7 things

I AM A CONSISTENT WINNER BECAUSE:

1. I objectively identify my edges.
2. I predefine the risk of every trade.
3. I completely accept risk or I am willing to let go of the trade.
4. I act on my edges without reservation or hesitation.
5. I pay myself as the market makes money available to me.
6. I continually monitor my susceptibility for making errors.
7. I understand the absolute necessity of these principles of consistent success and, therefore, I
never violate them.

What are the most important figures that influence forex market ?

Interest rate

Traditionally, if a country raises its interest rates, its currency will strengthen because investors will shift their assets to that country to gain higher returns

Employment Situation

Decreases in the payroll employment are considered as signs of a weak economic activity that could eventually lead to lower interest rates, which has negative impact on the currency

Trade Balance, budget and treasury budget

A country that has a significant Trade Balance deficit will generally have a weak currency as there will be continuous commercial selling of its currency

Gross Domestic Product (GDP)

It's reported quarterly and is followed very closely as it is a primary indicator of the strength of economic activity. A high GDP figure is usually followed by expectations of higher interest rates, which is mostly positive for the currency.

Less powerfull economic indicator are

Retails sales - it's the first real indicator of the strength of consumer expenditure

Durable goods - Rising durable goods orders are normally associated with stronger economic activity and can therefore lead to higher short-term interest rates, which is usually supportive for a currency

What Actually A Pip Is ?

If you are a beginning forex trader you might be wondering what exactly a pip is. Everyone throws around the lingo but hardly anyone ever stops to give a good explanation that makes things clear for the aspiring trader.

Generally, a pip is explained as the least significant digit of a price quote.

So, if the US Dollar (USD) trades at 120.19 JPY (Japanese Yen) then each unit of change, such as a an increase increase in value of the USD to 120.20 JPY, involves a one pip change in price.

I'm going to step out on a limb and say that a PIP is a price increment point. However, the more confusing official terminology is apparently percentage in point. Which is less confusing?

Either way, it's a single point of change in the quote price between two currencies. Now, while this is very simple, it can be confusing at first when you find out that different currency pairs are quoted to a varying number of digits.

By way of example, here are some relatively current price quotes for various currency pairs:

AUD/JPY   093.29
AUD/USD   0.8574
EUR/USD   1.4668
EUR/JPY   159.62
GBP/JPY   198.05
GBP/USD   1.8204
NZD/USD   0.7001
USD/CAD   1.0635
USD/JPY   108.75
Unfortunately, it is possible that your trading platform will display partial pips! If so, I'd recommend turning that extra level of detail off when you are just getting started. Being clear on currency price and profit/loss calculations will be much more important to you as a beginner than worrying about price moves in the partial pip range.

Why such a feature is enabled by default is something that mystifies me. I guess people in the forex industry soon forget what it is like to be at the beginning of your trading experience -- things can be confusing at first.

Forex Reflections

Saturday is a good time to reflect on Forex activities.

What did the markets do? What did I do? How much cooperation was there between these actions as measured by achievement of my goals?

As time passes, and I actively trade, I'm starting to notice trends. The entry points that cause me the most stress, that I end up regretting or being put in a position where I'm forced to make decisions, are the ones that occur near the top of a movement.

If you are silly enough to ask why anyone would get in near the top, just be assured that it is incredibly difficult not to do. I do have rules and strategies that are designed to protect me from such things, but at the same time my goals push against these security blankets.

Anyway, I have to devise some new strategies.

I simply am not going to have the time to babysit the market all day long while I watch CNBC anymore. I'll be sitting at a desk all day gainfully employed instead. However, this little tryst between the markets and I is not something I'm willing to give up at this time.

The lure of earning decent money, or better, is keeping me in the game. I've been doing a passable job during these turbulent times. I can imagine how I would do if these were not turbulent times. As the saying goes, a rising tide floats all boats.

If I've been able to weather the stormy periods with plenty of ups and downs, I'll be able to do much better when the economic sunshine starts to grace us once again. So, the real game plan in the medium term is to play safe. When things start to get better, when the weather starts to warm, I plan to be in the game.

My goal, and I've been experimenting with it for a few days, is to trade off balancing high cost and low cost positions to end up with medium cost positions. I know that doesn't sound very insightful or precise, but remember that I trade the AUDJPY and it's a good carry pair. So, what I'm suggesting is that I'll slowly work to lower my average price over time.

