs, because the buds of these patterns are often traded and are volatile. Another way to identify good break opportunities is through certain candle patterns that have formed on the daily chart. For example, the inner bar candle (also known as Harami bassist/bassist), can predict an imminent break, both in trend and in reverse, which is often used.

There is an inner bar formation when the next daily sail is of a different colour (day 2) and has its maximum and minimum price within the previous day’s sail (day 1). The entry is set on day 3 above/below the maximum/minimum sail of the second day.


The Forex market offers interesting trading opportunities that allow private traders to benefit from exchange rate changes. Whether it’s in the area of classic day-to-day operations, as well as to protect against price fluctuations or as a mix of separate strategies in the custody account. The advantages lie in the high liquidity and flexibility of the market and its 24-hour operation.

Moreover, foreign exchange markets always offer clear short-term trends. With trading margin and leverage, Forex is especially interesting for low capitalization traders. Operators also have the opportunity to choose between a more flexible interbank market, on the one hand, and standardised products, on the other. An investor will be able to choose from numerous trading instruments and strategies and combine them if necessary.

Forex Basics

The Most Common Reasons Why Forex Traders Lose Trades

As traders, we are driven to do our best and to walk away with a profit, otherwise, what’s the point? While the market presents vast opportunities for profit and growth, it is also unpredictable and isn’t shy about throwing us a curveball when we’re least expecting it. Of course, there are some ways that you can limit the losses you take, starting with understanding the most common reasons why forex traders lose trades in the first place. 

Reason #1: They Don’t Know Enough

One of the greatest things about trading is that just about anyone can do it with a few dollars and an internet connection. The downside is that many newbies jump in too quickly and open a trading account before they really know what they’re doing. If you don’t understand key indicators, know the best times to trade, or understand how the market works, how do you expect to make money? These traders are also more likely to experience frustration when trying to figure out how to work their trading platform. All of this leads to lost trades but this problem can be avoided if beginners would spend more time learning. If you’re experiencing this problem, you should take a break from trading and spend some more time becoming acquainted with everything you need to know. Then, you’ll be ready to come back and actually start making real money. 

Reason #2: They Don’t Have a Plan

Traders need a detailed plan to follow. This plan needs to think about what they will trade when they will trade, how they will trade, and so on. Failure is often contributed to trading without a strategy or deviating from your plan once it’s in place. Those that don’t skip this step really know what they’re doing and they can avoid problems such as being unsure of whether to enter a trade because their plan tells them what to look for. A plan also gives you a place to start when it comes to improvement because you can go back to analyze your results, figure out strengths and weaknesses, and make changes when needed.

Reason #3: They Risk too Much

Some traders are tempted to take big risks in order to win big, but this isn’t gambling. We have to remember that part of the success of being a forex trader involves limiting your losses in addition to having winning trades. In some cases, you might even have a higher number of losing trades but come away with a profit because those losses were controlled. Many professionals recommend keeping your risk tolerance to 1-2% of your account balance per trade, but this really does come down to personal preference. Still, you should not be risking big chunks of your account balance on each trade, as this is a surefire way to lose your investment. 

Reason #4: They Don’t Understand Trading Psychology

Traders that don’t understand the ways that emotions can affect trades might not pick up on big mistakes they’re making. For example, if you’re feeling greedy, you might be prone to overtrading. Those that are anxious or fearful avoid entering winning trades or pull out too early out of the fear of losing money, some traders take up revenge trading when they are angry that they’ve lost money, and so on. Trading psychology is a broad field that covers several different topics, so all traders should be sure to invest some time into learning about it. This way you’ll be more likely to spot emotional mistakes and you’ll know where to look for tips to overcome them. 

Reason #5: They Trade on Bad Days

Some traders keep losing because they just don’t know when to quit. If you’ve had a horrible day with a string of losses, for example, perhaps you should take a break and clear your head so that you can come back to trading with a fresh start. This would also be a great time to review your recent losses in your trading journal to figure out what the issue is. A bad day could also be at fault of the market, where there just aren’t any good moves to enter. Instead of forcing trades that could end badly, this is another time when traders should just sit out and wait for better opportunities.

Forex Basics

Did You Know that Good Traders Often Do Nothing?

The title sounds a little counterproductive, if you are not doing anything, how are you meant to be successful? One of the biggest and most important traits for a  trader is often their patience, the ability to simply sit and way, and to have the self-discipline to not jump at every single opportunity that comes up.

