ADS 2012

instabig

InstaForex

insta mastercard

InstaForex

instafx banner mastercard debit

InstaForex

INSTAFOREX PHP

INSTAFOREX TRADE GOLD METAL

Futures trading in oil, metals, agriculture

instafx big

InstaForex InstaForex

INSTA4

InstaForex

ADS123

INSTAFOREX

InstaForex

The Secrets of the FOREX Super-Traders

The first and perhaps most important "secret" is to realize that your methodology or approach (no matter how good) is only part of being a highly successful trader. This applies to any trading style including, day trading, swing trading or position trading.

The simple fact is that a bad trader can screw up a fantastic trading system. Conversely a talented trader can take a mediocre strategy and make money with it.

Why? Please read on and I will explain.

Many traders/investors that I have talked with think that to be a "Super-Trader" that they must possess some type of highly advanced trading techniques or software along with nerves of steel and a highly developed intuitive feel for the markets. In addition they think that these elite group, have some "inside information" that they don't.

You will be relieved to know that the above is not necessary. There are actually only a few things that separate traders who consistently make money and those who don't.

And here they are?

* Skilled traders find a strategy or market pattern that offers a high probability for success. They make money by exploiting this edge over and over again.

* Skilled traders never deviate from their methodology or "wing it".

* Skilled traders never enter a trade without a entry and exit strategy. They know exactly when and where to cut their losses as well as taking profits.

* Skilled traders never ever let a winning trade turn into a losing one. The easiest way to ensure that this doesn't happen is to place a protective stop at or a few ticks in the money once your position is up several points.

* Skilled traders never hope, pray or wish that their stock would go up. They understand that when they are wrong they are wrong and the best thing to do is cut their losses short.

* Skilled traders never trade with their emotions. They don't allow themselves to get caught up in the latest and greatest investment hype.

* Skilled traders always have one goal in mind: To preserve their capital at all costs. They do this by never taking on too large of a position. A good rule of thumb to adhere to is never use more than 5% of your funds on any one trade. This way in the worst-case scenario the stock could drop to zero and your account would not be severely affected.

* Skilled traders never get too greedy. There is an old saying that "Pigs gets fed and hogs get slaughtered". These traders don't try to make one big trade that will turn them into instant millionaires. They don't try to hit home runs, instead they understand that it is better to keep hitting singles and making smaller consistent profits.

* Skilled traders enter and exit trades swiftly and decisively.

* Skilled traders listen to no one else's opinion concerning the market or particular trade they are in.

* Skilled traders are often contrarians. They will be buying when others are too scared to and sell when the crowd starts buying.

That's it, the secrets to making big money in the markets. Perhaps that is a bit of a let down as you were hoping for something a bit more esoteric and complicated.

Let me assure you that if you follow the above principles that you will take your trading skills and profits to a level that you never thought possible!

This article is courtesy of Dr. Jeffrey Wilde, a trading veteran with 15 years of experience in all major markets. He is a trading coach to over 1400 traders in 38 countries.

For additional info: http://www.win-at-trading.com

ADS GRAPE

The Secret of Reduced Margin Spreads

One of the best kept secrets in trading is that of reduced margin spreads. You cannot name a trading method that provides more safety or a greater return on margin than does a reduced margin spread, while also being one of the least time- consuming ways to trade. Have you ever asked yourself why it is that many of the largest, most powerful traders trade spreads? I'm going to show you why!

WHAT IS A REDUCED MARGIN SPREAD?

Because of perceived lower volatility, exchanges grant reduced margins on certain types of spreads. Spreads consist of being long in one or more contracts of one market and short in one or more contracts of the same market but in different months-an Intramarket spread; or being long in one or more contracts of one market and short one or more contracts of a different market, and in the same or different months-an Intermarket spread.

DISTORTIONS ABOUT SPREADS

There are some distortions about spread trading that need to be dispelled. If we get them out of the way, I can show you the tremendous advantages spread trading has over any other form of trading.

It is said that spreads do not move as much as outright futures. I agree 100% with that statement. However, spreads trend much more often than outright futures, they trend much more dramatically than outright futures, and they trend for longer periods of time than do the outright futures. For these reasons you can make much more money with spreads than with the outrights.

The second distortion about spread trading goes like this: "You have to pay double commissions when you trade spreads." Yes! You have to pay two commissions for every spread you enter in the market. So what? You are trading two contracts instead of one. You pay two commissions because you are trading two separate contracts, one in one place and the other in an entirely different place. Paying two commissions for two separate trades is hardly unfair. Let me tell you what is unfair-paying a round turn commission for an option that expires worthless. Why don't you hear people complaining about that? You pay for a round turn, and you receive only half a turn. Doesn't make a lot of sense, does it?

