Forex Time Machine Forex Trading Course

Why Forex Trading is so popular

Forex is different from trading stocks, but the benefits and risks are similar

The Forex markets are quite different from the stock markets largely because the price behavior of the Forex pairs is different and entails abrupt price swings. This means traders should utilize trading methods different from those that are used to trade or select stocks so that traders may fully realize the profit potential Forex offers while still minimizing risk.

Both Forex and stocks, however, are similar in that they develop repeatable price trends that give traders enormous profit opportunities for those traders with strong trading methods, disciplined trading mindsets and sound money management tactics.

One of the reasons Forex has gained in popularity is the concept of Leverage, which allows traders to take Forex positions with a much smaller account size than would be required for trading stocks, and because the margin requirements for Forex are smaller than they are for stocks. This increases the reward ratio for profitable trades, but it also increases the risk.

For example, most brokers offer at least 100:1 leverage, which is more than enough to generate significant profits while maintaining sound risk management. Other brokers will offer up to 400:1 leverage — but the risk reward ratio is not in the trader’s favor with this type of leverage.

Leverage, combined with reduced margin requirements and high profit potential are the real driving forces of the expanding Forex trading market.

Forex Time Machine

How to trade Forex

Here’s a typical trade scenario:

Let’s assume the current bid/ask quote for the EUR/USD is 1.3802/05 and you want to take a long (or Buy) position because you believe the Euro will gain on the Dollar.

We’ll also assume that you are only buying 1 Standard Lot.

When you buy this pair, you are actually buying 100,000 Euros for $138,050 US Dollars. Using leverage, at 100:1, you would need to have an initial margin deposit of $1,381 for this trade to take place.

Let us then assume that the Euro indeed gains on the Dollar and trades now at 1.3865/68 and you decide to sell and take your profits. You would sell you 1 Standard Lot at a profit of 60 pips (1.3865-1.3805).

When you sell this pair, you are selling 100,000 Euros for $138,650 US Dollars. Since you bought the 100,000 Euros for $138,050 and sold them for $138,650, you made a cash profit of $600.

If on the other hand the Euro went down to 1.3775/78 and you sold at 1.3775, you would have a loss of 30 pips, or $300. ($138,050-$137,750).

When using margin and leverage, it is imperative that you employ sound risk management rules to ensure that your account equity never falls below margin requirements — if it does, your position will be automatically liquidated and you will sustain a significant loss.

Forex Time Machine Review

Forex Trading: Is this Forex system worth the money?

Let’s explore each of our criteria and their importance for determining whether or not a forex trading method, system, robot or program is worth consideration for trading the Forex markets.

In-depth, detailed learning instructions

Any forex trading product you invest in, whether it is a trading method, course or robot, must provide you with a detailed understanding of how to use it. You should get a detailed explanation of implementing the method (for example), the correct approach for trading with it, detailed examples of the method in use, and the types of trading, be it day trading or end of day trading that are best suited for the method.

Without detailed instructions, forex traders will find themselves incapable of understanding these key elements and each one is critical to the successful use of a method or robot.

Trade Opportunity Identification

Traders should avoid any forex trading product that does not or cannot identify the precise conditions that should be present before a trade is considered. These conditions are known as the setup conditions and describe the market, fundamental or technical indications that must be met before a trader can enter the market.

In most cases, we prefer setup conditions that are based on technical indicators that allow a trader to better visualize the potential for a trade to take place. While fundamental trading is acceptable, we see it is much more difficult, with greater opportunity for losses for the average or beginning trader. Trading based on technical indicators will give traders a better overall view of the market at large, the trends in any forex pair, and a stonger sense of the probable outcome of the trade.

Entry Rules / Exit Rules

Once the setup conditions have been described, any Forex trading method should also provide the exact rules for entering, managing and exiting a trade. No trader should practice a method without these as it leaves too much room for interpretation for the trader and increases the likelihood for mistakes and losses.

Entry rules should tell a forex trader at what price a trade should occur and provide the simplest of instructions for placing the trade.

Trade Management, which in part falls under Risk Management (ongoing), should provide instructions for managing the trade regardless of whether or not the trade is profitable.

Exit rules should provide step-by-step instructions for exiting a trade, again regardless of whether or not the trade is profitable.

Note that we say whether or not a trade is profitable. Too often, we see methods and robots that tell you what to do when your trade is profitable. Rarely do we see methods that tell you what to do if a trade has turned against you. This should be a simple excercise — if a trade moves against you, you should get out (that’s rather obvious), however, many programs out there do not
teach traders the correct way to get out of a trade to minimize their losses on the trade.

