Top 5 Characteristics of a Successful Online Forex Trader

Not anybody can be a Online Forex trader. Trading occasionally, as a side income or professionally requires certain skills and characteristics.
Are you up for it? Here are 5 critical traits that any trader needs.

1. Seeing the big picture: Are you able to separate the small details from the bigger picture? This is critical in two aspects. First, separating the current movements from the bigger trend. The second aspect relates to money management: being able to separate your current trade from the situation in your account and the bigger plan.
2. Patience: Too many traders lack the patience to educate themselves before jumping into a trade, or don’t wait for a really good opportunity, as Andriy mentions. Others don’t wait long enough for their trade to run its course. Or, upon meeting success, they have the patience to continue trading in the same position sizes, and quickly double the positions, hoping to win more but actually burning their account fast.
3. Being able to adapt: Market conditions change all the time, and a good trader needs to be able to adapt. Your trading system cannot work well forever. Changes in patterns occur all the time, and you’ll need to tweak the system, if not completely change it. Being able to adapt also applies to fundamental analysis: strong currencies may hit the wall when the tide turns against their respective economy. A weak currency can help a country’s economy recover over time.
4. Cautiousness: When uncertainty is high in the markets, a good trader will be extra careful when taking risks. This means focusing on more predictable currencies, lowering position sizes when necessary or even taking a break from the markets. Winning in forex trading isn’t limited to making winning trades, but also minimizing losing ones.
5. Identifying your weaknesses: If you are able to be fully aware of your weaknesses, you are half the way to solving your problems. All the important traits mentioned above will be closer to reach if you can see when you are too far from them and acknowledge them. Your basic character will not change, but you’ll still adapt better to changing conditions and you’ll be able to stay a bit more patient than usual.

What traits are important in your opinion? Can you identify your strengths and your weaknesses?

The Hiden Truth About Relative Strength Index(RSI): Online Forex Trading.

Relative Strength Index, or RSI, is similar to the stochastic in that it identifies overbought and oversold conditions in the market. It is also scaled from 0 to 100. Typically, readings below 30 indicate oversold, while readings over 70 indicate overbought.

How to Trade Using RSI

RSI can be used just like the stochastic. We can use it to pick potential tops and bottoms depending on whether the market is overbought or oversold.
Below is a 4-hour chart of EUR/USD.

EUR/USD had been dropping the week, falling about 400 pips over the course of two weeks.


On June 7, it was already trading below the 1.2000 handle. However, RSI dropped below 30, signalling that there might be no more sellers left in the market and that the move could be over. Price then reversed and headed back up over the next couple of weeks.

Determining the Trend using RSI

RSI is a very popular tool because it can also be used to confirm trend formations. If you think a trend is forming, take a quick look at the RSI and look at whether it is above or below 50.
If you are looking at a possible uptrend, then make sure the RSI is above 50. If you are looking at a possible downtrend, then make sure the RSI is below 50.

In the beginning of the chart above, we can see that a possible downtrend was forming. To avoid fake outs, we can wait for RSI to cross below 50 to confirm our trend. Sure enough, as RSI passes below 50, it is a good confirmation that a downtrend has actually formed. 

Bollinger Bands As Online Forex Best Scalping Indicator.

For better understanding am going to compare trading to building a house. You wouldn’t use a hammer on a screw, right? Nor would you use a buzz saw to drive in nails. There’s a proper tool for each situation.
Just like in trading, some trading tools and indicators are best used in particular environments or situations. So, the more tools you have, the better you can adapt to the ever changing market environment.
Or if you want to focus on a few specific trading environments or tools, that’s cool too. It’s good to have a specialist when installing your electricity or plumbing in a house, just like it’s cool to be a Bollinger Band.

There are a million different ways to grab some pips! and Bollinger Bands is one of the best especially on scalping.
Bollinger Bands, a chart indicator developed by John Bollinger, are used to measure a market’s volatility.
Basically, this little tool tells us whether the market is quiet or whether the market is LOUD! When the market is quiet, the bands contract and when the market is LOUD, the bands expand.
Notice on the chart below that when price is quiet, the bands are close together. When price moves up, the bands spread apart.

   
That’s all there is to it. Yes, I could go on and bore you by going into the history of the Bollinger Band, how it is calculated, the mathematical formulas behind it, and so on and so forth, but I really didn’t feel like typing it all out.
In all honesty, you don’t need to know any of that junk. I think it’s more important that I show you some ways you can apply the Bollinger Bands to your trading.
Note: If you really want to learn about the calculations of a Bollinger Band, then you can go to www.bollingerbands.com.

The Bollinger Bounce

One thing you should know about Bollinger Bands is that price tends to return to the middle of the bands. That is the whole idea behind the Bollinger bounce. By looking at the chart below, can you tell us where the price might go next?

