Over my past few years of Forex trading, and reading books written by various market wizards, I’ve found certain principles to be true. Understanding and using these basic principles provides an anchorage of sanity when trading in an insane Forex market. I always pull out these 7 basic Forex trading principles and review them, whenever I am stress or getting “whipped-saw” in the Forex market.

 1) Don’t Try to Predict the Future

I used to think that there were gurus and experts out there who knew what was going to happen in the markets. I thought that these Forex trading gurus and experts were extremely successful because they had the magic formula on how to predict the future of the Forex markets. Of course, the question is that if they were such geniuses, and if they knew where the market was going, why were they still conducting trading courses, posting newsletters…….etc? Why weren’t they driving to the seminars on their Lamborghinis? Why aren’t they the richest man in the country?

Of cos, I would like to give credits to respectable Forex trading gurus who teach for the sake of contribution to the society.

2) Nobody knows where the market is going

It has really taken me quite some time to realize that no one knows where the market is going. I have been to seminars in which the presenter made it seem as if he or she had some holy grail in trading to predict where the markets were going. Either they were insane or they were just plain good actors.

 3) The Market Experts aren’t David Blaine

The market experts aren’t magician. Some of the more reputable Forex trading experts or gurus that try to predict the markets actually profited from it. The reasons for them profiting in the market is not because they predicted the market correctly. They make money because they traded the market correctly.

4) Discipline, Discipline, and more Discipline

In the world of Forex trading without fixed rules and regulations on how you open your trade, close your position….etc. Discipline, Discipline, and more Discipline is the real rules of Forex trading-without it; it will be just a question of time, before you are doomed!

This is not an easy behavioral trait to master, I know but nevertheless an essential element and a key to be successful in Forex trading.

5) Aligned yourself with the Market

We make money trading when we are in harmony with the market. We are long when the market is going up, and short (or out of) the market when it is going down. If we bring an opinion with us while trading, we will end up fighting the market. We keep trying to go long as the market is declining, or we keep shorting a Forex market that it is in a bull phase.

6) Read the market, manages your emotions.

 To remove your personal biases and let the Forex market tell you what to do is to give up control, to give up the notion that you are actually in charge of how much money you make. For a profitable Forex trading, you need to move into the mental state of letting the Forex market determine the profits, not you. It won’t be whether you predict the market correctly that determines the profits, but whether your strategy is in a profitable mode or drawdown mode as determined by the market.

So, let the market tell you what to do base on your strategy. Let it get you long and put you short. Let the market determine how much money you are going to make. Trade your strategy and let the market do the rest. And know that the market gives money and the market takes away money. Your goal should be to develop a strategy that protects money than it takes away.

7) Accept losses as a cost of doing business

To be successful in Forex trading, the most difficult thing about trading is accepting the losing trade. We all have the desire to be right, to be correct all the time. For novice traders, the losing trade means that something is not working and that you have somehow made a mistake. For experienced traders, losses are just a cost of doing business.

Some of the best traders in the world lose money on more than half of their trades. If you look at the performance results of the best traders and money managers, you will see that they all have a large percentage of losing trades. If you trade, I guarantee you that you will have losing trades. Learn to love losing trades. They should be your friend because you will be spending a lot of time with them.

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America’s recession “probably” will end this year if the government succeeds in bolstering the banking system, Federal Reserve Chairman Ben Bernanke said Sunday in a rare television interview.

This is a short clip of his rare interview

Feeling sleepy today, perhaps due to the rainy day outside….Since it is a gloomy weather, i shall explore the darker side of Forex trading; 4 Painful Mistakes in Forex trading. Yes, the topic may sounds too painful to some, however, it does happens to almost 95% of people starting out in Forex trading (including me of cos!).

Without further ado, lets explore the following common painful mistakes in Forex Trading.

1) Traders become long Term Investors

How often have we hear of people saying, that they are still straddling on their losing positions in Forex trading, stocks or other financial instruments, etc? While they are still holding on to their losing positions, they are still hoping that the market will make an U-turn in favor of their direction.

This may happened to a lot of Forex trading, stocks..etc amateurs, who may find it too painful to cut small losses and get out of their losing trades. Why is that so? There are few possibilities; either they have over committed their positions (too large size) or having a large ego to admit that they are wrong. Eventually, they will grow tired of watching the prices going so much against them, that they just leave their position hanging there.

Many amateur Forex traders deny their losses, just like any alcoholics or drug addicts denying their problems.

There seems to be a stark parallel between an alcoholic and a trader whose account is being demolished by losses. They nurse the fantasy of being able to control their Forex trading losses, overly excited when the market goes in favor of their direction by only a few ticks. However, nothing will ever change their self-denial nature, if they never make an effort to admit their problems.

