Category: Traders mindset

Inspirational Forex Quotes From The World’s Best Traders

There comes a point in every forex trading career, or even every trading week or day, when you need that little bit of extra inspiration. There is always someone who has been through your situation before and lived to tell the tale, and who better to turn to than some of the most successful and admired traders of all time? 

 

Here are some of the best quotes from some of the world’s most profitable traders to give you a motivational boost on a bad day!

 

Let’s start with the best before we get to the rest…Warren Buffett is the ultimate high net worth trader with a personal fortune of over $110bn, making him the fifth richest person in the world. He is CEO of Berkshire Hathaway, a leading US financial holding company, and he has a long history of making successful investments and business decisions.

 

Besides all this, he has philanthropic beliefs and has already donated billions of dollars to charities. In 2006, he stated his intention to give 83% of his fortune to the Bill & Melinda Gates Foundation. Seems like a guy worth listening to! Some people even call him the ‘Oracle of Omaha’ (Buffett was born in Omaha, Nebraska, in 1930). 

 

Without further ado, let’s examine his well informed, wise and witty advice. 

 

“The most important quality for an investor is temperament, not intellect.”

 

This quote should be inscribed above the door of every forex trader’s office, or at least written on a post-it note and permanently left stuck to their laptop. 

 

It is a pithy summary of what all books about forex trading psychology are trying to say: That most trading errors are not made through ignorance, but because the trader allowed their emotions to influence their decision making process. 

 

New traders may feel dismissive of talk about psychology and emotions: after all, most of us like to think of ourselves as rational human beings who are capable of thinking objectively, especially when it comes to our professional lives and career. 

 

The problem is that trading is very difficult to separate from the aspects of life that concern us most deeply: when we place a trade, we are taking a controlled risk with our financial security and this affects our very basic needs for survival, such as food, shelter, and warmth. 

 

When these needs are under threat, primal human emotions come into play, including fear, greed, anxiety, and impatience. No one is immune to these feelings and they can subconsciously influence our decision making, usually for the worse.  

 

Fear can lead us to close a trade before the target price is achieved, greed can lead us to trade even when there are no good opportunities or reasons to do so, and anger or anxiety can lead us to ‘revenge trade’ to try and compensate for a previous loss. 

 

The wise trader is someone who is constantly checking in on their emotional state and imposing a system of checks and balances before every move. They have patience and discipline, and as Buffett states, this is more valuable than technical ability. As he also says: “The market is a device for transferring money from the impatient to the patient.” 

 

Let us graze further from the Buffett banquet table: “Risk Comes From Not Knowing What You’re Doing”. 

 

This quote might appear to contradict the first one, but it doesn’t mean that you need to know or understand everything about forex; it means that you need to research those areas that affect the currency pairs and trading strategies that you are working with. Forex trading is all about minimising risk, and knowledge helps you to do this. 

 

Keep up to date with the economic news, and with geopolitical events that affect the market price of your currency pairs. Review your trading journal on a regular basis to identify what is working best about your trading strategy and what might need adjustment. Master some technical analysis tools and find out which ones work best for you.

 

Learning about forex is a constant process and you need to stay ahead of the game. Even when you have had a run of successful trades, it can be very dangerous to sit back and assume you have hit on a winning formula. There is really no such thing in forex trading, so never be lulled into a false sense of security or you will soon be taking unmanaged risks. 

 

One final quote from the Buffinator before we move on: “Never depend on a single income. Make an investment to create a second source.”

 

There are two strands of wisdom forex traders can take from the above quote. The first is especially important for newcomers who are considering trying to make a living from forex trading. If you have quit your job in the hope of being your own boss and free from the pain of the 9-5, then you have almost certainly put too much pressure on yourself.

 

Inexperienced traders should use a demo account for at least two or three months before they start trading live, to get acquainted with the trading platform and to test drive their trading strategy. Even then, it is likely to be at least 12 months before you start making a steady profit as a forex trader.

 

Therefore, it is highly recommended that you have a second income stream to cover your basic living expenses while you gain confidence in your trading ability. It can be a rollercoaster ride, and it will be much easier if you are not also trying to make a living from trading. 

 

Many people fit trading in around a part time or even a full time job. The forex markets are highly liquid and operate almost 24/7. The peak trading hours between London and New York occur before 9:00 GMT and after 16:00 hours, so it is relatively easy to trade before or after your normal working day. 

 

Having a second income to support you will also help you maintain good mental health and stop you from being pushed into emotion-led trading decisions based on fear, anxiety, or greed, as we have already discussed. 

 

The second point to take from Buffett’s quote is more pertinent to forex traders who have some experience under their belt and are making steady profits. It’s about getting the best value from your hard won money, and choosing to invest it wisely so that it can earn you a second passive income. 

 

This means that you will eventually reap twice as much reward from your efforts, and in the long run this will benefit you more than a load of designer clothes or a succession of overseas holidays. 

 

Let’s move on to more words from the wise. Alexander Elder was born in Russia and trained as a psychiatrist. He moved to New York where he worked in medical practice before moving on to become a successful financial trader. As you might have already guessed, his background in psychology provided him with insight into the financial world. 

 

Here is one of his most famous quotes: “The goal of a successful trader is to make the best trades. Money is secondary.” 

 

This is a really important point for new traders to understand, especially if you have set high profit goals for yourself. Good traders have mental and emotional discipline, a thirst for knowledge, and are highly focused. Developing these traits will help you to make the best trading decisions, and in time steady profits will follow. 

 

If you are simply in it for the money, you will soon lose the willpower and motivation to carry on. The key is to enjoy the journey, rather than fret about the final destination.

 

One final quote from Elder to finish on: “You have to identify your weaknesses and work to change. Keep a trading diary – write down your reasons for entering and exiting every trade. Look for repetitive patterns of success and failure.”

 

We’ve said it before and no doubt we’ll say it many times over again: Keep a trading journal. If it worked for Alexander Elder, then it can work for you too. Your journal should be more than just a record of which trades you made and when. It should be an integral part of your planning process, so that you can review your past performance at a glance. 

 

Note down key performance indicators such as total profit or loss, monthly average return percentage, and eventually your annualised return and net gain, together with your overall success rate. It is also helpful to keep a watchlist of potential trading opportunities that are most likely to suit your trading strategy.

 

As well as these factual details, try adding a retrospective summary of each trade, and reflect on what you think you did well and what you need to improve. This can help you identify unhelpful patterns of behaviour, because we all have a natural tendency to repeat mistakes. 

 

Of course you can also look at your most successful trades to see if you can identify a pattern. Over time, your journal will become an essential part of your trading toolkit. 

If you are looking for instant forex funding, please get in touch with us today.

Recent articles

Share:

Why Forex Trading Can Teach You Valuable Life Lessons

On the face of it, forex trading may seem to be all about crunching numbers and analysing charts to try and make a profit. People are drawn to it because they want to have an extra income source, and there is nothing wrong with that at all. Who doesn’t enjoy having spare cash for nice clothes or holidays, or to build up a nest egg for the future?

 

However, most traders soon discover that if they are to realise their dream of becoming a profitable trader there is a lot to learn, and not all of it is about facts and figures. Pursuing success in forex trading can teach you wider lessons about life, which can often prove to be just as valuable. Here’s a look at just a few of them.

 

It teaches you about managed risks

Even before you start live trading, you should already know that forex trading is not about taking risks, but about managing risk. If you enjoy the thrill of uncontrolled risk taking you may as well spend your time and money on gambling. 

