- the system chosen by the trader is inherently defective and cannot generate profits
- lack of discipline in applying the system
- allowing trades to be influenced by emotion
- the trader simply made mistakes

Whatever the cause of the losses, reducing losses and maximizing profits can be yours with proper education and experience. Creating a definite and detailed FX online trading plan coupled with proper implementation can salvage seemingly terminal scenarios regardless of the system being used.

Your Plan

A market tested profit generating system and an efficient plan are two components for success in FX online trading. The trading systems on the market are much too numerous to enumerate here so our presumption will be that you have in fact, acquired your own system. The deficiencies begin when people presume that having a system is all they need. Well, in time they will realize that it certainly is not. The choice of system is definitely important but equally important is having a plan whose objective is the proper and effective implementation of the system chosen.

This plan must contain these three elements:

- the position size which is defined as the amount invested in every trade. While this would be defined in terms of lots, it is worthwhile to take into consideration the magnitude of the margin as well as what percentage it is of your total funds. Leverage available to you and the acceptable risk level involved are the determinants of the percentage amount.

- your stop loss level. This is defined in terms of pips but like position size, it’s better to analyze it as a percentage of your trading funds. As a general rule, traders should set up stop losses in manner in which they will not risk more than 2% of their total funds on just one trade. This may be adjusted based on your account balance. In cases where you have a minimal amount of funds, it may be necessary to take on more risk. This is because small normal market fluctuations will trigger stop losses every now and then. Ensure though that you keep foremost in your mind the fact that you are taking on a larger risk.

- exit levels for successful trades. Most traders do not plan this ahead of time but in reality, it should be done. For majority of market situations, profit maximization is facilitated by a preset profit exit amount. Resist the temptation to ride the trend to the end in the hope it will just continue and generate more profit for you. Eventually market conditions will change and when they do they may affect you severely.

Stick To Your Plan

What is the point of making a FX online trading plan if you won’t follow it anyway? The dissenting voices will always be there, urging you to waver from your plan, showing a large number of alternatives.

One temptation just mentioned was that of riding a positive trend indefinitely. This is just one of many temptations you will encounter. Another one occurs after a loss, where you are tempted to risk a larger amount than planned hoping it will create profit to compensate for the loss. Do not give in.

Another scenario is when your trading volume has been non-existent because there are no trades that conform to your trading criteria. One day, you are presented with a situation that just misses being traded by your system. You are tempted to give a little bit to accommodate this trade. Should you do it? Most certainly not. This is the essence of discipline, being able to say no.

It is also important to maintain focus by avoiding distractions in the course of your trading day to ensure that the chances of making mistakes is reduced if not eliminated. Mistakes can be unbelievable like going long when you intended to go short. Or maybe entering the market using the wrong pair and even setting stop losses at a level 10 times more than you had planned. Simple errors bordering on sheer stupidity but most traders will own up to making at least one such error once in their life. Domestic distractions are responsible for a good number of them. Doorbell ringing or maybe kids crying and your impulse is to place the trade immediately so you can address the distractions.

This is where the use of forex robots become a great advantage, no matter what the external elements are, the robot will implement the trading plan. As long as your robot can be setup as part of a profitable system, it will just go on trading automatically. By utilizing robots for your trades, you are able to insulate yourself from the dangers of temptation and distraction which can severely impact your fx online trading.

The traditional role of a broker before was to service the client by buying and selling for them via their dealing desks. For stock exchange trading, they would receive compensation via a commission charged on transactions. In the case of fx trading, they would make their profits via the difference between bid and ask prices or what is known as the spread. In the past, orders were placed through the phone which is in stark contrast to trading today which is done online with the trader having complete control of their account.

However, opening standard forex accounts required a large investment with minimums ranging from $10,000 all the way to $50,000 rendering it beyond the reach of individual investors. Today however, there a good number of companies offering lower minimum deposit requirements for forex mini accounts and allowing you to trade from your home. The business models of these companies are quite different from the traditional broker and you must be aware of them as they may have an impact on your investments.

Nowadays, there are a wide variety of companies that offer their services to the individual investor. Most of them don’t have their own dealing desks and operate in very different ways.

