Week 17: Market Going Stale, Investing In Stocks

The forex market is going stale as we reach the end of the year. Many investors are on vacation so the market is not liquid enough to be exciting. +1 in capital for this week.

But, I’ve entertained myself with investing in stocks. Primary strategy is to produce passive income. I’ll be using this nest egg to fund my forex trading account in the future or perhaps venture into real estate. Not sure for now, but the journey thus far have been so exciting. Stock market is not moving fast to date, but I’m investing in it, not trading. There’s a big difference, I like it that way since the stock market is not that liquid like forex, you can’t enter and exit within seconds, there must be a buyer or seller on the other end with the same price you want. In forex, you can enter or exit anytime, very liquid. And liquidity is very very good.

Whole Year Round Up

Well, this year I finally achieved my goal of $5,000 per month in net profit from forex. I am also trading at no risk. Which means, the money that I have in my forex account are the money that I earned trading. I already withdrew the money, initially deposited into my account and thus, trading with no risk at all. In numbers term, I already earned past 100% of my initial capital to trade with only the profits I made. Sweet huh?

This year, I also ventured into stocks and realized that its a lot different than trading forex. So I decided to change my strategy with stocks and focused on passive income generation. In which I am very much enjoying.

I realized that forex trading is a probabilities game. You can not predict what will happen next. A good forex trading system is not a system that could predict the next move of the market, because there is no such thing. A good forex trading system is 60% money management 30% emotional discipline and 10% Entry – Exit. The time I realized this, my trading just improved.

I learned to accept the risk before entering the trade. If $200 loss hurts me emotionally, I turned the risk down to $100 or $50 until I feel no pain from risk. The reward may be small, but small steps before you can run. And it have proven to be profitable.

The best way to trade forex is to trade defensively until the next big trend comes. Don’t be on the sidelines far too long or you can miss the trend. Always be in the market so you can be in the position when the trend starts. You just have to survive the ups and downs of price by money management. And if you caught yourself a big trend, double, triple, quadruple, quintuple up your positions until you are stopped. That’s how you can make money with forex.

I also realized that day trading is stressful. So I switched to swing trading daily. I forgotten my first reason in trading forex. It is to be free. The “illusion” of easy and fast money with day trading is a myth. There is no easy and fast money. The only thing you can find there is stress and a lot of time spent, staring at a computer. That is not the life I want. I want to be free. Maybe once a day looking at a chart for 5 minutes and I’m off to the beach or to the gym. With a lot of free time and let my money work for me, not the other way around. Its a great great feeling.

I think that’s all 2011 taught me when it comes to trading. If you have any comments or suggestion or have something to add, just leave it on the comments section below. What did you learn in trading this 2011?

Happy new year everyone! 2012 should be good. Wait, that’s when the world was suppose to end doesn’t it? (:))

5 Mental Things You Need Before You Start Forex Trading

Job Security is an Illusion.

Many people want to be a forex trader. And I know a lot of people in my social circle who wants to be a trader. I even teach them how. Recommend them books, websites and strategy. But there seems to be people who is just damn scared to let go of their day job. Afraid to take the plunge. Afraid to be laughed at. Afraid to make something happen in their life.

They are just too contented by the way things are. Perhaps, too fucking contented… Safe, secure… “But I really want to be a millionaire trading forex”. Do you see what’s wrong there? There’s a lot of contradiction in that statement. Being a millionaire is NOT synonymous to being safe in a day job. Being a millionaire is synonymous to risking, having the balls to follow what you want in life and most importantly, its ignoring what other people may say to you. Be it “bat shit crazy for quitting a high paying job.”

Have The Balls to Follow Your Dreams

The hard working people that goes to the office everyday to work 9 hours a day. Be stuck at traffic, be soaking wet during the rainy seasons, are probably the most common. Talk to them and ask them if they want to have a business. 100% of the time they will answer something like this “I really want to have a business, but I don’t have any funds right now.” or “I want to have a business but I don’t know how or have no time”. Or whatever other reason they have. Its all wishy washy. I’ll do this after I do that then I pray to the flying spaghetti monster in the sky to let me win the lottery. Before they know it, they are 40 years old. Now, they have a different problem and a little different reason. “I’ll want to have a business but I’m not sure if I’m still young enough to learn all that.”