 

It is essential that you understand the concept of risk in forex, because with high leverage available, the consequences of an irrational decision can be severe. While high leverage means that the potential rewards are greater, so is the potential risk of incurring losses. In the heat of the moment, we are all human and subject to the temptation of greed.

 

However, this is a slippery slope that professional forex traders won’t go within a mile of. They never, ever take a gamble in the hope that the dice will fall in their favour, no matter what their instincts are urging them to do. No one is born with a natural ‘gut instinct’ for a good trade, because there is really no such thing.

 

Experienced traders only ever act on cold logic. This means that they work out the probability of their trade being successful on the basis of fundamental and technical analysis. They spend time understanding which factors influence the movements of the markets and the price of the currency pairs that they trade to identify a suitable entry or exit point.

 

Before entering a trade, they will have drawn a line that they will not cross, based on how much money they can afford to lose, and are comfortable with losing. This amount will never compromise their ability to pay for life’s essentials. 

 

Furthermore, they will measure the risk they are about to take by studying price charts or by using another form of technical analysis. That measured risk will then be further managed by using a stop loss that will automatically trigger an exit once a predetermined price is reached. In other words, every single step of the way is managed to minimise risk.

 

There are countless ways that the ability to assess and manage risk can help you in your wider life and career. Knowledge is power as they say, and once you are a seasoned forex trader you will always look before you leap wherever you are and whatever you are doing. 

 

It teaches you self-discipline

As we have seen, successful forex trading is all about keeping ahead of the game, learning about economic events, mastering technical tools, and sticking to your strategy even in the face of temptation. All this takes hard work and self-discipline, which is a very useful quality to develop and something that anyone can learn.

 

The ability to stick to a routine, keep an eye on detail, plan ahead and not give up when faced with setbacks will help you succeed in any professional job role and achieve your goals. It is also useful for making those big life transitions go well for you, such as buying your first house, changing jobs, or even just booking a holiday. 

 

Even when it comes to our personal lifestyle, self-discipline can help us stick to an exercise regime, a healthy eating plan, or to master a new hobby or skill. This in turn can boost our mental and physical health, leading to better performance at work, more confidence, more energy—you get the picture! It’s a virtuous circle. 

 

It teaches you emotional maturity

We all have emotions that influence our decision making in life, whether we are conscious of them or not. Sometimes this may be inconsequential, but in forex trading it never is. When we place a trade, we are not just putting our money on the line. Our personal wealth is tied up with our status, ego, and our ability to afford our basic needs in life. 

 

Therefore even the most even tempered individual can be prone to powerful emotions such as greed or fear when they are trading. This can lead to decisions that are made under pressure on the spur of the moment, as that basic survival instinct kicks in and the adrenaline is surging around the body.

 

Professional traders learn how to step aside from any emotions they are experiencing, no matter what is facing them. Panic, excitement, fear or over confidence have no place in forex trading because they encourage you to take unmeasured risks, which as we have seen is not what trading is all about. 

 

Learning to recognise strong emotion and taking a step back from it is a valuable skill in all walks of life. It can help you develop better personal and professional relationships, and make more balanced decisions in your career or other areas.

 

We can probably all think of a life situation where being overconfident led to a careless mistake, or caused someone we care about to think badly of us. You can probably also think of a time when being too cautious or afraid led you to miss out on doing something you enjoyed. Learning how to manage these emotions can help you get the best out of your life. 

 

It reveals your personal strengths and weaknesses

Related to emotional awareness is self-knowledge. None of us is perfect, and we all have different strengths and weaknesses. In forex trading, your personality type can matter just as much as your technical knowledge. 

 

For example, if you know that you are naturally cautious and hate making decisions under pressure, then long term trading is likely to bring you the most success. On the other hand if you are naturally impatient and quick thinking, then you are likely to thrive when making short term day trades. 

 

Although good emotional management is necessary for forex traders, there is no point fighting against your nature. Admitting your personal strengths and weaknesses can actually be a superpower in all aspects of life, because it naturally helps you to work towards careers and interests that you enjoy, rather than trying to live up to expectations set by others. 

 

It teaches you how to handle failure

All forex traders fail. In fact, to be a profitable trader you only need to be successful in around 50% of your trades, and so you need to learn how to handle losses without becoming too overwhelmed or disheartened. No one likes to admit they are wrong, but sometimes it’s better to cut your losses and learn the lesson.

 

By looking over your trading journal and analysing the reasons why your trade might not have worked out, you can use your failures as an opportunity to learn and make improvements. This not only helps you be a better trader, but also develops mental resilience that is useful in all walks of life. 

 

It teaches you to be comfortable out of your comfort zone

Forex trading is a game of uncertainty, and always operating within your comfort zone will seriously affect your progress. To make gains, you need to push yourself and always be alert to changes in the market conditions. 

 

This isn’t to say that you should abandon your trading strategy and take uncontrolled risks, but that you should be proactive and dynamic in your approach to trading. This will mean that you are always well placed to identify good trading opportunities, rather than always sticking to a formula when the market conditions have changed. 

 

Stepping out of your comfort zone can also help you live a richer and more rewarding life, no matter what your goals are. Want to travel the world, get back into the dating game or take part in your first triathlon? Use those forex trading superpowers and you will soon be on your way to success!

 

It teaches you about wider geopolitical issues

To make the best trading decisions, it is important to keep up with geopolitical events that can influence currency prices, such as elections, conflict zones, and natural disasters. This can lead to a deeper understanding of how political and financial leaders shape our society and economy, and how they personally affect your life.

 

In conclusion, even if it wasn’t your intention, your journey to becoming a forex trader can also lead you to becoming a better informed and well rounded individual. It’s a win-win situation.

If you are looking for an instant funding prop firm, please get in touch with us today.

Recent articles

Share:

8 Key Forex Trading Terms To Familiarise Yourself With

There are lots of ways to learn about forex trading, from online learning courses to podcasts. However, sometimes you can’t beat the power of a good old fashioned book. Reading can enable us to get to grips with some of the more complex elements of trading at our own pace, allowing us to drill down into the details until everything really makes sense. 

 

The more widely you read about forex trading, the more confident and knowledgeable you will feel when you begin to make live trades. Some of the best traders developed their ‘edge’ by having useful pockets of information stored away that they could draw on at crucial moments.

 

From refining your strategy to learning more about the history and psychology of forex trading, there’s a wealth of material to draw on. Furthermore, you will be able to understand how all these different elements intersect with each other and this will help you to become a well-rounded and well informed trader. Here are some suggestions for your forex library. 

 

Forex for Ambitious Beginners: A guide To Successful Currency Trading by Jelle Peters

This book is excellent for those just starting out on their forex journey who are impatient for success. It does not make unrealistic promises about how you can become a profitable trader within a few months, or try to sell the idea that forex is a quick and easy way to make a buck. 

 

Instead, it is honest and upfront about the pitfalls that can await the unwary trader, and shows you how best to avoid them. It covers all the basic background information such as which factors influence the value of different currencies, how to determine your risk tolerance, and how to create your own trading strategy. 

 

The book also covers the basics of technical analysis and explains how to read line charts and candlestick charts. It reinforces the fundamental concept that successful forex trading is all about carefully managed risk and spotting opportunities to maximise potential profits. 

 

Forex Trading: The Basics Explained in Simple Terms by Jim Brown

This is one of those books that basically does what it says on the tin. It is an ideal starting place for newbies who are feeling just a little bit overwhelmed by the whole prospect. It is written in clear language but doesn’t talk down to the reader or assume any prior knowledge of the forex markets.