Forex NDD (No Dealing Desk)

These are the forex trading brokers who don’t have their own dealing desks. They utilize external liquidity providers to give prices and to match the trades of their clients. The true spread is usually small due to the liquidity providers range though the brokers sometimes opt to increase spreads to create a more optimal profit for themselves.

Forex ECN (Electronic Communications Network)

FX electronic communications network brokers offer a venue for market users such as market makers, banks and regular traders to have trades filled. For the sake of anonymity, trades are entered under the ECN providers name. While the spread is usually small, they generally charge matching fees for each trade.

Forex Market Makers

When a forex market maker is handling your account, the trades are not matched externally but internally by the market maker. What this means is that the market maker will occupy the opposite position in your trade and offer their price to their client, namely you. These prices correspond to the prevailing current market prices. To offset the risk of their position, they then take an equivalent position to yours with ECN or other venues.

In this case, the market makers are not true brokers since they don’t actually place your order in the marketplace. However a lot of traders define fx brokers with some ambiguity and consider market makers as fx brokers as well. Furthermore, some traders cannot see much difference between the market makers and bucket shops and would rather choose to steer clear of them.

Forex Bucket Shops

Bucket shops and market makers work a bit like each other. But bucket shops dispense with offsetting risk and have minimal connection to actual foreign exchange spot markets. Consequently, when dealing with bucket shops, you are actually betting against them. So they take an opposing position to your trade and profit when you lose. So in a manner similar to commercial bet takers, these bucket shops dislike it when you make money and would, in all probability, refuse your business, close your account and give back your funds.

They are considered illegal in some locations and even if they are legal in your location, it would be wise to avoid them, particularly if you are a beginner. As you can see, aside from not being true fx brokers, the bucket shops work against you and not for you.

Therefore, there is no single king of the hill solution that must be followed by the traders looking to maximize profits. There are however, a few guidelines that are true for any trader and these can be applied to your trading approach. These are my so called Golden Rules Of Trading.

1. Be A Trend Follower

The objective of most fx trading systems and strategy is the identification of trends. This is because getting in early on the trend is key to this market. Regardless of whether trends indicate a rise or fall in prices, going in long or short, it is important not to buck the trend. Defying the trends will likely result in quick losses for your account.

2. Protect Your Money

Putting all their eggs in one basket has taken down a large number of otherwise promising traders. Regardless of your conviction that this is THE TRADE that will not go wrong, resist the urge to risk large funds on a single transaction. Things can and will go wrong when you least expect them too.

The determination of the amount you can risk is dependent on your trading strategies and how much a total loss will matter to you. But a good rule of the thumb would be to risk no more than 5% of your total balance. A more conservative trader may opt for 2% to play it safe.

This percentage is maintained by many traders even as their funds increase. In this case, they are actually risking more money per trade because the actual monetary base is larger. It may be wise to reevaluate this because while you have a larger balance in your account, you may be very displeased when a larger loss is incurred due to keeping the percentage constant. If this is the case, it may be prudent to use a percentage reduction so as to risk only the same amount even if your funds are increased.

3. Have Goals For Every Trade

Each trade must have clearly defined profit targets. This means that even before entering the market, you must already know at what level you will close. Avoid overstaying in the market because of greediness.

On the other hand, when the market turns unfavorable for you, avoid keeping a death grip on your trades hoping that it will turn around. It is best to cut your loss and trade another day. A strategy that involves setting stop losses to automate this process is highly recommended.

There you have it. The 3 golden rules of fx trading. Regardless of your trading system, these guidelines will be invaluable in formulating your fx trading strategy.

FX Trading Platforms Designed For Brokers

In this category, a lot of brokers particularly the large organizations, utilize custom made trading platforms. FX trading is big business for these brokers and they will try to gain market share by specifying a platform that will outdo their competitors platform. This however, entails a large cost as well as a long development time. After all, it is the nature of software development to consume more time than was originally allotted. A characteristic it shares with the construction business.

