Analysis

A whole bunch of things make the price go up and down. Exceeding expectations. Not meeting expectations. Mergers that seem like a good idea. Mergers that seem like a bad idea. Anything. Nothing. Somebody thinks the current price is cheap buys from somebody who thinks the current price is expensive.

Analysing, or trying to guess if the market will go up or down, falls into two broad categories - fundamentals and technicals.

Fundamental analysis is when you make trading decisions based on your knowledge of a company (or country).

Technical analysis is when you make trading decisions based on your interpretation of the movement of that company's share price (of of the currency).

While fundamental analysis and technical analysis can be mutually exclusive, they don't have to be. You might have decided through fundamental analysis that a company's share price is severely overvalued, but you can then use technical analysis to decide when to actually open the trade.
 

Announcements

When significant announcements take place, it often causes a currency's price to spike in one direction or the other, and sometimes both.

It's not really a good time to be in an open trade. (Unless you're specifically trying to "trade the announcement").

So, we find out when they are going to happen by going to the Forex Factory Calendar. Major announcements have the red icon next to them.
 

What Is A Stop Loss?

A stop-loss is the most important tool in your trading survival kit.

Not all trades are going to be winners. You need to prepare yourself mentally for that. You are going to lose money sometimes. Maybe often.

It doesn't matter though, if you win more than you lose.

In one sentence, all other nonsense removed, that is the aim of the game - win more than you lose.

Because as I said, you are going to lose. This is important. Have I stressed this enough yet? :-)

When you open a trade and the price starts to go against you, the question is always "do I get out now, or is it going to come back?"

And the answer is always "it's going to come back" :-) Because we hate to lose, we hate to lose money, and we hate to admit we made a mistake.

But there has to be a point where you concede you made a mistake. This is a price that you have worked out before entering the trade. How this price is calculated will be talked about later.

What's important is that you have the entry price X, the stop loss price Y, and that you tell your broker both of these when you open the trade.

The stop loss should definitely not be just tucked away in your head. You don't want to wake up in the morning and find that the price has gone well past your mental stop loss.

So if the price does keep going in the wrong direction, while you are saying "it's going to come back", your broker will automatically execute the stop loss when it reaches the price you specified.

It's a method of enforced trading discipline. Emotions are going to muck with you, and we just got around the problem of staying in a losing trade too long.

Never move a stop loss to where it would be risking more money. Stop losses can be moved in order to lock in profit, or to risk less, but never to risk more.
 

Calculation Of The Contract Value (The Purchase Cost)

 
When "USD" Comes Last In The Pair

In this first example, we're going to purchase 1 contract (100K units) of EURUSD. The current rate is 1.2345.

Remember that in "EURUSD", the ordering of first "EUR" followed by "USD" means that you are buying EUR using USD.

The real question is then, "how many US dollars is it going to cost me to buy 100K units of EUR?" And because the Euro is a little stronger than the US Dollar at this time, it's going to cost you more than US$100K.

If you buy 1 contract (100K units), and the current EURUSD price is 1.2345, the purchase price is:

1.2345 x 100K = US$123,450

So the contract value is US$123,450.

If the price of EURUSD then went up 1 pip to 1.2346, the new contract value is:

1.2346 x 100K = US$123,460

We can therefore come to the conclusion that, if you buy 1 contract (100K units) of EURUSD, you gain US$10 for every 1 pip move upwards, and you lose US$10 for every 1 pip move downwards.

And in fact, this rule holds true for any currency that ends in USD. E.g. AUDUSD, GBPUSD, NZDUSD.

For AUDUSD, the Aussie Dollar is currently weaker than the US Dollar, so you would expect it would cost less than US$100K to purchase 100K units of AUD:

0.6789 x 100K = US$67,890

To summarise, when USD is last in the pair, and you are purchasing 1 contract, simply multiply the rate by 100K to get the contract value (the purchase price in terms of USD). And remember that each pip is worth US$10 to you.
 

