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The Problems of Day Trading Forex

Trading is a tough art to master. But the pros and cons of day trading forex become apparent once a trader begins to face the everyday market risk and stress.

Seeing the Bad Aspects of Day Trading Forex First

Day trading forex has many advantages, one of them being the fact that the trader is capable of capturing many small price movements. Movements that would not otherwise had been captured, thereby resulting in substantially larger profitability. So that a movement in a currency pair, seemingly being just 50 pips on the daily chart, actually hides much more volatility. And it may actually hide as much as 150 pips or more through sideways trading actions. So day trading definitely is a big plus, at increasing volatility and very likely profitability as well. All forex strategies may have something good to offer, the rest is down to the individual trader who has undertaken the task of making money through trading. There is though the darker side, the side of reality where problems become too difficult to handle, and day trading becomes almost a daily battle to survive in the markets. While it sounds possible to succeed in day trading, the time commitment required is really a big price to pay. Most amateur day traders actually achieve poor trading results, even those that win, do in fact make less than minimum wage. Then there is a minority of around 15% of traders, who do pay the time commitment price but also make very good money. The bad aspects of day trading are such that only 15% of those traders can handle them in a productive way. Day trading like that 15% of traders who make it big, requires for example a great deal of social isolation, and not being able to accept any phone calls during trading hours. In fact any kind of distraction is bad.

How that 15% of Traders Succeed in Day Trading Forex

Day trading forex requires top notch, relaxed trading strategies, and knowing your market better than most other traders know their markets. The use of forex news requires a special approach, as does the use of any forex calculator for working out key numbers. That 15% of traders, does not use generic methods, does not use any ridiculous popular indicators, at least not in the obvious way. And it certainly knows how to handle those negative aspects of trading. Isolation, time commitment, and risk handling are few such bad aspects, because in general they are difficult to handle. And finally there is the bright side of things. Good day traders can make as much as $10,000 per week, and still be at the amateur level, but definitely very determined to succeed. Good traders never consider themselves professional and perfect, they always look out for that overlooked risk, and not becoming complacent. Even those $50K a month day traders consider themselves amateurs, and vulnerable to making mistakes. There is no guaranty of on-going profitability. And all those negative aspects may overwhelm the trader at any given time, ultimately sabotaging their trading.

How to Become a Better Forex Trader

Many tips on becoming a better forex trader require making big changes and getting out of your comfort zone. Is there a better way to adapt and apply such tips?

How to Really Become a Better Forex Trader

In order to stay comfortable and still become a better forex trader, all one has to do is take things slow, and evolve naturally. Change, as with all kinds of change in life, can be pleasant when it happens gradually, over time, so that we do not lose our comfort. Most trading tips are neither bad or good, they are simply general advice. In fact most trading tips can be used in creative and effective ways, when one relaxes the so called unbreakable rules, and bends theses rules as they see best. The best way to learn forex trading and become a much better trader, is to accept the fact that changes are required. Especially tips which focus on risk control and stop loss placement. These tips should be dynamic, flexible and not fixed, because markets themselves are dynamic and volatility changes all the time. When one trades like robot, trading becomes unappealing and more of a duty rather than a pleasant activity. Tips on stop loss placement attempt to incite fear in the trader’s mind, to the effect that markets are too risky and poor judgement can blow one’s trading account in no time. This belief is partially true, but the opposite is also partially true. Which suggests that being too cautious and afraid to take losses, results in using stop loss orders which do not really work in the long run. When stop loss orders are too tight, they simply are triggered way too often, and for no good reason. In fact, one could avoid getting stopped out in their trades, simply by using variable size stops, and looking more at markets and less at the money. Money management in general, should be more relaxed, and the rules making up that money management system should be flexible, at all times. One needs to focus more on the criteria for entering each and every trade, not exclusively on price action. And despite conventional wisdom, markets are actually not always right! Certainly not as far as instantaneous price is concerned, it’s the steady state that matters above all. But it only takes an instant of price action to trigger that tight stop loss.

The Relaxed Forex Trader

The relaxed forex trader, is a trader who does a lot of research before placing the trade, and actually worries about things, being the neurotic type of person that many situation in life require. But once the trade has been placed, the wise relaxed trader tries to do the minimum of research. This is because of various psychological reasons, and of course because of the well known confirmation bias tendency. Where wishful thinking takes control over impartial judgement. When there is a large size open trade in the market, the trader cannot longer look at the live forex rates without allowing those to cloud their judgement to some extend. Panic never helps, in fact it never helped anyone. It is one thing to be fearful and have the time to think about things, but allowing panic to take control is quite another. Panic never helps, and it almost always results in making a bad situation more complex and more difficult to deal with. The global forex currency converter domain is so complex and unpredictable at times, that even the best traders can fail. And it is not a mystery why they fail. Even the world’s most experienced pilots have crashed sophisticated airliners, only because few things conspired against them, all tat the same flight, creating moments of panic. One can actually learn a lot about handling uncertainty in extreme circumstances. From pilots who had their lives at risk, and then put things in perspective. And see how much less important trading is, regardless of trading results.