The small brokers however lack the means to have a custom built platform so they usually opt for an out of the box solution. The trading software available in this category though are bound to be familiar to veteran traders who might decide not to deal with the brokers using them. The reason being, that for traders, their confidence is diminished when brokerage companies do not invest their resources in developing their trading software.

But all is not lost as there is a middle of the road solution which is quite feasible for lots of brokers. This involves taking a packaged trading platform and having it customized to give it a unique, custom made look. This could involve aesthetic changes like including company logos, using the company colors and other cosmetic factors. Others will take it a good step further by providing technical analysis stuff that are always useful for traders but hard to get out there. This provides the brokers platform with an air of uniqueness minus the full custom costs.

FX Platforms Designed for Traders

Majority of the single or private traders will just use the software provided by their broker. Therefore, the type of platform becomes one of their prime considerations when selecting brokers. In some cases, this may even carry more weight than the costs of trading with that broker. Larger spreads are accepted as a trade off for better technical analysis tools and information since they believe it may add up to better profits in the long run.

Moreover, there are traders with more specialized requirements. These are the traders who utilize forex robots or automated trading systems which require a software platform compatible with the robot. In fact, some veteran traders with their own profitable personal system, opt to design their own robot to automate their trades. The majority of robots and expert advisor systems use the Metatrader 4 platform so this free download may be needed to utilize most of the robots available on the market.

The use of forex robots has a lot of benefits for the user. Foremost among them is being able to close and open trades automatically when market conditions are favorable for your trading system. Consequently, a large number of traders are now using robots and for them, the Metatrader 4 should be the platform of choice.

As in many things in this world, hindsight gives us 20/20 vision of trends by way of charts. While the currency trends are most apparent in candlestick charts, this information can be seen on other kinds of charts as well.

During a period when prices are on the rise, drawing a line above the low points of candlestick shadows will give the uptrend slope. On the other hand, the downtrend slope can be seen by drawing a line above the high points of the candlestick shadows during a point when prices are going down.

Sometimes, a sideways currency trends exist wherein prices fluctuate up and down in between two points without going through them. At this point, should lines be drawn above and below the shadows, they would be horizontal.

In such cases with a horizontal line, it can be expected that in time, the price will break in either direction. To get on this breakout, traders would enter orders to place trades once the price moves to certain points above or below the horizontal line.

Then there are those traders who utilize the sideways currency trend to identify changes in general price movement. For instance, when the sideways pattern is a generally regular movement going up, this could mean there is resistance to prices going any higher. In this case, the upper line can be considered the resistance line after which a price movement going down would result in prices returning to the trading band acceptable to the market.

You are however, well advised to test these methods prior to integrating them into your system. Using backtests could be of assistance so you could establish if this system is worth pursuing. Then if you feel it is, employ demo accounts and do live market tests before risking real money in the system. Keep in mind the volatility and risks involved in forex trading. Even the very best systems will fail or even encounter a series of losses or a losing run.

Draw trend lines correctly and you can use them as a predictor of breakouts and large price movements. Done this way, they can be as accurate as the other methods available. Be mindful though to maintain your objectivity particularly when evaluating markets in real time.

The reason is that during a time when we are on the lookout for preset conditions that will signal that an order should be placed, it is all too easy to act prematurely. Subjectively, we decide that a trend or pattern has formed when the truth is that it’s still too early in the game to tell. Be aware of this tendency when drawing the lines on the charts to indicate trends. It may lead you to draw what you want to see rather than the real picture.

1. Employ weekly and daily charts

Using a weekly chart to survey the movements of your currency pair of choice, can give a clearer view of long term and short term market trends. Spot forex trading can sometimes put blinders on your perspective particularly in cases where day trades are the focal point of your methods. By using weekly charts, you are able to take a step back and view the market from a different angle.

Often this novel view of things can help you ascertain the right and wrong moves in your trades as well as the reasons behind them. This knowledge can then be used to gain more profit via fine tuning your system. One caveat is that you must not change a known excellent system each and every time a bad trade occurs. An equilibrium between discipline and fine tuning must be found.

