Most Popular Posts

Finding myself in a self-referential mood, I thought it would be interesting and maybe even useful to share the most popular blog posts and subject labels on the site. I'll add this list to the links over on the right and do my best to keep it updated regularly. But remember, just because they're the most popular doesn't make them the best - a principle as applicable here as it is to Britney Spears' career. And with that little disclaimer out of the way, enjoy...

10 Most Popular Blog Posts

1. Trendfollower Trading System
2. Second Life Currency Trading?!
3. Learning About Carry Trades
4. Forex Tax Tips
5. Forex & Currency Trading Blogs
6. BunnyGirl Trading System
7. Online Forex Interest Calculator
(just a long-winded link to Oanda, really)
8. Signs You May Be Overtrading
9. Bollinger Band Trade Filtering
10. The Martingale System: Some First-Hand Experience...From Las Vegas, of Course

10 Most Popular Subject Labels

1. Trading Systems
2. EUR/USD
3. Taxes
4. Carry Trading
5. Charts
6. Signals
7. Cable
(a fun vintage term for the GBP/USD pair, apparently still popular even in this wireless age)
8. Bollinger Bands
9. Brokers and Market Makers
10. Technical Analysis

(Here's the complete subject list.)

Good Investing Advice from Henry Blodget

While this is a forex site and this article by investment columnist Henry Blodget is about the stock market, I'm featuring it here because it's got good general advice no matter what market you trade in. The article takes a critical look at the recent stock market declines and the panicky headlines that accompanied them, as they always do.

Back in the day, Henry made a name for himself as one of those over-optimistic analysts who helped pump up the dotcom boom until it came crashing down. As someone who worked at a wayyyy overhyped web company back then (which shall remain nameless), it's good to see him coming back down to earth and offering sensible, clear-headed advice on how to think about market behavior and manage your investments accordingly. Some of the highlights:

The title: "The Market's Crashing! What Should You Do Now? Um, nothing."

His critique of the investment media: "What makes great investment media, however, often makes terrible investment advice."

His recommended timeframe for stock market investments: "If it really matters to you what the market does in the next several months or years, you shouldn't own stocks."

The risks of basing future investments solely on past market activity: "The last thing you should base your investment strategy on is what the market has done. One of the most common and most devastating mistakes investors make is 'driving with the rearview mirror,' as Warren Buffett puts it."

The value of keeping calm and maintaining a long-term view: "The only thing you can be reasonably certain of is that, if you have an appropriately long-term time horizon and an appropriately diversified portfolio, what the market does in the next few months or years won't matter a bit."

Tying this back to forex, I think it's very important to hold a significant percentage of your assets in non-currency investments. Putting all your money in forex is putting all your eggs in one extremely risky basket. I agree with Henry that a diversified portfolio is the key to long-term financial success - yes, I know it sounds boring, and frankly just typing the words "diversified portfolio" makes me yawn. But boring can be a good thing. If you're bored, at least you're not worrying.

To use myself as an example, my forex account adds up to about 3% of my total assets. The rest is in investments such as: a stock fund focused on capital appreciation; a 401k spread through a half-dozen money market, stock and bond funds; a small portfolio of individual stocks; and a high-yielding savings account. Oh yeah, and a house. Of course, I probably spend at least 50% of my time focusing on those 3% of my assets in my forex account, but that's because I'm still convinced my forex investments have the highest potential upside. Whether they do remains to be seen, and if they don't at least I'll have the other 97% in nice, boring, lower-risk baskets. (Well, except for the house. With the real estate market on the skids I don't know if I'd call this place a lower-risk investment at the moment. And did I mention I live 10 miles from the San Andreas fault?)

Read the whole article here.
Visit Henry Blodget's site.
Especially his "How to get rich" article.

The Single Greatest Money Management and Risk Reduction Tool Ever Invented

It's taken hundreds of hours of careful analysis, hard-won insights and intense, often painful first-hand experience to discover the single most important key to successful risk management and capital preservation in a trader's career. And unlike so many tools available out there, this one doesn't involve complicated algorithms, clever hedging, or stop-losses that don't always stop your losses. In fact, this Holy Grail of risk management can be summed up in just two words:

Don't trade.

By which I don't mean never trade - I just mean don't trade unless you have absolute confidence in your trade and are willing to let it run its course to success or failure.