 

It starts off with a bite sized definition of what the forex markets are and what the purpose of forex trading is. It then covers the basics of forex pairs and how to develop entry and exit strategies. Brown introduces the concepts of trading psychology and offers tips for how to choose the right broker.

 

Brown also discusses his own trading strategies that the reader can use for guidance or inspiration. 

 

Trading in the Zone: Master the Market with Confidence, Discipline, and a Winning Attitude by Mark Douglas

This book emphasises the importance of the trader’s state of mind when making decisions and tackles the common thought biases that can sabotage good practice. 

 

It focuses on the game of probabilities that is involved in any act of trading, and spells out that the trader’s goal should always be to aim for consistent profits over time, rather than to become emotionally involved with the outcome of every single trade. 

 

The book’s central thesis is that no matter how much technical or fundamental analysis has been carried out on the movements of the market, it is impossible to predict the outcome of a trade. Therefore what matters for making a profit in forex trading is developing a strategy with an edge that will lead to a higher probability of success over a series of trades.

 

As you might have realised, this is not the book for people who want to delve deep into the technical elements of forex trading. It’s very much about developing the right trading mindset, which can be just as important to success as more concrete skills such as knowing how to use Bollinger bands.

 

A Complete Guide to Technical Trading Tactics: How to Profit Using Pivot Points, Candlesticks & Other Indicators, by John L. Person

It’s good to balance out the abstract theory of forex with up to date technical tactics. This guide is written by a professional forex trader who explains how to use some popular technical tools such as candlestick charts. It provides plenty of examples with diagrams and charts so that the reader has a clear practical introduction to the topics.

 

The author shares his own experiences of using the various methodologies and introduces the reader to the futures and options market as well. It’s a good read for those who want to approach technical analysis tools with more confidence and discernment. 

 

It will allow you to work out which ones work best for you, and which ones you might want to refer to in the future. By broadening your knowledge of technical trading tactics, you can become a more competitive trader.

 

 Day Trading and Swing Trading Currency Market: Technical and Fundamental Strategies to Profit from Market Moves by Kathy Lien

This is a useful book for new traders who want to focus on making short term trades. This strategy often works well for those who are fitting trading in around a full time job or other commitment, because it allows you to dip in and out of trading at different times of the day. 

 

Kathy Lien is a respected figure in the financial industry. She is a leading currency analyst and often makes guest appearances on financial news programmes. This is the third edition of her popular book that combines the theories of both technical and fundamental analysis to introduce readers to day trading and swing trading strategies.

 

Lien discusses the factors both long and short term that affect the value and movement of currency pairs and the technical trading strategies used by professional traders. Throughout the book, she demonstrates how to put theory into practice in a clear and concise manner.

 

Currency Trading for Dummies by Brian Dolan and Kathleen Brooks

The For Dummies series are a bit like Marmite: you either love them or loathe them. Whatever your view, there’s no doubt that the formula of concise and to the point prose with plenty of recaps and examples works well for many people. 

 

The user-friendly approach will be appreciated by many new forex traders who want a clear and comprehensive overview of the forex markets. It discusses the major factors that drive the forex markets, different trading strategies and styles, and the importance of researching and devising your own strategy before you begin trading.

 

It also offers advice on risk management and discusses some of the most common pitfalls that can catch out new traders. The authors also take a look at the factors that they consider to be the most important traits of successful traders. This book is useful for beginners, and for those who want a refresher course in forex.

 

Market Wizards: Interviews with Top Traders by Jack D. Schwager

This book is a classic bestseller and is a fascinating insight into the personal stories behind the world’s most successful traders. The inspiring interviews with famous traders include Bruce Kovner, Richard Dennis, Paul Tudor Jones, Michel Steinhardt, Ed Seykota, Marty Schwartz, and Tom Baldwin.

 

The book dispels the myth once and for all that forex trading is an easy way to make money, or that it boils down to luck. The common thread to emerge from the interviews is a picture of solid trading strategies combined with mental and emotional discipline. 

 

The author provides a series of takeaways for the reader that they can use to shape their own approach to trading.

 

America’s Bank by Roger Lowenstein

This book focuses on a key episode of history that led to the shaping of the world’s largest economy. You will not learn about any techniques and strategies that you can specifically apply to forex trading, but it is worthwhile devoting some time to understanding the background forces that built the current forex markets. 

 

The events in America’s Bank relate to the aftermath of the financial crash of 1907, which wiped 50% of the value off the New York Stock Exchange. Prior to this crisis, many influential figures in American society were against the idea of a central bank.

 

 However, the financial landscape was to be permanently changed by the event, and the author tells the dramatic story of how the Federal Reserve was created. Before the forming of a Central Bank, the American banking system was provincial and disorganised, and resistance to reform was strong. 

 

Roger Lowensstein is a skilled financial journalist and weaves together a gripping narrative featuring the four men who were key to the founding of the Federal Reserve. It’s a fascinating tale of politics and power struggles that will seem all too familiar to modern day readers. 

If you are looking for an instant funding prop firm forex, please visit our website today. 

Recent articles

Share:

8 Key Forex Trading Terms To Familiarise Yourself With

Starting out with forex trading can be a little overwhelming. There’s a huge amount of information to take on board and a lot of industry terms and jargon to get to grips with – which is why so many people fail at the first hurdle.

 

But if you persevere, put the hard work in and really dedicate yourself to the fine art of trading, within a few months you’ll find that it all starts to click and you start seeing more consistent wins.

 

To help you pursue your ambitions as a top forex trader, here are some of the key trading terms you’re sure to encounter on your first foray into forex. 

 

Hopefully, this glossary should help you gain a clearer picture of what’s involved and what you need to do in order to enjoy a lucrative career as a professional trading expert.

 

Currency Pairs

 

There are around 200 different currencies in circulation around the world and traders work to speculate on how each of these will perform in the marketplace using their own analysis and research. Trading is based on how one currency performs in relation to another.

 

When you first start trading, you’ll see that these currencies come in pairs, all of which are categorised into three main groups. 

 

Major pairs are those that contain USD as either the base or counter currency and either EUR, GPB, CAD, CHF, AUD, JPY and NZD.

 

Cross pairs are classified as any two major currencies that don’t have USD as the base or counter currency. These are viewed as being more volatile in nature than major pairs.

 

And exotic pairs are simply those lesser known currencies in the world – and these have the potential to be extremely volatile, so should perhaps be approached with caution, particularly when you’re first starting out.

 

It can be helpful to think of the currency pair as a single unit, even though your trade will involve the simultaneous purchase of one and the sale of another. When you buy, you purchase the base currency and you sell the quote currency. When you sell, you sell the base currency and get the quote currency in return. 

 

When trading currency pairs, you’re selling one to buy another, with prices affected by economic factors like GDP, economic growth and interest rates.

 

Leverage

 

Leverage refers to the money you borrow (known as capital) to invest in your currencies. It’s very common practice in forex trading and it allows you to trade larger positions, making it possible for you to amplify your returns if exchange rates are favourable. 

 

However, it’s important to note that leverage can also amplify your losses, so it’s vital that you gain a deep understanding of this and how it works so you can work risk management into your trading strategy and help keep losses to a minimum.

 

Stop-loss orders come into their own in this regard, allowing you to keep potential losses under control. These are trade orders with your broker that ensure you exit a position at a particular price level so you can put a cap on any losses on your trades.

