MarioSingh.com - Asia's Favourite Forex Blog

Archive for the ‘Press Release’ Category

Money Matters

(As featured in The Sun, Malaysia’s national newspaper, on 26 Aug 2011. Click here to enlarge)

Education alone won’t ensure a successful venture into online Forex trading

It is hard not to be in awe in the presence of Mario Singh, a Forex trading guru and founder of FX1 Academy Pte Ltd. Decisive in his words and pragmatic in his views, Mario has created a set of philosophies that is said to have been successful in guiding 20,000 people ﬁnancially. Or so he says.

“FX1 is currently providing education on online Forex trading to approximately 20,000 people the world over,” says Mario.

“The largest transfer to wealth is happening now. Over the last year, nine Asian countries have raised interest rates. The list included Malaysia, Singapore, India, China, Taiwan, South Korea, and Indonesia,” he says, adding that he hopes to help some one million people become millionaires through Forex trading over the next 10 years. Read more…

“Currency Wars” and 6 Ways to Profit from It

February 25, 2011 by Mario · 8 Comments
Filed under: Press Release, Your Trading Edge

(As featured in Your Trading Edge on Jan/Feb 2011 issue. Click here to read pdf.)

Mario Singh explores the global forex outlook and what the seven trading milestones of 2010 mean for currency traders in 2011.

The year 2010 was eventful for the currency market.

Some currency pairs broke new highs while others found new lows. Understanding some major milestones from 2010 will help us to be better prepared for the currency market in 2011.

Milestone #1: Greece receives a bailout package

On 15 May 2010 Greece received the first tranche of a 110 billion euro bailout package jointly provided by the European Union and the International Monetary Fund.

In return for the loan, the Greek cabinet vowed austerity measures aimed at achieving budget cuts of 30 billion euros in the next three years and reducing Greece’s deficit from the current 13.6 per cent of Gross Domestic Product (GDP) to less than three per cent of GDP by 2014.

In the aftermath of the bailout, the European single currency fell to its lowest level against the dollar since 2006, reaching 1.1876 on 6 June 2010.

Milestone #2: China de-pegs from the US dollar

On 21 June 2010 China announced that it would de-peg its currency from the dollar; a first after 23 months of pegging.

It was a step in the right direction because it was largely a vote of confidence in global economic recovery. The initial impact caused a slight appreciation in the yuan, which would have hurt Chinese exporters.

However, on the international front, the Chinese government felt that global consumers were back to their spending ways and there wasn’t a need to protect their exporters. On the domestic front, the strong yuan made foreign goods cheaper for domestic consumers and would help to curb inflation within the country; a signal that the Chinese government was looking to stimulate domestic demand.

Milestone #3: Bank of Japan intervenes for the first time in six years

On 15 September 2010 the Bank of Japan (BoJ) sold about $20 billion worth of yen. This was the first time in six years that the BoJ had intervened in the currency markets in an attempt to weaken the yen.

Like the intervention that took place in March 2004, the effect was short-lived, with the 300-pip blast-off in the USD/JPY pair negated after about two weeks.

The intervention would have delivered more firepower had it been a coordinated effort between the BoJ, the Federal Reserve and the European Central Bank (ECB). However, for the Fed and the ECB to ‘help’ Japan and sell the yen, they would effectively have had to buy their own currencies in the process. The Fed and the ECB were opposed to doing that because buying their own currencies would inherently cause the dollar and the euro to appreciate. That would run counter to their plans to maintain a weak currency to pull their economies out of the slowdown.

This led to the solo effort by Japan, which didn’t meet its objective of weakening the yen.

Milestone #4: USD and EUR hit historic lows against CHF

On 8 September 2010, EUR/CHF hit an all-time low of 1.2764. In similar fashion, just one month later, on 14 October 2010, the USD/ CHF hit an all-time low of 0.9462.

The massive demand for the Swiss franc was caused by the general wave of fear and panic among traders and investors. Unconvinced of global economic recovery, they fled to safe havens.

Two main themes dominated the move:

1) Europe’s woes with sovereign debt issues. As well as Greece, Ireland seemed to be teetering on the brink of spiraling debt. In November 2010, interest rates soared on Irish government bonds.

