Forex Trader Becoming a Disciplined Investor

“A key to self management is the capacity for self-observation, it is not the same as over-criticism … it is rather a consistent monitoring of one’s performance from a perspective significantly detached to allow accurate evaluation.”

A. Garfield
It is clear that knowledge of oneself is just as important in trading as knowing facts, economic theories, news or trading methods. In the trading world, often emotion reigns supreme, facts are ignored and there is no wrong or right. The person who has control of himself due to his discipline and emotional self-control will ultimately emerge from the battlefield a winner.

However, coming to terms with our strengths, weaknesses and personal traits is not easy. It is not easy to analyse yourself objectively because you will naturally have a subjective perspective.

When trying to understand yourself, you must be willing to be totally honest with yourself. This can be difficult and painful. The person must have the ability to accept the results of looking within. Most people, however, find it difficult to admit they made a mistake. Ask a room full of people how many of them are happy admitting their mistakes and you will see few, if any, hands go up. Admitting mistakes, however, is a positive not negative attribute in trading, as it is in life. The world is full of people who want to be right, but the reality is everyone cannot be right all of the time.

“Learning is after all not whether we lose the game, but how we lose and how we have changed because of it, and what we take away from it that we never had before to apply to other situations’ losing in a curious way is winning.”

Richard Bach
All of us have physical and mental disabilities, which prevent us from achieving all our goals and desires. No one is perfect. It is possible, however, to isolate and work on weaknesses. This is similar to reviewing and working on your trading method. You must understand the strengths and weaknesses of the system and try to improve it, but realise perfection is impossible. Remember, in the final analysis you have inherent weaknesses and may not have all the required attributes for trading, but neither does anyone else. The more traits you possess, the greater your advantage, but the more you work at obtaining these traits, the better your chances for success.

Forex Trading ''Self control & Discipline''

SELF CONTROL & DISCIPLINE
“To the destructive element submit yourself.”
J. Conrad
Successful trading is 80% psychological and 20% methodical. As I have already said,self-knowledge is the key to market success. A trading method by itself, no matter how well thought out, cannot be successful if it is not applied in the correct manner. It is in the application of a trading method that many traders end up losing. Consider the analogy of a high performance-racing car. No matter how aerodynamic or technically advanced, it needs to be driven. An advanced piece of engineering such as racing car needs to be driven by a person who can drive it with care. Just as a disciplined driver is needed to race a car, a disciplined trader is needed to apply a trading method. All traders have heard the word “discipline”, but few really understand what it is and why it is so important to develop it.

EMOTIONS AT WORK
“When dealing with people, let us remember that we are not dealing with creatures of logic. We are dealing with creatures of emotion, creatures bursting with prejudices and motivated by price and vanity.”
Dale Carnegie
Intelligence, knowledge and talent have to be applied. Any person who is successful knows that application requires discipline, self-control and confidence in one’s abilities. Bjorn Borg was a great tennis player, he had talent. However, what always gave him the edge when playing was his mental control, which earned him the nickname “Iceman”. He combined talent and discipline to achieve his success and you must do the same.
We are all put in situations where, after they have occurred, we look back and feel that if only our emotional control had been better. You are going for a job interview and role-play Th a friend beforehand. You come over as assertive and confident. In the interview itself, however, the confidence goes. You practise a best man’s speech, it flows well and sounds great; however, on the day, delivery suffers as you feel nervous and shy.
All the above we can associate with. The fact of the matter is, when the pressure is on, our actions are influenced by our emotions. The more important the scenarios, the greater the influence will be.
Trading is no different. As soon as money is committed, logic can go out of the window and basic emotions take over. Consider the difference between paper trading and trading real time. Whilst paper trading, you earn very good profits, you are confident and optimistic. You see a very lucrative business opportunity, so you now decide to open an account and trade for real.
On studying of charts you see an opportunity, a perfect double bottom and prices low in historical terms, now is the time to buy. You ring your broker to place the trade; however, the overwhelming confidence of paper trading has now deserted you. Perhaps you had better double-check the formation. After much deliberation you decide to phone the broker and the trade enters the market. For the next two days prices rise dramatically, your profits grow; you feel great, what an easy way to make a living. The next day prices drop and your profits are cut in half. You feel uncertain; perhaps you should take the profit now before it gets away. You decide to wait. The next day prices fall further and close below your mental stop loss. Your system is telling you that you should be cut. However, you only have a small loss and it should turn around and you will soon be back in profit. The next day, to your horror, prices have collapsed and the majority of your equity is now lost. Your reaction is now one of anger, why didn't you bank the profit when you had it! The market’s move is totally illogical, you feel anger,pain and frustration, you are now totally disillusioned and fed up, and all you want to do is exit the trade.

