10 July 2011
Marsa on Forex (1)
1. Start off with a positive mindset, a winning one. Sounds easy yet ambiguous. Here are some starting pointers:
a. Be objective. Accept what you see on the charts. If prices are moving up, just accpet that they are moving up and vice versa. Don't fight them as you are nobody in this 4-trillion-dollar behemoth.
b. Treat losses as part of business costs. Trade forex as if you are running a business and know that all businesses do incur losses.
c. Do not gamble. Gambling is always negative and is bad for your trading psyche. If you make profits from gambling, you will allow yourself to do it over and over again. It will become a habit. As is well known, a habitual gambler will eventually go bust and that's not the results that you want.
d. Throw your ego out the window. One of the greatest downfall of many traders is their big fat ego. You see them everywhere shouting out loud to get attention, belittling others and always trying to prove they are right through their calls. If you have such tendencies, get a hold on yourself and stop it. Or else, do yourself a favour and stop reading further.
2. Learn or polish up on technical analysis. There is no other way.
a. Select a timeframe that you are comfortable with. Then select some technical elements like chart patterns, support and resistance levels, indicators, oscillators, etc and back-test them. Throw out what you find useless or don't understand. Take your time and do take notes as in writing down on a pad or book. Do screen captures and print them. Narrow your selections down to a bare minimum. The selections must satisfy you as the most profitable criteria. Using these filtered down selections, find out where your entry and exit points are. This defines your trading plan.
b. Do not clutter up your charts with too many indicators and what-nots. They will only confuse you. If you look at the charts I posted, there are only 2 oscillating lines and a useless MACD (which I use just to decorate my charts to make them look nicer) at the bottom.
c. Print out the charts with your criteria on hard copies or save them in your mobile. Review them when you are away from your computer, like having a tea break, travelling in a bus or the train, sitting on the toilet bowl, before going to bed. In other words, eat, breathe and sleep them!
3. Avoid forming opinions based on external sources. They will make you confused.
a. Do not read news or reports about currencies. You do not know what to make of them. For illustration purposes, those who went long the USDJPY on BOJ intervention mid-September are now some 450 pips poorer if they had hung on to the news.
b. Do not read or follow other traders's calls. Remember that 95% of them are always wrong and the other 5% (the winners)won't tell you anything. After all, this 5% make their profits from the other 95%!
c. Just rely on the charts.
4. Open a live account.
a. Don't waste time with a demo account. The reason why demo trading is useless is it is devoid of emotions and as far as trading is concerned, it is all about emotions. I would attribute trading to 90% emotions and 10% technical. Trading a live account lets you truly feel the market where real money is at stake.
b. Fund your account with money that you can spare, not the money that you need to pay your bills, housing loans, car loans, children's education or your food.
c. Open your account with Oanda which offers odd lots. Remember, you need not go into forex trading in a big grand manner and trade a 100,000 units per clip. With Oanda, you can trade just 10, 40, 50, 100 or anything between 1 and 10 million units. For beginners, I would strongly suggest that you trade a minimum of 100 to a maximum of 5,000 units which is about S$0.013 (one cent) to S$0.65 (fifty cents) per pip respectively for USD-denominated pairs. You can trade bigger units when you have built up your confidence.
5. Trading.
a. I would recommend the less volatile pairs like EURUSD or the USDJPY both of which enjoy the highest liquidity in the forex markets.
b. Now that you are armed with your trading plan vide 2a. above, put it in the moment you have detected and recognised your setup on the charts. Your plan consists of your entry, your stop loss and your take profit points.
c. After you have put in your plan, just sit down and do nothing if you are watching the prices. Do be aware of your emotions which will tempt you to alter your plan. Alternatively, leave your screen and shut your computer down. Remember, whatever it is, please stick to your plan. Don't micro-manage it or alter it.
d. Check on your performance later. Whether the outcome is positive or negative, you should adopt a neutral stance. Forget it if you made a loss. Do not think that you are no good or worse, blame everything and everyone except yourself. Forget it even more if you made a profit. Do not think that you are very smart; the markets can give you more money than you ask for. Your job here is to find out why you won or lost. Back-track and note down why. After having digested the reasons for your results, you will know what to do and what not to do in your next trade.