The gap between Irish and German borrowing costs also shot up to record highs. To make matters worse, borrowing costs in Spain and Portugal also spiked.

2) The Fed’s impending decision on a further round of quantitative easing.Talk was rife in the financial markets that the recovery of the American economy remained sluggish. Unemployment was at stubbornly high levels, just shy of 10 per cent. Many economists were predicting a fresh round of asset purchases by the Fed, valued at between USD500 billion and USD800 billion.

Milestone #5: Aussie reaches parity for the first time

The star of the currency show in 2010, the Aussie hit parity against the US dollar for the first time in history on 15 October 2010. The strength of the Aussie hinges on two factors:

1) Continued weakness and low interest rate for the US dollar. Australia has the highest interest rates (4.75%) among the G20 countries, which makes the carry trade very attractive for traders and investors.

2) China’s insatiable appetite for raw materials. Australia has been lapping up China’s demand for raw materials, namely gold, iron and coal. This has caused the currency pair AUD/USD to peak. In fact, for the second half of 2010, we saw how the AUD/USD moved in tandem with China’s trade figures.

Milestone #6: Fed launches second round of QE

On 3 November 2010, the Fed announced a second round of monetary stimulus, dubbed QE2, in a bid to jump-start the sluggish recovery of the US economy.

It will buy long-term Treasuries worth $600 billion until June 2011, and reinvest $250 billion to $300 billion more in Treasuries with the proceeds of its earlier investments.

The bond purchases will total up to $900 billion and will be completed by September 2011. This is the second time the Fed has had to step in and revive the economy through a round of asset purchases. From November 2008 to March 2010, the Fed launched its first Quantitative Easing Program, buying $1.7 trillion in Treasuries and securities.

Milestone #7: Gold and silver at historic highs

On 9 November 2010, silver hit a record high of $29 per ounce. On the same day, gold was seen at a price of $1424 per ounce. These prices were the highest ever reached by both precious metals.

This occurred just one week after the Fed announced its second round of asset purchases, causing the dollar to plunge. Widely seen as a natural hedge against the falling value of the dollar, gold and silver prices took off after both traders and investors hedged their bets and
found solace in commodities.

G20 Meeting

The G20 meeting, held in Seoul in November 2010, was a bit of a letdown. The term ‘Currency War’ was used frequently by many nations leading up to the meeting, but concrete details of how countries would prevent currency devaluations and cope with trading imbalances were
sorely lacking.

The highlight of the meeting was probably when US President Obama called the Chinese currency “undervalued”, though it was something traders knew all along.

Looking forward to 2011

‘Currency Wars’ was the major theme for 2010, and I expect the sequel to be played out in 2011. With the Fed’s second round of QE announced in November 2010, the possibility of higher interest rates for the United States in 2011 has all but vanished.

With low yields in the United States and sovereign debt problems plaguing peripheral countries in Europe, it is not difficult to see that the biggest beneficiaries of money flows in 2011 will be in the Asia- Pacific region.

China, in particular, will do very well. With its incessant demand for raw materials and its focus on building domestic growth, China will be the star of the growth story in 2011. Additionally, its strategic downsizing of US debt in the later part of 2010 sheds light on its emergence as a true global superpower.

2011 forecasts

Here are my thoughts for the majors in 2011.

EUR/USD
With the PIGS (Portugal, Ireland, Greece, Spain) coming into the currency spotlight for all the wrong reasons, I expect the euro to remain depressed for much of 2011. Its ‘web of debt’ will always be in the way of organic growth. Additionally, it is no secret that a low euro would help the region to increase its exports.
Year-end call: EUR/USD at 1.31

USD/JPY
With a failed intervention on 15 September 2010, Japan knows that its economy is heavily reliant on the progress of the American economy. However, with high unemployment and low spending, the US economy is badly wounded. Hence, the Japanese government and Japanese exporters have started to get used to a stronger yen. Many exporters have re-adjusted their hedging positions to factor in a stronger yen for 2011.
Year-end call: USD/JPY at 85

