The number one most important and most overlooked component to becoming a successful trader or investor is risk management. As a trader or an investor, capital preservation is priority. Regardless if you are an investor looking at the potential move of months or years ahead or a day trader looking to capture the small intra-day swings for quick profits, you must have a complete plan. You must plan how much risk you are willing to take on each trade before entering, know how to use trailing stops properly and know when to take profits. There will also be times when you are in a trade and things are just not going according to plan. And you must get out of that trade and look for another opportunity.

Do you know what your own risk tolerance is psychologically? How much can you afford to lose? Are you risking too much based on your total capital? Are you allowing yourself a chance to trade another day or looking to hit a home run on each trade? You must have a predetermined plan and know your limits based on the amount of capital you plan to invest or trade with.

Once you enter a trade, if the market moves against you by the predetermined risk amount you planned, get out! Take the loss. Accept that when investing and trading you will have losses. Losing is expected and part of the business of investing and trading. Think of losses as part of the expenses of running a business. Every business has expenses. The key is to manage the loss to keep it small. The most successful investors and traders will have regular and frequent small losses. Understand that taking small losses is healthy for you. By doing so, it allows you to think more clearly to find new opportunities down the road. If you’re hanging onto a losing trade, you will have difficulty thinking clearly to see new opportunities. A quote from Reminiscences of a Stock Operator by Jessie Livormore said it all. “Losing money is the least of my troubles. A loss never bothers me after I take it. But being wrong – not taking the loss – that is what does the damage to the pocketbook and the soul.”

To this day, it amazes me how so many people who want to make money in the stock market or want to become day traders come into this business without a plan. What most fail to realize is this is a business. It is no different than any other business looking to make a profit. You can’t just sit on the edge of your seat and make money. While the business of investing and trading is risky, it doesn’t mean you have to have a gambling mindset. The worst thing any investor or trader can do is stay with a losing trade, hoping it will come back and turn into a winner. This mistake is fatal. Many traders freeze when they’re in a losing position. They think if they stay in the market a few more ticks, maybe it will turn around. Train yourself to use stops to help control risk. Using stops is a necessity to having long-term trading success. Learn to take your loss. You can always get back in when the market turns around.

Investing and trading are based on probabilities. Work with a fixed dollar amount you are willing to lose if wrong. Based on your total account size, figure on anywhere from 3 to 5 percent to risk per trade. To some this is a very conservative amount, but it’s best to be more conservative than overly aggressive. Learn to use trailing stops once the position moves in your favor to manage your risk more effectively. Take part profits along the way at predetermined points. Yes, you must learn to take profits as well. By doing so you are controlling your risk more effectively and locking in profits. Remember, you’re investing or trading to make money. Learn to ring that cash register.

A common mistake by inexperienced investors and traders is they trade without a pre-planned amount to lose if wrong and no plan to lock in profits if correct. That type of action usually results with the investor or trader working on hope and prayer that will eventually run them to failure. Think back to the bull market, when so many stocks were running straight up. Many people got caught up thinking they could do no wrong.

I remember talking to many investors who asked for advice as the stock market climbed higher. I suggested they take part profits along the way and use trailing stops, but greed blinded them into thinking the market has to keep moving higher. One hundred percent, 200 percent, 300 percent and more was not enough. If they sold their stock at a profit, they complained about having to pay taxes on those profits. I often wonder why so many find it easier to hang on to a loser and have a tax write-off rather than happily paying taxes on making profits. Those same people now wish for 10 percent return.

Professional-minded traders know the use of several simple effective techniques would have saved many investors from giving back a majority of their profits or from stopping them from going in the red. The key is learning how to manage your investments no differently than a day trader manages trades. Doing so will help you become a better investor.

To better equip yourself as a trader/investor

· Understand how to read a chart properly to see key resistance and support levels.
· Understand and know how to identify a trending market and the failure of the trends.
· Understand that trading and investing are no different than any other business.
· Control your expenses and maximize your profits, otherwise you will be out of business.
· Be flexible and adapt to current market conditions.
· Learn and accept the fact it’s ok to be wrong and take the loss.
· Learn to take profits when you are in a profitable trade.
· When wrong, get out of your position.
· When right, scale out and use trailing stops to continue locking in profits if the move continues in your favor.
· Keep it simple and remember your downside risk must be less than your upside potential.