Hesitate and you will age. Run and you will die.

Ohh… How time flies…

Lose Your Ego

There’s nothing I enjoy more in watching other traders is their ability to talk about how confident they are in a market (stocks, bonds, commodities, forex). yet they can’t seem to accept the fact that they are wrong. And sometimes, which is more dangerous, they think they can predict where the market will go.

Forming a forum so you can exchange ideas (or persuade other traders) that your analysis is correct so you have a better confidence in your analysis. I don’t think that will do any good. Knowing first hand where your trade will go, before it even go there makes your mind closed. You are not open to the possibilities that your trade may reverse. Or it may give you a profit then reverse. The decision is based on ego that you are correct. And it will be harder for you to take a loss. And thus, you are fucked up inside. You can’t trade.

Think For Yourself

Does it matter if your friend is also LONG position on the same currency pair you are in? Does it matter if your technical trading mentor is SHORT on the EURUSD? Would you try to rationalize the idea that your LONG position on the EURUSD is wrong so you can join your mentor on the SHORT side?

This is the reason why I don’t like groups in trading. I think trading is like a boxing match. And I like it that way. You don’t need the spectator’s shout of advice. You are the one that’s getting hurt. Shouldn’t you worry about your own ass?

Have the Discipline

Of all things, discipline is probably the most important. It takes the most time to develop. And takes the most effort to practice. When lose control of yourself, you don’t even know. You sometimes don’t know that you are being greedy. Or being afraid. Self discipline makes you aware of those feeling and act accordingly. And most importantly, its the best skill to have if you want to learn a new skill. It is the trait of all successful trader out there.

Discipline is what makes the rich not use their money for parties or fancy cars. Not spend on hookers or drugs. Instead, use the money back into investing. That’s discipline. Focused on a goal. Whatever your goal is.

Week 24: Avoid the News in Forex Trading

I learned something. This is the thing I learned while learning stock investing. And I think it goes very well with trading in forex. I used to hear a lot of people saying this and I have never really understand the deeper meaning in it. Its about trading when there’s news.

A lot of traders have been saying that to never trade the news. And I have been a victim of greed over the past week. I try to anticipate news releases and have been wrong many times in doing so. I may have been right a couple of times, but results from news doesn’t last long enough to earn substantial profits.

I realized I was chasing something that I won’t be able to reach. And decided to trade only currency pairs that are not in the risk of news. I’ll let the news pass then I’ll return. Because of me, chasing the news, I realized I missed some great opportunities like in the currency pair NZD/USD. I was so caught up with EUR/USD, I missed the trend. It might not actually be a late time to enter but you get my point. Never trade the news. Go to currency pairs where there are no risk of news affecting it. Or in the words of stock investors, invest in obscure companies that are being ignored by professionals and traders.

I made money trading the USD/JPY on its way up. And got back to break even from the losses of EUR/USD hunting for the news. I’m still in good condition and still on my way to realizing my goal.

USD/JPY on Daily

USD/JPY could probably retrace now. Keep in mind though, if you’re going to take the short side, Bank of Japan have expressed their eagerness to intervene should the pair goes further down. Keep your stop losses tight. On a weekly note for this pair, its more of a sign to go long. I’ll try to catch the bottom of the retracement for the daily to enter. That position is less risky because you have BoJ on your side. The only problem now is the USD’s news affecting the currency.

Happy trading.

What is Forex Trading

Forex trading, in essence, is a market of people buying different currencies of the world and sell them at a particular time to earn money. The spot market or “forex market” is one of the most volatile market in the world averaging of $4 trillion worth of transactions per day. Money is moving up and down by the seconds that is why, many people, businessmen and investors like it, because its always active, always moving and there’s always an opportunity to earn and profit.

Forex trading is not for the weak at heart or those who are not willing to make any risk. Forex trading is a very risky game and you can potentially lose money in just a blink of an eye. With that said, the only way we can minimize risk is to educate ourselves on how to trade in the forex market. Education and experience is the key here. If you’re looking for that “get rich quick” because a friend told you so about forex, you’re looking at the wrong place.