GBP/USD
Called the ‘whipping boy’ in 2010, Sterling remained fairly resilient towards the end of last year. However, dogged by conflicting signs of economic recovery and inflation, the Bank of England reported that higher costs of living were certain and inflation will remain above its two-per-cent target until the end of 2011.
Year-end call: GBP/USD at 1.45

USD/CHF
Influenced by its label as a safe haven, many traders and investors fled to the Swiss franc during bouts of fear and panic in 2010. Although Switzerland is an export-oriented country, the Swiss National Bank has forsaken currency intervention and become used to its strong currency.
Year-end call: USD/CHF at 0.95

USD/CAD
On the domestic front, Canada is expected to do well in 2011. With oil as its biggest export and the possibility of more rate hikes, the Canadian dollar should strengthen over the next 12 months. However, bearing in mind that close to 80 per cent of Canada’s exports land in the United States, its gains will be somewhat muted, with weak US demand.
Year-end call: USD/CAD at 0.98

AUD/USD
Winning the title for favorite carry trade, the Aussie racked up an impressive 15 per cent gain over the dollar in the latter half of 2010. Piercing parity for the first time in history in October 2010, the Aussie is poised to extend its gains in 2011.

Reserve Bank of Australia Governor Glenn Stevens has dropped clues that rate hikes will continue well into 2011; and with China’s huge appetite for raw materials, the Australian economy will be red-hot.
Year-end call: AUD/USD at 1.06

In summary, some currencies are in for a bumpy ride, while others will continue to extend their gains.

One thing is certain: the Asia-Pacific region is poised to be the recipient of hot money flows in 2011, which will see its currencies rising.

Let’s trade forex!

The 3 Laws of Successful Trading

June 29, 2010 by Mario · 4 Comments
Filed under: Money Management, Press Release, State Of Mind, Strategies

(This is an article I wrote for “Your Trading Edge” in the June 2010 issue)

Having had the privilege of speaking to audiences about FX trading worldwide, I have noticed a common question: “What is the best strategy to trade forex?”

Each time I hear the question, I can’t help but smile. After all, that was my biggest question when I first started trading forex. It’s almost always, “Give me the strategy first, and we’ll talk about trading later!”

In this article I hope to shed some light on successful trading, and how we can all get there. Let’s start with the definition of a successful trader. The benchmark of a successful trader is that he must be consistently profitable.

Notice the word ‘consistently’. I’m never impressed when I hear someone is “making 500 per cent in a month”. Don’t get me wrong – these are amazing results; but any trader worth his salt must know that his game plan is to stay consistently profitable. It seems inevitable that the few who make exorbitant returns in one month get washed out the very next month, because they probably took on (and continue to take on) excessive risk.

Remember, you might be able to make 500 per cent a month for a particular month, but if you lose only 100 per cent any month, you are out of the game forever.

The Three Laws

How does one become ‘consistently profitable’ in the forex market? I would like to share my three laws of successful trading. They are not mutually exclusive; rather, they must go hand-in-hand. They are:

Strategies
Money management
State of mind

Strategies

There are four basic strategies for profiting from the forex market: trending, ranging, breakout and news release strategies.

Trending strategy
A trending strategy is employed when the market is clearly in an uptrend or a downtrend. When the market is in an uptrend, go ‘long’. If the market is in a clear downtrend, go ‘short’. This is, by far, the most popular method of banking profits in the forex market. As the saying goes: ‘The trend is your friend until it bends.’

Ranging strategy
A range occurs when the market is trading in a channel – between a floor and a ceiling. The price seems to bounce repeatedly between these two areas, called support and resistance. For this strategy, traders tend to go short near levels of resistance because buying pressure succumbs to selling pressure, hence pushing the price down. Conversely, traders execute buy, or long, orders near areas of support because selling pressure succumbs to buying pressure, which pushes prices up.

Breakout strategy
A breakout strategy is employed when prices finally break out of a trading channel and head either up or down. Momentum is greatest on breakout points; hence traders tend to capitalise on these specific movements by going long once prices break upwards from a trading range, or short once prices break downwards from a trading range.

