Free Forex Course : Emotion Controls During Fx Trading(Lesson

When markets are normal, we yearn for more volatility, more action!
When the action is upon us, many traders bail out reasons and let emotion take control.

It being said: Trading is 5% Luck, 10% Tools, 15% Discipline and 60% Emotions Management

You goal as a trader is to make money and in order to do so you need to get rid of that initial risk you have on every trade you take. You should take your trade to breakeven as soon as possible, what that does is to take the emotions out of the trade inmediately allowing you to manage your trades intelligently not trading emotionally at all plus its gives you that small edge that you know you are in a winning trade in which you know you can not lose. So right out the bat you are in good shape, you sit back, relax watching the trade working earning money for you.

My hope today is that you stay strong, knowing that the market will find an equilibrium and youll be able to act accordingly at the time.
If youve been hurt by todays market movement, you will recover if you stay disciplined. Remember a loss is nothing more than a learning opportunity seeking success. If youve already strayed from your discipline and youve made a panic move, fear not, as you too can get back to discipline and recover and learn from your mistake.

Experience is what we get when we dindnt get what we wanted.

1. Currency trading is so easy a trained money could do it?
Well is that your believe youll awake to a sad realization my friend. 95% of all newbies lost their money on a period of 3-6 months. Why? because trading is simple but not easy and most trading dont really know what their doing.

2. Forex market is too big, only big banks and institutions can make any money.
Investment banks, money center banks and hedge funds continue to reap significant profits from currency market speculation. In some cases it is 50% or more of their holdings. Retail investors and professional traders have traditionally either been locked out of the inter-bank market entirely or hesitant to incorporate Forex into their trading portfolios. However, the past five years have seen a dramatic increase of individual investors participating in the USD$3 trillion per day market *.

The banks are heavy traders in the Forex market, but dont be intimidated by the big players. The Forex market is a level playing field and you have the ability, under the right conditions, to out trade the banks. That is largely how every major Forex trading fortune has been made. Now days most Forex online brokers allow their retail clients to participate in the otherwise institutional world of Forex by making a market specifically for retail traders. By making a market specifically for its clients, brokers are able to offer tradeable mini-lots of as small as 1,000 units of a given base currency. Combined with up to 400:1 leverage available on many currency pairs, individual traders maximized exposure to the movement of currency prices.

Leverage is not all about gains of course, its been said its a double edge sword for good reason, increased upside exposure also means increased exposure to potential loss and despite all the over-hyped promotions found online and in printed advertisement Forex is a high risk/return market.

* The surge of retail Forex trading is underlined by the fact that daily trading volume typically exceeds $50 billion per day among retail investors. At the rate at which it has been growing, it will not be long before forex volume surpasses turnover on the New York Stock Exchange, which averages just over $60 Billion daily. CNN Money Mar 16, 06.

3. It will take me a lifetime to understand the intricate political and economic climates of every country whose currency I can trade. Where do I even start?
The Forex market can be traded in any number of ways. While it is certainly advised that a trader have a basic understanding of what moves particular currency prices, many traders rely heavily on purely technical indicators to trade the market. A good place to start is with daily Forex specific macroeconomic commentary that will give you an overall view of the currency market. From there, you may wish to concentrate on one currency or even one currency pair or you may concentrate on a specific type of news release regardless of country of origin. There are four (4) specific currency pairs that due to their inherent trading volume dominate the Forex market arena providing the best trading opportunities, these currency pairs are: GBPUSD (British Pound vs US dollar) simply called Pound or cable

EURUSD (Eurodollar vs US Dollar) simply called Euro

USDCHF (US Dollar vs Swiss Franc) simply called Swiss Franc or swissy

USDYEN (Japanese Yen) simply called Yen

4. Trading in the 24-hours spot FX market is risky, especially in an unregulated market.
The Forex market is not inherently more risky than other tradable products. In fact, as I have shown above, the Forex currencies market is incredibly liquid. However, as a retail trader of a market maker (aka broker), you will be utilizing leverage. It is leverage, and not the market itself, that increases your financial risk.

While leverage up to and including 400:1 allows you to gain exposure to price movements with relatively little collateral exposure, both gains and losses will be magnified. For this reason, I strongly encourages you to stick available risk management tool in the Kendo FX trading manual and to seriously consider your risk tolerance before you trade with real money.

The OTC Spot FX market is regulated by the National Futures Association (NFA) and the Commodities Futures Trading Commission (CFTC) in the United States. The broker, manager or introducing broker (IB) you chose to conduct business with should be a registered member of the NFA. You can find out more about the NFA and how it strives to protect investors at http://www.nfa.futures.org/compliance/forex.asp

5. Internet trading is risky. What happens if my computer crashes?
You must choose a broker that provide several means to trading; deskstop or online platform (or both) and a 24-hour dealing desk accessible by phone with which you can place trades. That way you will be protecting yourself against unforeseen events that might interrupt your trading activities.

There are at least 5 simple and basic principles that determine ones fate in becoming a better forex trader. These principles may seem simple, but they are essential keys to unlocking the door toward becoming a millionaire, or at least gaining a little more than losing.