Steve Rifkin S.E.R. Enterprises, Inc. One Northfield Plaza, Suite 300 Northfield, IL. 60093 Visit The Power of the Force at http://www.NaturesForceTrading.com

steverifkin@naturesforcetrading.com 847-441-3205

Legendary trader W D Gann amassed a fortune of $50 million dollars in the first half of the last century, although he died in 1955, his commodity trading systems are still used today by traders all over the world.

Successful commodity trading systems have the ability take the emotion out of trading, liquidating losses quickly and spotting and holding the big longer-term trends and that’s exactly what Gann’s Commodity trading systems did.

Gann’s Commodity Systems Track Record

Gann’s commodity trading systems allowed him to make some stunning predictions and trading gains such as:

1. He predicted improvements in business in 1921 and the Bull Run in stocks.

2. 1928 he forecasted the end of the Bull Market in stocks a full year in advance of the 1929 crash. He then bought stocks in the Dow at an all time low in 1932.

3. In 1935, of 98 trades in cotton, grain, and rubber, 83 trades showed a profit. His percentage of profitable trades was often 90% or higher.

History Repeats Itself

Gann was a prolific writer and wrote extensively, outlining his thoughts on commodity trading systems in a series of books and courses. Some of his ideas were grounded in empirical studies, while others were more mystical in nature.

Gann’s major contention was that certain laws governed not only the markets, but nature as well and were universal in scope. He believed that human psychology was constant and that this manifested itself in repeatable price patterns.

“We cannot escape it (emotion) In the future it will cause another panic in stocks. When it comes both traders and investors will sell stocks, as usual, after it is too late or in the latter stages of a bear market”

He was aware that human nature was constant and influenced the majority of traders.

“Therefore, in order to make a success the trader must act in a way to overcome the weak points that have caused the ruin of others”

For more information on trading psychology excellent books to read any by Jake Bernstein, Jesse Livermore, Larry Williams, Van Tharp and Jack Shwager and you will see why human nature repeats itself.

The Influence of Price and Time

One of the most important thoughts behind Gann’s commodity trading systems was the concept of combining price and time.

Gann believed that crucial price movements happened when price and time converged. These points could indicate an important trend change was imminent. If on the other hand, price and time were not coordinated, or did not converge, time always held priority over price. Time was therefore considered by Gann as the ultimate indicator, because all of nature was governed by time.

In the “Wall Street Stock Selector” Gann said.

“Just remember one thing, whatever has happened in the past in the stock market and Wall Street will happen again. Advances in bull markets will come in the future, and panics will come in the future, just as they have in the past. This is the working out of a natural law …” and, “It is action in one direction and reaction in the opposite direction. In order to make profits, you must learn to follow the trend and change when the trend changes.”

Making Big Profits with Gann

There are many commodity-trading systems to choose from and Gann with its unique method of technical analysis is worth serious consideration by any trader.

If you are, a day trader or long-term position trader, look at Gann’s commodity trading systems and see how they can help you become a better and more informed trader.

To learn more about using Gann methods to improve your trading performance please visit our web site: http://www.gann.co.uk

In the entrance to the New York Stock Exchange, stands a life-sized picture of W D. Gann (1878 – 1955) and this is a testament to his standing amongst traders worldwide. Today he remains one of the most influential traders of all time.

W D Gann Methods and Trading Performance

W D Gann employed a staff of 25 draughtsmen to draw charts of all the stocks on the New York Stock Exchange, as well as a variety of commodities. He would then use the charts to look for trading opportunities.

Gann in fact made huge trading profits from his technical analysis of the markets.

There are reports, which indicate that his trading techniques amassed him a fortune of over $50 million dollars, and many of his trades are on record.

W D Gann Trading Philosophy

W D Gann was a prolific writer, and wrote extensively outlining his thoughts and trading methods in a series of books and courses. Some of his ideas were empirical studies, while others were more mystical in nature.

Gann’s major contention was that certain laws governed not only the markets, but nature as well, and were universal in scope.

The Influence of Price and Time

One of Gann’s most important contributions was the concept of combining price and time. Gann believed that crucial price movements happened when price and time converged. These points usually indicated an important trend change was imminent.

However, if price and time were not coordinated, or did not converge, then time always held priority over price.

Therefore time, was considered by Gann as the ultimate indicator, because all of nature was governed by time.

In “Wall Street Stock Selector” Gann said.

“Just remember one thing, whatever has happened in the past in the stock market and Wall Street will happen again.

