Before you begin to Forex commodity trading, you need to learn the basics of money management first. One of the things you need to do is to decide how much money you can afford to lose on a single trade, but just as importantly, you need to have a system set up that you decide you're going to follow when you do your trades.

One of the biggest mistakes beginning traders make is that they decide they're going to try to gamble and try to win the jackpot, but that's not the way to make true money in Forex trading. Most important is that you make consistently profitable trades with an occasional loss.

It's true that some people do make money if they "gamble" in Forex trading, but most people don't. If you truly want to be a successful Forex trader with a consistent profit set up, you'll need to have a system in place that will make you consistent and regular profits, rather than exceptionally large ones on occasion. This way, you don't have to simply depend on luck; you can actually depend on your own experience and a set protocol to help ensure profitability.

Just as with anything else, it's easier to lose money with Forex trading than it is to make it. For example, you can certainly gamble 50% of what you have set aside on a single trade; it's also true that you can lose that money. What happens, then, if you lose the other 50% on a next trade? When you gamble, you might often talk about a "winning streak" or "losing streak," but you don't want this as a Forex trader. You want to have consistent wins you garner yourself through a system you've set up, along with an occasional loss.

So instead of thinking like a gambler, think like the casino owner. Make sure that you win more often than you lose. How can you do this?

Trade with just a small percentage of what you have set aside for Forex trading. Let's say that you have starting capital of $10,000. You are going to come out much further ahead over the long run if you only risk 5% of that capital on every trade instead of 10%. Therefore, go for the smaller percentage per trade and simply make more trades. This means that even if you only come out ahead on 70% of your Forex trades, you'll not only still make an overall profit, but your losses will be much more comfortable and will be much more readily absorbed. This also helps offset the fact that you may very well have 10 losing trades in a row before you have another winning one.

Take a look at the chart below to see how utilizing 5% of your bankroll instead of 10% of your bankroll per trade will affect you:

10 Percent of Bankroll:

Bank - Trade

$10,000 - $1,000

$9,000 - $900

$8,100 - $810

$7,290 - $729

$6,561 - $656

$5,905 - $591

$5,314 - $531

$4,783 - $478

$4,305 - $430

$3,874 - $387

5 Percent of Bankroll:

Bank - Trade

$10,000 - $500

$9,500 - $475

$9,025 - $451

$8,574 - $429

$8,145 - $407

$7,738 - $387

$7,351 - $368

$6,983 - $349

$6,634 - $332

$6,302 - $315

After 10 losing trades with 10% of your bankroll, you'll have $3487 left in your account. However, with 5% risked per trade, you'll have $5,987. This gives you a much greater cushion after each trade to bounce back. Assuming a 70% profitable trade versus 30% losing trade ratio, this means that you should expect to get 10 consecutive losing trades every 1024 trades.

If you risk no more than 5% of your bankroll at any one time, you should be able to ride out even significant losing streaks. In addition, if you choose, you can choose to trade with larger margins once your account amounts increase. This will help you post even greater profits (along with proportionately larger losses as well, of course, although overall your profits may significantly increase).

One note to make trades easier for you is that if 5% of your current bankroll happens to be an odd number, round down to the nearest convenient number, such as $600 instead of $613. This makes the math easier to keep track of.

Ian Armstrong is an avid Forex enthusiast.

He strongly recommends the free beginner's guide to forex trading, available directly from Forex Trading Systems

Article Source: http://EzineArticles.com/?expert=Ian_Armstrong

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It's a fact anyone can learn the skills needed to win at forex or other commodity trading - but they don't and the reason why is, they neglect the major factor they need to learn to achieve forex commodity success. Understand this factor and how important it is and you can win.

This is a simple equation for forex commodity market success:

Correct Knowledge = Understanding = Confidence = Discipline = Forex Success

What's obvious about the above?
That your forex trading system or the system you use is not important, providing it's logical and based on trading the odds - but your understanding, confidence and the way you apply it is. You can have a good forex trading strategy and fail here's why:

How do most forex traders learn to trade?

They day trade, or they trade mechanical systems sold by vendors, with simulated track records and we have two problems here that are the route cause of trader losses:

1. Day trading is not the correct knowledge to learn - it doesn't work!

It's based on ridiculous assumptions i.e. you can predict what millions of traders will do in a day!

2. If you use a mechanical system you cannot follow it unless you understand how and why it works (ok most the forex trading systems sold on the net are junk) but even if you do find a successful one, you still have to follow it with discipline through periods of losses. You won't follow it, if you don't understand it or have confidence in it!

Learning the correct forex knowledge and getting a robust forex strategy together is easy - the hard part is applying it. Understand this - success rests with you, not your broker, friends, vendors or anyone else - YOU.

Many forex traders hate taking responsibility and cry like babies when they lose, its everyone's fault but theirs - but it isn't.

