A word of warning

It's is very a tempting time right now and no doubt it will continue for a while.
Volatile markets present great opportunities, but they also present great risks.

It's very easy to open a trading account, study a few charts and leap in to take what looks like easy profits.
However, there are two main things to be aware of.
1. Although the markets may be moving very strongly in one direction, there will be plenty of contra-moves that will take out the unwary trader. Although a strong trend might be apparent, there will still exist a large degree of randomness.
2. High volatility means that safe stops will be triggered frequently -- usually before a trade has had a chance to make the required pips. And yet, if the stops are not in place, then losses can be crippling.

Today, the Bank of England announced a very rare and very surprising rate cut of 1.5%. Immediately the pound lost against the dollar in quite dramatic fashion. It seemed like an obvious play to jump on the bandwagon and sell the pound. Yet almost as quickly it regained all its losses. What seemed like a very predictable move ended up the complete opposite.
Time will tell whether the pound will revert to its seemingly predictable falling trend, but for a few minutes today it was very hard to call.
So, just because the markets move in a big way, don't assume it's easy to take the pips.
It really is a time to gain as much education and understanding as you possibly can.

Is Bird Watching still the one to read?

Interested in financial trading? Especially foreign currency trading or forex? Then you might have subscribed to the odd newsletter or two.
Maybe you use some financial sites and have registered your details there too.
Or perhaps you are just interested in business opportunities or earning a part-time income.
Whatever your own reasons or circumstances, if you have given your email address to any of the above or similar then there is a fair chance that you will have received details on forex trading strategies, systems or education.
In the past, on this site and the Neesh Enterprises site I have written about the excellent Bird Watching in Lion Country by Dirk du Toit.
The book has been around for a while now and so we have to ask the question, 'how does it compare to the range of courses on offer today?'
Well, to be honest I haven't checked out everything that is on offer, but I do read the publicity material and a lot can be gleaned form that, especially if you know what you are looking for.
I have to say, still, that although you do not have to spend a fortune on learning about forex, you do need a balanced view.
There are many forum sites out there and they have huge expanses of trading info, but they can be a minefield.
Why? Because what works for one person will not always work for another.
I'll reiterate that point because it is vital. A wining strategy is not always a winning strategy. Obviously the markets change from day to day and what worked yesterday may not work today, but, aside from that, we all trade in different ways -- it's no good holding a winning hand of cards if you fold them too soon.
So what has that to do with Bird Watching in Lion Country?
What made that book good was that it taught a common sense practical approach to trading. Not so much a strategy as a style. And if you have a winning style you'll make money.
So I'd say yes, it is still the one to read, but do reinforce it with some more general knowledge and all of that is available free of charge from the web.
Pay two or three thousand for a course if you must, but don't expect it to make you a successful trader. Read the book and do some homework instead.

What to do When You are Losing

It's not always plain sailing.

Regardless of your skills, there will be times when whatever you do, you lose. I went through such a period. When I looked back at my trades, I could see no reason why I shouldn't have made those trades. And yet, if I'd made the exact opposite trades I would have been on a strong winning streak.
Making analysis discoveries like this can severely dent confidence. We like to think of ourselves as knowledgeable traders. We have a pretty good understanding of the market, and importantly, we know that we cannot be winners all the time. We know that with the wins there will be losses. But, that's OK, it is all part of the game, and if you can't take the losses, then don't play the game.

That is why, when we make the wrong calls consistently, it makes us think that our whole concept of trading is faulty. We thought we had knowledge, maybe it was luck after all. Maybe we don't know anything of value at all. Has this happened to you?
If it hasn't, I would guess that you've not been trading very long.

It certainly happened to me, and the consequences are dire.
Once the confidence goes, more bad trades follow, only adding to the misery. What do we do though?

If we truly believe that we do have a pretty good handle on the markets then we must accept that sometimes they move against us for reasons that we just don't understand.