Advances in bull markets will come in the future, and panics will come in the future, just as they have in the past. This is the working out of a natural law “

“It is action in one direction, and reaction in the opposite direction. In order to make profits, you must learn to follow the trend, and change when the trend changes.”

Gann and the Importance of Trader Psychology

Many commentators focus on W D Gann’s thoughts on price and time, Swing trading methods, Gann angles, and his work with the Fibonacci number sequence.

However, you should not underestimate Gann’s analysis of trader psychology and his insights into the emotions of hope, greed, and fear.

Gann was well aware that emotions caused the bulk of traders to lose money:

“We cannot escape it (emotion). In the future, it will cause another panic in stocks. When it comes, both traders and investors will sell stocks, as usual, after it is too late, or in the latter stages of a bear market”

He was aware that human nature was constant and influenced the majority of traders:

“Therefore, in order to make a success, the trader must act in a way to overcome the weak points that have caused the ruin of others”

This is what W D Gann set out to do. It is a fitting tribute that successful traders around the world are still using his techniques and methods today. Without a doubt, many consider W.D. Gann to be one of the most influential traders of all time.

To learn more about using Gann trading methods please visit our web site: http://www.gann.co.uk

The fact is the majority of traders lose because they cannot control their emotions. Trading psychology is one of the keys to investment success.

A simple fact will illustrate the influence of trading psychology:

Why the majority of traders lose

There is one statistic that has remained constant since the beginning of investment records – the ratio of winners to losers has remained constant over time.

On reflection, this would seem a startling fact; despite the massive advance in communications and economic forecasting methods, the ratio remains the same.

The conclusion from the above is that the successful trading is dependant on something else. That something else is our trading psychology.

The influence Of Hope and Fear

In trading psychology, two emotions that are constantly to the fore are hope and fear. One of the traders who recognised this was the legendary trader W D Gann.

“Hope and fear: I have written about this often in my books and I feel I cannot repeat it too often. The average person buys commodities because they hope they will go up, or because someone advises them, they will go up. This is the most dangerous thing to do, never trade on hope. Hope wrecks more people’s lives than anything else. Face the facts, and when you trade, trade on the facts, eliminating hope”

“Fear causes many losses. People sell out because they fear commodities are going lower, but they often wait until the decline has run its course and sell near the bottom – never make a trade on fear”

Control Emotions and Become a Disciplined Trader
Gann, like all successful traders, realised that the only way to trade successfully was to remove emotions from trading, and trade on the facts and realised the significance of trading psychology on price movements.

To do this, he applied mathematical principles to investing that would give him the ability to trade without emotion, with discipline Gann was extremely successful, amassing a fortune of over $50 million in his trading career.

Human Nature Is Constant – Exploit It for Trading Success

It doesn’t matter what market you trade: commodities, stocks, currencies, or what type of trader you are, a day or position trader, the fact is, trading psychology influences the majority of traders. If you can control your emotions and trade with a disciplined plan you can gain a trading edge.

A Disciplined Plan for Big Profits

Gann was able to control his emotions by having a specific plan, which he followed, and the following three principles was the basis of his success:

1. He had a trading method, which relied on mathematical principles that he had proved over time would increase profit potential and reduce risk.

2. He traded on the facts as presented to him by his trading system and he never traded on his emotions

3. He used strict money management principles to run profitable trades and cut losses quickly

He realised that having the correct trading psychology was just as important as having a good trading method.

Essential Reading for Any Trader

After Gann’s death in 1955, there have been some excellent writers on trading psychology including Jake Bernstein, Larry Williams, Dr Van Tharpe and Jack Shwager. Gann’s works however, have stood the test of time proving him one of the most influential traders of all time.

Emotion is part of human nature. We cannot avoid it. All we can do is to:

“Act in a way to overcome the weak points that have caused the ruin of others”

This is what Gann set out to achieve.

To learn more about using Gann trading methods please visit our web site: http://www.gann.co.uk

Investors and traders around the world are looking to the Forex market as a new speculation opportunity. But, how are transactions conducted in the Forex market? Or, what are the basics of Forex Trading? Before adventuring in the Forex market we need to make sure we understand the basics, otherwise we will find ourselves lost where we less expected. This is what this article is aimed to, to understand the basics of currency trading.

What is traded in the Forex market?

