Forex Trading Rule #1: Never Lose Money

The most accepted adage, “Higher Risk is equal Higher Profit”, could be true for forex trading. But does it have to be that way?

I used to bet big on position only to find myself in a hole when the position becomes a lost. Ignoring the fact that if you want to be successful in forex trading, I think, the wisdom of the old rich people are still the best advice. Warren Buffett said “Rule #1 in making money is to never lose money. Rule #2 is never forget rule #1″.

This rule have been integrated into my trading system. Being contented in making small but sure profits instead of betting the house for a once in a lifetime lottery trade. Small but sure, consistent profits is much better than luxurious profits with high risk.

Closed: +35% USDJPY

Closed trade on USDJPY giving us with 35% boost in capital. Its a great trade and the reason I closed is because of the strong resistance. Also, there’s a doji that formed this morning. I don’t want to risk the profit if all the indicators are telling me its still uncertain.

As a rule of thumb for me when trading forex, I get out when I am confused. As of this moment, USDJPY is in a confusion as both buyers and sellers don’t know where to go. As proof, a doji formed. I’d rather be on the sidelines or open a position on the sell side since its a lot closer to a resistance line. But that’s just me.

The iPad 2 That Forex Trading Bought

From my very good trade on EURCHF and achieving my First Forex Goal, came the reward, an iPad 2.

I just got it this morning, just after I woke up.

A very handy tool for forex trading. I can trade virtually on any position while lying on the couch.

There should be another round of reward when I reach my 2nd forex trading goal. I still have no idea what kind of reward. What do you think should I reward myself with when I reach my 2nd trading goal? Leave your comments below….

Forex Trading CAD/JPY and Forecast

picture-31

I’ve been following CAD/JPY for a while because I was waiting for the breakout. There was a confirmation of this about to happen in the daily chart. I’m in this trade right now and currently at +61pips.

Why did I choose bear?

The red “cloud” you see on the chart is a resistance. The reversal pattern and the cloud plus the green and red line all indicates a bearish flag. This is a high probability trade and we may see some consolidation tomorrow by making a new low then pulling back, then breaking all the way down. If you’re going to get in this trade now, just make sure to put your stop loss.

Trading EURUSD & GBPJPY – Big Bluff

I personally think that the EURUSD and GBPJPY’s uptrend is one big bluff. Look at what happened when the news went out for EURO. The situation there is terrible. Just one news and down it goes for more than 200 pips in a few hours. I think the GBP will be next. Will it go up? Sure, but I think it is short lived and just a bluff.

I’ll still continue to wait for GBPJPY or find ways to add position on EURUSD. I think the short term traders may have made the pairs too overbought. But its a good opportunity for most of us to make money out of it.

Week 33: EURCHF Consolidating

EURCHF is playing hard to get and is still consolidating. We might still have more consolidation for the next week. But if you are in this trade in LONG Position and it did move up, expect a great reward from this. After all, our stop loss is just at 1.200 which have a low risk with great rewards. On previous post, if you have entered the trade, you have around 10 – 12 pips of stop loss and we are looking at our first target if this breaks out at 120 – 150 pips. That’s x10 reward right there as our first target. We are actually buying at bottoms here.

Its time to test those patience. EUR/USD is looking very good on the short side though. But I wouldn’t enter personally at this time.. The stop loss would be too much of a risk for me. I’d like to be on top, being a contrarian trader. EUR/CHF is a better pair for us to trade at the moment.

While in consolidation, protect your money. You don’t want to lose money at this time because after consolidation you know what happen… A breakout. You want to be on the sidelines or hold any position so you can survive the whip saw of the price until you earn a payday on the breakout. Its time to practice patience guys.

Of course, all this is for educational purposes only. Trade at your own risk. :)

Week 30: Sliding with USDJPY


USD/JPY Weekly

Seems like USD/JPY is forming a pullback from the past week of bull run. Looking for the red lines as support/resistance and targets.

USD/JPY Daily

I’m currently SHORT on USD/JPY and is already 14% up in green. Red lines are strong resistances/support. Could take a couple of more days before we hit our target 80.600.

USD/JPY 4 Hour

Strong support at 82.000. Resistance 82.65 if pulls back.

Comments on other Pairs

I’m currently on the sidelines for the other pairs. My watchlist includes, AUD/CAD, EUR/USD, EUR/CHF. Though, they made a clear price action before, the chart, for me, is not very favorable now and I would prefer to wait until a more clear price action appears. In the meantime, I’ll focus my forex trading on USD/JPY.

Never Trade on Mondays

I’ve been reading some beginner stuff about forex trading and one thing that caught my attention is that many experienced trader always advice not to trade on mondays. The reason behind this is because you want to know what will be the starting setup for the coming week so letting the first days alone is crucial. It also has the less volatility when it comes to pip movement.

I don’t know… Since I started trading, I’m never been more excited about mondays. When I was still in a full time job, I despise mondays! But now, I’m excited and I can’t even sleep sometimes.

