On March 5, we enabled the new version of the T3 Integration Bridge in our demo environment. This allowed traders to test the new features of the bridge 2.0 before using it to trade in the live environment.

The T3 Integration Bridge 2.0 allows EAs to write comments in the comment field, among several other new features and fixes.

If you haven’t tried version 2.0 yet, we encourage you to test your EAs with a demo account to make sure they perform as expected.

(And if you have any questions, please don’t hesitate to contact our technical support. They are available to assist during all active trading hours.)

Should you ignore your emotions and dismiss what you’ve seen? Absolutely not. First of all, it’s hard to control your emotions. You are human, after all. It is not possible to think and do things without any emotion.

Also, sometimes you emotions can be right and lead to a winning trade. Which is great! Controlling emotions is not easy, but you can still control your “trading fingers” and examine the trade before taking action.

Examine with your system. Does the trade match up with your trading system? Or is it disconnected? If there is no correlation, your hunch may very well be wrong.

Money and risk management. Don’t be overconfident with a trade. Always prepare for handling the consequences when the price goes to the opposite direction of your trade. Never enter a trade without deciding where to put this order and don’t forget to place a stop loss and take profit. And do not change them afterwards.

Verify on a clean chart. You probably saw the trade on the same chart you look at every day. Before placing a trade you should always check that chart in a new window, remove unnecessary indicators and tools that might make the chart messy. Redraw the lines you used to plan the trade if necessary.

After examining things mentioned above, you are ready to place a trade. If you are successful with a hunch, congratulations. You’ve developed an ability to predict a trade with relatively naked eyes. You are on the road becoming an experienced trader.

But don’t let your intuition decide everything.

The next time you have a similar hunch and feel you are “in the zone”, remember to control your fingers from hitting Buy or Sell before you have verified the trade.

How do you handle your intuition? Do you go with the process, depress it, and verify it comprehensively?

Further reading: 5 Most Predictable Currency Pairs – Q1 2012

Fundamental traders always take economic indicators into consideration, checking interest rates and prospects and acting accordingly. When a good figure is released for a certain country, the currency will usually rise. When the indicator is weak, the currency will fall.

The dollar, however, is different.

Since the break out the financial crisis, the USD has acted differently. The currency has risen  on bad US figures as traders flock to the “safe haven” dollar in times of trouble and ditch it on positive US figures, as they have more of a “risk appetite”. In recent months, sometimes the dollar reacts “normally” to the indicators, sometimes not. This has made the dollar very difficult to predict.

However other currencies continue to react normally to their own domestic indicators. The EUR drops on a rise in unemployment and the AUD enjoys an unexpected rate hike.

Example

On March 30 last year, the final release of UK’s GDP was better than expected – a rise of 0.4%. The GBP reacted with increases across the board. A few hours later, however, American CB Consumer Confidence was due. This is a major market mover.

The result was better than predicted as the markets moved up and down strongly and eventually the dollar has won the event – GBP/USD went down sharply and lost a significant part of gains.

But the outcome of the American figure and the market’s reaction aren’t known after the British release. There are five and a half hours, and the trader wants to ride on the Pound.

In this case, the wiser option would be to trade the Pound against another currency. In this case, it could be the Euro that suffers from the Greek crisis, so a currency such as the AUD that did not get any important news the same day, or the Japanense yen.

But why pick the yen? Earlier the same day, Japanese industrial production dropped by 0.9%, significantly worse news than was expected. The yen was on the decrease while the Pound was increasing. GBP/JPY did not drop like GBP/USD, but instead continued to rise after the release of the American CB Consumer Confidence.

There are many similar examples. Traders should keep an open eye to crosses, so they can avoid the high risk events in the US and choose a safer currency to trade against.

Also read:Most Predictable Currency Pairs – Q1 2012

When you lose the trade, the key is to learn from it. Analyze it. You do not need to do this right away. Sometimes a bit of distance from the actual trade can be useful. This allows you to be less emotional and able to analyze the trade more objectively. Acting too quickly and trying to take revenge on the market or entering into trades from a place of desperation is never a useful tactic.

How do you figure out what went wrong? There are a few key questions to ask yourself:

Did you follow your trading strategy? Maybe you’ve forgotten some calculation during the preparations. Maybe you’ve bent your rules and gone ahead with the trade. Or maybe you’ve made unnecessary changes after the position was open. Well, now you are aware of this, and your next trade will likely be a more precise one.