Here are some examples of times you might want to use this cutting-edge trading tool:

• You have no idea what the market is doing
• You have no idea what your trading system is doing
• You're faced with conflicting trading signals
• You're faced with zero trading signals
• You disagree with your trading signals
• You're panicking in the midst of a nasty drawdown and liable to do something desperate
• You've just opened a trading account, added a couple moving averages to your charts (using the default settings, of course) and are planning to make as many trades as possible today, sleep or no sleep
• The phrase "I'll trade my way out of this" keeps crossing your mind

I'm not saying it'll be easy. When faced by the most difficult market conditions, sometimes the most difficult thing to do is sit on your hands, watching patiently from the sidelines.

Best of all, for a short time only, I'm offering this remarkable trading tool* to you free of charge. Now the only question is, do you have the courage not to trade?

*May not in fact be the greatest risk management tool ever invented, as if anyone could even know that in the first place. But it's a damn good one.

Related topics:
Simplify Your Trading
Signs You May Be Overtrading
Sometimes No Signals Are Good Signals

Currency News Page

Quick update on a new site feature - I've just added this news page featuring headline feeds from various news services including DailyFX, FXStreet and MarketWatch: The Latest Forex News

It was fun to put together because it's the first time I've tried to integrate RSS feeds directly into my content. They'll be updated dynamically as each service publishes new articles, so the content of this page will be changing pretty frequently. Seems to be working OK so far. One disappointment was discovering Bloomberg's not publishing RSS yet, but once they get their act together and start pushing out some feeds I'll add those too.

If there's an essential forex news provider that I've missed (and that offers RSS) please let me know and I'll make sure to include them.

Related topics:
The Latest Forex News
Forex News Services

Subject Labels

Just wanted to highlight a new site feature: you can now jump between related topics using subject labels that appear at the end of most posts. Here's the list of labels I've used to tag the posts so far - I'll probably be adding more soon:

• Affiliate Programs
• Automated Trading
• Ben Bernanke
• Blogs
• Bollinger Bands
• British Pound
• Brokers and Market Makers
• Cable
• Calendar
• Candlestick Charting
• Carry Trading
• Charts
• Compounding
• DealBook FX
• Directory
• Discipline
• Divergence
• Dow Jones
• Emotions
• Errors
• EUR/USD
• Euro
• Events
• Federal Reserve
• Fixed Fractional
• Forecasts
• FX Engines
  
• FXCM (Forex Capital Markets)
• GBP/USD
• GFT
• Global Forex Trading
• Hedge Funds
• Inflation
• Interest Rates
• Investopedia
• Leverage
• Limit Orders
• Martingale
• Maximum Prices
• Minimum Prices
  
• Moving Averages
• Moving Medians
• News
• Non-Farm Payroll
• Psychology
• Resistance
• Resources
• Risks
• Second Life
• Signals
• Software
• STARC Bands
• Stop-Hunting
• Stop-Losses
• Support
• Taxes
• Technical Analysis
• Timing
• TradeBolt
• Trade Filtering
• Trading Systems
• Whipsaws
• Yen
• Yuan

New Site Feature: Directory of Forex Resources

I've just put together a little directory of forex products, services, and organizations that I've come across while trading and publishing this blog and thought might come in handy to other forex traders. It's still very much in the early stages so if you'd like to suggest additional resources you feel deserve to be included, please feel free to post them in the comments.

These are the subject areas I've come up with so far:

• Automated Trading Systems


• Calculators & Converters


• Carry Trading Strategies


• Chart-Based Trading Systems


• Currency Brokers & Dealers


• Discussion Forums


• Forex Blogs


• Forex News Services


• Managed Forex Accounts


• Policy, Regulation & Oversight


• Trading Courses & Seminars


• Trading Signals

Hope they're helpful; future topics are likely to include Charting Tools, Trading Strategies and Reference Information, for starters. Any feedback would be much appreciated!

Daily Forex Forecasts

I just came across a site called Forex Predictions which generates daily high/low price forecasts for a number of currencies. So if you're into trading based on daily ranges, an idea I've toyed with periodically, it might be worth a bookmark. My guess is it's applying the average daily range over a certain period (month, maybe?) to the previous day's closing price. Or something like that.

Here's their page with all the daily predictions for currencies like the Euro, Yen, Pound, Swiss Franc, Canadian Dollar, South African Rand, Thai Baht and various others, all calculated vs. the US Dollar:
Daily High/Low Forex Forecasts

Another handy feature is a little box you can install on your site with that day's high and low predictions. For instance, here's the Euro prediction box. Maybe I'll stick it in the sidebar one of these days.