News release strategy
I know a number of traders who trade exclusively around the news. Two of the most popular news announcements are interest rate changes from the G7 countries and the Non-Farm Payrolls from the United States on the first Friday of every month.

Because there is no telling which way the market is going to react once the news is announced, I do not advocate trading around the news for new traders. Markets tend to be irrational, and this is not the behaviour you want to experience when you have just begun your journey.

Another downside to trading around ‘hot’ news is that brokers have a tendency to widen their pip spread during these times. Spreads can easily widen to 20 pips, regardless of whether you go short or long, during this volatile session. Be mindful of this the next time you feel like trading on a ‘juicy, piece of news.

Money Management

Much can be said around the topic of money management; but I’d like to focus on just one aspect: risk. In the world of retail forex trading many promising traders are still oblivious to one of the biggest pitfalls of trading: the tendency to take on too much risk.

Sometimes traders just do not understand how much risk is too much. The golden rule is never to risk more than one to five per cent of your capital on any trade. In fact, I know many professional traders who consider five per cent to be too much. Some of them never go beyond two per cent.

What does this mean, specifically? If you have a trading account of $US10,000, a two per cent risk means that you will not lose more than $US200 if your stop loss is hit.

If we assume your stop loss is hit, then for your next trade you would begin with $US9,800 capital. It is hard to imagine anyone blowing up his or her account with such tight rules; but the sad fact is that traders are unaware of how they should practice prudent money management.

Here’s an example to drive home the absolute importance of money management. If you start with an account of $US10,000, you would have $US5,000 left if you blew off 50 per cent of your account. The real question is how much you would have to make in order to bring your account back to the break-even level of $US10,000.

The answer, of course, is 100 per cent. In fact, the statistics are not pretty (see figure 1).

We are often reminded: “Amateurs are concerned with how much they can make. Professionals are concerned with how much they will lose.”

State of Mind

State of mind concerns a trader’s thoughts and emotions. It is the component that will present itself as by far the biggest stumbling block to a trader’s success. Four human characteristics – fear, greed, hope and ignorance – will always be a part of every trade.

Imagine you have just completed your ‘apprenticeship’ trading the demo account and you are now ready to trade live. The first opportunity opens up. It’s time to make big bucks. However, when it’s time to execute the trade, you somehow freeze up. Your finger just can’t find the energy to click the mouse. This is fear. You then watch in horror as your trade (which you didn’t take) goes on to register a win!

At your next trade, you double your lot size. This is greed. You double your lot size because you want to win back the money you left at the table by not taking the first trade. As Murphy’s Law would have it, this trade is now heading towards your stop loss! You then do the unthinkable – you remove the stop loss. This is ignorance. You remove your stop loss because you are giving the trade some ‘breathing space’ to reverse and, you hope, register your first win. Sound all too familiar?

I hope (no pun intended) that you now see that all three laws – strategies, money management and state of mind – must come into play for you to achieve any degree of success in trading. In fact, if we assume that the three circles make up 100 per cent of a trader’s success, then they can be divided as follows:

Strategies: 15%
Money management: 30%
State of mind: 55%

Strategies (15%)
Even when your strategies work, it is a fact that they account for only 15 per cent of your success in trading.

Money management (30%)
Money management is twice as important as strategy because if you take on more risk than you are allowed, you put yourself in a position where your account can be badly damaged. Remember, it takes more effort to recover an account that has a significant drawdown.

State of mind (55%)
And state of mind is twice as important as strategy because everything rises and falls on the way you, the trader, execute your plan.

Strategies and money management can be taught. Strategies are what to do. Money management is how much to do. However, state of mind -– thoughts and emotions – is difficult to control. Humans are emotional creatures and money is an emotional topic.

In summary, the three laws – strategies, money management and state of mind – must work in harmony before you can be consistently profitable in the forex market.

(Download the PDF version of the article here)

http://www.fx1academy.com/doc/3_Laws_to_Succesful_Trading.pdf

Get Leverage!

June 14, 2010 by Mario · Leave a Comment
Filed under: Press Release

(This is an article I wrote for Smart Investor in the June 2010 issue)

What is “Leverage?”