When "USD" Comes First In The Pair

If the currency starts with USD, such as USDJPY, then remember that you are buying USD with JPY. So now the contract value is in JPY.

123.45 x 100K = 12,345,000 Yen

What does that mean for you if your account is in USD? Well, you know the USDJPY rate - it's 123.45 in this example. So to work out how much 12,345,000 yen is in terms of USD, just divide it by the rate:

12,345,000 / 123.45 = US$100K

Which should not be surprising. Because we were purchasing 100K units of USD, and 100K units of USD tends to work out to cost US$100K :-)

What fluctuates though, is how much each pip is worth to you.

Remember that when you buy 1 contract, and USD comes last, each pip is worth US$10. When USD comes first, each pip is actually worth $10 of the other currency (1000 Yen in this case):

1000 Yen / 123.45 = US$8.10

That result hopefully makes sense. If the USDJPY rate is 123.45, it means the USD is stronger than JPY. So 1000 Yen should work out to less than US$10.

If the Yen was stronger, e.g. at 95.67, then the USD per pip (when you buy 1 contract) becomes:

1000 Yen / 95.67 = US$10.45

So how much you win or lose per pip actually changes as the rate changes, when USD comes first in the pair. But the contract value in terms of USD does not change.
 

When "USD" Is Not In The Pair At All

Let's go with AUDNZD for this example, with the rate being 1.2345.

With AUDNZD, you are buying 1 contract of AUD with NZD. The contract value is going to be in NZD:

1.2345 x 100K = NZ$123,450

So it costs more than NZ$100K to buy A$100K. Which makes sense because the Aussie Dollar is currently stronger than the New Zealand Dollar.

To get that contract value of NZ$123,450 back to USD, now you also need the NZDUSD rate. Let's say it's 0.5678. USD is second in the pair, so the contract value in terms of USD is therefore:

NZ$123,450 x 0.5678 = US$70,094.91

With USD being stronger than NZD, it makes sense to me that NZ$123,450 is about $US70K. And I have to let you in on a little secret here - while I've been writing this article that's always how I've checked if what I'm doing is correct or not - "does the result make sense?".

The end result is that to buy 1 contract of AUDNZD at 1.2345, it costs US$70K.

Why are we converting back to USD? Because most people have their currency accounts denominated in USD. If yours is not, you would hopefully take the knowledge gleaned from above, and work out how to convert the contract value from NZD into whatever currency you use.
 

Buying Less Than 1 Contract

Should you buy 10K units instead of the full contract, divide both the contract value and how much you win or lose for each pip or down, by 10.

Should you buy 1K units instead of the full contract, divide everything by 100. So yes it only costs US$678.90 to buy 1K units of AUDUSD, but also you only win US$0.10 for every pip gained.
 

Why Is The Contract Value Important

Because you can only buy as much currency as your account balance allows.

With shares it's easy - 1000 shares at $50 each means you need $50K in your account if you want to buy that many.

With currency, as demonstrated above, there's a bit more to it.

The good part is you don't really need to do the calculations if you are not so inclined. You could simply try and place the order without checking your account balance first. If you don't have enough in your account, you're broker won't let you place the trade. A bit lazy, but sometimes there's just not enough time.
 

Why Is The Amount Won/Lost Per Pip Important

Because you need to work out how much you're going to lose if your stop loss is hit.

You don't want to place your stop loss based on how much you're going to lose though. Prices move up and down all the time, and as such you need some wiggle room between the entry price and the stop loss. If you place the stop loss based on how much you are going to lose, it may well end up in striking distance of an average-sized "wiggle".

Instead, you should calculate by some other means where the stop loss should go (in broad strokes, determine the normal wiggle size and put it just outside that range).
 

What Is Margin?

Essentially, it's a loan.

You can trade shares on margin as well, but you probably need to take out an official "margin-lending loan" with a bank. They'll give the money for the express purpose of buying shares. And maybe they'll give rules on which shares you're allowed to pick from.

