Power for Ex Profit Principles 2011

8/3/2019 Power for Ex Profit Principles 2011

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PowerForexProfitPrinciples

CopyrightProfitsRun,Inc. www.profitsrun.com Page1of44

SPECIALNOTE:Thisisalimitededition

updatetowhatIthinkisoneofthemost

powerfulreportsIhaveeverpublished,and

itsindirectresponsetotherequestsmy

studentshavebeensendingmeforyears.

Theyveessentiallybeenpleadingwithmeto

showthemhowtheycanpotentiallyprofit

intheForexmarkets.

Heresthedeal:Justlikeanyothermarket,

mosttradersarelosingtheirshirtwhen

theytradeForex.Thatsmainlybecause

theyregoingaboutitallwrong,andmany

havebeenmisleadbyunscrupulous

individualsorquestionablebrokerspromisingseeminglyovernightriches.

Forexisstillalittlelikethewildwest,so

theresnaturallyalotofconfusionand

misinformationoutthere.Inthisspecialreport,PowerForexProfitPrinciples,Im

goingtocovermanytacticsandstrategiesusedbysuccessfulForextradersall

overtheworld.Butunfortunately,onlyabout5to10percentofallForextraders

areactuallyawareofthisinformation.Iwouldstronglysuggestyouprintoutthis

reportandreaditmorethanonce.

Whatyouareabouttoreadismorevaluabletoyouthanwhatyouwillfindin

manytradingcoursesthatyoudhavetopayfor.ThisisaHUGEreport.Takeyour

timetoreaditall.

GoodTrading,

BillPoulos


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PLEASEPRINTTHISREPORTNOW!Pleasetakeafewsecondsandprintthisentirereport

rightnow.Hereswhy:

Whenyouprintthisreportout,thechancesthatyoullactuallyreaditandlearnsomethingnew

abouttradingtheForexmarketswillincrease

dramatically.Ihaveacollectionofdigitalreports

onmycomputer,andtheonlyonesIvereadall

thewaythrougharetheonesIveprintedout.

Whenyouprintthisreportout,youcanreaditanywhereinyourhouse(orontheroad,forthat

matter).Ilovemyfamily,butmyofficeissmack

dabinthemiddleofthehouse,soitsahightraffic

area.SometimestheonlywayIcangetasolid

chunkoftimetoreadsomethingIfindonlineisifI

printitoutandtakeitsomewhereelseinthe

house.

Thereisanactivityinthisreportthatrequiresyoutoanswersomequestions.Theimpactofthis

activitywillbemuchgreaterifyouactuallygetoutapencilorpenandactuallywriteonthisreport.I

highlyrecommendyouspendsomequalitytime

completingthisactivity.Yourfuturecoulddepend

onit.


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DISCLAIMER:Forex(off-exchangeforeigncurrencyfuturesandoptionsorFX)tradinginvolves

substantial risk of loss and is not suitable for every investor. The value of currencies may

fluctuateandinvestorsmayloseallormorethantheiroriginalinvestments.Risksalsoinclude,

butarenotlimitedto,thepotentialforchangingpoliticaland/oreconomicconditionsthatmay

substantially affect the price and/or liquidity of a currency. The impact of seasonal and

geopoliticaleventsisalreadyfactoredintomarketprices.TheleveragednatureofFXtrading

meansthatanymarketmovementwillhaveanequallyproportionaleffecton yourdeposited

fundsandsuchmayworkagainstyouaswellasforyou.Theuseofleveragecanleadtolarge

losses as well as gains. Under certain conditions you may fins it impossible to liquidate a

position. This can occur, for example, when a market becomes illiquid. The placement of

contingentordersbyyou,suchasstop-lossorstop-limitorderswillnotnecessarilylimitor

preventlossesbecausemarketconditionsmaymakeitimpossibletoexecutesuchorders.Inno

eventshouldthecontentofthiscorrespondencebeconstruedasanexpressorimpliedpromise

orguaranteethatyouwillprofitorthatlossescanorwillbelimitedinanymannerwhatsoever.

Past results are no indication of future performance. Information contained in this

correspondence is intended for informationalpurposes only andwas obtained from sources

believedtobereliable.Informationisinnowayguaranteed.Noguaranteeofanykindisimplied

orpossiblewhereprojectionsoffutureconditionsareattempted.Revision05-20110516.

FreeDistributionRights:AslongasthisreportremainsunchangedandinAdobe

Reader(PDF)format,youhavemypermissiontogiveawaycopiesofitforfree.

InThisReport

HowdotheForexmarketsoperateona24hourbasis?.........................................8Canyoutakemethroughatypicaltradescenario?................................................9WhattypesofordersdoIusewithForextrading?...............................................10HowmuchcanIexpecttomakewithForextrading?...........................................10Forexseemstobequitedifferentfromtradingstocks?.......................................11HowdoIfindareliableForexbroker?..................................................................11WhatarethebestForexpairstotrade?...............................................................13Whatisthebesttradingplatformandchartingsoftware?...................................14IsitbettertousefundamentalortechnicalanalysiswithForextrading?............15WhataretheattributesofagoodForextradingmethod?...................................16


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Whatarethebesttechnicalindicatorstouse?.....................................................17WhatsimplestrategycanIusetofindgoodentrypoints?...................................23HowcanIdeterminetheinitialstoploss,trailingstops,andexitpoints?............25 HowcanIfindaForexmethodthatworksalmostallofthetime?......................28HowcanIminimizedownsideriskwhilestillcapturingqualitygains?.................29WhataccountsizedoIneedtotradetheForexmarkets?...................................30

50,000Traders&TheirForexFrustrationsDearTrader,

Theinformationyouholdinyourhands

(orareviewingonyourcomputer)hasthe

potentialtodramaticallyincreasethepips

youpulloutoftheForexmarkets,andit

doeshavethepotentialtochangeyour

life.Thatsnothype,becausethe

potentialisreal.Itsuptoyoutomakeithappen,andmygoalwiththisreportisto

helpyoudiscoverinhoursanddayswhat

tookmedecadestorealizeaboutsuccess

inthemarkets.

Ivebeentradingthemarketssince1974,

andIvebeenteachingthousandsof

studentsaroundtheworldwhatittakes

tosucceedinthemarketssince2001.So

somepeoplethinkofmeasagrizzled

tradingveteranbecauseIveseensomuch

overthepast3decades.Sure,Ive

scrapedmykneesandhavebeenthrough


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afewbumpsandbruisesovertheyears,butIseemyselfasafilterforyou,or

someonewhohastheabilitytosiftthroughallthejunkandnoisethatsoutthere

andtellittoyoulikeitis.

So,Imaycomeacrossalittleharshinthisreport,butIdontbelieveinsugar-

coatinganythingorgivingyoufalsehopesofsuccess.Thereareenoughswindlers

doingthatalready.Iwanttogiveyouthefacts,likeemornot,soyoure

empoweredtotakeactionandmakepositivedecisionsonhowtosucceedinthe

Forexmarkets.

TheyNearlyBeggedMetoHelpThem

Foryearsnow,mystudentsandreadershavebeenpleadingwithmetoshow

themhowtotradetheForexmarkets.Andmanyofthemactuallytookmystock

tradingcoursesandstartedtellingmeaboutallthemoneytheyweremakingbyapplyingthosecoursestotheForexmarkets.Theyessentiallyprovedtomewhat

Iknewtobetruemarketsaremarkets.TheresnothingmagicalabouttheForex

markets,becauseallmarketsareultimatelydrivenbyhumanpsychologyfear

andgreedandsupplyanddemand.Sure,everymarkethasitsown

peculiarities,butifyouunderstandhowthebasicdriversofhumanemotions

work,youcanpotentiallysucceedbiginanymarket.

AsIresearchedtheanswerstomystudentsquestionsaboutForex,themoreI

realizedthattoomanytradersweregettingsuckeredandtakenbyless-than-

honestForexbrokers,aswellastheholygrailpeddlerswhowerepreyinguponthewide-eyeddesperationoftraderswhothinktheycangetrichquick

tradingthepopularForexmarkets.

Excuseme,butwhatIfoundwasdisgusting.Ifoundmoremisinformation,lies,

andhypeaboutForexthatIhadseeninsometime.AndthatswhenIdecidedto

putallmyenergyintodispellingthisjunksoIcouldgivemystudentsandreaders

asourceoffactual,actual,solid,realisticForexProfitPrinciplesthattheycould

usetopotentiallyprofitintheForexmarketsagainandagain.

