I have asked a few traders on how they determined the direction of the Forex market, and they would reply; “Intuition”. They depend on their gut feelings for the direction of the market and using their instincts to make their Forex trading decision. This has lead me to do a research on using intuition in Forex trading, and I have concluded the followings;

Intuition or discretionary traders used their instincts to make their trading decisions. For example; they might go ahead to place a trade despite larger stop loss is required for the current market conditions. Sometimes, they might even avoid place a trade when they sense that something is not right about the market, even when all their entry requirements are met.

While they may use their instinct in Forex trading, however, they need to differentiate their feelings of greed and fear (the 2 demons in traders). Why? It is because they need to know the reasons clearly why they enter or exit a trade, if they are not sure or very firm on the reasons, there is a possibility that their action is based on their emotions. Intuition in Forex trading requires experience and is not suitable for those who are just starting in Forex trading. The followings are ways to find out if you are using your emotions to trade instead of intuition;

1) Cold sweats

2) Heart beat fasten

3) Can’t sleep holding a position

4) Fatigue

5) Quick tempered

For those who are just starting in Forex trading, I would like to encourage using system trading. A system trading is defined as a set of specific rules and parameters that determines the entry and exit points. Some of the most commonly used indicators in system trading are Moving Average, Stochastic, Oscillators, and Bollinger Bands, etc. There are several advantages of using system trading;

1) Eliminate your emotions

2) Easy to learn

3) Can be automated by computer software

One thing to bear in mind when using system trading is that you are not allow to change the set of rules or enter and exit using your emotions. Only professional traders with years of experience overwrite their system sometimes. Another point to take note is that the system you used for Forex trading need to be time tested and be profitable in the long run. Thus it can be a time consuming job to develop a system in Forex trading from scratch.

 This article on Using Intuition in Forex Trading is brought to you by www.onlinetradingfx.com

Does your heart beat faster whenever you are about to place a trade? Or feels excited when the trade goes in your direction? If this is so, you need to learn how to condition your psychological aspects in Forex Trading. Today, I would like to discuss about how your emotions plays an important role to be successful in Forex Trading. At the same time, sharing with you 4 winning tips in trading psychology, that I have apply in my Forex Trading.

Trading in any financial markets can be the most stressful and challenging profession in the world. In the current economic recession together with the increase of retrenchments, any would-be traders are turning to the financial markets for wealth and security. However, most of them have failed to realize that the key to successful trading lies within individual decision making and reasoning (trading psychology). Why? Let’s take Forex Trading for example; the market is unpredictable and volatile at times. Any changes in the country’s momentary policy may cause the Forex market to turn in the opposite direction prior to the trend. So, since we can’t control the Forex market, the only valuable tool available is our mindset. Lacking control of our psychology in trading, will lead to disastrous results.

I would like to advise everyone to repeat the following 4 winning tips, before they start their trading session. This is to condition your mind to behave with discipline.

1. I Do Not Know the Direction of the Market

The above statement doesn’t not mean that you can skip your analysis of the market, and jump into the trades recklessly. What I meant here is for you to have an open mind about the market direction and not to be too bias in one direction. When you have an open mind about the market, you will have more ease on cutting loses in your trades and protect your capital.

2. The Past Does Not Equal to the Future

You need to take on every trade without emotions of your past trades. This is very important, because you may end up being “trigger happy” and suffer losses because of your previous winning trades, or afraid to execute your current trade because of your recent losing experience..  

3. I am Prepared to Lose Small Money

This may sounds negative to you. But what I mean is that in some strategies, you may have a string of losses before hitting a real winner that will cover your previous losses and make some nice profits. Remember that there are no such strategies that can give you 100% winning rate.

4. I have Patience to Wait

Not everyday is an action day, especially for the short/long term traders. In long-term trading, you may only find 3 good trades in a good year. Therefore you need cultivate the patience to wait for the right signal. Failure to have cultivate patience, will end up busting your account.

This article on 4 Winning Tips in Forex Trading Psychology is brought to you by www.onlinetradingfx.com

In the times of economy turbulence and unknown, many people have turn to Forex trading as an alternative source of income. Often it does not work out to be the way they have expected. So how can you overcome it?

The article I would like to share below is a typical case study by Dr Janice Dorn;

Ten Minutes Case Study

In the early hours of yesterday morning, I picked up the phone and heard a woman sobbing loudly.  I did not recognize the phone number or the voice, so I knew it was not a relative or friend.  Still half-awake, I asked her how I could help her.  It was yet another tale of sorrow, struggle and the inability to make ends meet.   She was a single woman who lost her job and turned to scalping in the DJIA mini-futures to make enough money to save her house and pay her bills.  She had been trying for four years to trade and was losing steadily. Her equity was going down every day and she was desperate to understand why.

