There are many preconceptions about what it actually takes to become a successful trader. However here are a couple of points to consider if you want to become a profitable forex trader.
Firstly you should try and forget about trading short-term / day trading strategies. Many people believe that if they want to make big profits from forex trading, then they need to trade lots of positions every single day. However this couldn't be further from the truth.
Day trading in itself is very difficult. You have to make quick decisions and deal with highly volatile markets, particularly during times when economic data releases are announced. You also have to deal with increased spreads during these busy periods which can seriously deplete your overall profits. You also have to deal with the random noise that occurs when the price isn't trending in one direction or the other, so overall it is far from easy.
A much better strategy is to use much longer time frames such as the 4 hour or daily charts, for instance. In general you will often find that technical analysis is much more reliable when you use these longer time frames.
This is something that is endorsed by many top traders such as Bill Poulos who has actually devised several trading strategies that only use end of day charts. (More details can be found by reading this Forex Profit Accelerator review).
Anyway the point is that although you can make money from day trading, it is so difficult to consistently make money in the long run. Scalping systems will often generate short-term profits but there are very few systems that will continue to be profitable in the long-term. Longer term systems are usually much more dependable and are often much more profitable because each trade usually has much larger profit targets.
Showing posts with label currency day trading. Show all posts
Showing posts with label currency day trading. Show all posts
Sunday, 22 March 2009
Monday, 14 April 2008
Forex Day Trading 101 - Important Facts for Novice Traders
This article is for novice traders and we are going to look at 3 facts which are all you need to know to decide whether day trading is right for you. So let's continue and review our forex trading 101 continues below...
Fact 1
All Short Term Volatility is Random
There is no order to short term volatility and prices can and do go anywhere in short time periods - Why?
Quite simply there are huge numbers of traders all with different levels of skills, systems and motivations for trading and you can tell what this mass diverse group of people will do in short periods of time - it's laughable that traders think you can measure human psychology of millions in just a few hours but they do and they lose for believing it.
Fact 2
Random Volatility = No Odds on Your Side
Forget the far out investment crowd who believe there scientific order and you can predict forex prices you can't ( if you could there would be no market as we would all know the answer in advance!), so those systems who tell you can make a regular income guaranteed are totally wrong. Forex trading is an odds game and to win you must be able to get the odds on your side. If volatility is random, you can't get the odds on your side and will lose - period.
Fact 3
Day Trading Breaks a Fundamental Rule of Trading
This is of course run your profits to cover your inevitable losses.
In forex day trading stops are close and losses are small and because you can get the odds on your side, you have a lot of them. Of course sometimes the forex day trader ends up with a profit when he's lucky - what does the trader do? Run it? Not a chance he cuts it!
It's pretty obvious that you would have to have luck constantly on your side to win and of course luck doesn't last forever. Eventually you have small losses and lots of them and the occasional small profit which leads to a decline and final wipe out of equity.
What about all the track records that claim to make money you may ask?
Well they all have the disclaimer / warning repeated below or a similar one and they mean nothing, as there just saying the track record has been made up and simulated on paper in hypothetical trading, read it carefully:
"CFTC RULE 4.41 - Hypothetical or simulated performance results have certain limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not been executed, the results may have under-or-over compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profit or losses similar to those shown".
You will NEVER see a day trading system sold online with a long term audited track record of gains - Why? If you have read this article you will already know the answer it doesn't work.
If you want to win you need to trade the odds and that means trading longer term.
So instead of day trading make longer term trading part of your forex education and you could enjoy currency trading success.
NEW! 2 X FREE ESSENTIAL TRADER PDFS
For free 2 x trading Pdf's with 90 of pages of essential info on Currency Trading Basics visit our website at: http://www.learncurrencytradingonline.com
Fact 1
All Short Term Volatility is Random
There is no order to short term volatility and prices can and do go anywhere in short time periods - Why?
Quite simply there are huge numbers of traders all with different levels of skills, systems and motivations for trading and you can tell what this mass diverse group of people will do in short periods of time - it's laughable that traders think you can measure human psychology of millions in just a few hours but they do and they lose for believing it.
Fact 2
Random Volatility = No Odds on Your Side
Forget the far out investment crowd who believe there scientific order and you can predict forex prices you can't ( if you could there would be no market as we would all know the answer in advance!), so those systems who tell you can make a regular income guaranteed are totally wrong. Forex trading is an odds game and to win you must be able to get the odds on your side. If volatility is random, you can't get the odds on your side and will lose - period.
Fact 3
Day Trading Breaks a Fundamental Rule of Trading
This is of course run your profits to cover your inevitable losses.
In forex day trading stops are close and losses are small and because you can get the odds on your side, you have a lot of them. Of course sometimes the forex day trader ends up with a profit when he's lucky - what does the trader do? Run it? Not a chance he cuts it!
It's pretty obvious that you would have to have luck constantly on your side to win and of course luck doesn't last forever. Eventually you have small losses and lots of them and the occasional small profit which leads to a decline and final wipe out of equity.
What about all the track records that claim to make money you may ask?
Well they all have the disclaimer / warning repeated below or a similar one and they mean nothing, as there just saying the track record has been made up and simulated on paper in hypothetical trading, read it carefully:
"CFTC RULE 4.41 - Hypothetical or simulated performance results have certain limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not been executed, the results may have under-or-over compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profit or losses similar to those shown".