Let's look at a simple analogy: the complete randomness of tossing a coin. We know that it is always a 50:50 game. We have absolute understanding that there is an equal chance of one side up or the other. So, if someone were to offer an ongoing bet even slightly in our favour, for instance 52:48 then we'd be mad not to take it. But, what happens when the coin toss goes against us for 6 times? What do we do on the 7th. Our decision can tell us a lot about our trading attitude.

Some people, would carry on regardless, and obviously get back on an even keel. Others might see this as an opportunity 'It can't possible go against us again' so they increase their bet, safe in the knowledge that they will win this time and recoup all their losses. Others may change their decision making process to support these results and change their bet accordingly. Then there will be those who just don't understand what is going on and take a little time out until things settle down.
It is quite easy to see looking at this coin toss example how foolish some of those decisions would be. Just because the coin has fallen the same side six doesn't increase the chance that it will change on the next toss; it is still 50:50 -- it could still catch you out.

So the best decision would seem to be carry on regardless.
Nevertheless, being on the receiving end of such inexplicable losses can play havoc with our state of mind and consequently our ability to make sound judgements. There is also, a very small chance -- just a small one -- that the person tossing the coin knows something we don't. Perhaps he's discovered a way to influence the results, perhaps he's learned a special way to flip it in his favour. Either one of these two reasons would suggest to us that it is prudent to stop playing for a while, so that -- at the very least -- we can re-enter the game when we've got a steady head on our shoulders.

So, when you find that whatever decisions you make are wrong, just take a step back. Perhaps paper trader for a while, but don't risk any more money until you feel confident again. There's no harm in that. It is a sign that you are in control and that you will not be adversely affected by whatever the market throws at you.

How Much Money Do You Need to Spend on Learning to Trade?

There is no doubt that trading currencies successfully is fantastically exciting and very lucrative.
But, contrary to what a lot of people proclaim (especially those selling to you), it isn't easy -- simple maybe, but not easy. It's very simple to trade currencies, either directly or using spread betting. It is also very easy to lose all your money.
A very high proportion of currency traders fail; less than 10% are successful. Nearly all of the successful traders started by losing a lot of money. Even when you think you've got it licked, the markets can turn against you and this is when they are that there most dangerous. A winning streak usually leads to complacency and a subsequent increase in stakes. Result? The loss is greater than the initial win.
There are those who argue that a painful lesson can be avoided by taking education. In recent years it has become so very easy to trade online. Consequently, there has been an explosion in the amount of education available to those who want to learn about the markets.

Personally, I have spent in excess of $4,000 on one course alone. Was it really necessary?
I have to admit, no. What I learned on that course was very well presented and explained. But what was on offer was basically one strategy that had worked very well -- historically. There was nothing wrong with the course, but it was built on a system that has become slightly outdated. The currency markets are very liquid, and I don't mean in the financial sense, but rather, that they are constantly evolving. The way the markets moved a year ago is not the same as the way they move today.
A lot of the courses available are good, don't get me wrong, but most are extremely overpriced.
The prices seem to be based on the rewards the seller thinks the buyer could enjoy. And that is very often they way they are sold. 'By this course and become a millionaire in 12 months'; if only it were that simple.
There are some hidden gems though. Publications that acknowledge that we live in the real world, and that teach the whole subject rather than a system or strategy -- you'll find a couple that offer real value for money in the link section here. Both teach a whole lot more than that $4000 course and can be bought for a very small fraction of that price.

The question given as the title of this article is, of course, impossible to answer universally. Some people (very, very few) will buy a cheap book in the bookshop and that will be enough to get them on the road to earning real money through currency trading. Others may well spend thousands on a course, then go on to lose even more when they start trading -- how much has their education cost them?
For most of us the answer lies somewhere in between; we could do with a helping hand in the form of books or manuals, but costing hundreds or thousands? I think it's not necessary.
We must always remember though that we never stop learning, and that the markets always have that nasty little lesson up their sleeve for when we forget.