Are you satisfied with your trading strategy most times? It is okay that every trading plan has losing trades. Even the best trading strategy will lose in some trades. The key is to win in the long-run. This means your RRR (Risk Reward Ratio) is good and that you are trading with a lower risk.

Do you need to change your trading strategy? Before making any decision you should double check the two points above. If you are certain that you’ve followed your trading strategy and still the losing trade is not just one of the regular losses you can sometimes expect, maybe it is time for a change. Five consecutive losing trades, assuming that your implementation was perfect, is reasonable enough grounds to make a change.

Changes to your trading strategy can include:

Tweaking some of the parameters of your trading strategy: Back test the losing trades with different parameters, such as entry point, stop loss. Playing a hypothetical “what if” game and see what you get. Sometimes a small change can make a big difference., which could be all you need.

Switch to different currency pairs: This is harder to examine using losing trades, since each currency pair has its own “personality” and most likely form different chart patterns. But if your currency pair was moving sideways and now it has broken out and extended the range (or moved in opposite direction), perhaps your system won’t work any more.

Look for a new trading plan: Sometimes chart patterns change in all pairs, and in some scenarios, your system may not have been optimal in the first place. If you are certain that this is the case, you should definitely make a change. Refusing to admit that a change is needed will inevitably just lead to more losing trades. We are not trying to be righteous. What’s more important is to win. If the system doesn’t work, abandon it and move on to another one.

But what about your winning trades? Analyze them as well. Was the win part of your trading strategy? Great. Was it simply by chance? Feel lucky and humble. Many traders become euphoric after winning a trade based only on gut feeling. This, however, can be the fast track to burning out your account. Confidence is a must, but overconfidence, especially misplaced overconfidence, can be fatal.

Also read: 5 Most Predictable Currency Pairs – Q1 2012

When some traders find themselves on a winning streak, they start to extend their trading time, hoping to keep the streak going. They sit in front of their computer, monitoring the charts, more and more and they begin seeing trades that aren’t really there. This is not a good for trading or a healthy lifestyle either.

It is even worse for traders having a losing streak: they extend their trading time in the hopes of being able to take revenge on the market. The market, however, is bigger and stronger and this is often the fast lane to blowing through your account.

You can avoid this by planning the times in which you trade.

Scheduling your trading times means that you allocate time just for forex trading. Being concentrated on one task and avoiding being distracted by other things will raise your chances of winning. This rule needs to be applied to every single trade, and you need to cultivate this habit in order to stay profitable in the long run.

The question then becomes: when should you trade? You need to take a few things into consideration before you find the plan that is best for you:

Trading type: Are you a trader who looks for big moves? If so, you should focus on the London and New York sessions. Why? These sessions usually have the highest volatility. If you are looking for range trading at quieter times, you should stay away from these sessions and focus on the Asian session.

Person type: If you are a “morning person” you’d probably perform the best in the morning when you have your best the focus and energy levels. If you are a “night person”, you may want to trade only in the night. The idea is to trade when you are at your optimum and can fully focus on the trading.

Life Limits: If you have a full time job, or a family, or anything demanding your attention and energy, you’ll need to adjust the times you trade to create a better personal life for yourself, and a higher chance of taking profits. Life is not only a bunch of trading opportunities. If your trading and the rest of life collide, you will find it hard to be successful in either.

In an ideal world, when you put up all the facts together, you will be able to find the “ideal” timing for trading. In reality, this isn’t always the case. It is important to avoid being addicted to forex and keep a balance between your life and forex trading. I’ve seen lots of traders lose their head to the charts. They probably didn’t lose a lot of money, but losing touch with reality did not make them successful in trading either.

Trading at scheduled times

Scheduled trading doesn’t mean that you need to trade at every session. In some cases, you will allocate time and test a few possible setups before making any conclusions about whether or not there is something there. Never force yourself into a trade.

Testing the market and avoiding trading during certain market conditions is a very good strategy that can save you money and pull you back from the risk of uncertainty.

Have you ever made a trade during your scheduled time and you still have time left? Don’t run for the next trade. It’s always better to take a break and avoid over-trading. As discussed above, running after the next trade can be disastrous, so can the sense of avenging.