6. Conclusion. If you can fulfil all of the above, you must keep at it, especially respecting your plans. If you break the guidelines and lose, then close your account and recognise that forex trading is not for you.
a. Be objective. Accept what you see on the charts. If prices are moving up, just accpet that they are moving up and vice versa. Don't fight them as you are nobody in this 4-trillion-dollar behemoth.
b. Treat losses as part of business costs. Trade forex as if you are running a business and know that all businesses do incur losses.
c. Do not gamble. Gambling is always negative and is bad for your trading psyche. If you make profits from gambling, you will allow yourself to do it over and over again. It will become a habit. As is well known, a habitual gambler will eventually go bust and that's not the results that you want.
d. Throw your ego out the window. One of the greatest downfall of many traders is their big fat ego. You see them everywhere shouting out loud to get attention, belittling others and always trying to prove they are right through their calls. If you have such tendencies, get a hold on yourself and stop it. Or else, do yourself a favour and stop reading further.
2. Learn or polish up on technical analysis. There is no other way.
a. Select a timeframe that you are comfortable with. Then select some technical elements like chart patterns, support and resistance levels, indicators, oscillators, etc and back-test them. Throw out what you find useless or don't understand. Take your time and do take notes as in writing down on a pad or book. Do screen captures and print them. Narrow your selections down to a bare minimum. The selections must satisfy you as the most profitable criteria. Using these filtered down selections, find out where your entry and exit points are. This defines your trading plan.
b. Do not clutter up your charts with too many indicators and what-nots. They will only confuse you. If you look at the charts I posted, there are only 2 oscillating lines and a useless MACD (which I use just to decorate my charts to make them look nicer) at the bottom.
c. Print out the charts with your criteria on hard copies or save them in your mobile. Review them when you are away from your computer, like having a tea break, travelling in a bus or the train, sitting on the toilet bowl, before going to bed. In other words, eat, breathe and sleep them!
3. Avoid forming opinions based on external sources. They will make you confused.
a. Do not read news or reports about currencies. You do not know what to make of them. For illustration purposes, those who went long the USDJPY on BOJ intervention mid-September are now some 450 pips poorer if they had hung on to the news.
b. Do not read or follow other traders's calls. Remember that 95% of them are always wrong and the other 5% (the winners)won't tell you anything. After all, this 5% make their profits from the other 95%!
c. Just rely on the charts.
4. Open a live account.
a. Don't waste time with a demo account. The reason why demo trading is useless is it is devoid of emotions and as far as trading is concerned, it is all about emotions. I would attribute trading to 90% emotions and 10% technical. Trading a live account lets you truly feel the market where real money is at stake.
b. Fund your account with money that you can spare, not the money that you need to pay your bills, housing loans, car loans, children's education or your food.
c. Open your account with Oanda which offers odd lots. Remember, you need not go into forex trading in a big grand manner and trade a 100,000 units per clip. With Oanda, you can trade just 10, 40, 50, 100 or anything between 1 and 10 million units. For beginners, I would strongly suggest that you trade a minimum of 100 to a maximum of 5,000 units which is about S$0.013 (one cent) to S$0.65 (fifty cents) per pip respectively for USD-denominated pairs. You can trade bigger units when you have built up your confidence.
5. Trading.
a. I would recommend the less volatile pairs like EURUSD or the USDJPY both of which enjoy the highest liquidity in the forex markets.
b. Now that you are armed with your trading plan vide 2a. above, put it in the moment you have detected and recognised your setup on the charts. Your plan consists of your entry, your stop loss and your take profit points.
c. After you have put in your plan, just sit down and do nothing if you are watching the prices. Do be aware of your emotions which will tempt you to alter your plan. Alternatively, leave your screen and shut your computer down. Remember, whatever it is, please stick to your plan. Don't micro-manage it or alter it.
d. Check on your performance later. Whether the outcome is positive or negative, you should adopt a neutral stance. Forget it if you made a loss. Do not think that you are no good or worse, blame everything and everyone except yourself. Forget it even more if you made a profit. Do not think that you are very smart; the markets can give you more money than you ask for. Your job here is to find out why you won or lost. Back-track and note down why. After having digested the reasons for your results, you will know what to do and what not to do in your next trade.
6. Conclusion. If you can fulfil all of the above, you must keep at it, especially respecting your plans. If you break the guidelines and lose, then close your account and recognise that forex trading is not for you.
Labels: Forex
