14 Nov 2007

How To Increase Forex Profits 100% in 10 Minutes


Hey all,

In this article of mine, I am gonna show you guys how to increase your Forex Profits 100% i.e double.

It works for 99% of the short term FX traders. So if you are the casual amateur investor, read on!


- stop trading too much - widen out your stops - widen out your profit targets - and limit your trading in the direction of the trend indicated by 4 hour chart.

For an article on why to follow this trend check this out.

http://forex-trading4you.blogspot.com/2007/11/practical-course-for-forex-beginners.html

Now, moving to individual ones.


1) Stop trading so much

Yes, there are no commissions at all but the spreads you get are HUGE and believe it or not the spreads are reducing your profits by almost half!! Just follow this simple excercise and you will believe me.

2) Widen out your stops

Initial stop loss should be kept to a minimum of 23 points; I generally limit my use between 23 and 35 point stop losses for short-term trading.

3) Widen out your profit targets

Unless you think a trade can make you atleast100 points or more , dont plunge in the trade.

4) Always trade in the direction of the 4 hour chart

The real $$$ are made in the direction of the trend

Follow this Simple exercise

1) Download all your trades for the past year into an excel spreadsheet (if you don'thave an idea on how to do this, go ask your broker for instructions).

2) Determine the dollar value of the spread for each of the trades.

3) Sum up the total dollar value of all the spreads for all trades and add this value to your current account balance; this gives your spread adjusted account balance.

4) Take this spread adjusted current account balance and divide it by your opening balance at beginning of the year; the result will give you a percentage change.

5) Now, take your actual current account balance and divide it by your opening balance at beginning of year; the result again will give you a percentage change.

6) Subtract your spread adjusted year to date percentage change from your actual year to date percentage change.

7) That number will be 100% or more

8) Take the necessary steps as outlined above (1 to 4) and improve your results 100%

If you liked this article and it worked for you, i would be delighted to know so. Please do leave feed back.


You might like to read other Forex related articles in the Articles section or browse through our huge collection of forex ebooks!

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12 Nov 2007

The AUDJPY is down around 96.00 at the moment.I've ridden the money train on the way down a couple of times. I don't know if there is a real term for this, but as it goes down, I add new positions as previous ones have profit protected behind a stop loss. When you catch a large down movement using this practice you can put nearly your entire account into play -- while only taking any risk on
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10 Nov 2007

9 Nov 2007

Common Sense Guidelines for the Average Trader

Here, i whipped up an article outlining the basic things an average forex investor should be watching out for....

Looking for a reputable broker

  • Ability to trade effectively depends heavily on consistency in the spreads and ample liquidity
  • Anyone can establish a position quite easily.
  • The Ability to close out a position at a fair market price is more important than anything else

Live to trade another day

  • Always apply prudent money management skills
  • Avoid using excessive leverage that puts your investment capital at risk.. Refer to the leverage articles that i will be posting soon.
  • And very importantly Always trade with a stop!

Don’t trade emotionally like an emotional fool, Just stick to your plan and maintain discipline

  • Establish a trading plan or strategy before initiating a trade
  • Set reasonable risk/reward parameters
  • Don’t override your stops for emotional reasons
  • Don’t react to price action – means don’t buy just because it looks cheap or sell because it looks too high, Have reliable evidence to back up your trade

Don’t punt

  • Don't punt( Punting is trading for trading sake without a view)

Don’t leave stops at obvious levels such as “big figures” (e.g. eur/usd 1.20, usd/jpy 110)

  • i.e. JUBBS stops = stops at obvious levels and thus are more likely triggered

Don’t add to a losing position in unless it is part of a strategy to scale into a position

  • In other words, don’t double up in the hope of recouping losses unless it is part of a broader trading strategy

Trading with and against the trend

  • When trading with a trend, consider the use of trailing stops.
  • When trading against the trend, be disciplined taking profits and don’t hold out for the last pip

Treat trading as a continuum

  • Don’t base success on one trade
  • Avoid emotional highs or lows on individual trades
  • Consistency should be an objective

Forex trading is multi-currency

  • Watch crosses as they are key influences on spot trading
  • Crosses are one currency vs. another, such as eur/jpy (euro vs. jpy) or eur/gbp (eur vs. gbp)
  • Crosses can be used as clues for direction for spot currencies even if you are not trading them