The majority of traders fail, and they often fail within their first year, quite a few within their first month. One of the things that can cause them to fail is overtrading, simply putting on too many trades. When you start out you will have your trading plan and your strategy, this will have some rules to follow. If these rules are allowing you to put on 100 trades a day as a day trader, then you are probably trading too much and your rules are not strict enough, your strategy only allows for one or two trades a day but you are putting on six or seven trades then you are not sticking to your rules, you are placing trades outside of it and this simply means that you are overtrading your strategy.

A good trader won’t let this happen. A good trader will always stick to their rules and a good trader will only trade when it is exactly right. You don’t need to take every single trade, even if it does one up with your strategy. It is often said that you should not let your emotions influence your trading, but when you are in a situation where your strategy is good enough, you can allow them to slightly influence you, not on the trades that your strategy allows, but whether or not you take those trades. Sometimes you simply have a hunch that something is not right or you just do not want to take it, use this and do not take it, you will kick yourself if you don’t, yet your strategy stated that it will be a good trade and one that you should take, so it is not the end of the world if you don’t, but you will begin to grow your own sense as to whether you should take it or not, just do not be afraid to say no and miss a trade every now and then.

Learning how to wait is vital, any good trader will understand how to do this. It helps you to keep some self-control and discipline within your trading. Not every single opportunity needs to be amazing. In fact, the majority of them are not. You only want to take the ones that both your strategy and your gut are telling you are right to take. If just one of those things exist, then it may be better not to take it. Of course, being able to train your gut feeling to lean more towards the better trades will take time, quite a lot of time, only through practice and experience will you be able to be sure that you are thinking along the right lines, this does not, however, mean that you should be trying to take lots of trades in order to train yourself.

Many newer traders like to rely on others which in the world of trading is never a good thing to do. You will be taking trades solely based on what it is that they are trading, with no actual knowledge of what it is that you are trading or why you are putting the trades on. This is not a sensible way of doing things, you will be putting on a lot of trades that you probably shouldn’t be, even if they are good trades, you have no idea why so you should probably not be putting them on.

Good traders simply do not need to put on a lot of trades in order to be profitable, they select their trades carefully and only select the ones that have the highest profitability and potential for a good win. So do not feel the need to place lots of trades to make a profit, pick them carefully and you can have quite a successful career as a trader.

Forex Basics

A Reality Check for Modern Forex Traders

Forex trading can seem glamorous, as it is often promoted with images of a luxurious lifestyle that’s fit for the rich and famous. That isn’t to say that you can’t get there someday, but trading is also surrounded by a lot of myths and misconceptions Today, we will explore some of these uncomfortable truths so that traders can start trading with realistic expectations.

Reality Check #1: You Have to Invest Money to Make Money

One of the advantages of trading is that you can start out with a small deposit – some brokers will allow you to deposit as little as $10 (or less!). This can be exciting for beginners because it makes it possible for everyone to start trading without requiring you to be rich in advance. However, traders need to realize that the amount they invest does matter. For example, if you want to make a living trading, one study suggests you’d need to deposit at least $30,000 to make around $3K a month. Most of us don’t have that amount laying around, meaning that we would need to trade for some time to make enough money to bring in a large enough profit to support ourselves.

On the bright side, you can make money off your initial investment, even if you do start as small as possible. We’ve heard stories where great traders have made themselves rich off a few hundred dollars, so don’t let this fact discourage you. Simply remember that it is important to start with realistic monetary goals without expecting to become rich instantly. 

Reality Check #2: Trade During the Action

We often promote the fact that you can find a trading strategy that supports your lifestyle, whether that’s part-time trading, trading during the morning, in the afternoons, or whenever you have free time. However, the best time to trade is actually when the market is experiencing the most action, which is typical during the New York and London sessions. If you can, you should try to trade during these times because there is more opportunity, even if it means rearranging your schedule. This isn’t absolutely required, but it can help to improve your results. 

Reality Check #3: There is No Magic Answer

As a forex trader, you will come across claims that something is the magic answer to becoming rich at some point. These claims could be referring to an indicator, trading strategy, forex robot, or something else. Don’t fall for this – especially when the product that is being advertised costs money. You have to remember that the market is unpredictable and nobody knows what will really happen, no matter how smart they claim to be or how convincing they are when explaining that their system is “foolproof”. This doesn’t mean that these systems can’t be profitable, but you should always be skeptical and never put all your faith into something that claims to make you rich. Instead, focus on perfecting your plan while taking proper risk-management precautions as this is the real key to success. 