“Why?  How can this happen to me?  I am smart, educated, good with numbers and even trained myself to be a professional blackjack player. I trade one contract and every time I lose money, I go into a total tailspin.  I get so emotional that I can’t recover.  I think
I need some kind of medication to get me through this
because I am at the end of my rope.

I backtest my system every time I change it and I change it often.  When I trade on paper, I make good money, but as soon as I go into the markets, I lose. If I had my job back or any other job, I would leave trading in a heartbeat.  I don’t know what to do. Please help me?”

In less than ten minutes, I heard almost every mistake a trader can make.  Almost.

Symptoms:

1. Trading with “scared” money
2. Trading from a state of desperation and fear
3. Ruled by emotions and unable to take a loss
4. Changing her trading plan often
5. Trying to be perfect
6. Looking for medication to deal with emotional issues over trading
7. Adopting a trading technique (scalping one futures contract) that is beyond her level of trading competence
8. Attached to the outcome of each trade
9. Not committed to the process of learning to trade-using trading as a temporary “stop-gap” source of income until something else becomes available.
10. Acting out personal dramas in the financial markets

Diagnosis:

Financial Anxiety Disorder ( FAD) with depressive components, leading to maladaptive trading behavior.

Possible gambling addiction. (Not enough information to confirm or deny)

Treatment:

Stop trading and look elsewhere for a source of income.

Find a competent, compassionate, communicative and transparent financial advisor to help with this aspect of her life.

Increase social or family support to mitigate isolation.

Begin a regular program of yoga to reduce anxiety.

One of the most amazing thing I have found out is that, most amateur Forex traders believe that the results of the Forex trading is not random, yet they can’t seems to produce consistent profits. Shouldn’t a random market produce inconsistent results and a nonrandom market produce consistent results?

What those new Forex traders fail to understand in Forex trading is; Events with probable outcomes can produce consistent results. Experience traders treat trading like a game of probability, which is similar to the way casinos and professional gamblers approach gambling.

To give you an example, let’s take a look at the game of poker. In poker, the casinos have approximately a 4.5% edge over the player. This means that, over a large sample size, the casinos will generate net profits of $0.45 on every dollar wagered on the game.

You may find that 4.5% might not sound like a lot, but if suppose a total of $100million dollars is wagered collectively in the casino over the course of a year. The casino will net 4.5million profit!

Every professional Forex traders understand that every individual trade is an unique event, where the outcome is random relative to the last trade or the next trade. New Forex traders must know that in each individual trade, there will be a random, unpredictable distribution between winning and losing. But on a collective basis just the opposite is true. If a large number of trades are executed, patterns will emerge that produce a consistent, predictable, and reliable outcome in Forex trading.

Now, let us get into deeper psychology into how new Forex traders can succeed in producing consistent results by applying the following simple Forex trading beliefs. Firstly, they need to know that it requires 2 levels of beliefs to be aligned in order to produce consistent results in a random situation.

At the first level, they must believe in the uncertainty and unpredictability of the outcome of each individual trade. On the next level, they must believe that the outcome over a series of trades executed is relatively certain and predictable. The degree of certainty is a function of how good their edge is.

It is the ability to believe in the unpredictability of the Forex market and simultaneously believe in the certainty of the outcome when a series of trades are executed that makes an individual Forex trader successful.

The belief in the uniqueness of each trade prevents experience traders from engaging in the pointless endeavor of trying to predict the outcome of each individual trade. Experience traders have learned and completely understand the fact that they don’t know what is going to happen next. Most importantly, they don’t need to know in order to make money consistently in Forex trading.

When you don’t have to know what’s going to happen next in Forex trading, you don’t place and special emotions on each trades. In other words, your egos involved will not get in your way of trading Forex effectively.

This article on Creating Consistent Profits in Forex Trading is brought to you by www.onlinetradingfx.com

For those looking to learn the basic foundation in Forex trading and other financial instruments, i would strongly recommend the course; Habits of Success conducted by world class trader, Ray Barros. 

Let me give you some brief intro about Ray Barros;

Originally a lawyer by profession, Ray has given up his lucrative practise in 1980s to pursue his passion and love for trading. His early attempts at trading failed miserably and he suffered heavy losses. Finally, Ray hit on a trading approach that gives him the market edge, allowing him to trade profitably and consistently.

Thereafter, he was highly sought after by major banks to manage their funds, and as a trainer to train other instituational traders.

In the early 1990s, he became as outsourced Forex Trader and it gives him the flexibility to focus on his passion on teaching.

A more detailed information on Ray Barros.

I have personally attended the Habits of Success conducted by Ray Barros, i can firmly say that it is a MUST for those who are keen on starting to learn any form of trading. It builts the basic trading psychology in you and lay out the true facts of trading without any hype. It is definately value for money.

Detailed Course Information