Wednesday, September 3, 2008

Forex Market. Forex Trading Strategies nad Forex System

A bear chased two hikers.
One hiker, while being chased, stopped to put on running shoes.

As he was changing out of his hiking boots, his companion looked at him in horror and exclaimed, “What in the world are you doing? You’ll never outrun the bear if you stop now!”

Calmly, the other hiker said, “I don’t have to outrun the bear. I just have to
outrun you.”

The forex market offers more opportunity for fast financial success – and
financial ruin – than almost any other forex market. The get-rich crowd has always been attracted to it. This crowd includes speculators, forex trading novices, retirees, and forex professionals looking for a way to get out of debt, increase the excitement in their lives, or simply get rich really fast.
These are the people who you will be taking money away from.

These are the people who will be eaten by the bear. You don’t have to outrun the bear (the entire forex market). In fact, that’s impossible. You can’t beat the entire market. Those of you who try will learn fast that the forex market has no mercy, can outrun anyone, and shows no mercy.
I want to teach you how to run faster than the other forex traders.

The Four Groups
There are four groups in the forex market. There are the novice traders –
the greenies, the ones who try to outrun the bear and lose every time.
In addition to the novice forex traders, there are three other levels of participation in the forex market: the dealers, the institutional traders, and the advanced forex traders.

The dealers are the most powerful and they make the forex market, setting prices and putting together deals.

The institutional traders work in banks, wire firms, or government
agencies. They trade huge amounts of money at a time, and the size of their
trades gives them enormous power.

Next, there are the advanced forex traders. This group is comprised of people from all across the world, sitting in smaller investment firms, offices, or even their homes. You can be a part of this group. In some cases, the advanced traders are the smartest group – trade for trade – than any other group.

Because they don’t move a lot of money on each trade, they don’t have as much power as the
institutional players. Because their trades are brokered by the dealers, they’ll never have absolute trading power. But, because there are so many novice traders – the advanced forex traders have plenty of people that they can outrun. Your goal as a forex investor is to aggressively take money out of the pockets of the novice traders.

Don’t feel bad about that. Someone’s going to take your money along the way, and it’s going to teach you, very quickly, lessons that can only be learned through failure. So, every time you take money from a novice trader, just remember: you’re teaching him a valuable lesson. After a while, you might even enjoy watching your hiking companion being eaten by the bear.

The Basics
Read this – a great forex primer:
On the left navigation section, you'll see "Forex Pro > Short Term Trend
forex Trading". This is an essential read for you – even if it seems technical in nature, you should read it anyway, just to get the information in your head one time. I suggest you read everything on this link, start to finish. Getting a background in the forex market takes about a week (at most), but it's very important for you to understand how the forex system works. The knowledge you gain early will pay off later. I didn't read this stuff BEFORE forex trading, and it actually kind of helps to read through the material while you’re entering and watching your first trades – because there’s nothing quite like trading while you learn. Read the sections in "Forex Essentials". This is as clear an explanation as exists.

Forex Pips
Okay, now back to our forex program. To start, you have to understand what a "forex pip" is. A pip is the last number to the right in a currency. For example:

If the EUR/USD traded at 1.1335 this morning. The "5" is the pip. If it moved to
1.1535, which it did today, that would be a 200-pip move.

The next concept that you need to understand is the concept of leverage.
It’s a lot like margin in stock trading, only on steroids. It’s a simple concept.
If you have $10,000 to trade with, your forex broker will let you borrow money
from him so that you can forex trade in larger quantities. They will let you borrow

as much as 400 times (400:1) what you put up in a trade. Most forex brokers allow
between 50:1 and 100:1 margin. So, if you put up $1,000, and your broker
allows 100:1 margin, then you’ll be forex trading $100,000 worth of forex currency (instead
of $1,000).

That’s important, because every forex pip equals a certain dollar amount. When you
trade $10,000, each pip movement equals $1. The chart below shows how it
goes from there.

If you trade 1,000,000 worth of forex currency, each movement would be equal to
$100. So if you bought at 1.1445 and sold at 1.1545, you would make 100 x $100,
or $10,000. Now, I don't know about you, but I could live off of that much.
That's not saying, however, that you can make $10,000 per day. Of course
it's possible, but there are a lot of factors that make it very difficult.

Like, how do I know that it's going up or down?
When should I get in a forex trade?

Even more importantly, can you deal with the emotions of forex trading?

Alan Farley, a forex trading expert, rightly observes that mastering the emotions of
trading is more difficult than mastering the technical skills. You’ll soon find
out what he means by that.
Amount Traded $ Per Pip
$10,000 $1
$50,000 $5
$100,000 $10
$500,000 $50
$1,000,000 $100
$5,000,000 $500

Most traders in the forex trading market try to make a zillion dollars on every forex trade.
They're greedy. This leads them to stay in a good trade, hoping to get more money out of it. This can lead to disaster -- the trade can move against them and they get creamed. This happens all the time, and it still happens to me from time to time. It's the single greatest threat in forex trading. But you can already understand why that's probably true. But how do you overcome greed when trading?