The instrument traded by Forex traders and investors are currency pairs. A currency pair is the exchange rate of one currency over another. The most traded currency pairs are:

EUR/USD: Euro
GBP/USD: Pound
USD/CAD: Canadian dollar
USD/JPY: Yen
USD/CHF: Swiss franc
AUD/USD: Aussie

These currency pairs generate up to 85% of the overall volume generated in the Forex market.

So, for instance, if a trader goes long or buys the Euro, she or he is simultaneously buying the EUR and selling the USD. If the same trader goes short or sells the Aussie, she or he is simultaneously selling the AUD and buying the USD.

The first currency of each currency pair is referred as the base currency, while second currency is referred as the counter or quote currency.
Each currency pair is expressed in units of the counter currency needed to get one unit of the base currency.
If the price or quote of the EUR/USD is 1.2545, it means that 1.2545 US dollars are needed to get one EUR.

Bid/Ask Spread

All currency pairs are commonly quoted with a bid and ask price. The bid (always lower than the ask) is the price your broker is willing to buy at, thus the trader should sell at this price. The ask is the price your broker is willing to sell at, thus the trader should buy at this price.

EUR/USD 1.2545/48 or 1.2545/8
The bid price is 1.2545
The ask price is 1.2548

A Pip

A pip is the minimum incremental move a currency pair can make. A pip stands for price interest point. A move in the EUR/USD from 1.2545 to 1.2560 equals 15 pips. And a move in the USD/JPY from 112.05 to 113.10 equals 105 pips.

Margin Trading (leverage)

In contrast with other financial markets where you require the full deposit of the amount traded, in the Forex market you require only a margin deposit. The rest will be granted by your broker.

The leverage provided by some brokers goes up to 400:1. This means that you require only 1/400 or .25% in balance to open a position (plus the floating gains/losses.) Most brokers offer 100:1, where every trader requires 1% in balance to open a position.

The standard lot size in the Forex market is $100,000 USD.

For instance, a trader wants to get long one lot in EUR/USD and he or she is using 100:1 leverage.

To open such position, he or she requires 1% in balance or $1,000 USD.

Of course it is not advisable to open a position with such limited funds in our trading balance. If the trade goes against our trader, the position is to be closed by the broker. This takes us to our next important term.

Margin Call

A margin call occurs when the balance of the trading account falls below the maintenance margin (capital required to open one position, 1% when the leverage used is 100:1, 2% when leverage used is 50:1, and so on.) At this moment, the broker sells off (or buys back in the case of short positions) all your trades, leaving the trader “theoretically” with the maintenance margin.

Most of the time margin calls occur when money management is not properly applied.

How are the mechanics of a Forex trade?

The trader, after an extensive analysis, decides there is a higher probability of the British pound to go up. He or she decides to go long risking 30 pips and having a target (reward) of 60 pips. If the market goes against our trader he/she will lose 30 pips, on the other hand, if the market goes in the intended way, he or she will gain 60 pips. The actual quote for the pound is 1.8524/27, 4 pips spread. Our trader gets long at 1.8530 (ask). By the time the market gets to either our target (called take profit order) or our risk point (called stop loss level) we will have to sell it at the bid price (the price our broker is willing to buy our position back.) In order to make 40 pips, our take profit level should be placed at 1.8590 (bid price.) If our target gets hit, the market ran 64 pips (60 pips plus the 4 pip spread.) If our stop loss level is hit, the market ran 30 pips against us.

It’s very important to understand every aspect of trading. Start first from the very basic concepts, then move on to more complex issues such as Forex trading systems, trading psychology, trade and risk management, and so on. And make sure you master every single aspect before adventuring in a live trading account.

Raul Lopez is a full time Forex trader and founder of http://www.straightforex.com a high quality Forex training and Forex trading course provider.

Mechanical trading systems are, as you would expect, systems that make trading decisions for you.

The thought of having mechanical trading systems you can simply use to generate automatic profits, is obviously very attractive to many traders.

Most traders however, end up disappointed with mechanical trading systems, as they never seem to live up to the sales hype, and the performance figures used to sell the system never seem to be repeated in real life.

Why do most mechanical Trading Systems fail to live up to the Hype?
There are two main reasons for this:

Black Box Systems

These are systems where the vendor does not reveal the logic of the system. Of course, for a trading system to be successful it needs following rigidly with discipline.

If however, you don’t know the logic of a mechanical trading system, you will probably not have the discipline to follow it when a losing period occurs. If you don’t have the confidence to follow a mechanical trading system, you don’t have a system at all!

