Consider the following facts:

These days most of  the websites are having forex banners. When you are writing an email in your gmail account and you happen to type something related to money, you will see forex adverts on the side. why is it so ? If it was so good and so easy, wouldn't everyone be trading ? Why do some people attempt it with the hope of becoming overnight millionaires just to lose their shirts and rent in their quest ? Yet, thousands and thousands of  people aged between 25 to 45 are throwing themselves into the market that is exchanging over 4 trillion dollars per day and out of these only 5% eventually make it. The rest of the financial dreams are swallowed up by the mega market. Why is it so ? Why cant the robots that people buy  work ? if the robots did work, the rate of losing would not be this high. As you read this, where do you think you will most likely end ? In the winning 5% or the 95% losers ? Those who manage to join the 5% winners make a very decent income. As I train people and guide them into this market, I would not want to lose even one student into the 95% losing lot. I would want people who will make profits one month after another and walk away satisfied with what the market has to offer because we cannot force the Forex market to give us more than it is willing. The only way to join the 5% winning team is to let your profits run and to cut down on your losses. what do I mean by that:

You have probably had the famous philosophy in forex which says, "Let your profits run and cut down your losses". How many people can live to this teaching ? How many can be very honest and say that they have mastered this art ? I will tell you there are very few and if there were many of them, the forex market would not be experiencing the high volatility like it is at the moment. It would be relatively quiet and probably only experience some sudden bursts when either the buyers or sellers win the battle before again consolidating at a particular level. You have to realize though that there are 2 major factors that are resulting to the high volatility:

1: Demand and supply and

2: Fear and greed

Business experts will teach you the first one and the indicators will help you to see the picture of demand and supply better.

What about fear and greed? Who will teach you to control your fear and greed in forex? I think the best answer lies within you but thousands and thousands of forex traders are being told over and over again to control their greed and fear so as to maximize on potential of making profit and minimize on losses but very few master the art. The reason is very simple; people come to forex thinking that it is a get rich quick scheme. They see the adverts that tell them you only need $25 to trade with a volume of $10000 and think they have the miracle of their life. Yes it’s very true you need $25 to trade with a volume of $10000 if the forex broker will offer you a leverage of 1:400. There are two things to realize here:

1. If you trade this kind of volume, one pip will be equivalent to approximately $1. If you win and your analysis is right, you will make $1 for every pip and if the market moves 200 pips in your favor you will make $200. But why does this deal sound to be too good to be true? The other side of the story is that the broker giving you a leverage of 1:400 is actually giving you $399 in loan to trade with so long as you are willing to commit 1$ from your account into the trade AND the condition is that if you make a profit, it is added to your account balance and if you make a loss it is subtracted from your account balance or capital. BEFORE you even consider whether the trade was for you or against you, the broker will always get a constant fee from the amount of volume trade (in this case $10000 and not your $25). If the broker charges 0.01% as a commission for the trade, you will pay 0.01 of 10000 and not 0.01 of your $25). This commission is subtracted automatically from your account when you open a position. Is it not clear now that the more the broker loans out to you to trade with the better their commission since the commission is being subtracted from your $25? That’s why brokers are willing to give that high leverage and the tough regulations by NFA (National Futures association) is blocking so many brokers from USA because maximum leverage that can be offered to USA clients is now 1:50 and those who do not understand leverage, majority of them are losing a lot of money.

How then do you take advantage of the fact that the broker is willing to give you some money to trade with but do it in such a manner that it works to your advantage? The simple answer is once you open a position, you have to let your profits run and cut down on your losses. This sounds very simple but in reality it is not. If you trade with a profit target of 100 pips, most people will tend to close the position with a 30 pips profit simply because they are afraid that they might lose it. On the other hand, when they are losing and they are -50 pips, most people hold onto the position hoping that the market will have mercy on them and reverse but in most of the cases more and more losses accumulate.

The reason I have been directing so many people to MT4 and opening of micro accounts is to be able to trade minimum trade volume of 0.01 lots which is 1,000 units. with a $200 account, it would be possible to open up to 5 positions each of 1000 units and in this case even if you lost in all positions with a stop loss of 100 pips, you would lose a proximately 50 dollars. You would still have $150 left for you to trade and if you make profit, you would have $50.