How Forex Training Can Be Beneficial

How forex training can be beneficial to new traders. Even though one should always look to take things further and customize, once their training is completed.

How Forex Training Helps New Traders

Forex training is always boring in the beginning and more or less kills creativity. As traders have to follow too many rules and stay disciplined all the way through, until the training course is completed. The main benefits of training are guidance, confidence boosting and the opportunity to shorten the learning curve around trading basics. Things tend to be boring in the beginning but all beginner traders start to think of new ideas, and customized settings as opposed to the default approach. As far as confidence boosting is concerned, training is really essential. As many beginner traders who do it all on their own, end up losing faith too soon, and eventually quit the idea of ever trading again. But when seeing an instructor trading on live forex rates, it brings back inspiration and confidence. As it becomes clear that it is possible to handle uncertainty in the markets, and turn it into profits. When good instructors are involved, training does help beginners psychologically. So much so that everyone wants to be like their instructor, or even better. Some humans believe so much in themselves, so that it becomes their goal, one day to exceed the skills of their instructors. The reality of dealing with live trades, right off the daily forex charts, does ignite strong interest and competition among learner traders. After all, many of them want to impress the person sitting next to them, and bring new ideas into trading even before the rigid training course is completed. This is true even in training courses which have nothing to do with trading. Such as a driving school for example. Where new drivers will have to learn all the rules of driving but there are always small extra bits where one can get creative. Things like having to drive on a very icy road, or start a dead battery car’s engine single-handedly, and without doing any pushing. Most driving instructors probably cannot deal with such scenarios, but it is actually possible to, if one gets creative…

Forex Training Course Selection

Selecting a course for forex training is quite a challenge, as there are so many different ones available. And with most of them, one has the impression that they pay for fancy wrappings rather for real content. Some course do have good feedback, by real traders. While others have neutral feedback, because different traders who took these course gave conflicting stories as to what these courses could or could not teach. There are training courses for day-traders, training courses for long term investors and Carry traders, courses for commodity currency traders, and just about any other course which falls in between these time frames of trading. Courses which focus on the idea of investing in foreign currency can be just as beneficial as short term trading courses. Especially to busy working people, who cannot afford to be sitting in front of a computer for hours each day, watching the markets. One has to figure out what works best for them, and what kind of time commitment is acceptable for their trading or investment objectives. Trading on longer time frames does not mean that there will be less risk. Some traders however can afford big trading accounts, well over $10,000, and at the same time very little time to watch the markets. So the investment approach, and week to week trading approach, using small leverage, are more appealing to them.

How Traders View the Global FX Exchange

The global FX exchange market is full of mystery, facts and myths. To the average trader however, it is a very real thing, where they can test their trading.

Why Traders Consider the FX Exchange as their Ultimate Trading Test

The FX exchange is to may traders, more or less, the ultimate trading test, where skills are tested and myths are busted. Though all kinds of markets and trading methods are tough, nothing comes close to the forex market, because participation is strong, and comes from all over the world. Opportunity for making a big profit is much higher as well. When compared to stock trading, a trader may have inside information, or just information from the trading floor. When it comes to the forex market, all forex trading strategies, for all participants, begin from the same level. No one can have specific advantage over the rest of the participants, because everybody can gain access to the same sources of information. Trading tends to become very technical, on most days, and very confusing during certain hours. That’s why it is considered to be the ultimate trading test. Market participants in the forex market are simply connected through their common forex charts, but trading itself is about as fair as it can possibly get.

Why the Trading through the FX Exchange is So Tough to Master

The FX exchange is very hard to handle at times, so much so that even veteran traders have days where they have to quit trading due to excessive confusion. Those who manage to learn forex trading, to a very profitable degree, do so because they manage to spot profitable, yet low risk trades. These trades usually are found at times where the majority of other traders are confused, and generally currencies trade with increased volatility. Excessive volatility creates all kinds of panic, fear and triggers stop loss orders, creating even more volatility in the process. Traders who lose most during volatile times are traders using tight stops, or who focus too much on intraday events. Whereas, the most profitable traders are the ones who use massive stops, and who can sleep well at night with an open losing trade on. Despite the overnight risk theory, which is more of a myth than a reality, most profits can actually be made overnight. Sometimes, favourable price movement might happen early in the morning, but way too early in the trader’s local time. So day traders tend to miss out on such movements. The forex market is tough, and day trading is even tougher, so much so that most traders tend to fail. Those who make it through though, gain a lot of confidence, they are used to extreme volatility. So even if these traders attempt to trade stocks or commodities, they find risk management much easier to handle.

Why Smart Investors Trade in the CFD Market

The CFD market offers many unique advantages, such as linear hedging, isolation and more. Keeping one’s trades secret is a less known reason for using CFDs.