Reality #4: You Can’t Always Win 

Losing trades are an unavoidable part of forex trading. The truth is that if you begin with the idea that you’ll never lose a single trade, you’re living in a fairy tale. The good news is that this doesn’t mean you’re out of luck because it’s possible to be profitable with low win rates, as long as you make enough money on the trades that you do win. You also might wind up with a high win percentage and only take a losing trade every now and then. For most people, this is perfectly acceptable, but some traders do struggle with these losses and blame themselves way too much when things don’t go according to plan. This is why it’s important to understand that this will happen from time to time so that it doesn’t take you by surprise. 

Reality #5: Trading Isn’t for Everyone

It’s pretty easy to set up a trading account, deposit a few dollars, and get started trading. Unfortunately, trading is not for everyone. That doesn’t mean that everyone couldn’t make money doing it, but some people just don’t want to put in the time, effort, and patience that it takes to stick with trading. Those that easily give up are more likely to walk away if their expectations aren’t met or after one or two bad trades. If you want to be among those that do make it as successful traders in the long-run, you have to be willing to work hard and understand that trading isn’t a scam, but that it isn’t always easy.  


Beginners Forex Education Forex Basics

Why Do Some Forex Traders Ultimately Give Up?

The unfortunate truth about trading is that it is not for everyone, in fact, it is for the very few. Thousands of people take up trading each year but it has been estimated that one a very small percentage, around 2 to 5 percent of new traders actually continue to do it long term and actually make money. It takes a lot of time, money, and patience to actually become a successful trade and this is most likely why most people do not continue and stick with it.

So why exactly is it so hard to keep going, we will now look at a few of the most common reasons as to why new traders are so often giving up and why so few of them actually continue on to be profitable.

A Blown Account

Let’s get straight into the big one, they managed to blow their account, we have all been in this situation, coming in with wide-open eyes, thinking of all the possibilities and all the money we are going to make. Then things go wrong and we blow our account, most likely due to our inexperience, but whatever the reason is, it’s gone. Now we are annoyed, trading clearly isn’t what was advertised, we just lost our money and so we no longer want to trade. At this point some quit, others, they try again and inevitably the same thing happens all over again, some quieter and the cycle continues. Without wanting to put in the proper learning to understand why they lost their account, they will just give up instead and move onto what they think the next big money-making opportunity is.

Information Overload

We can see exactly where they are coming from, on the outside, trading can look pretty simple, the markets can go up or down, the news can affect it and so can Donald Trump, but once you actually get into trading, it is a whole other beast. In fact, we haven’t really come across anything which has more information available and different scenarios of things that can happen, of course, that is not including things like quantum physics or storyline from the Metal Gear games.

There is a lot, and it is enough to overwhelm anyone, especially someone coming into it that didn’t really know what to expect. Many people see all the information, the hundreds of indicators and then decide that it is too much, they do not have the time or the energy to start going through all of it, not to mention it is pretty hard to work out where to start too. So this bombardment of information is another thing that can cause people to step back and walk the other way.

They Suffered Some Losses

This is similar to the blowing on an account but often comes once someone has actually put in some of the work of creating a full or at least partial trading plan and strategy. They have put in a lot of effort to get it to the stage that it is at, then they begin to trade and they experience a string of losses, it may only be two or three, but it could be five or six in a row. This will hit their confidence, it would hit anyone’s confidence. Having put in all that work and then losing, it can make you wonder what the point was and if it is worth putting in any more. Those that feel that it is not worth it will stop at this point, others may realise that losses are as much a part of trading as winning, but the disheartening feeling of doing all that work just for losses is just too much for some newer traders. The good news is that at least they will have something to take out at this point before actually blowing an account.

A Bad Signal Service/Trading Robot

These days, trading is being advertised as being extremely accessible, and it is, the unfortunate thing is that it is being advertised this way by a lot of scammers and people who want to make a quick buck. They often do this by realising and then advertising either a trading signal service or an expert advisor that will enable someone with no knowledge of the markets to trade them successfully. Now, there are some legitimate robots and signal services out there, but those ones aren’t really advertised as aggressively, instead, most people see the ones promising returns of 20% per month or 90% accuracy of trades. When you see numbers so high, avoid them. New traders get into trading for quick money without having to put in any work, but like anything in life, the less work you put in, the less quality you get in return. These trades or robots go bad and an account is blown, it’s not as easy as it looks and the new traders leave.

Forex Trading is Simply Not Suitable for Them

Forex is not for everyone, in fact when I started, I hated it, but I stuck with it and grew to love it. Not everyone wants to stick around in order to get past that dislike stage. Often when you start doing something that you do not like, you simply put it down, walk away, and don’t look back. This is what people especially those that hate numbers often do with trading. This is perfectly fine, it won’t be for everyone just as sport isn’t for everyone, those that don’t like it will often leave within the first week or two.

