Wednesday, July 09, 2008

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Forex Options - The 2 Golden Rules For Huge Profits


Forex options are a great trading tool if used correctly. They give you unlimited profits with a set risk in advance and allow you to ride out short term volatility.

They are an excellent way to stay in the market and seek huge gains, but you
Must use them correctly and most traders don?t.

Here are your golden rules for options trading:

The Odds

Most people don?t look at the odds of the option they buy making money, they simply get obsessed with the potential profit.

They therefore buy options way out of the money and if it gets to the price and trades in the money they will make a killing.

The big word here is ?if?

Buying way out of the money options a long way from the strike price is like backing the outsider at a horse race.

You will win occasionally but most of the time you will lose and the odds are firmly against you.

The real pro?s do the following:

1. Buy close to the strike

That means buying options that are at or close to the money or in the money.

Keep in mind if your option is not in the money at expiry you lose your entire premium.

This therefore puts the odds in your favour, you may not make as much but your chances of winning are greater and these profits will mount up over time.

The second golden rule of options trading is

2. Get time on your side

The closer and option comes to expiry the more the time premium will eat into the profit.

Therefore buying options with just a few days or few weeks to expiry is not a way to put the odds in your favour.

Get plenty of time on your side and make sure time premium doesn?t kill you.

Forex options are a great trading tool if used correctly novice traders simply look at the unlimited gains and forget about the risk that options trading involves as you have to pay for the limited risk.

Don?t make the same mistake use the two rules above as your basic strategy for trading options.

You will win more often and the profits will add up to some great long term gains over time and that?s the aim of all forex traders.

MORE FREE BETTER TRADING INFO

On all aspects of becoming a profitable trader including free trading guides downloads, systems and for more forex articles visit our website at http://www.net-planet.org/index.html



Forex Trading - Are Trading Forums Worth Your Time?


Are trading forums worth your time? Yes and no. (Terribly indecisive answer, I know :-) Let me explain. It depends on how you use them.

If you're very new trading, forums can be an asset, if you proceed with caution. There are a lot of people on those boards who perceive themselves and being something important and skilled. They are neither. The bad part is sometimes they are hard to tell apart from those who offer real value. Don't take anyone's word in a forum as gospel.

So, if you're new, you could find yourself being steered down the wrong path. However, it can be a great way to be exposed to new ideas. The way you want to approach a forum is like hit and run . . .

Take this for example, if you find yourself posting multiple times per day, you are wasting your time, and that is the great danger of these forums. They can become addictive to certain types of people. They leech your time away.

Time that should have been spent trading or something productive. Instead, you wasted it away "chatting."

Here's how I use forums. When I need feedback or an idea, I hop into them. When I've gotten what I want, I hop out. I know, that's not supposed to be how it's done. You're supposed to stay and "add value" to the forum.

You're not taken seriously if you don't have 100 posts along with your name. Who cares? Don't waste your time. You don't need acceptance into that "circle." Get what you need. Move on.

Do you want to learn more about how I trade? I have just completed my brand new guide, "Forex Trading - What Finally Worked For Me".

Download it free here: Forex Trading

Nathan Pennington is a forex trader and the author of Winning Forex Trading -THE Definitive Guide



Forex Trading - Scale Trading


Scale trading is a method of trading that was originally developed for commodity traders. In it's most basic form, you buy a commodity as the price sinks. You do this because you know the price of corn, oil, wheat, live cattle, etc can't go to zero. These are real products that the masses need.

Then as the price rebounds, the futures contracts are sold off at prices slightly higher than when they were bought. If the price dips before all contracts can be sold, then more are bought with the profits of the ones that have already been sold.

That in a nutshell is how scale trading is done in futures. One of the most important keys to this method of trading is simply making sure that you don't run out of capital. You are going to let the price run against you. If you don't properly prepare ahead of time, you could be out all your trading capital.

Just like commodities, we know that currency prices will not get to zero (unless the currency becomes totally worthless, and believe me, if a currency like the dollar or euro becomes worthless, you will have much bigger problems than the fact that the currency itself is worth nothing!)