SotomakesureIdidntmissanybigquestionsorconcerns,Isurveyedover

50,000activetradersrecentlyandaskedthemonequestion:

Ifyoucouldsitdownandhavelunchwithme,whatisthetopquestion

youwouldaskmeaboutForextrading?


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Thatsit.Plainandsimple.

Almostimmediately,thequestionsbegantopourin.Youknowwhatitslike

Mondaymorningwhenyoucheckyour

emailandtheresatonofitfromover

theweekend?Well,itwaslikethat

multipliedbyahundred,orathousand.

PeoplewereconfusedmorethanI

realizedaboutForex.

IWasShockedandExcited

Quitehonestly,thisresponse

overwhelmedme.AtfirstIthoughtto

myself,HowcanIpossiblyaddressallthesequestions?Theresjustnot

enoughtimetodoit!ButthenI

noticedsomethingamazingIstarted

seeingthesamequestionsoverand

over.SoIbegantoputtheminto

categories,andafteralong12hourday,

Iwasshockedandexcited.

Why?

Well,Iwasshockedtofindthat,indeed,mostofthequestionsfellneatlyintoa

handfulofbroadcategories.ButIwasexcitedbecauseIhadpersonally

experiencedwhatallthesequestionswereasking.AndIknewwithoutashadow

ofadoubtthatIcouldhelpthesetraders.

Butitgetsbetter,becauseIrealizedthatifasurveyof50,000tradersresultedin

acore,commonsetofquestions,thenmillionsoftradersallaroundtheworld

probablyhadthesameconcerns.

Sothisreport,thePowerForexProfitPrinciples,ismyanswertothetop

questionsIreceivedfrommyreadersandstudentsaboutForextrading.Now

letsgetrightintothenittygrittyandclearupthesequestionsonceandforall.

Areyouready?Letsbegin.


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IhearalotaboutForextradingandamvery

interestedinlearningmoreaboutit.Canyougive

meabriefoverviewofthebasicsofForex?

UnlikestocksandfuturesthattradethroughexchangesortheNASDAQ,Forex

tradingisdonethroughmarketmakersthatincludemajorbanksaswellassmall

tolargebrokeragefirmslocatedaroundtheworldwhocollectivelymakea

marketona24/7basis.TheForexmarketisalwaysopenandisthelargest

financialnetworkintheworld(dailyaverageturnoveroftrillionsofdollars).

ForextradinginvolvestradingcurrencypairssuchastheEUR/USDpair(Euro/US

dollarpair)whereabuyerofthispairwouldactuallybebuyingtheEuroand

simultaneouslysellingshorttheUSdollar.

TheformatofaForexpairisYYY/ZZZ,wherethefirstcurrencyiscalledthebase

currencyandthesecondcurrencyiscalledthecountercurrency.Thepricefor

aForexpairisexpressedintermsofthecountercurrency.

Forexample,thepriceoftheEUR/USDpairisexpressedinUSdollars(the

countercurrency)as1.3667.Thismeansthatthebasecurrency,theEurointhis

case,equalsUS$1.3667.ThepriceoftheUSD/JPYpairisexpressedinJapanese

Yenas108.02,becauseforthispairtheJapaneseYenisthecountercurrency.

Thismeansthatthebasecurrency,theUSdollarinthiscase,equals108.02JapaneseYen.

Pricesareexpressedinpips,whicharenothingmorethantheminimum

incrementthatacurrencypairpricecanchange.Forexample,iftheEUR/USD

pricechangesfrom1.3790to1.3791,thepriceissaidtohavegoneupby1pip.

Mostmajorpairsarepricedto4decimalswhichistheequivalentof1/100thof

onepercent.TheexceptionwouldbetheJapaneseYenpairthatonlytradesto2

decimals.Thisisbecausethereareusuallyover100yentothedollar.

Forexpairquotesareonabid-askbasis.Thebidisthepricethatthemarketiswillingtopayaselleratapointintimeforaspecificcurrencypair.Theaskisthe

pricethatthemarketiswillingtoselltoabuyeratapointintimeforaspecific

currencypair.Thedifferencebetweenthebidandtheaskiscalledthebid/ask

spread.Forexample,atypicalEUR/USDquotecouldbe1.3784bid1.3787ask

whichisaspreadof3pips.Sincethespreadishowthemarketmakersare

compensated,thereisnocommissionwhenplacingatrade.


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Also,itisimportanttonotethatthespreadwillvarydependingonmarket

conditions.SothequoteitselfforanygivenForexpairisthebid-ask

combinationatapointintimebasedonthemarketdrivenfloatingexchange

rate.Thequotationliststhebidpricefirst,thentheaskprice.FortheEUR/USD

exampleabove,thequotewouldbeexpressedsimplyas1.3784/1.3787or

1.3784/87.

Tradingisdoneinlots,either100,000unitstandardor10,000unitminilots.For

example,forastandardlotpurchase,iftheEUR/USDquotewas1.3784/1.3787,

thenbuyinganEUR/USDpairmeansbuying100,000Eurodollarsandselling

short$137,870USdollars.Therefore,forastandardlotinwhichtheUSDisthe

countercurrency,1pipwillequal$10($1foraminilot).Forothermajorcounter

currencypairs1pipwillrangefrom$8to$10.

Forexdealersofferleverageashighas100:1andsometimeshigher.At100:1

leverage,1standardlotpairinwhichtheUSDinthebasecurrencywouldrequire

$1,000inmargin($100,000/100).Ontheotherhand,a1minilotpairwould

requireonly$100inmargin($10,000/100).Iftheaccountvaluefallsbelowthe

marginrequirement,thedealerwillcloseoutthetradeautomatically.

HowdotheForexmarkets

operateona24hourbasis?

Activetradingsessionsineachcountrysfinancialcentersaroundtheworldtake

placefromSunday5:00PMESTtoFriday5:00PMEST.Forthemajorfinancial

centers,tradingstartsinSydney,thenmovestoeachfinancialcenterinthis

order:Tokyo,London(andEurope),NewYork.Thedailysessionfordaily

chartingpurposesendsat5:00PMEST(coincidentwiththeNewYorkclose),

butthemarketdoesnotactuallyclose.

Herearethetimeintervalsforeachofthemajorfinancialcentersexpressedas

EST.

Sydneysessionstartsat5:00pmandendsaround2:00am. Tokyosessionbeginsat7:00pmandendsaround4:00am. Londonopensat3:00amandendsaround12:00am. NewYorksessionopensat8:00amandendsaround5:00pm.


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Togiveyouavisualrepresentationofthis,heresafigureshowingthesame

businesshoursforthevariousregions.Inthisfigureyoucanseetheoverlap

betweentheLondon(andEurope)sessionandtheNewYorksession,between8

amand11amEST.Thecurrencymarketsexperiencethehighestvolatilityand

volumeduringthatoverlap,whichalsocoincideswiththereleasesofimportant

USeconomicreleases.

Figure1-ForexMarketsTimeline

Canyoutakemethroughatypicaltradescenario?

Letssaythecurrentbid/askquoteforEUR/USDis1.3802/05andyouwantto

buythepairbecauseyouthinktheEuroisgoingtogainontheUSdollar.Soyou

buy1standardlot.Whenyoudothatyouareactuallybuying100,000Euros(1

standardlot)for$138,050USdollars(100,000x1.3805).At100:1leverage,your

initialmargindepositwouldbe$1,381forthistrade.

Soinourexample,letssaytheEuropairgoesupandisnowtradingat1.3865/68

andyoudecidetosellandtakeprofits.Youwouldthensellyour1standardlot.

Whenyoudothatyouareactuallyselling100,000Euros(1standardlot)for

$138,650USdollars(100,000x1.3865).Sinceyoubought100,000Eurosfor

$138,050andsoldthemfor$138,650,youmadeaprofitof$600or60pips.

IfontheotherhandtheEuropairwentdownto1.3775/78andyousoldat

1.3775,youwouldhavealossof$300($138,050-$137,750).Andagain,ifthe

accountequityfellbelowthemarginrequirement,thetradewouldbe

automaticallyliquidated.However,thisshouldneverhappentoyouifyoufollowsoundriskmanagementrules.


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WhattypesofordersdoI

usewithForextrading?

Therearedifferentordertypesfor

differenttradingneeds.

MarketOrder:Thisordertypeisusedto

enterorexitthemarketimmediatelyat

thecurrentquotedprice.Ifyouwantto

buyyouwillbefilledattheaskingprice.

