Sunday, September 9, 2007

Online Forex Trading The Main Reasons Traders Lose

Online forex trading is often promoted as a way to get rich quick and that it can be easily.

While it can be done and is one of the most financially rewarding ventures you can do for the effort, you need to know where to put your effort.

Its a fact that in online forex trading most traders have no idea how to really make money and lose and here are the basic mistakes they make.

1. You can buy success from someone else

They buy an e-book for under $100 and expect it to make them rich.

These people are greedy, ignorant or fools or maybe all three.

There is some good advice out there (and our other articles explain this) but dont expect anyone else to make you rich, the final judgment on trades is yours and you need to accept responsibility.

2. The myth of short term trading

Most new traders want to day trade or intra day and this group are simply guaranteed to lose.

Short term trading doesnt work.

No one can calculate daily moves their random and all you do is have a huge amount of small losses and marginal profits that destroy your account equity over time.

Ever seen a short trader with long term track record of consistent real time gains?

I havent and you wont find one either.

3. Not understanding volatility and risk

Most traders have no concept of volatility and market timing to take advantage of it.

They end up entering trades when risk is high and placing stops that have high odds of getting them stopped out.

Learn about standard deviation of price and make sure you understand it.

4. Buying low and selling high

Most traders focus on buying low and selling high. This is destined to wipe them out.


Because they should wait for confirmation and buy high sell higher

Not enough room to explain this in depth here, look up breakouts on the net and see for yourself, most major trending moves start from new market highs.

5. Changing systems

Traders constantly change systems or methods.

This is normally because they dont have one they understand and have confidence in, in the first place.

All systems lose at some point, but you need to stick with it if its logic is soundly based.

If you have confidence in it you will have the major trait all successful currency traders have.

6. Discipline

Many traders have a system but they dont have the discipline to execute the signals as they should and these people may as well not have a system at all.

Some positive advice

Dont make the above mistakes when you approach online forex trading.

Accept responsibility (even if you follow someone else) make sure you understand and have confidence in your system, so you can apply it with discipline.

Never day trade look for long term trends then:

Use a breakout methodology with just a few confirming indicators and understand volatility so you can place stops and targets to allow you to run the big profitable trends.


On all aspects of becoming a profitable trader including features, articles and FREE FOREX trading PDF'S visit our website at

Exploding The Cash Is Trash Myth

So, in May 1989, with the Australian share market in the depths of a bear market, and real estate has just crashed, where do you put your money? Obviously in Japan (if you belong to the Flat Earth Society, as most do, and you know nothing about the underlying mood insight of the socioeconomist).

Okay, so let's you and I invest $1,000 each in May 1989. You put yours into Japanese shares (buy the Nikkei index at 34,000) and I'll put mine in the bank. Let's assume that you have taken the advice of your broker or adviser to "buy and hold for the long term. Even if the share market falls, it will always rise to a new high in the long term."

Let's say that over the next 18 years, to May 2007, I earn 6% per annum interest. (Note that the cash rate in Australia was 18% in 1989, but I want to be generous here). Dividend yields on Japanese shares are notoriously low, and I am probably being overly generous again (by about 50%), but let's assume you earn 1% per annum in dividends on your Japanese shares. And let's say you hold your shares right through until now. That is, when the Nikkei fell below 8,000 points in 2003 you didn't sell in panic, because "shares will always rise in the long term." Let's say the Nikkei is 17,000 points today. We'll ignore tax and inflation for the purpose of this exercise (if only we could).

How do we compare? My $1,000 is today worth $2,854 with compounding interest. How did you fare?

Your shares are worth $500, but you have earned $321 in dividends, which I have compounded for the sake of the exercise.

So I put my money in the bank and made 185% profit in 18 years. You put yours into the equivalent of today's Australian share market and lost 18% in the same period. Are you still sure you want to rush back into the share market? Are you sure that cash in the bank is such a bad investment? Are you going to keep listening to the "cash is trash" merchants who are simply talking their book (vested interests)? Or will you use your neo-cortex to override your emotion?

I rest my case. Just because all the "experts" say "cash is trash" does not mean that it is. It depends what you invest. There will be a time when the share market will be a fantastic investment. At that time I will be recommending it "with my ears pinned back." Yet at that time nobody will want to touch shares. Shares will be a dirty word. Aren't humans funny creatures? The Graham Dyer Newsletter has not missed a month's publication since July 1983. His track record for forecasting is the envy of many, including the 1987 stock market crash, the demise of the Japanese economy and stock and real estate markets in the 1990s, the bull market for bonds from 1989, and the real estate boom this decade. His book is entitled: How to Profit from the Coming Great Depression. If you want to know the pitfalls of investing as well as the opportunities, Graham Dyers world class work is a must read. For more of Graham's work you can visit