My main quibble with the site is it doesn't provide data on the past performance of their predictions. So I definitely wouldn't take the forecasts at face value - I'd monitor them for a while to see how close they come to the real prices.

Online Forex Interest Calculator

Every so often I get curious about how much interest I'm earning or losing by holding certain currency positions. For instance, I recently discovered I've shelled out a lot more than I've made in interest this year because I've been making a lot more long EUR/USD trades than short ones. Knowing that I can make a few extra bucks may also affect my decision to hold a position through the weekend or not. So I decided it would be helpful to have a handy calculator on hand that would tell me exactly how much I could expect to earn or pay out in interest.

Fortunately there's no shortage of these calculators online, and Oanda offers this easy to use one as part of its FXMath suite of currency trading tools. Curious how exactly interest is calculated, or perhaps you'd enjoy nothing more than calculating it yourself? Here's a detailed explanation of how it's done.

Related topics:
Forex Calculators & Converters
Learning about carry trades

Forex & Currency Trading Blogs

If you ever get bored with this forex blog (unlikely, I know, but still possible) I highly recommend these other online purveyors of forex wisdom. I've included their RSS or XML feeds when I could find 'em so you can subscribe if you have an RSS reader (My Yahoo is free and easy to set up, here's where to get started.) Enjoy!

The Forex Project

Frequent updates from a trader who's testing out various forex strategies. I've been following his posts about FX Engines and news trades with particular interest. And check out the topic tags in the left sidebar, a great navigational aid. I wish my blog was this well done!

RSS/XML Feeds: RSS 2.0, Atom XML

Soul's Mad Forex Trading Diary

Updated less frequently since Soul Trader retired from day trading, but still a valuable resource - his post about why he's stopped discretionary trading and the advantages of automated trading is a must-read. My goals are very similar to his and most of my forex work is leaning toward maximum automation whereever possible.

RSS/XML Feeds:
http://feeds.feedburner.com/SoulsMadForextradingDiary
http://soultraderdiary.blogspot.com/atom.xml

Pippin' Ain't Easy

Great name and a great blog with daily trade updates and detailed chart graphics with showing entry and exit points and on-screen analysis of each trade.

RSS/XML Feeds:
http://feeds.feedburner.com/forextradingjournal
http://pippinainteasy.blogspot.com/atom.xml

Globetrader

I just read his July 7 post "No System Works Forever" and thought he made some great points about the fallibility of forex systems. This is something that's on my mind a lot, since a change in market conditions can really shift the odds in a system designed under different conditions.

RSS/XML Feed: http://globetrader.blogspot.com/atom.xml

Forex Blog

Written by "forex guru" Adam Kritzer with a heavy focus on news analysis and economic updates affecting the forex markets. Not a lot of technical analysis, but a great read if you have a news-oriented trading strategy.

RSS/XML Feed: http://www.forexblog.org/index.rdf

Simon Super Trader

Since starting up his blog in January 2007 Simon has made some excellent posts on important trading topics. Here's a quote I thought was right on the money: "The Internet is awash with suggested entry techniques, but they are of no value unless you can flawlessly execute them and also know what their true performance is over time."

RSS/XML Feed: http://simonsupertrader.blogspot.com/rss.xml

Grace Cheng's Forex Blog

Grace's blog features daily forex commentary from the perspective of a full-time forex trader. Check out the rest of her site at GraceCheng.com for forex advice, a calendar of market-moving events, and a forex trading course.

RSS/XML Feed: http://www.gracecheng.com/rss.xml

Vincent Hunt - HuntFX

Blogger and Ichimoku analyst Vincent Hunt shares his thoughts on trading strategy and psychology, and provides detailed analysis of currency trends using the Ichimoku Kinko Hyo system.

So, by now you must have the uncontrollable urge to share your own forex strategies and experiences online. Well then don't control it - blog it! Here are some free blogging platforms to get you started - I use Blogger, but frankly it's not the best and you may have better luck with one of the others:

• Blogger

• Wordpress

• BBLog

This one's good too but you'll have to pay for it: TypePad

If you want to host the blog on your own domain, like this one, there are a lot of affordable web hosting plans to choose from. I use GoDaddy.com for this site. Why? They're cheap! (And also very reliable.) For more advice on blogs and blogging, check out my very own Blog Tips website. Actually, it's a blog too. Shocking, I know.

If you do start up a forex blog, let the rest of us know by posting your blog URL in the comments below.