Finding the right time to trade and keeping a good pace: one of the keys to success in forex trading.

Also read: 5 Most Predictable Currency Pairs – Q4 2011

Click here to view the embedded video.

There are a few methods of scaling up. Some of them are useful, while others could be harmful to your trades.

• Increase your trade positions at your usual trading times.

By using time more efficiently, you can execute more trades and potentially more profits. If you have utilized a strict and careful trading strategy, your experience will help you know how to filter bad trades and restrict yourself only to the ones with high winning probabilities, giving you more room to add trades. However, this must be done carefully. By opening more positions you will put yourself under more pressure and might find yourself looking for trades that aren’t really there.

• Extending your trading hours

If you trading hours have been limited up to now, and you feel you have more time and the capability for longer trading time, you should try to increase your daily trading time little by little, expanding your trading sessions. One thing you should be wary of is that your trading systems might not work equally well in all trading sessions. Instead they might work surprisingly well in certain trading session, but under-perform in other sessions. The best strategy is to try and test your systems using demo accounts before you adjust your live trading plan.

• Scaling up position sizes

This is the preferred method of scaling up your trading. This way you won’t need to adjust your trading times and number of trades, instead you change only position sizes. Assuming that the value of your account has been increasing, you will not be increasing the percentage of each trade you risk. Money management rules all still apply, keeping your risk in check. Here as well, you should always increase the size a little at a time so you won’t feel stressed when you open a sufficiently large trade that might lie just outside of your comfort zone.

Also Read: 5 Most Predictable Currency Pairs – Q4 2011

]]> http://www.fairtradingtech.com/blog/scaling-up-your-forextrading/feed/ 0 http://www.fairtradingtech.com/blog/money-management/ http://www.fairtradingtech.com/blog/money-management/#comments Thu, 03 Nov 2011 00:00:48 +0000 Yohay Elam http://www.fairtradingtech.com/blog/?p=1178 Continue reading →]]> You’ve probably read about money management many times, a word forex brokers wouldn’t be unfamiliar with. Yet very few managed applying it in their day-to-day forex trading. How can you turn money management from a buzzword, into an actionable trade plan.

 

Risk is involved in most types of investments. The concept would be to take control, and be aware, of your risk . This could help you avoid margin calls, in addition to being an easy way to control your account.

 

1. Always use a stop loss: Putting a stop loss in any trade will get you out of your trade, and prevents a situation where you loose a lot from one trade. Although this states the obvious for the vast majority of traders reading this, I still know traders who don’t use a stop loss order. This precarious deed is done also by folk working at forex brokerage companies and trade with their account. Sad but true.

 

2. How much money are you risking: There are lots of money management methods out there emphasizing the risk/reward ratio. Some take 2:1 and others take 3:1. That’s awesome. But many ignores how many dollars they are risking per trade. Is the sum too high? Check with your forex broker. There are two mathematical factors that could help reduce the amount of money you risk:




Set a tighter Stop Loss: Setting a tighter stop loss lets you lose less money in a losing trade. Sounds good? Not really. A tighter stop loss can put your trade in a riskier situation. Lowering the money you risk doesn’t mean you should increase the chance a stop loss being hit. It shouldn’t depend on the amount of money risked.

Lowering the position size: A lower position size still gives you the option to place a stop loss at a level that is right for you and the money at risk are lower. On the other side of the coin, your reward is also lowered. Although most people attempt to trade large positions, always keep in mind that we are trading with leveraged money, not real money that we have on hand. By lowering the position size you still get to trade your position in full, just with lower risks.

 

3. Account Risk: By now you’ve learned to monitor the amount of the cash you are risking. But to be frank, what is your burn rate? Suppose you start your trading account with $1000 USD. And for each trade your risk is 20% of your account capital. If you stick with this high risk it only takes 5 trades to blow up your account. And for new forex traders, it’s not uncommon to see 5 or more consecutive losing trades at a time. Risking a big portions means you burn out your account quickly before you had enough time to learn and increase your winning rate.

 

Thumb Rules: Never risk more than 2% of your account per trade!

This may sound very strict, but it helps you stay in the battle of forex trading and will help you accumulate a long term sustainable profit.

A forex demo account is probably very useful for practice, but only a real live account brings you the emotional stress. If you start applying the 2% rule in your trading, you will understand the power of money management.

 

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