2. Avoid excessive trading

Resist the urge to run after every trading opportunity. There are times when holding back is the better alternative. Oftentimes, the trader with less trades makes more profit. It does run contrary to the belief that substantial profits can only be achieved through a large number of trades. However, ill timed trades will lead to loss thus lending credence to the “less is more” theory.

Being able to live with risks is a necessary trait for forex traders. Some traders actually find themselves enjoying the risks involved. However, this can make it harder to control oneself when faced with what appears to be a chance for a great trade. Investing is not synonymous with gambling and trades must be chosen with care. Throwing caution to the winds while in pursuit of a potentially humongous profit is likely to lead to a potentially disastrous hit to your account.

Some excellent trading systems trade less than others at certain times so less profit is made during this period. When this happens, resist the urge to modify the criteria, widening it so that more trades are made. Making such modifications will almost guarantee that your system, which was making profits before, will now be accumulating losses for you.

When faced with this, two options are available to you. One involves increasing the dollar amount of the individual trades. However, this obviously increases the risks and is not recommended unless you have great confidence in your system. The other option is to look for another system that has the same profit potential as the first. Once you find one, use them simultaneously so as to increase your profit potential. For majority of the traders, the second option is the preferred one though it must be stressed that prior to using the new system it must be evaluated and studied well.

3. Avoid setting unrealistic goals

When trading forex, avoid keeping yourself focused exclusively on the potential profits. All large potential profits carry with them the risks of large potential losses as well. Losing money in forex trading is a reality that you must accept and be prepared for. Therefore be sure that you trade only with your disposable income, not the kids college fund etc. And don’t think that your profit will increase exponentially at a rapid pace.

However there are a large number of forex ads that encourage unrealistic expectations. Some even offer to double your investment in a week. The truth is, there is no certainty that you will double your money. And there most certainly is no guarantee that this will happen once every 7 days with no losses. While making double your money in a short time period may be possible, repeating it continuously without encountering any loss is an expectation that is out of touch with reality. It’s prudent to assume that for every two steps forward, you will take a step backward. Evaluating potential gains in other markets like stocks and bonds can assist you in setting realistic targets for your forex investment.

Lastly, before embarking on trading forex with real money, arm yourself with methods and techniques, which you thoroughly tested personally. Consider all the choices available and keep in mind that you will be encountering a lot of risks. Ensure that you give yourself the best shot at forex trading success by keeping these trading tips foremost in your mind.

A trader who keeps on switching systems is being instrumental in ensuring that he will not make money on his trades. All of us are lured into doing this at some point in our trading career but we must do our best to resist. However, if resisting becomes too difficult, you may want to try a technique or two below to assist you in your quest to stay true.

1. Your choice of system must be the result of long and exhaustive evaluation by you, the end user. One veteran trader, when asked about his success secrets said, it’s all about thorough researching before deciding on a system, then sticking to your decision like iron. While your choice of system need not be the best, it must be a profitable and track tested one. Each system requires actions from its users during the good and bad periods of trading. Know what is required of you and be sure that it is acceptable to you as well.

2. A lack of self discipline in other non-trading aspects of your life could be utilized as a tool to learn the art of discipline prior to commencing trading with real money. To do this, perhaps its best not to start with the most difficult area that needs discipline. It’s more advisable to begin with easier tasks like sticking to a regular exercise program.

3. Put aside a separate mini account, a kind of budget for fun trades. These are the trades that don’t conform to your trading criteria but are so alluring that you couldn’t bear to let them go past you. Chances are you will eventually lose money trading this way so be realistic and be sure your finances can absorb the losses. If they cannot, then just resist and trade on paper or utilize demo accounts to indulge your urge to trade. When you do trade in this manner, whether with a fun budget or with demo accounts, ensure that the trades are recorded and tracked. It will help in addressing the all too human trait of retaining the memories of the few profitable trades while conveniently forgetting the more numerous disastrous ones.

4. Avoid discussing your trading system and trades with others. Soliciting opinions from online forums prior to choosing your system is ok. However, once you have chosen your system, avoid the “mine is better” discussions with others as they are always counter-productive. People will always think that their choice of system stands head and shoulders above the rest so debating is futile. Family members and friends who are not into trading are likewise bad audiences simply because people react negatively when presented with something that is beyond their understanding.