To effectively scale trade currencies, you need to find the major resistance points in the market. By major I mean MAJOR. You are going to treat these points as the zero line. Then from where ever the price is now get the difference between the price and your zero line (major resistance).

That is the distance you have to cover with your trading capital. Divide it into equal parts so that you won't run out of capital even if you have to buy all the way down.

The as the price dips, you buy. As it surges back up, you sell taking your profits.

Do you want to learn more about how I trade? I have just completed my brand new guide, "Forex Trading - What Finally Worked For Me".

Download it free here: Forex Trading

Nathan Pennington is a forex trader and the author of Winning Forex Trading -THE Definitive Guide



Forex Trading Systems - Thinking of Buying One? Then Look For This


I read a lot of material on forex trading systems and the great copy offering me huge profits for $100 or so, sounds great!

Then when I come to buy the system I look for one thing and one thing only to see if it?s worth me parting with my money.

Its obvious but most forex system buyers don?t think to ask the obvious its:

The real time audited track record from the vendor.

After all if they make claims about how great their system is shouldn?t they be trading it and shouldn?t they have some proof it makes money?

Of course they should!

In most cases however with forex trading systems all you get is a hypothetical track record at best, or a load of vague claims without substantiation.

A hypothetical track record means absolutely nothing.

Let?s define exactly what this means:

It means the person had all the closing data in hindsight and can simply make the profit and loss whatever they want it to be.

You never see one that loses money.

Let?s face it, if we are doing a track record knowing the closing prices anyone can make money as they know what the prices did.

My 10 year old boy can do that!

There are some good forex trading systems out there and the best way to get one that is reputable is to get a trader who puts his money where his mouth is and trades his own system.

Would you take driving lessons from someone who had not driven before?

Of course you wouldn?t!

Use the same rule in trading if the vendor doesn?t have the confidence to trade his own system why should you?

Don?t fall for the hype

Fact is, there are many forex trading systems sold by vendors without track records and they know their systems don?t work and that?s why they don?t trade.

Of course, they make money from greedy and foolish people who fall for the copy.

Vendor wins you lose ? Simple.
People will say the fact that a froex trading system just because it has made money in the past does not mean it will make money in the future and of course this is true, but I Like the fact the person selling at least has shown profit and has the confidence to trade.

My view is never trade a system without a real time track record of at least two years.

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Forex Trading - Forex as a Home Business


There is a learning curve with any business. Doesn't matter if you want to start some MLM program, do dropshipping, or trade forex.

However, forex for some reason seems to have a huge learning curve. No one knows for sure how many traders fail, but estimates are around 90% to 95%. That may be a little on the high side, however, it does illustrate that you need to really know what you are getting into.

Another disadvantage of forex as a home business is the start up capital. One of the biggest reasons that new traders fail is not having enough capital to see them through the rough spots.

However, the negatives aside, there are some very intriguing things about forex trading. For example, there are no customers.

Sure, customers are the lifeblood of commerce. But as a trader, you don't have customers. All the headaches associated with them don't exist.

Second, down turns in the economy have no effect on you. You trade currencies from all around the world. You don't care if it's trending up or down. It really doesn't matter. You can profit at all times.

So, yes you can be totally autonomous. Just remember what I mentioned at the beginning. The learning curve is steep. You need to have plenty of capital. Trying to trade this market with just a few hundred dollars isn't going to work.

Brokers love people who try to trade like that. If you open an account with just several hundred dollars, they will consider that money already theirs. Sufficient startup capital is very important.

Do you want to learn more about how I trade? I have just completed my brand new guide, "Forex Trading - What Finally Worked For Me".

Download it free here: Forex Trading

Nathan Pennington is a forex trader and the author of Winning Forex Trading -THE Definitive Guide



Forex Trading - Financial Freedom Through Forex (Part 1)


Let's get the bad news out of the way first. You won't get rich fast and easy through forex trading. Yes, you can do well, but you're going to have to plan and work you plan. Ready?