If you said down, then you are correct! As you can see, the price settled back down towards the middle area of the bands.

What you just saw was a classic Bollinger Bounce. The reason these bounces occur is because Bollinger bands act like dynamic support and resistance levels.
The longer the time frame you are in, the stronger these bands tend to be. Many traders have developed systems that thrive on these bounces and this strategy is best used when the market is ranging and there is no clear trend.
Now let’s look at a way to use Bollinger Bands when the market does trend.

Bollinger Squeeze

The Bollinger Squeeze is pretty self-explanatory. When the bands squeeze together, it usually means that a breakout is getting ready to happen.
If the candles start to break out above the top band, then the move will usually continue to go up. If the candles start to break out below the lower band, then price will usually continue to go down.

Looking at the chart above, you can see the bands squeezing together. The price has just started to break out of the top band. Based on this information, where do you think the price will go?

If you said up, you are correct again!
This is how a typical Bollinger Squeeze works.
This strategy is designed for you to catch a move as early as possible. Setups like these don’t occur every day, but you can probably spot them a few times a week if you are looking at a 15-minute chart.
There are many other things you can do with Bollinger Bands, but these are the 2 most common strategies associated with them.

Advancing online forex trading in Nigeria

I can vividly recount the advent of online forex trading in Nigeria. If I am that correct, I can date it back to 2006/2007. Laudable idea! Like any new business, Nigerians took to it en masse. But regrettably, it was a rush in, rush out thing.

The bane actually was lack of technical, experienced personnel to impart knowledge, direct and mentor trainee traders. I could recall a trainee of mine whom without a month experience opened a training centre on forex trading. He has crashed out permanently now.

Forex trading is lucrative but it requires sound knowledge and discipline. I am taking you through this because I have a vision to really impart knowledge to the populace as a contribution to self-empowerment programme and self-employment as well.

But what really brought about this article is that when you decide to empower people, you directly or indirectly empower yourself. The feedback is one of this. One of my trainees over the weekend was on a website. A site I had shown them for fundamental and technical analysis and also economic snippets that affect forex market. He went under the education link and called me to alert me about a forex expo called Lagos Forex Expo and Conference, scheduled for the later part of this year. The first of its kind in Nigeria in the commercial and financial hub of Lagos. He pressed on me that he would like me to present a paper there as he sees my efforts in advancing the course of forex trading in Nigeria.

I went to the site and looked up what the expo will have for traders. But in the process, what struck me is the statistics of traders given there, which I guess the organisers must have done some serious homework to lay to that claim. It says there are over 300,000 active traders in Nigeria. That is a staggering figure to my amazement despite the hues and cries about online forex trading. With Nigerians, I know the geometric progression of this figure will soon be bloated. I also smiled to myself that I have been part of that contribution in terms of the response this column has generated since its debut.

Secondly, I read that the Securities and Exchange Commission is giving a backing. That will put a paid stamp to doubtful minds about the authenticity of forex trading in Nigeria and I look forward in due time for foreign brokers to give more recognition to us here in this part of the world, once our regulatory authorities come up with rules and guidelines. The influx of brokers will be better for our economy and will provide more jobs and opportunities.

Even though I do not hold the brief for the upcoming Lagos Forex Expo organisers, as a trader/trainer/market analyst and signal provider, I know it will do a lot of good to this profession. The line-up of invitees will definitely shore up the image of the career as it will bring together traders, trainers, agents, brokers, investors, financial institutions, government agencies and many others. The benefits will really be tapped into by a lot of Nigerians. It will definitely be a good turn around. I wish the organisers well and also congratulate those in this business/career for a ground breaking event.

Market analysis for October 7, 2013 (as of the time of finishing this article. Entries are at trader’s discretion and money management is advised). Analysis discrepancies may result due to forecast time and economic news.

Forex Trading Strategies #1 – The Real Reason.

By  Henry Liu,

Far too many times Forex traders get into the market without the right reason, or for that matter, without a good enough reason. Usually the emotion factor is driving the trade, such as greed or fear of missing out on a potential profitable trade… And I have to confess to this as well, because when you take away all of the technical mambo jumbos, the only reason that sometimes compelled me to take a trade was: greed…

They say that to sell to a man you need to give him 2 reasons, the real reason and the reason he tells his wife why he bought it. Most of us traders tell ourselves the wife-reason, but the real reason is that we just wanted to make money fast…  Of course, fundamentally there is nothing wrong with being greedy or wanting to make money, or we wouldn’t be in this business in the first place. However, we have to be smart greedy, not stupid greedy and get our hands caught in the cookie jar. That’s why it is so important to have a right reason to take a trade, instead of chasing after the market like a chicken without a head…

In a fair game, as defined by 2 players with the same odds, or neither one has an advantage over the other; it is proven that the one with the biggest purse will  win the game. In Forex Trading however, it is NOT a fair game  for Retail Traders because:

1. We enter the market at an immediate loss due to spreads
2. We have limited margin accounts
3. We use methods that are well-known and studied by traders all over the world, and
4. There are so many underlying factors that move the market and no one can be certain at times.

