Many traders, especially those new to the markets, have a habit of “averaging in” to trades that aren`t going their way. The following reasoning is used: If this trade was a good entry at my earlier price, then it must be an even better entry now! On top of that, the trader gets caught up in the idea of improving his “average entry price.”

Unfortunately most traders learn the hard way that this logic simply does not hold up. This is a natural response that everyone has, which is exactly why it doesn`t work in a market. The reasoning that “this trade was good then so at this price it must be even better” is based on the flawed assumption that the first entry price was a good one.

Pride tries to keep us from realizing that the very fact that the position is a loser right now is PROOF that the first entry was NOT a good entry (at least not yet). In fact, the stock or option has moved in the opposite direction the trader thought it was going to move, indicating that either the analysis/reasoning used to take the position in the first place was incorrect or at the very least the reasoning has been weakened by the market action since the position was established. This does NOT mean that the trade is no longer a good one just because you did not make your initial entry at the perfect moment (who does?) — it just means that you probably shouldn`t be willing to put more capital at risk now that it has started to prove you wrong.

The other part of the reasoning, that “this will improve my average entry” is simply a mathematical illusion.

By “averaging in”, you don`t just move your entry closer to the current price (the part Pride makes us focus on), you also double your losing position (the part we don`t want to see). Instead of 1000 losing shares at 10.25 you now own 2000 losing shares at 10.00 — BIG DEAL — you are still down $500 because the stock price is still at $9.75 and now you own 1000 extra shares of a stock that is in a downtrend instead of the uptrend you predicted!

Don`t get me wrong, it is not always a mistake to increase your position on a losing trade — some circumstances (such as the stock sitting right at a very strong resistance or support level) warrant it. If you absolutely must add to a losing position, always do so with the conviction necessary to exit the ENTIRE position quickly should the trade move against you (through that critical support level you saw, etc.) from there.

On the flip side of the coin is the exact opposite reasoning and the exact opposite results over time. Adding to winning positions is a practice rarely done by even the most experienced traders, but one that can lead to increased profitability over time. This is exactly the strategy that our Day Trading Systems have used successfully since 2000. The next few times you hear pride telling you to “lock in your profits”, double your position and set a stop at your new “average entry”. After 5-10 of these trades you will be surprised at what a profitable (and a confidence building) method this can be.

Once again, traders who ignore pride and trade the opposite of emotion will reap extra profits and a much more pleasurable trading experience. DON`T MISUNDERSTAND ME — you will not profit more every time you add to a winner and you won`t lose every time you add to a loser — I am talking about trading strategies to work OVER TIME — anything can happen in the window of a few trades.

Andy Swan is co-founder and head of trading at DaytradeTeam.com

My purpose for writing this article is to demonstrate to you the advantages of trading on the FOREX market. However, there is one myth that I want to dispel before I go further. The myth is that there is a difference between trading and investing. To dispel that myth I quote from Al Thomas, President of Williamsburg Investment Company, who wrote “If It Doesn’t Go Up, Don’t Buy It”. He said “Everyone who invests is a trader, only the time period is different.” It is a lesson that I took seriously after taking a beating in the stock market in 2000.

So now, let’s compare features of currency trading to those of stock and commodity trading.

Liquidity - The FOREX market is the most liquid financial market in the world around 1.9 trillion dollars traded everyday. The commodities market trades around 440 billion dollars a day, and the US stock market trades around 200 billion dollars a day. This ensures better trade execution and prevents market manipulation. It also ensures easily executable trading.

Trading Times - The FOREX market is open 24 hours a day (except weekends) which means that in the US it opens at 3:00 pm Sunday (EST) and closes Friday at 5:00 (EST), allowing active traders to choose the times they want to trade. Commodities trading hours are all over the board depending on which commodity you are trading. Including extended trading times US stocks can be traded from 8:30 am to 6:30 pm (ET) on weekdays.
Leverage - Depending on your FOREX account size, your leverage may be 100:1, although there are FOREX brokers that offer leverage of up to 400:1 (not that I would ever recommend that kind of leverage). Leverage in the stock market can be as high as 4:1, and in the commodities market, leverage varies with the commodity traded but it can be quite high. Because the commodity markets are not as liquid as the FOREX market, its leverage is inherently riskier. Although I was never shut out of a commodity trade by the day limit, the fear was always in the back of my mind.

