Taking Responsibility for Your Actions - the Forex Way

It is something we try to teach our children, but when it comes to trading there are plenty of traders that are not willing to do just this. Taking responsibility for your actions is one of the most important things a trader can do, mainly because it leads to real and true introspection. The trader simply has to be able to be honest with themselves as to what happened in a trade if they are going to learn anything at all by their losses.

The whole point of learning to trade is to understand what works, what doesn’t, and be able to adjust to changing conditions in order to come out ahead in your trading account. It is nearly impossible to do any of these things if you are not honest with yourself, and what actually happened during a trade.

When I speak to traders, I will often hear things like, “The broker decided to do a stop loss hunt.” I hear this one often enough to recognize it for what it truly is: A flat-out denial of responsibility in taking the loss. The big thing with this person is that they feel the need to be right 100% of the time. This is a person that is setting themselves up for failure as the pressure will be far too great for them to feel they can function in an efficient manner.

Another one I hear a lot is a variation of “Trichet came out and killed the trade.” I can assure you that the person that made the announcement wasn’t watching your position. Traders that get upset about this kind of event seem to suggest that the announcement was aimed directly at them, and not as a statement the central banker, politician, or whoever felt necessary to make. It is like anything else in life: things happen. Timing isn’t always going to work in your favor. Besides, the person who complains about this very thing thinks they are a trading genius when the announcement goes in their favor and they make large profits from it.

The main point is that you cannot fall into the “blame the other guy” trap I see so many others get involved with. It is a loser’s game that will only allow you to make the same mistakes over and over as you don’t look in the mirror for the answers to your losses. Also, I should mention that sometimes a loss is a fairly random thing. Sometimes, there is no real deep answer. The market ebbs and flows, and sometimes you are on the wrong side of it is all. 

Either way, unless you are honest with analyzing yourself, you will never be able to analyze the market.

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Forex ArticlesForex TerminologyForex Technical Analysis in Non Technical Terms Forex Technical Analysis in Non Technical Terms

What is technical analysis and why should you care? Well, let’s start with the fact that what separates Forex from gambling is the fact the in Black Jack or poker, the hand you receive from the dealer is purely and completely based on luck. There is absolutely no way to decipher what your hand will be (unless you know how to count cards), and therefore, there is nothing you can do to be prepared.

Forex, on the other hand offers you the ability to predict with high probability what the future will bring for a currency. Now, of course, there are no guarantees, and it is very possible that based on your analysis, you predict the currency will go one way, and it ends up going the other. However, the Forex experts out there, who truly know how to analyze the charts, will make predictions that are accurate 7 out of 10 times, and sometimes even more.

The basic principle of Forex technical analysis is of course the famous saying “The trend is your friend”. What does that mean? Well, in ultra simple terms, it means that there is no real reason to assume a current trend will reverse itself without a driving force. Just like in life, an action brings a reaction, and without the action of a news announcement or a financial event, no reason the reaction of a trend reversal should take place.

Having said that, the analysts who are followers of the fundamental school of thought will uproot the claim that a trend reversal is unlikely by proving that all trends eventually come to an end or even worse, reverse themselves. The US Dollar might go up against the EUR, but eventually it will stop, even if there is no major announcement.

It is for this reason that the real Forex experts out there will tell you that technical analysis alone is an insufficient tool for Forex traders. It is only half the equation. Forex charts and trends should receive the attention they deserve, but only in the context of fundamental analysis on the side.

A Forex trader who wishes to succeed should pay close attention to the charts with one eye, and the other eye should be focused on the financial news site or channel. Even once you do that, there still are no guarantees, but your chances of success cannot be compared to your chances in a casino. In fact, once you use technical and fundamental analysis properly to analyze the Forex market, your chances of success are much more similar to a meteorologist accurately predicting tomorrow’s weather. It may not be 100% but it's a definite science that is often on the mark.

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Forex Success in 4 Simple Steps

As I was writing that title, I thought that it sounds nearly impossible, but actually, I am not promising immediate wealth or success, but rather, a slow paced and long lasting strategy that, at the end of the road, will lead you to success, making the proposition entirely possible.

For starters, what I just wrote above is one of the key components to Forex success -patience. If you ever have the misconception that Forex will make you rich fast, you need to get it out of your head before you experience some serious disappointment. There are no free meals in life, and that is no different than Forex.

Ask yourself this simple question: “If this or that broker can guarantee me wealth and success, then why isn’t everyone trading Forex with that broker?” If there was a magic potion, there would be a lot more Forex traders out there, and even more so, there would be a lot more billionaires around.  (This is why you should research carefully and read Forex brokers reviews before choosing a broker that will serve you well for the long term).

The problem is Forex can bring you wealth and success, but it requires patience, which is a commodity most people do not possess. If you are willing to take the time to invest in your Forex career, not just trade, then you will eventually look success in the eye.

The following is a short list of the first four steps you must take in order to succeed in Forex. If you take these steps properly, there are still no guarantees, but there is a guarantee that if you do not, Forex success will be considerably more elusive.

• Educate Yourself: Do not, under any circumstances begin trading Forex without getting to know every little detail about the market. Learn the history, terminology, strategy, and volatility of the market. Do not forget to also study the different philosophies about market analysis, as well as the various tools and resources at a Forex trader’s disposal. Once you feel comfortable with Forex, jump in to the next stage, which should be Forex demo trading.