The very first thing you need to do is create a plan. To create this plan you're going to need some data. For example:

What method or system are you going to be trading?

How well does it do in the market?

What can you expect from it?

How much are going to initially invest?

How much will you be able to continually invest?

Mostly likely you don't have the answers to any of these questions. Unfortunately, no one is going to hold your hand. You're going to have to roll up your sleeves and do the work yourself. I know that's a drag, but it's the way the real world works.

So what if you don't know anything about methods or systems or testing them? Find out! MetaTrader will let you construct and test trading systems for free. There are tutorials on the web as to how to use it. There are even people who will program a trading method for you as well.

After you have done that research, you now know the answer to the first three questions. Good. Now you need to address your finances. How much can you invest? More importantly, how much can you continue to invest?

You see, there isn't a legitimate system that will earn 5000% return on investment. So, your initial investment isn't going to make you rich. You'll need to continue to invest in your fund on a regular basis.

Now it's time to bring this plan to life . . . see you in part 2.

Do you want to learn more about how I trade? I have just completed my brand new guide, "Forex Trading - What Finally Worked For Me".

Download it free here: Forex Trading

Nathan Pennington is a forex trader and the author of Winning Forex Trading -THE Definitive Guide



Forex Trading - No-Touch Options


There is a saying that the person who makes the rules wins the game. Usually that's true. It's also true when it comes to exotic options in forex.

You have to remember that the forex brokers aren't stupid. The way they price the options and all that. They are setting you up to fail if you trade them. There are very complicated algorithms that compute how likely the price is to get to (or not to get to a certain level) by a certain time.

You are playing their game when trading options like that.

For example, if you're sure the price wouldn't touch 1.3212 and you get pricing on that option, you'll notices that if the broker agrees with you, your risk-to-reward ratio is terrible. If the risk-to-reward ratio is good, then definitely don't trade it. The broker thinks you're going to get slaughtered and is trying to bait you into trading it.

The people who make the rules win the game. Remember that.

It's much better to just take an outright position if you really have that strong of an opinion. Remember that no broker can manipulate the price of the currencies (at least not for very long).

Options are a trap. The broker thinks of you as a mouse. The option is really tasty cheese. It promises low cost, and a big pay-out. But it won't deliver. It's very similar to playing the lottery, but you're a trader, not a gambler.

Only take a trade if you have a edge.

Do you want to learn more about how I trade? I have just completed my brand new guide, "Forex Trading - What Finally Worked For Me".

Download it free here: Forex Trading

Nathan Pennington is a forex trader and the author of Winning Forex Trading -THE Definitive Guide



Forex Trading - The Day Trading Myth(s)


There is a whole mythology surrounding day trading. Numerous myths have sprung up around it. Some myth busting needs to be done. :-)

1) There is a trade (or more than one) every day. No. There isn't. If you try to trade like that, you are going to have problems. It's called over-trading. The spread will eat you alive. You're trying to trade like a broker without the advantage of being spread positive.

2) You're always flat at the end of the day. Not true. This relates to the first point. If you try to get in and out quickly, you won't let the market give you anything. But it doesn't matter if the market gives you anything or not, the broker is going to take his share one way or another. You will (in terms of your account balance) bleed to death.

3) It's easier than other kinds of trading. Really? I think the real meaning of this is it's easier to sell day trading courses than other kinds of courses. Remember the old line about a sucker being born every minute (they're actually being born faster now). It's still true.

4) The market is the same on all time frames. They would have you believe that things happen on the five-minute chart just like they do on the daily chart, just the daily chart is slower. Not so. The market is much more random on the faster time frames. More randomness, means it's harder to discern what is really going on. And that means it's a recipe for being separated from your money.

Do you want to learn more about how I trade? I have just completed my brand new guide, "Forex Trading - What Finally Worked For Me".

Download it free here: Forex Trading

Nathan Pennington is a forex trader and the author of Winning Forex Trading -THE Definitive Guide