5. Never drink while trading. Even surveying the markets after downing a few cold ones is not rcommended. Your sense of judgment will be impaired and it is likely to cloud your judgment. Alcohol makes discipline and control difficult particularly when an alluring trade is presented which must be resisted because it does not conform to your own rules.

While trading while lounging around with beer and chips is an appealing vision, the truth of the matter is, indulging in this scenario is incompatible with success in foreign exchange trading. To succeed, your thinking cannot be influenced by alcohol as it will make it difficult, if not impossible to exercise the discipline necessary to stick to your system.

In such scenarios, the forex robots which trade automatically can be your salvation. While you work at developing the trading discipline and skills needed, the forex robot can trade consistently on your behalf. Then when you feel confident about your abilities, you can try your hand at live trading sans the forex robots.

In forex trading, any of the worlds currencies can be used. Real world trading though, confines itself to a subset that includes only the currency of the major financial power players. Note that a nations financial power has no direct bearing on the actual physical size of the nation nor its political power. Switzerland is a good case in point of large power emanating from relatively small land masses. In this case, the power of Switzerland is a direct result of the global significance of their banks.

Six major currency pairs account are involved in 90% of the trading in foreign exchange markets, namely:

- USD/CHF: the US dollar and Swiss franc.

- EUR/USD: the euro and US dollar.

- GBP/USD: the British pound and US dollar. Bit of trivia, the nickname of this pair is “Cable” derived from the fact that an undersea cable in the Atlantic, was utilized for synchronizing them.

- USD/CAD: the US dollar and Canadian dollar.

- USD/JPY: the US dollar and Japanese yen.

- AUD/USD: the Australian dollar and US dollar.

While other currency pairs are used by other traders, some involving the New Zealand dollar, limiting their trading to the major powers shown above is recommended for new traders.

Among the majors, the US dollar stands as the most prolific in light of a 2007 study that showed that 85 percent of the trading done involved the USD. Second place at 37% is the euro and following it in order are the yen, pound, Swiss franc, AUD and CAD. Note that they will never add up to 100% because all the trades involve currency pairs.

So What Currency Pair is Best for Beginners?

The consensus of experts in this matter is the EUR/USD is the currency of choice for beginners because of the voluminouse data available about these currencies. Furthermore, smaller spreads are produced by the high liquidities involved thus trading costs will be relatively low.

Moreover, trading certain currencies require specialized knowledge from those wishing to trade them effectively. Case in point is the Canadian dollar. Since Canada is a significant exporter of oil, the world market price of oil will have a direct bearing on the value of their currency as well. At the other end of the spectrum is the case of Japanese yen which is influenced in a major way by oil prices due to the fact that Japan consumes and imports a lot of oil.

At the start also, it is best to avoid trading with a large variety of currencies. Starting with the EUR/USD first for a couple of months is advisable. After this, the general trend for traders who are just sharpening their skills is to include the GBP/USD currency pair in their trading portfolio.

Practice, practice, practice. You must have a large store of knowledge and strategies at your disposal, but putting these theories into practice is how you will become an effective trader. It is not a good idea to practice with your hard-earned money; beginners often lose more than they gain. A great alternative that will give you the experience you need is to open a free demo account with a broker. This is good practice for Forex brokers because as beginners grow, they tend to start using real money. When this happens, the brokers charge trading fees that will, hopefully, be covered by your gains.

After you have set up your demo account, it is time to put some theories into action. If you know very little about Forex trading, it can be overwhelming because some of the indicators are very complex and meant for serious investors. Is there an easy way to gain entree into the market?

A natural place to begin is a trading strategy known as “support and resistance.” During periods when the market is fluctuating, it is helpful to view it as part of a larger trend. This way, you will see how prices typically behave.

In your Forex demo account, you should have charts and indicators available. Look at the candlestick charts that show movement over several periods. Here you will be able to spot price increases and decreases between different points.

After you have identified the high points, simply draw a line along them. This horizontal line is called the “resistance line,” above which it is unlikely that prices will rise. When your currency’s value hits this line, it typically moves back down. It may be a good time to sell.