Even in the case that the particular currency or stocks did make an U-turn after many years beyond their expected time-frame. This including the opportunity costs and the interests from the bank may even worth more than the profits make.

2) Cheap become Cheaper

This is a very common mistake which may happen to those who committed it do so by comparing the current price with the 52 weeks high of the currency. Many people using this gauge assume that a fallen Forex price represents a good buy, but the fact that the bear trend is just at the begining. That’s why it pays to analyze the overall picture first.

Deteriorating fundamentals and increased interest rates are all possible reasons for weakening of currency- but they also provide good reasons to suspect that the currency might not increase anytime soon. It is important always to have a critical eyes since a weakening currency might be a false buy signal.

Sometimes, it pays to avoid buying currency that simply look like a bargain. In many instances, there is a strong fundamental reason for a price decline. Just imagine buying Malaysian Ringgit 20 years ago!!!

So do your homework and analyze the currency outlook before investing in it.

3) Picking High & Low

Many started Forex trading without knowing the nature of the market. Unlike stock market, Forex is a very trendy financial instrument and the trend may continues for over a period years, some even decades.

Most Forex traders like to be the first one to pick either the high or the low of the market, and they may even describe to you the thrill and excitement they get from being right. Their feeling of thrill or excitement of being right are equivalent to having sex or flying a plane. However, in the Forex trading arena, it favors more on continuation rather than reversal. To be truly profitable in Forex trading, extra cautious needed to be taken for initiating a reversal trade.

4) Presuming or Predicting

Many amateur Forex traders gambled on hunches and use it to make their trading decisions. Or you may even hear your relatives or friends talking about a currency that they heard will get a bull rush. Even if these things are true, they do not necessarily means that the currency is the “next big thing”, and pick up your mobile phone to call your broker.

Other unfounded tips come from Forex trading “professionals” on the media who often tout a spcific pair of currency as though it’s a must buy. These currency tips often don’t pan out and go straight down after you buy them. Remember, buying on media tips is often found on nothing more than a speculative gambling.

Conclusion
Almost 95% of the painful mistakes you can find in the internet or books are due to the human psychology factor, which i would like to explore together with you in the future.

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Online Forex trading have enjoyed exponential growth and widespread notoriety over the past few years in Asia; online foreign exchange trading is only now gaining popularity among active traders. Until recently, large international banks dominated the foreign exchange (FX or Forex for short) market, only allowing access via telephone trading to a select few such as large MNC, high–net worth individuals, and so on. But now, the tide has turned and finally there are established online trading firms that provide individual investors with direct online access to the largest, most liquid financial market in the world.

Trading opportunities in the Forex market online, deserve serious consideration as a diversification strategy for your portfolio. Only few traders consider expanding into Forex. Why? The reason may be in the simple fact that in Asia, investors tend to be underexposed to foreign exchange. Unfamiliarity typically breeds misconceptions, and online trading foreign exchange in Asia is no exception.

Forex a Risky Business?

Is Forex as risky as everyone thinks? One way to measure risk is to compare a financial product’s risk/reward ratio. If you take the time to compare an investment in Forex to common investments such as equities and fixed income, you will find that from a risk/reward standpoint, Forex investments provide respectable returns and should be considered a viable portfolio diversification tools.

As you can see the claims on some Forex web sites, implying that FOREX is a risk-free pastime. No investment is risk-free.

In Forex you are trading substantial sums of money, and there is always a possibility that a trade will go against you. With essential education, Forex trader can learn how to trade profitably and minimize losses.

Common Misconceptions in Forex Trading

Many investors unfamiliar to online Forex trading may have some misconceptions about the market. One of the most common myths interprets Forex online trading as a higher risk component than other investment alternatives. All financial markets involved risks, and only with substantial level of education you are able to minimize the risks and profit consistently.

The Forex market is like any other financial market and technical analysis does translate well into forex. Many technical indicators that are used in other financial market can be apply and profit from trading Forex online.

Conclusion

Of the more than one trillion dollars a day transacted in the Foreign exchange market, an estimated 95% comes from speculative trading. While large international banks are responsible for the majority of this volume, there are retail investors all over the world trading Forex online on a daily basis. Without a doubt, online trading investors in the US are behind the curve with regard to learning about and participating in this market. Active traders who appreciate liquidity, strong technical indicators, and a multitude of short-term trading opportunities will find online trading Forex especially appealing. But at the very least, trading the foreign exchange market deserves serious consideration as a diversification strategy in anyone’s portfolio.

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