 

Pip

 

The acronym ‘pip’ stands for percentage in point and it’s essentially just a unit of measurement that’s used to reflect the change in value between two currencies. It’s essential that you understand pips and how they work before you trade, as it will affect the decisions you make.

 

Exchange rate fluctuations are measured by these pips. The majority of currency pairs are quoted to four decimal points, with the smallest whole unit change set as one pip. Pip value will depend on the currency pair in question, as well as the exchange rate and the trade value.

 

Bullish & Bearish Trends

 

You’re sure to come across the terms ‘bull market’ and ‘bear market’ very early on in your trading journey and identifying these trends can help you work out what direction you want to trade in.

 

When markets are bullish, it means that prices are on the rise, whereas if a market is bearish it means the prices are starting to fall. Note, however, that upward market trends (bulls!) need to see price climb higher continuously for a long period of time to be considered bullish. 

 

You may see bearish markets register a few days of upswings, but this isn’t usually significant and won’t typically indicate a move towards a bullish market. Similarly, a few days of falling prices won’t generally signify that a market is becoming bearish… so stay the course, stick to your guns and ride it out to see what happens.

 

In terms of trading, it’s perhaps advisable to short sell in a bear market as prices start to fall. If you’re buying into a bull market, be aware of your loss risks, since short selling a bear market means that you run the risk of losing big if prices continue to move against you.

 

Day Trading

 

As you might expect, day trading in forex involves buying and selling currencies within just one trading day, closing out positions at the end of the day and starting up again the following day.

 

If you want to be a day trader, you’ll need to make sure that you’ve got the motivation and dedication required to buy and sell multiple currency pairs in a short space of time and you’ll need to be able to make decisions quickly.

 

Risk Management

 

Trading has always carried with it an element of risk, but the advent of the internet means that risk management must be a top priority for forex traders, because transactions take place at lightning quick speeds all over the world. 

 

It’s also worth noting that the adrenaline rush you get from trading when you start turning profits can feel almost addictive, which is where the trouble can start.

 

As such, it’s vital that you implement a robust risk management strategy and include it in your plans from the outset so you can protect yourself and ensure that you don’t make any risky trades based on your emotional state.

 

The first step to getting risk management right is to work out what the odds are of your trades being successful. In order to do this, you’ll need to understand how the markets work and have carried out in-depth analysis to ensure that the decisions you make are grounded in fact.

 

Another key point for risk management is to ensure that you have put measures in place that allow you to control the risk you’re taking. You need to have a cut-out point in mind where you feel happy to accept the potential losses.

 

If the loss in question would be too much for you to bear, it’s essential that you don’t trade so you can keep your stress levels in check and ensure that you’re able to be objective in your decision-making.

 

Going Long/Going Short

 

Don’t panic if you hear people using the phrases ‘going long’ or ‘going short’. All this means is that they’re about to buy (going long), or they’re about to sell (going short). 

 

If you think that the price of your asset will rise, you can go long, speculating that the base currency will strengthen against the quote currency. And you’ll go short if you expect that asset prices will drop, speculating that the base currency will weaken against the quote currency. That’s it!

 

Look out for buy signals if you want to enter long positions, such as when a currency drops to a level of support. This refers to an area on a chart that the price has dropped to but which hasn’t yet broken below. 

 

Theoretically, support is the price level at which buying power will be strong enough to stop prices from falling even more. As prices get closer to this level, they get cheaper – which encourages buyer action, with traders taking advantage of better deals. Sellers will be less likely to sell, however, which will help stop prices from falling below the level of support.

 

If you want to enter a short position, look out for sell signals, such as when the underlying currency price reaches a level of resistance. This is a price level that the underlying currency is struggling to break above. Here, selling power is strong enough to stop the price from rising above a certain point. 

 

In theory, the idea is that as the price gets closer to this level of resistance, it becomes more expensive and this means sellers will be more likely to sell. Buyers, meanwhile, will be less likely to buy, which will stop prices from rising above the level of resistance.

Looking for forex funding programs at the moment? With FTUK, you can trade when you like, where you like. All you need to do is join one of our programs and take full advantage of the most rewarding proprietary trading experience in the industry.

Recent articles

Share:

How To Identify Strong Currency Pairs In Forex

One of the key skills in forex trading is learning how to identify strong currency pairs. To do this, you need to be able to analyse the relative strengths and weaknesses of a currency pair at any given time. This will enable you to achieve optimal results when they are traded against each other in the market. 

 

Currencies are always priced relative to another currency, with the value of most world currencies floating in response to supply and demand.  Forex trading works by making a profit or loss based on the difference in price when you use a currency to buy or sell in the forex market at a strategic price point.

 

Monitoring the relative price of currencies is an ongoing task and there are advanced technical analysis tools that allow you to track patterns and changes in detail. For new traders, understanding the basics of how currencies work is a priority.

 

The difference between strong currencies and tradable currencies

The most tradable currencies are not always the strongest. For example, the Kuwaiti dinar (KWD) is the strongest currency in the world, with one Kuwaiti dinar worth about 3.26 US dollars (USD). This is largely due to the fact that Kuwait is a leading exporter of oil, which is one of the world’s most valuable commodities. 

 

However, the KWD is not considered as a major currency pair in forex trading. This is because the KWD is not widely used and therefore has limited presence in global trade, and it has low volatility. This means that the value of the KWD does not fluctuate greatly and therefore does not present much opportunity to buy or sell at a profit. 

 

The same is largely true of the three next strongest currencies in the world, the Bahraini dinar, the Omani Rial, and the Jordanian dinar respectively. These are countries with stable and well-regulated oil-based economies, but their currencies do not have much liquidity in the forex market.

 

The USD on the other hand is only the world’s 10th strongest currency, behind the British Pound (GBP) which is the fifth strongest currency in the world. The Swiss Franc (CHF) and the Euro (EUR) are the joint eighth strongest currencies in the world. 

 

However, the US is the world’s largest economy by Gross Domestic Product (GDP), and the USD is the most traded currency in the world by a considerable margin. It’s also the largest reserve currency in the world, meaning that it is the currency held by most central banks. 

 

The US is a business friendly country that has generated some of the richest and most powerful companies of the 21st century, such as Amazon, Google, and Facebook. This makes it an attractive destination for global investors and the USD is the most widely accepted currency in the world.

 

For this reason, the major currency pairs always include the USD because it is highly liquid, which means that huge volumes are traded on a daily basis. THe USD is involved in over half of all of the turnover of US$ 7.5 trillion in daily forex trades. 

 

The major currency pairs 

Now we have established the difference between the strongest currencies and the most tradable currencies, let’s have a look at the major currency pairs. These are the Euro and the US dollar (EUR/USD) which account for 20% of all forex trades. The Euro is the common currency of 19 of the 27 EU member states that was introduced between 1999 and 2002. 

 

The Eurozone is one of the world’s strongest and most stable economies, with efficient cross-border trade and coordinated economic policies. It comprises many economically high-performing countries, including Germany, France and Spain. This makes the Euro one of the most attractive currencies for investors and traders.

 

The value of the Euro is strongly influenced by the unemployment rate, the Consumer Price Index, and the inflation rate. Therefore when you are using the Euro as one of your currency pair, you should closely follow the economic news for any imminent changes in these areas. For example inflation is particularly volatile in the Eurozone at the moment. 

 

The other factor to bear in mind when trading the Euro is that its value is tied into smaller and sometimes less stable economies, such as Greece. This means that it can be volatile and more sensitive to political changes than other currencies.