Ifyouwanttosellyouwillbefilledatthe

bidprice.

LimitOrder:Thisordertypeisusedto

buyorsellapairatapredetermined

price.Abuylimitorderwillonlybefilled

ifthemarkettrades(ask)atorbelowthe

limitprice.Aselllimitorderwillonlybe

filledifthemarkettrades(bid)atorabovethelimitprice.

StopOrder:Thisordertypeisusedtobuyorsellapairatapredeterminedprice.

Abuystoporderwillonlybefilledifthemarkettrades(ask)atorabovethestop

price.Asellstoporderwillonlybefilledifthemarkettrades(bid)atorbelowthestopprice.

HowmuchcanIexpecttomakewithForextrading?

Itisveryimportanttohaverealisticexpectations.ThetruthisthatForextrading

isnotagetrichquickproposition,despiteallofthehypetothecontrary.That

doesnotmeanthoughthatthereisntmoneytobemade.

OneoftheappealsofForextradingisthegreatleveragethatisoffered.

However,leveragecanworkfororagainstyouandthereforeitiscriticalthatyou

followgoodtradingmethodsalongwithsoundriskmanagementprinciplesto

havetheopportunitytounlocktheprofitpotentialthattheForexmarketshave

tooffer.


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Forexseemstobequitedifferentfrom

tradingstocks.Whatarethebenefitsand

risksincomparisonandwouldamuchbiggeraccountbeneeded?

InadditiontotheForexattributesexplainedinthebasicsofForexquestion

above,theForexmarketsareindeeddifferentfromthestockmarketsinthat

theirpricebehaviorisdifferentwithusuallymoreabruptpriceswings.This

requiresdifferenttradingmethodsthanthosetypicallyusedforstocksinorderto

takefulladvantageoftheprofitpotentialthatForexhastoofferwhileatthe

sametimedesigningtherightstrategytominimizerisk.

Ontheotherhand,theyarealikeinthatbothForexandstocksaremarketsthat

developrepeatablepricebehaviorthatpresentprofitopportunitiesforthose

traderswithgoodtradingmethods,soundmoneymanagementprinciplesand

disciplinedtrading.

BecauseofthehighleveragethatForexoffers,Forexpositionsrequireamuch

smalleraccountsizethandostockstradingsimilarsizedpositionsasForexmargin

requirementsaremuchsmallerthanstockmarginrequirements.Andsothe

rewardcanbemuchgreaterwithForex,butatthesametime,theriskismuch

greater.Butthiscanbedealtwitheffectivelywithgoodtradingtacticsandgoodmoneymanagementrulesthatallowformaximizingprofitpotentialand

minimizingrisk.

HowdoIfindareliableForexbroker?

Unlikestockandfuturesbrokers,notallForexbrokersareregulated.Itisvery

importanttoopenanaccountwitharegulatedbrokerorbankthatisaregistered

memberofaregulatingbody.Sincethereisnocentralmarket,thereisnoglobal

regulatoryagencyresponsibleformonitoringtheactivityofthecurrencymarkets.Therefore,regulationislefttoeachcountry.

IntheUnitedStatestheFederalReserveBankmonitorsthebankingsystemand

theCommodityFuturesTradingCommission(CFTC)hasjurisdictionoverall

FuturesandForexactivity.Whentradingintheforeignexchangemarkets,

individualsshouldonlytradewithaCFTCregisteredentitythatisalsoamember


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oftheNationalFuturesAssociation(NFA)andisregulatedbytheCFTC.Fornon-

USbroker/bankentities,besurethatthebrokerorbankisregisteredwiththat

countrysappropriateregulatorybodies.

Inadditiontoworkingwitharegulatedbroker,youwantabrokerthathaslow

spreads.Thesespreadsarecalculatedinpips,whichisthedifferencebetween

thepriceatwhichacurrencycanbeboughtandthepriceatwhichitcanbesold

atanygivenpointintime.Thisishowtheforexbrokersorbanksmaketheir

moneysincetheydontcharge

commissions.So,obviously,lower

spreadswillsaveyoumoremoney.

Tradingtoolsarealsoveryimportant

whenchoosingaForexbroker.

Specifically,youwantabrokerthatwillgiveyougoodchartingandtrading

softwarethathastheabilitytoplotthe

indicatorsthatyourtradingmethod

uses.Thisbringsupanimportantpoint.

Youshouldnevergolookingforcharting

softwarefirstandthentrytouseor

developatradingmethod.

Instead,youshouldfirstgeteducatedon

agoodtradingmethod(ordevelopyourown)andthenfindchartingsoftware

thatwillletyouimplementthismethod.

Iveseentoomanytradersstubbornly

useinadequatechartingsoftwarejustbecausetheirbrokergaveittothem.Dont

makethismistake.

Thankfully,unlikestockbrokers,manyforexbrokersdoprovideyouwithvery

adequatechartingandtradingsoftware,allbundledtogether.

Otheraspectstowatchforwhenselectingabrokeraretheleveragelevelsand

accounttypes(standardandminiaccounts)offered.Mostbrokersofferatleast

100:1leveragewhichismorethanadequateformosttraders.Somebrokersalso

offergreaterleverage,upto400:1.Thistypeofleverageiscompletely

unnecessaryastheriskrewardratiocanquicklygoagainstyouifyouuse


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excessiveleverage.(Illcoverthisinmoredetaillaterinthereportinthequestion

aboutriskmanagement.)

Dependingonyouraccountsize,youwillwanttobesurethebrokeryouchoose

offerstheappropriateaccounttypes.Standardandminiaccountsaretypical.

Thestandardaccounttypicallyrequiresminimuminitialcapitalof$2,000or

more,whiletheminiaccounttypicallyrequires$300ormore.Leverageof100:1

shouldbeavailableforeitherastandardoraminiaccount.

WhatarethebestForexpairstotrade?

IbelievethatnotallForexpairsaresuitablefortrading.Whatweshouldbe

lookingforastradersareliquidmarketsthathavesufficientpricemovementto

makeatradeworthwhile.Withthatinmind,thefollowingpairsarethemostwidelytraded,mostliquidpairsandtheonlyonesthatIwouldconsidertrading:

EUR/USDEuro/USdollar

GBP/USD-BritishPound/USdollar(oftenreferredtoastheCable)

USD/JPY-USdollar/JapaneseYen

USD/CHFUSdollar/SwissFranc

USD/CADUSdollar/Canadiandollar

AUD/USDAustraliandollar/USdollar

AndtofurthersimplifyForextrading,youcouldeasilylimityourtradingtothe

twomostliquidandwidelytradedpairs,theEUR/USDandtheGBP/USD.This

reallystartstoreducedemandsonyourtimefortradingactivitieswithoutgiving

upgoodprofitpotential.


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Whatisthebesttradingplatformand

chartingsoftwareforbothbeginnersand

moreexperiencedtradersalikeandwhere

shouldIobtainthemostreliabledata?

Theanswertothisquestionstartswithyourbroker.First,Ihighlyrecommend

thatyouonlyopenanaccountwitharegisteredbroker.Havingsaidthat,most

Forexbrokersprovide,freeofcharge,anonlinetradingplatformthatisintegral

withdecentchartingsoftware.Sothatyouhaveyourchartingsoftware,your

datafeedandyourtradingplatform(theabilitytoplacetradesonline)allinone.

Ibelieveyoucanconsiderthedatareliableandtheorderexecutionproperas

longasyouaredealingwitharegisteredbroker.

However,sometradingplatformsandchartingsoftwarearemoreintuitiveand

easiertousethanothers,soinselectingabroker,youwanttoopenademo

accountfirstandgetthefeelforthatbrokersplatformtoseeifitiscomfortable

foryou.Youwillbeabletodeterminethiswithalittlepapertradingoverafew

daysandweeks.

Also,youwanttobesurethatyourbrokerschartingsoftwareisabletoplotthe

indicatorsthatyourtradingmethodscallfor.Mostwillbeabletodothis,butnot

all.

Inaddition,sometradersprefertoalsouseadditionalupscalechartingsoftware

independentfromthedealer,suchasofferedbyMetaTrader.MetaTraderand

othersofferadditionalchartingcapabilityaswellastradealertcapabilitythat

sometradersfinduseful.


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Isitbettertousefundamentalor

technicalanalysiswithForextrading?