You will have losing trades – the critical element to that is to keep those losses as small as possible.

Trade Plan and Strategy

Any method or course for trading Forex must also include a trading plan or strategy. This refers to the daily use of the course to identify trades, whether for day trading or end of day trading, or simply casual trading.

Some examples of elements traders should look for include:

- Using the setup conditions criteria within charting software
- Planing the amount of time needed to trade (short term/long term)
- Monitoring the trade once it has executed
- When to trade and when NOT to trade
- Best hours for trading certain pairs
- Trading the majors and/or the exotics

Risk Management (Initial and Ongoing)

Risk Management is without question the most critical, yet least taught element to Forex trading. First, we need to establish exactly what we mean by Risk Management. When talking about Risk and Risk Management, we’re referring to both the risk involved in every trading event and the money management principles once a trade has been taken. The primary factors every Forex trader should be aware of are:

- Amount of capital risked per trade, as a percentage of your account balance
- Calculating a reward to risk ratio before entering a trade and for the duration of a trade
- Calculating the correct Lot size and Position size for each trade entered
- Initial stop loss settings for each trade entered (based upon above factors)
- Ongoing stop loss management for the duration of a trade
- Managing the profit exit of a trade

A brief overview of the importance of each of these elements:

Typically, the initial risk for any trade should be limited to 2-5% of your account balance. This means you will automatically limit the amount of capital you could lose on any single trading event. If a trading method does not trade within these guidelines, or presents wider guidelines, you should be very careful in the application of that method. You may also consider avoiding it
altogether.

Every trade should operate from a reward to risk ratio, however, don’t fixate yourself on this number. Instead, you should be looking for methods that REDUCE risk and have a higher probability of reward.

The initial risk on a trade will help you to determine the correct lot size and position size for any trade you are going to enter. Note the distinction between the two: if your account balance is $500, you are not going to be able to trade a standard lot. You’ll likely be trading micro or mini lots and you’ll need to be able to determine the correct number of lots (position size) to trade based on the amount of capital risked on the trade.

Stop loss management is critical to the success of any trade. First a method or program should clearly set out the initial stop loss placement, based also on the amount of capital risked on the trade, and then, provide ongoing stop loss management for the duration of a trade. This may include trailing stops, or, a simple exit strategy once a profit target has been hit.

Last, a method or program must show you how to manage that profit – especially if you are scaling out of a trade in multiple stages. Too many programs leave this one category in the trader’s hands and guarantee more failure than success for the trader. The reason for this is once trades go profitable, traders fall into the ‘greed’ trap. They’ll want more pips than the market is
willing to give them, or, worse yet, when a trade hits a high and then reverses, traders will stubbornly wait out the market to get back to that previous high (or maximum profit) only to see all of their gain evaporate.

Far too often we see methods and robots that fall into these categories:

• No risk management guidelines taught in conjunction with the product
• Stop loss settings that are too wide and lead to massive drawdowns
• No money management principles for lot/position sizing
• No guidelines for managing risk and protecting gains once a trade is entered

Don’t make the mistake of trading with a method or program that does not provide exact guidelines for managing all of the elements of Risk and Money Management principles.

Product Support (Materials and Customer Support)

This is as simple as it gets — when you purchase a forex trading method or forex robot, you need to have world class support. It doesn’t matter whether that is telephone support or email support — be certain that an outlets exists to answer your questions or solve your problems.

One warning sign and how to test it: As soon as you purchase a forex trading method, course or robot, send an immediate email to their support team. This can be as simple as asking questions about the setup of the program, or verifying the return policy. The key is to see how long an answer takes; or, if you even receive an answer — we’ve run across many products that don’t even respond to their customer’s emails!

Additional Product Tools (Forums, Member Websites)

Generally speaking, the Forex trading product should have additional outlets for help, whether those outlets are forums or member’s only websites. Here traders should have access to additional information that assists them in utilizing the method or program and provides other resources or training information on putting the method into practice.

While we do not necessarily blackmark a method or program that does not have a forum or member’s website, those that automatically include one rank higher in our reviews.

Product Guarantee

In most cases, you’ll find Forex trading products come with 30 day money back guarantees. We prefer companies that give you more than 30 days to test their product. Why?

First, you need time to understand how the method or program works. While you may be able to get through the learning portion of a method in a few days, you still need time to test it until you thoroughly understand it and are able to put it to full use.

Second, we advocate always trading with a new method or program on a demo account until traders have complete confidence in following and implementing ALL of the rules – from setup condition identification, trade entry and exit, to risk management.