Be cognizant of what news is coming out each day so you don’t get blindsided

  • Be cognizant of what news is coming out each day so you don’t get blindsided
  • Beware of trading just ahead of an economic number and be wary of volatility following key releases

Beware of illiquid markets

  • Beware of illiquid markets
  • Adjust strategies during holiday or pre-holiday periods to take into account thin liquidity
  • Beware of central bank intervention in illiquid markets

Forex Market Snapshot

Introduction

The facts and figures that will be denoted in this article relate to the foreign exchange market. Much of the information is drawn from the findngs of the 2007 Triennial Central Bank Survey of Foreign Exchange and Derivatives Market Activity conducted by the Bank for International Settlements (BIS) in April 2007 and released on September 25, 2007. 54 central banks and monetary authorities took part in this survey, collecting information from approximately 1280 market participants.

Summary of this survey by BIS:"The 2007 survey shows an unprecedented rise in activity in traditional foreign exchange markets compared to 2004. Average daily turnover rose to $3.2 trillion in April 2007, an increase of 71% at current exchange rates and 65% at constant exchange rates. Against the background of low levels of financial market volatility and risk aversion, market participants point to a significant expansion in the activity of investor groups including hedge funds, which was partly facilitated by substantial growth in the use of prime brokerage, and retail investors. A marked increase in the levels of technical trading – most notably algorithmic trading – is also likely to have boosted turnover in the spot market." - BIS

Structure

  • Decentralized , over-the-counter market, also known as the 'interbank' market
  • Main participants: Central Banks, commercial and investment banks, hedge funds, corporations and private speculators
  • The free-floating currency system began in the early 1970's and was ratified in 1978
  • Online trading trend started in the mid to late 1990's


Source: BIS Triennial Survey 2007

Trading Hours

  • 24 hours market . Note: not 24/7 though
  • Sunday 5pm EST through Friday 4pm EST.
  • Trading starts in New Zealand, followed by Australia, Asia, the Middle East, Europe, and America

Size

  • Largest financial market in the world
  • $3.5 trillion average daily turnover, equivalent to:
    • More than 10 times the average daily turnover of global equity markets1
    • More than 35 times the average daily turnover of the NYSE2
    • Nearly $500 a day for every man, woman, and child on earth3
    • An annual turnover more than 10 times world GDP4

  • The spot market accounts for just under one-third of daily turnover

1. About $281 billion - World Federation of Exchanges aggregate 2006
2. About $86 billion - World Federation of Exchanges 2006
3. Based on world population of 6.6 billion - US Census Bureau
4. About $48 trillion - World Bank 2006.


Source: BIS Triennial Survey 2007

Major Markets

  • The United States & the United Kingdom markets account for just over 50% of turnover
  • Major markets: London, New York, Tokyo
  • Trading activity is the heaviest when major markets overlap5
  • Nearly two-thirds of NY activity occurs in the wee morning hours while European markets are open6

5. The Foreign Exchange Market in the United States - NY Federal Reserve
6. The Foreign Exchange Market in the United States - NY Federal Reserve

Average Daily Turnover by Geographic Location

Source: BIS Triennial Survey 2007

Technical Analysis

Commonly used technical indicators:

  • Moving averages
  • RSI
  • Fibonacci retracements
  • Stochastics
  • MACD
  • Momentum
  • Bollinger bands
  • Pivot point
  • Elliott Wave

Currencies

  • The US dollar is involved in an overwhelming 80% of all foreign exchange transactions that take place daily , equivalent to over US$2.7 trillion per each single day.

Currency Codes

  • USD = US Dollar
  • EUR = Euro
  • JPY = Japanese Yen
  • GBP = British Pound
  • CHF = Swiss Franc
  • CAD = Canadian Dollar
  • AUD = Australian Dollar
  • NZD = New Zealand Dollar

Average Daily Turnover by Currency

N.B. Because two currencies are involved in each transaction, the sum of the percentage shares of individual currencies totals 200% instead of 100%.

Source: BIS Triennial Survey 2007

Currency Pairs

  • Majors: EUR/USD, USD/JPY, GBP/USD, USD/CHF
  • Dollar bloc: USD/CAD, AUD/USD, NZD/USD
  • Major crosses: EUR/JPY, EUR/GBP, EUR/CHF

Average Daily Turnover by Currency Pair

Source: BIS Triennial Survey 2007


A Few WORDS ABOUT THE TREND

I think that most of us heard such a saying as “the trend is my friend”. Many of us also had met in Internet and books different opinions as to the sensee of the above saying..