In its purest sense, Leverage allows us to do “more with less.”

In the financial world, the concept of leverage is used by investors to significantly increase the returns on an investment. Leverage is commonly seen as a “double-edged” sword in trading. It has its fans and its adversaries.

Those in its camp love the fact that large amounts of money can be made with “little money down” while those in the opposing camp lament the fact that leverage always causes accounts to “blow-up.” This quickly gives an impression that high leverage is “risky.”

While many traders have heard of the word leverage, few have a clue about what leverage really is, how leverage works, and how it can impact their account. In short, leverage is quite a misunderstood term, especially in the area of Forex Trading. Having said that, let’s delve into the topic a bit more before we draw any conclusions.

Now, leverage involves “borrowing a certain amount of money.” In the world of Forex, that money is usually borrowed from a broker. For instance, when a trader opens up an account with a broker, the amount of leverage provided is either 50:1, 100:1 or 200:1, depending on the broker. Some brokers today even offer leverage of up to 400:1 or 500:1.

Let’s quickly run through some basics to understand the use of leverage a bit more.

When you trade 1 standard lot in Forex, you are trading 100,000 units of the base currency. For example, let’s say that the current price of USD/JPY is 100. This means that 1 USD is equivalent to 100 Japanese Yen at that point of time.

You assess the market and realise that the US dollar is undervalued against the Japanese Yen, which means that you initiate a BUY order in the hope that the price moves up.

Now, to buy 1 standard lot of USD/JPY at the current price of 100, you are actually buying 100,000 units of US Dollars. Most of us do not have that kind of money to initiate the trade! Hence, brokers step in with the perfect solution and offer us the “additional capital” needed to fund the trade.

They do this by introducing “Margin Trading.”

Margin allows a trader to purchase a contract without the need to provide the full value of the contract. Hence, for a $100,000 position (1 lot), on 1% margin, the trader is required to “put down” only $1,000.

The leverage provided on a trade like this is 100:1 (100,000/1,000). Here’s the formula:

So for 1% margin, leverage is 100:1. Hence, a trader can control $100,000 with just a sum of $1,000. For a leverage of 400:1, the trader only needs to “put down” 0.25% margin. This means that a standard lot of $100,000 can be controlled with only $250.

The table below gives us a quick reference on how margin and leverage co-exist as two peas in a pod:

Although high leverage gives the impression that the trade is risky, the “perceived risk” is significantly less when one considers that currency prices usually change by less than 1% during intraday trading. If currencies fluctuated as much as equities, brokers would not be able to provide as much leverage.

What? Now wait a minute.

I thought Forex has high volatility and that it fluctuates more than equities?

Let me explain.

In Forex, the currency movements are so small on an intraday basis that a new term called “pips” had to be introduced. A pip is the smallest movement in a currency price. This could be the second or fourth decimal place of a price, depending on the currency pair. However, these movements are really just fractions of a cent. For example, when a currency pair like the EUR/USD moves 100 pips from 1.5100 to 1.5000, it is just 1 cent (or $0.01) of the exchange rate.

Let’s look at a recent example to drive home the point. On 1st April 2010, the price of EUR/USD was 1.3580. On 1st May 2010, the price of EUR/USD was 1.3380. Consider also that this was during a period where the markets were very volatile because of the problems in Greece.

Now, as volatile as the movements were, it was “only” a movement of 200 pips, or a mere 2 cents. Would you trade a stock that moved just 2 cents in 1 month?

So you see, the reason why brokers can afford to give high leverage in the Forex market is because, intraday movements in the Forex market are minute.

This is why currency transactions must be carried out in big amounts, allowing these minute price movements to be translated into decent profits when magnified through the use of leverage. It is the provision of leverage that allows traders to earn significant profits in the market.

However, leverage can also work against investors. For example, if the currency moves in the opposite direction of what a trader believed would happen, leverage would greatly amplify the potential losses. To avoid such a catastrophe, Forex traders usually implement a strict trading style that includes the use of a “Stop Loss.”

Now that we understand the definition and utilisation of leverage, how do we deal with the fact that leverage “kills” a trader’s account?

