Casual Forex Trader

There are a lot of people that want into this market, but they don’t know the important forex trading secrets that I know. You have to have a bit of class to be good at this. Sure it is easy to get started and start trading, but if it was that easy, everyone would be a millionaire. Most people that get involved will end up losing all their money because they simply don’t “get it”. You have to know all the little forex trading secrets to be successful at this and that is what I want to show you.

Stop Losses

This is important. Making money is one part of the equation, but how do you control yourself from losing all your money. If you make a trade that goes down in value, when you do you cut your losses or do you hold onto it until it goes back up. Most new players don’t understand this question.

Things are going to fluctuate and things won’t go the way you want them too. That’s life. I always set a stop loss point before I even make a trade. There is a point that everyone doesn’t want to loose anymore money. In the heat of the moment, you can’t make an objective decision, so make the decision before you make the trade. Always know how low it can go before you sell.

That’s a very important forex trading secret. It’s more important to learn how to protect your money, than increase it.

Make Moves

I get it. When you’re new, you want to take it slow. You want to analyze every little thing a hundred times until you know it’s a sure thing. Well, you can’t. There is risk involved and there is no guarantees that you’re going to get anywhere with a trade. You can analyze something to death, but eventually you’re going to have to make a move.

You need to be able to determine when you’re doing an analysis to find out if a trade is good, or if your analyzing for the sake of not making a move.

An important forex trading secret is to make a move, when you know there is a move to be made.

I wanted to talk to you about trading the trend and breaks. There is a lot to learn in the forex market and this is probably one of the most important. Always go with a trend because in a bullish market, there is always a trader that is going to sell to make a profit.

Trends are always good because it’s as easy as your job can get. It’s pretty easy to determine direction and what you need to do to profit. You just have to make sure that you break away from such traders before the trend ends.

Here is a simple rule that I follow, in a bullish market, I try to buy when the price reaches the ascending trend line. If the price actually breaks through the trend line, I will stop. It’s a really easy rule to follow and you get to make a relatively easy profit with it.

You’ll see more than one trend line on a graph. You’ll have the main one and you’ll also have secondary ones. Always look at the bigger graphs for the primary trends because looking at a graph for an hour isn’t going to tell you much. It’s going to be all over the place, but the trend is what will count.

Hope this helps.

I thought it was apparent for me to write a post on how I objectively set the stop loss point. Typically all software that you have for forex is going to have a stop loss point. This is basically a mark you put on a trade that it will automatically sell if it goes down to it. It’s very simple and safe way to keep your money. Not to many people take advantage of it and a lot of people think they can make the decision themselves.

I believe in doing this objectively for one reason - in the heat of the moment, it’s hard to be objective. There are people out there that will watch a trade like a hawk. When it gets down to a point where they should sell, they end up holding onto it because they feel it will go back up and they don’t have to lose quite as much. The idea is that they think the trade might have bottomed and it would be stupid to sell at that point.

It’s basically a rough road to go down because it’s hard to say. It’s really an unknown because you can’t guarantee any direction when it comes to Forex. When I’m about to make a trade, I decide right before I make the trade on a stop loss point. This is about objective as it can get. I don’t “own” the trade yet, so I have no reason to have a bias. This is the best way to do things.

Well, it looks like the Canadian dollar is making a decline on Thursday, like I said it would. I hope all of you made some good investments on it because we probably won’t see it again until the economic slowdown worldwide ends.

I predict sometime in the mid-to-late 2009 that we’ll come out of this economic downturn and when that happens oil will spike again. It sort of sucks, but OPEC wants oil at around $100/barrel. I guess they get that number from political manipulations rather than smarts. I don’t think they understand that when gas is above $3 or $4/gallon it starts to get profitable for alternative forms of energy.

Anyway,

When the economy start making it’s rebound and places like China and India start heavily back into the oil, prices are going to sky rocket, and that means the Canadian dollar will be on a huge rise. Depending on where you’re money is at, that could mean earning 30-40% return.

Gann’s ‘Law of Vibration’ is a book a very technical trader has written and it is a pretty decent look at things. I think it will help you better understand how to read things properly without all the gibberish you usually see with candlestick graphs.