I believe that to be able to come up with a good analysis of the market and therefore have a realistic profit target that you can wait to be hit is to use the four hour chart as well as the one hour chart in your trading. Do not be attracted to the energy in one and five minute charts. These once to me have the energy to completely disorient your perception and thus make it not possible for you to have a clear picture of the market yet the high time-frames are highly rewarding in online forex. 

Why Trade Foreign Currencies?

Today lets look at the some of most attractive reasons that make forex to be so attractive. What is it that is making nearly everyone interested in making money online look into the direction of forex? Definitely, despite the high turnover rate and the possibility of extremely huge profits when one is right, forex does have some advantages over other forms of investment. Please note that the same way the potentials of profit are big is the same you can easily loose your money. So always stick o your trading plan. When it comes to trading Forex, you have a wide range of pros and cons. However, the advantages exceed the disadvantages by far and there are so many investors choosing this route. Here's why:

You don't have to pay fees

When you trade currency, you don't have to pay fees or any sort of commission to brokers. Instead, brokers make money based on the bid ask spread.

You don't have to deal with a middleman

Spot currency trading eliminates the middlemen, and allows you to trade directly with the market responsible for the pricing on a particular currency pair. Most of the brokers do not make use of the dealing desk and this an advantage. I will highly advise you to check your broker very well before investing. As for me I have used FXCM for one year now and they are good if you trade NOT on news which as far as am concerned is the best way to trade forex. Since FXCM does not guarantee that a position will be closed at the said price e.g for stop orders, then trading news is very dangerous. It can result to multiple margin calls that can easily wipe out your account. If however you the kind of a person who sticks to your trading plan I don’t see any problem with fxcm as they are very well capitalized.

Flexible lot sizes

Lot sizes are set based on the exchanges. But when you trade in Forex, you have the flexibility to determine what you want to put in. Going too low can be a problem though. Avoid too much leverage as it can result to huge losses.

The costs for transactions is low

In regular conditions, the bid over ask spread is usually under 0.1%. When dealing with larger deals, the transaction cost can go even further down. The transaction price moves up and down depending on leverage.

The market is always open

In the Forex market, you can trade in the morning, the evening or at night. If you have a full time job, it would be beneficial for you to be able to come home, relax and start trading. This doe not mean however that you should not go for the most profitable times, such as during the London session. Find out some time during the market overlaps when you can trade.

No individual group can control the market

Due to its tremendous size, the foreign exchange market is nearly impossible uncontrollable. You don't have to worry about anyone manipulating the market.

Better leverage

You can utilize more of the market with a smaller investment. This means you can risk low capital, but earn a large sum of profits. However, there is a catch to controlling more of the contract value: you can also lose a lot. This is why it's a good idea to take proper risk management procedures.

High Liquidity

With the Forex market so big in size, it liquidates fairly quickly. So you can finish trades faster – buy and sell within a shorter time frame. In essence, you're never locked into a trade. You can set the trading platform through limit orders and stop loss orders to make x amount of profit, or pull out for you automatically.

Free play money to better your skills

Use a free demo account to dip your fingers into trading. Once you're comfortable playing with fake money, you can start risking your own money. These demo accounts often offer news and charting services. It's probably a good idea to gain as much knowledge and experience as you can before diving in.

ONLINE FOREX TRADING 

In life, our decision making and judgement are highly dependent on our skills and experience. No wonder Abraham Maslow put it so well that if the only tool you have is a hammer, you tend to see every problem as a nail.  I want to write about the different stages one might go through as a forex trader and in each of these stages I will highlight what you will most likely do because that is the best you can offer at that particular stage. I will not use terms from psychology but I will just highlight what to me are the different stages of a forex trader.

ONLINE FOREX TRADING STAGE 1: YOU HEAR OF FOREX AND THINK YOU HAVE JUST LANDED ON THE BEST INVESTMENT IDEA

To me and to most of my clients, this stage is very exciting. It is highly emotional. One will have their blood “boiling” as they wait for their online forex deposit to be processed by the forex broker or when they are waiting for their online forex mentor to guide them on the best forex broker, how to open a forex trade e.t.c The mention of the fact that you can make money even when the market is going down makes greed speedometer breakdown as they think they are in to becoming millionaires in a month.