The “support line” is a horizontal line along the low points. It marks the point below which prices are unlikely to fall during this trend. When you see prices fall to this line, it may be a good time to buy because they are likely to rise again to stay within the support and resistance boundaries.

Because the market can be unpredictable, this does not always guarantee gains. It is possible to see prices extend under or over the boundaries. This happens when new trends are emerging. This is why demo accounts are so great – you can practice support and resistance strategies, while using indicators to predict breaking trends. When you learn to use them in conjunction, you will be able to make safer and more profitable trades.

Work with your demo account for several months. You will learn to use different trading strategies and gain familiarity with the Forex market. Trading is risky even for veteran investors, but with practice and a conscientious testing of strategies, you can create a profitable trading system.

Oversold markets are those in which stock prices are considered too low. Overbought markets, by contrast, are those in which stocks have a higher price than their actual value. When RSI scores fall below 30, it tells traders that the market is oversold. At the other end of the spectrum, scores above 70 point to a market that is overbought. While many traders use the 30 and 70 markers as signals to buy and sell, others opt for 20 and 80. This is a stronger indication that a reversal or price correction is imminent.

Being able to recognize trends is important in making successful Forex trades, and the RSI can help with this as well. The center line, 50, indicates a stable market. You may be able to spot an uptrend by looking at the RSI score. If it is above 50, it can mean that currently, average gains outweigh average losses. Evidence of a down trend, on the other hand, can come with RSI scores below the center line.

RSI and other indicators are useful only during established trends. Within any given day, there will be price fluctuations which are normal parts of the market. Trends, however, last up to several months and indicate where the market is overall. Those interested in day trading will not find the RSI helpful in closing trades as it is a medium to long-term investing tool.

How does the RSI calculate momentum? When a trader uses an RSI program, it calculates scores by looking at the averages from past periods. Typically, at least 14 periods are used to ensure a balanced overview of the market. There are two different theories on using an RSI and improving its accuracy. If one increases the number of periods beyond 14, the score is more accurate. However, it will be more difficult to spot an emerging trend early. On the other hand, one may use fewer periods to calculate scores and get in on trends sooner. The downside to this is that it is possible to get a less accurate result, which may affect trading.

Momentum oscillators, the RSI in particular, are extremely useful in helping investors spot trends and time trades. Easy to read and often very accurate, the RSI can help maximize profits and minimize gains. It is not, however, foolproof. Traders have to balance the need to get in on trends early with the having the most accurate information. It can easily happen that a trader jumps on a perceived trend that does not materialize. As part of an overall investment strategy and in conjunction with other indicators and charts, though, the RSI is invaluable.

Indicators and charts, such as trend lines, typically track prices as they fluctuate. Reading trends is essential in timing trades and accurately predicting where the market is going as a trend begins. Equally important is the ability to gauge when a trend is nearing its end. It is entirely possible to see your gains evaporate as the market swings.

Parabolic SAR was designed to help you anticipate trend reversals through a series of complex formulas and calculations. For non-mathematicians, charting software will create the Parabolic SAR automatically so all you have to do is read it correctly. You will see a series of dots marking a channel through which prices are currently traveling. If prices go above or below these points, it can mean that there will be a trend reversal in the very near future.

The dots are set up along a candle chart: during up markets, you will see the dots below the candle, and during down swings, you will see them above. The candle charts movements in price. Traders learn to close trades when the trends reverse. When this happens, you will see the dots crossing the price line, which indicates that the current trend is likely ending.

Stock and Forex markets are notoriously fast-paced and mercurial. Instead of watching fluctuations all day or constantly monitoring your charts, you can simply use trailing stops. With stops, you can close trades instantly and automatically when trends reverse and keep losses from becoming too great.

The Parabolic SAR can be used as a trailing stop loss, which means that if the price dips a certain amount below market price, the trade is closed automatically. In other words, it minimizes loss without minimizing gain. At the initiation of a trend, the stop is relatively wide, meaning that small dips will not trigger the stop. There is more room for movement at the beginning of a strong trend. At the end of a trend, much smaller movements will cause a stop because they most often signal a reversal at that point.

