Archives: 2010 February

Foreign exchange trading is easy enough, but making money with it is another matter. Many of us start out with big dreams only to suffer a resounding crash. Here are ten necessities that you must have if you’d like to become a successful currency exchange trader. They especially apply to you if you’re using foreign exchange trading systems like USDBOT.  

1. Realism

You have to be realistic about your goals if you are going to hang on to any profits that you make. Forget making great sums of money in a very brief time : that’s only possible if you take huge risks, that may see your profits wiped out as quickly as they were made. Aim for a realistic profit goal and keep your trades minute while you are learning.

2. Training

Nobody was born a successful foreign exchange trader, we all have to learn. Seek out good strong training in the fundamentals of trading, including analyzing the market, risk management and mental aspects. Training comes in several forms and at many costs from free to thousands of dollars. Price and quality are not necessarily closely related. Having mentioned that, do not expect to get everything for free .

3. Support

There’s nothing wrong with asking for help when you want it. Just be certain you ask someone who can actually help you, and not a confused amateur who likes to hang out in forums.

4. Good Trading Practices

This is a look at the Technical Analysis Explained series where we speak of congestion entrance, a type of trading .

We already know that the market can move from congestion to trend and on from trend to congestion , in a cycle that continues without ceasing , constantly going on over and over again . This has happened as long as there has been a market and will presumable continue as long as markets exist in the future . The only times when we do not see this cycle occurring are in times of intervention, regulation, or artificial constraint , such as market regulation, price fixing, market suspensions, price limits, and more – and this only causes a temporary disruption .  But as long as supply and demand can vary , and as long as together in trade humans come together ad they act on opportunity and value as they perceive it, markets will engage in trends and congestions .

We can call it by many different names . Sometimes we have talked about equilibrium and disequilibrium , others talk about horizontal and vertical movement describing the way the chart moves across the page , some speak of distribution as a movement upwards and development being a sideways movement . But it is all the same .

Trends are moves that carry us progressively in one direction ; congestions are times when the market is fluctuating between support and resistance and it’s movement is horizontal .

Your trading system needs thorough testing before you decide to trade live with it. A trading system might comprise of a set of indicators. You need to know how well your trading system and its set of indicators work in a particular market.

For this you can do back testing. Back testing is a method that uses historical data to test how well your indicators work in a particular market. You can use back testing software that enables you to look at the past market data and test how well the indicators and your trading system have worked in the past market.

Now, back testing is done with historical data. What this means is that although your trading system might perform very well with back testing, it may not work in the present market. Market conditions keep on changing and what worked in the past may not work in the present. In the same way, what didn’t work in the past may start working now.

What we can say is that no two trades are exactly alike. So when you look at back testing results, you should look at them with scepticism. But it doesn’t mean that backtesting is entirely useless!

Back testing can give you a feel how a particular market behaves under certain conditions. Back testing can also spot you certain general characteristics of the market like the seasonal trends and market tendencies.