Theanswertothisquestiondependsonyourtradingmethod.Themarketsare

indeedmovedbyfundamentals(balanceoftradedata,moneysupply,interest

rates,economicandfinancialreports,etc.)butonlythroughtheprismofhuman

psychology.Itisnotthefundamentaldataorinformationthatissoimportantas

muchasitisthemarketsreactionstothatinformation.

Manyadvocatetradingonthe

fundamentals;however,acasecanbe

madethattradingonthefundamentals

isextremelydifficultduetothefactthatthemarketsalwaysimmediately

andcontinuouslyaredigestinganyand

allfundamentaldataandtodothis

successfully,youneedtobeavailable

onarealtimebasisatwhateverhourof

thedayornightthatthenewsislikely

toimpactthemarket.Then,youneed

toactonthatnewsbeforeoratleastin

thesameinstantthattherestofthe

worlddoesorelsetheopportunitycouldbelost.

Whilesomedotradethefundamentals

successfully,Ibelieveusinggood

tradingmethodsbasedontechnical

analysisisaneasier,lessdemanding

waytotradewithfargreateroddsofsuccess.ThisisbecauseIbelieve,asdo

technicaltradersingeneral,thatanyandallfundamentalsarealreadyalways

reflectedinthepriceofthemarketatanyinstantandsoIwouldratherapply

technicalanalysistothemarketsandtradethemonmyterms,whenIwantto

tradethemandhowIwanttotradethem,withaslittletimespentintheprocess

aspossible.


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Whataretheattributesofa

goodForextradingmethod?

Agoodtradingmethodshouldbeassimpleaspossibletoprovideapowerfuledgetothedisciplinedtraderthatisbaseduponspecificsetupconditions,entry

rules,initialstops,andexitstrategy.Inadditionthemanagementofpositionsize

andnumberofpositionsmustbeaccordingtostrictmoneymanagementrules.

Agoodtradingmethodalsomustbe

relativelyeasytofollow.

SetupconditionsThesearethe

specificrequirementsthatmustbe

mettoconsiderapairforatrade.

Theserequirementsareexpressedintermsoftechnicalanalysisindicators,

patternsandpriceaction.Theaim

hereistoonlyconsideratradewhen

themarketmeetsthesepre-set

conditionsandtostandaside

otherwise.Thisisoneoftheways

requiredtoputtheoddsinyourfavor.

EntryRulesOncethesetupconditionsareinplace,entryrulesdefinethe

triggernecessarytoactuallyenterintothetrade.Thisusuallymeansthatprice

mustbehaveinacertainwayinordertotriggerintoatradeusingeithera

market,stop,orlimitorder.

InitialStopRulesThesearetherulesthatgovernhowanewpositionshouldbe

protectedfromanadversemoveinthemarket.Sincethereisalwaysriskwhen

tradingtheForexmarkets,itisveryimportanttoknowtheappropriateplaceto

placetheinitialstoporder.Placedtooclosetothemarketrisksbeingstopped

outprematurely.Placedtoofarfromthemarkettakesontoomuchrisk.Thisis

oneofthemostcriticalaspectsoftrademanagement.EffectiveInitialStopsshouldbeplacewhereyoudontexpectthemarkettogoandifitdoes,the

premiseofthetradeisoverandyoushouldexitthetradewithasmallloss.

ExitStrategyRulesTheserulesgovernhowtomanageatradetoexitthetrade

profitably,iftheInitialStopRuleshavenotbeenappliedtothetrade.Theserules


17/44



shouldstrikeabalancebetweenprotectingopenprofitsasmuchaspossibleand

exitingamarkettoosoonandmissingfavorablemarketmoves.

Whydontallsetupconditions

triggerintopositions?

Thereisacommonmisunderstandingamongmanybeginnersthatifatrading

methodisgoodthenanytimethesetupconditionsasdefinedbythatmethod

occur,thenthatmeansitsOKtogoaheadandenterthemarket.Asseasoned

tradersknow,thisisnotalwaysthecase.

Inordertohaveanedgewhentradingthemarkets,asuccessfultraderwaitsfor

conditionstodevelopthatmaysignalagoodtradeopportunity.Butwhenthese

conditionsdevelop,whichareusuallycalledsetupconditions,thatoftentimesonlymeansthatthetradershouldbeonalerttoatradingopportunity.

Anactualtradedoesnotoccurunlessafterthesetupconditionsareinplacea

triggeralsooccurs.Thetriggerisnecessarytoconfirmthatthemarketwillmove

intheintendeddirectionbeforeenteringthemarket.Thisisaveryimportant

concept,asitiscommontohaveseveralsetupconditionalertsthatdonot

trigger.

SothemoralofthisstoryisthatitisperfectlyOK(andexpected)forsetup

conditionstoNOTtrigger.Thatmeansconditionsarenolongergoodforthetrade,andyouarebeingprotectedbecauseyoudidntenterthattrade.

Amateursandbeginnerswillsometimesassumeatradingmethodisnot

workingbecausesetupconditionshavenotbeentriggeredintoaposition.

Nothingcouldbefurtherfromthetruth.

Whatarethebesttechnicalindicatorstouse?

Atlastcountthereareover100technicalindicatorsavailableinmostchartingsoftwarepackages.Thereisnomagicintheindicatorsthemselvesastheyall

strivetotellyousomethingabouthowthemarketisbehavingatapointintime.

Anditisnotthatsomearebetterthanothers,ratherthekeytousingindicators

successfullyistoselectonlyafewthatcomplementeachotherandtousethem

inanuncommonmannertogetherwithpowerfultradingtactics.


18/44



Thetendencyofamateurtradersistoover-complicatethings.Theywanttouse

(ormisuse,really)toomanyindicatorsandpatterns,andthinkthattobe

successful,theremustbeabunchofcomplexitythatisrequiredinagoodtrading

method.Nothingcouldbefurtherfromthetruth.Simpleisbetter,byfar,for

severalreasons.

1. Usingtoomanyorthewrongindicatorsiscounterproductive,astheinformationthatthoseindicatorsprovideiscounterintuitiveandjustplain

misleading.

2. Usingafewsimpleindicatorsinauniquelypowerfulwaycanprovidetherightinformationnecessarytomakegoodtradingdecisions.

3. Withtherightindicatorsandpatterns,youwillbefarmorelikelytotradewithdisciplinebecauseyouwillbeabletounderstandanobjectivesetofrulesthattherightindicatorsandpatternscanprovide.

LetmecommentonaphenomenonthatIseetimeandtimeagain.Hopefully,

youwillnotfallvictimtothis.Hereitis:Youresearchanewtradingmethodand

ultimatelybuyit.Thenyouquicklyflipaheadtowhatyouconsidertobethe

meatofthemethod,andtotallyignorethemore-importantaspectsofrisk

management,discipline,andpsychology.Thenyouexaminethemethod,looking

forabig,mysterious,jaw-droppingsecretthatwillletyoupredicteachand

everymarketmovelikeamodern-dayNostradamus.Youlookforacomplicated

formula,oryoulookforsomecrypticcombinationofindicatorsthatmustbegood,becausetheyrejustsocomplicatedlooking!Wow!

Thenwhathappensisyoulltypicallyburnyourselfouttryingtoapplyit.Youll

becomefrustratedwhenthemethoddoesntwork.Or,youllblameyourselffor

notbeingsmartenoughtounderstandorapplythemethod.Thenyoullputthe

methodontheshelf,onlytooccasionallyglanceatitinwonderfromtimeto

time.Wonderingwhyyoucouldntgetwhatyoustillassumetobeagreat

methodtowork.


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Buthereswhatcanalsohappen.Intheexampleabove,afteryoudiscoverthat

themeatofthemethodisverysimple,easytounderstand,andonlyusesafew

commonindicators,youbecomeperplexed.Youmayevenbecomedisappointed.

Afterall,inyourmind,youexpectedsomelabyrinthineskeletonkeythatwould

unlockthemysteriesoftheforexmarketsonceandforall.Youmayevenbe

temptedtothrowinthetowel,instantlygiveupthemethodandsenditback

justbecauseitsnotcomplicatedenough.

What?!Thatsjustcrazy.ButIhaveto

admit,Iwentthroughaperiodinmy

younger(andpoorer)dayswhenI

thoughtabitlikethat.Timeand

experiencehavefinallytaughtme,and

muchtomyrelief,thatcomplicatedis

usuallynotgood,andsimpleisalmostalwaysbetter.Ifthosetradersthatare

stillcursedwiththatcomplexity

mindsetwouldjusttryasimple

tradingmethod,theywouldbedoing

themselvesaHUGEfavor(notto

mention,potentially,theirtrading

accounts).Thisgoesforbothtrue

beginnersaswellastraderswhothinkof

themselvesasexperts.