If they lose it's their fault.

Successful forex trading involves you getting and applying the right knowledge and applying it is the hard part. All forex trading systems lose, for sometimes weeks on end (and that includes the best) so you have to accept responsibility and have the confidence and discipline to follow your plan.

Why Its Forex Trading is so Hard and The Rewards so High?

You are trading against the market and it is always right and only you can be wrong. Your success is down to your market timing and how accurate you're trading signals are and that's it. Sure, the market will prove you wrong and sure the market will make you look stupid - but that's trading.

So if you understand the above, then your forex education is all about:

Getting a logical method that puts the odds on your side, having confidence in it and trading it with discipline, through good times and bad times.

It's easy to learn currency trading - but it's harder to get discipline however, if you accept this and want success, forex trading can reward you with a fantastic and sometimes even life changing income. Currency trading success is in your hands - are you up for the challenge?

If the answer is yes - welcome to the exciting and lucrative world of global FX trading.

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If you want to make money forex commodity trading you don't need to constantly watch prices - this is a total myth. You really only need to look twice maybe three times a day at most and that's it. So what are the best times to trade?

The first point I want to make is you will hear a lot of rubbish written about the best times to trade.
Today there is a huge market in telling people they have to be in touch with price quotes all the time to make money - Nonsense!

This is normally put about by day traders (who all lose anyway as all short term movements are random) who think that it helps them. They also put about another myth - stop loss hunting by brokers! Forex brokers don't need to do this, because day traders have their stops within random volatility and will get stopped out anyway.

So What Is The Best Time To Trade?

If you are swing trading or trend following the best times to trade are:

After the close of the American Stock markets or the Start of the London Session.

When I started forex trading we didn't really have a retail forex market at all and everyone traded forex futures. We all tended to base our trading on the close of the US markets, it worked very well and I still use this time frame to this day.

Today, the London trading hours see most volume and the USA next.

The Asian market is not really significant in terms of trend direction you need to focus on the big two.

My trading is always done at the close of the US markets and I check London Open and that's it.

All the moves that you see intra day are random so don't watch them.

You hear of traders staring at quote screens and I always think why?

It won't help you make money, stresses you out, gets your emotions involved and it's boring!

So if you want to trade forex or other commodity and you want to get good times to initiate your trading signals, I would use the close of New York and if still not totally sure, wait for London and that's it.

Forex trading is all about making money and traders who think that watching quotes all day need to brush up on their forex education, as it won't help them win.

By: Monica Hendrix

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While technical analysis is critical to currency trading - especially for pinpointing entries and exits - it is insufficient on its own for creating a comprehensive trading game plan. Market sentiment in FX is driven primarily by the economic and geopolitical news of the day. The key players in the currency market - Fortune 500 multinationals, the world's central banks, multibillion-dollar hedge funds and the top tier investment banks that service them - do not care if there is a double top in the EUR/JPY on the hourly candles. Instead, they formulate their trades by analyzing the most recent economic news and geopolitical developments, as well as the latest pronouncements from G-7 monetary authorities. Therefore, the proper approach to FX trading can be summarized as follows: trigger fundamentally, enter and exit technically.

Popular wisdom in the market states that traders who want to trade fundamentally should choose a longer time frame involving daily, or even weekly, charts. Those traders who want to trade more short term (hourly charts, for example) should focus strictly on technical setups. As with so much conventional wisdom in FX, this bit of advice couldn't be more wrong. For the purposes of this article, we define scalping in FX as using short-term time frames (usually hourly charts or smaller) to make trades with targets and stops approximately 20-30 points in length. Not only is it possible to scalp FX fundamentally, but retail traders actually have a significant advantage over larger market players when it comes to executing their trades.

Macroeconomic News Moves the Market
One of the great aspects of the currency market is that it trades off macroeconomic news that is transparent, impossible to fabricate and readily available to all market participants at the same time. (To learn more, see Trading On News Releases.) The key news that drives the FX market is governmental economic data such as the latest employment statistics, GDP growth rates, trade balance reports, inflation readings and interest rate announcements. These reports are typically released every month and can been previewed on economic calendars such as the ones published on Daily FX and FXStreet.com.

Not only is the release of this data planned well in advance, but it is also reported instantaneously through a variety of news outlets including Bloomberg, Reuters, Dow Jones and CNBC, making it universally accessible. There's no need for traders to know about a secret contract that Intel may have negotiated, or the super-cool new product that a company like Apple just prototyped at its labs in Cupertino, California. In FX, headline economic data really does move markets, and currency traders can take advantage of that fact. More importantly, individual traders often have a decided advantage in reacting to the news faster than the larger corporate and hedge fund players.

