Submitted by: Winsor AGA Hoang

Michael Jordan was one of the best basketball players in the world. So what do Michael Jordan and automated Forex trading have in common? It is known in sports terminology as a cold streak or slump. Michael Jordan has missed more than 9000 shots in his career. He and his team have lost almost 300 games, and he failed to make the final game winning shot more than 25 times in his career. Does this make him a poor basketball player because he has failed over and over again during his career?

An athlete will go through a losing streak, and every trader will go through a similar losing streak, a period of consecutive losses with no profitable trades. In trading, this term is defined as drawdown, and it can be defined as a percentage or a number. Regardless of whether you are trading manually or using any automated Forex trading systems, you will experience a period of consecutive losses. It does not matter if you are Michael Jordan of the basketball world or the Warren Buffett of the investment world, everyone will face losses during their career or investment period. Losses are inevitable, and as investors/traders, we cannot avoid them. Trading involves both risk and reward; hence, it is impossible to obtain any type of reward without involving some risk.

An automated Forex trading system cannot avoid a losing streak; however, it is with proper money management that it can minimize the losses during the cold streak. For example, if an automated Forex trading system has a maximum drawdown of $3,000 using a 0.1 standard trading lot, it is not advisable to start trading with this system using $5,000 as starting capital. If you are unlucky and a drawdown immediately starts right after you have turned on your automated Forex trading system, you will see your trading account going from $5,000, to $4,000, to $3,000, to $2,500 and then to $2,000. In this example, you just experienced a losing streak of $3,000, or a 60% drawdown.

Before using any particular trading systems, you want to know what is the largest loss you can face when an automated Forex trading system starts incurring losses due to changes in the volatile Forex market. You must understand that this is a temporary worsening condition of a trading system. This period is the trading risk, and it will pass. With this risky period, a good trading system will recover and provide you with ample rewards (a.k.a. profits). Depending on your level of risk tolerance, a 60% drawdown is quite extreme in one s trading account. If you know that the drawdown is $3,000, you may want to start trading with $10,000 instead of $5,000. During a losing streak of $3,000, you will only experience a drawdown of 30%, which is a lot more tolerable.

Be a good investor scout and always prepare for the largest losing streak during your investment period. A drawdown period can be as long as three months; hence, don t jump from one system to another system looking for the Holy Grail. If you have found a profitable trading system, stick with it during its three months drawdown period and you will be handsomely rewarded for your patience. Alternatively, follow a profitable automated Forex trading system and wait until it starts losing and then jump in. Just like Michael Jordan of basketball, after missing three baskets, he will likely score on the fourth basket, so don t give up on him too early.

About the Author: Winsor A.G.A. Hoang is a registered Professional Engineer and the founder of

ctsforex.com

. He has developed five

automated Forex trading robots

for managed forex trading. His automated software is internationally ranked with live trading results published every 30 minutes. Visitors can use the published trading results as free Forex trading signals

Source:

isnare.com

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The forex money trading market works in a very methodological way. Once you understand the method, there is no stopping you from gaining invaluable investment profits. Studying how the market works is very simple. From constant studying, you will find the following.

The market moves and accumulates to a certain area and stays there for a while; once it has accumulated enough, it moves ahead for a few minutes and then starts distributions. And then moves over to accumulations of funds again. This is basically how the market works. If you are interested in day trading, then this could not be profitable enough and not a very wise investment bet, especially when accumulation and distribution work. In day trading, when the market moves out a bit off the accumulation area, you could stand in danger of your profits being cut short.

Most traders’ advice against day trading since there is not much profit making, the accumulation could move in a zig zag manner, not leaving behind enough profits for its traders.

If you really want to make profits in the forex market, make sure that you wait till accumulation period is over and still distribution begins and wait for reverse when the market has a short term 2-10 days of trading.

Most traders find that shot term trading with accumulation and distribution methods in the forex market is highly beneficial. However, you will still need to study well about the forex market trends so that you base your own trading tactics on it.

Forex money trading requires that the individual choose his own style of trading that they are comfortable with. In the mean time, they can get a lot of advice from big players in the trading market. However, it is best that they make their own scheme, depending on their schedule and comfort.

Standard Deviation – An Essential Tool For Forex Trading Success

by

sacha Tarkovsky

Standard deviation is a concept all fore traders should understand, as it will give you a greater edge in your quest for forex trading success.

If you want to understand it read on and find out how it can make you a more profitable forex trader.

Standard deviation is logical and will help you time entries better and define targets for trades.

What is standard deviation?

Standard deviation is a statistical term that shows the volatility of price in any instrument including forex.

Standard deviation measures how widely values (closing prices) are dispersed from the average.

Dispersion is defined as:

The difference between the actual value closing price and the average value or mean closing price.

The larger the difference between the closing prices and the average price, the higher the standard deviation and volatility of the currency measured will be.

The closer the closing prices are to the average mean price, the lower the standard deviation or volatility of the currency.

The confusing bit (don t worry we will simplify it later) but here is the definition:

Standard deviation is calculated by taking the square root of the variance, the average of the squared deviations from the mean.

High Standard Deviation is present when the price of the currency studied is changing dramatically.

Conversely, low Standard Deviation values occur when prices are more stable or less volatile.

Spotting Contrary trades

Major tops and bottoms are accompanied by high volatility as prices reflect the psychology of the participants.

Greed and fear, push prices away from the average to unsustainable levels and prices eventually return to the mean average.

Why is standard deviation such an essential study?

Any currency moves with the following inputs determining the price:

Supply and demand fundamentals + investor psychology = Price.

Taking Advantage Of Human Psychology

A big rise in volatility and a dramatic move away from the mean average, means that emotions are moving the currency too quickly away from the mean.

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