ADVANTAGES OF SPREAD TRADING

There are so many advantages to trading reduced margin spreads that I hope I don't run out of room here before I can tell you all of them. Let's begin with return on margin, i.e., yield.

Yield: As I write this, the margin to trade an outright futures position in soybeans is $1,050, whereas a spread trade in soybeans requires only $250, only 23% as much. If soybean futures move one full point, that move is worth $50. If a soybean spread moves one full point, that move is worth $50. That means either a 5 point favorable move in soybean futures or a 5 point favorable move in a soybean spread earns the trader $250. However, the difference in return on margin is extraordinary: In the futures the return is $250/$1,050=23.8%. For the spread, the return is $250/$250=100%. Think about that!

Leverage: This leads us to the next benefit of spread trading-with the same amount of margin, you could have traded 4 soybean spreads instead of one soybean futures. How's that for leverage? Instead of making $250 on a five point move, you could have made $1,000. Reduced margin spreads offer a much more efficient use of your margin money.

Trend: Earlier I said that spreads tend to trend much more dramatically than outright futures contracts. Not only that, but they trend more often than do outright futures. I don't have room here to show you the dozens of sharply trending spreads that can regularly be found in the markets, so we'll have to settle for a recent one. You'll have to take my word for it that this sort of trending happens frequently when trading spreads.

Opportunities: Because spreads tend to trend more often and more dramatically than do outright futures contracts, they offer more opportunities for earning money, and they do so without the interference and noise caused by computerized trading, scalpers, and market movers. Spreads avoid the "noise" in the markets. There are numerous reduced margin spread opportunities, enough to keep almost any trader busy. And it is the lack of interference by market makers and shakers that leads us to one of the most important advantage of trading spreads, whether they be reduced margin or full margin.

Invisibility: One of the primary problems with any kind of trading in the outrights, whether it be in futures or stocks, is that of stop running. The insiders love it when they can see your order. Even when your entry or exit is held mentally, they know where it is. They are keenly aware of where people place their orders. That is why they love Fibonacci and Gann traders. They know precisely where those people will place their orders. The same is true for anyone who uses one of the more commonly known indicators. The insiders fade moving average crossovers, and so-called overbought and oversold-regardless of which indicator is used to show either of those conditions. They know when prices have reached the outer limits of the Bollinger Bands, and they know the location of supposed support and resistance, etc. But with spreads, they have no idea of the location of your orders. You are long in one market and short in another. Your position is invisible to the insiders. They can't run your stop, because you don't have one. You cannot place a stop order in the market when trading spreads! Your exit point is entirely mental; it exists exclusively in your head. In that respect, spread trading is a more pure form of trading. It is the closest thing in trading to having a level playing field. Could that be the reason you hardly ever hear about spread trading?

Liquidity: Attempting to trade in "thin" illiquid markets is one of the surest ways to encounter serious stop running and bizarre price movements. However, other than occasional problems with getting filled, spread trading does not suffer from a lack of liquidity-which in itself creates more trading opportunities. I would never consider taking an outright position in feeder cattle. Feeders are a thin, illiquid market normally best left to professional interests. But a reduced margin (feeder cattle)-(live cattle) spread is something I look for all the time. Some of the moves in this particular spread are incredible. They are worth hundreds and even thousands of dollars per spread, several times a year. They are highly seasonal in nature due to the birth and growth cycles of cattle. The same thing is true of spreading both live and feeder cattle against lean hogs. These spreads are seasonal, which brings us to the next great advantage to spread trading - seasonality.

Seasonality: Whereas seasonality doesn't always take place as planned, i.e., seasonality can come early, late, or not at all, but when it is happening, you can see it. It is obvious when a seasonal trade is working as expected. Seasonality is not subject to the whims of man. Seasonality is one of the strongest reasons for trading spreads. Crops are planted within a given period of time. Calves and piglets are born according to their birth cycle and they grow according to their growth cycle. Even futures based on financial instruments are seasonal, and many of them offer reduced margin spreads.

Backwardation: Along with seasonality comes the huge profits that can be made when an underlying goes into backwardation. This is true for any agricultural commodity as well as any financial instrument. I don't have space here to explain backwardation, but when it occurs, which is commonplace, the spread between front and back months widens tremendously, thereby offering marvelous profit-making opportunities to the spread trader. As if that weren't enough, the same opportunity becomes available when the period of backwardation ends and the relationship between front and back months returns to normal.

Probabilities: If we eliminate those trades in the outrights in which you get yourself whipsawed in a sideways market and maybe win or lose a little, the actual odds of winning on any trade is 50%. If you are long and prices move down, you lose. Conversely, if you are short and prices move up, you lose. It doesn't matter how accurate is your trade selection, the bottom line is that your chances of being right once you enter a trade are one in two. However, when you enter a spread you are not primarily concerned with the direction of prices. Your primary concern is with the direction of the spread.