With currency, when you open an account with a forex broker, you are automatically granted this "loan".

What it means is, you can buy a lot more currency than you have actual dollars of your own.

From the example above, it cost US$123,450 to buy 1 contract of EURUSD. Maybe you don't have US$123,450.

But if your forex broker let you trade on a margin of 1:10, it would cost you only $12,345 of your own money to buy that contract.

If your broker let you trade on a margin of 1:100, it would cost you only $1,234.50 of your own money to buy that contract.

Yes, a bit over a thousand dollars of your cash can buy US$123,450 of Euro.
 

What's The Catch?

It's very easy to lose all of your money :-)

Remember how when you buy 1 contract of EURUSD, one pip up makes you US$10, while one pip down costs you US$10?

You spent $1,234.50 to buy that 1 contract of Euro. How's this calculation for you:

$1,234.50 / $10 = 123.45 pips

That's right - if the EURUSD rate dropped by 123.45 (let's say 124) pips, all your money is gone.

I just pulled up a chart of EURUSD and am looking at daily bars. I picked an average-looking one. It opened at 1.2867, and closed at 1.2752 - a drop of 115 pips in one day in an average-looking bar. Your 124 pips could easily be taken out inside a day.
 

Theoretically, You Can Lose More Than 100%

Well, let's say that all you had was $1,234.50, and you purchased the 1 contract of EURUSD at 1.2345 using a margin of 1:100. It used up all of your account balance.

When the rate came down by 123 pips, you now have only $4.50 of account balance left. When it fell the next pip, now you owe $5.50. As the rate continues to fall, you continue to owe more and more. That's the catch with margin lending.
 

I'm Scared Now, Make It Better

About the owing-money-thing, that's actually only theoretically possible - it's not possible practically. If you owed money to your broker, they would have to be able to get that money from you somehow. When banks lend money so you can buy a house, they can take the house off you if you don't make the repayments. But with currency trading, you could be, and probably are, in a completely different part of the world to the broker. They don't want to be in the debt-collecting game. So they will have procedures in place to sell your 1 contract for you, automatically, if your account balance falls to zero (or close to zero).

So, practically, you're only able to lose 100% of your account balance. I'm sure that's a big relief for you :-)

The mistake we made above that made us lose our 100% was that we bought 1 contract when we only had $1,234.50. We should have gone for something a lot smaller, like 1K or 10K units.

Using a stop loss, and by purchasing the correct amount of units, you can ensure that if your stop loss does happen to be taken out, your monetary loss is limited to a particular percentage of your account. 2% is often quoted as a good figure to risk on any one trade. Risking 2% is not risky at all in terms of your trading survival.

I have to conclude then, that currency trading is not that risky, compared to other types of trading. We can limit our risk on a trade to 2% of our balance if we want. But if you're an idiot then sure, you could lose all your money quite quickly. I'm not sure how this any different though to the stock market. Even walking across the road is risky if you do it wrong.

For the exact method to keep your risk to 2% (or whatever percent, which should be decided by you and you alone), you need to keep reading.
 

Calculating The Number Of Units To Purchase

Once you know the price where you want to enter a trade, and you have calculated where you want to put the stop loss, do this:

1. calculate the number of pips between the entry price and the stop loss (e.g. 15 pips).
2. calculate how much of your account balance you want to risk (e.g. 2%).
3. calculate how much that means in terms of dollars to risk (e.g. for an account balance of $2625, 2% would be $52.50)

So, you want to risk $52.50, and there are 15 pips between the entry price and stop loss price.

From these numbers you can work out how many units to purchase.

It varies though between currencies. It goes back to the calculations above of how many US$ a pip up or down is worth.

Those calculations were when 1 contract (100K) was purchased. What you need to do is alter the actual number of units to purchase until you are risking a maximum of $52.50.

Taking the simplest example - where USD comes second in the pair - buying 1 contract means 1 pip is worth US$10.