When should a trader use the Parabolic SAR? It is most useful during established trends when traders need to recognize signs of a turning market. It is far less effective during horizontal or with short term fluxes.

While it may sound complicated initially, the Parabolic SAR can be an extremely useful tool for Forex traders. Programs can generate the appropriate charts, but it is important to know what you’re reading and how to apply it to the Forex market. This, along with other techniques and strategies can help maximize profits and minimize losses – which is the goal of any trader.

Trend lines are very basic and easy to use. They simply follow ups and downs in the market, which can help you discern patterns. Timing is essential to successful trades, and trend lines may help you determine when to buy or sell.

Since the 18th century, candlestick charts have been used to follow and even predict markets. With one, you can chart trend lines and determine what the market will do.

A trend line is made by charting both highs and lows. When the market is going up, a line is drawn up from the highest point. A corresponding parallel line is drawn down from the lowest point. The resulting channel indicates where prices are rising.

To chart down days, you simply chart the lowest point with a line and a corresponding parallel line through the highest point. This is called a “descending channel” and tells you where prices are falling.

When the market is making neither huge losses nor gains, your channel will be horizontal. Using the trend lines, you can then extrapolate patterns and make trades based on this information.

How does a trader use this information for Forex trading? It is ideal for traders who hold currencies very briefly. As the price of a currency fluctuates throughout the day, traders keep an eye on the upper and lower points. When a price hits the top of the channel, many will sell because it is likely the price will go back down. Likewise with buying: when the price hits the bottom of the channel, it may be a good time to buy as the price will likely go back up according to the trend.

During a trend, prices typically don’t rise above the resistance line, or top line, or fall below the support line, or bottom line.

If it were that easy, everyone could predict the market. Being able to predict when trends will reverse is difficult, so some traders use general guidelines. For instance, they only sell when a currency’s price moves beyond the resistance line on an upward trend. When it moves above the resistance line on a downward trend, many will not sell because it seems to indicate a reversal in the trend.

You can also use the trend lines even during stable market trends. If you have tracked prices during several down periods and are now seeing a stable trend, it could indicate that the next trend will be toward higher prices. Before putting any theory in action, it is best to test them and see if they play out according to your predictions.

Develop and test theories using a demo account or use real-time prices so you can get a feel for trading without involving actual money. Once you’ve used trend lines or other techniques with good long-term results, you are far better prepared to invest in the Forex market.

The central line on a chart with Bollinger bands indicates a moving average over a length of time, usually 20 periods. It is a base for the two other lines. The lines above and below the central line are determined by market volatility and are calculated using the same data that gives us the average with a typical standard deviation of 2.

Created by John Bollinger in the 80s, Bollinger bands work on the premise that stock or currency prices are usually within two standard deviations of the average, so prices are apt to fall in the area between the upper and lower bands. When prices either reach either top or bottom bands, it alerts traders to a possible reversal that will keep prices in the confines of the bands.

When markets are more volatile, the bands are wider and allow for more movement and fluctuation.

Bollinger bands are most commonly used in the following manners:

1. To identify oversold and overbought markets.

If investors work on the assumption that currency prices will stay within the bands, they can use Bollinger bands to time trades. Many choose to sell when the prices close above the upper band and buy when they close below the lower line. If the prices return to the center or average line, they close their trade.

It is important to remember, though, that when prices move outside of the bands, it may signal the emergence of a new trend. It is possible to miss this and be stuck holding currency that is tanking or fail to buy currency that is rising. As always, it is best to use a variety of indicators, especially those that are non-oscillating. Checking the Bollinger bands against chart patterns or trend lines will give you a more complete overview of the market.

2. To identify when markets will contract and anticipate breakouts.

The bands converge (become narrower) or diverge (become wider) depending on how volatile the market is. Contractions are when a currency or stock value declines from its high point by 10% or more. On Bollinger band charts, this is seen as the area between bands becomes narrower. Many traders see this as evidence of a breakout, meaning prices will go above or below the bands. They place buy and sell orders outside the parameters of the bands in order to capitalize on the breakout.