With a spread you can make money when both legs of the spread are moving up, both legs are moving down, when both legs are moving sideways but one more so than the other, or best of all, when the leg you are long is moving up and the leg you are short is moving down! As long as the leg you are long is moving better than the leg you are short, you will have a winning trade. There is only one situation in which you can lose with a spread, and that is to be dead wrong about both legs. So with a spread you can win even if you were wrong about the direction of price movement, as long as you're not too wrong. The chart gives you an idea of what I'm talking about. Both months of this natural gas trade were moving down, but the spread was widening and moving up.

There are additional opportunities in spread trading, including spreads that require full margin. You can trade spreads with stock indexes, sector funds, and single stock futures. Did you know you can daytrade stock index spreads? These are topics for another day and another time.

Unfortunately, either by accident or design, much of the truth of spread trading has been lost over the years. There are many more aspects to it than I have touched on here. Furthermore, there are some wonderful and inexpensive tools available that make spread trading a delight. Spread trading is one of the most relaxed ways to trade. It rarely takes more than 1-2 hours of your time each day, and more often than not, we are talking about only minutes per day to seek out and trade the wonderful opportunities that are available in reduced margin spreads.

Find more detailed information & click on spread-trading.com

Joe Ross
Trading Educators Inc

ABOUT JOE ROSS:
Joe Ross has been trading for more than 47 years, and is a well known Master Trader. He has survived all the up and downs of the markets because of his adaptable trading style, using a low-risk approach that produces consistent profits.

Joe is the creator of the Ross hook, and has set new standards for low-risk trading with his concept of "The Law of Charts?." Joe was a private trader for most of his life. In the mid 80's he shift his focus and decided to share his knowledge. After his recovery, he founded Trading Educators in 1988 to teach aspiring traders how to make profits using his trading approach. He has written 12 major books on trading. All of them have become classics and have been translated into many different languages.

Joe holds a Bachelor of Science degree in Business Administration from the University of California at Los Angeles. He did his Masters work in Computer Sciences at the George Washington University extension in Norfolk, VA. Joe still tutors, teaches, writes, and trades regularly. Joe is still an active and integral part of Trading Educators.

ADS3

extracash

Get cash from your website. Sign up as affiliate.

ads rec

Monday, December 29, 2008

Why Demo Account Performance Is Often Better Than Real Account Performance

Over the past several years, the popularity of online currency trading has grown substantially. Each day, online FX brokerage firms attract new investors - each of them lining up with a glint in their eye, lured in by promises of easy money. Most of these companies allow you to sign up for a free demo account which lets you place mock trades using their trading platform to get a feel for the excitement of currency trading. In the casual world of free demo accounts - many young traders find they are able to garner impressive profits without a significant amount of effort. It almost seems too good to be true. But transferring this success from a demo account to a real account is far less common. Why is this? The actual trading platform behaves the exact same way, the market doesn't care whether you're a demo or real trader - so what is different? It's you who has changed. Not your personality, not even your trading style - but the factors that affect you are different.

What is the key factor to trading success?

The search for the "Holy Grail" of trading has been a common theme throughout the history of markets. There are a variety of different techniques. Those whom are inclined towards number crunching and pattern recognition may prefer technical analysis, whereas those more focused on the big picture, logical macro perspective prefer fundamental analysis. Then there are specific methodologies like swing trading, trend following or even more esoteric ideas like the Elliot Wave theory. Which one is best? There are examples of very successful traders using each methodology.

Since most new traders lose money - perhaps the more appropriate question to ask is, "What is the key factor to trading failure?"

Greed and Fear

Trading is an atmosphere rich in the porous emotions of greed and fear. The current price of a given security or financial instrument at any point in time can be thought of as the confluence of greed (bulls) and fear (bears). These two emotions make up the core of humanity itself. When market information is released, trading can be a high intensity experience. Sensing danger, your body releases adrenaline that acts to accentuate both your greed (fight) and your fear (flight). Because these emotions are so strong, they can cause you to act irrationally, ignore your system, stated set of rules or trading plan and to act upon impulse. Indeed, this is a genetically programmed response - but it is often also the trader's downfall, especially when he's playing with much better capitalized, more sophisticated and experienced foes that know how to manipulate those emotions.

When you are a trader - you are always under the influence of at least one of these two emotions, even if you don't have any trades on.

Impact of fear and greed on your trading

If the market's going up and you're in - greed is telling you to buy more and fear is telling you to take your profits while you still can. If it's going down, fear of being wrong makes you hold onto a losing position - and then greed sometimes convinces you to "average down" your position (and buy more) so it'll be easier for you to come back.

If the market's going up and you're not invested - fear is telling you that you're missing out on easy money but it's your greed that causes you to get in just after the greatest increase (just when its about to reverse course). If the market's going down and you're not invested - greed is telling you to get in as the price is cheap, while fear reminds you that you'll miss out on this opportunity if you don't act quickly.

