VC's Junk

Consumer Price Index (CPI)

2014-09-12T14:06:00.000+08:00

A Consumer Price Index (CPI) examines the weighted average of prices of a basket of consumer goods and services purchased by households, such as transportation, food and medical care. The Consumer Price Index in the United States is defined by the Bureau of Labor Statistic as a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services. Changes in Consumer Price Index are used to assess price changes associated with the cost of living.

The annual percentage change in a Consumer Price Index is used as a measure of inflation.

A Consumer Price Index can be used to index (i.e., adjust for the effect of inflation) the real value of wages, salaries, pensions, for regulating prices and for deflating monetary magnitudes to show changes in real values. In most countries, the Consumer Price Index is one of the most closely watched national economic statistics.

Gross Domestic Product (GDP)

2014-09-09T13:38:00.002+08:00

Gross Domestic Product (GDP) is the primary economic indicators used to gauge the health of a country's economy over a specific time period, as well as to gauge a country's standard of living, you can think of it as the size of the economy. Usually, GDP is calculated on an quarterly or annual basis. It includes all of the private and public consumption, government outlays, investments and exports less imports that occur within a defined territory. For examples, if compared to the previous calculated GDP and it is up 2%, which mean that the economy has grown by 2%.

GDP = C + G + I + (EXP - IMP)

Here is a description of each GDP component:

C (Consumption) - largest GDP component in the economy, consisting all private consumption, or consumer spending, in a nation's economy
G (Government) - the total of the government spending
I (Investment) - the total of all the country's business spending on capital
EXP (Export) - the nation's total net exports
IMP (Import) - the nation's total net imports

Basics of FOREX Theory

2014-09-08T16:04:00.001+08:00

Disclaimer: Trading leveraged products such as Forex and CFDs may not be suitable for all investors as they carry a high degree of risk to your capital. Please ensure you fully understand the risks involved before trading, and if necessary seek independent advice.

Foreign Exchange Definition

Foreign exchange (Forex) is the cross-country exchange of currencies and is, single handedly, the largest and most liquid financial market in the world. With an estimated $1.5 trillion in currencies traded in a single day, it eclipses the trading of other types of commodities. Unlike other commodity trading, Forex has no centralized exchange and is traded primarily through banks, brokers, dealers, financial institutions and private individuals. Due to this ability for financial institutions to trade Forex, the Forex market is open 24 hours, 5 days a week (closes Saturday morning).

Prior to the late 1990's, Forex trading was only the practice for institutional traders and even though retail traders had access to trade the Forex market, only recently has it become popular and more common for individuals to trade Forex for profit. Most of the world's different country currencies are free floating; meaning they retain an individual value and will appreciate and depreciate against other currencies. Currencies are always listed in pairs as they need another currency to benchmark against.

Reasons for Trading Forex

Trading Forex has many purposes and you'll be surprised of the many levels traded that impact you and you're not even be aware of it. For every purchase you make, the contents, ingredients, by-products, parts or materials may not necessarily be from a domestic source. It could have been bought internationally and as such the exchange of foreign currency would have had to be taken place.

From a financial perspective, some people may trade the Forex market for profit. By taking a cross currency pair, they may exchange currency to a foreign designation hoping for domestic currency values to depreciate, thus when you convert it back you will receive more than you initially started.

For international importer or exporter of goods and services, there are great opportunities by having access to the international market. However, with fluctuating international currency rates, payment can sometimes be difficult. Initially companies make a sale for an agreed price, then on the day of payment the agreed value is significantly less than agreed to, due to a currency fluctuation is known as "foreign exchange risk".

You will find all types of businesses, from large financial institutions to small retail freight forwarders will practice foreign exchange hedging. Simply put, these companies will put in place measure to ensure that their agreed payment value will represent the same value at the day of payment regardless of currency value fluctuations.

The Eight (8) Major Currencies

Internationally, there are eight (8) currencies that are traded more than other currencies. These are often referred to as "Majors". These currencies are as follows:

USD - Unites States Dollar
JPY - Japanese Yen
GBP - British Pound
CAD - Canadian Dollar
EUR - European Currency Unit
CHF - Switzerland Dollar
AUD - Australian Dollar
NZD - New Zealand Dollar.