Curve Fitting and Optimization

Another problem is curve fitting or optimization of mechanical trading systems. These systems yield extraordinary performance in back testing because of the tweaking of the system rules to make them fit the data. A trader once likened this to shooting holes in a barn door, and then drawing circles around every hole to make each shot a bull’s eye!

Of course, anyone can make a mechanical system make money if it is already know what happened in the past.

You will never see a hypothetical performance that fails! Most vendors achieve this by making the system fit the data, which of course will lead to disappointment in the brutal world of trading.

The fact is that most mechanical trading systems don’t deliver the results they promise and traders end up disappointed. This is not to say that there are not good mechanical trading systems to buy, but you need to do your research first, and the following checklist will give you the salient points to look for.

Mechanical systems – What Makes a Good System?

The rules and logic are fully explained, so you have confidence in the system when it suffers a string of consecutive losses:

Some evidence of a real time track record i.e. the system has made money in the real world of trading and not just hypothetically.

Look for simple systems, as these tend to work best and will tend to be more robust in the real world of trading.

Avoid any optimised system. Clues to an optimized trading system are ones that use unique rules or different parameters to trade specific financial markets. If the system has sound principles, then it should work on a broad spectrum of financial instruments.

Make sure that the drawdown figures are compatible with the equity you have to trade.

Not all mechanical trading systems are doomed to failure, but if you want to get one that works, be realistic and do your homework first.

Building Your Own System

Most traders like the concept of a mechanical trading system, but like to have some input to customize the system to their specific personality.

If you have some human input, it is easier to implement the trading system with rigid discipline, which is the key to building consistent profits.

To learn more about using Gann trading methods please visit our web site: http://www.gann.co.uk

In this report, we will look at the history and background of Fibonacci numbers and The Golden Ratio. We will then outline three specific money management tips that can help increase your profit potential.

Support and resistance levels are an important consideration for most traders to help identify entry and exit points when trading.
Fibonacci percentage “retracement” levels based upon the Fibonacci number sequence and golden ratio are very popular with many traders but what are they exactly?

What are Fibonacci Numbers and the Golden Ratio?

The Fibonacci sequence first appeared as the solution to a problem in the Liber Abaci, a book written by Leonardo Fibonacci in 1202 to introduce the Hindu-Arabic numerals used today to a Europe still using Roman numerals.

The original problem in the Liber Abaci posed the question: How many pairs of rabbits can be generated from a single pair, if each month each mature pair brings forth a new pair, which, from the second month, becomes productive.

The Golden Ratio

After the first few numbers in the Fibonacci sequence, the ratio of any number to the next higher number is approximately .618, and the lower number is 1.618. These two figures are the golden mean or the golden ratio.

Its proportions are pleasing to the human senses and it appears throughout biology, art, music, and architecture. A few examples of natural shapes based on the Golden Ratio include DNA molecules, sunflowers, snail shells, galaxies, and hurricanes.

Important Retracement Levels

The two Fibonacci percentage retracement levels considered the most important in trading are 38.2% and 62.8%. Other important retracement percentages include 75%, 50%, and 33%.
Three Profit Tips for Using Fibonacci Numbers

1. Fibonacci Defines Stop Loss Levels

A trader can use Fibonacci numbers to set stop loss orders.

For instance, if at least three Fibonacci price levels come together in a relatively tight zone, a stop loss placement just below or above the zone may be set.

A Fibonacci number helps define stops in the following way, if a trader trades against a support zone, if the support zone is violated and the price trades below that zone, the reason for the trade is negated and the position should be closed.

Setting stops using Fibonacci retracements takes the emotion out of trading and gives a pre defined exit point.

2. Fibonacci Defines Position Size

Depending on the risk you are prepared to take per trade, Fibonacci numbers can also define position size. For instance, if prices are right on a specific level, you may wish to have more positions than if the price is further away.

3. Fibonacci Defines Objectives

With Fibonacci numbers, once a pattern completes against a Fibonacci price zone you can use them to set profit objectives to bank partial profits or tighten stop loss levels. This clear objective for traders helps them to lock in profits.
The great advantage of Fibonacci numbers and the golden ratio is the fact that they take the emotion out of trading and can define not only stop losses to exit a market, but also set profit objectives as well.

W D Gann and Fibonacci – The Perfect Trading Combination!