Retail Traders Can React Quickly
As the most liquid financial market in the world, forex trades almost US$2 trillion each day in volume (in April 2004, the Bank for International Settlements (BIS) reported that the forex market traded US$1.9 trillion a day). Most retail brokers will provide liquidity up to $20 million, meaning that they will allow any trader to buy up to $20 million worth of a currency pair at the current ask or to sell the same amount at the present bid. This trade size can accommodate 99% of all retail orders, making it easy for traders to open a position quickly without affecting the market. However, larger players that are looking to place trades worth hundreds of millions or even billions of dollars at a time will move markets. Therefore, by reacting quickly, retail traders in FX have a chance to front-run the big players and benefit from any momentum generated by that order flow. Economic news, whether favorable or unfavorable, can take up to several hours to fully filter through the market as traders adjust to the new information. This type of time frame offers astute retail traders a great opportunity to take advantage of the situation and scalp short-term profits as the pressure from the big players moves prices in the direction of the news.

How the Best Fundamental Scalps Occur
If event-driven scalping were as easy as buying good news and selling bad news, every FX trader would be inordinately rich. Of course, success is not that simple. First and foremost, good or bad economic results in and of themselves are usually meaningless to the market. FX markets trade on expectations and perception. Therefore, relative comparisons matter much more than absolute ones. For example, suppose the United States reported quarterly GDP growth of 5%, while the eurozone reported GDP results of only 1.5%. At first glance, it would appear that EUR/USD should decline because the U.S. results clearly show superior growth. However, if the market expected 7% GDP numbers from the U.S. and only 0.5% readings from the eurozone, the exact opposite might occur because eurozone news would have exceeded expectations, while U.S. results would have come up short.

However, playing the expectations game alone is not enough to create profitable trades. This is where technicals become integral to a successful fundamental setup. The best, most profitable fundamental scalps occur under technically extreme conditions. These highest-probability setups are created when a favorable fundamental surprise takes place under technically oversold conditions and vice versa. At that moment, the currency can bounce like a rubber ball off pavement, as every market participant who is short scrambles to cover his or her position. The same dynamic occurs in reverse. If prices are extremely overbought and fundamental news shocks to the downside, most market players will rush for the exits, creating a stampede of sell orders that generates a strong momentum-driven move that can be profitably traded to the downside.

Figure 1

Examples
Figure 1 shows an example of an actual fundamental scalp that a trader could have traded in the EUR/USD. On April 6, 2006, the euro was rallying against the U.S. dollar ahead of the monthly meeting of the European Central Bank. Rumors were flying on FX dealing desks that the ECB would surprise the market by raising rates by 25 basis points to 2.75%. The pair had become technically overbought, trading to the upper Bollinger band on the hourly charts as traders positioned for the news. When the announcement came that rates would stay the same (at 2.5%), prices receded, forming a red candle on the hourly charts. At the close of that candle, a trader could have gone short at 1.2306 using the swing high of 1.2331 as his or her stop and targeting the lower Bollinger band value of 1.2250 as his or her profit. (To learn more, see The Basics Of Bollinger Bands and Using Bollinger Band "Bands" To Gauge Trends.)

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The Federal Open Market Committee (FOMC) decision on interest rates is one of the most powerful market movers in the forex market and when the markets move traders trading the news have the opportunity to make money.


The FOMC sets the discount rate or federal funds rate and because interest rates are set higher to induce foreign investment and therefore fight inflation during times of prosperity and lower to increase spending during recessions they are one of the main factors influencing the strength of the dollar.


Economic indicators play a huge role in the forex trading especially for traders who approach the market through fundamental analysis and trade the news. The Federal Open Market Committee (FOMC) interest rate decision is one of the most influential indicators for the US dollar and you can be sure after the news is released there is going to be volatility in the markets and volatility is what traders thrive on.

I have heard many 'traders' say never to trade the news and especially the FOMC. Although the FOMC interest decision is a news event and can fall under the category of through fundamental analysis I am a technician and I believe that charts always price everything in. However I guarantee the market does not know what exactly the Feds comments and decision will be, therefore it is not priced in yet and this will cause the markets to react when they do find out. This is confirmed by the change in price after the decision and the continuation in the days following.


I have been trading the Fed for eight years now and yes I have been burnt in the past and that is exactly how I have come to learn how to trade it properly. The most common pattern to trade the Fed is the whip-saw. But do not be fearful of it, embrace it. Here is how it happens, first there is a large spike one direction (traders come in and follow that direction)followed by a large spike in the opposite direction (those same traders now sell their first position at a loss and reverse their position - this is when I take a position in the direction of the original move)followed by an extended move back in the direction of the original spike (all the emotional trades are left sick to their stomachs) and I am left holding a very nice position setting myself up to capture a larger than average market move.


If this pattern does not play out exactly as outlined I stand on the sidelines and do not trade at all. Because the markets are moving fast in the period following the FOMC interest rate decision I am watching a very short time frame, mainly the one and five minute charts.

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