Benefits of Trading through the CFD Market

The CFD market offers great secrecy to traders willing to hide their investment intentions from the mainstream market. Liquidity in CFDs is great and extremely helpful. But CFDs also provide excellent secrecy for smart and large size traders willing to keep their trades away from public view. Online CFD trading offers so much flexibility to commodity and stock traders, where some of them make millions. Without having to disclose their trades to anybody else, only their broker knows but information is confidential. CFD trading platforms offer very good one way liquidity, while shielding the trader from adverse, extreme market conditions. But confidentiality is also good sometimes, because many smart traders don’t want their trades revealed through a main exchange. Many of these traders trade stocks and commodities where a major trend, or very sharp movement is due to happen. And in cases where they don’t want many people to figure out their intentions, they always use CFDs. CFDs also allow them to go short stocks, at times where markets are going down and here is a high risk of short selling restrictions being imposed in major stock exchanges. CFD trades handle any bear market with no problems, even as other stock traders are unable to hedge falling stock prices. Especially in this case, everyone wants to keep their short selling secret as mainstream investors despise short sellers. There is a feeling that short sellers profit fast and easily out of the buying of long term buy and hold investors. But markets do move fast when they fall — it’s always been that way — regardless of CFD trading activity.

The CFD Market is the Swiss Army Knife of Smart Traders

The CFD market meets the needs of most traders today, and is perfectly suitable for fast trading, up to $100 per point, but also for low frequency traders and investors even above $100 per point. Online CFD dealing delivers on aspects of trading where the classic spot market and futures markets cannot deliver, for all kinds of reasons. Smart traders and investors were the first to spot the advantages and turn to CFDs. CFD trading doesn’t make the financial markets less risky; the risk of losing is always there. But the advantages make trading more efficient, and actually possible where other instruments become useless or too crude to use in a precise manner. Hedging for example requires low dealing costs and linear pricing, Futures fail to meet hedgers’ requirements. Therefore smart traders and investors use CFDs in all kinds of hedging, including cases where they don’t want many people to know what market is being hedged. High profile traders even place small misleading trades on the open spot market. While also placing their massive, opposite, intentional trades through CFDs.

Forex Trading Basics Every Trader Should Know

All traders find their way to mature and wise techniques, through a learning curve which is often long. And which always starts with the forex trading basics.

Some Forex Trading Basics to Always Remember

Success in the currency markets starts with the usual forex trading basics, which sometimes are not so usual and popular. In order to learn forex trading better than most, one has to be an original thinker and keep some of these basic tips while at the same time ignore other such basic tips. One very important tip is to try and be a specialist, and focus all your market research around few currency pairs. Another such tip, is to avoid high frequency trading, at least in the beginning, and go for the more relaxed and less stressful approach of swing trading. Learning to trade while having to deal with live forex rates and news driven volatility, is hardly a good start. And while the industry seems to push for this kind of trading, the truth is that most forex day-traders who make money, do in fact make money, but too little money. In fact, most profitable forex day-traders end up making less, per hour, than they would be making if they were working at a fast food joint. There is absolutely no gain in trying to be a smart day-trader, when one cannot handle the risk and volatility. Most new traders cannot cope, it’s that simple! Other important basic tips are things like focusing on the 4-hour chart, and going down to the minute charts because they create too much confusion. Thereby sabotaging the trader psychologically. Many good trends can be identified on the 4-hour chart perfectly. Other tips also focus on volatility and predictability, and advice new traders not to trade economic reports, or any kind of information which is portrayed as easy, but is in fact impossible to trade. And above all, it is important to maintain a cool approach to trading, and refrain from using so called low risk-reward ratios. These low ratios are actually bad ratios, this basic tip seems to be against common sense, but the probability of success, as defined per trade, does strongly favour the high risk-reward ratio approach.

Forex Trading Basics to Ignore

Apart from the so called low risk-reward ratio, there are more forex trading basics, which are actually bad tips. Many such tips are tips like the idea of placing stops right below or above yesterday’s low or high. This is in fact one of the worst tips ever, and all wise traders have long ignored it. Many other popular basic tips may or may not be wrong, but they are poorly defined and therefore do not constitute serious trading advice. The idea of not being allowed to add to a losing trade is one of those ambiguous tips, where one has to question the logic and the benefits of this basic tip. It is also a big mistake to take other traders’ advice too seriously, so that you feel the need to learn from veteran traders by attempting to emulate their trading methods to the letter. Things such as stop placement, stop loss size, profit target and news trading are all big factors. They cannot be measured and quantified, so as to be used in the same way on every single trade. And one trader’s stop loss size cannot possibly meet the needs of another trader. Therefore it is pointless to follow other people’s trading in an effort to duplicate their trading results, it won’t work. Trading has to be original and creative. The global market acts as a forex currency converter, it follows some basic principles, but at the same time it also has its own rules. Some currency pairs in particular, such as EURUSD are perfectly capable of defying technical analysis. So anyone who believes too much in technical analysis is likely to be disappointed when even the best chart patterns and signals will let them down.