This is the other big one. A lot of traders get creamed in the forex market and then want to strike back. So they double their last order and go for broke.
This is natural, and I still deal with this emotion every day. The problem is, how does one combat this?
Do not underestimate this emotion. It will drive you to ruin if you let it. The forex market is not your friend. The market is so much more powerful than you are. You cannot get “back at” the forex market. Forex Trading when angry or vengeful will be a total disaster. If you get rocked on the market, then back up, take a deep breath, and talk to a mentor. Re-read the forex charts. Take a break. Even if you think you see the best forex opportunity in the world after you get blasted – just take a break. There will be trades tomorrow.

A Different Forex Strategy.
It’s as simple as this: I don't try to make a ton of money on each trade, and I
never try to get revenge. I’m not a forex scalper (someone who sits and makes 20-second
trades for a few forex pips at a time).

Instead, I set up good forex trades, that have a lot of potential, and then I shoot for 10
pips. Just 10 forex pips. That’s it. I don’t let myself lose a lot of money. I only try to get
10 pips, and if that’s all I get, then I’m out for the day. It's easy enough to get 10 forex pips
that once that threshold is met, it's okay to get out. When you know that you can
turn turn $10,000 into $130,000 in one year on 10 pips a day, it's no longer important
to strike back at the forex market or get greedy on one day of forex trading.

And you can learn to turn $10,000 into $130,000 in one year on just 10 pips a day.
Why is this innovative, different, or revolutionary? Because you are going to not
only take money from novices with this forex strategy, you’re going to take money from
other advanced forex traders. Advanced traders want big money. They didn’t spend years
learning to trade so that they could make $200 a day. They want big, big returns.
They go for 40 pips at a minimum. They are conservative with their trading capital
because the forex market can take BIG swings against them when they’re waiting for 40
pips. Advanced traders think I’m nuts for getting out of a trade at 10 forex pips.

What if it goes to 40 pips? Won’t I be upset that I missed out?

Not at all. I’ll show you later how I can still make those 40 pips. But I’m never
displeased with 10. First, though, I’ll explain stops and limits.

Stops and Limits
A STOP is placed so that you don't lose too much money. For example, if I
bought EUR/USD at 1.1445, I would start losing money if it started moving down.
So, I might set a STOP at 1.1425 -- meaning, if the forex currency drops to that level, the
forex system AUTOMATICALLY exits the trade. I'm out 20 pips, but that's a lot better
than being out 40 pips if it starts tanking really fast (and this happens all the time, as
you have seen).

A LIMIT works the same way, only for gains. If I set my limit to 1.1535 on that
same forex trade, then later in the day (or the hour), when the forex currency moves up to 1.1535,
the forex system AUTOMATICALLY exits the trade, and I make money. This happens
whether I'm still at the computer, or down the street, or dead.


My forex system for forex trading relies heavily on three things:
1. Technical analysis - a . hour, 3 hour, daily, weekly, and monthly chart.
3. 10-pip goal every day. This requires DISCIPLINE.

If you started with $10,000 on January 1st, and earned 10 pips per day, and only
traded 17 days of the month, then you would end the year 2,000 pips UP, and with
about $130,000.

If you continued the next year with 10-pips per day, the next year you would be
making between $10,000 and $17,000 per month forex trading (depending on your risk
tolerance). Can you do this? Absolutely. Can you do this today? Maybe, maybe
not. You have to dedicate yourself 100% to learning how to trade intelligently.

The 7:10 Principles.
1. Forex Buy and sell on breakouts. I teach this in the 1 on 1 forex training, and I
do it myself.
2. Stop trying to make $8 million on every trade.
3. Set a 10-pip limit only. Exit the forex trade at 10. Exit the trade at 10.
Stops are set based on forex market conditions, but are always set.
4. Goal: + 10 pips every day.
5. If I earn more than 10 forex pips on a trade because the trade moves so
fast in my direction, I can set my stop to protect the 10 and then go
for more. I like to teach forex traders to just start going for 10. There are
advanced forex strategies that go for more than 10, but we just start here.
6. There is no ‘makeup’ forex strategy. If I take a loss, then I’m just trying
to end up with a 10 pip gain for the day. If I can’t get it, then I
don’t try for 20 the next day, or whatever. I can keep trying for the
10 forex pips gain as long as I haven’t lost more than 5% of my capital.
7. Time: I can forex trade for 5 hours per day, meaning I can have the
forex trading platforms open and sit at my computer for a max of 5 hours
per day. If I can’t earn my 10 pips during that time, then I can set
my stops and limits and walk away, but I can’t actively watch the
forex market any longer.

The Daily Routine.
Here’s a daily routine that I’ve used in the forex Strategy: 10 forex system. Some of the most
successful months of my forex trading career happened when I followed this plan.
Up at 3:00 am EST. Check the forex charts.
Ask the following questions:
1. Where did the USD close (5pm EST) yesterday against the majors?
2. What effect will today’s economic reports have, if any, on the forex market?
a. FED interest rate movements
b. ECB decisions
c. Unemployment – Weekly Moving Average above or below 400k?
d. Greenspan speaking?
3. Are we at an all time high or low on the EUR or GBP or CHF? Or:
a. Are they way oversold or overbought? Is it better to not forex trade today?
4. If I make a trade now, what might go wrong? What’s the most I’ll lose? Gain?
Is the forex market just dead quiet right now? Moving fast?
5. Is the EUR or GBP moving right now? How far are the pairs from support and

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