Tackling the Emotional Demons That Wreak Havoc On Your Trading Account

Today we have a special treat for you. on what may be one of the most important, but little understood, factors that help define how successful a trader may become: Emotions and Trading. Enjoy it!

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Tackling the Emotional Demons That Wreak Havoc On Your Trading Account

It is easier said than done to keep your losses small and let your winners run. We've all experienced the powerful emotions involved in trading and the challenge is to keep those feelings at bay when we're in the middle of a trade and to do what we know is the right thing. All too often, though, they get the best of us and we wind up making decisions that we regret later.

How frustrating it is especially when we make the same mistakes over and over again without knowing how to change what we do. We want a different result, but we get caught.

You too may have experienced the anxiety of pulling the trigger when you know you should. That fear of being wrong or the market turning against you as soon as you've entered grabs hold of you and paralyzes you. It seems next to impossible to just "do it" and take action. Maybe you've had a trade that really went south on you and you just have a hard time keeping it from coming to mind when you're placing trades.

Or how about the urge to avoid placing your stop-loss order, because it's happened too many times that you get in, get stopped out almost immediately, and then the market takes off just like you expected it to. Ooh, that is so aggravating! And of course we can't leave out revenge. When we 'get hurt' by the markets and their uncertainty, it is a natural impulse to want to get even.

Emotions don't come from the logical part of our brain. They are a mechanism that functions at a lower level, and that's why they can be so hard to deal with. Now, some say to "trade without emotion", but that is neither possible nor would you want to shut off the emotional centers in your brain when trading. Emotions are part of who we are and a vital part of our decision-making process.

Einstein recognized that "We cannot solve problems from the same level of thinking from which they were created." This is especially true of emotional challenges.It usually takes the help of someone outside of us to help guide us to the root cause of the issue. Someone who can understand our situation and what we're dealing with that can lead us to the specific factors that are coming into play, and then give us specific actions to take to address the matter.

That's where having a knowledgeable trader to bring your issue to can really help. One who understands the psychology and challenges of trading, who knows the right questions to ask to help get to the root cause, and who also can give specific actions to take to make lasting change for the better.

We hope this article has piqued your interest in this topic. More post On These Coming Later.

Delords

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Reading a Forex Quote and Understanding the Jargon

Today we will talk about how to read a Forex Quote.

One of the biggest sources of confusion for those new to the currency or Forex market is the standard for quoting currencies. In this section, we'll go over currency quotations and how they work in currency pair trades.

Reading a Quote
When a currency is quoted, it is done in relation to another currency, so that the value of one is reflected through the value of another. Therefore, if you are trying to determine the exchange rate between the U.S. dollar (USD) and the Japanese yen (JPY), the forex quote would look like this:

USD/JPY = 119.50

This is referred to as a currency pair. The currency to the left of the slash is the base currency, while the currency on the right is called the quote or counter currency. The base currency (in this case, the U.S. dollar) is always equal to one unit (in this case, US$1), and the quoted currency (in this case, the Japanese yen) is what that one base unit is equivalent to in the other currency. The quote means that US$1 = 119.50 Japanese yen. In other words, US$1 can buy 119.50 Japanese yen. The forex quote includes the currency abbreviations for the currencies in question.

Direct Currency Quote vs. Indirect Currency Quote
There are two ways to quote a currency pair, either directly or indirectly. A direct currency quote is simply a currency pair in which the domestic currency is the base currency; while an indirect quote, is a currency pair where the domestic currency is the quoted currency. So if you were looking at the Canadian dollar as the domestic currency and U.S. dollar as the foreign currency, a direct quote would be CAD/USD, while an indirect quote would be USD/CAD. The direct quote varies the foreign currency, and the quoted, or domestic currency, remains fixed at one unit. In the indirect quote, on the other hand, the domestic currency is variable and the foreign currency is fixed at one unit.

For example, if Canada is the domestic currency, a direct quote would be 0.85 CAD/USD, which means with C$1, you can purchase US$0.85. The indirect quote for this would be the inverse (1/0.85), which is 1.18 USD/CAD and means that USD$1 will purchase C$1.18.

