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[Ek0]

I am going to explain in this thread how I became a better trader, my strategy, and resources to learn.

Steps to learn how to trade from no knowledge -

Reasons why to trade forex -

24 hour market
No insider trading
Deregulated market
Does not require huge capital to start... etc etc...

There are many reasons why to trade forex and if you are here, you are looking to trade forex so I wont go into this any further.

When I first started I had no idea about charts, fundamentals, or trading at all. I wanted to learn. I bought three books and read them. They did not help me all that much. I still truly believe the best teacher is trading the forex.

What you need to know to trade profitably in the forex-

1.) Fundamnetals... the forex is driven heavily by fundamentals. You MUST understand the basic concepts of the carry trade, interest rates, countries and their resources (also imports and exports) and understand what backs the currency.

Understand what news reports are important to what countries. For example... the Bank of Japan raising interest rates 100 basis points would be a HUGE deal especially if it was a suprise as of right now 9/28/07. If you dont understand why this is a huge deal in the forex, you probably should not be trading until you do. Why? This is because interest rates and central bank decisions along with economic reports and commodities/equities prices are what drive the largest movements in the forex.

Interest rates
Central bank decisions
Important economic reports such as GDP, consumer confidence, and CPI are typically the more important reports for all countries however its not the same.

Find a way to learn. Watch the news. Read the news. Absorb this information. I warn you, do NOT overlook the news. Start to track the news and see how the market reacts to it. Read analysis reports.

Why I dont trade pure technicals any longer-

I used to try to trade technically but I hardly even bother anymore with indicators. The only indicators I use now are resistance and support levels, trend line analysis, and bar formations when I believe they are pertinent. There are way too many times where fundamentals have overtaken my technical trades. I found it difficult to trade short term especially with the spreads I was taking. I found it hard on faster charts to make 2:1 ratio type trades trading technically. Also I have found that no technical system works all the time so you still must have the background of fundamentals to help you know when your system is more likely to work than fail based off of the trading environment.

Its possible you can do it. However it is not my cup of tea and I believe you SHOULD trade fundamentally with a technical background for entering the market at the right time.

2.) Understand trading concepts itself (learn the terminology and basics)

Understand ideas such as

Margin
Spread
Commission on trades
Interest Rate Roll Over - Also what time your broker initiates roll overs

One issue I experienced that hindered me from learning more quickly was that I could not find a glossary for trading terms, offer and bid for example, or what hawkish or dovish meant. Find a dictionary. There is investopedia.com or I personally traded with Gain Capital group (www.forex.com) for a while and I know they have a decent glossary.

A side note : Gain Capital Group are some what bucketshop bastards but they also provide some good services. If you maintain an account of 1000 dollars and make at least 10 trades per month they give you free access to an E-Signal account in case you dont have trading software. They also have someone who posts commentary. I dont use the commentary for anything except to see what pairs are having some movement. Those are useful. You dont need to trade with them really, but can maintain an account for free e signal basically.

You must also have a deep understanding of technical analysis. What this means is that you must deeply understand what the indicators mean. This is so that you can read them properly in the proper environment. Here is a list below of what to understand for technicals.

Support/Resistance - Also understand trend lines
Time Frames - when to use different ones

For example, after the credit crisis release in the US just a few weeks ago. GBP/JPY has been range trading. I understand that it should be. It should probably continue to range trade. On a 4 hour chart it looks like no movement, I go to a 5 minute chart and I can see the bars and the actual movements. This pair is actually moving a few hundred pips in each direction and make sure you're getting enough data to see the chart properly. Same idea on USD/CAD, I use a 5 minute chart and the chart is probably going to be completely flat because its a slower pair. I must use a longer term chart like 4 hour and daily and it starts to show how the pair has truly been moving.

Indicators - Any indicator you use you must understand why you're using it and how, what it means, and when it works most often.

This is the knowledge you should know before you ever make one single live market trade. I did not take this route, however, I didnt have someone telling me to understand fundamentals and watch the markets. =\

2.) To trade profitably in the forex, give yourself the best chance possible from the start

1.) Find a good broker thats not a bucketshop. I personally trade with MBtrading.com. The interface is hard to work with at first and understand, however they are like the only legit broker I can find and they are good people.

2.) Manage your risk - the hardest problem I had over coming was controlling my risk. I would make 20 profitable trades and destroy all my gains in 4 trades. Heres a trick to help you avoid that.

Find a broker who will allow you to change the amount of margin they give you on your capital. For example, ask your broker if its possible to set your account to 50:1. If you have $10,000 you will have $50,000 to trade and should only be trading one lot at a time. If you try to trade anymore you're going to most likely get margin called anyways on a bad trade so dont even risk it. This is a way to control yourself. Set how much margin your account has.

Also, dont tie your money up into one trade. If you are aggressive and thats just your nature and want more money. Then try trading 1 lot in three pairs instead of 4 lots in one pair. Spread your money around, reduce your risk, and trade multiple pairs instead of more lots.