Perhaps if we just felt greed, or just felt fear we would be able to control our emotions a little better. But when both of these little devils whisper into our ears at the same time - it is often impossible not to listen.

The Thrill of Greed

The first time you try FX trading - you will feel the thrill of greed. It is an ecstatic experience, your brain flush with neurotransmitters and your mind giddy with visions of untold riches about to be reaped. Greed is bold, aggressive and incredibly exciting. It can take hold of you both mentally and physically. Just imagine the possibilities!

This greed is what draws us into FX trading in the first place - the dream of easy money and 100:1 or 200:1 margin rates. It inspires us and causes us to forego rational thinking in favour of reckless abandon.

In the movie Wall Street, Gordon Gecko says, "Greed is good", but it is also very dangerous - especially if you are unable to recognize when greed is the one doing the talking. Greed is also one of the most common techniques used to manipulate people. Every get rich quick scheme, promising untold riches for no money down takes advantage of your natural predisposition to throw all logic and sense out the window when greed pays a visit. The argument starts to appear very compelling and you ignore what would otherwise be clear warning signs. Like drunk goggles, greed can mislead you and when you eventually wake up you are often in a very precarious position.

The Fear of Losing

Fear can be equally as dangerous. The most potent and easily manipulated form of fear is your fear of admitting that you are wrong. Fear of having your precious ego bruised. This fear can cause people to do incredibly stupid things. The funny thing about this world is that everyone thinks that they are right. Most people would rather lose thousands of dollars than admit they are wrong. It is easy to feel ashamed of trading losses and live in denial but this is self-destructive behaviour. By denying the problem exists, you fail to take steps address it and only ensure that it will continue in the future.

Demo Trading

Demo trading is a great way to get started in foreign exchange trading. It is identical to real trading, except that you're using "pretend" money. Demo trading allows you to get a taste for what type of events move markets and how they move. It encourages you to learn more about geopolitics, macroeconomics and global finance and these are all incredibly positive things.

Demo trading also introduces you to the rapture of greed. Trading is a means to one of the purest, most raw and potent forms of greed. The whole point of trading is to make money and the more money you make - the stronger the pull of your greed becomes. It is intoxicating and can take complete control of you.

But demo trading does not introduce you to fear. There is no fear when you are demo trading. It is like you have a perpetual get out of jail free card. If you start losing badly on a demo account - simply start a new one. There is no accountability for your trading failures and only recognition of your trading success.

So your demo account does not teach you how to handle the emotion of fear. This emotion is most likely going to lead to your downfall. Greed may get you overextended, but fear will stop you from cutting your losses. You may think that fear of losing money would cause you to cut your losses, but the stronger emotion is fear of being wrong and that causes you to hold on to your losing position - until it's all gone.

There is also the issue of account size. Many demo accounts give you $50,000 to play with. This type of capitalization allows you to buy 5 lots (500K) of EURUSD pretty easily. If goes up 20 pips you've made $1000. Nice one. But when you open your real account - it's more likely that you put $5000 or $10000 in there to begin with. Now you're dealing with a 50K lot, which means you'll take $100 out of a 20-pip movement. But mentally you are used to getting $1000 for that movement so you usually end up risking more. Next thing you know - your 200K position has turned against you 50 pips and you've lost $1000. That's real money you just lost. You can't just start another account.

The capitalization of the demo account is sufficient to sustain losses and still come out on top. But your real account is likely to be undercapitalized and if you're trying to achieve returns similar to what you got on your demo account - you are going to blow up very quickly.

Being honest with yourself

Ultimately, while providing an excellent introduction to FX trading - demo accounts do not accurately predict whether you'll be successful trading real money. Markets are dominated by psychology and often go against what fundamental logic or technical indicators suggest should happen. The single most critical factor in your trading success will be your ability to control your emotions of greed and fear. These emotions cloud your judgment and cause you to trade recklessly. Demo accounts introduce you to the emotion of greed, but by their very nature they are risk free and therefore there is no fear involved. They are also likely to be better capitalized than your real money account, which misleads you with respect to the amount of returns you can expect to earn.

For all of these reasons, demo accounts allow you to avoid being honest with yourself and this is perhaps the most important factor of all. You need to know your edge and your limits and in order to know these - you must be honest with yourself.

This being said, demo accounts are still very entertaining and educational and I highly recommend opening one to anyone who's interested in getting a taste of the exciting world of FX trading. It's a great way to learn more about economics, global politics and yourself.

William White is a software developer and avid foreign exchange enthusiast.

His website - Finance Maps offers free maps depicting short, medium and long range trends for the major currency pairs which allows the reader to easily get an overall sense of the global forex markets in a single glance.

Posted by at

No comments:

Post a Comment

Subscribe to: Post Comments (Atom)

ads mobile content