Important for a Forex Trader

A common mistake by many new traders is that they think they can make money… fast! While it’s true you can make money in a short amount of time, it doesn't mean you will end up profitable in the long run.

A typical scenario is that a new trader reads a little bit about trading forex, finds a system online that claims to make money quickly, and then jumps right into trading because he feels like he’s got enough of a background to make millions of dollars.

Unfortunately after the “honeymoon” period is over and the excitement settles down, this new trader now realizes that trading isn't as easy as he thought. The system doesn’t seem to be working like it claimed it would and he has no idea why the market is doing what it’s doing.

The most important thing you can invest in as a forex trader is your TIME! Every single trading day is a learning experience and if you stop learning, then you will never become a truly successful trader.

Take into account how much time it will take you to learn the basics. Then consider how much time it will take in your daily routine to read charts, news reports, record your trades, and be in the markets.

For someone who can dedicate a “full-time” job mentality to forex trading, then this is no problem. However, if you're like most people, you may have a job, school work, tuba lessons, World of Warcraft dailies, so you cannot exactly dedicate your entire day to trading.This doesn't mean that you can’t trade, but it should give you some realistic expectations when it comes to determining your trading style. You probably can’t be a scalper or day trader, but maybe longer term trades will work better for your schedule.

Each day requires your time to analyze the market. Because news makes the market move, it’s important to consider the economic developments going on around the world and to make it part of your daily routine.

• Forex Market Developments – Look at what the “talk of the town” is in the forex world. See what the analysts are buzzing about and how the currencies reacted.
• News Releases – Know what news reports are coming out each day and how they affect the markets. The more important the news report, the more movement you can expect to see in its currency. Make sure you check out Forex Calendar
• Market Prices of Other Commodities – The price of oil or U.S. Treasury yields can affect the way currencies move so it’s important to find out why these things are rising or falling and keep that in mind when trading currencies. 
• Current Events – Check out many news websites and get to know what is happening across the globe. Events such as major elections, military conflicts, and political scandals can all affect currency movements or global risk sentiment. 

Finally, after going through your daily economic analysis, you have to look at the charts. Charts will give you insights into key support and resistance levels, trends, and possible price points in which to enter the market.

Forex broker

 About Forex broker?

Your broker will offer a trading platform with a certain time frame (the time frame will depend on the country where broker operates). When focusing on market hours, you should ignore the time frame on your platform (in most cases it'll be irrelevant), and instead use the universal clock (EST/EDT) or the Market Hours Monitor to identify trading sessions.

Forex trading hours & trading time:-

New York opens at 8:00 am to 5:00 pm EST (EDT)

Tokyo opens at 7:00 pm to 4:00 am EST (EDT)

Sydney opens at 5:00 pm to 2:00 am EST (EDT)

London opens at 3:00 am to 12:00 noon EST (EDT)

There are hours when two sessions overlap:

New York and London: between 8:00 am — 12:00 noon EST (EDT)

Sydney and Tokyo: between 7:00 pm — 2:00 am EST (EDT)

London and Tokyo: between 3:00 am — 4:00am EST (EDT)

For example, trading EUR/USD, GBP/USD currency pairs would give good results between 8:00 am and 12:00 noon EST when two markets for those currencies are active.At those overlapping trading hours you'll find the highest volume of trades and therefore more chances to win in the foreign currency exchange market.