The Profits are Too Low

A lot of people come into trading in order to make money, what they do not realise is that they actually need money to make money, which in all honesty, is how the rest of the world works too. Many people don’t realise that if you come into trading with just $100 to $1000 you are only going to make a couple of dollars a day at the most (unless you get lucky or risk too much per trade). So after a week or so, people begin to realise that this is not the get rich overnight thing that they believed or was told to them, this can put them off and so they will leave to look for something that can generate them some money a little quicker. Those coming in knowing that it is a very long term thing will be far more successful and more likely to stick around.

So that are a few reasons why people decide to leave, they are all very valid reasons, some slightly more unfortunate than others. Trading is a niche, either you will like it and stick with it, or you will not and leave. Whatever your decision, trading will be around for a long time, so even if you leave, there is no harm in trying again in a few years.

Forex Basics

Top Four Questions For a Professional Prop Trader

Becoming a professional prop trader is not easy. The positive results of trading and effort come after a few years. Whatsmore, they may not even come at all. Investors commonly have a crafted mindest when it comes to decision making. They will put all the possible outcomes of an investment or action on one side, and the negatives on the other. When we want to decide if Forex trading is a good venture, it may be hard to measure that investors balance. The final question we have to ask, the question that covers all the others, is can we dedicate ourselves to Forex, can we persist and endure the challenges this market will throw at us? If you have doubts when you fully understand what you are facing, turn away, find some other options, only financial or psychological frustration will await you. Every trader feels these challenges.

Proprietary traders mastered these emotions, persisted, and have built trading systems that put them on the top, consistently squeezing the profits out of forex. They are rewarded for their years of endurance. Traders that are just starting can greatly shorten their path to becoming consistently profitable for the first time by learning from these masters. Yet, few of proprietary traders share their knowledge as a goal, creating valuable and rare resources for the starter traders who have decided to walk this path. This article contains their opinions and answer to the top 4 questions asked by traders, some of which are already experienced.

US citizens seem to be the ones that ask the most although even more surprising is the fact Forex is not that popular in the US. The US is the most economically developed country and since the stock market is the first place to go for investors. Whatsmore, the media has a great contribution to this, shadowing what other markets are there. Still, such is the habit in the US, where the rest of the world seems far, unrelated, not important to the lives of US citizens. This creates ignorance and therefore makes some of the questions funny and uninteresting for experienced traders.

A good analogy to this is comparing the NFL to the UEFA Champions League, in addition to the football and soccer being completely different sports for the US citizen, while abroad it is the same for most. Soccer is Forex for the rest of the world and the NFL is a stock market for US citizens. Most of the proprietary traders are trend following strategy traders in many variations. These strategies are scientifically proven to be, according to their sources, the most successful ways to trade. As such, the questions asked do not primarily come from traders who are trend followers.

So, starting from the number 4 top frequent question:

Where do you think the EUR/USD is going to go?

The EUR/USD is the most popular currency pair to trade (which prop traders avoid) and the pair could easily be substituted with any asset on the forex market. Prop traders are masters of analysis, psychology, and systematic approach to trading. But they cannot see the future. The shortest answer to this question would be – I do not know. The question is also not very well defined for them. They need more information, they need precision. Prop traders would ask you back about the timeframe, then how far into the future, what risk tolerance, and so on. Still, the answer is the same. They will also say that it is a good thing they do not. If you can know the future, there would not be any profit to be made in a perfectly balanced market (since everyone knows what is about to happen). And it would ruin all the fun. This answer is shocking to people, who have probably just entered into forex. The answer also turns them away, discredit the prop trader, making prop traders question if the effort of sharing the knowledge is worth the trouble. However, this is the extension of the answer – prop traders use technical analysis (not all of them).

Charts, indicators, and tools show them using math where are the points a trade can be entered. These signals are not extended into the future, they are in real-time, what is going on right now. Prop traders have a daily routine, they wake up, eliminate any distractions, and have precise time when it is time for trading analysis and operations. There are three options the charts or tools can tell them, trade long, short, manage already open trade (partially close, exit, scale in, move Stop Loss, etc), or do not trade at all. Then, they move on to the next asset and repeat. Sounds simple right? They have worked hard for the system to work, once it is all set and they are ready, it becomes one of the best “jobs” in the world. Yet again, this is not the answer most will be satisfied with. Another reason why people fail is that they seek something to consume right away, something to use, a takeaway that will make them pips. It will not work.