 

The USD and the Japanese Yen (JPY) are the next most traded pair. The JPY is the most traded Asian currency and the third most traded currency in the forex market. Japan’s economy is a high performer on the world stage, and its currency is stable and regarded as a safe haven due to the highly controlled interest rates.

 

However the fact that the JPY is protected from fluctuations in interest rates and inflation means that it has low volatility and therefore does not offer much opportunity to make substantial profits. It’s seen as a secure and consistent currency that is useful when the markets are going through a period of turmoil.

 

The British Pound (GBP) is popular in forex trading because of its high value relative to the other major currencies. It’s most often paired with the USD and the EUR. The UK generally has a strong and relatively stable economy, although it has been going through a tough Brexit transition with some political uncertainty. 

 

When considering trading GBP with the USD, pay attention to the time of day. 14.00 UK time is considered optimal, because this is the crossover period when both the London and New York markets are both active. When gauging the value of the GBP, look at the GDP, the Consumer Price Index, and the unemployment rate and average earnings.

 

The Swiss Franc (CHF) is something of an outlier in the major currencies, because the Swiss economy is small and it is not a member of the EU or the G-7 countries. The major draw of the CHF is that Switzerland is a gold rich nation that is regarded as a stable safe haven. 

 

Gold is one of the world’s rarest commodities and it holds its value even during financial downturns, and this tends to protect the CHF from the worst effects of inflation. The pairing of the USD/CHF is therefore especially popular in times of high market volatility.

 

When considering trading with the CHF, study the value of the EUR, because the close proximity of Switzerland to the EU means that the two currencies tend to follow the similar market pathways. 

 

The commodity currencies

THe commodity currencies refer to the currencies of economies which are rich in highly tradable commodity reserves that are usually in high demand around the world. These include oil, natural gas and other fuels, timber, dairy products, meat, precious metals, and grains.

 

A commodity is basically an essential raw ingredient, rather than a finished product or service. The major commodity currencies include the Canadian dollar (CAD), the Australian dollar (AUD) and the New Zealand dollar (NZD). 

 

As previously mentioned, the currencies of the oil-producing nations such as Kuwait are included in this category and are among the strongest currencies in the world. However, because they are not widely traded on the global stage they are much less liquid, meaning that there are far fewer opportunities to buy and sell them at a profit.

 

However, trading in the major commodity currencies paired with the USD can be highly lucrative. The value of the currency is obviously highly correlated with the price of the commodities that they trade in, so a forex trader must keep a close watch on supply and demand in the market. 

 

How to identify a strong currency pair

Forex traders aim to buy currencies that they expect to rise in value, by studying the market conditions that are most relevant to that currency, or to sell currencies that have risen in value since they bought them. They may also sell off currencies which they expect to fall in value in order to protect themselves from making a loss.

 

The market conditions that most strongly affect major currencies include interest rates, inflation, GDP, unemployment rates, and the Consumer Price Index. Wider geopolitical factors, such as elections, changes to economic policy, wars and natural disasters, also affect the stability and value of a currency. 

 

When trading in the majors, the starting point will always be the US dollar index, or DXY. This measures the value of the USD against a basket of currencies that will include the other major currencies. 

 

This will give the trader an indication of the comparative strength or weakness of the dollar compared to the other currency, and they can decide if the time’s right to buy or sell.

 

Remember that comparative currency strength is only one aspect of making a trade, and you also need to carry out further technical analysis to determine which is the best time to enter or exit the market. 

If you are looking for instant forex funding please get in touch with us today.

Recent articles

Share:

Trading and mental health

Whether you’re a novice trader or have been dealing with currency pairs for years, one thing is absolutely sure and certain… you’re going to experience a level of stress at some point. 

 

Trading is full of ups and downs, and trading the markets is inherently risky, which can definitely take its toll if you’re not careful, especially if you’ve been on a losing streak or you feel as though you’re starting to lose control. 

 

Before you know it, your heart rate starts to rise, your muscles tense up, your stomach starts to cramp, your head starts to ache… and your trading starts to suffer.

 

Emotion really has no place in forex trading and being led by your heart instead of your brain can lead you down the garden path, so it’s essential that you do all you can to keep your emotions fully in check, promoting good mental health and wellbeing both on and off the trading floor to ensure that you can achieve the levels of success you’re striving for.

 

And speaking of garden paths, one of the very best ways to go about prioritising good mental health is to embrace the concept of biophilia, a move that could change your outlook, how you think, how you feel… and how you trade.

 

Literally translated to ‘love of life’, biophilia is all about being driven by the need to connect with nature and all other living things. The idea is that by embracing the power of nature, you can have a significant influence over your mental health, your home and workplace, your thoughts and views, your hobbies and your goals.

 

As traders, we spend a huge amount of time plugged into technology, as far removed from the natural world as possible. We recently blogged about the dangers of too much screen time and, although technology is essential in order for us to complete our trades and to devise a winning trading strategy, it’s important to offset this wherever you can… and biophilia is the perfect antidote to a tech overdose.

 

It’s thought that the term ‘biophilia’ was first coined by psychologist Erich Fromm, but later popularised by Edward Wilson who wrote a book called… you guessed it… Biophilia! The Harvard biologist turned author argues in this worthy tome that our attraction to nature is genetically predetermined and down to evolution. 

 

For example, the reason we appreciate flowers is that their appearance on plants is a signal that fruit would soon be arriving, a much-needed food source. And we’re drawn to cute little baby animals because enjoying close relationships with animals and protecting them gave us an evolutionary advantage and engendered a powerful nurturing instinct for our own children.

 

What’s interesting to note is that, from an evolutionary perspective, people with greater connections to the landscape and the natural world, as well as animals and water sources, were simply more likely to survive than those who were detached from these resources… and this kind of survival instinct through an attachment with nature could certainly serve you well as a trader, now and well into the future.

How can nature help mental health?

 

Nature is hugely important in keeping us in fine fettle, emotionally, psychologically and physically – and what’s particularly good about it is that, for mental health, the definition of what constitutes nature is incredibly wide, so there are many different avenues you can explore to bring more of it into your life for the benefit of your general health and wellbeing.

 

Most obviously, perhaps, is the act of getting out and about in the countryside, exploring local parks in your community or going further afield and really heading out into the wild. One key wellness trend doing the rounds right now is forest bathing, which is something you could try if you’re looking for a serious mental health boost right now.

 

A stroll on the beach, a dip in the ocean, wild swimming, a stroll along the canal, exploring local wetlands… these all represent excellent wellness opportunities as well. But what do you do if you don’t have the time to get outside as much as you’d like?

 

Well, if you are pushed for time (which many traders are), there are still ways in which you can bring the outdoors in and use biophilia to the advantage of your health and wellbeing. 

The most obvious way to do this is to fill your home with house plants, but make sure that you choose your varieties wisely so you know they’ll fit in with your lifestyle. 

 

There are plenty of plant species out there that are practically unkillable and which don’t need much maintenance or looking after in order to survive and these might be the best option if you’re new to the wonderful world of houseplants.

 

Interestingly, studies show that increased urbanisation is linked to increased levels of mental health problems like depression and anxiety. But conversely, growing up in the countryside and more rural settings are linked to less acute stress responses, while exposure to green outdoor spaces has a strong association with a positive effect on wellbeing.

 

Even sounds and images of the natural world have been found to decrease stress levels in people, so you actually don’t even need to be outside in order to take advantage of the biophilic effect. 

 

With a bit of clever design ideas and a few touches here and there, you could quite easily create a space at home that puts biophilia at its heart and helps to promote feelings of calm, serenity and peace… which will certainly help you as a trader when faced with stressful and challenging situations.