In the forex spot market, most currencies are traded against the U.S. dollar, and the U.S. dollar is frequently the base currency in the currency pair. In these cases, it is called a direct quote. This would apply to the above USD/JPY currency pair, which indicates that US$1 is equal to 119.50 Japanese yen.

However, not all currencies have the U.S. dollar as the base. The Queen's currencies - those currencies that historically have had a tie with Britain, such as the British pound, Australian Dollar and New Zealand dollar - are all quoted as the base currency against the U.S. dollar. The euro, which is relatively new, is quoted the same way as well. In these cases, the U.S. dollar is the counter currency, and the exchange rate is referred to as an indirect quote. This is why the EUR/USD quote is given as 1.25, for example, because it means that one euro is the equivalent of 1.25 U.S. dollars.

Most currency exchange rates are quoted out to four digits after the decimal place, with the exception of the Japanese yen (JPY), which is quoted out to two decimal places.

Cross Currency
When a currency quote is given without the U.S. dollar as one of its components, this is called a cross currency. The most common cross currency pairs are the EUR/GBP, EUR/CHF and EUR/JPY. These currency pairs expand the trading possibilities in the forex market, but it is important to note that they do not have as much of a following (for example, not as actively traded) as pairs that include the U.S. dollar, which also are called the majors.

Bid and Ask
As with most trading in the financial markets, when you are trading a currency pair there is a bid price (buy) and an ask price (sell). Again, these are in relation to the base currency. When buying a currency pair (going long), the ask price refers to the amount of quoted currency that has to be paid in order to buy one unit of the base currency, or how much the market will sell one unit of the base currency for in relation to the quoted currency.

The bid price is used when selling a currency pair (going short) and reflects how much of the quoted currency will be obtained when selling one unit of the base currency, or how much the market will pay for the quoted currency in relation to the base currency.

The quote before the slash is the bid price, and the two digits after the slash represent the ask price (only the last two digits of the full price are typically quoted). Note that the bid price is always smaller than the ask price. Let's look at an example:

USD/CAD = 1.2000/05 Bid = 1.2000 Ask= 1.2005

If you want to buy this currency pair, this means that you intend to buy the base currency and are therefore looking at the ask price to see how much (in Canadian dollars) the market will charge for U.S. dollars. According to the ask price, you can buy one U.S. dollar with 1.2005 Canadian dollars.

However, in order to sell this currency pair, or sell the base currency in exchange for the quoted currency, you would look at the bid price. It tells you that the market will buy US$1 base currency (you will be selling the market the base currency) for a price equivalent to 1.2000 Canadian dollars, which is the quoted currency.

Whichever currency is quoted first (the base currency) is always the one in which the transaction is being conducted. You either buy or sell the base currency. Depending on what currency you want to use to buy or sell the base with, you refer to the corresponding currency pair spot exchange rate to determine the price.

Spreads and Pips
The difference between the bid price and the ask price is called a spread. If we were to look at the following quote: EUR/USD = 1.2500/03, the spread would be 0.0003 or 3 pips , also known as points. Although these movements may seem insignificant, even the smallest point change can result in thousands of dollars being made or lost due to leverage. Again, this is one of the reasons that speculators are so attracted to the forex market; even the tiniest price movement can result in huge profit.

The pip is the smallest amount a price can move in any currency quote. In the case of the U.S. dollar, euro, British pound or Swiss franc, one pip would be 0.0001. With the Japanese yen, one pip would be 0.01, because this currency is quoted to two decimal places. So, in a forex quote of USD/CHF, the pip would be 0.0001 Swiss francs. Most currencies trade within a range of 100 to 150 pips a day.

Currency Quote Overview
USD/CAD = 1.2232/37
Base Currency	Currency to the left (USD)
Quote/Counter Currency	Currency to the right (CAD)
Bid Price	1.2232	Price for which the market maker will buy the base currency. Bid is always smaller than ask.
Ask Price	1.2237	Price for which the market maker will sell the base currency.
Pip	One point move, in USD/CAD it is .0001 and 1 point change would be from 1.2231 to 1.2232	The pip/point is the smallest movement a price can make.
Spread	Spread in this case is 5 pips/points; difference between bid and ask price (1.2237-1.2232).