Forex will filter these attempts, you may try again, differently, fail again. Those that remain have a great chance of becoming good at extracting profits from forex. There is another group who like to get informed this way just to sound smart in front of other people, and have no idea how to trade. One more thing prop traders want to add, making forecasts is a bad way to trade. Weird as it may sound, predictions will be met with a bust account, sooner or later. Forecasting is extremely popular. Just turn on the TV and enjoy all the smart speeches by renowned financial figures. They are terrible traders. They are good analysts, say smart things about the market conditions.

In practical trading, they are not good. Guess that is why being on TV is a better business option for them. Similarly can be said for certain brokers account managers or recruiters. This may be hard to believe. If you need some proof, we can quote Ray Dalio, one of the best hedge investors in the world estimating over 17 billion in net worth. In reference to his book, “Principles”, aside from being the classic on investments, on page 42, he says:

“Truth be known, forecasts aren’t worth very much, and most who make them do not make money in the markets.”

It is not uncommon to find professional traders that have aligned their trading methods with the Ray Dalio ideas. A certain group even dares to say fundamental analysis and forecasting is a waste of time! So prop traders do not care to please the masses with this answer, they do not trade Forex to impress people, they do it for financial freedom, effective use of their time and this should also be a genuine reason for future traders too. Moving on to the next question, which is:

Based on _____(some elections, economic news, reports, etc) happening in the world, where do you think _____(some forex asset, EUR, USD) will go?

Now, thins question is very similar to the first one, just a bit expanded to new aspects. The answer by a prop trader is not the same. Let’s fill in the blanks with Trump elections and the USD moving as a consequence because the question was posed soon after the US elections. There is an answer to this but it is somewhat complicated. Trump elections can be regarded as surprising. Trump was never “supposed to” win. When he did, investors are on the rampage to find good opportunities. The market was already expecting Hilary Clinton’s victory and went in the corresponding price direction. Hilary did not win, investors looked for the surprise piggyback. This move can be predicted by prop traders because they know how forex works and how the big banks work.

If you are not familiar, the Big Banks article explains how the price is set by these big players on forex. The Big Banks and institutions decide how the price is going to move. Any serious trader must know this. In the case of the USD prospect when Trump won, the long term is bearish. But the exact time when this trend is going to take fold is on the big players of forex to decide. Basic logic says weaker USD opens up the economic expansion and Trump is a businessman first, money-making mindset. At no point is he going to allow equity markets plummet during his mandate.

The result until now in 2020 is exactly this, Indexes rise even quickly after the trade war and COVID-19 pandemic. The move when the USD is going to start trending down was not expected to start right away. Banks know that this logic is evident to many, even to the inexperienced investors. The EUR/USD move up was not to be seen, on the contrary, the big banks pulled it down, sharp. There were just too many long positions big banks could not let go by, investors who went in too soon were met with a surprise they could not handle. Even the ones with a deeper Stop Loss tolerance were not spared.

A slight correction took place to give out a slight hope of the logical bull (USD weakening) move they have expected. Well, this hope was chocked along with the investors’ positions until the bing banks ran out of long positions to flush. This answer is also not for the common people. Even more, the answer will not change much, the same will repeat. Other events, like the Brexit and its consequences, are not this easy to predict. Most prop traders would not even try, they will focus on the present. The final point to all this is to know that massive directional trades because of a major event are transparent to you, other investors but to the big banks too, and their word is final.

The second question is: Do you trade cryptocurrencies?

Crypto assets are new to the scene and they come with several risks. Therefore, prop traders still need to adapt to this risk so they can trade it as they would forex. The idea of cryptocurrencies is great, it is the new age of money. Traders who entered early deserve their share of the fortune, although this market has a different kind of rule(s). It is an alien with many unknowns and it is not adapted to the world yet. Prop trader likes the environment with proven track records, movements, actors, and information resources. This is how they can have an edge – when all rules are known. This knowledge is trader specific, you should not invest with a market you are not familiar with. Of course, some games are designed players only can lose in the long run. Casinos have many of them.

Luckily for prop traders and others who know how to play, forex is not one of these games. Forex can also be thrilling as the casino games but you are probably reading this article for the money-making reasons too. The Crypto market simply does not come into play with careful traders yet. This does not mean you should not test it or build the trading system for the crypto world, you would be limiting yourself an opportunity.

The number one question for a prop trader is (and the most ridiculous one):

I have some Iraqi dinars here, a lot of them. Do you think they will go up in value sometimes?

