When I read a lot of accepted wisdom by so called experts, I wonder if these people have actually traded in their lives.
Here is some common advice that I see all the time, that if you follow it you will lose.
Don’t fall into the trap of accepting it or following it.
Here are 6 of my favorites:
1. Day trading is a low risk high reward way to trade
How many writers do you see talk about day trading and how successful they are at it?
Lots!
Now:
How many of them can show a real time track record of profits over the long term?
None.
This is simply the dumbest way to trade there is.
All short term volatility is random.
You can never get the odds in your favor and you will lose and lose quickly.
2. Knowledge is power
No its not.
Only the RIGHT knowledge is power.
Trading is made very complicated by many experts yet, simple systems work best and the real problem for most traders is acquiring self confidence in their own ability and discipline.
Most traders like to follow others and if you do that, you will more often than not lose.
3. Buy low sell high will make you money
Well we all want to do this:
Pick the market bottom and sell the market high but it’s simply not possible.
Take an example:
Prices are moving to support so a trader buys, trying to predict a bottom and hope support holds.
Well, that’s a good way to lose your money trading against price momentum.
You need to wait for the turn and see price momentum move back up.
Sure, you won’t get in at the bottom but the odds will be in your favour.
On the other hand, a breakout occurs of important market highs so the trader thinks:
Can’t buy that and waits for the pullback.
Of course, it never comes and the trader is left watching one of the biggest trends of the year accelerate away from him.
He should of course have bought the first break!
It’s a fact:
Most big trends develop from breaks of important market highs or lows and if you don’t follow them you won’t catch the big trends.
Fact is:
“Buying low and selling high” will never make you money Buying high and selling higher will”
4. Listen to the news.
This is a great way to lose money.
All those experts taking convincingly about where prices should go and it’s all so believable.
Of course, where prices should go and where they do go, are two different scenarios.
Experts are not traders and are there to entertain and give good stories.
More often than not their wrong – don’t listen to an expert, use your own brain and make your own mind up.
5. Paper trade will help you
Use a demo account and you will sharpen your skills. To a degree it’s true, but its use is limited in helping you become a good trader.
As there is no money on the line and no pressure paper trading is easy.
When you’re in the brutal world of real trading and thousands of dollars are on the line the experience is far harder.
6. Trail stops quickly
The idea here is to lock in profits.
Most traders become so obsessed with doing this they simply get stopped out of a trade and are never able to follow a big trend.
The fact is forex trading involves taking a risk.
Try and restrict the risk to much and you will simply never make any big profits.
Traders get so obsessed with avoiding risk they actually create it and guarantee they will lose.
These are 5 of my favorite accepted wisdoms that will see you lose and we will cover some more in part 2 of this article series.
Tuesday, May 6, 2008
Start Trading The Right Way
So you need a Forex broker. And you have heard about some of the advantages about having your banking in Switzerland. Would it make sense to have a Swiss online Forex broker? Here we look at some of reasons why you may want to go down this route.
Forex brokers are companies or individuals who will execute your trades for you. In practice they will usually provide you with a computer interface or platform that will allow you to monitor the market are place your trades. Everything is done electronically; there is none of the 'I'm getting on the phone to my broker' that you sometimes see on the TV.
Some of the online brokers have based their operations in Switzerland. In this country banking secrecy is considered a civil right. It is similar to the confidentiality agreement between a doctor and a patient. It doesn't matter whether you're a Swiss citizen or a foreign national using financial services in Switzerland, your personal information is considered secret. This level of privacy is one of the main attractions of having a Swiss online Forex broker.
But there have been some changes recently. The Swiss authorities have introduced money-laundering regulations that affect financial institutions in that country. It is important that your broker abides by these regulations. If you are suspected of laundering money, or being guilty of financial criminal act, your right to banking privacy is likely to be removed by a judge in a court of law.
Regardless of where they are based, your broker should be able to offer you a demo account to start practice trading. This will allow you to get a feel for their platform and you can evaluate whether you are comfortable with it. In fact it is not a bad idea to try 2 or 3 companies in this way and you can then select the best one for your needs.
Before making a final decision on your broker do some research online and see what their customers' are saying about their service. Visiting industry specific forums can be very revealing. I've noticed that some of the companies offering the best customer service are Swiss online Forex brokers. Although they are US companies, they have based their operation in Switzerland.
Forex brokers are companies or individuals who will execute your trades for you. In practice they will usually provide you with a computer interface or platform that will allow you to monitor the market are place your trades. Everything is done electronically; there is none of the 'I'm getting on the phone to my broker' that you sometimes see on the TV.
Some of the online brokers have based their operations in Switzerland. In this country banking secrecy is considered a civil right. It is similar to the confidentiality agreement between a doctor and a patient. It doesn't matter whether you're a Swiss citizen or a foreign national using financial services in Switzerland, your personal information is considered secret. This level of privacy is one of the main attractions of having a Swiss online Forex broker.
But there have been some changes recently. The Swiss authorities have introduced money-laundering regulations that affect financial institutions in that country. It is important that your broker abides by these regulations. If you are suspected of laundering money, or being guilty of financial criminal act, your right to banking privacy is likely to be removed by a judge in a court of law.
Regardless of where they are based, your broker should be able to offer you a demo account to start practice trading. This will allow you to get a feel for their platform and you can evaluate whether you are comfortable with it. In fact it is not a bad idea to try 2 or 3 companies in this way and you can then select the best one for your needs.
Before making a final decision on your broker do some research online and see what their customers' are saying about their service. Visiting industry specific forums can be very revealing. I've noticed that some of the companies offering the best customer service are Swiss online Forex brokers. Although they are US companies, they have based their operation in Switzerland.
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