Certain parts of the world have part of their Saturday to trade, as it's still Friday in other markets.
Financial institution in these countries may be dealing with the Forex market during their work hours, the Forex market is open and trading 24 hours, 5 days a week. For someone living in the East Coast of Australia, the market hours for the corresponding markets are outlined below:

New York session opens at 8:00pm and ends around 6:00am
Sydney session starts at 6:00am and ends around 4:00pm
Tokyo session begins at 7:00am and ends around 5:00pm
Europe opens at 2:00pm and ends around 11:00pm.
London opens at 3:00pm and ends around 12:00am.

How To Develop A Profitable Trading System

2014-09-03T12:21:00.002+08:00

"Step 1: Select a market and a timeframe

Step 2: Define entry rules

Step 3: Define exit rules

Step 4: Evaluate your system

Step 5: Improving the system

Let’s take a closer look at these steps.

Step 1: Select a market and a timeframe

Every market and every timeframe can be traded with a system. But if you want to look at 50 different futures markets and 6 major timeframes (e.g. 5min, 10min, 15min, 30min, 60min and daily), then you need to evaluate 300 possible options. Here are some hints on how to limit your choices:

· Though you can trade every futures markets, I recommend that you stick to the electronic markets (e.g. e-mini S&P and other indices, Treasury Bonds and Notes, Currencies, etc). Usually these markets are very liquid, and you won’t have a problem entering and exiting a trade. Another advantage of electronic markets is lower commissions: Expect to pay at least half the commissions you pay on non-electronic markets. Sometimes the difference can be as high as 75%.

· When you select a smaller timeframes (less than 60min) your average profit per trade is usually comparably low. On the other hand you get more trading opportunities. When trading on a larger timeframe your profits per trade will be bigger, but you will have less trading opportunities. It’s up to you to decide which timeframe suits you best.

· Smaller timeframes mean smaller profits, but usually smaller risk, too. When you are starting with a small trading account, then you might want to select a small timeframe to make sure that you are not overtrading your account.

Most profitable trading systems use larger timeframes like daily and weekly, but be prepared for less trading action and bigger drawdowns.

Step 2: Define entry rules

Let’s simplify the myths of “entry rules”: Basically there are 2 different kinds of entry setups:

· Trend-following: When prices are moving up, you buy, and when prices are going down, you sell.

· Swing-trading: When prices are trading at an extreme (e.g. upper band of a channel), you sell, and you try to catch the small move while prices are moving back into “normalcy”. The same applies for selling.

In my opinion swing trading is actually one of the best trading styles for the beginning trader to get his or her feet wet. By contrast, trend trading offers greater profit potential if a trader is able to catch a major market trend of weeks or months, but few are the traders with sufficient discipline to hold a position for that period of time without getting distracted.

Most indicators that you will find in your charting software belong to one of these two categories: You have either indicators for identifying trends (e.g. Moving Averages) or indicators that define overbought or oversold situations and therefore offer you a trade setup for a short term swing trade.

So don’t become confused by all the possibilities of entering a trade. Just make sure that you understand why you are using a certain indicator or what the indicator is measuring. An example of a simple swing trading strategy can be found in the next chapter.

Step 3: Define exit rules

Let’s keep it simple here, too: There are two different exit rules you want to apply:

· Stop Loss Rules to protect your capital and

· Profit Taking Exits to realize your profits

Both exit rules can be expressed in four ways:

· A fixed dollar amount (e.g. $1,000)

· A percentage of the current price (e.g. 1% of the entry price)

· A percentage of the volatility (e.g. 50% of the average daily movement) or

· A time stop (e.g. exit after 3 days)

I don’t recommend using a fixed dollar amount, because markets are too different. For example, natural gas changes an average of a few thousand dollars per day per contract; however, Eurodollars change an average of a few hundred dollars a day per contract. You need to balance and normalize this difference when developing a trading system and testing it on different markets. That’s why you should always use percentages for stops and profit targets (e.g. 1% stop) or a volatility stop instead of a fixed dollar amount.

