Forex Trading Tip: Invest Before You Trade

I think that the most important thing in trading is to not be attached with money. Once you realized that the money you are throwing away due to bad trades, is money that you need to feed yourself, you become attached to it until trading becomes impossible.

Remember that trading can be tough. Its a mental game. And a lot of decision making involve. It also takes a toll on your mental health. Look at Jesse Livermore. Before you can really say “Fuck You Money!” ignoring its value and not be attached to it, I think you have to invest your money.

But I think, investing has its merits as it gives you more security on your financial future, should you have a lot of losing streaks in trading. Investing gives you residual income.

Investing can be fun for those who likes big big gains over the course of many years. For a trader, it might not be an attractive proposition. You literally have to wait a lot of years for it. But I think, investing has its merits as it gives you more security on your financial future, should you have a lot of losing streaks in trading. Investing gives you residual income. Stock dividends, real estate rental properties and brick and mortar business. It might not be a huge business or huge profit, but over the course of the year, it will compound. Slowly but surely.

Planning your financial future and before getting into forex trading, fix your finances first. Invest a portion of your money to passive income, have an emergency fund and the rest goes as your trading fund. I think that is the best course of action to take.

Just a quick note. If you’re going to invest your money in mutual funds or UITF, I’d rather not put it there. I think its a redundant thing. Mutual fund managers trade with the money you gave them, but you are already trading, you don’t want your investment money to be traded. Not to mention the high fees. You want it to be invested. I think buying the index as an investment is the best way to go.

Forex vs Real Estate

Real estate has been one of the pillars of wealth as most people believe. The popular notion that, “you don’t get to produce more land” usually the selling point to seal the deal and invest in real estate.

I think, real estate is a good investment. But saying that real estate is the only good investment is far from the truth. Real estate for me, has the highest PITA (Pain In The Ass) ratio. There’s a lot of people involved and you need to pay each one and negotiate with each one. If you love talking to lawyers, accountants and marketing people, you’ll love real estate. I have an engineering background so I would love to talk to the engineers and architects that’s involved in the project, other than those people is too much for me.

Once the tenants come in, more headaches come in. Maintenance, repairs, tenants who doesn’t pay rent, tenants who delay payment of rent. For me, life is too short to be stressed out like that.

Is it safe because we are not producing any more land? Remember the housing crash of 2007 – 2009? A lot of companies, banks and investment companies who invested in real estate went bankrupt. What about invasion? China invading Tibet and more land from South East Asia, how safe really is real estate?

It also has the highest capital requirement. And very slow in liquidity. It would take months to buy and sell a real estate property. Managing the property would be time consuming.

Now looking at forex, you can buy and sell currency anywhere in the world. You just need a laptop (or a smartphone) with internet connection. I think this is one of the best benefits of forex. Management of forex portfolio can be a breeze, with tools available for traders, automation and what not, you can be free to spend your time on things you like (i.e. travel). Should invasion from China comes, pack your things and fly to another country, taking your laptop with you and your portfolio is still there.

You can so decide to NOT invest in the country you don’t like. You can liquidate your position any time, instantly, and take advantage of opportunities faster.

I think forex wins hands down. But since this is a forex blog, I am biased. But I hope that you think about this deeply, see the benefits of it all. Some people would like real estate others don’t. I’m one of those people who likes to spend my time on things I want, and managing a real estate portfolio for me, I think, would prevent me from living the life I dream of.

Forex Philippines Mailbag: Answering Your Questions

During the past couple of weeks, I have received a couple of emails asking if I offer mentoring classes or if not, any recommendations for a forex mentoring or seminar.

Forex Seminar

As of this moment, the only mentoring I offer is the free forex course which I add lessons every couple of weeks. I realized that a lot of people are asking so I made an online lesson for it and to help a friend of mine. If that happen to be a worthwhile pursuit I may offer something like a real seminar in the future. But for now, I am enjoying my travel and a no hassle approach to trading.

Recommended Seminar

I will be blatantly honest… In this industry where most people make money not by trading, but offering seminars, its hard to really find a legitimate mentor who will teach you what really work. I don’t want to name names, but honestly, the seminars that are being offered here in the Philippines at the moment are found online for free. You don’t have to pay P6,000 for a 2 hour seminar on how to use a trading platform or how to interpret if a chart is going up or down… There’s a lot of sources for that already. I know it could be kind of hard to search for a mentor especially if you’re new. And I understand that, I have been there. But keep going for this is a worthy pursuit. What you need is to be reading books. Not looking for someone to teach you how to use a trading platform.

The Insecurities of Technical Analysts

Trading, whatever markets you are into is still the same, making profit out of the volatility of the price. Whatever you use to have an edge over the market is a personal reference and thus every person may have a different way to try to trade the market. Thus, there is no one person that can claim that there is only 1 way to trade.

I am using technical analysis to try and trade forex. But its only 10% of my whole trading system. Its not even that important. When I try to share this knowledge, you may already being branded as a fundamental analyst and this can raise eyebrows. What else can you be using aside from technical analysis?

I think there is a perversion in technical analysis today. Trying to claim that it is a the holy grail to trading. I think there is none. I think its a probabilities game. Its all guesses and betting money for that hunch. Ok maybe its still predicting, but its more like a perverted way to say LONG or SHORT by saying, the market will go down at this price and bounce back at this price and we can enter to earn this amount.