Traders should never move to live money account trading until they have that confidence.

Furthermore, you need time to ensure that a forward testing of the product produces positive results. By positive, we do NOT mean that every trade is a winner – this is impossible – but we do mean the overall trading activity results in net gains.

While traders can accomplish this in a 30-day period, it puts far too much pressure on the outcome of every trade. Traders are forced toward that ‘every trade’ should be a winner mindset, especially as they get closer to the last few days of the guarantee period. This causes discipline mistakes as traders take greater risks, enter trades they should not, or trade during times when the market is moving against them.

2. The shorter the guarantee period, the more suspect the product, in our opinion. Again, this is due to two factors: one, the learning curve and two, the forced pace at which traders feel the need to trade profitably. As well, the shorter period is designed to limit the exposure to the markets for programs that do not fare well over time — especially automated programs, robots or
scalping programs.

By reducing the market time exposure, the makers of these programs hope to ‘hide’ the short term likelihood of a massive loss due to the lack of risk management principles.

Backtesting: A quick note on backtesting — where it relates to automated programs like robots or other ‘cheap’ trading methods, you should be aware that such programs are often CREATED from a backtested theory. That means the system maker used old market data to form a method and let history ‘prove them right’.

Since that’s the case, what are the chances you’ll discover something doesn’t work when backtesting it? Not all that high.

You are better served by forward testing with real market conditions in a demo account (even if the product has only a 30-day money back guarantee) as that testing will give you far better accuracy in terms of the ability for the method or program to generate successful trades.

Do I have to day trade Forex is one of the most common questions asked about trading the Forex markets. Day trading Forex is very widespread but most people cannot commit the time to day trading because it requires that you watch the markets on a to-the-minute basis. Another approach, however, is trade the forex on an end-of-day basis.

Trading on this basis will require significantly less time, impose less stress and provide profit potential no different than day trading. You will need to identify a good trading method which is specifically designed for end-of-day trading as many of the rules governing day trading will not necessarily be applicable to end-of-day trading methods, or they will differ in unique ways.

Traders, especially those who are new to Forex, should recognize that if you cannot make money trading Forex on an end-of-day basis you will not fare any better in a day trading environment. This is due to the time pressures needed to make instant decisions on order entry, immediate placement of stop orders and profit targets — all of which are extremely stressful and demanding.

If you consider any of the six majoy pairs and look at longer term charts of each pair, you will clearly be able to identify long-term trends which could have generated significant profit over time. Day traders need to make fast, small profits; end-of-day traders can have the patience to take longer, larger profits.

So don’t believe that the only way to trade Forex is in a day trading environment. You can do as well or better trading Forex on an end-of-day basis.

Forex Trading Courses

How to Manage Your Forex Trades

We were talking with some forex traders about one of the problems affecting them while their trades were ongoing and found a common issue — watching winning trades become losing trades.

As we’ve talked about before, if you aren’t managing your forex trades, from entry point to exit point, you’re going to see this happen to you – and it will likely happen often.

Here’s the root of the problem:

A trade is entered along with an initial stop loss. What most traders do is try to get ALL their profit at once, but they don’t actually have a ‘target’ –

When the trade initially gets profitable, many traders will ’screengaze’ — they get focused on how much they’ve made or are making at that moment. What they don’t do is plan for exiting the trade — they overstay in the trade and frequently watch their profits evaporate when the market turns against them (and then compound that error by staying in EVEN LONGER to ‘get back’ those lose profits). This is a losing proposition in forex trading.

In short, they let GREED cause them to lose sight of the purpose of the trade.

What is the purpose of a trade? To maximize gain and minimize risk – it IS that simple.

Maximizing gain does not mean you exit a trade at the absolute ‘Top’ – it does mean that for the duration the trade is on, you have a set of rules that determine where you’ll exit for profit – and it isn’t where YOU think it is! More on that in a bit…

Minimizing risk means more than just setting that initial stop loss — you MUST manage your stop losses throughout the duration of a trade.

When forex traders enter a trade they must protect their capital first and think profit second. When their position starts trending up, they can take the right action to protect their capital AND their profits.

In fact, most successful forex traders ASSUME they’ll lose on every trade. They perform this psychological trick to make sure their risk strategy is always top of mind! Once a trade turns in their favor (much to their surprise), the first steps they take is get themselves into a break-even trade situation; followed by aggressive stop loss management to maximize their profits on the trade.

They think risk first, profit second.

Watch this video to see how it’s done:

Forex Trading Video

Forex Time Machine

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