Well, what is the real meaning of it infact?

The real deep meaning and idea of this saying is a simple and clear demand: Always Trade in the direction of the current trend and ignore trading signals directed against the flow of current trend.

Friendly trend will remain friendly generally, while the trader treats him like a friend , not doing any thing against the desire and will of his friend/trend. Do you know friends who would not be disturbed or irritated by your doings against their desire, understanding and will ? Nobody likes such things.

But nevertheless, many of us starting examining charts/tickers etc absolutely forget this simple rule and try to catch the high or low peaks and/or to trade against the trend. This means, that the trader lacks the main thing - discipline. It's very interesting, that the looser, while considering and investigating his own mistakes, often does not see his actual mistake and culprit - trading against the trend.

How can we define the trend ? Very simply - with the help of combination of four Simple Moving Averages (MA). For example, let us take combination of 5/20/40/60 МА.

Usually current trend is defined by looking at Daily chart and this is right. But the traders with small cash amounts may define trend at 4-hour chart and 1-hour chart. As it often happens that in the interests of relatively quick trading the trend may be defined using only 1-hour chart. But we shouldn't forget about the Daily chart, coz if the hourly signal coincides with the daily trend, then there appears a brilliant possibility for a mighty movement along the trend.

But let us return to the above mentioned combination of MAs. So, if МА 40 is above МА60, then the trend is upward and each time when MA5 crosses MA20 upward (that is in compliance with the trend direction), we enter the market. But when MA5 crosses MA20 downward, we use this signal only for closing of previously opened positions.

And vice versa, if МА40 is under МА60, then the trend is downward and now we enter the market only when MA5 crosses MA20 downward, and we use upward crosses of MA5 and MA20 only for closing opened earlier positions. SIMPLE??

Look at the above Chart. The red dots in there at the above chart denote the crosses of MA40 and MA60. Blue and red lines show the places for openeing positions in the trend direction.

I know of traders, who, in the situation alike trying to catch the price peak, opened SELL positions near the blue lines. If the trader opens positions without minimum analysis at least for definition of the current trend, then he would better go to casino and gamble off, where one can always trying to guess right, but never can make a prognosis. There exists an opinion that MAs are lagging behind as an indicator. It’s true, sometimes, but as a trend indicator, they are very good.

Here МА5 - green, МА20 – red. Red dot - place of closing position ( MA5 crosses MA20 downward). Blue dot - place of opening position in the trend direction (MA5 crosses MA20 upwards ).

We have the same at this chart - red dots - places of closing positions, blue dot - place of opening position in the direction of the current trend.

But WHERE should we place a stop-loss ?

If we enter the market just after the cross of M40 and MA60, then the best place for stop would be 2-4 pips beyond the closest peak directed opposite to our market entrance direction. If you agree, of course, with the size of the stop-loss, or if your collateral permits such stop. But if we opened position some time after MA40 and MA60 had been crossed, then the best place would be 2-4 pips beyond MA60, then, a bit worse, but still ok, beyond MA40 and the weakest variant is beyond MA20.

It’s only natural that the combinations of meanings for MAs could be whatever the trader would want , cause nobody can prevent him from performing experiments. Here are some examples of four simple MA combinations : 10/20/60/80 or 8/12/24/48 or you may even use Fibonacci numbers like 8/13/34/55 or 13/21/55/89 etc.

The main idea in the combination of four MA is that the pair with big numbers defines the existence of the current trend and the pair with small numbers permits us to effect relatively quick trades.

Here is one more example of trading with the trend. Upward cross of MA40/60 is designated by two blue dots. Red dots are denoting the places of positions closing after MA5/20 were crossed downward. One blue dot shows the place where the position in the direction of the current trend was opened again after MA5/20 had crossed upwards.

The next chart is the same as above, but along with the aim of comparison it has another combination of four Simple Moving Averages - MA8/13/34/55.

I understand perfectly that all stated above is not a brand new concept or something. But looking at newbies I noted that disregarding the current trend is one of the most often met mistake, which can lead to potential heavy losses. Therefore, the aim of the above material is to remind and emphasise once again about the necessity for checking the trend direction before entering the market.

Good luck!


The yen is appreciating quickly at the moment, or should I say a short period ago. Luckily I was awake and able to scramble around in my account to keep things sane!EDIT: It is still unwinding... now at 102.75 and holding. Oops, now approaching 102 and probably beyond.
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