ONLINE FOREX TRADING STAGE 2: LEARNING BASIC ONLINE FOREX TECHNICAL ANALYSIS

At this stage, it’s like learning for the very first time how to drive a car. You feel good when you realize you can open a trade and it moves in your direction. Who would not!! A student learning how to drive will feel on top on the world when they see that they can keep the car on track. Fortunately at this stage, it is the teacher who takes care of the brakes, signals and looking from the rear and side mirrors for 'potential danger' thus carefully and safely guiding the student. Maybe before I forget, the training often happens on level grounds.  It is at this stage where these wise words are most applicable: If the only tool you have is a hammer, you tend to see every problem as a nail - Abraham Maslow. If a forex trader at this stage only knows opening and closing of a trade and they see the market move either in their direction or against their direction, the next thing they will do is to just close the trade.

ONLINE FOREX TRADING STAGE 3: YOU START PLANNING ON RESIGNING FROM YOUR FULL-TIME JOB

Everything looks easy to you and as a result, you start planning your retirement. If it was that easy, the global economy would have collapsed because everyone would have turned to online forex for a living. If you do not learn it well, you can as well avoid engaging in it completely to save your money, heartache and precious time. If you learn and execute the knowlede well, a good comfortable life filled with the joy of constant flow of cash will be all yours. 

ONLINE FOREX TRADING STAGE 4: YOU ARE INTRODUCED TO ALL TECHNICAL ANALYSIS

At this stage, REAL CONFUSION IN LIFE STARTS. Before you were not taking care of stop loss (brakes), now you have to. You have to make sure that you keep your car on track, make sure that the tractor behind you does not land on your car e.tc. as a forex trader, you have to make decisions regarding how much margin will you commit, which currency will you trade, when will you open the trade e.t.c  the reality downs on you, learning is easy but executing may not be easy, you put some more effort and master the technical analysis and can even make profits here.

ONLINE FOREX TRADING STAGE 5: YOU FEEL CONFIDENT TO TRADE WITH REAL MONEY

This is the most dangerous stages of all. It is also the stage where most people quit and never come back. Having mastered technical analysis, you feel good about yourself and there is no problem with that) but you become over confident. You make profits most likely consistently and then with your ego up in the sky, you increase leverage, lose the profits you made and even the capital. Majority of the people never come out of this stage. Learn how to go past this stage by learning from a forex trader who has gone through all these stages and emerged successful for several years. 

ONLINE FOREX TRADING STAGE 6: YOU ACCEPT YOU DID A MISTAKE

At this level, you realize that mastering technical analysis is not enough. You have to learn how to master yourself. This is extremely difficult but once you pass this stage, you are on your way to success. If you go past this stage and deep within yourself you are sure that it is not pretence but you have gained full control of your emotions, then your success trading online forex has just began.

ONLINE FOREX TRADING STAGE 7: YOU DETACH YOURSELF FROM THE MARKET AND LEAD A VERY HEALTHY SUCCESSFUL LIFE IRRESPECTIVE OF FOREX MARKET  MOVES

At stage 7, we can say you are a master of the art of trading. It does not matter whether the market moves in your favor or against you. You are composed and accept the outcome based on the fact that you gave the decision you took before taking a trade your best. You are not excited by the profits because you expect the best out of the market and equally, you are not emotionally attached to the trades should the trade go against you. This is the most enjoyable stage but few make it here. Majority of those who make it here are profitable forex traders and they are likely to consistently make profits out of the online forex market for their entire life.Whichever the stage you are at, just remember that you will make it tobecome a very successful trader if you do not give up and you are willing to be taught. 

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We wish you abundant success and with that, make more and more money out of this mega online forex market. Out of the $4 trillion dollars traded per day, take some home, the market is big enough to accomondate all of us. Online forex market can reward you with a very successful financial life.  

Who are world’s wealthiest forex traders ?

Several of the world’s wealthiest persons have accomplished at least a portion of their outstanding wealth in the sphere of trading. Whether they amassed wealth by speculating or investing in stocks, gold, foreign exchange, or other capital markets, the activities of these high net worth persons in any financial or commodity market can be of substantial relevance to other traders. Consider the following personalities.