Forex Psychology Principle #1
The first and most significant principle is trading with a regimented plan and system. Many traders do not realize that trading is more complex than how it seems. It should not be driven by merely a hunch or gut feels. A good trader is always ready with a feasible plan. This plan should include sophisticated research and examination of the currencies as well as stop and limit levels of the trade. This prepared plan should have an analysis of the expected upside along with the downside.

Forex Psychology Principle #2
The next principle is cutting your losses at an early stage and being loyal to your profit earners. Some traders want to believe that their losses might still do well after a good waiting time. More often, in reality, the market moves against these non-profitable positions and make them lose hundred of points, thus, not recovering enough to sustain even if they do rise again. Do not be caught in the belief that every trade should be profitable. If half the number of your trades are earning, you are on the right track. The key to making sure you still get enough even if only half of your trades are winners is to allow your winners to run and to minimize your losses.

Forex Psychology Principle #3
Another principle is playing smartdo not let your emotions rule in trading. Always be objective with your decisions. The old saying goes never marry your trades. While in the market, do not hope that it will move in a favorable direction just for you. Rather, be sensitive enough to see the factors that may have influences the changes that transpired against the original analysis you had mapped out. If the substantial signs are there, reconsider your losing position.

Forex Psychology Principle #4
One more principle talks of overtrading. Do not do it. This is actually one of the most common mistakes traders commit. Leveraging your account too high by trading far larger than before puts you in a very vulnerable position. Always analyze the charts correctly and use this information to derive at a sensible trading decision. One good tip is to limit your leverage at 10%; in this way, you wont be forced to exit a position at a wrong timesay, before you even get a win.

Forex Psychology Principle #5
Lastly, the basic and most essential principle is awareness. Besides the given principles above and the common mistakes novice traders make, there are still simpler tips to keep you on the right track. Never follow blindly by entering the market first, figure things out before plunging in. Do not be greedybe patient and set realistic targets daily. Admit your mistakes and never commit them againbe open to learning. Be confident and radiate a winning aura. Invest your valuable time to truthfully and completely comprehend the complexities and fundamentals of Forex trading.

A lot of traders love the fact that the forex markets are open around the clock as it provides many more trading opportunities than the equities markets. The only downside to a market that is open 24/6 is that you cant possibly watch it all the time and as a result your are bound to miss trades from time to time.

With that said dont get hung up on the trades you are bound to miss and simply try to make the most out of the time you do have trading the forex markets. To help make your time most productive, it helps to put more focus on the trading days that have the most movement. With that said, the best days to trade forex are:

Best: Tuesday and Wednesday

Second Best: Monday and Thursday

Third Best: Friday and Sunday These days are slowest because people are not at work or taking extended weekend breaks.

Two great pairs to trade are the GBP/USD and USD/JPY during high volume times.

These times are the London open from 6AM 8AM GMT and the New York Open from 1PM 4PM GMT.
You cant expect to trade well if there is no-one to trade with. So timing is very important, sure you will hear that the markets are open 24 hours a day. But some hours are better than others.

Below are the different FOREX trading sessions:

At present, there are 5 time zone changes per year that affect the majors if you include New Zealand. If you do not include New Zealand, then there are 3 during the year not two as some people believe. These periods are as follows:

On the last Sunday of March, Europe and the UK switch from standard time to Daylight Savings Time (DST) and Australia switches from standard time to DST.

On the first Sunday of April, North America switches from standard time to DST.

On the third Sunday in May, New Zealand switches from DST to standard time.

On the first Sunday in October, New Zealand switches from standard time to DST.

On the last Sunday in October, Europe and North America switch from DST to standard time and Australia switches from standard time to DST.

Hong Kong and Japan do not adjust their clocks. They stay at the same offset from GMT all year.

First we need to understand what a market order is:
Market Order is an order to buy or sell a stock or other security at the best available price at the time the order is received in the marketplace.

Stop Loss Order:
By layman terms a stop loss (aka stop) is an order that becomes a market order if and when a security sells at or below the specified stop price. It is used to protect oneself against a potential downward slide in a security.
This technique allows an investor to set a limit on the maximum possible loss without setting a limit on the maximum possible gain, and without requiring paying attention to the investment on an ongoing basis.

Stop Limit Order:
A stop limit order is a stop order that becomes a limit order if and when a specified price level has been reached.

Trailing Stops:
The following quotes were taken from InterBank FX website:
A common mistake among traders is to rely upon a trailing stop as if it were a stop loss. It is important to remember that a trailing stop is not triggered until a trade is positive the amount of pips the trailing stop was set for (+ 1). In other words, a trailing stop set for 15 pips does not become your stop loss until the market has gone at least 16 pips in your favor. If the market were to immediately trend against your position you would have no protection in the form of a stop loss.
One the features of MetaTrader 4.0 trading platform is the ability to use automatic trailing stops.