In reality, the issue isn’t leverage, it is poor risk management. High leverage only reduces the amount of capital required to initiate a position. Great traders know that they will never risk more than 3% of their capital on any trade. Your job is to employ sound risk management by not risking more than 3% of your capital on any one trade.

As an example, if you start with a capital of USD10,000 then a 3% risk means that you will not lose more than USD300 of your account on that trade. Hence, it really doesn’t matter if you trade with 100:1 leverage or 500:1 leverage. It wouldn’t be any “riskier” if you used a higher leverage provided you used proper risk management.

Proper risk management means planning your entry point, profit target and stop loss before placing the trade. Your lot size is then calculated accordingly so that you never risk more than 3% of your capital on the trade.

The point is that leverage is not the enemy. If you plan your trade so that you are risking a small amount of capital on each trade, very high leverage will not have a negative effect. On the contrary, low leverage can severely hamper a trader’s potential for profit because the trader may not have enough capital to enter a full position and/or multiple positions at the same time. On a 10:1 leverage, a trader would have to put down $10,000 to initiate 1 lot as opposed to just $1,000 had he employed a 100:1 leverage.

In summary, leverage is a good thing. It is there to help you. Leverage is an imperative tool that all successful traders use to grow their account consistently. Now shouldn’t we do the same? To quote Archimedes, 220BC: “Give me a lever long enough and a fulcrum on which to place it, and I shall move the world.

(Download the PDF version of the article here)

http://www.fx1academy.com/doc/Get_Leverage.pdf

7 Habits of Great Forex Traders

May 25, 2010 by Mario · 8 Comments
Filed under: Press Release, State Of Mind

This is an article I wrote for Smart Investor in the May 2010 issue:

By definition, a habit is an acquired pattern of behaviour.

There are many “kinds” of habits, both good and bad. Some of these include:

1)    Over-eating
2)    Neglecting yourself
3)    Being a workaholic
4)    Chewing your nails
5)    Negative thinking
6)    Being late
7)    Blaming others

To set the record straight, I would classify the above as “bad habits.” The antithesis of the above list would thus fall in the category of “good habits.”

As an example, negative thinking vs. positive thinking, or being late vs. being punctual.

Here’s an interesting question – how do we get into the momentum of developing habits, good or bad?

Take a look at the graph below:

From the graph, it is suffice to say that ACTIONS, repeated over a period of time, would develop into habits.

We can go further by saying that “positive actions” repeated over a period of time would develop into good habits, while “negative actions” repeated over a period of time would develop into bad habits.

Here’s a classic example.

In the book “The French Paradox,” the author explains how the French live longer because they drink a glass of red wine a day. We could classify this as a good habit.

Taken OUT of context, drinking a bottle of red wine in a day could be passed off as a good after-dinner celebration. Drinking a bottle of red wine a day everyday, for an extended period of time, would border on alcoholism – a bad habit. You get the picture.

Habits, good or bad, apply to all disciplines in life. Let’s take a look at how habits apply to a discipline where my passion lies – Forex Trading.

Over the years, I have found that the following SEVEN habits, above all else, keep a trader grounded and more importantly, consistently profitable.

Let’s have a look at them:

Habit #1: Know your reasons for taking every trade

All too often, many traders take a swing at the markets because they “feel” it is a good price. The most common scenario where this occurs happens when a trader goes “long” after the price drops a considerable amount. The train of thought is “Woa! It has fallen quite a bit already! It’s bound to reverse!”

Let’s look at an example.

From 1^st Dec 2009 to 31^st March 2010, the EUR/USD plunged from a high of 1.51 to a low of 1.32. A stunning move of almost 1,900 pips in just 4 months.

What if you went “long” after EUR/USD dropped a “considerable amount” of 500 pips? Or 700 pips? Or even a mammoth 1,000 pips? Your account would have been ravaged.

Here’s the key: Have a reason for entering every trade. This means you MUST follow a trading plan. Never enter a trade based on “gut-feel.”

Habit #2: There’s always the next trade

In the course of my trading career, I have come across traders who always appear to be on tenterhooks. They get anxious and frustrated because they “missed a trade,” and rue the day they “should” have been at their laptop to execute the all important trade.

