Feb 9, 2010

Forex Crunch 5 Tips for Avoiding Forex Euphoria

Forex Crunch 5 Tips for Avoiding Forex Euphoria

5 Tips for Avoiding Forex Euphoria

Posted: 09 Feb 2010 04:03 AM PST


In forex trading, also winning can be dangerous. Some traders get euphoric, make bad trades and eventually kill their forex account. This can happen to anyone. Here are 5 tips for overcoming it.

So you’ve learned forex at course or by yourself and trained yourself with technical analysis using a forex demo account and you’re absolutely ready for a real account. You open an account and things begin well:

The Euphoric Scenario

You followed your strategy, place a trade and closed the position with a nice win that was lower than your Take Profit point. You then planned another trade, placed it and saw the trade close at your Take Profit point. Perfect!

Now you feel more confident and double the size of your trade. You win again and you regret not placing the large trade size beforehand. Another win, and you feel that you’ve learned the system. Yet another win and you feel invincible. Who needs a strategy when you’re winning?

With all this confidence, you find yourself in a bigger position. The trade now goes against you and you move your stop loss away. The trade loses, and then you see it shoot the other way. You’re still certain that you know how to beat the markets. This slap doesn’t get you to reduce the size of your position, but just put a deeper stop loss. Another loss makes you want revenge. Dealing with losses is something you’re not familiar with.

You know the end – the account is wiped out.

I’m sure that some of you have experienced a similar scenario.

  1. Analyze a winning trade: Many traders analyze their losing trades and take the lesson for the next trade. This is great! Do it also for winning trades. There’s a lot to learn from those ones as well.
  2. Take a break: Don’t rush into a new position immediately. This will probably be a hasty and losing position.
  3. Don’t drool on your larger account: It sure is fun seeing more money in your account, but it doesn’t help you being a better trader. This is a waste of time and you can become over-confident.
  4. Don’t enlarge your position sizes: Yes, you could have made more money with a larger position on a winning trade. This goes both ways – you can lose more money in your next trade. Change the positions only periodically.
  5. Withdraw winning money: Occasionally withdraw money from your forex account to your regular bank account. Seeing less money will weaken the euphoria sensation and also minimize the sum that you can lose…

I’m sure that you have tips of your own. I’ll be glad to hear them.

Want to see what other traders are doing in real accounts? Check out Currensee. It’s free.

Video Weekly Outlook – Dollar Strength to Continue

Posted: 08 Feb 2010 02:32 PM PST


In the weekly forex outlook on Forex TV, I spoke with Julie Sinha about the continuing dollar strength, the position of the kiwi dollar and the calendar, following the dollar’s storm last week, which came to a peak after the nonfarm payrolls. Enjoy the video!

Want to see what other traders are doing in real accounts? Check out Currensee. It’s free.

Forex Daily Outlook – February 9th 2010

Posted: 08 Feb 2010 02:00 PM PST


The week is warming up with a busier calendar today. Let’s see what’s awaiting us.

Britain starts the day early with two interesting indicators: the BRC Retail Sales Monitor will supply an early indication to retail sales, while the RICS House Price Balance is expected to be weaker than last month, showing a drop in the places where the prices of homes are rising.

Later in Britain, Trade Balance is predicted to show a smaller deficit, 6.6 billion instead of 6.8. For more on the British Pound, read the GBP/USD forecast.

In Europe, German Final CPI is predicted to confirm the drop in prices last month at 0.6%. This came after a month of rising prices. Also from Germany, the Trade Balance surplus is expected to dip.

The most important point for the Euro/Dollar is 1.3750. As it continues to settle below this line, the direction continues to be down. For more on the Euro’s week, with its climax on Friday, check out the EUR/USD forecast.

In the US, IBD/TIPP Economic Optimism is predicted to edge up to 49.3. Wholesale Inventories are expected to rise by 0.5%, less than last month’s 1.5% rise.

Australia’s Westpac Consumer Sentiment is released at the end of the day and will probably continue the positive trend of recent months. The Aussie was beaten last week and is expecting important figures later on. For more on the Australian dollar, read the AUD/USD forecast.

Japan closes the day with the release of the Core Machinery Orders,  a figure that usually moves the Yen. A rise of 8.1% is expected to follow last month’s big drop.

That’s it for today. Happy forex trading!

Want to see what other traders are doing in real accounts? Check out Currensee. It’s free.
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