One Very Valuable Trading Lesson

During the time that I have been forex trading -- with varying degrees of success -- one lesson that I have constantly been reminded of is the almost complete randomness of the markets in the short term.

What do I mean short term?
Well, I'm sure we all know this scenario: looking at a live chart, we see the price begins to move in one direction, and it keeps going. We are thinking, this is looking like a good move, I'll just take a few pips and I'll exit as soon as it turns against me.
We execute the trade and almost instantly the move reverses. Just a blip we think, and give it 10 pips to breathe. Fifteen pips down we exit only to see the original move rekindled and keep going.
Yet again, we made the right call, had the trade in the right direction -- and lost the money.
Why?
Because we've still not learned one of the most important lessons: short term -- and we are talking less than a couple of minutes -- the markets are random.
Such trades can be very dangerous because they encourage the "get even" tendency. So we go in again, just a few pips to win back, we'll soon be back level for the day. You know the rest, another 15 pips down the pan.

What should we do to avoid these costly trades?
Simply step back. Take a look at the bigger picture. Study the chart and look at the way it moves.
Ask a few questions. How often is a 10-pip move continued without a minor correction? How big are these corrections? Once we get an idea of the movements, we should get an idea of how much breathing space we need to give our trades.
Although it will take a while, this form of study will be very worthwhile. Do remember though: what you learn about the movements of one particular currency cross is not necessarily applicable to another.

Useful Currency Trading Tool

Here's a quick little post to give you a really useful currency trading resource.
You'll probably know that there are two kinds of currency traders: fundamentalists and technical analysts. Actually there’s a third type who is a mixture of the two (they are very often the most successful).
Anyway, the fundamentalist, who by the way is not the member of an extreme political or religious movement, uses economic and political data to form an opinion on what direction currency values will take. The Technical Analyst, sometimes called Chartist, looks at a graphical interpretation of past prices to form his (or her) opinion. This graphical interpretation is also knows as — you’ve guessed it — a chart.
Charts only show past prices. This is a very important point. They cannot tell you where a price is moving, even in the very short term. It is very tempting to assume that a price that has been heading down steadily for the past hour is going to continue in that direction; it is random. It’s like saying that if a roulette wheel has turned up red for 5 times then the next colour that little ball selects will be black; we’d all be millionaires by now, wouldn’t we?
Having said that, a chart can be a very useful tool in the right hands. Charts can show price movements over a very wide range in time periods: one-minute intervals, yearly intervals, or anything in between. A one-minute chart spans a very short period, whereas a yearly chart delves deeply into history.
New traders are often lured into the excitement of the one-minute chart or maybe even a tick chart than can hop about by the second. However, due to the short-term randomness of price movement, these very short-term charts are of limited use to the average trader.
So, where can we get these charts? It is very easy to find financial data providers who charge by subscription for their info. Fortunately, for us, one of the very best charting applications is completely free of charge and readily available. It is extremely easy to use, very adaptable and easy to customize. It will satisfy all your charting needs and more; it doesn’t unfortunately come with a crystal ball though. It’s called the Meta Trader Client Terminal. Sadly it won’t work on a Mac so you’ll have to do what I did and buy a cheap PC to run it on (PCs are quite useful sometimes).
Later we shall look at how to use Meta Trader as well as delve into the magical world of Technical Analysis.

Bird Watching in Lion Country

Here's something that could save you a small fortune.
It could also get you well on your way to trading in a profitable way.
The book, written by Dirk du Toit (a trader with many years experience), contains more information on currency trading than many courses costing thousands.
It gives a thorough background to the markets: how they work, why they work, why it is so easy to end up in financial ruin.
Contained within the book is fantastic advice on trading strategy and examples of how to play the markets for maximum gain and minimum loss.
Read more about Bird watching in Lion Country