If we bought 1 contract of EURUSD, say, then losing 15 pips would be losing $150. That's too much. We have to buy less than 1 contract.

Instead we go like this:

$52.50 to risk / 15 pips = $3.50/pip

We want to risk $3.50 per pip. It's $10 per pip when you buy 100K units, and so in this case it's the ol':

$3.50/pip is to ? as
$10/pip is to 100K

And the answer is 35K units. The numbers are not always so nice though - just make sure you're risking a maximum of 2% (in this case).

At Oanda, you can buy 35K units. You can also purchase 35K units at brokers that offer 1K unit purchases.

But if the broker only allows purchases in chunks of 10K units, then you can only purchase 30K units. Because you want to risk a maximum of 2%, so you can't buy 40K units.

If the broker only allows purchases in chunks of 1 contract, then you cannot take this trade - you'd be risking more than your maximum % if you did so.
 

Margin Rate Is Therefore Not Important

When we calculated the number of units to purchase, we didn't actually use the margin rate anywhere. (The margin rate being the "1:100" thing).

To say it another way, the margin rate is therefore not important when calculating how many units to purchase. It is also not important when calculating how much we will win or gain on a trade.

It is only important when calculating how many units we can purchase.

Because we bought 35K units of EURUSD, we will win or lose US$3.50 per pip regardless of if our margin rate was 1:10 or 1:100.

But margin rate tells us "can we buy 35K units?". The separate question of "should we buy 35K units?" is between you and your life-partner :-)

A margin rate of 1:100 is only risky when you abuse it and buy too many units relative to where your stop loss is.

How many units you purchase, and the distance between your entry price and the stop loss, are all important.

It shouldn't take long to create an Excel spreadsheet or something to help you do these calculations.
 

There Is No Central Clearing House For Currency

With shares, the price of a particular stock is the same regardless of the broker you use. Because there's a central clearing house. You send the order to your broker, they then send it to the central clearing house. Buyers and sellers are matched up, and shares transferred. The price at which the transaction took place is reported back to all brokers.

You paid brokerage/commission to your stock broker. That's how they make money.

With currency, each broker is its own clearing house. You send the order to your broker, and they go off to the wholesale market and buy what you asked for.

You may not have paid any brokerage nor commission to your forex broker. The question is then, how do they make money?

And the answer is perhaps three-fold (although I'm happy to be corrected):

1. Forex is always quoted in terms of the bid and the ask. There is always a couple of pips difference. Just how big a difference often depends on which currency and how volatile it is at the moment.

   You have to buy at the highest price (the ask), and sell at the lowest price (the bid). The difference, which is called the spread, is what the forex broker gets.

   What keeps this spread low is competition. If one broker has high spreads, and another low spreads, generally people flock to the one with lower spreads.
    

2. Forex brokers buy on the wholesale market, and sell to us on the retail market. In all businesses, there is always a mark-up when they buy wholesale and sell retail.

   What keeps this mark-up low is the competition between forex brokers.
    

3. Forex brokers that use a traditional dealing desk arrangement often take the opposite position against you. What that means is if you win, they lose. And vice versa.

   There are often stories of disgruntled customers who say they won big initially before their broker "noticed them" and started trading against them. What this suggests is that winning traders make the broker lose money, so they are targeted. Because the broker knows the customers' stop loss, and because the broker essentially sets the currency prices, they can manipulate the price to take out somebody's stop loss. (But I have to think that there is more to it than that, surely? Otherwise these brokers would be relying on a constant influx of new customers).

   This verges on conspiracy theory stuff, so don't take it as gospel. But the issue is big enough for some brokers to offer no dealing desk, or straight-through, or ECN trading. They all mean the same thing - that orders are routed directly to the wholesale market so there is no chance (little chance?) of manipulation by the broker. You would probably pay brokerage/commission to such forex brokers, just like when you buy shares.

Hopefully you can see, especially from points #1 and #2, why the price of a currency might be different at different brokers. It's just like the price of lettuce between one grocery store and another - the prices will be roughly the same, and often exactly the same, but sometimes there will be differences.

