Becoming a successful forex trader

Hi

A few words of wisdom

Forex prices are sensitive mainly on interest rate related issues.Political issues and climate are secondary issues to the majors.

The prices depend on what the yield investor can get over the next 10 years on a paricular currency.

If interest rates in the U S are to increase 3 % over the next 3 years , traders should expect usd to appreciate by 3% *10 years = 30%, this figure is somewhat discounted and a appreciation of 20% can be expected.

People will invest in a currency if interest rates are in a tightening cycle because they tend to benefit from higher interest rates plus an appreciating currency.

Good book to read

Trading cross currency rates

Trading Currency Cross Rates - Google Book Search

The best way to trade is to analyse inflation,economic growth data , labour market
and employment growth

The best charts to trade are daily charts and look for trades for breakout of the daily range and into a trending mode

OILFXPRO

Lesson 2 from "bird watching in lion country"

It still amazes me every time I search "forex trading" or "forex training" to see all the new forex trading "experts" out there. Another day, another expert, all vying to reach the top of the heap. And each one has got ANOTHER easy money-making forex trading system.


Doesn't it irritate you that once you probe a little deeper the "experts", "trainers" and "course providers" are mostly failed traders turned "mentors", or Internet marketers? Aren't you frustrated by the fact that you only find copies of web pages you have seen many times before? Rehashed in a new form, but with the same old stories.

Consider this: Only 25% of forex professionals use technical analysis as their primary tool in their ‘decision-making package’. The rest use it in a supporting role only. Were you told otherwise by a marketing wizard? Are you finding that your charts are not telling the full story? Timing off - again and again? Stop too close - again and again? Dollar fell on 'good' news - how could it - again?

Technical, Fundamental
and Relational Analysis
Another whopper of a lie is that the forex market is ideal for technical analysis. It is the least suitable of all the major markets for technical analysis. Don't fall for this marketing wizardry. It is very easy to concoct 1-2-3-you're-rich technical trading systems with fancy names. The people that know, the people who made real money in forex long before you and I joined the queue, simply used the most basic technical analysis in conjunction with fundamental and other types of analysis. I call this relational analysis. This is one of the main keys to success in the forex market.

Thanks to the author of Bird watching in lion country


Another indicator another system fails , try a new digital indicator or a signal service
only to lose all your money and give up forex


OILFXPRO

I really love this site.... Great post...by the way....spot on...

I have to say though the crooks that the sell signals etc, are really a product of the idiots that are willing to part with cold hard cash for them.... classic stuff

I am actually thinking of starting a new "time machine" business , I wonder if anyone would be interested...

Lesson three

Get off these message boards full of idiots,scammers and thieves.Most of the losers of the 95% club hang around these boards and u will learn nothing or learn the wrong things from them.Some of them will pass your their poor losing skills and knowledge

http://www.trade2win.com/boards/for...ing-forex-tsd-forex-factory-4.html#post403732

Look for a great message board with skilled traders who are successful.If u hang around with winners u will become one of them

OILFXPRO

Hi

The only thing good about forex factory is it's calendar.Many traders use it

Forex Calendar @ Forex Factory

OILFXPRO

In my experience most kinds of analysis do not work with the majors. Sure, you’ll see some nice looking charts and indicator set ups after the event but you will not get them to work in real time.

I believe that there is a reason for this and it is simply this; the short term price of major currency pairs is determined by a huge amount of speculative position taking. This makes FA and TA pretty much useless unless you can actively monitor the volume of positions coming into and out of the markets. The greater the amount of speculative positions the greater the possible deflection away from ‘fundamental value’. Add to that is the ability of the various banking houses to quickly shift the price and mop up ‘The 95% Club Members’ as the price gets pushed straight into the obvious stop loss areas. I’ve seen it many times. The professional money ‘sets up’ the small money time and time again. That is why this market is so ruthless.

Personally I make money from fx. GBPUSD to be exact. The only way that I have found that allows me to do this is by monitoring volumes. By watching this you can see where the majority of people’s positions lie and therefore work out the key areas where the ‘clever money’ might want to push the price.

