Forex trading

Non-farm payrolls report

We yesterday talk about news and event trading. We concluded that if traders want to achieve consistency they need a well-tested strategy. Something that cant be done trading the news, because we dont know what the traders around the world are thinking. A sole trader thinking the EUR/USD could go down, can negate us the possibility to win the trade.

There is something I have been noticing in the last months though. All fundamental releases dont have the impact the used to have two or three years ago.

Three years ago, the market (i.e. the EUR/USD) could move 150 pips in just seconds after the NFP release. Today, the market just spikes up and down, both ways maybe trying to get stops (or triggering orders) 20 or 30 pips away from the market.

This is just another point against trading the news. We are never going to be able to see where is the market going after a news announcement.

If you trade this way, try to incorporate other analysis such as technical analysis or price behavior to your strategy. It will generate better results.

Regards,

Raul Lopez
Forex Trading training

Forex News and event trading

Today, I was talking to a fellow trader, he talked to me about a killer trade he made the last month. He traded the non-farm payrolls release.

Those of you who dont know, the NFP release is the biggest fundamental mover. The market goes crazy the first friday of each month, when the NFP is released.

Sometimes trading the news can be very profitable. But the question here is, could you trade the news and have consistent results? I dont think so. In order to be consistent (trading the news) you need to know exactly what every trader in the WORLD is going to do (stay on the sidelines, add to a position, close a trade, etc.)

It is impossible to know all these information, thus it is impossible to make a living trading the news.

If you want to trade consistently, base your trades on a well-tested methodology or trading system, dont fall prey of random rewards.

Raul Lopez

Hello back traders,

We talked about two of the most important factors that determine success in the trading environment (trading systems and money management). Now its the turn of the third pillar, Trading psychology.

By this time you know of the importance to have a system that perfectly fits you and what money management could do to your trading. By mastering those two aspects, the only thing left would be how to handle your emotions.

Ok, You have created the perfect system for you, and have implemented a money management technique that will keep you in the game for the long haul and will also help to boost your profits. But you are still afraid to pull the trigger...

Well, dont feel bad about this, it is humane nature, every trader suffers from the same psychological barriers. You dont need to get rid of those emotions, but handle them.

The best way to handle our emotions is to accept the fact that every trade has a probable outcome. When we created our system, we tracked high probability trades. We know that when our trading signals go on, historically they produced good results. This doesnt mean that every trade was profitable, was it? So it doesnt matter what is the outcome of the next trade, what we do know is that statistically, our trade has a high probability of success, our only work here would be to make ourselves availabe to that opportunity.

Thats all, we dont need a perfect system in order to make money trading the Forex market, we only need follow our systems so we have a chance to profit from market movements and to accept the risk...after all, all traders are risk takers.

When a trader truly accepts the risks, the emotions will play in his or her favor.

I will develope more about this subject in the future.

Raul Lopez
http://www.straightforex.com

Traders,

Welcome back to this your Forex training blog. As I mentioned before I would like you to participate in this blog and ask questions in just about everything related to the Forex market.

On prior posts we talked about the three pillars of trading:

Forex trading system
Money maganement and,
Trading Psychology.

We dedicated some words to the first pillar of trading on the last post. Now is the turn of Money maganement.

Money management tells you how much to risk on every trade, and has as a primary objective to avoid the risk of ruin. Thats right, by using properly any money management technique you make sure you are going to be in the game tomorrow, next week, month and years.

Money management works on your profits as well as your risk. It allows your profits to grow geomitrically and at the same time it limits your risk.

The most common money management techniques are:

1. Trade one contract fore ever $XX,XXX. This is the most simple MM technique. It states that a trader is going to risk one contract for every $XX,XXX in his/her trading account.

2. Fixed fractional trading. This technique is probably the most used. It dictates that a trader whould risk a fixed percentage of his/her trading account on each individual trade.

3. Optimal f. Developed by Ralph Vince, he claims that there is an optimal fraction that will produce better results for any given set of trades.

4. Fixed Ratio. Developed by Ryan Jones, in this technique, the relationship between the number of contracts being traded and the ammount of profits required to increase to one aditional contract should remain fixed.

I like to trade based on a fixed fractional technique, explained below:
I only trade 4 different currency pairs: EUR/USD, USD/CHF, USD/JPY and the AUD/USD
I risk on each trade the following fixed percentage:
For EUR/USD I risk 1% of my trading account
For USD/CHF I eisk .75% of my trading account
and for both USD/JPY and the AUD/USD I only risk .5% on each one of them.

This ensures that the most I will have at risk at any given moment is 2% of my trading account (I only trade either the EUR/USD or the USD/CHF at the same time.)

The most important thing here is that as my account grows, I permit the geometric growth of it. And at the same time I limit mi risk during drawdowns.

Ok traders, I have to go now, I hope you enjoyed this Forex training lesson.

Success to you.
Raul Lopez
www.straightforex.com

Hello Forex traders,

I would like you to think as this place as a Forex training source. So keep the questions and comments coming on just about everything related to the Forex market.

As I mentioned on my prior post, there are three very important aspects of trading which are: a Trading system, money management and trading psychology. I am going to dedicate a few words on the first aspect.

Forex trading systems.
Why are Forex trading system such an important part of trading? Well, they indicate a trader where to get in the Forex market, but most importantly where to get out. Many traders forget about the last part if it. Getting in the market is the least important part, after all our exits determine wethere we make money or not, dont they? So we need to pay special attention on our exits while devising our Forex trading system.

Why is it important to have a Forex trading system?
While we are in a trade, it is hard to make an objetice judgement about the market conditions, because all our toughts are manipulated by our mind. By having a system, you dont have to make this desisions; you have a set of rules that if followed they will provide you with the best results in the long run, you dont need to worry about single trades.

Another important aspect of a Trading systems is that you need to make sure your Forex trading system fits your trading personality. Otherwise you will find it hard to follow it. Im sure you have heard about traders that are afraid of pulling the trigger when a system signals a trade, or when a trader gets out of a trade when his/her system is telling him/her to stay in the trade. Well, most of the time it is because the trading system doesnt fits his/her personality. So take this in consideration when devising your forex trading system.

It will be hard sometimes to do everything right, but try as hard as you can, the reward is big, really big...

Ok traders, remember take this place as a Forex training course, dont hesitate to post your comments or questions.

Its friday and I have to do some paper-work to finish my trading week. I will see you next monday.

Raul Lopez
www.straightforex.com

Hello Forex traders,

This blog has as the main goal to provide Forex traders valuable information just about everything related to Forex trading. Stay tunned as this source of information will be updated several times a week with useful information. We will also include information about the current market conditions.

Let me first introduce myslf. My name is Raul Lopez, I have several years of experience in the Forex market. I am trading for a living since 2001. I am Also the founder of http://www.straightforex.com a high quality Forex Training company.

I am a firm believer of price behavior. I like to incorporate price atcion to every system I trade, so they generate higher probability trades.

Also I do think that trading successfuly comes primary from three important aspects:

Trading system. Having a system that perfectly fits the trader personality.

Money management (MM). To let you increase your profits geometrically and at the same time limit your risk exposure.

Trading psychology. Being aware of all psychologycal isuess that affect every trading decision defintely helps.

Thats all for now traders, I will see you again later this week.

Raul Lopez
www.straightforex.com