 

Biophilic interior design

 

Research in the field of environmental psychology (which looks into how our spaces – both natural and manmade – can impact our health, mental processes and the way we socialise) suggests that buildings serve us the best when they reflect the natural world, taking into account sound, lighting, pattern and dimension.

 

As such, developing a deeper understanding of biophilia can help you create spaces at home or at work that support your mental health on a more involved level, promoting positive wellbeing.

 

The principle behind biophilic design is to use as many natural materials as possible, while maximising natural light and green plans – and your limit really is your imagination in this regard!

 

Although it can be tricky to achieve and get right first time if you’re not a professional interior designer, we’re very lucky to be blessed with the internet these days and you’ll find lots of inspiration on the information superhighway. 

 

This article on the Dezeen website, for example, has an impressive array of different houses that focus on biophilia and it could give you lots of ideas for your own spaces at work and at home.

 

Check out the Jungle house in Sydney, for example, which was designed by architecture studio CplusC Architectural Workshop. The site is partly made from recycled materials and features an aquaponics system (complete with edible fish) and has its own rooftop vegetable garden so that even those who live in more urban environments can enjoy a closer relationship with nature.

 

Or what about the Wall House in Vietnam, designed by CTA? This architectural feat has been made from hole-punctured bricks and features a central atrium to create a courtyard-feel to the home. Around the periphery of the space you’ll find lots of trees and luscious leafy green plants that make it feel almost as if you’re living in a garden.

 

Furthermore, the use of the hole-punctured bricks means that the house is almost able to breathe by itself day by day, helping to improve air quality throughout the property.

 

And then there’s The Cork Studio in the UK, constructed by Studio Bark… a space that’s made almost entirely from cork! This is a great natural material to consider bringing into your home because it can be completely recycled, reused elsewhere and it can even be composted, so it’s a true powerhouse if you’re looking to embrace sustainability at home.

 

The studio was made using discarded granules from a wine cork manufacturer and it was built around an existing sycamore tree growing onsite, making the interior of the space feel very much like a grownup treehouse.

 

Of course, some of this will be practical and easy to bring into your own home, while other ideas may not be quite as achievable… but it’s certainly excellent food for thought if you’re keen to really promote good mental health and wellbeing at home with a view to boosting your performance as a trader this year.

 

Looking for funded forex trading accounts at the moment? Have a browse of our site to see what programs we have on offer.

Recent articles

Share:

5 Ways To Defend Yourself Against Revenge Trading

Revenge trading is one of the easiest forex trading mistakes to fall into, even for experienced traders. It is particularly toxic because traders often don’t recognise the warning signs until it is too late and some serious damage has been done. In fact, those who think they are immune to such pitfalls can be most at risk.

 

Here’s a closer look at what revenge trading is and how you can be on your guard against it.

 

What is meant by revenge trading?

Revenge trading occurs when a trader takes on more trades to try and compensate for a substantial loss. It’s a knee jerk reaction to cover up failure and regain the lost funds. All sorts of powerful and dangerous emotions come into play at this point, which as you can probably guess is not conducive to logical and measured decision making. 

 

In fact in most scenarios, revenge trading only serves to compound the initial loss and can lead to a downward spiral that is impossible to recover from. This is because the desire to take revenge on the markets clouds rational judgement, and carefully worked out trading strategies are abandoned in the heat of the moment. 

 

What is the emotional state of a revenge trader?

The revenge trader is driven by a toxic brew of emotions that inevitably colour their actions. These are likely to include stress and anxiety at lost funds, which can be compounded by hurt pride and loss of face—after all, no one likes to be a loser. Some people may feel shame or embarrassment at having to admit the loss to colleagues or friends. 

 

The trader may feel disappointment and frustration at their own performance or at the perceived ‘unfairness’ of their loss. Sometimes in forex trading, losses occur even if all the rules have been followed, but new traders can find this a difficult lesson to learn. This can lead to anger or fear that they will never recover their losses.

 

A loss can also trigger greed to regain what the trader sees as rightfully theirs. They can feel as though the money has been stolen and the natural human instinct is to take it back as quickly as possible. These are all deep and primal instincts that have developed from the earliest days of humanity, when gains and losses were really a matter of survival. 

 

No matter how much more evolved we think we are than our ancestors, we are all to a certain extent hardwired to respond in this way to adversity. It takes self-awareness and mental discipline to overcome such powerful primal instincts, and this is why all forex traders need to be aware of the psychology of trading.

 

The most dangerous and vulnerable traders are often those who think they are too strong to fall prey to their emotions, because nobody is. Real strength comes from learning to put aside the ego and make decisions that are rational and only ever based on market research and in line with a predetermined trading plan. 

 

How to recognise the triggers of revenge trading

One of the most important steps to avoid revenge trading is to learn what triggers it in the first place. One of the most common scenarios is when a trader has been on a successful run of trades and has become overconfident in their own abilities. 

 

They may have come to assume that they can do no wrong, and when the winning streak ends the loss is particularly painful. The trader may feel hubristically cheated out of what they feel entitled to, and they redouble their efforts in an attempt to take it back. 

 

However, even the most experienced traders make losses, and simply making more trades means putting yourself at the risk of more losses. Another scenario is when a trader exits a trade early in response to a market downturn, and then tries to compensate for the loss by quickly placing a new trade.

 

Impatience, fear and anxiety then come into play as the market continues to plummet, and the trader then falls into the same panicked reaction and exits the trade, only for the markets to recover soon afterwards. This pushes the trader into placing yet another ill-thought through trade and the downward spiral becomes hard to break out of. 

 

There are just a few examples of how a trader can be pushed to abandon a trading strategy and risk management plan when events do not always turn out the way they expected. Sometimes, external factors can influence the revenge trade, such as feeling stressed or worried about a job or relationship.

 

How can you avoid revenge trading?

Once you have learnt to recognise the red flags that signal a revenge trade, the next step is to learn how to maintain your self-discipline in the face of challenging situations. Here are some tips.

 

Do nothing

The hardest thing to do is often just to learn to do nothing. We instinctively want to take immediate action to fix a problem or mistake, but this will just lead to further mistakes and losses. When things do not go to plan, step back from trading for a day or two and work out why.

 

All successful traders continue to make losses, and learning how to deal with them calmly is all part of learning how to trade. That is not to say the trader should just ignore the poor outcome and plough on robotically with the same course of action. However, any changes must be aligned with the risk management plan and trading strategy. 

 

Check in with any emotions you are experiencing, such as frustration, panic, or fear, and allow yourself to vent if you need to. However, pick a displacement activity such as going for a run or chatting with a non-trader friend—anything but placing another trade. Close that laptop and step away.

 

Some people find that meditation or breathing exercises helps them to clear their mind and reach a state of calm objectivity, where they can park their emotions and focus on the cold logic of the markets. 

 

Look at your trading strategy

When you have dealt with any negative emotions and accepted the loss, take a look at your trading strategy to see if you can identify the reasons for the poor outcome. Losses happen to the best traders and it may be that you decide to take it in your stride and carry on with your tried and tested strategy.

 

You may well find that you did not follow your entry or exit strategy closely enough, or that you were impatient in placing a trade when there was not enough evidence that the conditions were favourable. 

 

Look at the wider market conditions

We are living through some turbulent geopolitical times and this can cause unusual volatility in the forex markets. If you do not regularly read the financial press and follow the international news, then you could be missing out on warning signals of upcoming turbulence in the markets. 