From Friday I have 2.0178 and 2.0119 as two key areas. Watch how we move today and watch how price ‘reacts’ with those two areas.

Steve.

stevespray said:

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Personally I make money from fx. GBPUSD to be exact. The only way that I have found that allows me to do this is by monitoring volumes. By watching this you can see where the majority of people’s positions lie and therefore work out the key areas where the ‘clever money’ might want to push the price.



Steve.

Click to expand...

Steve

It is very difficult to monitor volumes in forex.The only way of monitoring volume is the activity and price movements in U K /European and U S sessions.

The commitment of traders reports are all lagging and are no reliable guide to volme

OILFXPRO

I'd love to know how to monitor volumes in fx. Steve, seriously, if you'd care to provide me with any enlightenment on this I'd be very grateful

oilfxpro said:

Steve

It is very difficult to monitor volumes in forex.The only way of monitoring volume is the activity and price movements in U K /European and U S sessions.

The commitment of traders reports are all lagging and are no reliable guide to volme

OILFXPRO

Click to expand...

We have proprietary software for monitoring volumes. It’s a form of ‘volume scoring’. If you think about this carefully you will see that it does not matter what the volumes actually are in each bar but more importantly how the volume bars compare with each other. This way we can detect critical areas within the market.

In terms of trading – the closer that you can place a trade to these ‘critical areas’ the better since, when price moves away, you will know quickly if your trade is a good one or a bad one. You will also have targets for your trades as the market tends to be draw towards these different areas.

Steve.

Hi

Many forex forums are full of thousands of indicators.95% of them do not work on forex.
It is an illusion sold by forex forums that buying indicators from forum owners will give u the success.Forget it!

Here is something I wrote many years ago

When trading a currency pair , one is trading the volatility of 2 currencies against each other.Take Euro /usd for example .....the euro could be strong but so could the U S dollar be strong ,so
price could go up on euro
but it would equally come back to the orignal price.

If u trade a currency pair your chances of making money are reduced by 50% to start with , 50 % volatility of one currency euro and 50% volatility of another usd.

Now look at oil .when oil is strong or weak your chances are 100% ,so traders make upto 100% from trading oil .

When oil shows strength after 25% of daily range move ,you got 75% to profit from.

When currencies make 25% from bottom of daily range ,you got 25% to profit from and it could easily go 50% lower before going higher.It is not easy to trade currencies.

OILFXPRO

FXPro - I say that your logic is flawed! It does not matter what you feel the volatility is or was. The market will do what the market will do. This is the reasons why backtesting is pretty much useless. Backtesting assumes that, given the same set of circumstances again, people will re-act in an identical manner...... they dont. Add to that is the fact that your system will now react when, in the back test, your system was not a factor.

Each pair will have characteristics. Some of these change over time whilst others stay very similar. If you get 'close' to a pair and trade it day in day out then you sense these things. Because of this you evolve as the market evolves.

The biggest mistake most people make is believing that they have to make a prediction on which way the market is going move. THIS IS NOT THE CASE. This over complicates trading forex. The key is trade in areas where you can identify low risk entries. This is not predicting market movement but entering a position and preparing for all outcomes. If you make a good entry then you might win or you might lose - it's still a good entry - the key is that, if you are wrong, you find out about it very quickly and close for minimal losses.

I hope that you can understand the poinst which I am making here.

Steve.

stevespray said:

The key is trade in areas where you can identify low risk entries. This is not predicting market movement but entering a position and preparing for all outcomes. If you make a good entry then you might win or you might lose - it's still a good entry - the key is that, if you are wrong, you find out about it very quickly and close for minimal losses.

I hope that you can understand the poinst which I am making here.

Steve.

Click to expand...

steve

Very good point and a good way of trading but all these types of methods fail ,unless
APPLIED IN CONJUNCTION WITH fundamental anylysis

Perhaps u would like to post some images of trades executed and explain the set ups.