A time stop gets you out of a trade if it is not moving in any direction, therefore freeing your capital for other trades.

Step 4: Evaluate your system

The first figure to look for is the net profit. Obviously you want your system to generate profits. But don’t be frustrated when during the development stage your trading system shows a loss; try to reverse your entry signals. On our website www.rockwelltrading.com you already learned that trading is a zero sum game: So if you are going long at a certain price level, and you lose, then try to go short instead.
Many times this is the easiest way to turn a losing system into a winning one.

The next figure you want to look at is the average profit per trade. Make sure this number is greater than slippage and commissions, and that it makes your trading worthwhile. Trading is all about risk and reward, and you want to make sure you get a decent reward for your risk.

Take a look at the Profit Factor (Gross Profit / Gross Loss). This will tell you how many dollars you are likely to win for every dollar you lose. The higher the profit factor the better the system. A system should have a profit factor of 1.5 or more, but watch out when you see profit factors above 3.0, because it might be that you over-optimized the system.

Here are some more characteristics you might want to consider besides the net profit of a system:

· Winning percentage

Many profitable trading systems achieve a nice net profit with a rather small winning percentage, sometimes even below 30%. These systems follow the principle “Cut your losses short and let your profits run”. However, YOU need to decide whether you can stand 7 losers and only 3 winners in 10 trades. If you want to be “right” most of the time, then you should pick a system with a high winning percentage.

· Number of Trades per Month

Do you need daily action? If you want to see something happening every day, then you should pick a trading system with a high number of trades per month. Many profitable trading systems generate only 2-3 trades per month, but if you are not patient enough to wait for it, then you should select a system with a higher trading frequency.

· Average Time in Trade

Some people get really nervous when they are in a trade. I have heard of people who can’t even sleep at night when they have an open position. If that’s you, then you should make sure that the average time in a trade is as short as possible. You might want to choose a system that does not hold any positions overnight.

· Maximum Drawdown

A famous trader once said: “If you want your system to double or triple your account, you should expect a drawdown of up to 30% on your way to trading riches.” Not every trader can stand a 30% drawdown. Look at the maximum drawdown the system produced so far, and double it. If you can stand this drawdown, then you found the right system. Why doubling? Remember: your worst drawdown is always ahead of you.

· Most consecutive losses

The amount of most consecutive losses has a huge impact on your trading, especially when you are using certain types of money management techniques. Five or six consecutive losses can cause you a lot of trouble when using an aggressive money management.

In addition this number will help you to determine whether you have enough discipline to trade the system: Will you still trade the system after you have experienced 10 losses in a row? It’s not unusual for a profitable trading system to have 10-12 losses in a row.

Step 5: Improving your system

There is a difference between “improving” and “curve-fitting” a system. You can improve your system by testing different exit methods: If you are using a fixed stop, try a trailing stop instead. Add a time stop and evaluate the results again. Don’t look only at the net profit; look also at the profit factor, average profit per trade and maximum drawdown. Many times you will see that the net profit slightly decreases when you add different stops, but the other figures might improve dramatically.

Don’t fall into the trap of over-optimizing: You can eliminate almost all losers by adding enough rules. Example: If you see that on Tuesdays you had more losers than on the other weekdays, you might be tempted to add a “filter” that prevents your system from entering trades on Tuesdays. Next you find that in January you had much worse results than in other months, so you add a filter that enters trades only from February – December. You add more and more filters to avoid losses, and eventually you end up with a trading rule that I saw recently:

IF FVE > -1 And Regression Slope (Close , 35) / Close.35 * 100 > -.35 And Regression Slope (Close , 35) / Close.35 * 100 < .4 And Regression Slope (Close , 70) / Close.70 * 100 > -.4 And Regression Slope (Close , 70) / Close.70 * 100 < .4 And Regression Slope (Close , 170) / Close.170 * 100 > -.2 And MACD Diff (Close , 12 , 26 , 9) > -.003 And Not Tuesday And Not DayOfMonth = 12 and not Month = August and Time > 9:30 …

Though you eliminated all possibilities of losing (in the past) and this trading system is now producing fantastic profits, it’s very unlikely that it will continue to do so when it hits reality."