Prop traders would smile awkwardly, they get this question a lot. This question is posed mostly by US citizens that served in Iraq or have this currency from a relative. This could be a souvenir they would like to be valuable, carrying the mystic feeling of a secret-treasure they never knew about sitting in the attic. Or, they bought the currency notes off a scamming seller claiming its worth in the future, building up this treasure in the attic feel. You can check the USD/IQD chart and analyze if this is going to happen. To prop traders, this idea could stay just as an idea for a very long time. The country like Iraq has a very different history, culture, government, economy, and everything in between to consider rebounding the value of the IQD soon. Unfortunately, forex brokers and other actors around this market are not always honest, similarly to the seller of IQD with a story to back it up. Keeping your reason open will identify this. Forex scams are present and not hard to fall into one, but this is a subject for a separate article.

*Source: No-nonsense Forex Channel

Forex Psychology

The Lifestyle of Forex Traders

What is like to be a professional forex trader? Not long ago, we had an interview with a high-profile forex trader named Arnold, he was speaking about the motives and transitions he was going through, why he became a trader and how that decision affected his life. When we asked him how he discovered forex, he said that in his mid-twenties he worked as an assistant manager at Abercrombie & Fitch store in London, drinking around with his lads, and always struggling to support his living. One day on his way back home, he was in the metro sitting next to the nifty guy and noticed him playing some strange video game on his mobile phone. He was curious so he politely asked a guy about the game.

The thing is that wasn’t a game, it was the Metatrader, which is a trading platform used by a large majority of forex traders. Later on, a guy said to him that he had been made fifteen thousand pounds the day before. Later that day, our guy spent hours on internet researching about forex trading, and that’s how his journey went on. Today Arnold is a professional forex trader and mentor to over one thousand beginners worldwide.

Here we are going to try to pull back the curtain a little bit on a lifestyle of someone who trades daily, and who is close to understanding and anticipating the landscape of forex trading. We’ve been listening to all the time about different daily routines. About waking up early, trading, drinking coffee, going to the gym, taking our vitamins, reading news, trading again, and that’s it. That doesn’t tell us a lot, to be frank. What we can expect from this lifestyle and what it is? For all of you flashy people who think that lives of traders are super glamorous, if you think that every day is going to be a P. Diddy video, hot girls wearing bikinis, drinking cocktails, riding around the pool on roller skates, you better think twice. There are a bunch of traders around wearing Rolex watches, driving Bugatti cars, having the latest gadgets, and owning multi-million dollar houses, but we need to be reasonable and put those commodities on aside for a bit.

Don’t get us wrong, being a forex trader is great, it could be super beneficial, but it takes a lot of effort and practical knowledge if you want to be in the game. In this world, we have as well, a significant number of low intelligence people and very desperate people that can be easily amazed by a flashy lifestyle of forex traders. They happen to think that forex trading is their way to the penthouse. Those people are bound to fail, no matter what you tell them. Arnold says it’s the first law of marketing: ‘Don’t advertise to intelligent!’ because at the very end someone is making money out of your ignorance. So be careful about what you take for granted. If you are a type of person who genuinely wants to know what it’s like to be a professional forex trader, we shall try to give some answers here because you can make pretty good life trading forex. Speaking further with our guest, he told us it could be helpful to live below our means.

We should avoid buying stuff we can’t afford. If we want to be successful, we should stop wasting our time, drinking a lot, feeling sorry for ourselves, or anything like that. As forex traders, we need to do everything we could to make our trading consistently profitable. For beginners especially, you guys are not going to be able to put yourself in a comfortable position where you can easily trade your money. It’s most likely you are going to lose all. So if we manage to present consistent results maybe somebody out there would give us money to trade for on their behalf. Eventually, some steady company might be a solution for us. Private coaching could be a potential source of income as well, for people who have a capacity for something like that, and if you find yourself confident about the knowledge that you are about to present.

Whoever wants to make a living out of this type of business, that person must be ready for the extreme inconsistency because there will be a lot of time not knowing how much money we are going to make the next day, the next week, or the following month. From this stand of point, it is going to be almost impossible to project the future or to make any plans. So the first moment when we actually taste the money and think we could sit back and pop the champagne cork or treat ourselves with a golden watch, we should stop right there and act accordingly because we simply don’t know just how long that is going to last. Hopefully, it’s going to last for a very long time, but if we don’t adopt a long game approach it might ruin everything we achieved. We should be better thankful for what we got and try to maintain a certain level of decent modesty. Instead of spending money on things we don’t need, we should consider to allocate our income into other businesses, other markets, or put our money in more passive income. Arnold emphasizes that he was constantly trying to build and build and add those layers of protection so this lifestyle he worked so hard to create never goes away.

