A Tale of Two Traders!

Two traders want to climb their way to success two different ways. Mr. Daytrader has a goal of 100 pips, and sets out to place 10 trades of 10 pips apiece in order to accomplish that goal. Mr. Swing Trader has the very same goal of 100 pips, yet sets out to do it in just two trades of 50 pips each.

They both trade the exact same pair: EUR/USDTheir spreads average 2.5 pips (or $2.50 per standard mini lot traded). Both traders reach their goal in this instance.

So what’s the difference?Mr. Daytrader had to incur 10 spread costs (25 pips or $25) in order to make 100 pips or $100. Meanwhile, Mr. Swing Trader paid a spread twice (5 pips or $5) for his trading costs in order to reach his 100 pip goal.

Wonder which trader has the better odds of success over the next year? Mr. Swing Trader…why? The lower your costs before you get into the profit, the more likely you are to actually “make that profit”.

So, I know it seems that everyone “wants” to be a day trader…but maybe they “need” to start off as a Swing Trader first. I hope you’ve enjoyed the “Tale of Two Traders”.

Fundamentals in a Nutshell!

Some people avoid fundamentals because they feel they are so complicated. However, the basics are very simple and easy to follow. You just follow the trail.

What’s the trail?Watch what the CPI (Consumer Price Index, which tracks inflation) does, especially on a Year over Year (YoY) basis. If it’s increasing, then central banks will have to address this by hiking interest rates. Increasing rates means that you can earn more money on your currency and money loves “yield”.

So the pattern is: higher CPI over time results in higher interest rates over time. Higher rates attract more money to that currency than a currency that has lower rates. Thus as money pours into that currency (they are buying up the currency), it pushes the currency higher. Therefore, over time…you end up with an appreciating currency that earns higher interest over time.

When do currencies not follow this simple pattern? When the pattern reverses. Slowing economy, can equal lower CPI and lower interest rates and money pouring out of a currency. So when a recession hits or an economic slowdown or a deflationary period hits….this cycle actually reverses. But even then, you know the drill and can profit from it.

Hope you’ve enjoyed this short lesson on fundamentals.

A Year of Performance Tracking

It has been more than a year since I first started to measure my daytrading systemperformance on a monthly basis. Here a couple of charts I put together to see how I have been fairing:

These graphs tell me that I have been doing the right thing all year long by:
1) Generating the right trading ideas at the right time
2) Diversifying my money in two different market places, i.e. Major Pairs and Yen Crosses.

I am able to make steady gains with the two systems, simply by betting against the short-term moves for the US dollar and Japanese Yen day in day out. The combined results say it all. I have made more gains than losses, 10 positive months out of 14, averaging about 310 pips each month.

Worth mentioning, the only one time my system made a triple-digit losses was back in July 2008, that is -140 pips. Others are -50, -70 and -25 pips in May' 08, Nov' 08 and Jan' 09. Also on the plus side, the system is capable of hitting four-digit monthly gains, which so far outstrip the recorded losses by many times. This has already happened twice: +1175 pips in Aug' 08 and just recently +1055 pips in Feb' 09.

Overall, my system did incredibly well even when the market was volatile. I hope my system can continue to make gains for me and you as the economy recovers

How much money should you start up an account with?

I’m often asked the question in our courses….”How much money should I start my account with?” Good question.

Let me give my personal opinion on this.A micro account CAN be started with $25 and a standard mini account CAN be started with $2,000. However, the less you start with, the bigger percentage of your account that you have at risk generally.

So one way you can increase you chances of success is to have a well funded account. Let’s say that you have a 100 pip stop on one lot. That would be a $100 loss in the mini account and a $10 loss in the micro account. Let’s focus on the micro account, since that’s the best place for most beginning traders to start out anyway.

If I have a $25 micro account and lose $10…then I’ve lost 40% of the account balance. However, if that balance were $100, then I’ve lost 10% of my account balance. I’m much more able to recover from a 10% loss than a 40% loss. Emotionally speaking too…it’s easier to handle the loss of 10% than it is for 40%. Now, if I had an account balance of $200, then my loss would be 5%.