You can not be that too much precise as if you know the next move. Even elliot wave, which I have quit a bit of time learning, will never tell you when is an extension of a wave will end. Where a correction will end or when the extension of that correction will end. So, when do you enter?

Just because everybody is doing it, it is the right thing. More often than not, it is the wrong. Or if it is right, when will you know when it is wrong? Markets change, trading strategies become obsolete. At one point in time, one system will not work anymore. So how will you know that your trading strategies is already dead? Because your mentor is still using it? Its not a very good indicator is it?

Thinking for yourself and welcoming new ideas is the evolutionary quality that makes great traders. If you try to shoot down any new concept because it wasn’t the way you were taught, you will find yourself old with an old system that doesn’t work. The world and the market has moved on and you can never adapt.

Forex Trading vs Stock Trading

One of my first question when I learned about trading or investing in general is that, “Which is better? Forex or Stocks?”. Though many people will argue that one thing is better than the other. I would like to give my opinion on this case. They are both great vehicles for making money and have a lot of potential in making you rich and we will tackle them in this post at forex philippines.

Forex market is The Largest Market in the world. The market is open almost 24hrs a day. When one market closes, other markets open, making it possible to have a continuous 24hrs operation. There are a lot of benefits trading in the forex market and one of it is being liquid. You are trading money with other money (currency) how liquid can you get? It is not like real estate where you can declare you are a millionaire but still you can’t even use that million unless you sold your house. Being liquid makes it possible for you to invest and reinvest money quickly.

In Forex Trading, There is little to no intervention. Not like stocks, the forex market is too huge of a market and encompasses all of the nation’s condition and reflected it in their currency. Its not just 1 company we are talking about here. Its the sum of all businesses that a country have and their economic condition. Politics and current events play an important role in which non of them you can control.

Little investment required. In trading forex, you don’t need to shed out a lot of money to start. Me and my friend started out $100, testing the waters and we continue to increase our funds as our experience increase. And with most brokers offering leverage, your $100 can buy 40 times more.

Investing in the Stock Market for me is a long term goal as forex is a short to mid term. I think the volatility of the forex market makes it difficult for an average investor to keep the money for the long term as you will be stopped most of the time, if not margin called. In the stock market you can take advantage of dividends offered by companies, pay checks for you for investing with them. You can be the top head of that company just by buying majority of the shares. These are all wonderful perks of stocks. But what keeps me from investing money here for now is the fact that it can be manipulated by people inside the company. Just as the popular movie “Wall Street”.

We can not really say what is better or best in investing. It comes down to preference and your view of each market. One thing is for sure, if you have money, invest in both as they are great vehicles to earn money.

Polishing My Trading Style

Been trading demo and live money for weeks and trying to come up with my own trading style. Been focusing on just 1 currency pair and with one time frame (15 minutes).

For the first few days that been trading, my funds are diminishing everyday, trying to bang my head on the wall why do I lose trade? I came up of the idea to make everything simple. Watch out for just 1 setup and wait.

Knowing that setup and pattern will get you acquainted with it. Making you recognize the pattern anywhere on the chart and recognize it when it is forming. You get to know one setup and pattern really well, try to learn another pattern until you build up your trading pattern vocabulary.

Indicators

I did a lot of indicators in the beginning. But the I didn’t like it that much. The reason for that is because all indicators are lagging. Meaning, they only indicate what already happened and try to assess what will. But still, things already happened, the ideal scenario would be – you to know things will happen before they happen, not after. All indicators lag behind.

That leaves me with nothing more than a blank slate of just candlestick charts. How can trade with just candlesticks? The answer is, price action. I’ve been amazed by how price action can well determine what’s happening in the market. It even tells you what the news tells you. Price action is a technical analysis that shows fundamentals very clearly.

Did I Profit?

I’m proud to say, after lots of weeks practice and money lost. I am beginning to feel that I learned and I am improving. I traded with small volumes last Friday night before market closes and it got me 40+ profit twice. And this time, I know it is not just by mere luck.

I’m still way behind my trading goal. But I know I’m seeing the light. I know I’m on the right track. And I won’t stop until I reach that goal. To anyone who reads this blog for forex trading tips. I think that the most important thing to know first when trading is to never give up. Developing your own style of trading by just trading by yourself, without the help of other people’s advice. We develop our own style when put into lots of pressure, emotions, greed and diminishing red font on your capital funds.

It is pressure that turns a lump of coal into diamonds.

P.S. I have a friend trading with me next week and we decided to record our trade in video. Stay tuned. :)

Jun 29 2011 – Trading with Reversal Pinbar

As you all know. The way I trade currency is using technical analysis. I know that there are many people out there that has been using fundamental analysis to decide on their trade. And this is what works for me and allow me to share some bit of information about technical analysis that might help you improve your trading.

Please see the image below.

I would like to introduce you to a reversal pinbar called engulfing pattern. It is a bar that “Engulfs” the previous bar indicating the end of the trend.

As you can see, I took the trade once I saw the engulfing bar pattern and placed my stop loss above the previous high.