The 10 Power Principles of Successful Trading Systems

2014-09-03T12:14:00.002+08:00

The 10 Power Principles of Successful Trading Systems (10個成功交易系統的威力規則)

Principle #1: Few rules - easy to understand

規則一：少規則、容易懂

It may surprise you that the best trading systems have less than 10 rules. The more rules you have, the more likely you "curve-fitted" your trading system to the past, and such an over-optimized system is very unlikely to produce profits in real markets.

你可能會驚訝於最好的交易系統其規則少於10條。規則愈多，你就有可能在針對過去歷史對你的交易系統做”曲線近似”(意即針對過去的少數失敗的交易加了很多濾網，以確保未來這些失敗交易不會發生，使得回測績效曲線美化)，像這種過度優化的系統是相當不可能在真實的市場產生利潤的。

It's important that your rules are easy to understand and execute. The markets can behave very wildly and move fast, and you won't necessarily have the time to calculate complicated formulas in order to make a trading decision. Think about successful floor traders: The only tool they use is a calculator, and they make thousands of dollars every day.

規則容易懂並且容易執行是相當重要的。市場有可能非常狂野且快速，你不一定有時間為了交易決策去做複雜公式的計算。想想那些成功的”地板交易員”，他們僅靠著計算機就可以每天賺進數千美元。

Principle #2: Trade electronic and liquid markets

規則二：使用電子交易於活曜市場

We strongly recommend that you trade electronic markets because the commissions are lower and you receive instant fills. You need to know as fast as possible if your order is filled and at what price, because based on this information you plan your exit. You should never place an exit order before you know that your entry order is filled. When you trade open outcry markets (non-electronic) you might have to wait a few minutes before you receive your fill. By then the market might have already turned, and your profitable trade become a loss!

我們強烈建議你使用電子交易，因為佣金便宜而成交回報快速。你需要儘快知道你的單子是否成交及在什麼價位，因為基於這些資訊你要計畫你的出場。你應該永遠不在知道進場單成交之前就下出場單的單子。當你用人工單你需要等幾分鐘才能得到成交回報，屆時市場可能已經翻覆而你的有利潤的交易就變成損失。

When trading electronic markets you receive your fills in less than one second and can immediately place your exit orders. Trading liquid markets you can avoid slippage, which will save you hundreds or even thousands of dollars.

當你用電子交易時你收到成交回報少於一秒鐘，因此能夠立即下你的出場單。於活曜市場交易，你可以避免滑價，這可以讓你省下數百甚至數千美元。

Principle #3: Make consistent profits

規則三：賺取穩定利潤

You should always look for a trading system that produces a nice and smooth equity curve, even if in the long run the net profit is slightly smaller. Most professional traders prefer to take small profits every day instead of big gains every now and then. If you trade for a living, you need to pay your bills from your trading profits, and therefore you should regularly deposit profits in to your trading account. Making consistent profits is the secret of successful traders!

你應該找尋一個交易系統能夠產生好且平滑的利潤曲線，甚至在長期淨利是稍微少的。大多數職業交易員較喜歡每天賺取小利潤而不喜歡偶而賺大利潤。如果你是以交易為生，你需要從交易利潤裡支付生活開支，因此你應該有規律的賺取利潤在你的交易帳戶裡。賺取穩定利潤是成功交易者的祕密。

Principle #4: Maintain a healthy balance between risk and reward

規則四：在風險與報酬之間維持一個健康的平衡

Let me give you an example: If you go to a casino and bet everything you have on "red", then you have a 49% chance of doubling your money and a 51% chance of losing everything. The same applies to trading: You can make a lot of money if you are risking a lot, but then risk of ruin is very high. You need to find a healthy balance between risk and reward.

