Forex Fortunate 5%

Written by admin on March 20th, 2011

Forex Fortunate 5%

” Look at market fluctuations as your friend rather than your enemy; profit from folly rather than participate in it.”    Warren Buffett

Caveat Emptor

The financial markets industry attracts its share of dishonest and devious people, and the Forex sector has its quota of charlatans. Please be mindful of this when assessing brokers, signal services, and the various others who populate the Forex world.

Some people are easily misled, deceived and cheated, especially traders who are inexperienced, unrealistic, and lacking a suitable temperament. Forex blogs and reviewers report various signal scams, including falsification of performance results, sending different signals to the same client base, and various other tricks. We encourage you to beware, and undertake thorough research before signing with any Forex service providers.

Gambler or Trader?
Probably the most serious impediment to profitable Forex trading is an inappropriate attitude. Forex often appeals to inveterate gamblers who seldom resist the urge to place a bet in the forlorn hope of satisfying their “big win” craving. How do we recognise a penchant for gambling? Overtrading with excessive margin is probable a certain indicator.

One of the most astute traders we know was a chronic gambler and is now a wealthy Financier. He has related several times that what eventually made him a profitable Forex trader were the lessons learned to overcome his problem gambling. Those capable of being honest with themselves will recognise any signs of ludomania. If you have a gambling problem please seek professional help, and avoid Forex trading.

Some claim any financial instrument trading is a form of gambling since it involves taking a risk in hope of reward. What is the difference between gambling and professional trading? Professional traders have a highly developed sense of discernment. They employ prudent risk/reward assessment, usually erring on the side of caution, and identify multiple confirmation signals before entering the market; for them each trade is a probable profit making opportunity.

Odds For and Against
The Forex is arguably the most authentic zero sum game on earth. Why do the odds greatly favour those who divide so such of the Forex game spoils? Because they are playing against traders who are hugely disadvantaged by there own attitudes and behaviour. It is a matter of statistical probability. You have a much improved chance when the odds are in your favour, and that may simply mean not being one of the traders with the odds unquestionably against them.

Adept traders enter the market when they have determined the odds strongly favour them, and not merely marginally so. They put their money at risk only when they have a high probability of making a profit.

Losses are certain to occur. Professional traders minimise them by employing loss mitigating management methods and self-discipline.  Gamblers have insufficient control to do this, and are thus eating their own odds, actually betting to lose.

Telling Statistics

It is said 5% of Forex Traders take 95% of the profits. Another noteworthy statistic is the claim that approximately 90% of Self Directed Forex traders lose their opening account balance within 90 days. We hear remarks that such losses are a trader’s tuition fees. Doubtless it may help to teach some valuable lessons, unfortunately most repeat the errors, and their habitual losses predictably become the spoils divided by the fortunate 5%.

These numbers may be somewhat distorted and exaggerated, yet they convey telling facts. An extremely low percentage of Forex traders share an extremely high percentage of the profits, and the preponderance of new Forex trading accounts are soon lost.

The vast majority of Forex traders attempting are totally unqualified to accomplish their profit goals. Perhaps they have thoroughly researched the subject, done several courses, opened trial and active accounts, however, in most instances they remain ill equipped to meet the Forex challenge. They usually lack the capital necessary for a reasonable chance of success, are easily lured by brokers offering extremely high leverage, habitually trade with perilously high margin, and lack the requisite self-control. Accordingly, the odds are comprehensively against them.

The attitude of habitual Forex losers often has a common denominator. They take losses personally, believing the Forex should be subject to their trading decisions; they actually blame losses on the market. Professional traders see the market as their friend, the source of their livelihood.

The Fortunate 5%

The definitive Forex challenge is becoming one of the few taking most of the profits. We know and accept that losses and drawdowns are inevitable, even for the five percenters. The difference between them and those whose money they share is making considerably more profits than losses, and they achieve this by applying a superior Trader Intelligence.

The 5% are dedicated to taking profits.  An “if only” attitude does not prevail. There are no regrets or recriminations when a closed trade reverts in the direction they had traded. They understand that the market will constantly offer profit opportunity; it is not about one particular trade. These traders have an unshakeable conviction that their highly developed Trader IQs will consistently reveal profitable market entries and exits.

Trader IQ
Most Forex traders have above average intelligence; nonetheless, the statistical evidence suggests an alarmingly high percentage have below average Trader IQs. Joining the Fortunate 5% requires a high Trader IQ.

To begin, make a earnest effort to analyse your trading. Traders give myriad reasons why their losses are not their fault. The capacity to generate plausible excuses and believable justification is not indicative of a high Trader IQ. Intelligent practitioners of the Forex trading art accept responsibility, exercise discipline, learn and practice patience and detachment.

Intelligent Forex traders are willing and able to risk a reasonable capital sum, establish achievable profit goals, eliminate impulsive trades, and avoid excessive risk.

Unless you are able to make a genuine commitment to achieving these goals you are wasting your time and money. Irrespective of the professional Signal Service you use, or the trades you select, without a sufficiently high Trading IQ you are on a fools errand.

Glimpses of the Forex World

The Internet is replete with data for those seeking information on the technical and fundamental factors that impact the Forex, education and training, broker choices, and signal services. An good resource list for Forex service providers is available at

On 17th of September 2008 CLS Bank settled 1,554,166 Forex payment instructions with a gross value of US$ 8.6 trillion. Huge numbers, though of course leveraged to varying degrees. Many quote trillion as the nominal daily Forex volume, though it now seems to have surpassed trillion.

Impulsive, self-destructive traders fuel the profits of online Forex brokers. Those of us who have witnessed the introduction and proliferation of retail Forex trading have seen numerous churn and burn shops come and go, and some remain and continue to grow. Those interested in pertinent facts may want to review the Refco story –

Forex brokers receive good and bad reviews. A broker may score high ratings on some sites, and far lower on another. There are sites where no broker rates over 50%, supposed review web sites that are owned by brokers, and the inevitable fake reviews generated by self-interested parties. Sound confusing, that is exactly what the retail brokerage market has become, and the Caveat Emptor warning must be heeded.

Conflicting reviews and scams apart, the real issue is how to make a relatively informed choice when choosing a Forex broker. A good place to start is your Internet search engine. Incidentally, there are sites purporting to answer this question that describe the exact features of particular firms, and conveniently provide links to them.

The fact is, we cannot know how a broker will deal with us until we have opened an active account. Many make the error of thinking brokers with the highest Internet profile will provide the best service and attention. Substantial advertising budgets are not necessarily indicative of a brokers ethics or efficiency. Even big brand associations can lead the unwary astray.

Market Maker brokers may trade against your position. Stop hunting price spikes, persistent data glitches, unfilled orders/slippage, and suddenly widening spreads during high liquidity sessions, are a few of the practices used by such predators. Brokers who claim to have no intervening trading desks may also engage in sharp practices in the dedicated pursuit of your money.

First and foremost make a concerted effort to verify the broker is legitimately connected to the Forex, and is reputable. Treat reviews with a degree of circumspection: some use reviews to denigrate each other. You can usually spot a real review.

As a general rule we prefer ECN brokers, though we stress there are ethical alternatives.

Trading Platforms
Most Forex platforms will successfully process your order with a varying degrees of sophistication. At any given time a few become popular and tend to be dominant. Where possible

Pages: 1 2

Tags: , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , ,

Leave a Reply