Currency Pairs in the Forwards and Futures Markets
One of the key technical differences between the forex markets is the way currencies are quoted. In the forwards or futures markets, foreign exchange always is quoted against the U.S. dollar. This means that pricing is done in terms of how many U.S. dollars are needed to buy one unit of the other currency. Remember that in the spot market some currencies are quoted against the U.S. dollar, while for others, the U.S. dollar is being quoted against them. As such, the forwards/futures market and the spot market quotes will not always be parallel one another.

For example, in the spot market, the British pound is quoted against the U.S. dollar as GBP/USD. This is the same way it would be quoted in the forwards and futures markets. Thus, when the British pound strengthens against the U.S. dollar in the spot market, it will also rise in the forwards and futures markets.

On the other hand, when looking at the exchange rate for the U.S. dollar and the Japanese yen, the former is quoted against the latter. In the spot market, the quote would be 115 for example, which means that one U.S. dollar would buy 115 Japanese yen. In the futures market, it would be quoted as (1/115) or .0087, which means that 1 Japanese yen would buy .0087 U.S. dollars. As such, a rise in the USD/JPY spot rate would equate to a decline in the JPY futures rate because the U.S. dollar would have strengthened against the Japanese yen and therefore one Japanese yen would buy less U.S. dollars.

Now that you know a little bit about how currencies are quoted, let's move on to the benefits and risks involved with trading forex.

Delords

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The Benefits of Forex Trading

Today's discussion will cover some of the benefits of Forex Trading.

With the advent of the Internet, anyone can reap the benefits of Forex Trading. Forex Trading is the trading of world currencies. Forex Trading is open twenty-four hours a day except for the weekend.

Beginning in Australia and continuing around the globe as the markets open up, an individual trading in currencies can use the latest news to help determine which currencies will raise or fall.

You can also trade currencies when your schedule permits. Trading in currencies is the ultimate liquid market, with volume often 50 to 100 times greater than the trading of stocks on the New York Exchange.

Because of the nature of currencies and the multiple factors controlling its value, no one has an overriding advantage or insight into the market. Insider trading is nonexistent in Forex Trading, and with Forex Trading you dont have to worry about price gaps.You can decide when to sell or buy.

Also, because of high volatility in the currency market, traders often earn five times more than in trading liquid shares. Forex Trading generates a volatility of 500 versus 60 to 100 in liquid stocks, and there are no transaction fees or commissions in the trading of currencies. Because of the efficiency of trading currencies, slippage costs are virtually non-existent.

An individual wishing to trade in currencies does not need a large amount of money to invest. This is an ideal investment opportunity for the investor with a small amount of cash.

One of the great advantages of Forex Trading is that you can buy currencies when they are being devaluated, thus making a profit when it gains ground. When a stock is falling, the only way to ensure a profit is to sell.

I hope that helps you see the POWER of trading in the Forex Market. Until next Post,

Delords

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Forex Trading and Other Investments

Today we will talk about how Forex Trading compares with other investments.

Forex Trading and Other Investments There are many advantages to Forex trading over other types of investments. While regular stock markets are open during business hours, the Forex market is open 24 hours a day.

Trading cycles run around the world as financial markets open, starting in Australia then Tokyo, London and New York.

With most investments a large amount of capital is needed. However, with Forex, you can begin trading for as little as $50 USD. With this amount anyone can enter the market and begin trading a "mini account.

The Forex is a very liquid market. When trading Forex you have full control of your capital and it does not get tied up for long periods as it can with many other types of investments.

Forex trading possesses unlimited earnings potential. With a daily trading volume of over 1.5 trillion, The Forex market is the largest in the world.

Forex traders can make a profit during up trends and downtrends and profit in either bullish or bearish market conditions.

Since each market is one currency against another, when you buy one you are selling another. This way it doesnt matter whether the market is moving up or down as long as you choose correctly.

With some knowledge of Forex you can accurately predict the outcomes. Since currency prices generally repeat themselves in predictable cycles so you can see what the trends are. Technical Analysis can be used to help see these trends and profit from them.