Again,thekeyhereissimple,but

powerful.Usejustafewindicators,

appliedinamannerthatisnottheusualtextbookapproach.Thatiswhatcan

giveyouanedgetradingthemarkets.

Incidentally,theunfortunatetruthofthematteristhatthattheold80/20rule

willcomeintoplayhere(exceptintrading,itsmorelike90/10,or95/5),and80

to95%ofthetradersthatjustreadthissectionandnoddedtheirheadsin

agreementwillcompletelyignorethisadviceandfallrightbackintothetrap

describedabove.Itsanearcertainty,andthatstoobad.SoIreallyurgeyouto

gobackandreadthissectionagain,andhopefullyyoucanescapetheself-

sabotagingpatternsthatareseparatingmosttradersfromfailureandsuccessin

themarkets.


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Letstakealooknowatsomeexamplesofafewindicatorsthatcanbeusedto

formthebasisofverypowerfultradingmethods.

Figure2-USD/CHFDailyChart

Figure2showssometypicalandnotsotypicalindicatorsappliedtotheUSD/CHF

pairusingVTTrader.First,noticethattwosimplemovingaverageshavebeen

plottedonthechart(inblueandred).Thesearecommonlyusedindicators.I

havealsoplottedmovingaverageenvelopeswhichareafixedpercentageabove

andbelowthebluemovingaverage.Thesearenotsocommonlyusedandcan

beveryhelpfulsupportingvariousquickhit,inandouttradingstrategiesthat

onlyneedattentiononceadayatthe5:00PMESTdailyclose.


21/44



Figure3-USD/JPYDailyChart

Figure3showssomeadditionalindicatorsappliedtotheUSD/JPYpairusingVT

Trader.Onthischart,Iamapplyingalongertermmovingaverageinpurpletogetherwithtwoveryshorttermmovingaveragesinbrown.Thelongterm

movingaverageisbasedontheclosingpricewhiletheshorttermmoving

averagesarebasedonthehighandcloserespectively.Also,includedistheADX

atthebottomofthechart.ThisiswhatImeanwhenIsaythekeytodeveloping

anedgewhentradingthemarketsistocombineafewindicatorsinan

uncommonway.Eachoftheseconfigurationsisdesignedtoexploitacertain

behaviorinthemarket.Buttheindicatorsaloneareinsufficient;onlywhen

combinedwithpowerfultradingtacticsdoesthepowerofagoodtradingmethod

emerge.


22/44



Figure4-USD/CADDailyChart

Figure4showsaconfigurationwereviewedinanearlierquestionappliedthis

timetotheUSD/CADpairusingVTTrader.OnthischartIamapplyingtwosimplemovingaveragesplottedinblueandredandtheADXindicatorplottedat

thebottominbrown.

Thissetofindicatorswhencombinedwithdifferenttradingtacticsisdesignedto

capturelongertermmovesintheForexmarketssuchasoccurredonthis

USD/CADpairbeginningatthelefthandsideofthechartandcontinuingforover

5months.Thesemegatrendscanonlybecapturedbytradingthedailybar

charts.


23/44



Figure5-AUD/USDDailyChart

Figure5showsanothercombinationofindicatorsappliedtotheAUD/USDpair

usingVTTrader.Onthischart,IamapplyinganintermediatetermmovingaverageinredtogetherwithslowstochasticsandADXinthetwopanelsbelow

thepricechart.Theintermediatetermmovingaverageisbasedontheclosing

price.Thissetofindicatorswhencombinedwithdifferenttradingtacticsis

designedtocapturesuddentrendreversalwavessuchasoccurredonthis

AUD/USDpairjusttotherightofthecenterofthechartandcontinuingfor

almost3months.

WhatsimplestrategycanIuseto

findgoodentrypoints?

ThegeneralapproachthatIuseistodevelopspecificsetupconditionsthat,when

presentinthemarket,indicatethatIshouldconsiderenteringintoanew

position.Sothefirstthingistoidentifytheconditionsthatoccurrelatively


24/44



infrequentlyinthemarket,butthatwhentheydo,ahighprobabilityopportunity

mayawait.

Thisisaveryimportantconcept,becauseoneofthekeystosuccessfulForex

tradingistowaitpatientlyfortheprimeopportunitytoenterthemarket.

Amateurstoooftenbecomeimpatientandwanttotradejustforthesakeof

tradingandconsequentlyenterthemarketunderotherthanidealconditions.

Thisgreatlyreducesthechanceofasuccessfultrade.

Figure6-GBP/USDDailyChartEntryPointExamples

Amateurtradersthatdothisare,ineffect,tryingtoforcethemarkettocometo

themontheirterms.Guesswhat?Themarketdoesntcare!Itsgoingtodowhat

itsgoingtodoandthereisnothingyoucandoaboutitexceptforonething.

Andthatistowaitforthemarkettodevelopaccordingtopredefinedsetupconditionsandonlywhenthathappensisitappropriatetoconsideratrade.In

thatway,yourenotforcing,butratherwaitingforthemarkettocometoyou,

whichmakesaworldofdifference.

Anotherkeyconcepttofindentrypointsthatiscommontomosttypesoftrend

tradingistoattempttobuyintosupportlevelsandsellintoresistancelevels.The


25/44



successorfailureofthisattemptliesintherobustnessofthesetupconditions

definedinthetradingmethod.

Oncethesetupconditionsareinplace,specificentryrulesneedtobefollowedto

triggertheactualtrade.Forexample,oneofthepairsthatyouarefollowing

maymeetthesetupconditionsforalongtrade.Now,dependingonthetrading

method,theentryordercouldbeaStoporderthatsays,Onlybuyifthemarket

tradesaboveacertainlevelwhichconfirmstheresumptionoftheuptrend.Or,it

couldbeaLimitorderwhichsays,Buyonlyifthemarkettradesdowntoa

supportlevel,definedbyamovingaverageorFibonaccileveloroldhighs,etc.

Thereisnoonerightwaytodothis.However,thepreciseentrytriggerpointhas

tobeintegraltotheotherfeaturesoftheoveralltradingmethod,including

plannedriskinthetrade.Theentrypointrulesofthemethod,bynecessity,will

determinethestoplosspointandconsequentlyplannedriskinthetrade.Thetwogohandinhand.

HowcanIdeterminetheinitialstoploss,

trailingstops,andexitpoints?

Besidesmoney/riskmanagement,Ibelievethisisoneofthemostimportant

questionsregardingagoodtradingmethod.Itshouldgowithoutsayingthatas

soonasyouenterthemarketwithanewposition,aninitialstopordershouldbe

enteredtoprotectthepositionagainstanadversemoveinthemarketoranexitstrategyshouldbeemployedtocoverthetradeifthemarketclosesadversely.If

suchamoveoccurs,asisoftenthecase,youwantyourpositionliquidatedand

outofthemarketwithaminimalloss.

Theconsequencesoffailingtodothisarethatyouwillnotbesuccessfulat

trading-period.Infact,everytradeyouputon,youshouldplantolose,sothat

youaresuretoplaceyourstoplossorderorcoverthetradeonanadverse

close.Otherwise,whatwouldhavebeenasmalllossturnsintoabigloss,

throwingtheentirerisk/rewardratiooutofkilteragainstyou.

Thatbeingsaid,whereshouldthestopbeplaced?Theshortansweris,Where

youdontexpectthemarkettogo;or,morespecifically,wheretheassumption

inputtingonthetradeisnolongervalid.Forexample,ifalongpositionwas

enteredintoafteranuptrendorbreakoutmarkettradedbackdowntosupport,

aninitialstopcouldbeenteredbelowtherecentlowbecauseifthemarketdoes


26/44



gothere,support(asdefinedbythatlow)wouldhavefailed,andthereisno

longeranyreasontobelongthemarketsogetout!Dontwaitaroundforitto

comebackinyourfavorbecausetheoddsareagainstit.

Ifthemarketgoesinyourfavoroncetheinitialstopisinplace,thenyouneeda

setofrulesthatwillallowyoutoexitthemarketprofitably.Thisposesareal

dilemma.Ifyouexittoosoon,youmaysecureasmallprofit,butmissoutonall

thosebigmovesthatoccur(andthebigprofitsthatgowiththem).Ontheother

hand,ifyouwaittoolongtoexit,themarketmayreverseandtakeawayallof

youropenprofitsandevenputyouintoalossposition.