 

If the markets are particularly volatile due to wider economic or geopolitical events, this could explain your losses. Step back from trading until the opportunities are more settled and favourable. New traders often overtrade out of the mistaken notion that more trades means greater profits, but in fact it is just as important to learn when not to trade. 

 

Learn from your mistakes

Be humble enough to accept your mistakes and learn from them, as this is the path to becoming a truly self-confident trader. Be honest with yourself about your own strengths and weaknesses and how these bear on your trading style. 

 

For example, if you know that you have a tendency to impulsiveness or a quickness to anger, learn how to control these instincts when you are trading. Always bring yourself back to your predetermined trading plan before acting, and never do anything to compromise your risk management strategy. 

 

On the other hand, if you are naturally cautious you are probably less prone to the pitfalls of revenge trading, but not being proactive enough can also hold you back. Learn how to identify a genuine opportunity for a good trade and act on it decisively. 

 

If you have fallen into a run of bad trades, then it’s time to sit down and review your strategy and records to try and identify a pattern. Is there a common factor that links all the trades? Can you improve your technical analysis skills or pay more attention to the economic news? 

 

If you do want to try new trading methods, start small to mitigate against any potential damaging losses.

 

Have a good work life balance

Finally, it is important to keep your mental and physical wellbeing in good shape by ensuring that you have a life outside of trading. Forex trading requires mental agility and stamina as well as good emotional discipline, and it is impossible for anyone to sustain this frame of mind by working round the clock.

If you would like some information about funded forex trading accounts, please get in touch today.

Recent articles

Share:

How To Use Colour To Boost Your Trades

Whether you’re just starting out on your forex trading journey or are old hat when it comes to trading currency pairs, one constant remains true… you will always be learning and finding new avenues of interest that could help you up your trading performance and continue raking in the big wins.

 

With trading, a lot of your success will depend on your mental and emotional health and wellbeing – and your overall outlook can have a huge impact on how well you do on the trading floor. 

 

This is why we blog so much about psychology and the importance of mindset… because it really can make all the difference between swim and sink if you’re looking to become a professional trader.

 

Interestingly, colour has the potential to have a significant impact on your mood and it can even potentially sway your decision-making, actions and behaviour (without you even knowing about it!), so researching colour psychology and how it can affect you could make a big difference where your trading prowess is concerned.

 

What is colour psychology?

 

At its core, colour psychology is simply the study of how different colours can influence human behaviour, with the various shades associated with their own connotations and potential psychological effects. 

 

There are cultural differences, of course, and you also need to consider personal preference, but there are typical associations that different colours generally have… such as red for danger, for example.

 

Psychologist Carl Jung even went so far as to suggest that people themselves could be sorted into four different colours based on their temperaments: Cool Blue, Earth Green, Sunshine Yellow and Fiery Red.

 

According to Jung, everyone has all these different colour energies within themselves but to varying degrees and the different energies will manifest themselves depending on what’s’ going on around us, although we do have one dominant colour energy that will affect us and our behaviour the most.

 

Fiery Red, for example, is associated with being positive, decisive, assertive and bold, while Sunshine Yellow denotes a cheerful, uplifting, enthusiastic and spirited side. Earth Green, meanwhile, suggests a soothing, calming and tranquil personality, while Cool Blue types remain analytical, detached and objective, demonstrating little to no bias.

 

For traders, adopting a more Cool Blue attitude to life could be particularly useful, since people with this type of dominant energy typically lead lives based on facts, logic and principles grounded in reality. 

 

They’re highly analytical and consider all the possibilities to ensure they don’t make any uninformed decisions and enjoy approaching tasks systematically… all of which are excellent attributes for a trader to have.

 

Fiery Red energy could also prove particularly useful for forex performance and these personality types are very action-focused, capable of making swift decisions without being swayed by past events. 

 

They prioritise focus and efficiency… although this can be detrimental to a certain extent if it leads to impatience and a need to exert control over any given situation.

 

How to use colour to boost productivity

 

If you accept the theory that colour can, indeed, affect your behaviour and emotions, it stands to reason that by surrounding yourself with certain shades you can actually exert some level of influence over your mental and emotional outlook, as well as your actions and reactions.

 

Taking the time to create an appropriate office or workspace at home or elsewhere is always advisable for traders and if you don’t have a robust setup in place, you may find that your trading success never quite hits the stratospheric heights you’d like it to.

 

You need to get your head in the game for trading and your work environment is essential for achieving this, so perhaps cast a critical eye over your office and see what changes you could introduce that could give you a big productivity boost.

 

To this end, armed with your new knowledge of colour psychology, you might want to consider doing a bit of painting, or surrounding yourself with home decor items in certain shades to help keep you in the right mindset for trading.

 

But what colours to go for? Which tones would be the most beneficial to use? 

 

Green

 

A great colour to consider if you’re looking to work efficiently and with intent focus is green. This is a restful and calming colour, known for helping to improve concentration, while boosting creativity and inspiring innovative thinking… so an ideal one for aspiring traders everywhere to go for.

 

Not only that, however, but green also has links to nature and the environment, which can help improve your mental, emotional and even physical health and wellbeing… something that will really help you be a resilient and successful trader. 

 

There’s a reason why biophilia really came to the fore as one of the top interior design trends during the pandemic (and why it hasn’t waned in popularity in the years since) and that’s because being connected to nature helps us to feel happier, less stressed, more creative and more productive.

 

Blue

 

If green doesn’t float your boat, or perhaps you want to bring in a range of different colours, you might find what you’re looking for with a blue design scheme.

 

Research from the University of Texas shows that this colour may have an important role to play in increasing productivity and, in fact, it was found that people seemed to work more effectively when their working environments were a combination of both blue and green… so it could prove to be a very winning combination indeed!

 

In terms of connotations, blue has long been associated with calmness, tranquility, peace and security, which could really help centre you as you trade, no matter whether you win or lose.

 

And like green, it too has links to the natural world, with blue the primary colour of the sea and sky, so you could feel even more connected to nature if you include it in your interior design ideas.

 

Red

 

The colour red is an interesting one because it is somewhat contradictory, representing love, passion, energy and excitement, but also anger and power… so it can yield positive and negative results, depending on how it’s used. 

 

If you do want to decorate your home office in this most energetic of colours, it would perhaps be wise to use it as an accent colour rather than painting all the walls in this shade, which could become overpowering quite quickly and start having a negative impact on your trades.

 

This interesting study, published back in 2017 by the Swedish House of Finance, looked into the effects that colour can have on investment behaviour, finding that when investors are faced with potential losses in the colour red, their risk taking is reduced. 

 

And when they’re shown past negative stock price paths in red, their expectations regarding future stock returns are reduced as well, consistent with the colour red being associated with avoidance behaviour. It was also found that red can reduce the propensity to buy stocks… all of which suggests you may want to be careful in your approach with this shade!

 

That all being said, warm colours like red are also very stimulating and can certainly give you a productivity boost if used in the right way.

 

Yellow

 

Another really energising colour to consider decorating with if you want to give your trades a boost is yellow. This shade radiates positivity and can really help keep your confidence levels high and your mood equally optimistic. 

 

A happy trader is usually a successful trader and yellow can really help invoke feelings of warmth and brightness, lifting your mood and keeping you focused on the road ahead, no matter what forks appear along the way.

 

However, as with red, you also need to be a bit careful when decorating with yellow as too much of it can be a bit wearing on the eyes and cause visual fatigue, so approach with caution. 