Forex Trader; Martin Schwartz

Schwartz is an icon and role model for myriad traders all over the world. It is on record that Schwartz was specially thriving in short-term trading. In two trading years, he had accrued over USD1.2M in profits alone. From a military officer, Martin Schwartz grew to be among flourishing entrepreneurs, concentrating on investing in stock exchange.

Forex Trader; Stanley Druckenmiller

Druckenmiller is a renowned figure in stock market. He is the man who made use of “top-down” trading strategy. It is said that this strategy brought him to the rim light and stood to be counted among successful brokers in America. In most cases he opened exceedingly risky positions but constantly managed to complete them with profitable edge. For many years as a trader, the knowledge and self control  Stanley Druckenmiller’s  had earned him reputation and wealth.

As a passionate human being, he donates a lot of money to charity with an aim of eradicating poverty through provision of quality education and health care.  

He is said to have a net value of around 3.5 billion USD and he continuously emerge in second hundred of Forbes ranking of World’s richest persons.

Forex Trader; George Soros

George Soros achieved international unsavory reputation when, in September of 1992, he risked $10 billion on a single currency speculation when he opened a short position with the British pound. His speculation turned out to be right, and in one day the trade generated a profit of $1 billion. Due to this, he is legendary known as the "the man who broke the Bank of England."

Forex Trader; Alexander Elder

For him, a proficient stock market trader is what would best describe him. In addition, he legendary mentor, expert especially on technical analysis as well as on market psychology.  As a matter of fact, he has written a book that contributes immensely on market success. In his book, he describes the market success by making use of three”M”. The first M stands for Mind (being a logical and a disciplined trader), the second M stands for Method (trading strategy while making your market analysis) and the third M stands for Money Management (risk management). It is in record that this book in the year 2002 won “Barron’s Best Book” award. Taking advantage of his medical knowledge, Alexander has contributed significantly on trading psychology. Through this, he argues that a trader’s worst enemy is executing the market due to fear. To solve this he advices that as long as one need to develop a workable trading strategy and be able to obey all the rules of trading such as placing stop loss at all times. This advice is best suited for the new traders. 

Forex Trader; Larry Hite

He is regarded by many to as among the founders of contemporary stock exchange trade. He is a legend in the field of trading, and has also contributed hugely in financial publications. His forex trading career begun when he became a stock broker. With time he had gained immense knowledge and pursued in the line of commodities market such as oil, gas and precious metals because he didn’t feel confident enough to work with futures.

Larry Hite took a decade to gather all the essential knowledge and know-how involved in long term financial investments.  He has spent substantial amount of time in pursuit of a sound trading strategy that would be consistent with good returns and less risky.

Forex Trader; Jack Schwager

He is an economist and a mathematician has had decades of experiences especially in commodities. Due to his wealth of knowledge and experience in trading commodities, he has written some popular publications such as “Market Wizards”, “New Market Wizards” as well as “Stock Market Wizards”. Market Wizards and New Market Wizards carry content related to investments in Forex trading, commodity as well as stock indexes while New Market Wizards comprising of talks with standard class forex wizards.  The interviews are based on the strategies they use. As such it is the most valued publication by average investors. 

In all his books, Jack makes a profound effort to encourage the novice traders to surmount most challenges that they come across as beginners. Most of all he encourage them to develop their own trading strategies rather than copying celebrities in financial markets.

The above among many others Jimmy Rogers and Bill Lipschultz have entered in books of history of trading by making profitable trades making them among the wealthiest traders under the sun. You too can be part of the modern history for being among the most profitable traders. They all started small and grew big. No one is exempted from success in forex, everyone who learns this business well too does have a share of the profits. The best place to start is to make sure you have an a real forex account and then follow that with a comprehensive training. You can apply for a free account here, Free Forex Account with Free trading notes, and then follow your basic notes on forex with a very comprehensive training on a very successful trading strategy discussed here, Training on Forex Trading. 