This is why I suggest people start micro accounts with at least $500 to $1,000 and start off trading only 1 micro lot at a time. In the end, you’ll be glad you started this way vs. starting with the minimum. Again, this is strictly my opinion as a trader and as an instructor.

Ultimately, it will be your decision as to what you feel is the most prudent thing to do for you. However, a lot of people don’t think about the impact of their “beginning balance” upon their trading and the likelihood of their success and that’s why I bring it up here. Happy trading!

India’s Bonds Advance as One-Month High Yields Attract Buyers

May 13 (Bloomberg) -- India’s benchmark 10-year bonds gained on speculation banks and investors will put spare cash into debt after their yield yesterday reached a one-month high.

Benchmark bonds gained by the most in a week as subscriptions at the Reserve Bank of India’s daily reverse- repurchase auction, a gauge of surplus money in the financial system, averaged a record 1.4 trillion rupees ($28.2 billion) a day this month, compared with 1.1 trillion rupees in April. India’s five-phase general election ended today, with counting set for May 16.

“Liquidity support and the fact that there aren’t fresh factors to be concerned about are making present levels attractive,” said s. srikumar, chief of fixed-income at state- owned Corporation Bank in Mumbai.

The yield on the 6.05 percent note due February 2019 fell nine basis points to 6.33 percent at the 5:30 p.m. in Mumbai, according to the central bank’s trading system. The price rose 0.61, or 61 paise per 100-rupee face amount, to 98.01.

Bonds pared gains before the government’s scheduled sale tomorrow of 120 billion rupees of debt, the second this month. India plans to raise a record 2.41 trillion rupees from bond sales in the six months ending Sept. 30 as it increases spending to revive growth in Asia’s third-largest economy.

Elections

As many as 714 million voters began casting their ballots five weeks ago in the world’s largest democracy. Exit polls showed neither the ruling Indian National Congress party nor the main opposition Bharatiya Janata Party garnered enough votes to form a government without the support of regional parties.

The Congress party-led United Progressive Alliance may win 199 seats in elections to India’s 545-seat lower house, or Lok Sabha, a poll by the NewsX television channel showed. The BJP- led National Democratic Alliance may get 191 seats, it said. The majority mark is 272 as two seats in the house are nominated by the president.

The cost of five-year swaps, or derivative contracts used to guard against rate fluctuations, declined. The rate, a fixed payment made to receive floating rates, slipped to 5.73 percent compared with 5.78 percent yesterday.

Forex Trading Tips ---2

Tip 5. Never risk more than 2-3% of the total trading account.

One important difference between a successful and an unsuccessful trader is that the first is able to survive under unfavorable conditions on the market, while an unsuccessful trader will blow up his account after 5-10 unprofitable trades in the row.
Even with the same trading system 2 traders can get opposite results in the long run. The difference will be again in the money management approach. To introduce you to money management, let's get one fact: losing 50%of total account requires making 100% return from the rest of money just to restore the original balance.

Tip 6. Put emotions down. Trade calm.
Don't try to revenge after losing the trade. Don't be greedy by adding lots of positions when winning.
Overreaction blocks clear thinking and as a result will cost you money. Overtrading can shake your money management and dramatically increase trading risks.

Tip 7. Choose the time frame that is right for you.

Choosing wise means that you are comfortable and have time enough to analyze the market, place and close orders etc. Some people can't wait for hours for the price to make a move, they like action and therefore prefer smaller time frames.On the contrary, for others 10-15 minutes is a hustle to be able to make the right decision.


Tip 8. Not trading or standing aside is a position.
When in doubt — stay out. If it is not clear where the market will move — don't trade. In this case saving present capital is and absolutely better choice than risking and losing money.