我舉個例 : 如果你去賭場而賭你身上所有在”RED”上，你有49％機會將你的錢翻倍而有51％的機會輸光所有。一樣的道理在交易上 : 你可以賺很多錢如果你冒很大風險，但毀滅的風險非常高。你需要在風險與報酬之間維持一個健康的平衡。

Let's say you define "ruin" as losing 20% of your account, and you define "success" as making 20% profits. Having a trading system with past performance results let you calculate the "risk of ruin" and "chance of success". Your risk of ruin should be always less than 5%, and your chance of success should be 5-10 times higher, e.g. if your risk of ruin is 4%, then your chance of success should be 40% or higher.

假設說你定義”毀滅”為帳戶金額損失20％，而你定義”成功”為賺取20％利潤。用你的交易系統以過去的績效結果讓你計算”毀滅的風險”及”成功的機會”。你的毀滅風險應該總是少於5％，而你的成功機會應該5-10倍更高於毀滅風險，亦即如果你的風險是4％，那你的成功機會應該是40％或更高。

Principle #5: Find a system that produces at least five trades per week

規則五：找個每週至少交易五次的系統

The higher the trading frequency the smaller the chance of having a losing month. If you have a trading system that has a winning percentage of 70%, but only produces 1 trade per month, then 1 loser is enough to have a losing month. In this example you could have several losing months in a row before you finally start making profits. In the meantime, how do you pay your bills?

交易次數愈高，月虧損的機率愈低。如果你有一個交易系統勝率是70％，但一個月只交易一次，那只要一次虧損，當月就是虧損。在這個例子裡你可能有連續幾個月的虧損在你最後開始賺錢之前。在這期間，你要如何支付你的帳單?

If your trading system produces five trades per week, then you have in average 20 trades per month. Having a winning percentage of 70% - your chances of a winning month are extremely high. That's the goal of all traders: Having as many winning months as possible.

如果你的交易系統每週有5次交易，你每月平均有20個交易。以70％的勝率，你當月賺錢的機率非常高。那是所有交易者的目標 : 賺錢月份盡可能的愈多愈好。

Principle #6: Start small - grow big

規則六：由小而大

Your trading system should allow you to start small and grow big. A good trading system allows you to start with one or two contracts, and then increases your position as your trading account grows. This is in contrast to many "martingale" trading systems that require increasing position sizes when you are in a losing streak.

你的交易系統應該允許你由小開始而長大。一個好的交易系統允許你由一個或兩個合約開始，然後增加你的部位當你的交易帳戶長大。這是與許多需要於虧損期間增加部位的”加倍賭注”交易系統相反。

You probably heard about this strategy: Double your contracts every time you lose, and one winner will win back all the money you previously lost. It's not unusual to have 4-5 losing trades in a row, and this would already require you to trade 16 contracts after just 4 loss! Trading the e-mini S&P you would then need an account size of at least $63,200 just to meet the margin requirement. That's why martingale systems don't work.

你也許聽過這策略 : 加倍你的合約於每次你虧損時，一次就能贏回最近所有輸去的。連續4-5次虧損交易是不尋常的，而這會使你需要去交易16個合約在4次虧損之後！交易e-mini S&P 你需要你的帳戶金額至少$63,200的保證金需求。這就是為什麼加倍賭注系統不能用。

Principle #7: Automate your trading

規則七：將你的交易自動化

Emotions and human errors are the most common mistakes traders make. Clearly, they are to be avoided by any means possible. Especially during fast markets, it is crucial that you determine the entry and exit points fast and accurately; otherwise, you might miss a trade or find yourself in a losing position. For that reason you should automate your trading and look for a trading system that either already is or can be automated. Automating your trading makes it free of human emotion. The buy and sell operations are all automatic, hands-free, with no manual interventions and you can be sure that you make profits when you should, according to your plan.

情感與人為錯誤是交易者最普遍的失誤。無疑的，這些失誤應該用盡各種可能方法避免。特別是在快速市場，你快速而準確地決定進出場點位是非常重要的 ; 要不然，你可能錯失一個交易或者你發現你在一個輸的局面。為這個理由你應該自動化你的交易而去尋找一個交易系統是已經自動化或可以被自動化。自動化你的交易會使你的交易沒有人性情感因素。買與賣都是自動的，免用手，沒有人工介入。你可以確定依據你的計畫，你應該獲利時你會獲利。

Principle #8: Have a high percentage of winning trades

規則八：擁有一個高比率的獲利交易

Your trading strategy should produce more than 50% winners. There's no doubt that trading systems with smaller winning percentages can be profitable, too, but the psychological pressure is enormous. Taking 7 losers out of 10 trades and not doubting the system takes great discipline, and many traders can't stand the pressure. After the sixth loser they start "improving" the system or stop trading it completely.