Look, the Forex Market trades about USD4 trillion a day, making it the largest financial market in the world. There’s ALWAYS the next trade. It’s no use beating yourself up for missing a trade. If it’s any consolation – who said the missed trade would surely register a win anyway?

Habit #3: Always put a stop loss

This habit is well turning out to be my mantra when I coach my students. I sometimes joke with the class by saying that if I ever hear of ANY student not putting a stop loss immediately after entering a trade, I would personally fly back from wherever I am and smack their heads!

Friends take my word – the biggest reason why traders blow up their account is the habit of taking on excessive risk. Don’t fall into that trap. Always put a stop loss. Make it a habit today.

Habit #4: Don’t take revenge over losses

You have just completed your “apprenticeship” in trading the demo account and you are now ready to trade LIVE. The first opportunity opens up. It’s time to make the BIG BUCKS.

You take a trade and it hits your stop loss. You take the second trade and it hits your stop loss too.

You get angry. This is not how it’s supposed to be.

At your 3^rd trade, you now TRIPLE YOUR LOT SIZE because you want to “win back” the money which the Forex Market has so cruelly taken away from you.

Sounds all too familiar doesn’t it?

Don’t fall into the “revenge” trap. The Forex Market will make you pay heavily for it. The key here is to not take things personally. No one wins every trade. What you should do is to step away from the computer and re-analyse your trading plan.

If everything is going according to plan, then great! Accept the fact that losses are part of the game.

Habit #5: Maintain a trading journal

This is a tough one, and not many traders do it. Those who do, profess of its immeasurable effectiveness.

A trading journal, among other things, should document your decisions before you take a trade AND note down your thoughts and emotions after the result is achieved. Here’s a short list of what a trading journal should encompass:

1)    Date and time of trade
2)    Currency pair (e.g. EUR/USD, USD/JPY or GBP/CAD)
3)    Action/Strategy used (long or short)
4)    Risk (how many lots, stop loss)
5)    Profit potential (do you have one or multiple profit targets?)
6)    Result (profit/loss)
7)    State (what are your thoughts and emotions? Did you execute it correctly?)

A trading journal is like a road-map. It helps you stay on track. Here’s a question – how would you know if you’re heading in the right direction if you are not documenting your progress?

How would you know if certain “bad habits” have unintentionally crept up on you if you don’t have a framework to measure against? Start maintaining a trading journal today!

Habit #6: Maintain a clear mind

Would it be wise to analyse or enter a trade just after a heated verbal exchange with a friend or family member? What about just after you had a long 14 hour work day where your boss berated you for the things you failed to accomplish?

Certainly not. A clear mind must always be maintained when you step up to the computer. You do not want any emotional distress to cause you to see patterns on the screen that aren’t actually there!

Habit #7: Pay yourself consistently

Is this habit important? But of course.

What is the ultimate purpose of trading? To generate consistent and profitable returns. However, what good is that if you are not enjoying the fruits of the game?

There are many ways to pay yourself in this business. I’ll list a few:

1) Have a goal to earn 100% of your capital. Then withdraw your initial capital, and continue to trade on the profits generated. This is now essentially a “risk-free” business venture.

2) After your trading account has grown sizeably, withdraw 20% as profits and leave the rest to be compounded. Ensure that the withdrawn amount far exceeds the amount you might have to pay for wiring fees charged by brokers.

So there you have it. The 7 habits of great Forex traders. How do you instill them into your system? Simple. Maintain these actions for an extended period of time. These actions will then automatically become conditioned habits.

This is when you bloom into a mature trader and become a force to be reckoned with in the trading world.

I’d like to leave you with a wonderful quote:

Winning is not a sometime thing;
it’s an all time thing.
You don’t win once in a while,
You don’t do things right once in a while,
You do them right all the time.
Winning is a Habit.
Unfortunately, so is losing.
~ Vince Lombardi (greatest football coach in history)

Download the PDF version of the article here:
http://www.fx1academy.com/doc/7_Habits_Of_Great_Forex_Traders.pdf