Tip 9. Learn to use protective stops. Respect them and don't move.
Hoping that market will turn in your direction is a very delusive hope. By moving a stop loss further a trader increases his chances to end upup with much bigger loss. When holding to a losing trade too long, and even if funds permit, traders as a rule are very reluctant to accept big losses, thus often continue "hoping for best"In the mean time invested money is stuck in the open trade for unknown period of time (weeks and even months) and cannot be used for opening new positions. Not working money — dead money. Also this will reAlso this will result in constant interest payments for holding open positions.

Tip 10. "Keep it simple, stupid" — applies to indicators, signals and trading
strategies.
Too much information will create a controversial picture of when to trade and when not to. To avoid lots of confusion create a simple but working method of trading Forex.

Forex Trading Tips --1

tip 1. Gamblers go to casino. All unproved, spontaneous actions in Forex trading — are a part of pure gambling.
Any attempt to trade without analysis and studying the market is equal to a game. Game is fun except when you are losing real money...

Tip 2. Never invest money into a real Forex account until you practice on a Forex Demo account!
Allow at least 2 month for demo trading. Consider this: 90% of beginners fail to succeed in the real money market only because of lack of knowledge, practice and discipline. Those remaining 10% of successful tradersad been sharpening and shaping their skills on demo accounts for years before entering the real market.
A good demo account to start practicing with could be, for example,fxgame from Oanda.

Tip 3. Go with the trend!
Trend is your friend. Trade with the trend to maximize your chances to succeed. Trading against the trend won't "kill" a trader, but will definitely require more attention, nerves and sharp skills to rich trading goals

Tip 4. Always take a look at the time frame bigger than the one you've chosen to trade in.
It gives the bigger picture of market price movements and so helps to clearly define the trend. For example, when trading in 15 minute time frame, take a look at 1 hour chart; trading hourly would require obtaininga picture of daily, weekly price movements.

If a trend is hard to spot — choose a bigger time frame. Up and down market patterns are always present. Always make sure you know the dominant trend, unless you are a scalper. Scalpers have no need to spend their time studying big trendswhat's happening in the market here and now (during 5-10 minute time frame) should be of only importance to a Forex scalper.

India’s Bonds Advance as One-Month High Yields Attract Buyers

May 13 (Bloomberg) -- India’s benchmark 10-year bonds gained on speculation banks and investors will put spare cash into debt after their yield yesterday reached a one-month high.

Benchmark bonds gained by the most in a week as subscriptions at the Reserve Bank of India’s daily reverse- repurchase auction, a gauge of surplus money in the financial system, averaged a record 1.4 trillion rupees ($28.2 billion) a day this month, compared with 1.1 trillion rupees in April. India’s five-phase general election ended today, with counting set for May 16.

“Liquidity support and the fact that there aren’t fresh factors to be concerned about are making present levels attractive,” said s. srikumar, chief of fixed-income at state- owned Corporation Bank in Mumbai.

The yield on the 6.05 percent note due February 2019 fell nine basis points to 6.33 percent at the 5:30 p.m. in Mumbai, according to the central bank’s trading system. The price rose 0.61, or 61 paise per 100-rupee face amount, to 98.01.

Bonds pared gains before the government’s scheduled sale tomorrow of 120 billion rupees of debt, the second this month. India plans to raise a record 2.41 trillion rupees from bond sales in the six months ending Sept. 30 as it increases spending to revive growth in Asia’s third-largest economy.

Elections

As many as 714 million voters began casting their ballots five weeks ago in the world’s largest democracy. Exit polls showed neither the ruling Indian National Congress party nor the main opposition Bharatiya Janata Party garnered enough votes to form a government without the support of regional parties.

The Congress party-led United Progressive Alliance may win 199 seats in elections to India’s 545-seat lower house, or Lok Sabha, a poll by the NewsX television channel showed. The BJP- led National Democratic Alliance may get 191 seats, it said. The majority mark is 272 as two seats in the house are nominated by the president.

The cost of five-year swaps, or derivative contracts used to guard against rate fluctuations, declined. The rate, a fixed payment made to receive floating rates, slipped to 5.73 percent compared with 5.78 percent yesterday.