How does an automatic trailing stop works?
Trailing stops are designed to lock in profit levels. Trailing stops literally trail along your increasing profit and adjust your stop loss levels accordingly. A trailing stop set for 15 pips will trigger once a traders position is positive at least 16 pips. From this level the trailing stop will adjust pip for pip as your profit level continues to increase. A trader whose trailing stop is set to 15 pips and who is positive 20 pips has protected at least 5 pips of profit. As this traders position increases so will their protected profit level.

Does your computer need to be on for the automatic trailing stop to work?
Once a trailing stop is triggered a new stop loss is sent from your computer to Interbank FXs servers. However, for your trailing stop to continue to send updated stop losses to our servers, your computer does need to be up and running. Essentially, if your trailing stop has been triggered you do have a stop loss safely in place. However, if your computer is shut down your stop loss will not continue to trail.

How to set up a self-moving trailing stop?
Once your trade has been placed, locate the trade ticket number in your Terminal window. Right click on the ticket number and select the Trailing Stop option. As shown in the picture below, select from the various preset trailing stop levels. A check mark will appear at the level your trailing stop has been set for.

There is an old saying in trading: The trend is your friend until the end, or A trend is a trend until it bends meaning place your trade in sync with the market direction. Trading with the existing trend, in a trending market, can be one of the easiest routes to profitability. Yet many traders are hesitant to participate in this approach, hence one the reasons why over 95% of currency traders lose all their money.An essential first step in identifying current market direction is to scan the big picture. Very often beginning traders focus on smaller time frames such as 5 minutes charts to shape their trading decisions. The focus on a small time frame may lead to some winning trades but you might find yourself trading against the trend resulting in an accumulative loss overall, therefore the importance of ask yourself:

What are the currency pair patterns on a hourly, daily, weekly and monthly chart?
These charts provide clues as overall price direction and to whether the currency pair is getting close to an importance are Support and Resistance or an important Key Psychological Level of hesitation in the market. By scanning the larger time frames the trader should be better prepared for recognizing whether he or she should be buying or selling the market any given day.

One of the most effective methods for choosing the direction to trade is the price itself. Our standard definition of an uptrend is persistent pattern of higher highs and higher lows or lower highs and lower lows, indicating a down trend.

The key to trading does not lie in following a specific wiggly line, but in recognizing that the prevaling trend represents the underlying momentum of the market, which is the direction your trades should take as well.

If the currency pair price is above its long term moving average, this indicates that global sentiment has been strong for the currency pair. ALWAYS TRADE WITH THE TREND. Do not take trades against the trend shown in the hourly chart unless you are certain the market has turned. Check this by watching a long term moving average (144 EMA). If price is above the 144 EMA and prices are showing a series of higher highs and higher lows, the trader interprets this as being in a bullish mode and can choose to look to place a buy order when the opportunity arises (ignoring any given short entry signals).

A trading opportunity in bullish mode is called a bullish trade or a long position.

If price is below the 144 EMA and price is showing a series of lower highs and lower lows, the trader interprets this as the market be in bearish mode and can choose to look for selling trading opportunities (ignoring any given buy entry signals).

A trading opportunity in bearish mode is called a bearish trade or a short position.

The Important of Money Management in Forex

Money management is without a doubt the most important and most overlooked subject in trading, chances are you already bought a trading related book and youll find the money management section near the end of the book, why?

Because money management it is boring subject, and lack of the excitement of other topics such as How to Make Money Day In and Day Out or How to Double Your Money in the Foreign Currency Market exciting isnt?. Now, what about: How Not to Lose Your Money Trading Forex sound for a title? Doesnt have the same punch, same appeal, doesnt it? and thats not what you want to hear from the get go, right? Be honest now.

1. It needs to be small enough not to cause us distress to lose and,
2. It needs to be large enough to offer us a reasonable opportunity to profit.

• Never trade with more than 10% of your total trading capital on a single day.
• When in a trade, you should never risk to lose more than 3% of your trading balance on any given trade

• Never increase you risk percentage more than 3% of your trading account balance on any given trade. NEVER put yourself in the position of risking wiping out your account in one single bad trade because, believe me, it can happen. Ive done it twice myself, just to be sure!
• Always set an initial protective stop-loss to protect your trading capital in case your market assessment is right but market doesnt perform as planned.
• Make the habit of taking profit on any open trade at 20 pips gain (pay you first) while let some profit run.
• Always trail stop your exit(s) locking some of those unrealized profits.
• Do not let greed and fear influence you trade decisions, do your best effort to be emotionless.
• Always have a trading plan, you MUST have one! Then you must practice sticking to it. Do not try and second guess or trade against it. Plan your trade and trade your plan.
• Learn to sit on your hands and not trade! Its better to wait for good quality trades than take a mediocre one and lose money. A day of no trades is better than a day with a losing one. If you dont like what the market is doing, just walk away. It will always be there later.
• DO NOT overtrade your account. Read our Two Years Trading Plan and our money management approach to make sure you fully understand why this is important and follow our trading strategy according to your personal trading capital.
• Approach trading as a business. Trade to make money not the other way around.
• Remember money management its a matter of damage control, nothing more.