Figure7-GBP/USDDailyChartInitialStop,TrailingStops,&ProfitTargetExamples

Sowhatdoyoudo?Well,thefirstthingistorealizethatthereisnomethodthat

canforecastwhetherornotaparticularmovewill:

Goagainstyouimmediately Gouponlyalittlebeforegoingbackdown Goupalotinyourfavor


27/44



Forexample,afteryouenteralongtradeinanuptrend,theresabsolutelyno

waytopredictwhatwillhappennext(contrarytowhattheso-calledgurustell

you).Becauseofthis,youabsolutelyneedanexitstrategy,becausetheriskof

lossissignificantnomatterhowcarefullyyouplanyourentriesandexits.

TheOptimalProfitExitStrategy

ThefollowingistheverybestexitstrategythatIbelievepossiblewhentrading

theForexmarkets.IcallittheOptimalProfitExitStrategy.Itsastrategythat

scalesoutofatradeintwosteps.Thisstrategyisfirstandforemostabouttaking

aninitialprofitassoonasappropriate,therebytakingsomemoneyoffthe

tableandreducingtheriskinthetradeatthesametime.

1. Steponeistocover1/2ofyourpositionatapre-determinedprofittarget.Theprofittargetismodest,butenoughtomakethetradeworthwhileandthespecificlevelisalsodependentontheoverallmethodbeingused.

Oncethatinitialprofittargetishit,youshouldmovetheinitialstopupfor

theremaining1/2ofthepositiontothelowestlowofthepast3daysfor

anuptrendtradeorthehighesthighofthepast3daysforadowntrend

trade.Yourenowoutof1/2ofthetradewithaveryniceprofitandatthe

sametimeyouarepreparedtoridethemarketasfarasitwantstogoin

yourfavorfortheremaining1/2ofyourposition.

2. Theremaining1/2positionshouldremainprotectedbyatrailingstopalwaysbasedonthelowestlowofthepast3days(foranuptrendtrade).

Andsoasthemarketcontinuestomoveup,youshouldcontinuously

movethestopupwithit.Thislocksinasignificantportionofthe

remainingopenprofitbutalsogivesthemarketenoughroomtotrade

downabitwithoutshakingyououtofthetradeifitmoveshigher.

Withthisstrategyyoushouldbepreparedtotakeadvantageofthemarketafter

enteringatradenomatterwhatitdoes.Andthatsabigdeal.


28/44



HowcanIfindaForexmethodthatworksalmost

allofthetimewithminimalornolosses?

IcallthistheHolyGrailSyndromeand,ofcourse,theHolyGrailoftrading

simplydoesnotexist.IvetalkedaboutthisconceptmanytimessinceIstarted

trainingindividualstotradethemarketsbackin2001,butitbearsrepeating

here.

Foryears,Irefusedtobelieveinthis

conceptandwasforeverlookingforor

tryingtodevelopamethodthatwould

alwayswinwithnolosses,orcertainly

neverexperiencetwolosingtradesinarow.Iwastedyearsofmylifewiththis

falseimpressionaboutwhatitwould

taketotradesuccessfully.Dontfall

intothesametrap.Whiletheholygrail

oftradingdoesnotexist,norwillitever;

thankfully,itisnotnecessaryinorderto

besuccessful.

WhatisnecessaryasIhaveemphasized

repeatedlyinthisreportisatradingmethodthatgivesyouanedgeinthemarket,thedisciplinetotradeitandof

coursesoundmoneymanagement.Thatsoundssimple,andinsomerespectsit

is,untilyoufactorushumansintotheequation.Considerthesequestions.

1. Doyouhaveanedgeintradingthemarkets?Whatisit?Ifyoudontknow,thenyoudonothaveanedge.

2. Howaboutdiscipline-canyoureallyfollowyourtradingmethodwithoutfail,especiallyaftertwosuccessivelosingtrades?Whataboutthree?Or

willyoudropthemethodandsearchforsomethingelse?Whenthat

happenstheHolyGrailSyndromeisatwork.

3. Thenthereismoneymanagement.Areyouallocatingtheappropriateleveloffundsandcontrollingthedegreeofriskoneachtrade?


29/44



ThereasonmosttradersloseisthattheycannotanswerYestoallthree

questionslistedabove.AndIbelievethatthekeytomusteringthediscipline

neededtobeawinneristohaveamethodthatdoesindeedprovideawinning

edge,thatisrelativelysimpletoapply,andthatusessoundmoneymanagement

practices.Onlythen,inmyopinion,canonemustertherequireddisciplineto

tradeeffectively.

SodoyourselfafavorandabandonthesearchfortheHolyGrail.Instead,finda

goodtradingmethodthatfitswithyourpersonality,applysoundmoney

managementpractices,andtradeitwithdiscipline.

HowcanIminimizedownsideriskwhilestill

capturingqualitygainsintheForexmarkets?

First,youmusthaveagoodtradingmethod.Butevenmoreimportantly,you

musthavestrictmoneymanagementrules;withoutthem,evenagoodtrading

methodwilleventuallyfail.Ihavefoundthatinordertobeeffectivewithrisk

management,youmusthaverulesthataresimpleorelseyousimplywont

followthem.

Forexample,oneriskmanagementmethodiscalledOptimal-f.WhileOptimal-f

hasalotgoingitforit,Ibelieveitistoocomplicatedtobeofpracticaluse.

InsteadIbelievethebetterapproachisasfollows:Simplyrisknomorethan2%

ofyouraccountsizeonanyonepositionandnomorethan8%ofyouraccountsizeonallopenpositionsatapointintime.Riskinthiscasemeanstheamount

youplantoloseifthetrade(s)goesagainstyou.

So,asyouraccountsizegrows,youwouldbeabletoplacelargerandlarger

positions.Whenyouhavealosingtradeortwo,youwouldbereducingthe

amountriskedandthereforethepositionsizeonthenexttrade.Sothisisavery

simpleselfregulatingconceptthatkeepsyourpositionsinproperalignmentwith

youraccountsizeatalltimes.ThisisparticularlyimportantinForextrading,

giventhetremendousleverageofferedbythebrokers.Thelastthingyouwant

todoistoovercommittoatradejustbecauseofthebrokerslowmargin

requirements.Bytheway,IbelievethatmostForextradersthatenduponthe

losingenddosobecauseofpoorriskmanagementmorethananyotherfactor.

Letslookatanexample.Supposeyouopenanaccountanddontunderstand

theimportanceofriskmanagement.Youelecttorisk30%oftheinitialaccount


30/44



sizeoneachtrade(becausethebrokersmarginrequirementsallowit)andthen

promptlylosethreetradesinarow.Youraccountwouldbealmostcompletely

wipedoutafteronlythreetrades.

Ontheotherhand,letssayyouunderstandtheimportanceofriskmanagement

andriskonly2%oftheaccountsizeoneachtrade.Nowletssayonceagainyou

losethreetradesinarow.Thistimeyouwouldhavelostlessthan6%ofyour

initialaccountsizeandstillhaveplentyofcapitalleftforadditionaltradeswhere

onegoodtradecouldmorethanoffsetthethreelosers.Youmightsaythatthisis

anextremeexample,butIthinkitmakesthecase;whenyoutradewithproper

riskmanagementrules,youstayinthegame.

WhataccountsizedoIneed

totradetheForexmarkets?

Thereisnoonerightanswertothat

question.First,youshouldonlytrade

withfundsthatyoucanaffordtolose.

However,Forexbrokersallowyouto

tradestandardlotsandminilots.The

margin(dependingonthepairyouare

trading)forastandardlotisaround

$1,000andforaminilotaround$100.

Sotechnically,youcouldopenanaccountwith,say,$500andtrade5mini

lots.Ofcourse,youwouldbeviolating

yourriskmanagementrulesandwould

probablyenduplosingyourstake.

Thekey,onceagain,istorisknomore

than2%ofyouraccountsizeonanyone

tradeandsoifyouweretoputon1mini

lotandrisk50pips,thatwouldbeabout

$50ofriskinthetrade(foraUSdollar

countercurrencypair).Thatmeansyou

wouldhavetohaveanaccountsizeofat

least$2,500($2,500x2%=$50)toputthattradeonwithoutviolatingtherisk

managementrules.