This is not risk-free, however, because it is possible for false breaks to form. Prices will bounce above or below the bands for a short period and then reverse. Many traders opt to wait before placing orders until they see more than one move outside the band lines. It is always important to check other indicators against the Bollinger bands before making a trade.

Do you need to know everything about the Forex market and trend indicators before investing? While it is always smart to research and practice as much as possible, you can certainly get started after becoming comfortable with one or two sound strategies. Practicing and achieving consistent results gives you a solid start.

Beginning investors need to accept that they will not be successful all the time. No one method is 100% guaranteed. What is important is that you are able to handle losses and keep them from sinking all your profits. When traders experience a loss, many dive right back in and increase their risk, hoping to recoup losses, but very commonly, all this leads to is back-to-back losses.

Sound investment strategies allow for the occasional loss. What you should not do is increase your risk to recover. This is not a strong long-term plan; it can lead to more losses in the short-term and deplete your investing capital.

Spotting a trend early is essential because you can invest when prices are most favorable and exit when profits are peaking. Expert Forex investors credit their experience and say there is nothing mysterious about spotting trends. Rather than psychic ability, they have the technical ability to read the market.

Experienced traders have read charts and indicators for years, and this knowledge is retained. They are adept at glancing at a chart and spotting trends because they are familiar with the patterns. A beginner can labor over a chart, uncertain about what to do. When a veteran looks at a chart, he is looking not only at the information in front of him, but all the information he’s accumulated. He learns to trust his intuition, which is based on knowledge, not emotion.

Beginners should act more conservatively. Not acting at the initial stages of a trend will keep profits smaller, but it will also mitigate losses. Modest gains are important learning tools. It is very possible to misinterpret data and jump on a trend that doesn’t materialize. New investors often hold their currencies on a rising market in the hopes of bigger gains. The danger is that they will hold too long and be stuck with a currency whose value is sinking due to a reversal. In other words, new investors may want to wait a little longer to enter a trend and exit a bit earlier.

Using measures and indicators, like the MACD or RSI, will help you identify trends and determine the appropriate time to enter and exit trading.

Those new to the Forex market should learn about the different indicators available and become comfortable with a handful of solid ones. Using this as a base, you can learn more about market patterns and the pros and cons of different indicators.

System Operation

This is a manual trading system that leaves full control of all trades in your hands. The course provides very detailed and well defined directions. Direction is provided on profit goals, stop losses, market entry signals and risk management.

The system analysis is determined by price and has no dependence on lagging market indicators. Stated system objective is to attain a 10 to 30 percent increase monthly in your portfolio. The inclusion of 2 different trading systems allows for more trading opportunities.

Unlike day trading systems, the 10 Minute Forex Wealth Builder does not require you to monitor accounts and trades for hours at a time. In fact the “10 Minute” portion of the title emphasizes the need to use only 10 minutes daily for account setup once you have familiarized yourself with the course materials.

Upon setting your market entry and exit points, the system can be configured to automatically trade through your broker without requiring any more attention from you until the following day.

More than just saving you time, setting the trades this way prevents emotional components from affecting your trades. By entrusting the system to automatically trade for you based on the system guidelines, the temptation to intervene because of fear or greed is reduced if not eliminated.

Some Caveats

Managing money competently in tandem with a good trading system is critically important. Dean Saunders discusses both aspects in this system. You are advised to pay attention to money management practices within the system and to think twice before taking on risks above the recommended levels.

Make sure that you follow the exact sequence of the training. Even if you feel that you already know certain topics, resist the temptation to skip sections. In this system, as in all systems, making a few alterations and deviations can impact your profits. The basis of any trading system’s success is consistently applying the same, exact, proven system over time.

User Level

In deference to truly newbie users, the system also provides 2 videos to introduce the process of opening demo accounts as well as the usage of charting software. These beginner tutorials can be skipped if you are already familiar with these topics, just be sure not to skip any sections that relate to the trading system itself.

There is an absence of the usual fluff often included in other training sources. Most of the material relates directly to the implementation of the two systems, which allows you to get up and running quickly.