Some people try to take advantage of these minor differences. This is called scalping.
 

Scalping

Actually, scalping has two definitions.

One is where you try to take advantage of the minor differences in the prices of the same currency between two or more brokers.

This is expressly disallowed by all brokers (I'm pretty sure). It's written in their terms and conditions.

The other definition is where, using the one broker, you try to take advantages of small movements in the price of a currency. As far as I know, this practice is fine. The only downside to it is that you are trying to capture a movement of a couple of pips, and each time you open a trade you have to at least beat the spread, which is also a couple of pips.
 

The Twist In The Trading Story

You don't need to own stuff before you sell it. And seriously, you don't even need to understand how that works. So you could skip the next couple of paragraphs.
 

Currency

Take for example GBP/USD. This is the Great Britain Pound (GBP) vs the United States Dollar (USD). Remember that the ordering is important. When you buy "GBP/USD", what you are actually doing is buying GBP using USD.

Let's change the example a little, to bring it back to something we do everyday. Instead of "buying GBP using USD", let's say we are "buying food using money". When you buy food, you hand over cash. You keep the food. You lose the cash. You are essentially buying food and selling cash.

Now think about it from the store's perspective. They sell the food, and get the cash. They are essentially buying cash with food.

So originally we had:

You - buy - food - lose - cash
They - sell - food - get - cash

And that can be changed to this:

You - buy - food - sell - cash
They - sell - food - buy - cash

And if we revert that back to our currency example:

You - buy - GBP - sell - USD (which is going long GBP/USD)
They - sell - GBP - buy - USD (which is going short GBP/USD)

When you go long, there is always a counter-party going short, and vice-versa.

And that is why you can sell (go short) a currency without owning it first. Because to go long GBP/USD is buying GBP with USD, and to go short GBP/USD is buying USD with GBP. You're actually buying in both instances.

Now you're going to say "But the money in my account is in Aussie Dollar! How do I use USD to buy GBP, or GBP to buy USD??". And the answer is, don't worry about it :-) Your broker will do some magic behind the scenes.
 

Shares

You can sell shares without owning them, but this is only possible on some exchanges, and only if your broker already owns those shares.

What your broker does is lend you those shares, and then you sell them. That's how you can sell shares without owning them - you are actually selling someone else's shares!

Hopefully for you the price goes down. Later you buy the shares back so you can give them back to your broker.

The normal order of events is of course to buy shares, then sell them at a higher price.

When you think the price is going down, however, you still do the buying and selling, but you do it in the opposite order. First sell, then buy. This probably sounds weird, but remember that you are selling someone else's shares. So really the order of events is:

1. your broker bought the shares
2. they lend the shares to you
3. you sell the shares
4. price goes down (hopefully)
5. you buy the shares
6. you give the shares back to the broker
7. you pocket the difference
8. everyone's happy :-)

In both cases you want to do the buying at a lower price, and the selling at a higher price.
 

The Realisation

Hopefully you now understand that you can make money whether the currency or share price is going up or down. You should no longer care when the news tells you that the share market crashed, or if it's booming. All you need to do is be on the right side of the trade. If you think the price is going up, you buy (go long). If you think it's going down, you sell (go short).
 

Backtesting

You need two things for a backtest:

1. significant amounts of historical price data
2. a set of trading rules to test (i.e. a trading system)

What you do, bar by bar of the historical price data, is use your trading system to determine whether you would have entered a trade, how much you would have bought, at what price, with what stop loss, and at what time.

You then work the trade through to its completion, at which time you start looking for the next time your trading system said you would have entered a trade.

At the end of the backtest you would have a list of theoretical trades. Each one would win or lose money. Remember these are trades you would have taken in hindsight.

Add up the win/loss amounts, and decide whether those trading system can be tweaked in any way to improve the theoretical performance. If you do tweak the system, go back and do the backtest again to see if the changes were actually better.