31/44



HowareordersplacedwithForexbrokers?

PlacingForexordersismostcommonlydoneonlinethroughyourbrokersorder

platformthatisoftenintegratedwithyourbrokerschartingsoftware.Thisis

veryeasytodoonceyouunderstandtheordermechanics.

FollowingareexamplesoftypicalorderplacementsusingVTTradercharting

softwareandorderplatform.Thisinformationisreadilytransferabletomostany

brokerschartingsoftwareandorderplatformastheyareallverysimilarinthe

waytheyoperate.

Improvidingthisinformationheresimplytodemonstratehoweasyitistoplace

ForexordersbecauseIgetalotofquestionsfromnewcomersaboutthis.If

youreamoreexperiencedtrader,thenthisinformationwillbeoldhattoyou.

Figure8AUD/USDDailyBarChart11/07

Hereisatypicaldailybarchart;inthiscaseitisfortheAUD/USDpair.Iwilluse

thischarttodemonstratehowtoplaceamarketordertobuythispairandthenhowtoplaceastoporderprotectingtheposition.


32/44



Figure9Initiateanordertobuyatthemarket

Inordertoplaceanordertobuyatthemarket,weright-clickonthechartabove

thecurrentmarketpriceandthenawindowpopsupasshownonthischart.

Next,selectBuyinthepopupmenu.

Figure10OpenPositionsWindow

AnotherwindowwillpopupcalledOpenPositions.


33/44




Hereyouwanttoenterthenumberoflotsyouwillbebuying.Inthisexample,

wewillplaceamarketordertobuy1standardlot.(Theprocedureforaminilot

accountwouldbethesame,exceptyouwouldbebuying1minilotinstead.)So

youjusttypein1intheamountperaccountrowandclickOK.

Figure12RequestforConfirmationWindow

Thiswindowisrequestingconfirmationthatyouwanttogoaheadandplacethe

order.JustclickOKandyourmarketorderwillbeimmediatelyplacedand


34/44



becauseitisamarketorder,itwillbefilledimmediatelyatthecurrentask

price.

Figure13AUD/USDDailyBarChart

OnceyouclickOKabove,youarenowlong1AUD/USDpairandyouare

returnedtothedailybarchart.


IfyouthenclickontheOpenPositionstab,awindowwillopenthatshowsyour

currentposition;inthiscase,thatyoubought1AUD/USDpairat0.8844(under

theopencolumn),theclosecolumnshowsthecurrentprice.Othercolumns


35/44



includestop,limit,andopenprofit/loss.Toenterastoporder,toprotectthe

longposition,youjustrightclickonthestopboxandanewmenuopens.

Figure15OpenPositionsWindowwithRight-ClickMenu

Fromthismenuyouthenleft-clickonthewordstop.

Figure16OpenPositionsWindowwithStopOrderWindow

Withinthiswindowyouthenenteryourstopprice;inthiscase,weentered

0.8744,meaningwewanttosellthepositionifthemarketdropstothatprice.

Andthenleft-clickthesubmitbutton.


36/44



Figure17OpenPositionsWindowwithRequestforConfirmationWindow

ThenanotherwindowwillpopupcalledRequestforConfirmation.After

reviewingyourordertoconfirmthatitiscorrect,goaheadandleft-clickonthe

OKbuttonandtheorderwillbeentered.


ThiswillreturnyoutotheOpenPositionswindow,showingagainthatyou

bought1AUD/USDpairat0.8844,butnowitalsoshowsunderthestop

columnthatyouhaveanopenstopordertosellat0.8744.Ifyouwantedtoalso

enteralimitorderabovethemarketataprofittargetlevel,youwouldjustclick


37/44



onthelimitcolumnandfollowthesameprocedureasabovetoalsoentera

limitorder.

Thatsallthereistoit.Andonceyouhavepracticedthisprocedureseveral

times,itwillbecomesecondnaturetoyou.

Howimportantisittohave

atradingmentor?

Masteringgoodtradingmethodscanbedonewithoutamentor,butIhighly

recommendhavingaccesstoamentorbecauseamentorcandoseveralthings

foryouasaForexstudent.

Withamentor,youhavetheopportunitytodramaticallyshortcutyourlearningcurvebycheckinginwithyourmentorfromtimetotimeasyoustudythecourse

materialandpracticeapplyingthenewtradingmethodstaughtinthecourseby

papertrading.Thisalonewillsaveyouagreatdealofstudytimeaswellascostly

mistakes.

Whileyoumusttakeresponsibilitytostudyandmasterthetradingmethods,

yourmentorcanansweranyclarifyingquestionsonthecoursematerialthatyou

mayhave.

(Caution:manyso-calledForexmentorsmerelyoffercannedmaterialandsketchy,ifany,support.Besureyourmentoroffersadedicatedsupportteamto

answeryourquestions.)

Anotherkeyroleforthementoristoverifythatyourinterpretationofvarious

tradeopportunitiesinrealtimemarketsiscorrect.Icanttellyouthenumberof

beginningtradersoreventraderswithsomeexperiencethatgiveuponagreat

tradingmethodbecauseitdidntworkforme.Andthereasonitdidntwork

forthemisthattheywerenotapplyingthetradingmethodscorrectlyinthefirst

place.Withoutamentor,thesetradersneverevenknewwhyothersweresomehowsuccessfulwiththemethodbuttheywerent.Butworseyet,those

thathadaccesstoamentorneveraskedforhelpfromtheirmentor.Eitherway

theyendupmissingmasteringthegreatmethodthattheyhavebeforethem,

onlytogoontosomeothermethodthatmayormaynotbegoodandjustkeep

repeatingtheprocesswithsuccessneverhavingbeenachieved.


38/44



Amentoralsoprovidesencouragementandperspectiveontherealworldof

trading.Thishelpsyouovercomeanylearningchallengesalongtheway.

Realisticexpectationsareanotherthingamentorcanhelpwith.Somany

beginnersfallpronetothegetrichquickhypeandthereforeexpecttoachieve

doubledigitreturnsmonthinandmonthout.Thatisnottherealworld.There

willbeprofitsandlossesandgoodmonthsandbadmonths.Asadiligent

student,youneedtounderstandthisandstaydisciplinedasyouawaityournext

greatprofitopportunity.

Insummary,havingaccesstoamentorwhilemasteringagoodtradingmethod

cangreatlyenhanceyourprobabilityofsuccess.

Forexfreedominjustminutesaday?AsIsaidbefore,Ivebeenteachingthousandsoffolksjustlikeyouhowtotrade

themarketssince2001.Backthen,therewasaTONoftradinginformationonline

(andoffline,forthatmatter).Andtoday,thisinformationseemstohave

multipliedexponentially.Sowheredoyoubegin?Well,tradingisverypersonal

businessandIvealwaysmaintainedthatyouneedtotradewithamethodthat

fitsyouremotions,tradingstyle,andpersonallifestyle.

Butwhatareweallreallytryingtoachieve?Honestly.Itsnotadigitaltrading

accountpaddedwithabunchofzerosisit?Sure,weallwanttomakeaprofit(aBIGprofit,right?),butwhatweultimatelywantiswhatthatmoneycandoforus.

Theressomethingtobesaidaboutlifestyle,andyouneedtoaskyourselfavery

personalquestion.Whatstherightmixoftradingandnon-tradingactivityfor

you?Whenitcomestobalancingthis,IthinkIvebeenthroughitall.Inmyearly

days,whenIwaskillingmyselftocaptureprofitsdaytrading,mylifeoutside

tradingsufferedandtooksomebigbruises.Irememberatleastafewtimes

whereIwouldbeinaverycriticalmeetingatmydayjob,wheremyfocuswas

needed100%totrulybeeffective,butmymindwouldwandertothatopentradeIhadjustplacedanhourearlier.Sonotonlydidmyeffectivenessatworksuffer,

butmytradedid,too.

AndtherewasalsoastretchoftimewhenIdgethomefromalongdayofwork,

seemywifeandkidsatdinnerandthendisappearintomytradinglairwitha

potofblackcoffee,asmywifeputthekidstobedandfellasleepwithoutme.


39/44



Thesearesometheeventsthatdrovemetodiscovertradingmethodsthatonly

requiredafewminuteshereandtheretoapply.AndwhenIbegansharingthem

withtheworldin2001,IfoundoutIwasnotalone.Therewerethousandsof

tradersouttherewhofeltjustlikeme.