Okay, so now you must be wondering, how do I learn about all of these things? This is how.

www.actionforex.com, click on action insight and click on one of the reports. Read over them. Why do i tell you to do this? To understand how forex analysis is done. You want to think like the banks do. You want to think like a trader. Understand how they are looking at the forex and how they draw their charts. This is a way to understand better how to draw support and resistance and trend lines.

Also this is a great news site, one of the best in my opinion. Interest rates are located on this page for most of the important pairs.

www.forextv.com, this website has an amazing program. The reason why its great is that its completely about trading. They spend a lot of time in their short segments discussing the forex and economics. Watch forextv.com, they are a great resource. They have plenty of guests come in and discuss the economic releases, news, and other things.

www.forexbastards.com, sign up for felix's free trading signals. Watch his system. if you follow his emails and watch his videos im certain along with forextv.com you will get a better grasp of how to trade news... and the news itself.

www.bloomberg.com, watch the TV sessions. You can learn a lot about the economy and just how analysts view it. Dont take their word for it. Try to understand how they view the market and how they are reaching those conclusions. Think like them, and make decisions for yourself on your own about what they are saying.



Now... after you have all of this knowledge... what should you do? Well you should already have a demo account and should be trading! You should be watching the market and the news and seeing how the news affects the market. How the market reacts and how the market prices in things can only come from experience. The forex is the greatest teacher. You must now take everything you have learned and apply it to the forex and how the markets price it in and why.

You must understand the currency pairs themselves and why they move in that matter. For example - why they move in the manner that they do. For example the usd/cad dropping for such a long time and even reaching 1:1 and better for the cad. (this goes back to understanding fundamentals, the carry trade, and etc.)

Honestly i would suggest anyone who wants to learn how to trade. its probably going to take you the better part of a year or so to completely understand all of the fundamentals and such by yourself. Its taken me a while with no mentor and no resources, i have had to find them all by myself.


So heres my strategy -

I personally am some what impatient and do not like to do longer term trades unless in strong strong trends like the USD/CAD short. I trade pairs which have a strong currency and a weak currency. For example as of today, USD/CAD, AUD/JPY, NZD/JPY, Eur/USD, Eur/JPY, AUD/USD, GBP/JPY...

Imagine... the australian keeps getting strong and the yen keeps getting weaker. Thats a good pair to buy up on dips especially with with gold prices rising and the interest rate difference between the pairs. (If you dont understand what Im talking about in this paragraph... you need to learn your fundamentals.) If you do understand you're saying no duh because im just talking about the carry trade etc.

See how I understand that the AUD/JPY is a good buy on dips because of fundamentals? I understand the value of the two currencies and where it should be and can project where its going to go based off fundamentals, news releases, and interest rates and etc.

I suggest that you all trade the same manner. Pick pairs with a weak currency against a strong currency. Also if you are a beginer... trade only one pair. Just follow one pair until you understand those economies deeply and then move onto another pair. For example trade Eur/JPY and only EUR/JPY and then move onto AUD/JPY and understand the australian economy in the market and world before trading it. Just watch it for a while.

I dont have an exact system except to wait for when theres a chance to make money. Its a deeper understanding of the market and when a pair is overbought or oversold.

I try to find value in the market and do it by understanding fundamentals and using technicals to time my entries.

Please use what I have posted here as a reference guide somewhat. These are all things I have learned from when I started trading and things I have found to be more and more important. If someone would have told me to look for these exact things to understand better, I probably would have learned twice as fast.

Im happy to answer any questions.

Good luck.

[Ek0]

Some more tips

1.) Keep track of the news

Dont trade when you see news releases that are going to release when you're not sure of them. For example... I know that UK GDP is coming out at 2:00pm PST... I have a long position and Im not sure how this news release will come out. I should exit my trade and wait till tomorrow and re-asses the market OR push my stop loss to retain profits.

Main point : keep track of the news and when its going to release

2.) Buy and sell at resistance only or on dips either way

Buying or selling into something off of these moves are a quick way to lose money.

3.) ALWAYS HAVE A METHODOLOGY...

Do not ever trade for no reason. Have a strategy always so you can test it. If you're trading without any strategy even if you're right, you're not understanding how to reproduce those results.

4.) Always have a stop loss and time your entries and exits correctly.

This is easier said than done, but it requires patience and confidence. However if you do understand technical support and resistance and fundamentals.

Profitable trading IS exactly what tip 4 says... entering and exiting at the right times. Trading with knowledge of fundamentals and following technical levels with proper risk management is exactly what trading the forex requires.

Consider this... you want to get as much information as you possibly can to make better decisions. Absorb as much knowledge as you can and you will do better. You will develop intuition and confidence. This is the age of information... so use the links i gave you to help you understand and study the ideas and terms I have presented in this thread.