Sure, I know, that's easy, right? Just buy into new positions when the price is lower than your current average! The problem with that is that with limited capital it simply is not safe to enter into more and more positions. Pretty soon too much of your NAV (net asset value) is sunk into the market. Pretty soon you are carrying way too much risk and eating Rolaids for breakfast.

No thanks.

Create a budget, pop in some new funds on regular basis, and sink them into the market at opportune entry points. Over time you'll develop some positions that represent high cost entry points and others that are low cost. Those pairs can be canceled out and used to retry at some new lower entry point.

Time is a powerful thing so put it to work for you instead of struggling against it. Heck, it's a force of nature. Enlist it to your cause and then stay out of it's way.

Exchange Rate Differ From Stocks

There is an important difference between Forex instruments and stocks or bonds. The nature of this difference requires that you adjust your thinking.

When you buy a stock, the presumption is that with inflation or growth that the stock will eventually always climb. That, at least, is the goal.

Trading on exchange rates is a different ballgame. The rate of exchange is a ratio representing the relative value of the two currencies. It simply is not possible to expect one currency to appreciate relative to another indefinitely. For example, if the exchange rate between two currencies widened a lot then trade opportunities would be created to adjust this imbalance.

Obviously, with a plethora of fundamental variables and widespread speculation it will be difficult to determine the range, but you can theoretically consider Forex instruments to be variable between some unknown high and low exchange rate. Personally, I would prefer to rotate my charts 90 degrees, label each side with the currency in question, and then have the line move from left to right as the relative exchange rate adjusts.

At the same time, I'd like it if instruments were mirror imaged. By this, I mean that we should not be limited to buying and selling EURUSD, for example, but instead that we should be able to buy and sell both EURUSD and USDEUR. Yes, I know all of this is semantics, and it would require work for the market makers to either support this or have the trading systems perform on the fly translations, but it would make things less susceptible to common misconceptions.

Or so I think today. With a bit of time I'm sure I'll buy into the current way things are done if for no other reason that it is the way it has always been done. Also, at that point, why should newcomers have it easier than I did?

A Winning Forex Trading Philosophy

I'm starting to believe that being successful trading Forex has more to do with your philosophy than anything else.

You cannot trade based on how much money you want to make. You cannot trade based on how much money you need to make. This means that you can't push money into the market, desperately searching for opportunity, risking a large portion of your net asset value in the process.

You must trade lightly.

When you trade lightly, you simply let the market give you the returns that it is willing to relinquish to you. Quite simply, it is not a process of taking.

If you can change your mindset it will give you a lot of peace compared to the level of stress that many generate. Dip your toes into the market, following your strategy, with a level of investment that simply cannot begin to raise your blood pressure.

A little bit of market wisdom, developed with experience, combined with an appropriate philosophy will generate profits. I know that this is difficult to consider or even believe in today's rational calculating world, but the only way to win is to not fight the market. It is way too big for you.

Stop trying to generate winning positions and simply let the market give them to you.

Forex Trading Review

So, I've been practicing my strategy using a micro-account for months, and it's time to up my game and start trading for real.

I capitalized my account on Thursday evening and have been playing the AUDJPY with a more serious dollar value for the last two days. Here is a summary of the mistakes I noticed myself making over this period:

Discipline breakdown. I broke discipline and acquired too many open short positions as I was predicting an eventual downturn. Actually, I was afraid of it and wanted to be protected from it, but the result is the same. Lesson -- stick to the plan.

Too impatient. For quite a while the market was moving very slowly. I tried to push capital into the market and forced some trading. This was a mistake. Lesson -- stick to the plan.

Too protective. I was overprotective of my open long positions. Stop losses were placed too early or too close to market prices. This accumulated with my strategy of acquiring in-profit positions. Lesson -- adjust the plan.

Confused. With a long position trading sub-account and a long position carry sub-account, I need to use different strategies for each. I got confused and used my grid strategy in the carry account as well. Needless to say this was not conducive to accumulating profitable carry positions. Lesson -- stay focused.

Buying tops. With gridding strategies it is easy to buy at the top of price spikes. It is necessary to factor this in when setting stops (see point 3). Lesson -- adjust the plan.
In summary, trading with some real money for a period of almost two days has me up $1. While pitiful, I'm happy to not be negative while trading in such a sloppy manner. Fixing these errors, with the size of positions being used, would have me up $20-$40 over this period. Lesson -- do it right and make some useful money!

I don't know if what I'm describing will be helpful to anyone, but I'm putting this out here for my own benefit. Of course, if you can learn from my mistakes, that would be great.