Chart Analysis in Currency Trading

Importance of chart analysis in currency trading:-
Basically, there are two major types of analyzing methods in predicting price or movement of currency in the forex market, i.e. Fundamental analysis and Technical analysis / chart analysis. Fundamental analysis involves the studies of the economic conditions of the country, for example the balance of trade, current account, GDP, unemployment rates and inflation index, government monetary and fiscal policies, interest rates, even social and political forces. Some investors rely on their analyses on these economic indicators, news and announcements to set their trading strategies.
Whilst we must admit that all these financial and non-financial factors are the actual reasons behind most the long term currency fluctuations, in other word is the reasons or causes about the movements, when it comes to short-term day to day trading, the role of technical analysis becomes much more important (and what is actually the reason does not really matter). In technical analysis, traders make forecast of price movements or future market directions by studying various types of charts of past market actions, the purpose of technical analysis is to identify a trend in its early stage so as to trade in the direction of that trend. Technical analysis is a very powerful method of forecasting, as the analyst is not influenced by prevailing market sentiment and he can make a more objective judgment of which way and how far the price is likely to move in the future.
Since forex market is the largest financial market in the world and is also highly leveraged, even minor price movements can have a dramatic effect on your trading performance, so traders need some effective plans and methods to set precise entry and exit points and this is also another very important aspect in technical analysis. By using certain technical indicators (e.g. moving averages or Ichimoku) and calculation techniques (e.g. Fibonacci percentage of retracements and projections) when formulating his/her trading strategies, one can identify more objective levels for setting entry, exit and stop-loss prices, which fundamental analysis is not capable of in providing such levels.
In short, technical analysis is not only an effective method in price-forecasting process helping traders to predict future market directions, it is also an indispensable analysis technique in order to find clear and precise timing and level of entry and exit in day to day trading, therefore, chart analysis or technical analysis
is a very valuable principle in formulating trading strategies.

Theory of chaos

“The organisation of the Universe demands that matters abandon itself to the games of chance.”
  H. Reeves - Atoms of Science
The theory of chaos is not a theory to help you make investment decisions, its usefulness lies in the greater understanding it gives us of the trading environment and how we should cope with it.

1. It shows us how human psychology influences price movement, why trends occur, and how they can end up being understood in terms of probability. The herd mentality is fully explained in our Special Situations Report available from the office. Human psychology has remained constant over time, and it is this fact that helps us predict the probability of price movement via technical analysis.

2. It disproves Random Walk theory; although market movements may appear random, under statistical tests they are not.

3. If it disproves that the markets are random, it also shows why the quest for the “Holy Grail” computerised or mechanical trading system is doomed to failure. It also confronts those disciples of such analysts as Gann and Elliott who believe the Universe is ruled by law.

4. It helps us to operate in an unstructured environment by giving us a greater understanding of it. The best you can do is understand the original conditions that give rise to probable future events, and act accordingly. This may sound disheartening, it is not. By understanding chaos, you will be able to keep the odds firmly in your favour. If you can do that, you will end up making a lot of money from your trading, year in year out.

Trading Hours

The Market Hours
The trading begins once the markets are officially open in Tokyo, Japan at 7:00 PM Sunday, New York time.Afterwards, at 9:00 PM EST, Singapore and Hong Kong opens followed by the European markets in Frankfurt at 2:00 AM and in London at 3:00 AM.
When the clock reaches 4:00 AM, the European markets are in the hot spot and Asia just concluded its trading day.Around 8:00 AM on Monday, the US markets opens in New York while Europe is slowly going down. Australia will take the lead around 5:00 PM and when it is 7:00 PM again, Tokyo is ready to reopen.

Daily or Position Trader, their strengths and weaknesses

Day-trading, which was once the exclusive domain of the floor trader, is now fair game for all speculators. Inspired in part by large intraday price swings, instant availability of quotes, affordable high powered computers and competitive commissions, the new wave of day-trading methods and systems has attracted thousands of traders in recent years. The undeniable thrill of trading within the time span of one day is, however, a double-edged sword: one that can hurt as well as heal. To be successful, a day-trader must have the discipline of a machine, the instincts of a fox, the emotions of a rock, the skills of a surgeon and the patience of a saint. (And a little luck wouldn’t hurt either.) The day trader works more with the emotions along with the fundamental analysis.

Definition
Very active currency trader who holds positions for a very short time and makes several trades each day. Day traders are individuals who are trying to make a career out of buying and selling stocks very quickly, often making dozens of trades in a single day and generally closing all positions at the end of each day. Day trading can be costly, since the commissions and the bid/ask spread add up when there are so many transactions.

Position Trader looks for occasional significant moves that may unfold quickly or over time. It patiently waits for ideal trade setups to occur during minor and major trend reversals in certain sectors, indexes or entire broad markets. Determination of these potential setups is derived from technical indicators, chart patterns, point and figure charts and fundamental news events. Once a move shows sign of development, hourly and intraday charts are monitored for optimum entry.