你的交易策略應該要有超過50％的勝率。無疑的低勝率的交易系統一樣可以獲利，但心理壓力是非常大的。10次交易7次輸而不懷疑交易系統需要極大的紀律，而很多交易者不能忍受這壓力。在六次輸之後，他們開始改善系統或者完全停止此交易系統。

Especially for beginners it is a big help to gain confidence in your trading and your system if you have a high winning percentage of more than 65%

尤其是初學者，如果你的交易系統勝率超過65％那麼高，這將大力的幫助你對你的交易及你的交易系統取得信心。

Principle #9: Look for a system that is tested on at least 200 trades

規則九：尋找一個系統至少經過測試200次交易

The more trades you use in your backtesting (without curve-fitting), the higher the probability that your trading system will succeed in the future. Look at the following table:

The more trades you have in your backtesting, the smaller the margin of error, and the higher the probability of producing profits in the future.

愈多的交易次數在你的回測，錯誤率就愈少，而未來獲利的機率就愈高。

Principle #10: Chose a valid backtesting period

規則十：選擇一個有效的回測期間

I recently saw the following ad: "Since 1994 I've taught thousands of traders worldwide a Simple and Reliable E-Mini trading methodology".

我最近看到一則廣告：”自從1994年，我教導過全球成千交易者一個簡單而可靠的E-Mini 交易方法”

That's very interesting, because the e-mini S&P was introduced in September 1997, and the e-mini Nasdaq in June 1999, therefore none of these contracts existed before 1997. What kind of e-mini trading did this vendor teach from 1994-1997???

這是非常有趣的因為e-mini S&P是在1997年9月才開始的而e-mini Nasdaq是在1999年6月，因此1997之前沒有任何合約存在。這個賣方在教什麼e-mini交易？

The same applies to your backtesting: If you developed an e-mini S&P trading strategy, then you should backtest it only for the past 2-4 years, because even though the contract has existed since 1997, there was practically no one trading it (see chart below):

你的回測也是一樣:如果你研發一個e-mini S&P交易策略，那你應該回測過去2-4年而已，因為即使合約自從1997即存在，實際上那時並沒有人在交易(見上表) :

Now you should have working method for separating the good trading system from the poor one. By applying this checklist you will easily identify trading systems that work and those that will never make it.

現在你應該有方法區別好的及不好的交易系統。用這個查檢單你將輕易鑒別哪些交易系統可以用哪些不能。"

Fussen, Germany.

2014-08-29T21:44:00.001+08:00

Amsterdam, Netherlands.

2014-08-29T21:08:00.001+08:00

Risk vs. Return vs. Time

2014-08-24T11:56:00.000+08:00

There is a law that states that your returns are directly proportional to the risk you take.

Risk can be your money, life, time and etc, it is the cost of getting a return.

In the financial world,

Higher Risk = Higher Return

Higher Return = Higher Risk

vice versa.

Example, you are doing a traditional business.

You invest USD100,000 and get 10 times return on investment within 10years.

In 10 years you get USD1,000,000 but your risk is still lower than who invested USD1,000,000.

He can get USD10,000,000 in 10years time.

It is the same in Forex trading business.

The more you invest, the return you get is higher than others within the same period of time.

In order to get high return, either you invest more money or invest in high frequency trading.

High frequency trading, you can earn very fast but it can makes you lose faster too.

That's your risk.

How much return you want, depends on how much risk you can take. It's stressful.

Zurich, Switzerland.

2014-08-22T22:16:00.001+08:00

Geneva, Switzerland.

2014-08-22T21:41:00.001+08:00

Lucerne, Switzerland.