Trading costs - Transaction costs in the FOREX market is the difference between the buy and sell price of each currency pair. There are no brokerage fees. For both the stock and the commodity markets, there are transaction costs and brokerage fees. Even when you use discount brokers, those fees add up.

Minimum investment - You can open a FOREX trading account for as little as $300.00. It took $5,000 for me to open my futures trading account.

Focus - 85% of all trading transactions are made on 7 major currencies. In the US stock market alone there are 40,000 stocks. There are just over 200 commodity markets, although quite a few are so illiquid that they are not traded except by hedgers. As you can see, the fewer number of instruments allows us to study each one more closely.

Trade execution - In the FOREX market, trade execution is almost instantaneous. In both the equity and commodity markets, you count on a broker to execute your trades and their results are sometimes inconsistent.

While all of these features make trading the FOREX market very attractive, it still requires a lot of education, discipline, commitment and patience. All trading can be risky.

I have been an environmental consultant for more than 20 years and have dabbled in trading for longer than I care to remember. Please visit me at http://www.creative4xtrader.com for your free copy of “FOREX FREEDOM”.

I find it amazing that nearly everyday I receive something online or offline that is the greatest break-through in Trading. You know the stuff. This ‘system´ or that ‘method´ has been thoroughly tested and back-tested in every conceivable fashion and is wildly successful. Some work for a period of time but most do not. The decades old statistical fact still remains, 90+% of Futures Traders will lose all of their trading capital within their first year of trading. Now there is a new and promising alternative.

Enter e-Currency Trading. In simple terms e-currency is Internet Money. E-Currency allows the purchase of Internet goods and services at lightning speed and most importantly with a high level of security. Much higher than credit cards, bank transfer etc. The demand for e-currency should only grow as Internet Commerce grows.

So what does this have to do with trading? There are literally hundreds of different e-currencies. Each is backed by an underlying Currency or a precious metal. The need arises to exchange between these e-currencies or convert an e-currency to hard cash. Much like the Euro is to the European Union. We can profit from the exchanging process and profit from the fluctuation of the underlying currency value.

The same basic strategies apply to e-currency trading as with futures trading. Supply and demand dictates price primarily. You could buy e-currency that has historically performed well (buying the trend) or go the opposite way and buy those that are under-performing, looking for a turn-around. You can even chart them if you like.

Leverage, that double-edged sword that Futures Traders are so familiar with is also present in e-Currency Trading. You can borrow against your portfolio to buy more e-currency. The compounding affect is almost outrageous. Some would argue that you never have to pay back the leverage. I contend that it is paid back if you closed your e-Currency account, because your final balance would be less the amount leveraged. The point here is the leverage in futures trading is often times the demise of a well intended trader versus the leverage afforded an e-currency trader combined with the daily compounding affect creates portfolio growth at a phenomenal rate. It is not uncommon to see portfolio growth of 20 - 40% per month.

Futures Trading and e-Currency Trading have a common downside. The learning curve is huge and can be frustrating and costly. Each has unique terminology, which is impossible to work around until you have a good understanding of the meaning. Thankfully in this world of information, we are able to find resources online and offline that shorten that curve. How much it is shortened is dependent on how much time you want to dedicate.

Industry experts have debated for years the optimum amount one should fund their futures trading account with. The obvious moving target is enough capital to withstand the drawdown periods. Many factors go into this but I´ve seen numbers range anywhere from $10,000 to $50,000 and up. If this is the case then there is little doubt why most futures traders lose as most are willing to fund only the amount required to cover Margin or the Brokers account minimum usually a few thousand dollars. One of the biggest reasons for small business failure is being under capitalized, the same holds true in futures trading.

E-Currency Trading is different in that the experts recommend starting with a few hundred dollars and let the system build your account. Whatever route you choose, only trade with risk capital.

E-Currency Trading certainly has advantages over traditional futures trading and may well be worth your serious consideration.

Merv Thompson is the owner of a website that provides trading tools, resourses and reviews for todays futures trader. http://www.futures-brokers-review.com

Merv has started his own personal e-currency trading account and will periodically post updates - Visit the website to view the results

Additional information about e-currency trading can be found on his website at http://www.futures-brokers-review.com/ecdwnld.html

Forex (Foreign Currency Exchange Market) has been used by international banks and large investment companies for years to make millions of dollars. However, with easy access to the Internet, it is now possible for anyone to take advantage of this powerful tool and make money the same way large institutions do, even with minimal startup funds at hand.