• Question Yourself: This might sound childish, but before trading Forex, you need to make sure you are emotionally capable of trading Forex. It is not an easy trading arena. It is filled with entities that profit from your losses, it is unfortunately highly populated by people trying to trick you, and it is a nerve wracking experience like nothing you have experienced before. The flip side of course, is that the Forex market offers endless potential for profits, but only to those who can handle it. So, before jumping into the deep Forex waters, ask yourself “Do I know how to swim under such sever weather conditions?”

• Train Yourself: The last thing any Forex trader wants is to find themselves experiencing major losses due to a lack of control. You need to ensure that your emotions do not get the best of you when you are trading. Do not be afraid to lose, do not be afraid to win, and do not be afraid to pull the plug on certain open positions. Before trading Forex, you need to train yourself to be an objective and scientific trader, one that adheres to their Forex trading strategy, no matter what. A trader that uses Stop Losses and Take Profits when necessary, and a trader that is able to cope with losses, sometimes painful ones, an inevitable part of Forex trading.

• Know Yourself: In order to succeed in Forex, you need to know yourself to depths not necessary in other parts of life. You need to have complete and utter control over your natural instincts as well as emotions. You need to know how you react to high pressure situations, and you need to know how you handle high risk scenarios. If you can answer all those questions and others about your essence, then you are emotionally prepared to enter Forex. But, let there be no mistakes, such self knowledge can take months and sometimes years to achieve.

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How do Forex Automated Systems Work?

If you are going to trade Forex, sooner or later you will hear about automated Forex systems. They are also called “robots”, “expert advisors”, and “auto traders”. No matter what you call them, they all operate in a similar manner. While the exact technical set ups will vary from system to system, the operation of them will essentially be the same.

You will download and install the system to your Forex trading platform, and set up should only be a couple of steps. The basic premise of these things is that they are essentially an “add on” to your trading platform. This allows for easy installation, and uninstalling is just as simple. Because of this, many traders will actually have several different systems that they use in a variety of market environments.

The systems will fall into two basic categories: automatic and semi-automatic. The automatic ones will place trades for you, without any input from you at all. The semi-automatic ones will simply give you a signal or suggestion as to which way to trade a particular currency pair.

The automatic one will simply buy or sell based upon a sometimes complex mathematical formula that tells the computer when it is time to enter or exit the trade. The automated system simply does all of the work for you. It is very common for these systems to have a hidden proprietary algorithm that you never see in order to make these decisions. The one thing they will all have in common is that they are all mathematically based. Hiding the algorithm is just a simple way of protecting their intellectual property.

The semi-automatic system offered by Forex automatedtraders will simply let you know when it gets a signal to buy or sell. The system will still have that hidden algorithm that you won’t see, but instead of placing the trade you will often see some kind of pop up alert when it is time to trade. You can then choose as to whether or not you want to trade the signal, allowing greater flexibility for the trader.

The majority of these systems are made for the MetaTrader 4 platform as it is by far the most popular one out there. There are systems made for other platforms such as GFT’s DealBook 360, NinjaTrader, TradeStation, and many others. However, you will find an almost unending supply of them for the MT4 platform as even the brokers that use other platforms will often offer MT4 as well.

The better Forex automated systems will come with a money back guarantee, normally through some kind of ClickBank vendor account. Because of this you should be able to feel somewhat comfortable with the software as your money can be refunded. However, it is recommended that you try a new system out on a demo account just to make sure it performs up to your standards. Like anything else, there will be some that are better than others and your mileage may vary so to speak.

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How Forex Connects to Other Markets

One of the most commonly overlooked places that a trader can find information as to the future direction of a Forex pair is in various financial markets around the world. Most Forex traders will simply stare at the currency pairs, completely oblivious to the world around them and the fact that it takes various reasons to move that money from one international border to another.

This is a very common problem with Forex traders, as they are brought into this world under the assumption that Forex is where all of their money will be made. They are often enticed by the fact that Forex offers the most leverage, and is supposed to be the most "simple" market out there. Because of this, they miss a lot of the more obvious signals that professionals around the world pay keen attention to.

By knowing some correlations, you can often see signals and other markets before you see them on your Forex terminal. As an example, the gold market is often either predictive more reactive of the Australian dollars moves. This is simply because Australia exports massive amounts of gold. If you think about it, it makes sense as companies will have to pay these Australian miners in Australian dollars. So as gold rises, as a general rule over time the Australian dollar will as well.

Another market the trader should pay attention to is the crude oil market. The futures market for crude can often have a massive effect on the Canadian dollar. This is because Canada exports so much crude oil to the rest of the world, with a special emphasis on the United States. Because of this, as the price of oil rises the value of the USD/CAD pair will fall - which of course signifies strengthen the Canadian currency. This is a double whammy of fact, has the oil markets are priced in dollars. So as the value of the US dollar falls, it will take more of them to buy those barrels of oil.

Quite often, the yen base pairs are a good proxy for risk. In other words, as the world's markets rise in value - which of course signals that traders are feeling like taking risk, the value the yen typically falls. The main reason for this is that a lot of large institutions will borrow their funding in Japanese yen, and invest abroad in countries that have higher rates of return. As these institutions feel more nervous about the markets, they will often bring money back to Japan in order to pay off these short-term loans. This is essentially what the so-called "carry trade" was about.

By knowing a couple of these correlations, you can often see an anomaly in one market ahead of the other one. For example, if you see gold breaking through resistance, there is a very good chance that you will see a rise in the value of the Australian dollar. Or perhaps you see crude oil falling in price. As it breaks through support, the US dollar will typically rise in value over the Canadian dollar. As you can see, these are trading signals in and of themselves but rather a good way to get a "heads up" on where to be looking for trade setups in the currency markets.

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