Forex trading, when you login to your forex trader account, you’ll see a bunch of graphs. And it is what comprises of the forex market. These graphs tell stories of how the price of a particular currency pair moved throughout the day, week, hour, months or year. You should be familiar on how to read these graphs. One of the most popular kind of graph is the one invented by the japanese to trade things in the ancient times. They call it the candle sticks. Candle sticks are well known graph in the forex trading industry and we suggest you also read on that for starters.

Forex philippines is not any different. Since we are playing in a global market, we don’t have to worry about the country we are in as we can always buy foreign currencies and earn money. Of course, there are advantages though in buying your own currency paired with another currency. You know the local news and news may affect the forex market. Being in the same country as the currency you are trading will have huge advantage.

New to Forex Trading? Start Here!

Welcome to the wonderful world of forex trading. This is the place where all the money of the world goes. The largest market in the world. Larger than all the stock market of the world combined.

What is Forex Trading

Forex Trading is a kind of short term investing in currency or foreign exchange. Hence the name “forex” and trading as oppose to investing, where the goal of buying a currency is to sell it at a higher price in the future to make a profit.

The goal of successful forex trading is to make a profit by buying and selling currencies of other countries e.g. US dollar, Japanese YEN, British POUND and others. You can learn more about forex trading on my post about “Why forex trading is the best business”.

How much money can you earn in Forex Trading?

The market is worth 4 Trillion Dollars. If you become a good trader, even a small slice of that pie can make you a millionaire. The challenge of course is knowing how to trade and how to get started.

How to get started in Forex Trading

1. You need a computer with internet connection. If you are reading this, then you are all set.

2.1 A dollar account at your nearest bank. You need this because you’ll be transferring money to other banks internationally. And the easiest way to do this is to open a dollar account. You can get more info on how to do this in my article.

2.2 No dollar account? Have no fear. You can try social trading and use Paypal to deposit and withdraw your earnings. Though I would recommend the first option more.

3. Forex brokers. Forex trading used to be for “the rich” only. But now, since the advent of the internet, there has been a lot of companies catering to normal people like us, called retail traders. We have list of brokers in this page. Brokers allows you to trade. They are the one who processes your request to buy or sell currencies. Its important to know your brokers well.

4. Your trading capital. You’ll need money to trade.

How much money do I need to start forex trading?

Contrary to popular belief, you don’t need a lot of money trading forex. You can get started in forex trading in any amount you like. I started forex trading with $100 and built it up from there. Some brokers have minimum deposit so you might want to look around, ranging from $100 to $10,000. We have a list of brokers here if you need any recommendations. I personally use these brokers.

But I don’t have money yet. Or am afraid to trade.

That’s ok. Maybe forex trading isn’t for you. And there’s nothing wrong with that. But before you quit just yet, why don’t you try demo trading to test the water. Its free and you’ll not lose money while doing it.

The idea of demo trading is to open a demo account with a broker and deposit it with “play money”. You can trade online in real time but not at risk of losing real money. Its a very good way to learn how to trade. You may open a demo account from our list of brokers.

That’s pretty much it. Its easy to get started in forex trading. I hope this article helps you in getting started in this wonderful, intellectually challenging endeavor. If you like this article, please consider liking us on facebook or sharing this with your friend.

Why Everybody Should Trade Forex

I’m taking time off forex trading as I notice I have been getting a few consecutive losses in my trades. Time to learn and read some more and reflect why am I so dumb. I came across a great post by someone who is a professional forex trader. The original post is here. I just want to post it here for future reference and inspiration.

There are:
1. no rent of offices (that is, NO dealing with Realtors, Lawyers, and government departments…man, what a pain in the ass). Also no office fit-out costs

2. no staff, (man, unless you have had large numbers of staff depending on YOU for their paypacket each week, you cannot know what a huge pain in the ass it is. They ALL want you to solve their problems)

3. No inventory or stock to buy. No shrinkage (theft of stock) and no “slow moving” items. No massive amount of funds tied up in inventory

4. You can “borrow” as much as you want (by increasing your leverage), WHENEVER you want. (Try running a big business and going to the bank for a short term loan for $10 mill…it will take a month minimum). I am trading $10-12 mill all the time and I get it instantly through the brokers by the use of leverage.

5. If the business becomes a hassle for whatever reason, you can shut it down (that is, close all positions) instantly…and re-open (initiate new positions) whenever YOU want to re-open your “business.”