2014-08-22T21:18:00.002+08:00

Switzerland

2014-08-22T21:03:00.001+08:00

Top 10 Ways New Forex Traders Lose Money

2014-08-07T21:38:00.000+08:00

"Top 10 Ways New Forex Traders Lose Money
Statistics show that the initial success for new forex traders is disturbingly low. Over time, this trend tends to improve, but for many, it is too late. After posting a series of losses, many new traders will give-up, believing that forex trading is simply not for them. It does not have to be this way.

1. Lack of Experience
Forex trading - like any new initiative - has a learning curve. However, unlike learning a new skill such as learning to play guitar for instance, you are not risking your entire savings while discovering the difference between a major and minor chord. Learning about the currency markets and basic trading principles solely on a trial and error basis is not a recommended approach for gaining the skills necessary to be a successful forex trader.
Most online forex brokers offer a practice version of their trading platform that offers the very same experience as a live trading application. Typically, once you create a practice account, you are free to trade and deal as you wish risking only the "play" money used to seed your account.
With a forex demo account, you can see how the market reacts to economic forces including news events without actually risking your investment capital. However, you must treat this account seriously if you expect to learn from the experience. If you simply shrug off a loss without understanding why the loss occurred, then you are wasting your time and setting yourself up for disappointment. Take advantage of this unique forex market training tool before committing your money to a real forex trading account.

2. Unreasonable Expectations
First off, stop believing all the “get-rich quick” hype still perpetrated by some forex dealers. Yes, there are those that do get rich trading forex but some people also get rich selling houses. In either case, it does not happen overnight and it might take years to gain the experience and insight to turn forex trading into a full-time, successful occupation.
As a new forex trader, if you manage to stay in the game without losing all your money in the first few months as is all-too-common – then you may be able to learn what is required to be profitable. In other words, don’t quit your day job just yet.

3. Absence of a Sound Trading Plan
Next to having unreasonable expectations with regards to the risks associated with forex trading and the amount of time required to be successful, a common mistake made by new traders is the lack of a forex trading plan. In reality, there are two aspects to this plan; an overall objective for your trading activities and a plan for each trade you make.
Your overall objective should include the currencies that you intend to deal in, the amount of leverage you will use, and the amount of time you intend to devote to your trading activities. Your plan must also include a realistic rate of return you expect to achieve. In addition to your overall objectives plan, you also need an exit strategy plan for each trade you make that includes the upper and lower boundaries of the trade.
In other words, you must identify the level at which you will close positions and take your profits (take-profit order) or in the case of a losing trade, the level at which you are prepared to go before you get out of the trade thus limiting your losses (limit order). We’ll talk more about stop-loss and take-profit instructions later.

4. Lack of Discipline
A plan is only of value if you actually have the patience and the discipline to follow it. While this can be difficult, it is necessary if you expect to be successful, and it is this very reason why developing a plan prior to the trade is so fundamental. As rates fluctuate, you can easily get caught up in the market and it is only human nature that you will begin to second-guess your actions. If, for instance, the rate moves up surpassing your original take profit point, you may be tempted to hold out for an even higher return; alternatively, if the price drops below your limit level but you believe there is a big rebound just around the corner, you may be tempted to keep the order open on the hopes of a reversal.
But does either scenario really make sense? If before you entered the trade you had a sound reason for establishing both your take profit and your loss limit levels, how likely is it that conditions have changed so much that now you are prepared to throw your previous assessments out the window in the heat of the battle? Can you be sure that you are not acting on emotion rather than sound analysis?
This is why a plan is so important – it allows you to avoid the emotion that is bound to arise during times of volatility.
Now this is not to say that a trading plan can never be revised – in fact, your overall objectives should be re-examined every few months or even more frequently if required. As well, it may be necessary sometimes to abandon a plan mid-trade if market conditions warrant but this should be the exception and not the norm.
And yes, sometimes the market can be so volatile that no amount of planning will produce positive results. In this case, maybe the best option is simply not to trade until you can get a better handle on things. Never allow yourself to fall into the “I have to do something” trap – sometimes the best plan is to do nothing.