Market transparency is another advantage in Forex trading. You can manage risk and execute orders within seconds. Its highly efficient and allows you to avoid unexpected surprises.

With a computer you can trade the Forex market anywhere, especially with sites that provide in-depth coverage of the Forex market.

Until next time,

trade well and prosper.

Delords

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History of Forex Trading

The Babylonians appear to be the first to use receipts and notes made of paper, but the exchange of currencies occurred long before the Babylonians.

Early trade was done through a barter system and was soon replaced with an object of value being tallied up to equal the value of goods in exchange. Gold and silver eventually became the standard object of value in exchange for goods. Traders in the Middle Ages used an I.O.U. as a means of exchange which finally led to the creation of modern currencies.

Before World War I, currencies were based on a gold exchange. Paper money was valued on a backup of gold. Sometimes, in a panic, investors would appear in mass to exchange their currency for gold. In those cases, the economy would go bust. When the gold standard was eliminated in 1931 after the Great Depression, Forex Trading became almost non-existent.

Economist John Maynard Kaynes recommended a currency based on a world reserve, but in July of 1944,through a United States initiative, it was decided to base currency value on the United States Dollar, which was valued at $35.00 an ounce in gold.

This arrangement of currency value based on the United States Dollar began faltering in the 1960s and finally tumbled in the 1970s.

President Richard Nixon suspended this system in August of 1971 because of the United States Dollars unsuitability as basis of value as a result of American trade deficits and budgetary woes.

With the introduction of the Euro in 2002 after the implementation of the European Monetary System in 1979, the European economy tottered for a time until stability was finally imposed with the signing of the 1991 Maastricht Treaty which established the EURO as currency across Europe in member nations of the European Union. The EURO became a strong currency and impacted the monetary exchange globally.

With the volatility of currencies in the Third World adding to the mix, investors have become more enamored of Forex Trading so much so that currency exchange has become the largest investment market in the global economy spreading quickly across the world particularly quickly

through the Internet

That's all for today. Next Post we will talk about the importance of Forex Education. See you then.

Delords.

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What is Forex Trading ?

FX, Forex, Foreign Exchange are all names for the transaction of one currency for another, e.g. you buy £100.00 with $150.25 or sell $150.25 for £100.00.

Traders buy and sell currencies with the hope of making a profit when the value of the currencies changes in their favor, whether from market news or events that takes place in the world.

Forex trading has been around for years. It is viewed as the largest financial market in the whole world. The estimated amount of daily volume is 1.5 trillion (US) dollars.

A true 24-hour market, Forex trading begins each day in Sydney, and advances around the globe as the business day begins in each financial center, first to Tokyo, London, and New York.

Unlike other financial markets, Forex Allows investors to respond to currency fluctuations caused by economic, social and political events instantaneously, at the time that events occur, day and night. The market only closes on weekends.

A benefit of forex trading is that it is not really subject to the same kinds of swings in the market that stocks are subject to. Of course if you always buy and sell the same currencies then there will be market swings. But, because there are hundreds of currencies out there, there is always going to be something for you to make money on because while one currency is up in value another one is down and vice versa.

Forex trading does not take huge amounts of capital to start. Traders can begin investing with as little as three hundred dollars. Transaction costs are usually minimal. Often brokers will provide you with the tools and data you need to make trades for free.

There are a large number of buyers and sellers all selling the same products. Information is free-flowing and there are few barriers to participation.

Forex trading is an over-the counter (OTC) market. This means buyers and sellers do not meet in central locations to make exchanges. Instead transactions are completed by phone, fax, and email or through the websites of brokers specializing in this market.

Currencies are always traded in pairs. Transactions always involve selling one currency and buying another. If you believe the euros would gain against the dollar you would sell dollars and buy euros.

A very liquid market, your money is not held up for long periods of time. You will have full control of your capitol. With planning, a good system to follow, strong money management skills, and self-discipline, Forex trading can be relatively low risk and quite lucrative.

We hope that today's message was informational to you. Tomorrow we will talk about several benefits of Forex Trading. See you then.

Delords.

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