…all of these put us at a great disadvantage in our trading, and it’s no surprise why most traders hit or miss with their trades all the time…

That is why we need to identify The Real Reason behind our trading decisions.  Ask yourself why are you in this particular trade, is it because you saw how the market jumped 30 pips in the last 5 minutes? Or did you have a strong fundamental reason to take this trade?  Is it because you’ve been sitting in front of your PC the whole day and you haven’t made any money? Or you took this trade because it was the entry level you’ve been waiting for the whole day?

So make a habit to always ask yourself when you are about to take a trade, and pretty soon you’ll realize that you no longer look at the 5-min chart and fly by the seat of your pants… And since you are always looking for the real reason, you’ll soon anticipate the market and plan ahead…  It is always a good habit to plan ahead, knowing where you want to get in, why you want to get in, your stop loss, and your take profit levels, so you can see some consistency in your trading.

How to Create a Trading Plan That Works For You

By Alwin Ng

The last two months has been amazing for me as I continue to develop myself in the areas of trading psychology as well as building new trading systems for my portfolio. The idea of continuous learning is utmost important for any trader and I definitely encourage everyone to do so if you can.

In the process of building a new trading system, I had to sit down to write a new trading plan and I had to go through various market scenarios before I could nail down a system that works. Even though I've written past articles around this subject, it still amazes me that I'm still learning and I'm able to discover new trading insights or lessons.

I would like to share this experience with you and to remind everyone the importance of creating a trading plan that works. More importantly, to creating a trading plan that works for you - yes, it must work for YOU! With that, enjoy today's article!

 1. Technical Know-how is a Must

This is probably the most laborious part when creating a trading plan yet this is also the least significant of the entire plan. When writing a plan on a new trading system, you must have the technical know-how before you even consider trading it in the market.

You will also need to take time to understand how the system works. So, ask as many questions and make use of Google as much as possible because everything you ever need to know about trading systems can be found on the internet. Of course, where possible, make sure to check that it is from a reliable source.

If Google doesn't know about it, the chances are it's either something very niche or that system may not exist. While there's nothing wrong with that, it just means that you have fewer resources to use. Either way, do your homework and find out as much as you can.

It goes without saying that you need to test it out. As you test the system, you will generate even more questions. From personal experience, DO NOT ignore those questions during testing because these are the things that you won't learn on the internet. Make sure to find those answers (through coaching or more testings) because trial and errors are the best and quickest way to learn about any thing and that applies to trading the market too.

 2. Risk/Money Management Trumps Technical

Risk and Money Management should be on the top of the priority list when writing a trading plan. Think about it, you cannot make money without learning how to manage money. Make sense?

To keep this simple, I'm going to summarise some rules that I frequently use.


  Do not trade on money that you cannot afford to lose. And I'm not just talking about financial account - this includes your emotional account as well. For example, $1,000 might be a lot of money to a middle income trader. However, sometimes you might find that $500 means even more to a high earner because he/she gets so stress that one cannot make rational trading decisions. If you can't afford to lose (financially and emotionally), then either reduce the pot or keep it to demo trading while you continue to build your confidence.

  NEVER enter the market without knowing when to exit. You make money by cashing out as well as cutting losses. You'll lose money if you don't know when to exit the market.

  As a rule of thumb, beginners should position size and keep trading risk to 1% (per trade) of your account and one should not go any more than 3-5% per trade. You might wonder, why am I being so vague? Well, to be honest, there's no fix and hard rule about this. Trading is all about your own risk appetite and whether or not you can handle the emotions when things don't go your way. Do not trade what you cannot handle.


The list can go on for awhile but I think you get the point. Again, if you need to, buy books, read or get a coach to teach you about risk/money management.

 3. Emotional Checker

Once you got Pt 1 and 2 sorted, here comes a trading secret/method that I use - I call this the Emotional Checker.

As you go through your trading plan, try to visualise a trade set up happening in the future. This can be any point in time in the future but visualise yourself actually taking this trade. As you see the trade (using your imagination), you place your orders and you let it run. Ask yourself - how do you feel? Comfortable? If yes, good. Now try the following:


  Visualise the trade going in your favour. How do you feel?

  Visualise the trade going against you. How do you feel?

  Visualise the trade going in your favour and now you following your exit plan. How do you feel?


Essentially, this is what I call scenario planning but using your emotions to check that you are fine with it. When ever you feel uncomfortable or fearful, you should consider tweaking your trading plan. Then, repeat the exercise.