Doing backtesting is by no means a guarantee of future earnings though - markets can, and do, change personality.

Take this scenario though - you come up with a trading system, backtest it, and find that it consistently lost money. Would you use that trading system to trade real money?

If the trading system seemed profitable, the next step is trading it in real-time in a demo account.
 

Historical Price Data

All forex brokers' prices are slightly different to each other. So it's best, if you can, to backtest using price history from that particular broker.

You should also be careful of indicative price data. This is price data that can be described as "this is roughly what you would have paid". Currency prices are quoted in terms of both a bid price and an ask price. Indicative prices just take the average (I think). If you backtest using indicative prices, the spread would not be taken into consideration, and your backtesting results would appear more profitable than they actually should be.
 

Interest

When you buy some currency, you will either be paid or have to pay interest. Remember with going long EURUSD, you are in fact buying EUR and selling USD. Well, as it turns out, each of those has an interest rate attached to it. As a very simple example, let's say buying EUR means you are given 10% interest (on the total amount you bought - not just on the margin you used). And let's say selling USD means you have to pay 8% interest. You get the difference: 10% - 8% = 2%. So you get 2% interest on about US$123K of currency. And you get that regardless of if you lose or win money on that particular trade.

But if you went short EURUSD, you are doing the opposite. So, and remember this is just a simple example, you would have to pay 10% interest on the EUR, and you would get 8% interest on the USD. You get the difference: 8% - 10% = -2%. In other words, you have to pay 2% interest, regardless of if you lose or win money on that particular trade.

The interest rates are not symmetrical like that though. Banks never pay the same interest that they ask for. So if you were given 10% for EUR and asked for 8% for USD (making a difference of 2% which you get), then the opposite would probably be more like pay 12% for EUR and are given 6% for USD (making a difference of 6% which you have to pay).

Here's the good part - sometimes the difference in interest rates is so great that you can get a WHOLE LOT of interest. Like 250%!

And this leads people into a type of trading called carry trading.
 

Carry Trading

Basically, buy and hold. The trader earns their money from the interest. If the currency goes in their favour, they will get the profit from the trade plus the interest. If the currency doesn't go in their favour, their loss from the trade will be offset somewhat by the interest.

Which currencies are best for this? It changes when a country's interest rate changes, and in the recent economic climate many countries have been lowering their interest rates dramatically in order to boost spending. You're looking for the biggest difference in interest rates, so you want a country which has a high interest rate versus one with a very low interest rate (normally Japan, so check out GBPJPY, AUDJPY, etc).
 

Trading Systems

A trading system is just a set of rules which very basically tells you the following:

1. when to enter a trade
2. how many units to buy
3. the stop loss price
4. when to exit the trade

Here's an example:

1. if the close is above the simple moving average, enter at market
2. buy as many units as possible so that a maximum of 2% of my account balance is at risk
3. put the stop loss 5 pips below the low of the bar
4. exit at market if the price goes 50 pips in my favour

In this case, either the price will go up 50 pips and we'll exit at market for a profit, or the stop loss will be hit and we'll take a loss.

That is a trading system. A very simple one, but everything we need is laid out in black and white.

Moreover, the rules are not subjective at all. There's nothing in there that says "if it's in a down-trend", or "if the simple moving average looks like it's about to turn down". Each rule could be calculated by a computer, which is what you want.

(n.b. sometimes it's very easy to tell when a stock or currency is "in a down-trend", and sometimes you're just guessing. I don't like guessing).

How about we try to increase our chances of a profit? What we're going to do is modify our trading system so that we use a trailing stop loss.

A trailing stop loss means that instead of just setting the stop loss at the time we place the entry order, what we're going to do is move the stop loss up until eventually even if it was hit we would still make money.

The trading system becomes:

1. when to enter a trade
2. how many units to buy
3. the stop loss price
4. when to exit the trade
5. when to move the stop loss
6. where to move the stop loss

Which might be something like:

1. if the close is above the simple moving average, enter at market
2. buy as many units as possible so that a maximum of 2% of my account balance is at risk
3. put the stop loss 5 pips below the low of the bar
4. exit at market if the price goes 50 pips in my favour
5. if a new bar has a higher low and a higher high than the previous, move the stop loss
6. move the stop loss to 5 pips below the low of the new bar

And trading systems grow like this to be as simple or as convoluted as you think necessary.

The main points about trading systems are that:

• everything is written down
• everything is objective

No interpretation of what you've written should be required, nor indeed should it be possible for one person to interpret your rules differently to another person. If you can do computer programming, or you know a friend or next-door neighbour's kid who can do it, you or they should be able to program the rules into a computer.

This makes the rule "in a down-trend" an invalid rule. Instead you have to specify an objective way of calculating a "down-trend". And that might be as simple as saying:

• close is below a simple moving average; and/or
• the close of today was lower than yesterday, and of the day before that; and/or
• today's bar had a lower low and lower high than yesterday

Which of these rules works best, if any, takes us back to backtesting :-)
 

Next Steps

 
1. Open A Demo Account

Perhaps the easiest thing to do is open a demo account at a forex broker.

Opening a demo account at FXCM is extremely simple:

1. Go to the FXCM website
2. Enter the required information (the fields in bold)
3. Click the "Submit" button.

They'll send you an email with your new demo account details. Inside that email are instructions on how to download and use their software.
 

2. Make Some Trades In The Demo Account

Click around in the software and make some trades. It's a demo account so you can't do anything wrong. After a while you'll be a pro at buying and selling.
 

3. Start To Build A Trading System

You've probably already read some books. Or a bunch of websites. Or maybe you bought some trading system for $49. Write down your rules. At this point just choose anything, because trading in a demo account has no risk. If the trading system doesn't work, change it. If it does, please send it to us :-)
 

4. Trade The System In Your Demo Account

Make sure you follow your rules.
 

5. Discover Trading Currency Is Very Easy In The Demo Account

Made some money in your demo account? We all do :-) Rush off now and open a live account and put some of your savings into it.
 

6. Discover Trading Currency Is Very Hard In A Live Account

Yeah... hopefully you stuck to your 2% rule and didn't lose too much. But how was it possible you lost so consistently? Puzzling.

You went through all the emotions, right? Fear, greed, anger, paranoia (was someone watching you, or what?!), and so on. Good.
 

7. Decide That Hey - Emotions Do Play A Part When Using Real Money

And so you opt to buy some software which can do the trading for you, following your rules, but using none of your emotions. Moreover, you don't need to be a programmer to use this software, because all the setup is done with your mouse.

Congratulations. It takes years for some people to come around. You have taken a giant shortcut.

Here's more information about our Automated Trading Machine. And you can download it from here. It'll even do the backtesting so you can experiment and come up with new and exciting trading systems. Read how to get started.
 

More Reading

 
Risk

• Managing Risk - talks about how you can minimise your risk, and how our software also minimises risk.

Trading Systems

• Systems trading theory
• The trading systems tag in the wiki shows a lot of posts which show how the theory in the first link is applied in ATM.
• Common mistakes when creating trading systems in particular, should be very helpful.
• The example trading systems tag in the wiki shows both educational and real-world examples.

Backtesting

• The Problems With Backtesting - backtesting is not an exact science. There are some issues around it that pop up regardless of the software you use. Having written the article, we obviously know the issues and have done as much as we can to guard against them.
• Also see the backtesting and obtaining price data tags in the wiki.

Automated Trading

• The Good & Bad Of Automated Trading - it's not all good. But by following the steps outlined in the "Managing Risk" article above, you can navigate through some of the bad stuff.

External Links

• Baby Pips is an excellent place for beginners to learn all about currency trading.
• EarnForex.com has some more beginner information, as well as online calculators.
• ForexBook.org has some trading books in PDF format, from beginner to advanced, that you can download and read for free.
• And here's an interest rate table