This guy trades a similiar method but he has been changing from system to system over the last two years
FXiGoR-(T_S_R) very effective Trend Slope Retracement system

This is the sort of technical trading system which would work well if applied with fundamental anylysis

Pivot Point Squeeze, high probability system - Page 2


OILFXPRO

I do not use any kind of FA in my trading – there is no point. My trading revolves around the ‘noise’ which is created when speculation enters and leaves the market. I’m not interested in holding positions for many hours, days or weeks. There is no need. My interest is in playing on the side of the 5% who consistently win. If I took a view, based on FA or TA, then I would not be able to maintain a balanced view about what the market was telling me on a short term basis. Lots of folk lose because the ‘marry’ themselves to a view and hence a position even when the market is going against them. I try not to do this. Analyse you biggest loss making trades – I guarantee that these are trades where you know full well that you should have closed them before you did. For some people this is the only thing which lies between success and failure as a trader.

As I mentioned in an earlier post – trading the majors can be a brutal business. The markets movement has a ‘grating’ effect on oneself. This can happen if you are running a loss or a profit. How many times have you sat there and thought that ‘the market’ has a webcam hidden over your shoulder watching what you do so it can do the reverse? In my opinion what one needs is a system which negates or considerably lessens this ‘grating’ effect. This is where the volume studies come in. By monitoring more than price we can examine the market more deeply to justify or nullify our position in the market. This gives us a strength that a simple examination of price cannot. Hopefully it helps us run winners (when the condition prevails) and cut losses quickly when the balance of the market shifts. The point is that you only need a small edge to make fair bit of money providing that you don't get overly attached to your individual trades. Some of my better trades have lasted only a few minutes.

Those two systems that you posted seem, at first glance, to be wholly indicator based. This to my mind is a false prophet. All indicators use prior price to produce a further derived number. From this number other numbers might be deduced and potential trades identified. This makes little sense to me generally since there is no way of the indicator detecting which prices are important and which ones are not.

Have a look at the numbers that I posted earlier this morning. At 9.09am I told you that 2.0178 area was fairly key. Pop that line on a 5 minute chart and check it out. How many trades could you have made this morning using that level as a critical level? Even from the time I mention it you could have made 3 or 4 trades for +16 winners. Sure you might of had a loss in there too but overall you’d be well ahead. Let us examine the loss. The loss would have occurred on the 12.30 bar (1 min chart) and immediately it was visible that all was not well with a long at 1.0180 ish. Realistic loss on that trade, even if you froze for a minute or so, would have circa 15 pips. As I said, trading is as easy or as hard as you want to make it.

Steve.

Hey Steve,

Time to stop this man, if you know what I mean.

Steve and FXscalper

The purpose behind this thread was to trade currencies the traditional way .I can understand your scalping and day trading method and I hope u contribute more to this thread with your trading style. hopefully with some charts and images.

I am making the assumption that Bill Lipshultz was trading 4 or 5 trades a year in the tradional way.

http://www.trade2win.com/boards/forex-strategies-systems/29630-signal-providers-2.html#post403855


The difference is you guys want to trade 1,000 times a year plus .......thats scalping
Bill Lipschutz summed it up when he said, "Out of 250 trades in a year, it comes down to five, three of those will be wrong and you will lose a fortune and two will be right and you will make a fortune; for the other 245 trades-you should have been sitting on your hands."

OILFXPRO

Steve,

I know you said that you have software that somehow determines volume. Does this work off a datafeed or is it calculated in a different way ?

I have previously plotted a "representation" of volume but have not worked as much on it as maybe I should have.


Paul

Steve

which volume figures do u use ?ebs or currenex or broker or cme or globex or the total entire forex volume combined?

OILFXPRO

stevespray said:

My trading revolves around the ‘noise’ which is created when speculation enters and leaves the market.

I’m not interested in holding positions for many hours, days or weeks. There is no need. My interest is in playing on the side of the 5% who consistently win.

Lots of folk lose because the ‘marry’ themselves to a view and hence a position even when the market is going against them.

Click to expand...

Great posts Steve.

I agree with your comments that these instruments are brutal & indeed require very specific templates to successfully trade them on a consistent basis. I also appreciate that if someone is fortunate enough to unlock a strategy (or two) which also beats clearly to the rhythm of a particular pair, then they can certainly begin to make life a whole lot easier for themselves.