However,thatsjustmyexperience,and

mystory.Youneedtolookatyourstory

anddecidewhatsrightforyou.Youmay

lovestaringatchartsforhoursonendall

daylong.Ifthatsyou,Ireallyhopeit

worksoutforyou.AllIknowisthatsnot

forme.

ButhoweveryoudecidetotradetheForexmarkets(oranymarkets),you

needtodooneoftwothingstobe

successfulbasedonmyexperience:

1. Dedicateyearsofyourlifetotest,experiment,tweak,try,invent,

etc.agoodtradingmethodon

yourown.

2. Investinagoodtradingmethoddevelopedbysomeonewhos

alreadygonethrougheverythingdescribedinitem1above.

Waybackinthe1970s,Ididntunderstandthis,soIchoseoptionone.Ittookme

yearstofinallycomeupwiththecoretradingconceptsthatIknowtobetrueand

effective.Thefunnythingis,Iranintoahandfulofgreattradingmethodsthat,

hadIhadtherightmindsetandunderstoodtheconceptsItalkaboutinthis

report,Iprobablywouldhaveavoidedyearsoflossesandfrustration.

AllIknowisthatifIhadatimemachine,Idgobackintimeto1974andslapmy

youngerselfinthefaceandsay,Donteventhinkaboutit.Goodmethods

alreadyexist.Findthem,andtradethem.Idalsogivemyselfacopyofthis

report!


40/44



So,sometraderswhineandcomplainaboutspendingmoneytolearnhowto

trade.Ortheymoanabouthavingtosubscribetoamonthlydatafeedservicefor

goodtradingdata.Ijustdontgetit!Tradingisaseriousbusiness.Inthebroader

picture,Ibelievespendingmoneyontradingeducationoronchartingsoftwareis

anabsolutenecessityforquicklyreachingyourtradinggoals(andthankfully,with

Forextrading,mostbrokerswillgiveyougreatsoftwareforfree).Sure,youcan

gotothelibraryorreadeveryfreearticleyoucanfindonline.Ilookatitthisway.

Youregoingtospendthemoneyonewayoranotherlearninghowtotrade;

eitherinlosingtradesovertime,orupfrontingoodtradingeducation.

Letmebeclear.Thisreportisnotatradingmethod.Itsmerelyacollectionof

questionsandanswers.Yes,Ibelieveitcontainssomeverygoodinformationthat

canbeusedwithanytradingmethodonthemarket,whetheritsyourownor

someoneelses.Butthisinformationisonlyonepieceofthelargertrading

puzzle.

Personally,ifIcanlearnjustonenewinsightoronenewnuggetofinformation

whenImevaluatinganewtradingmethod,thenwhatevertimeormoneyI

investedinitwastotallyworthittome.Andasyoubecomeamoreexperienced

Forextrader,youllseesomeofthesameconceptscoveredagainandagainin

varioustradingmethodsandcourses.ButthatsOK!

RememberwhatIsaidaboutsimplicity.Youdontneedanoverlycomplex

methodtobesuccessful.Ifyoulearnjustonenewtechnique,orifyouseea

familiarconceptrephrasedinawaythatcreatesnewclarityforyou,thenyourtimeandinvestmentinthatmethodshouldhavebeenwellworthit.Thisis

makinggradualimprovementstoyourtradingsuccessovertime,andits

somethingIbelieveallofusastradersshouldstrivefor.

WhyAreYouInterestedInForex?

Asyouredigestingandassimilatingalltheinformationinthisreport,Iwantyou

tothinkabouttheunderlying,corereasonswhyyoureactuallyinterestedin

tradingtheForexmarkets.Formosttraders,itsbecauseyouwanttoimproveorchangesomethingthatsnotworkingforyou.

So,tohelpyouout,pleasetakeafewminutesandcompletethisshortactivity

thatIlearnedafewyearsago.Ithinkyoullfindthatitwillhelpyouclarifywhere

youare,whereyouwanttogo,andwhatitsgoingtotaketogetthere.Ifyou

haventalreadydoneso,Ihighlyrecommendyouprintthisentirereportoutso


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youcanactuallywriteonitandfillinyouranswerstothesequestions.Ivefound

bydoingitthatway,thisexercisewillbemuchmoreeffectiveforyou.

(Bytheway,ifyoureananalyticalpersonlikeIam,youmightfindthisactivitya

littleweirdoruncomfortableIknowIdid!Buttrustme,itforcesyoutothink

aboutwhatyoureallywantinlife,andthefirsttimeIdidthisactivity,itwasvery

profoundforme.Soifyourefeelingalittleresistance,goaheadandsmash

throughitandcommittotakingthefirststeptocreatingthefutureyouwant

RIGHTNOW.)


42/44



1. Whatisyourultimatedream?Thiscanbeanythingyouwant(forexample,retiringearly,travelingtheworld,sendingyourkidstocollege,starting

yourowncharity,etc).Describeasifyoualreadyhaveandarecurrently

experiencingitrightnow(forexample,Iretiredatage40andam

currentlyonaworldtraveltourwithmywife.Sofar,wevevisitedItaly,

Spain,andPortugal,andhave8morecitiestovisitthisyear.)

_____________________________________________________________

_____________________________________________________________

_____________________________________________________________

_____________________________________________________________

2. Whatdoesyourdreamlooklike?Describeitinasmuchdetailaspossible.

(Continuingwiththeexampleabove,MywifeandIarehealthyandhappy

asweeffortlesslytravelfirstclassfromcountrytocountry.Aprivate

limousinepicksusupateachairportwelandatwhisksusofftothenext

5-starhotel.)

_____________________________________________________________

_____________________________________________________________

_____________________________________________________________

_____________________________________________________________

3. Whatdoesyourdreamfeellike?Again,useasmuchdetailasyoucan.(Forexample,Itfeelssogoodtobefreeandtobeclosetomyfamily.The

stressandstrainIusedtowakeupwithwhenIstruggledtomakeends

meetisnowgone.Ifeeltotallyrelaxedandincontrolforthefirsttimein

mylife.)

_____________________________________________________________

_____________________________________________________________

_____________________________________________________________


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_____________________________________________________________

4. Writedown5compellingreasonswhyyouMUSTtransformthisdreamintoreality.(Forexample,Mykidsaregettingolder,andIMUSTspend

morefreetimewiththembeforetheygrowupandmoveaway.)

1)___________________________________________________________

2)___________________________________________________________

3)___________________________________________________________

4)___________________________________________________________

5)___________________________________________________________

5. Finally,writedown5thingsthatMUSTCHANGEinorderforyoutoachieveyourdream.(Forexample,IMUSTdedicateatleast20minutes

everydaytostudyingsuccessfulForexmentors,orIMUSTfindagood

tradingmethodIcanrelyonsoIcanhaveconfidenceinplacingtrades.)

1)___________________________________________________________

2)___________________________________________________________

3)___________________________________________________________

4)___________________________________________________________

5)___________________________________________________________


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Now,savethesepagesandkeepthemsomewherewheretheycanbereviewed

everyday.EventhoughIdidthisafewyearsago,Istillkeepmyanswersnextto

mytradingcomputer.Itinspiresmetostayfocusedandontarget,andIhope

thishelpsyoudothesame.

ForexSurveySummary

Itwasalotoffungoingthroughallthe

questionsIgotfromconductingthis

surveyonForextrading.Weallthinkwe

haveuniqueproblemsandquestions,

buteverytimeIdoasurveyIm

remindedthatwerenotsodifferent

afterall.

Remembertogobackandre-readthese

questionsandanswersatleastafew

times.Somethingthatyoumissedthe

firsttimethroughwillundoubtedlyjump

outatyouinsubsequentreadings.

AlsorememberthattheForexmarkets

arenotmagicalormysterious.Theyre

justmarkets.Period.Andyoucan

potentiallypullprofitsoutoftheForexmarketsjustlikewithanyothermarket.

SowithagoodForextradingmethodin

hand,youshouldbewellpositionedtoaddForextradingtoyourownpersonal

tradingtoolkit.

Idliketothankeveryonewhotookthetimetosendmetheirtopquestions.In

doingso,youhelpedalotoftraderswhowillreadthisreport.AndIhopeyougot

atleastoneusefulnuggetofinformationaboutForextrading.Remember,you

arenotaloneinyourquesttosuccessfullytradethemarketsasalways,Iam

heretohelpyou.

GoodTrading,

Documents

Power for Ex Profit Principles 2011