6. You can “scale” your business to whatever size YOU want simply by increasing/decreasing your positions.

7. Absolutely minimal paperwork. Simply send your 12 month summary Profit and Loss Statement to your Financial Accountant for tax payment purposes.

8. You can trade from anywhere in the world. My wife and I travel most of the year. (take your laptop or PDA or whatever else they will come up with and trade while sipping a nice drink as close by as your local cafe or as far as some open air cafe in some remote little town in beautiful Italy while you watch a bocce match at the park.)

I could keep telling you more of the benefits of this business, but suffice to say…this is the best “business” in the world. I run a multi-multimillion dollar business from my laptop.

And did I mention that it was exciting and fun????

But of course, not everybody can because of certain elements like willingness to learn and take risk. Only few people becomes successful and they control a market of $4 trillion dollar value.

Contrarian Forex Trading

USD/JPY right after the Dollar Sell off, I placed a buy trade. Contradicting the market sentiment and news. And it paid off greatly with minimal risk.

There are a lot of forex traders out there and hundreds more forex trading system to choose from. But why I settled with contrarian trading is more of its match to my personality than any amount of percentages any system can deliver.

I would not promote my system to be the best trading system nor all other analysis are crap. I won’t even go far to say that one system fits all. The points of having the best forex trading system lies within the individual. Its like finding your soulmate, it must be a match.

A match to your personality. And that’s the beauty of trading, its both an art and a science. Its a science because you can explain all the data with numbers and predict some events that may occur based on that data, but its art to express your views of the world based on your strategy. Its a wonderful feeling. So finding the right strategy, system or method based on your world views and personality is the best forex trading system that you can use.

Stop searching for the holy grail. Stop going from one forex trading system to another. Know thyself and pick the right system for you. Make it your own then customize it to better fit you.

I am a contrarian trader. And has always been a contrarian all my life. I am the problem employee and the jerk in the group. My strong point is, I know what am. So I know what fits me. I don’t go pretend I’m a sheep just to be accepted. And forex trading is the best vehicle to express that view and be rewarded. When the whole world frown upon who thinks differently and does not conform. In the market, you get to be rich for thinking differently while staying anonymous in the process. Got to love that!

Week 12: Waiting for the Bearish Trend

Last week has been good. Trading forex gave me a positive +10% gain because of the EUR crisis. This week I’m seeing the EUR and other affected currency to be consolidating before really going into the trend. My opinion on the matter is that, EUR and its affected currency will most likely start a bearish trend for the long term. Keeping eye on the news will most likely keep us informed should the trend start. But of course, technical is very important.

Last week I learned to control risk. Though some trades did manage to become a lost, it doesn’t affect me that much now even if its a profit or a loss. I think the fact that thinking of each trade as a probability detach myself from being self denial of the reality that my trade may go against me. It helps to keep an open mind rather than wishing that your trade must go into your direction. Bottom line is, I made profit, 10% return for just risking 1% risk each trade. I can’t be any happier.

Also looking to get into stocks, its never bad to be diversified. Once I get the setup running and my plan tested that is.

4 Useful Forex Tools and Resources

Hello my fellow forex trader. Today is my first post for the year 2011. It has been a late post because I’ve been busy. The usual boring stuff, business. Anyway, what I want to give you for today is a list of useful websites and tools that can help you learn or even master forex trading. The same tools and website I used to educate myself in this trade.

Before you spend your money on forex seminars here in the Philippines, read the list first. Most of the seminars that are offered locally are the same materials you’ll find online for free. Well… most of them. You want to save that money for investing. And in forex trading, you need all the money you can get.

#1 – Forex Education / Forex 101 / Forex Fundamentals

picture-3Babypips

There are a lot of forex education out there in the market and its for free. The one that’s particularly close to my heart is babypips.com. Simply because you have all the things you need to learn all in one place. And you won’t get overwhelmed by the information because you can learn at your own pace. Visit them and read some of their lessons. I’m pretty sure you’ll be spending a lot of time in babypips.

#2 – Forex Trading Journals

picture-4

MyFXBook

You need to keep track if you’re progressing or not. You need to know if you’re following your trading strategy. The use of forex trading journals is just that – to know if you’re diligently following your own rules. And to get into the habit of emotionless trading.