Levels & their significance, or rather the perceived significance, tick different boxes for different players though. And surely that directly reflects the importance or emphasis one places on the method chosen to observe price activity?

The method you utilize obviously works perfectly fine for the specific slant you’ve uncovered for analysing & triggering your trades. Common sense, sensible application sure gets my vote.

The 2 levels highlighted on the 15min graphs below clearly carry significance for followers who are of the view that price gyrates, re-visits & attracts 2 way activity until the imbalance becomes restored & fair value finds it’s level.

Coincidence that price experienced temporary barrier activity Friday/today on the first visit since the rejection of late 07? Maybe, or simply the laws & structure of differing players agenda’s converging & doing their respective business at (their) specific area of (technical?) relevance. After all, there are coats of many colors strutting their stuff out there.

Same could maybe said of the 1.9800-1.9950 channel, which would have alerted those interested parties again as it pressured late into February (visible from a large hourly graph) on the attempted launch off the solid 1.94 base.

Eventually, the demand overwhelmed the supply to current levle. But for the s&r players, or those who view these reference zones as (possible) significant trigger levels, a playable set-up occurring on & around said zones of interest, is a natural function of their working day.

What are the odds that this zone (particularly 9950), will flag up the first fulcrum on a return trip?

On the upside, 2.0220 will undoubtedly harbour strong influence to 2.0350 as the demand soaks up, flips the bias north & gets accelerated via the breakout crew.

Do these market vibrations offer value to the slightly longer term player? Sure.
Do these market vibrations offer value to the shorter term player? Sure.

If each respective participant can work their edge as price pivots around these repetative activity zones, then those levels will write a regular pay check. That they utilize very differing tools & view the landscape from slightly different perspectives doesn't really dilute their common aims.

It’s those who play these levels devoid of a confident (tested) set-up….devoid of a structured game plan who consistently feed their bank roll to the savvy operators.

Evening Ampro – Very good and interesting post.

For what it’s worth most of what you write is not actually that relevant to my style of trading / learning. I understand what you have written but it is far to ‘global’ for me. In setting up my charts I rarely look back any further than a few days and, in most cases, I am set up basis yesterday and what I see developing today. What you may have gathered, based on my prior posts, is the fact I try to look at things as simplistically as is possible. If you think about this realistically then you will see that the ‘current price’ is derived by people trading in the shortest time frames. It’s the same in shares and index futures (which is what set me on this road). As more people get involved in a particular market it has a greater ability to deflect from its ‘true’ or ‘fundamental’ value. The so called ‘Tech Boom’ aka ‘The Dot Com Bubble’ is a clear example of this on a grand scale – in the end every man and his dog had a position in the market and the market was deflected massively from its fundamental value.

The same thing can occur in certain Forex pairs but on a much more short term basis. Again this needs careful consideration and in depth thinking. You see, it’s my belief that short term traders trade entirely on price – this is their downfall. Their every action and reaction is based solely on the prices that they see. A stop loss for example is a pure reaction to price. No consideration is given to other factors which, for example, might also have a bearing on the validity of their current trade. This leaves the 95% wide open to consistent loss as their every trading action is dictated by the markets movement. This is why the market has this amazing ability to consistently ‘generate’ its own trade even when it is reasonably quiet in nature. This ‘generated trade’ is short term players reacting purely to price – either fear or greed.

A simple experiment might help me make my point. Next time anyone gets the ‘urge’ to take a position in the market just stop for a moment. Bring up a chart or two of the relevant instrument. Now place yourself in two scenarios and answer the following two questions;
1 ) Imagine that you have recently gone long in this instrument – where would you place your stop?
And...
2 ) Imagine that you have recently gone short in this instrument – where would you place your stop?
Once you have identified the two stop areas you have identified an area where taking a trade is of much lower risk. It is of lower risk because you have found an area where temporary price deflection is likely to occur. In those areas the 95% are flushed out of their positions purely due to price – this is where you can step in. Obviously, if you have supporting volume as well then you are more than likely onto a good thing.

Right – I need some sleep!

Steve.

Another good post Steve with real relevance to market action.


Paul