Check it out here.

I told you… It’s going to keep going up until Thursday and than it should go back down after some grim economic data is released. You should of got in on this. I told you…

Well, maybe we’ll see some more fun from the Canadian dollar soon enough.

I told you guys to to watch the Canadian dollar. It just seemed so unnatural with it’s huge fall during the month of October. Just a month or two ago USD=CAD, but now it’s changed. The Canadian dollar was free falling along with the price of oil, but today showed that there is a change in that trend. Oil fell a few dollars, yet the Canadian dollar rallied anyway.

In fact the Canadian dollar rallied 2% on Monday and the belief for this rise is that the drastic fall in October was a little too much.

It’s hard to say what will happen with the Canadian dollar. Like I mentioned in a previous post that the Canadian economy was viewed by the world economic forum as having the soundest banking system in the world.

It’s hard to say which way the Canadian dollar will go. It’s dramatic rise to parity with the US came with the rise in oil prices, but will it fall back down with oil - even though the Canadian economy is supposed to out perform the other G7’s?? It’s hard to say, but it is definitely a currency that will be on the move for quite a while.

This Thursday key economic information will be released and I have a feeling it’ll be bad news, so I expect to see the Canadian currency head back down on Thursday.

A lot of people want to know about a breakout forex strategy and how it works. Well, it’s actually not that sophisticated. I don’t want to bring you down by hearing that. It’s just simple correlated observation. You need to look at potential breakout signs and leverage yourself for a profit.

Like, you’ve noticed that the US dollar has been going up very fast during the month of October and that is definitely a breakout that has happened. You have to go back and look at that instance where the US dollar stopped going down and started going up.

What happened? Identify the characteristics of that moment.

Once you do that, go back and find another similar time for the US dollar where it was bottoming and went back up. Identify the characteristics and take note of the things that happened in both observations.

This means you always have to be on the ball because you want to catch these bottoms and ride the currencies back up for maximum profit. Like I said, it isn’t sophisticated, it just routine stuff. Just start doing it, observe the market and make a smart choice.

Money management in forex is just a fancy way of saying how much risk you’re willing to take in a trade. Not all trades are given and typically the ones with huge profits also have a lot of risk associated with them. This makes managing risk that much more important in forex.

Risk comes into the picture of the likelihood that a trade will perform. The less likely it will perform, the more risk is associated with it. You’re probably wondering… How do I know the likelihood that it will perform? Well, it comes down to historical trends and the forces on the market.

If you see a currency that you hear is going to perform quite well and look at the historical trends, which reveals nothing like that has happened before - you’re getting into something risky. It’s not to say that it couldn’t happen especially in economically unstable times like today, but there’s more risk here.

You’re going to be subject to risk no matter what you do, so you want to stomp the bad side of risk as soon as it raises its head. The best thing you can do is take advantage of stop loss points. Pick something that is reasonable, so you feel you gave a chance for the trade to perform without the risk of losing a significant amount of money.

I find this time for forex to be tough. A lot of people are running to forex to avoid the horrible stock market, but I feel a bit scared with the moves of the US dollar.

Ever since all this financial mess happened, the US dollar has just skyrocketed. It’s an amazing run and I happy for the results of the run - my problem is that it shouldn’t be happening. It’s just simple economics.

The dynamic between the USD/CAD dollar is amazing. It’s such a fast rise in the US dollar compared to the Canadian dollar. It strikes me as odd for a few reasons.

1. The massive injection of US dollars into the economy

The printing presses can’t keep up with the amount of money that is actually needed in the US economy. It’s insane. But thoughts of people running around with wheelbarrows full of money comes to find.

2. Canadian banking system is the best in the world

The Canadian banking system is sound and there has been liquidity added, but nothing compared to what is needed in the US. The Canadian banking system was able to avoid all this stuff because it required people to make down payments and if they couldn’t make a high enough down payment, they had to buy mortgage insurance.

This is where the problem lies for me. The US dollar is rising compared to the Canadian dollar, yet the US treasury & Federal Reserve are throwing money into the economy and the Canadian banking system was sound.

It seems quite illogical to me.