Definition
Currency trader who, unlike most traders, takes a long-term, buy and hold approach. In currency trading, «long-term» refers to holding until the delivery date is close, usually 5-7 months.
Basically, a position trade approach is to enter the markets only during times of key reversal probability in order to capture large moves as they gradually or quickly unfold. It is designed for traders who favor a gradual, buy and hold approach when ideal trade conditions exist for high-odds success.

Important dates in the Forex History

Early 20th Century
Only in the 20th century paper money start regular circulation. This happened by force of legislation, the efforts of central banks to manage money supplies, and government control of gold supplies.
Within a country, this fiat money is as good as any other form. Internationally, it is not. International trade has always demanded a money standard accepted everywhere.
Gold and silver provided such a standard for centuries. An official Gold Standard regulated the value of money for about a century, prior to the start of World War I in 1914.

1929
The dollar has been perceived as more of a has-been, due to the Stock Market Crash and the subsequent Great Depression.

1930
The Bank for International Settlements (BIS) was established in Basel, Switzerland. Its goals were to oversee the financial efforts of the newly independent countries, along with providing monetary relief to countries with temporary balance of payments difficulties.

1931
The Great Depression, combined with the suspension of Gold Standard, created a serious diminution in foreign exchange dealings.
World War II
Before World War II, currencies around the world were quoted against the British Pound. World War II crashed the Pound. The only country unscarred by the war was the US. The US dollar became the prominent currency of the entire world.

1944
The United National Monetary and Financial Conference at Bretton Woods, New Hampshire discussed the financial future of the post-war world. The major Western Industrialized nations agreed to a «pegging» of the US Dollar, which in turn was pegged at $35.00 to the troy ounce of gold. The future was designed to be stable, in part due to the tight governmental controls on currency values. The US dollar became the world’s reserve currency.

1957
The European Economic Community was established.
© 1st Forex Trading Academy 2004 9
Introduction

1967
At the IMF meeting in Rio de Janeiro, the Special Drawing Rights (SDRs) were created. SDRs are international reserve assets created and allocated by the IMF to supplement the existing reserve assets.

1971
The Smithsonian Agreement, reached in Washington, D.C., had a transitional role to the free floating markets. The ranges of currencies fluctuations relative to the US dollar were increased from 1 percent to 4.5 percent band. The range of currencies fluctuating against each other was increased up to 9 percent. As a parallel, the European Economic Community tried to move away from the US dollar block toward the Deutsche Mark block, by designing its own European Monetary System.
In the summer of 1971, President Nixon took the United States off the gold standard, and floating exchange rates began to materialize.

1972
West Germany, France, Italy, the Netherlands, Belgium and Luxembourg developed the European Joint Float. Member currencies were allowed to fluctuate within 2.25 percent band (the snake), against each other and 4.5 percent band (the tunnel) against the USD.

1973
The Smithsonian Institution Agreement and the European Joint Float systems collapsed under heavy market pressures. Following the second major devaluation in the US dollar, the fixed-rate mechanism was totally discarded by the US Government and replaced by The Floating Rate.

1978
The International Monetary Fund officially mandated free currency floating.

1979
The European Monetary System was established.

1999
January 1st, 1999, the Euro makes its official appearance within the countries members of the European Union.

2002
January 1st, 2002, the Euro becomes the only currency and replaces all other twelve national currencies within the European Union and Monetary Market: Belgium, Germany, Greece, Spain, France, Ireland, Italy, Luxembourg, Netherlands, Austria, Portugal and Finland.

Successful traders

Successful investors may use different systems or approaches to the market, have different educational backgrounds and be of various ages. However, they would have the following beliefs that enable them to reap profits from the markets:1. Self-confidence. This comes from both knowledge of the markets and self-knowledge of their strengths and weaknesses. They effectively believe that they will make profits in advance. They believe the game has been won before they begin. If you are not self-confident in your own ability, it is unlikely you will ever become a successful trader.2. Money itself is not important; this allows them to emotionally detach themselves from trading.3. Losing money can and will occur, and is acceptable to these investors.4. Profits will occur over a period of time and these can be run to a significantly larger size than their losing trades.5. These investors love and enjoy what they are doing, and therefore have no problem devoting regular time to trading.6. Open-mindedness and adaptability. Successful traders remain open-minded and receptive to new ideas when it is necessary. They find it easy to adapt and change and they are not concerned with admitting when they are wrong.A well thought out and logical trading method, combines with the above beliefs, will give any trader an edge in the quest for profits.