 

Again, you may want to avoid painting your walls in a bright yellow as, despite its cheerful nature, studies have shown that people are more likely to lose their tempers when in yellow rooms… and babies are even more likely to cry when their surroundings are yellow!

 

Grey

 

If you’re looking for a calming colour to decorate with, however, grey could very well be the way to go. 

 

Halfway between black and white, grey is associated with objectivity and neutrality – which could be absolutely perfect for traders, since it’s important to maintain an objective outlook when trading, not being swayed by your emotions no matter what happens on the trading floor. 

 

The formal aspect of the colour also represents clear-headed thinking and logic… exactly what you want to engender within yourself as a trader.

 

And from a purely design and style perspective, grey is an excellent choice because it goes well with a range of other colours because of its achromatic nature, so you’ll be able to pick out shades and tones easily, even if you’re not an experienced interior designer.

Interested in setting up your own funded forex trading account? Browse our site to find out more about the various programmes we have available.

Recent articles

Share:

How To Use The 80-20 Pareto Rule In Forex Trading

You may have heard of the Pareto rule, which is applied to many aspects of financial trading as well as other purposes. The basic idea is that 80% of outcomes are the result of 20% of the causes. Therefore, small changes can make a big difference to the end result of a process. This theory has been adopted by forex traders to improve their strategy.

 

Here’s a look in some more detail at the Pareto Principle, and how you can use it to strengthen your forex trading performance. 

 

Where does the Pareto Principle come from?

The idea is based on the observations of the Italian sociologist and economist Vilfredo Pareto (1848- 1923). He noted during the course of his studies that 80% of the land in Italy belonged to about 20% of the population. The story goes that this observation arose from noticing that 20% of the pea pods in his garden yielded 80% of the peas.

 

This led to the development of a power law distribution based around the 80/20 rule that has been applied to many other fields, particularly in the world of business and economics. In the 1940s, a management consultant named Dr. Joseph Juran applied the theory to quality control in factories.

 

He found that it held true for the proportion of defective products in relation to faults in the production process. In other words, 80% of the issues were caused by 20% of the flaws in the production method. Therefore, efforts to improve could be focused on one targeted area, which resulted in a great improvement in quality.  

 

However, it has been applied to areas as diverse as engineering, quality control, and healthcare. Another area the principle is commonly applied is occupational health and safety, which assumes that 20% of hazards are responsible for 80% of accidents and injuries. This allows safety experts to target their efforts in the areas where they will have maximum effect. 

 

In essence, the Pareto principle can reduce the time and effort spent trying to improve the many processes that matter only a little or not at all, and allow the work to be focussed on a much smaller area that will yield much greater benefits. It’s all about making the most efficient use of time, creativity, and resources.

 

 Investors often work to the rule that 20% of the holdings in a portfolio are responsible for 80% of the growth, and thus focus their attention on the most lucrative stocks and shares.

 

How can the Pareto Rule be applied to forex?

There is no one single way that the Pareto Rule is applied to forex trading, but the general concept that 20% of your efforts will reap 80% of the rewards is a useful principle to bear in mind. Here’s a look at some of the different ways that you can integrate this approach to your trading.

 

Trade less, trade better

Less is more, as the saying goes, and many forex traders abide by this principle. One of the most effective ways this is applied to forex trading is to concentrate on making fewer trades that are very well planned, rather than a greater number of trades that have had less preparation. 

 

Many new traders are keen to respond to every fluctuation in the market, rather than having the patience to wait until there is a worthwhile opportunity to make a good trade. More experienced traders develop the discipline not to trade when the market conditions are just not there. 

 

Some traders might even tell you that 80% of the time, the market is not worth trading, but 20% it definitely is. Learn to identify that 20%, and use the other 80% to watch, wait, and keep your powder dry until the right moment. Learning when not to trade is just as important as knowing when to trade. 

 

Analyse your trading journal

Take a look at your trading journal (you are keeping a trading journal, right?) and work out which are the best and worst performing trades. You may even notice that 20% of your trades generate 80% of your profit. 

 

See if you can notice a pattern that repeats itself in your most unsuccessful trades, such as a certain time of day or currency pairing that just isn’t working for you. You may even find that your worst trades were those that you made impulsively without any proper planning and research, or were too influenced by your emotions such as greed and fear. 

 

Next, look at your best results. Do they have any factors in common? Chances are, they are the trades where you were disciplined enough to follow through with your trading strategy and remained completely objective in your decision making process. 

 

Whatever you find, look for the reasons behind the wins and losses in your track record, and refocus your energies on the techniques that are bringing you the best results. 

 

80% of trading is about risk management

Forex trading is largely a process of taking managed risks. Even the most experienced of traders accept that only about 50% of their trades will be profitable. The reason why they continue to be successful is that they are able to manage their level of risk to minimise their losses. 

 

The first step to risk management is to understand your risk tolerance; in other words, how much money are you comfortable with losing on each trade? Most forex traders are risk averse and will only risk between 1 and 3% of their account balance on each trade. Your approach will depend largely on your financial circumstances and personality.

 

Consider how much spare capital you have at your disposal, your level of trading knowledge and experience, and your temperament. Are you a natural worrier who would be kept awake at night by the thought of potential losses? Or are you someone who is comfortable with a level of uncertainty? How confident are you in your current trading abilities?

 

The other main risk management strategy is to use stop loss orders. No matter how confident you may be that you have identified a great trading opportunity, the markets are volatile and don’t always move in predictable ways. 

 

A stop loss order automatically triggers an instruction to sell the currency pair at the market price once a predetermined price is achieved. This provides you with a safety net to mitigate against incurring substantial losses on any one trade, should the market suddenly turn against your favour.

 

It is important to note that when the stop loss is triggered, it becomes a market order, and is executed at the market price, which may be higher or lower than the stop loss price. It is possible to move your stop loss after your position is open, to protect a good profit margin or to move it out of the loss zone. 

 

You may not want to set a stop loss on all your trades, but you can use the Pareto principle to identify your least successful 20% of trades and use stop loss orders for these. 

 

Applying the 80-20 rule to your time management

One of the most effective ways to apply the pareto rule to your trades is by addressing your time management. If it holds true that 20% of our actions account for 80% of the outcomes, then it’s worth examining exactly how you spend your time when trading. 

 

You may be familiar with the adage that work expands to fill the time available. This is known as Parkinson’s Law, because it was first observed by Cyril Northcote Parkinson in a 1955 essay for The Economist. In essence, it’s the idea that a simple five or ten minute task can take all day if we let it.

 

When we think that we have plenty of time at our disposal, it is easier to get sidetracked with small and often irrelevant details. We might also take more opportunities to procrastinate. Sometimes, this can be a useful learning experience, but mostly, it’s just an inefficient use of time. 

 

To test how this theory might apply to you, limit your trading time by a few hours each week, or even each day if you devote yourself full time to trading. You might be surprised at how well you begin to focus on the most important aspects of your trading routine, and spend less time on the least productive tasks.

 

Note down how spending less time trading affects the outcome of your trades over the course of two weeks or a month. Did your success rate go up or down? You might be surprised to learn that you are getting better results, despite putting in fewer hours. It might be a cliche, but working smarter rather than working harder can really pay off.

 

Focus on your best performing currency pairs

Finally, this might seem obvious, but if you trade a lot of different currency pairs, it is likely that 20% of them are generating 80% of your profits. Unless you particularly enjoy the challenge of trading minors, it’s best to focus on the strongest currencies.

If you are looking for an instant funding prop firm, please get in touch with us today.

Recent articles

Share: