How Does the Forex Trading System Work?

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What's the Secret to Trading E-Mini's Profitably and Consistently?

If I had a nickel for every time I was asked this question I would be a rich man indeed. I don't know if it's just the American way, but new e-mini traders are often convinced that there is some sort of secret equation that will assure them success. Nothing could be further from the truth when trading e-mini contracts; there are no shortcuts and most of the real valuable information is not in an average e-mini trading textbook.

That being said, why are some traders so much more successful than other traders?

There can be several explanations for a relatively rapid success and they all center around the concept of proper education. Most new e-mini traders, for egocentric reasons, tend to buy a few "how to"trade e-mini textbooks. This doesn't work very well, as most texts are very generic in nature and, so far, have stuck to introducing outdated and lagging indicators and oscillators.

To the average new trader, shelling out a moderate sum of money to learn the tricks and internal workings of the market seem to be a waste of time. After all, they have already read several books and feel well-equipped to tackle the markets.

That's when I usually meet up with these folks; after they lost $10,000-$20,000 trying to implement the simplistic strategies their beloved textbooks preached. I tried to explain that most indicators/oscillators are lagging in nature and it is very difficult to trade profitably with this trading framework. Usually it is a pretty tough sell; has students generally returned to the market to be further beaten up. Eventually they end up in my room though, and I show them tape reading, order flow and other market internals. This experience is a completely new one for them, and many think I am some sort of mad scientist or a crackpot. Eventually though they see how smoothly educated traders (I have been trading for nearly 30 years, mostly in an institutional setting) handle the market.

This is not to say that I don't have losing trades, but I have been trained on how to deal with losing trades and do not attempt to over trade and these situations. The same can generally not be said for new traders, there are a litany of mistakes that are not covered in the "how to trade e-mini's" textbooks.

That being said, I can generally get most of these traders straightened out and on their way to profitability. On the other hand, the stubborn ones refuse to listen and go ahead and blow up their account. That makes me feel sad, I often wish I could've reach them before they made a hasty exit from the e-mini trading markets.

Real Live Trading Doesn't Lie. Spend 3 days with me, in my trading room, and see if you are one of the many that can profit from a fresh and unique view on trading e-mini contracts. Sign up for your free trading experience by clicking here.

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Top 4 Mistakes Made By Forex Traders

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Why a Good Trading System Is Only 20% of the Game?

Since my move back to Asia, I have met many new traders - including professionals, beginners as well as some who are just completely clueless about trading.

It's quite an interesting experience for me as I could tell very quickly the ones who will be a successful and who won't. I don't think I have a crystal ball but I am only making the assumption based on one simple fact - the questions they ask. The common theme among the beginners and the clueless is this:

"How do I find the Ultimate Trading System"?

I made the assumption not because of the above question, but because that was the only question they asked. It was clear that they are putting too much weight in finding the Holy Grail - which, in my view, does not exist. Worst of all, some of them have not (and are not planning to) enrol in any form of Trading Education or Mentorship.

Note: Just to be clear, a Trading System is defined as a systematic and process orientated method of entering and exiting the Financial Market.

Trading System is only 20% of the Game

Today, I'm going to share something pretty crucial for your trading career, and that is - having a good trading system is very important, but the system is only a small part of the game. In my view, a good Trading System only contributes to 20% of Trading Success.

Just as an illustration, many amateur traders get frustrated when trading results are not favourable, they often give up on the system and/or start to jump from one trading system to another. Some even go to the extent of blaming the Market or their Brokers - but never themselves.

On that basis, I'm pretty confident to say that many amateurs spend about 90-95% of their time working on trading systems. Many amateur traders do not realise the only thing that stands between the market and the system (assuming that it is a proven profitable system) is YOU. If you, the market and the system are not in sync, you are pretty much assured long term trading failure.

The Remaining 80%

In my view, I strongly believe that the remaining reasons required for trading success is Trading Psychology. However, Trading Psychology is a very broad area which covers multiple subjects or can be multi disciplinary. Hence, please do not jump into the conclusion that I'm only referring to Emotions or Personality of traders. Instead, it should be a combination of the following:

• Money Relationship


• Belief


• Positive Mentality & Attitude


• Emotional Awareness


• Routine

Management

Like Psychology, this is a fairly big topic as well. In my view, I would break Management down into the following sub-categories:

• Trade Management


• Money Management


• Risk Management


• Self Management

There are a few schools of thought on this subject, some would argue that Trade, Money and Risk Management are part of a Trading System and they should not be view separately. Some would also argue that Self Management is part of Trading Psychology.

To be honest, I'm not here to debate with you to see who is right and who is wrong. My point here is to highlight the fact many amateur traders spend too much time on the system and they are not aware of the importance of Management.

Similar to Trading Psychology, Trading Management can be multi dimensional and I have highlighted some of them in my previous article. Again, I believe this will further highlight areas that one might overlook.

Conclusion

Your Trading System is really only a small part of your Trading Career. However, just to be clear, please do not ignore the importance of having a good profitable trading system. In fact, I highly encourage you to continuously develop your trading knowledge and to make your Existing system perfect.

Of course, if your trading system does not show favourable statistical results (including Expectancy, Reward:Risk ratio and etc) based a large enough sample size, then do go ahead to change it or dump it. Nevertheless, only change it after having a systematic review.

There's nothing wrong if you have been all over the place in search of the "Holy Grail" trading systems. As the saying goes, "you don't know what you don't' know". However, ignorant is not valid reason any more. On top of that, if you're reading this right now, I strongly encourage you to re-evaluate your trading plan.

Thank you.

Anyway, hope you've learnt something from this article.

If you like what you read, do visit us at TradeYourEdge.com

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What Are Stock Trading Signal Services?

When it comes to making money with investments, you'll find that there are a lot of different opinions on the matter. You could easily search online and find a great deal of information on the topic of smart stock buying and selling, but most of it will be based on speculation. The speculation can be detrimental to your portfolio if you miscalculate even one of the suggested purchases. There are, however, options that may give you an edge in the marketplace, and something that most people don't even realize exist. Using mathematical data, there are services available that will send you a signal when there is an optimum time to trade, buy, sell, or do nothing. This is done through the analytics of a variety of different components and can be easily found on the web with what are known as trading signals. For those that are wondering exactly what are stock trading signal services, the following may help you understand.

First and foremost, it's important to understand that these options are not necessarily complicated in nature. They are often times easy to manage and will provide a wealth of information into the marketplace in a way that most others will simply not be able to compete with. When you sign up for a service you will often times get a chart to watch. The chart will showcase different fluctuations in the price of any given stock alongside measurements that would give you a line of where to buy, sell, or trade. This visual guidepost is similar to that of looking into a graph for the stock market, only it will have several different components that you will have to measure.

Each different iteration will be lined up in a way that will literally signal what to do next. This graphing mechanism is utilized to look into the risk management of markets. When something is oversold or overbought, a calculator can determine whether or not a person can invest with minimal risk factors in place. This sort of calculated effort takes a great deal of math and syntax to fully understand, which is why many traders look towards services that do this for them. When you invest in stock trading signal services, the heavy lifting is done by the company that you sign up with, instead of yourself.

Some stock signals services may opt for email signals instead of charts or software. These services allow you to subscribe to the service and then receive instant email updates when strong buy and sell opportunities are identified. These email services typically include additional details on the stock and even more precise information on just how to best take advantage of the signal.

A person could do this on their own, however, it requires a great deal of maintenance, research, number shifting, and knowledge of how certain equations work out to contribute to whether or not a market is risky. Unless you're a trained statistician, it's best to let the experts handle this sort of measurement.

Visit MHGSignals for excellent Day Trading Signals and Stock Trading Signals services: http://www.mhgsignals.com/

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Copycat Traders: A Great Way to Learn To Trade

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How Our Experiences and Expectations Can Wire Our Emotions The Wrong Way

Do you remember the last time you visited your favourite restaurant? You like it so much that, before you even arrive at the place, you know what you wanted to order and you know what to expect without even looking the menu? As soon as you reach the restaurant, just by seeing/hearing the buzz of the place is enough to put a smile on your face because it reminded you of the experience. At the end of the meal, there is just a sense of satisfaction and contentment inside you.

You can agree with me on the experience, can't you?

Well, that is precisely how your mind works. With sufficient experiences (assuming you visit your favourite restaurant regularly), you will have the right expectations. With the expectations being met, that wires your emotions to feel satisfied and content.

With that, I hope to break down and share the relationship between (1) having the experience and knowing what to expect from the experience. Then the relationship between (2) knowing what to expect and having feelings and emotions that are generated from those expectations. More importantly, I hope to illustrate this important relationship in the trading career.

Shaping The Expectations

Every individual becomes who and what they are now because of their personal history and experiences. Those histories and experiences are the source of a trader's beliefs, values, assumptions, and, to a certain extent, their biological sensory systems (common biological sensory systems include vision, auditory (hearing), kinaesthetic (feeling), gustatory (taste), olfaction (smell)).

As you would realise, as you build those experiences (in any specific areas), your beliefs, values, assumptions and sensories (towards that experience) will increase as well. You might feel anxious or excited initially but after repeating the same thing several times, those emotions fade away because you already know what to expect. More often, than not, those expectations are met.

For example, since you have been to your favourite restaurant for a millionth time by now, you strongly believe that restaurant has the friendliest waiter or the tastiest pie. However, you also know that it is worth visiting even if there was the longest wait list ever. But it's all OK because your value and beliefs know that the food is good enough that you're fine with the wait.

So here's the first relationship - like it or not, repeated experiences will shape your expectation.

Your Emotional Driver

Now that those experiences in your favourite restaurant is fully integrated into your unconscious mind, you will often use that experience as a benchmark. While it may occasionally go against you, it is how the human mind works because you are familiar with and it is what makes you comfortable. Does that sound familiar?

Now that your expectations has been installed, let's flip the story around.

Say you were visiting a completely new restaurant and there is nothing similar about it to other restaurants. As soon as you enter the restaurant you noticed a very long queue or wait list. Using your benchmark, that is quite a normal experience for you. In fact, you automatically assume that its fine and you would equate a long wait to relatively good food - that's because it's normal in your favourite restaurant. Unfortunately, as soon as the food arrived, it was not what you had expected. However, just because the food was different, you assumed it was not-as-good.

Here's the unfortunate truth, even though you've never been to that restaurant, you have already set an expectation and once your expectations were not met, you automatically feel unhappy. Some might even get frustrated because they felt like they wasted an hour waiting for a meal that was not worth the wait.

And that is the second relationship - your expectations will consciously or unconsciously drive your emotions.

In the end, the restaurant turned out to be an unforgettable one, not because it was the worst in town, but because it was different from your past experience and that created a below par expectation. Hence, it caused some unfavourable emotions (or feelings).

Apply that To Trading

OK, enough of food and restaurants. If you think that the bad experience of the new restaurant is not too unusual, then, let's see what you make out of this.

You learnt that traders can make a living just by trading the financial market. However, like every conventional job, you try to look for any form of certainty because that is how you benchmark any normal career (though you probably do it unconsciously). You are looking for something you are familiar with and something that makes you feel comfortable. Unfortunately, retail trading is not exactly your usual 9-5 career.

If you can't get that, you would at least want to see some income after working on trading development for a period of time (whatever that timeline may be). Regrettably, you don't see it and you don't know when you'll get there because you there is no fast and hard rule in trading that shows when someone can start making money. In fact, the harder you work towards the financial rewards, the more you distant yourself from it.

Traders who manage to become successful will probably have no issues with their emotions. That's mainly because the results are inline with their expectations. The real problem starts for those who are still struggling to see profits. Since their expectations were not met, they started to feel uncomfortable, they get frustrated and/or annoyed. While some decide to stop trading, others move into what we recognise as self-sabotage or they may even inherit certain stress related problems.

Here's What Went Wrong

As you can see, your past experiences in jobs as well as in live have shaped you expectations and you have created you own world view of trading. You have unconsciously used your past job experiences even though it may not be relevant because you have no relevant experiences to support your trading expectations.

Since those expectations were from the wrong experience to start with, more often than not, they are not met. Once that happens, the second relationship kicks in and your emotions go haywire. For example, you know consciously that you should not expect to win all the time but deep inside you, you secretly expect to see some positive results. Unfortunately, this is how negative emotions are created.

Conclusion

Everyone's history and experiences are different, which lead to different expectations. With different (or wrong) expectations, your emotions go the wrong way fairly quickly.

With that, the main point that I really want to share today is this - if you truly want to learn to control your emotions, you really need to learn to manage your expectations. In order to work on your expectations, you should disconnect the relationship between your past experiences and your trading expectations. Then, you will, by default, resolve your emotional issues.

Meanwhile, work on getting the correct experiences. Keep trading either on a demo or a small account until you are comfortable and until your emotions fade away. When that happens, you know you are ready.

Thank you for reading and please share your comments below.

If you like what you read, do visit us at TradeYourEdge.com

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