#3 – Forex Backtesting

Forex BacktesterForex Backtester

Before you go all out on live trading. I recommend doing demo trading for at least 8 months. At least 8 months should be at least 8 months profitable. The thing about forex backtesting or demo trading is that for you to be confident on your system and also be comfortable with your chosen trading platform. I personally don’t want to demo trade now because of time restraint. What I do is purchase a forex backtesting software such as forex backtester and trade in my computer anytime of the day. What this forex backtester software do is to import all the trading signals that happened for the last 10 years and you have a lot of information to work with. A lot of signals to test your strategy on. If you don’t have the money, forex demo trading is still good, but if time is more important for you than money then a forex backtester is the best investment to make for your forex education. (Absolutely than any forex semiar in my humblest opinion.)

#4 – A Forex Strategy to Follow


japanese-candlestick

Japanese candlestick charting techniques

Personally, this one is the hardest one to find, practice and decide. There seems to be a lot of different strategy in trading. And I recommend you try them all. See what works for you. Try them on your forex backtester or try it demo. Your forex strategy will be your main weapon to live, survive and thrive in the world of forex trading. Don’t forget that during your first 8 months practicing, should be spent on testing what forex strategy fits your personality. The reason why there are a lot of forex strategy out there is because there are a lot of people trading forex and each one of them will have a unique strategy based on their personality.

Diving into the world of forex strategy could be overwhelming as there are thousands upon thousands of them to choose from. In my personal opinion, your quest should start with this book. And your strategy should be based on candle stick chart readings. It is a technical way to reading forex charts that has been proven to be very effective.

My Cardinal Rules in Forex Trading

The more I lose in forex trading, the more I learn. I learn more things from losing than from winning. And as time goes by, I learn to adjust my thinking and strategy and learn to have a fixed set of ideas about the market that I use to trade with. These set of ideas are based on rules to help you become more successful in trading. These rules have changed the way I trade for the better and I hope it change yours too.

#1 – Never Lose Money

Rule # 1 is the most basic. Never lose money. The more you trade, the more you lose. That is why, you need rule number 1 to be picky on trades that will only result in winning. Keep in mind this rule every time. Before entering, while in the trade and before exiting the trade. Never lose money. You’ll last longer and learn faster.

#2 – Think For Yourself

Learn a forex strategy then stick with it. You enter and exit by those rules defined only by you. What your peers or your guru tells you is irrelevant. If he tells you to enter the trade, you are not trading, but he is. You are now dependent on him when to exit. Will you ever know when that is? Will you ever sleep at night?

#3 – Use A Non-Negotiable Stop

Stop loss should be non negotiable. You do not use a stop then try to adjust it because it will be hit by the price then hoping that the price comes back. Stick to the plan. Have a defined amount of risk, accept that risk and don’t whine if it got hit. Man up, take the loss, move on to the next trade.

#4 – Let Your Profits Run

I used to have a take profit when trading. But I soon realized that it doesn’t make sense. Why would I settle with a fixed profit if the market is willing to give me more? Throwing your greed aside, putting your stop loss on break even, then letting the trade run is a 0% risk with greater profit potential. Its definitely better than a measly profit for small risk.

#5 – Define Your Risk and Forget About The Target

In any trading and investing books that I read, these lines always comes up “Cut your losses short and let your profits run”. Its a combination of #3 and #4. In my own words, this also means, never add to losing positions or adjusting your stop loss because you are “afraid” to take a hit and then defining your profit target instead of “risking” for a chance to earn more.

#6 – Take Note of Your Mistakes

Reflect on each losing trade. What made you lose it? Did you follow your plan? Is it you who messed up the trade because of greed and fear? Or is it some underlying factor that you might have missed like news? Whatever that is, always reflect if you are following your system and what is wrong or missing with your system so you can adjust and adapt to the ever changing market.

#7 – Victory Loves Preparation

Waiting for the perfect time to enter is what makes forex trading exciting. Its damn hard to sit still while you wait for the perfect time to make that order. And then wait some more for the trade to unfold itself. Trading is waiting game. Its a damn exciting game I must say and usually, the person who waits and “prepare” himself for the high probability trade would be the winner. Not being swayed by the crowd is the hallmark of a great trader.

I got burned a few times because I got in so early. And got frustrated when I got left out by the trend. Patience is a virtue they say, but in forex trading, patience is money.