Think about this, if you have done your work in Pt 1, you should have a thorough understanding of how the market works. It can work in your favour as well as go against you and you should have captured this in your trading plan. If you haven't done your homework, that's the reason to you feeling uncomfortable or fearful.

 Conclusion

In the end, it's all about trading a system that works for you. The key success factor of any trader is that their trading plan must work for them. Many amateur traders buy trading systems from trading schools and assume that it will work fine. Unfortunately, it might work for some but, chances are, it won't work for everyone.

These traders forget that, at one point in the future, you might not feel comfortable with the system. If you're not comfortable with it, that's when your emotions kick it and followed by a long list of negative actions (which I will not dwell into today).

Forex Trading - Understanding the Dangerous Schemes in Forex

By Onyebuchim C Obike

Forex Trading is one of the highest yielding financial investment in the world. According to the Bank for International Settlements, as of April 2010, average daily turnover in global foreign exchange markets is estimated at $3.98 trillion, a growth of approximately 20% over the $3.21 trillion daily volume as of April 2007. Some firms specializing on foreign exchange market had put the average daily turnover in excess of US$4 trillion of which $1.490 trillion us being generated from spot transactions (i.e. Forex transactions)

The above fact is the key factor that entices most people to invest in Forex. The enormous returns in Forex also gave rise to fraudulent schemes, which have been on the rise since Forex began.

Fraudulent shemes in Forex is also referred to the word "scam".

What is scam?

"Scam is a fraudulent business scheme" or "to deprive off by deceit" - (TheSage's English Dictionary and Thesaurus)

Scam is synonymous with fraud. It is deception, make belief, trickery, pretense, cheating, e.t.c.

A lot of people have fallen one time or the other to scam deals knowingly and unknowingly. Some got out with partial loss, while others lost everything without a single recovery. Scam victims usually suffer unbearable psychological pain due to the level of trust built with the scammer and the loss incurred.

Unfortunately any venture with high potential for money making is always alluring to scammers and Forex is one of those ventures.

Scamming in Forex had been in existence right from when Forex began, only that it has taken a new dynamic dimension in this current era. Forex Scam is the act of fraudulently taking money from a client or customer with the intention of providing a rewarding service for the client or customer, which is not true. In some cases the services provided by the vendor could be rewarding or true, but at the long run, when a glitch occurs due to poor design then the vendor disappears after months of negotiations without making any refunds.

Examples of Forex scams include;


Fake products
Ponzi Schemes
Fake Managed Account Schemes
Pyramid Schemes


These examples are more prevalent in Forex due to the nature of the perceived returns and high rate of unsuspecting traders who patronize them.

Understanding the true perception of Forex scam is very important in detecting and protecting yourself from fraudulent schemes in Forex. A lot of traders have a wrong perception of Forex scams due to their limited knowledge about Forex. A case scenario might look similar when it's being matched with real scam cases. But when you look deeply into such complaints, you'll find wrong perceptions and false alarms.

A lot of inexperienced Forex Traders are quick to scream "I've been scammed" due to their level of knowledge in Forex. If you fail to follow the instructions of a product, and experience loss then that is not a scam.

For example when a signal service provider says "use default settings for accounts lower than $1000, and do not adjust the Money Management Settings otherwise you will get undesired results. However you'll make little pips but on the long run your account will grow steadily".

If a user of this signal service gets impatient or greedy, and ignores the warning by tweaking the settings in order to attain short term quick gain in his account, such a trader would unfortunately experience undesired results to his/her account.

Let's assume the trader gets infuriated and sends series of complaints to the vendor about the poor performance of the product and later request for a refund. When the vendor refuses based on the trader's negligence, then a scam alarm is raised. Unfortunately this does not qualify for a scam case.

Every forex product has its threshold or required standards because they cannot be 100% perfect at all times. Most vendors usually state this caution or disclaimer notice on their website in order to protect users from unprecedented loss from market uncertainties. So it is the duty of a customer to keep to the product's limits. When you go against it and face the undesirable consequences then asking for refunds would not work, and establishing a scam case would be extremely difficult.

When a trader uses a Forex product not designed for news trading or for a particular trading session or configures the settings against the design of the Forex Product and gets losses then the trader cannot claim he/she has been scammed.

One of the best ways of understanding and protecting yourself from fraudulent schemes in Forex is to get yourself updated with the Forex regulatory agencies like CFTC, NFA and your local financial regulatory agencies. These regulatory agencies regularly publish red alerts and warnings about fraudulent schemes in Forex to protect Forex traders.

Fraudulent schemes in Forex can be very enticing, cheap, alluring, and certain. Understanding the hidden traps in any alluring offer is the first step of protecting yourself from loss.