Forex Investment Myths

I just came across this excellent article on the Forex Capital Markets (FXCM) site discussing many of the dangerous preconceptions that aspiring traders often bring to the currency markets. Here are some of the key points it makes to help dispel these "investment myths":

"One cannot hope to make extraordinary gains without taking extraordinary risks."

"Trading currencies is not easy (if it was, everyone would already be a millionaire)...One must realize that trading takes time to master and there are absolutely no short cuts to this process."

"Most traders...tend to over leverage themselves...and as a consequence, often end up forced to exit a position at the wrong time."

It's well worth a read, whether you're just getting started as a trader or have some experience under your belt -- it's always good to remind yourself of possible biases and bad habits that can adversely affect your trading.

Awesome Investing Site: Investopedia

Just wanted to pay a quick tribute to one of my favorite online investment resources, Investopedia.com. This site is packed with an amazing set of free articles, tutorials, financial tools and calculators, historical studies, and explanations of common (and uncommon) investing terms. Looking for a fascinating read that's both frightening and enlightening? Check out the Greatest Market Crashes, a series of essays explaining the economic trends, speculative behavior, and irrational exuberance behind such debacles as the Dutch Tulip Bulb Craze, the South Sea Bubble, the Great Depression, and the Dot-Com Crash.

For more practical advice on day-to-day trading, be sure to check out the investment dictionary and the tutorials on topics such as trading indicators and strategies, money management, electronic trading platforms, and how to code your own trading system. And for a currency trader, their introduction to the forex markets is a must-read.

Since I'm on the Investopedia site quite often to satisfy my curiosity about a particular trading approach or find out how a certain indicator is calculated, look for more highlights from their extensive resources in future posts.

Free Online Forex Charts - Well Worth a Bookmark!

I thought I'd pass on this handy charting tool for your forex bookmarks. It's provided by Forex Capital Markets (FXCM) and allows you to generate detailed web-based charts for all the major currency pairs. It runs off a Javascript applet, so you'll need the necessary plugins installed, but those aren't hard to get. I've found it useful in situations where I'm away from my home computer and hence don't have access to the charting software on my desktop (DealBook FX, for example). With the DailyFX charts it's easy to check out currency action from any computer with a standard web browser like Internet Explorer.

You can specify timeframes from ticks up to months and switch between line charts, dot charts, forest and candlestick charts, and several other formats. There's also a great selection of studies, including MACD, Stochastics, Parabolic SAR, ADX, exponential moving averages, Bollinger Bands, RSI, CCI, and a variety of oscillators. Not to mention Fibonacci fans and retracements.

Another nifty thing about the applet is you can actually draw in the chart window, adding your own trend lines, highs and lows, and other visual markers of your own choosing. Zoom in and out for a closer look or to make a more detailed notation on the chart, or overlay the chart of another currency pair on top for quick comparison.

I've found this a fun charting tool to play around with, and I think you will too. Who knows, you may even stumble on some indicators you weren't aware of before!

Creating "Flash Cards" to Improve Your Trading Skills

One strategy I've pursued in the never-ending quest to improve my trading skills is creating flash cards from screenshots of forex charts. These cards can help remind you of the key factors in winning (and losing) trades, so you get better at recognizing these patterns the next time they show up. Many successful forex traders reap their profits using finely-honed pattern recognition skills; in fact, this may be the most "intuitive" way to trade forex, and the more practice you get recognizing the right patterns, the better your odds are likely to be. Over time, your collection of forex flash cards will become an in-depth visual record of your trading history that you can for valuable insights.

Below are some examples of screenshots I took following winning and losing trades. This one shows the 5-minute CCI (Commodity Channel Index) and candlestick chart with 5 and 20 unit moving averages that I had open when I made a successful 8 pip short trade of the EUR/USD in August 2005:



And below we see an unsuccessful attempt to trade the EUR/USD short, using only the 5-minute CCI chart (I was using Woodie's CCI system at the time):



In this case, the clear lesson is that what seems like a valid signal -- that little downward spike the lower arrow is pointing to -- can often turn around in an instant and become a false one that loses you 11 pips and leaves you shaking your head in exasperation. In fact, this is a perfect example of the type of losing trade that eventually made me swear off the 5-minute chart entirely. Ah, memories.