This is surprising but the trend of huge number coming to forex and losing all of their initial investment over and over again is very common. Let us try and use the common terminology “Over ? 95% I think 97% lose their money in forex and never make any profits consecutively. Majority of them lose all their money as they try to make up for losses that they could have encountered and in the process, they keep on increasing the leverage in the hope of regaining what is lost. 

What if we ask a simple question of, if people already know that this possibility does exist and they know the problem, then why is it that one year after another, traders repeat the same mistake again and again. The question we might ask here today might send some light as to why traders struggle with the same problem year after year and help you to make a firm decision that you are going to change for better. If the traders fail to acquire strict discipline trading, then making one million dollars in one trade will just but be followed with several losing trades that will wipe out the entire one million dollars gained as one thinks that the market is now obeying them like they are a god simply because they were able to get one trade with  big profits. Discipline is the key as it protects the trader’s capital and makes sure that year after year, one has enough capital to trade with and therefore in the good months, one has some good profits to take home.

What then could be the reasons causing over 95% of all forex traders lose their money ?

Failure to manage risk

Low startup capital

Greed

Indecisive Trading

Failure to accept that you can also be wrong  e.tc. And in summary, I can say it is basically lack of knowledge in what majority are doing. There is an exception of when the market does the odds, but most of the time, lack of knowledge plays a major role.  wish you success

If you have been in this forex market for a while now, you definitely know that there are some times when the forex market does not make a major move. It only consolidates at certain levels without a clear direction. Most traders get so much stressed up as they do not know whether to buy or to sell. The simple question one might ask is how one would be selling or buying in such market conditions unless one is gambling with their money!! Forex is a market, and when there are no enough buyers and sellers, it is wise to stay on the sideline.

Let us start by asking the reason as to why market consolidates at certain levels which I will call psychological levels. I will use EUR/USD in this article. The movement of the currencies that we see on the charts is as a result of the human activity. We can therefore say that, though there is no life inside our charts, the charts respond to some form of life (human beings). The behavior of every human being in this world is mainly influenced by desire; desire for comfort, more money, e.tc but also to be noted is that greed and fear do play a major part in controlling what a human being does. As a result, we will always find the forex market as well as any other market in this world obeying some psychological levels which mostly come with even numbers because we human beings do not like to be stressed up.  To say that euro/usd was going to hit 1.2700 was much easier than considering the option of 1.2717. The latter appears much difficult to recall and to make life much free of stress, 1.2700 becomes an ideal level. Coincidentally, the same happens with STOP LOSS. People also have the tendency of putting the stop loss in the same psychological levels. As a good example, those who were selling the euro/usd last week may have opted to put the stop loss at around 1.2850 when they sold at 1.2800. You need to remember that a stop loss is an actual order in the opposite direction and when thousands of people put orders at certain levels, the market will tend to be drawn towards those levels and as soon as those orders are filled e.g at 1.2850, the demand for that level is gone and the market resumes its direction. This causes a huge frustration to people as they think that it is the broker who is hunting their stop loss.

If I would have opened a sell position at any point around 1.2800, I would not have put my stop loss anywhere between 1.2800 and 1.2900 reason being several people will most likely chose these levels as their stop loss; 1.2810, 1.2820, 1.2830, 1.2840, 1.2850, 1.2860, 1.2870, 1.2880, 1.2890 and 1.2900. most of the time, when the market does not have enough momentum, it will always tend to retrace back towards certain psychological levels and only after it has removed all the demand (stop loss) does it resume the trend with higher momentum.

It’s very unfortunate to note that when people are stopped out, they think the market has reversed and that they were very wrong, just to open another position in the opposite direction trying to make for the loss they have encountered and as soon as they do this, they are stopped again. Very unfortunate but the cycle repeats itself over and over again. Last week on 13th January, 2012, as soon as the market hit the final psychological level 1.2880 of retracement and probably eliminated all the stop loss between 1.2800 and 1.2900, the downward momentum picked. With this in mind, we can conclude that there is nothing like a stop hunt with a good broker. Only orders (stop loss orders) that have been placed at certain psychological levels are executed.

To help us with these levels where prices might most likely go, there are several indicators one might use such as pivot points Fibonacci retracement levels or the Andrew’s pitchfork and mastering one is the best option than trying to use all of them at the same time.