So what is being a professional forex trader, what that lifestyle is? It is anything you choose it to be. If it’s private jets, exotic pets, and shiny jewelry, ok. But it might not last very long because it isn’t right kind of money management, investing in things like depreciating assets was always pretty questionable. You guys are free to do whatever you want to do with the money that you made, it is your money, but we are going to live a very long life hopefully, we might as well build that empire while we can. Most hi-expert digital nomads are mainly focused on flashy ideas rather than flashy possessions because that is the financial energy that we want to be involved with. Preservation should be our number one goal as Arnold likes to point out. So traders, understand that if we don’t take necessary steps to preserve our wealth it could all be gone in a blink of an eye, and it may never come back. So the real life of a professional forex trader is relentless work and dedication. We need to learn from our mistakes, write them down, find out what went wrong, what was behind that and we must be patient. Remember guys, the game is far from over, and whatever that dream of yours is, go and get it. The time is now.

Forex Price-Action Strategies

Good Things Come to Those Who Wait

Patience is a virtue. Forex traders need to keep patience and must not get carried away. It is not easy, but to be successful in trading, traders must be patient. A trader needs to have a sniper approach. He is to wait for the best trade setup to trigger an entry. The Forex market often produces entry with less chance. If a trader can restrain himself from taking those entries, he would be able to keep a better winning ratio. In the end, it gives him more confidence and makes him a good trader. In today’s lesson, we are going to demonstrate an example of an entry with less chance and a good entry. Let us get started.

The chart shows that the price makes a strong bullish move. Upon finding its resistance, it makes a bearish correction. It finds its support and produces a bullish engulfing candle. Such a nice price action for the buyers this is! However, it takes one more candle to make a breakout at consolidation resistance. As far as the breakout trading strategy is concerned, this is not an A+ trade setup. The price may come back down and consolidates again. Thus, it is better to skip such an entry.

The chart produces two more bullish candles, but the price does not go too further up. It rather starts having consolidation. The buyers may keep an eye on this chart to see whether it produces a bullish engulfing candle.

The chart does not take long to produce such a good-looking bullish engulfing candle closing well above consolidation resistance. This is an A+ trade setup. The buyers may trigger a long entry right after the last candle closes by setting stop loss below consolidation support and by setting take profit with 1R. Let’s proceed to the next chart to find out how the entry goes.

The chart produces another bullish candle. The last two candles suggest that the bull has taken control. It may hit the target soon.

As expected, the price hits the target. The last candle comes out as a bullish candle having an upper shadow. The price may reverse now. Anyway, the buyers have made some green pips. Their plan has worked well.

If we look back to the chart, we find that the first entry would not be that good an entry. It would make them wait too long. Often the price goes the other way and hits the stop loss. The second one comes out as an excellent entry. It does not make them wait but hits the target in a hurry. Traders must remember that if they want to avoid waiting with their entry to hit the target, they must wait and calculate well before triggering an entry.

Forex Basic Strategies Forex Daily Topic

Significance of Breakout Confirmation or Reversal at Pullback

Breakout trading is one of the most widely used trading strategies in the Forex market. Breakout confirmation is equally important. Without breakout confirmation, a breakout may not work in favor of the traders in many cases. Thus, if we want to have a tremendous rate of winning, we may wait for breakout confirmation or reversal at pullback before taking entry. In today’s lesson, we are going to demonstrate an example of this.

The price after being rejected at a resistance level heads towards the South. It produces a bullish inside bar and heads towards the North again. The momentum suggests that the price may make a breakout at the level of resistance. Breakout traders are to keep an eye on the pair to get a breakout followed by breakout confirmation or reversal candle at the pullback to go long on the pair.

The last candle breaches through the level of resistance. Candle’s attributes suggest that this is an ideal breakout candle. The candle barley has the upper shadow. The breakout traders are to wait for either for the next candle to close above the breakout candle or the price to come back at the breakout level to consolidate and produce a bullish reversal candle to offer them a long entry.

The price does not head towards the North. It comes back at the breakout level closing within the breakout level. The breakout is still valid. However, the buyers must wait to get a bullish engulfing candle to close above consolidation resistance to trigger a long entry by setting stop loss below the breakout level. Let us proceed to the next chart to find out what happens next.

The price breaches the level of support and closes well below the breakout level. The sellers may take control soon in the pair. Traders taking a long entry right after the breakout candle closing are to have a loss here. If they set stop loss below the lowest low, the risk-reward would not be lucrative. When the price breaches a breakout level, it usually generates more momentum and changes its trend. Let us see what happens here.

The price goes back to the breakout level. This time it makes a bullish correction. The equation changes completely another way round. If the chart produces a bearish engulfing candle closing below consolidation support, the sellers may go short and drive the price towards the lowest low.