Even experienced investors seem mystified by Forex and have very little understanding of it. Forex is not much different from the Stock Market, often the same or similar techniques can be used to trade currency as is used to trade stocks and commodities. What make Forex so mysterious is the lack of available information and opportunities of training.

I have listed 10 good reasons why I prefer Forex to the Stock Market or any other investment option and why any individual, or small investor, should look at getting involved with Forex:

1. A 24 hour market. You don’t have to worry about running out of time because the Forex is open 24 hours a day, nearly all week.

2. Huge liquidity. Have you ever got stuck trying to get rid of some stocks or options? With Forex, there are always buyers, thousands of them!

3. No commission on your trading. This is specially important for individuals with small amount of money to invest. When using other investment vehicles the cost of the investment is often prohibitive no matter how attractive the investment itself is. Brokerage and other government fees can easily eat up your profit even before you completed a transaction. With Forex, there are no brokerage, government etc fees involved.

4. Low transaction costs. Typically less than 0.1%!

5. No middleman. The investor is dealing directly with the Market.

6. Instantaneous transactions. Forex is fully computerised and transaction can be completed in as little 2 seconds. The investor does not have to wait for trade confirmation to arrive by email, worst yet, by post. All ‘paper-work’ is in electronic format, easily viewed, search, analysed.

7. Huge leverage yet low margin. Both increase your profit. In most cases leverage of 10:1 to 100:1 is the rule not the exception.

8. Minimal startup requirements. Again very important for individual or small investors. With Forex it is possible to start trading with as little as $300.00 dollars!

9. Easy access to the Market and your accounts, online, 24/7. Since Forex is completely computerised, anyone with Internet access can trade online and easily access their account and trading history. Most trading platforms allow the user to export this information to other third party software for storage, graphing, analysis etc.

10. No insider trading. Because of the way Forex is ‘de-centralised’, it is almost impossible for anyone to fraud the system.

I could go on for ever about Forex, it is an amazing tool for investors and also a very exciting opportunity for individuals. I hope you’ll catch the fever, too.

Wishing you success,

Ference is fanatic about currency trading. When not gazing currency charts he spends his time searching for new investment opprotunities. Visit one of Ference’s sites at: http://www.forexguys.com or contact him at ference_kish@yahoo.co.nz

A mini forex trading account is designed for those who are new to forex trading or when the trading account balance is less then $10.000.

Mini forex account key points

- Only $250-$300 to open
- Up to 200:1 trade leverage
- 1 pip = $1 for EUR/USD and GBP/USD
- Smaller trade size

Mini forex account advantages

Build up confidence starting small

A trader can trade a mini forex account using 1 mini lot and building up lot size slowly when he makes profits in his account. A general rule is to trade ONLY 1 mini lot for every $1000 a trader has in account. For example, if an account is worth $5000, trader can take up to 5 mini lots.

Develop a forex trading strategy

Because on a mini forex account, pip value is $1 = 1 pip, trader can pay more attention on building a solid trading strategy without focusing on floating profit & Loss (P/L).
Most traders with a small account balance trading on a standard account will tend to base trading decisions on profit &Loss and not on their trading strategy, they are emotionally too involved.

Their account balance fluctuations are so important that they even can’t think developing a proper trading strategy.
Their account size is too small for the lot size they take and every small pip loss can lead to a painful loss in their trading account.

Such traders will tend to take profits (too) soon and cut losses too late because they always hope the trade will make a reverse and come back.

Consider the following example:

A trader has a $2000 trading Account.

When trading a forex standard account, a 37 pip loss will result in a $370 loss in his trading account or 18.5% of his account balance. When taking the same trade on a forex mini account, a 37 pip loss will result in a $37 loss in his trading account or 1.85 % of his account balance.

Conclusion

By starting with a Mini account- a trader loses only a small amount on every losing transaction making it easier to stick to a disciplined trading strategy, in the long rum, this will lead to much better trading results.

Toby Smitz - Daily Operations Mini Forex Trading