One trader who incorporated Fibonacci numbers and The Golden Ratio into his trading was the legendary trader W D Gann.
We feel that the use of Fibonacci numbers with the Gann trading method provides traders with the best possible combination to seek long term trading profits.

To learn how to increase your FOREX profits using Gann methods please visit our web site: http://www.gann.co.uk

Trading using stock index trading systems has become increasingly popular in recent years, as they offer traders a great speculative vehicle to seek above average profits.

There are plenty of stock index trading systems, but which is the best?

Stock Index Trading Systems – Catch and Follow the Trends!

For profitable stock index trading, you need to be able to lock into, and run the big profitable trends, and the best way to do this is by using technical analysis to spot, and act, on these trends.

The best way to do this is to find a stock index trading system that has stood the test of time.

Stock Index Trading Systems and Gann’s Methods for Profit

W D Gann was a trader and legend in his own lifetime. Even today, a half a century after his death, he remains one of the most influential traders of all time.

Gann had an astounding trading record and amassed a fortune of over $50 million dollars in his trading career. Many of his recommendations are on record, for example:

Each year Gann published a forecast for the following year. In 1928 he published a forecast, which predicted the date of the September 1929 US Stock Market high, and that a black Friday would occur, a year in advance of the actual events.

In 1932, he recommended buying stocks at the all time low in the Dow in June and July.

History repeats itself allowing us to Predict the Future
Gann’s major contention was that certain laws governed not only the markets, but nature as well, and were universal in scope.

He argued that human nature repeated itself and that by looking at the past we could make predictions about the future.

In “Wall Street Stock Selector” Gann said.

“Just remember one thing, whatever has happened in the past in the stock market and Wall Street will happen again. Advances in bull markets will come in the future, and panics will come in the future, just as they have in the past. This is the working out of a natural law …” and, “It is action in one direction and reaction in the opposite direction. In order to make profits, you must learn to follow the trend and change when the trend changes.”

How Gann Can Help You Become a Better Trader

If you are looking at stock index trading systems, then Gann is one of the best traders to consider. While Gann wrote much of his work at the turn of the century, it still is as significant today as it was then.

Gann was aware that human behaviour repeats itself repeatedly. Since price patterns reflect shifts in human psychology, one can assume that certain patterns, cycles and trends, will repeat themselves again. A simple formula reinforces this concept

PRICE + TIME = VALUE

We all associate value with a certain price that we are accustomed to paying over time and Gann developed this concept.

Gann combined price and time to generate signals to trade the market. Gann believed crucial price movements happened when price and time converged. These points usually indicated an important trend change was imminent. If however, price and time were not coordinated, or did not converge, time always held priority over price.

Time was therefore considered by Gann as the ultimate indicator, because time governs all of nature.

Exploring Gann’s Methods

There are many stock index-trading systems, but Gann, with his unique methods and insight into trader psychology, makes his work as relevant today as when he first wrote it.

To learn more about using Gann trading methods please visit our web site: http://www.gann.co.uk

The Fibonacci numbers sequence and the golden ratio have fascinated mathematicians for hundreds of years.

While Fibonacci numbers have many applications, they have received considerable interest from traders due to their uncanny accuracy in spotting market turning points in advance.

You can use Fibonacci numbers as a predictive tool and when used correctly they can enhance a your analysis of the market, helping you to increase profits and decrease risk.

The History of Fibonacci Numbers

The Fibonacci number sequence first appeared as the solution to a problem in the Liber Abaci, a book written by Leonardo Fibonacci in 1202 to introduce the Hindu-Arabic numerals used today to a Europe still using Roman numerals.

The original problem in the Liber Abaci posed the question: How many pairs of rabbits can be generated from a single pair, if each month each mature pair brings forth a new pair, which, from the second month, becomes productive.

The Fibonacci number Sequence

The resulting Fibonacci numbers 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, are the result of the following equation.

If Fn is the nth Fibonacci number, then successive terms are formed by addition of the previous two terms, as Fn+1 = Fn + Fn-1, F1 = 1, F2 =

The ratio of any number to the next larger number is 62%, which is a popular Fibonacci retracement number. The inverse of 62% is 38%, and this 38% is likewise a Fibonacci retracement number.

Fibonacci Numbers and the Golden Ratio

Fibonacci numbers are found to have many relationships to the Golden Ratio F = (1 + /5)/2, a constant of nature which was of constant interest to the ancient Greeks, appearing in both Greek art and architecture.