You will NEVER see a day trading system sold online with a long term audited track record of gains - Why? If you have read this article you will already know the answer it doesn't work.
If you want to win you need to trade the odds and that means trading longer term.
So instead of day trading make longer term trading part of your forex education and you could enjoy currency trading success.
NEW! 2 X FREE ESSENTIAL TRADER PDFS
For free 2 x trading Pdf's with 90 of pages of essential info on Currency Trading Basics visit our website at: http://www.learncurrencytradingonline.com
Monday, 22 October 2007
Forex Day Trading - Beware Of Curve Fitting Or Lose
Forex day trading simply doesn't work and traders get wiped out yet, it is very popular and this popularity has nothing to do with profits and everything to do with curve fitting so lets look at.
Curve fitting is the bending of parameters of a system in hindsight to fit the data.
This is done by some traders who don't know what their doing and by forex day trading vendors who know exactly what their doing.
A trader I know compared curve fitting to - shooting blindly as a barn door, then afterwards drawing a chalk circle around everyone, to make it look like a bulls-eye!
Many traders test their day trading system over a period of data and they cant get a profit with the parameters or inputs they are using so they simply bend the system to fit - by optimizing the system rules. Of course, no period of data replicates itself exactly in the future and the optimized system collapses.
A curve fitted system normally has a lot of rules or parameters and unique rules and parameters for different market conditions or currencies and if it does - it will break in real time trading.
Forex traders don't just do this in day trading they do it in all areas - but its very common in day trading.
Vendors on the other hand, know that forex day trading is a good story and they therefore want to make an attractive track record to sell their system - so they optimize it to show big profits and low risk. If you look at some of the track records produced you know they can't be real - or not for a few hundred bucks!
All they do is present the track record and then put a disclaimer on them, to cover themselves and this the disclaimer you will see:
"Hypothetical or simulated performance results have certain limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not been executed, the results may have under-or-over compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profit or losses similar to those show".
So you can make up whatever you wish as you know the closing prices. Of course, in reality these track records never make gains in real time, as the vendor does not have the advantage of the closing prices and being able to manipulate the track record.
Investors who buy these forex day trading systems from vendors, don't stop to think that these track records are not worth the paper their written on, trade them and lose.
Vendors make a lot of money from day trading by selling systems NOT trading the markets.
The buyer takes the loss and the vendor makes a profit from the sale.
You will never find a real time track record of profits (or if you do let me know) because day trading simply doesn't work. Here's why:
In daily time frames, all volatility is random and prices can and do go anywhere in a day. Support and resistance levels are meaningless and cannot be traded, you can't get the odds in your favour and you will lose.
Don't believe me?
Then try and find a real time track record and you wont get one.
Sure, those day trading track records look attractive - but keep in mind their almost certainly curve fitted, done in hindsight and will not repeat their profits in the real world.
NEW! FREE 2 x CRITICAL TRADER PDFS - NEWSLETTERS - TRADING ALERTS + MORE
On all aspects of becoming a profitable trader including: Free critical trader PDFS, and more FREE Forex Education visit our website at: http://www.learncurrencytradingonline.com/index.html
Curve fitting is the bending of parameters of a system in hindsight to fit the data.
This is done by some traders who don't know what their doing and by forex day trading vendors who know exactly what their doing.
A trader I know compared curve fitting to - shooting blindly as a barn door, then afterwards drawing a chalk circle around everyone, to make it look like a bulls-eye!
Many traders test their day trading system over a period of data and they cant get a profit with the parameters or inputs they are using so they simply bend the system to fit - by optimizing the system rules. Of course, no period of data replicates itself exactly in the future and the optimized system collapses.
A curve fitted system normally has a lot of rules or parameters and unique rules and parameters for different market conditions or currencies and if it does - it will break in real time trading.
Forex traders don't just do this in day trading they do it in all areas - but its very common in day trading.
Vendors on the other hand, know that forex day trading is a good story and they therefore want to make an attractive track record to sell their system - so they optimize it to show big profits and low risk. If you look at some of the track records produced you know they can't be real - or not for a few hundred bucks!
All they do is present the track record and then put a disclaimer on them, to cover themselves and this the disclaimer you will see:
"Hypothetical or simulated performance results have certain limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not been executed, the results may have under-or-over compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profit or losses similar to those show".
So you can make up whatever you wish as you know the closing prices. Of course, in reality these track records never make gains in real time, as the vendor does not have the advantage of the closing prices and being able to manipulate the track record.
Investors who buy these forex day trading systems from vendors, don't stop to think that these track records are not worth the paper their written on, trade them and lose.
Vendors make a lot of money from day trading by selling systems NOT trading the markets.
The buyer takes the loss and the vendor makes a profit from the sale.
You will never find a real time track record of profits (or if you do let me know) because day trading simply doesn't work. Here's why:
In daily time frames, all volatility is random and prices can and do go anywhere in a day. Support and resistance levels are meaningless and cannot be traded, you can't get the odds in your favour and you will lose.
Don't believe me?
Then try and find a real time track record and you wont get one.
Sure, those day trading track records look attractive - but keep in mind their almost certainly curve fitted, done in hindsight and will not repeat their profits in the real world.
NEW! FREE 2 x CRITICAL TRADER PDFS - NEWSLETTERS - TRADING ALERTS + MORE
On all aspects of becoming a profitable trader including: Free critical trader PDFS, and more FREE Forex Education visit our website at: http://www.learncurrencytradingonline.com/index.html
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