All of these screenshots were taken on a rather geriatric Dell PC from the charts on Global Forex Trading's DealBook software. First, I'd hit the "Print Screen" key to capture the screen image I wanted, then I'd paste it into my Microsoft Paint program and crop it down until it just displayed the chart images I wanted. After that, I'd save the images into either my "Good Trades" or "Bad Trades" folder, and voila, my digital flash cards were complete. I could easily review them on screen, or print them out if I wanted a hard copy as well. On some of the cards, I'd also type in a few comments about the circumstances surrounding the trade -- whether I'd waited too long to enter or exit, whether I'd been indulging in an excess of wishful thinking (I usually had), and anything else relevant to that particular gain or loss.

If you're a chart-based trader, you may find these types of flash cards a valuable addition to your arsenal. They're a convenient record of what worked for you and what didn't, and by looking at them on a regular basis you can begin to intuitively recognize the patterns that will make or lose you money.

Trader beware: how to avoid forex scams and report fraud

The forex markets unfortunately have their share (perhaps more than their share) of fraudsters and con artists, people and organizations peddling systems and trading strategies designed to bilk the unsuspecting with promises of fast, easy money. Forex trading is an inherently risky proposition, and anyone who says it isn't and goes so far as to guarantee profits, if you'll just hand over a large chunk of cash, may not have your best interests at heart.

If you're concerned about a particular forex service, it's a good idea to see whether they're registered with the National Futures Association (NFA). You can look up a particular forex company using the NFA's Background Affiliation Status Information Center (BASIC) search service, which will tell you whether that company's registered with the NFA, and will list the number of complaints and disciplinary actions taken against them. For example, here's the NFA's record for Global Forex Trading, which offers the DealBook trading platform I discussed in an earlier post.

It's also a good idea to check out the Commodity Futures Trading Commission, a US government agency whose mission is to "protect market users and the public from fraud, manipulation, and abusive practices related to the sale of commodity and financial futures and options, and to foster open, competitive, and financially sound futures and option markets." The CFTC publishes advisories like this one on how to spot potential forex fraud, and tracks down and prosecutes scammers violating commodity exchange laws. (Got a few hours to kill and feel like reading the entire Commodity Exchange Act? Here ya go!)

If you feel you've been a victim of a forex scam and would like to report it to the CFTC for investigation, you can use their convenient online form to do so. In some cases you may also be able to receive reparations if you've been a victim of forex fraud, and you can file your reparations claim on the CFTC site as well.

Obviously you really don't want to reach the point where you're filing complaints with the CFTC; the best policy is avoid frauds altogether, and you can do so by doing some basic research on each forex service you're considering working with, before you hand over any funds to them. Performing this type of due diligence early on could save you some serious headaches down the road.

Related topic:
Forex Policy, Regulation & Oversight

Fun Forex Reading

As I blundered my way into developing a forex trading system, I read a lot of great stuff online about the psychology, strategy, and even humor involved in being a currency trader. I found many of these by reading through the discussion forums at Oanda, an excellent place to hear about the experiences of other traders and learn about what forex strategies are working (or aren't working) for them.

Here are some of my favorite online perspectives on the forex markets and those who trade them:

38 Steps to Becoming a Successful Trader
A humorous look at the emotional and intellectual stages commonly encountered on the road to a successful forex career. Note that the list goes well beyond 38 items when various members of the forum chip in with their experiences.

Day Trading Strategies
A lively and informative discussion of effective strategies for trading forex on an intraday basis. Includes a number of links to related resources.

The Learning Cycle for a Newbie Trader
Another great discussion, this one at the MoneyTec forums, kicked off by an essay from Soul Trader, an experienced British trader and inventor of trading software.

Soul's Mad ForexTrading Diary
Soul Trader's own blog, where he narrates his latest trades and offers insights from his trading experiences.

Beware of Foreign Currency Trading Frauds
A cautionary document from the US government's Commodity Futures Trading Commission, with tips on how to spot fraudulent forex brokers and related services eager to part you from your money. Here's an excerpt: "Currency trading scams often attract customers through advertisements in local newspapers, radio promotions or attractive Internet sites. These advertisements may tout high-return, low-risk investment opportunities in foreign currency trading, or even highly-paid currency-trading employment opportunities. The CFTC urges you to be skeptical when promoters of foreign currency trading claim that their services or account management will earn high profits with minimal risks, or that employment as a currency trader will make you wealthy quickly."

Anti-Martingale Strategy: How NOT to Roll Dice on Concrete
A wide-ranging, insightful essay drawing on a variety of examples from history and literature, as well as the financial markets, to illustrate the perils of excessive risk-taking and the differences between the thrill of gambling and the discipline of systematic trading. A rather long read, but a good one.

That's all for now -- hope these help you as much as they did me!