5. Failure to Include Stop-Loss and Take Profit Instructions
When you place a market order and leave it open – that is, enter a trade at the market price without instructions to close the order – you are in effect, gambling with the total value of your account. For this reason, you should consider adding stop-loss instructions to all open positions.
For instance, if you are holding a long GBP/USD position, you can include a stop-loss instruction that automatically sells your long position if the rate falls to a certain level. In this way, you can limit the amount that you could lose on any given trade – even if you are unable to constantly monitor your account.
Take-profit orders are similar in that they allow you to establish the rate at which you want open positions closed in order to lock-in profits. Again, you simply need to identify the rate at which to take the profits, and the trading system closes the position without further intervention on your part.

6. Excessive Leverage
Depending on your experience level, trade leverage can be a powerful tool to help you maximize returns, or it can be the cause of your downfall. It is not something to be taken lightly and if you do not understand how it works, don’t trade until you do understand.

7. Holding Too Many Open Trades
Fighter pilots call it “helmet fire” and it happens when too much is happening around you too quickly for you to react. In the cockpit of a jet fighter, it can get you killed – as a forex trader, you may not end up dead but you will probably end up broke.

8. Holding Losing Positions Too Long
One of the things that really separates seasoned forex traders from those just starting out is their ability to determine when a losing trade is not going to reverse the trend. Rather than “hold and hope”, disciplined traders will take the loss and get out much more quickly.
This is another reason to set protective stops on all your trades; if you include effective stops when you submit a new trade, you can at least limit your losses without having to spend too much time “babysitting” the order. If the trade hits the stop, you will lose the amount committed but you also protect the bulk of your capital, leaving you with funds to move into something else that, hopefully, will be more profitable.
Sometimes, you just have to treat these things as life lessons – learn and move on.

9. Ignoring Rate Spread Fluctuations and the Impact Spreads Have on Profitability
Exchange rate spreads – the difference between the bid and the ask price – are of utmost importance and directly affect the profitability of each trade. You need to be aware that spread differentials can fluctuate wildly during the day – sometimes to the point of turning a profitable trade into a losing one.
You also need to understand that forex spreads will widen during off-market hours when volumes and liquidity are lower. In addition, spreads tend to widen ahead of important news such as an impending interest rate decision or the latest employment results.

10. Thinking About the “Big Win” More Than Effective Cash Management (AKA Greed)
This one is pretty straight-forward – greed; or more correctly, how greed can cause you to enter into ridiculous trades. This must be the same gene that causes some people to keep “doubling-down” even when the odds are so against them that it make no sense at all. If you want to gamble, go to Vegas."

Source: Lost track...

Financial Freedom or Financial Failure?

2014-08-06T21:05:00.000+08:00

In the financial world, only 20% are successors.
They are top-level employee, high income self-employed, successful businessman and successful investor.

How much you can earn, it depends on how much risk you can take and the plan you have.
Low Risk = Low Reward / High Risk = High Reward
Degree of Risk / Reward = Amount Losses / Profits in a given period.

There is a law that states that your returns are directly proportional to the risk you take.

Investment ( High Risk )
Business ( Above Average Risk )
Self-Employed ( Average Risk )
Employed ( Low Risk )

Risk for being employed always come late, either no increment on salary, voluntary separation scheme or not getting promoted.

Blackpool, England.

2014-08-05T22:13:00.000+08:00

Inverness, Scotland.

2014-08-05T21:33:00.000+08:00

Liverpool, England.

2014-08-05T21:04:00.000+08:00

Edinburgh, Scotland.

2014-08-05T20:13:00.001+08:00

Prague, Czech Republic.

2014-08-02T20:49:00.001+08:00

Cambridge, England.

2014-08-02T17:08:00.001+08:00

Bath, England.

2014-08-02T16:21:00.002+08:00

Stonehenge, England.

2014-07-30T22:16:00.001+08:00

Budapest, Hungary.

2014-07-29T18:13:00.000+08:00

Probability

2014-07-29T14:56:00.003+08:00

A group of small red circle, big red circle, small green circle and big green circle.

50% of the chances you will get two circles with the same colour.

25% of the chances you will get one particular colour and size of circle.

Engelberg, Switzerland.

2014-07-29T14:43:00.002+08:00