The chart produces a bearish engulfing candle followed by another strong bearish candle. It looks like a different ball game completely now. It is now the sellers’ territory.

In the bullish market, the chart does not produce a bullish reversal candle; thus, the price gets bearish. In the bearish market, it produces a bearish reversal candle (engulfing) and offers entry to the sellers. By taking entry upon breakout confirmation, we may not find as many entries as we would like, but it gets us more consistency in winning trades.

Forex Basics

Some Spikes are Not to Be Ignored

Forex traders often struggle with spikes on their trading charts. The Line chart does not show spikes, but Candlestick Chart does. Price action traders usually use candlestick charts as one of their weapons to trade effectively. Thus, they face this problem every now and then. There is no sure method confirming which spikes are to be ignored, and which are not to be ignored. We have to be sensible about that. In today’s lesson, we find out a kind of spikes that are not to be ignored. Let us get started.

The price heads towards the South with good bearish momentum. It finds its support and produces a bullish reversal candle. The last candle comes out as a bullish candle as well. The sellers are to wait for a bearish reversal candle to go short in this chart.

Here comes the bearish reversal candle that the sellers wait in such price action. We have not drawn any resistance line. If we closely observe, we find that the last two candles’ bodies suggest a line of resistance. Candles’ bodies play a significant role in determining the support/resistance line. Let us draw a line of resistance here.

Here it is. The combination of the last two candles and their bodies suggests that we may draw a line right above their bodies. In most cases, we are to do this. However, the last two spikes have something more to think about. If we closely look, we find that the last two spikes are lined up. They have had their rejection at the same level. This means that the line is significant, which must not be ignored. Thus, if we want to take entry here, we may count the line above as the level of resistance. Let us have a look at the chart below with more drawn lines.

Look at the Stop Loss level. To be safe, we may not ignore such levels, where the price gets rejected multiple times. The candles may end up having spikes, but these spikes shall be counted to determine our stop loss, take profit, and breakout level. Let us not proceed to find out how the entry goes.

The trade setup works well for the traders. The price heads towards the South with more bearish pressure. It gets 1R to the sellers in a hurry. Now many of us may say the price never goes back to the level. In 80% of cases, the price does not go back near to the resistance. In the rest of the 20% cases, it may go. That is when we are to take an unnecessary loss. As they say, it is better to be safe than sorry. Let us be safe with spikes like these.

Forex Daily Topic Forex Price-Action Strategies

Forex Traders: Get Patience, Optimism, and Never Give Up Attitude

In today’s lesson, we are going to demonstrate an example of the daily-H4 combination trading, which makes traders wait for a long time. Usually, if the daily chart produces a daily reversal, it creates an H4 entry within a day or two. In today’s lesson, the H4 chart takes four days after creating a daily reversal to produce the signal candle. Let us find out how it offers us entry.

This is a daily chart. The chart shows that it produces a bearish inside bar at a strong resistance zone. An inside bar is not a strong reversal candle, but a strong resistance zone may attract the sellers to look for short opportunities. The daily-H4 combination traders are to flip over to the H4 chart for the price to consolidate and produce a bearish reversal candle to offer a short entry. We flip over to the H4 chart later. Let us now have a look at the daily chart with four more daily candles.

The chart produces four more candles that are bearish. However, the daily-H4 combination traders do not get any A+ entry to go short. Should they skip eyeing on this pair? Never, they need to perform the same duty. As long as the last daily candle is bearish, they are to flip over to the H4 chart. The last candle on this chart is bearish. Let us flip over to the H4 chart this time.

You may notice that the H4 chart does not make deep consolidation followed by a bearish engulfing candle to offer them a short entry so far. Traders are to flip over to the H4 chart every day with no luck. Let us proceed to the next H4 chart.

The chart shows that it is having a deep consolidation. The last candle comes out as a bullish engulfing candle. However, the chart is still bearish biased unless it produces a bullish daily reversal candle. The sellers are to wait for an H4 bearish engulfing candle closing below consolidation support to offer them a short entry.

Here it is. The last candle comes out as a bearish engulfing candle closing well below consolidation support. The sellers may trigger a short entry right after the last candle closes with 1R.

The price heads towards the South with extreme bearish pressure. The price hits 1R with ease. Some traders may even make much more than 1R by taking a partial profit. In the end, it ends up being a prolific entry.

It does not come easily, though. The daily-H4 combination traders are to keep eying on the charts for four consecutive days. The H4 chart produces the signal on the fifth day after producing the daily bearish reversal candle. This is why Forex traders need to have patience, optimism, and never give up attitude.