Fibonacci Numbers and Market Analysis

Changes in stock prices are not simply a tug of war between supply and demand but also reflect human opinions, valuations, and expectations.

A study carried out by mathematical psychologist Vladimir Lefebvre demonstrated that humans exhibit positive and negative evaluations of the opinions they hold in a ratio that approaches phi, with 61.8% positive and 38.2% negative and that Fibonacci numbers are rooted in a trader’s psychology.

Predicting Market Movements with Fibonacci Numbers

Research shows markets as being perfectly patterned, explaining that humans, being part of nature, create perfect geometric relationships in their behaviours, even if they don’t realize it themselves.

The Golden Mean is the number 0.618. In Both Greek and Egyptian cultures, this number was highly significant. They believed that the number had important implications in many areas of science and art. This dimension was utilised in the construction of many buildings – including the pyramids.

The Golden Mean appears frequently enough in the timing of highs and lows and price resistance points that adding this tool to technical analysis of the markets can help to identify key turning points.

W. D.Gann and Fibonacci Numbers

Gann was a stock and commodity trader who reputedly made over $50 million trading the markets.

Gann made his fortune using methods which he developed for trading instruments based on relationships between price movement and time and his work was heavily influenced by Fibonacci numbers.

Gann divided price action into eighths and thirds. This yields numbers such as 1/3, 3/8, 1/2, 5/8, and 2/3. In percentage terms, these fractions are 33.3%, 37.5%, 50%, 62.5%, and 66.7%. These five ratios are commonly used retracement values. Gann placed strong significance on 50% retracements.

To learn more about using Gann trading methods please visit our web site: http://www.gann.co.uk

How difficult is it to make money trading the Forex market? How much time does it take to actually be able to make a living trading the Forex market? These and other important aspects of trading are to be discussed in this article.

Trading the Forex market has many benefits over other financial markets, among the most important are: superior liquidity, 24hrs market, better execution, and others. Traders and investor see the Forex market as a new speculation or diversifying opportunity because of these benefits. Does this mean that it is easy to make money trading the Forex Market? Not at all.

Forex brokers agree that 90% of traders end up losing money, 5% of traders end up at break even and only 5% of them achieve consistent profitable results. With these statistics shown, I don’t consider trading to be an easy task. But, is it harder to master any other endeavor? I don’t think so, consider musicians, writers, or even other businesses, the success rates are about the same, there are a whole bunch of them who never got to the top.

Now that we know it is not easy to achieve consistent profitable results, a must question would be, Why is it that some traders succeed while others fail to trade successfully in the Forex market? There is no hard answer to this question, or a recipe to follow to achieve consistent profitable results. What we do know is that traders that reach the top think different. That’s right, they don’t follow the crowd, they are an independent part of the crowd.

A few things that separate the top traders from the rest are:

Education: They are very well educated in the matter; they have chosen to learn every single and important aspect of trading. The best traders know that every trade is a learning experience. They approach the Forex market with humility, otherwise the market will prove them wrong.

Forex trading system: Top traders have a Forex trading system. They have the discipline to follow it rigorously, because they know that only the trades that are signaled by their system have a greater rate of success.

Price behavior: They have incorporated price behavior into their trading systems. They know price action has the last word.

Money management: Avoiding the risk of ruin is a primary subject to the best traders. After all, you cannot succeed without funds in your trading account.

Trading psychology: They are aware of every psychological issue that affects the decisions made by traders. They have accepted the fact that every individual trade has two probable outcomes, not just the winning side.

These are, among others, the most important factors that influence the success rate of Forex traders.

We know now that it is not easy to make money trading the Forex market, but it is possible. We also discussed the most important factors that influence the rate of success of Forex traders. But, how much time does it take to have consistent profitable results? It is different from trader to trader. For some, it could take a life time, and still don’t get the desired results, for some others, a few years are enough to get consistent profitable results. The answer to this question may vary, but what I want to make clear here is that trading successfully is a process, it’s not something you can do in a short period of time.

Trading successfully is no easy task; it is a process and could take years to achieve the desired results. There are a few things though every trader should take in consideration that could accelerate the process: having a trading system, using money management, education, being aware of psychological issues, discipline to follow your trading system and your trading plan, and others.

Raul Lopez is a full time Forex trader, his trader are based on a price behavior approach. Raul is also founder of http://www.straightforex.com a high quality Forex training company.