What do you think? Do you trade mondays?

Forex Trading Small First Before You Go Big

People are greedy. That’s a fact. But its the emotion that keeps us wanting more and always wanting to have the things we want. Makes us think of ways on how to get it. Don’t fear greed. Make use of it. Master it.

Most newbie traders, me and my friend, talked about the profits in trading. One of us will argue that to have great profits you need to have large amounts of pips in a winning trade. Ok. Fair enough. More pips = more profits.

Think about this, you have $1M in your account as capital. And your target profit in terms of pips is in the 200+ pip range. Sounds like a lot money to be made when you get that 200+ pip. But think of the risk you will get and also the time before you get to profit. In forex trading, there are fluctuations, can you stay calm when your account displays -100pip because of its initial retracement? Can you still decide if the trend is against you or its just a retracement? Remember, earning that kind of pip will require you to hold the trade from 1 hr to 1 day. Can you handle the pressure?

I say, pip size doesn’t matter. How much you risk in each trade matters. Playing with small profit pips will reduce risk. And also, having a profit target that’s small will minimize risk. Smaller pips means, shorter time inside a trade which means lesser risk, less pressure from greed or fear.

Pip size doesn’t matter, volume does. Increase your volume once you got the thing going. Increase more to profit more, while still maintaining the same pip per trade profit. And always remember, don’t overtrade. Take a time out. Every businessman needs his vacation once in a while.

Good luck!

10 Misconceptions About Forex Trading

A lot of people will enter the market with the wrong misconception about the forex. Diving in, nose first without the proper mindset on what they are getting into. I hope this list will clear your mind and hopefully give you a healthy dose of forex trading success.

Forex trading is never easy… What is easy anyway? Picking your nose perhaps?

  1. Forex trading is easy. Many people that want to dive into the world of the foreign exchange market believe that the Forex trading is easy — you just read a book or two and then you will be able to earn daily profits with just 2-3 hours trading daily. Others think that they can buy a profitable strategy and it will make them rich in Forex. In reality that’s just a myth. Succeeding in Forex isn’t easier than mastering any other profession — it takes time, money and a lot of practice.
  2. “I will make money in Forex, if I can trade stocks successfully.” Success in stock market doesn’t imply that you will get success in Forex market — there are many differences between trading stocks and the spot currencies. First of all, Forex market requires a lot of hard work and dedication as this market is open for 24 hours a day. You cannot just sit in front of your computer for the whole day and night, so the best way is that you should find the most suitable time periods for trading. Second, “buy&hold„ strategy simply won’t work in Forex market. Third, you don’t have that much information about currencies as you can get from the companies’ reports and statistics.
  3. “I can make profit whenever I want if Forex market is open 24 hours a day.”Once again, you won’t be sitting in front of your PC for the whole day to be able to trade 24 hours. You’ll have to develop automated trading software to get the advantage of 24 hours a day working schedule.
  4. “I can be a successful Forex trader just following someone else’s signals.” Many beginning traders get burned by the blind signal-following. That’s like putting away the whole responsibility for your actions to someone else. That may sound cool, but in reality you end up with the huge losses. Learn to rely on your own knowledge and skills. Remember that there were no great signal-followers in any financial market.
  5. No commission is to be paid in Forex market. You only have to pay the spread, but you don’t have to pay the commission. And what’s spread? It is the difference between the buy and sell price of the currency pair at the same moment. You may end up with the major part of your profits in the broker’s hands if you plan to rely on the short-term trading.
  6. Forex is a scam. Some skeptics and disappointed traders think that Forex is just some new fad to scam people for their hard earned money. Although there are many scams that are hiding behind the “brand” of Forex, that doesn’t mean that the Forex itself is a scam. There are many institutional Forex brokers, regulated Forex account managers and other solid companies in the market to whom you can trust.
  7. “I need to exactly predict the market outcome to be profitable in Forex.” There is no scientific method to know something in advance in the market with a 100% certainty. There would be no Forex market if you could know the exact currency rates beforehand. Trading is not the game of certainties; it’s a game of odds. One of the first things that new traders learn is to think in the terms of probabilities and risk-to-reward ratios.
  8. “I need to use a very complex strategy to be successful in Forex.” It’s a popular myth, in which many on-line sellers would want you to believe. The main requirement to be successful in Forex is a self-discipline and money management. There are many traders that make consistent profits with rather simple and old strategies.
  9. “I need to have a lot of starting capital to get profit in Forex.” Big capital investment won’t help you in Forex. You don’t need a lot of money to diversify in currencies and you can’t move the currency rates with your trading orders (you’d need billions of dollars to do that). Actually you can trade with a very a little capital, because Forex trading is almost always leveraged with the broker’s money.
  10. Forex is gambling because it’s completely random. Although there is no certainty in Forex (as in any financial market) it doesn’t mean that it’s completely random. And it’s certainly not a gambling, since your success in this market depends mostly on your skills and experience, not on your luck.