4 Easy Steps to Remove Emotions from Your Forex Trading

Emotions are the one of the greatest problems of the Forex traders. Almost every beginning trader, who starts with the demo account, experiences a great success in his trading, but fails to carry this success to the real money account. What’s the problem? Emotions! When we lose we feel frustration and sometimes even despair. Winning can cause us to lose control over our actions and turn our trading into a gambling or cause a serious overtrading. So here are the four easy steps to stop emotions from ruining your Forex trading:

1. Single loss is not your fault. It’s not even the market’s fault. And it’s not your system’s fault. It’s just a loss. No trader or system can guarantee 100% winning rate. So, losses should happen. If you lose then your system works. It may even lose again, but that won’t change the full picture. Trading doesn’t work with a single loss or win; it works with the loss rate and risk-to-reward ratios. So, next time you lose, remember that there is no one to blame, because there is no guilt in losing.
2. If the losses prevail over the winning positions then check your risk-to-reward ratio first. If each of your losses is less than a third of your single winning position then maybe your system is intended to work with 65% of your positions in the red zone? If your risk-to-reward ratio doesn’t compensate your poor loss-to-win ratio, you still don’t have to blame yourself, the market or your system. Probably, it’s just the wrong system for the market you are trading in. Time changes and the old systems stop working, while the new ones are created. Just switch to something else and continue your pursuit of success.
3. Single winning position is not an indicator of your success. The same as with the losses don’t treat a single win as your accomplishment. It’s just a part of the routine process of trading Forex.
4. If your winning rate is high during the long period of time and the risk-to-reward ratio is rather low then I can congratulate you with finding the right strategy that worked fine for the kind of market you were trading on during that period. That’s it! Stick with it until your winning rate declines below the satisfying level. Then look at the number 2.

Heiken Ashi Trading System

Heiken Ashi (or Heikin Ashi, Heikin-Ashi) is the method of representing the charts using the Japanese technique of the balanced bars. Compared to the traditional Japanese candlestick charts the Heiken Ashi charts are more easily read, provide clearer picture of the market and allow easy trend spotting. What is good about this method is that it’s included into the standard set of the MetaTrader 4 indicators. You can find it there under the Custom submenu. I won’t explain how to calculate those candlesticks here because MT4 does it all automatically for you and you don’t have to worry about how those candles are drawn. Here I will tell you how to use Heiken Ashi in trading the trends. You can see the example Heiken Ashi chart:



As you see, white bodies are the uptrend candles and the red bodies are the downtrend candles. The upper shadows are usually absent on the downtrends and the lower shadows are absent when the trend is going up. There are 5 Heiken Ashi scenarios for trends:

1. Trend is normal. Rising white bodies signal ascending trend and falling red bodies signal descending trend.
2. Trend is getting stronger. Rising longer white bodies with no lower shadows for ascending trend; falling longer red bodies with no upper shadows for descending trend.
3. Trend is getting weaker. Candle bodies become shorter and for ascending trends lower shadows occur, for descending trends — upper shadows.
4. Trend consolidation. Small candle bodies with both upper and lower shadows.
5. Trend is changing (not accurate signal). Very small candle body with long upper and lower shadows.

That’s all you have to know to trade on the trends successfully if you are using Heiken Ashi charting method. But I also recommend reading some other article on Heiken Ashi if you want to learn more about using it.

Introduction to MetaTrader 4

The MetaTrader 4 is possibly the most recognized and efficient home broker trading application nowadays on the market. It is free and available for download from the MetaQuotes Software Corporation website, the producer of MetaTrader 4. If your broker offers the possibility of having MT4 as your main trading platform, it will be likely to provide a download link directly when you sign up for your trading account. Even if many brokers have their own platforms, MT4 it is still a powerful and reliable tool for Forex, stock, and commodity traders. If your broker doesn’t support MT4, you can freely access real data from several servers on MT4, the currency pair rates differ a bit from MT4 servers and your broker, but it is not something that will significantly affect your trading performance.

Once you have successfully downloaded and installed the MT4 software, launch it. It may seem a bit complex for beginners, but all the information is very clear and divided by windows that allow you to control all your orders and a different number of pairs simultaneously. From the Market Watch feature, normally positioned on the top left size, under the menu bar, you have all the pairs available on the server, and with a click and drag mouse movement you can make that pair to appear in any of your chart windows, making it easier and faster to switch from one pair to another, and you, as trader, know how decisive can time be, when you have more than one order opened, mainly during news and market events.

One of the best features that MT4 offers is the option to create templates that fit better each and every trader needs. The profiles can have one or multiple charts. For example, 3 EUR/USD charts with different timeframes, or 3 different pair charts, in which you can totally customize them using the indicators of your choice. From colors to templates, the MetaTrader 4 offers the trader full interaction with his orders, which is often not possible in many broker platforms.

The main disadvantage that MT4 has against other web-based trading platforms is the fact that you have to download it. Many traders have to often check their orders from different places, such as: office or university. So if your broker only offers the MT4 or other downloadable software, it can be quite complicated for you to manage your orders, if you fall into this category. The optimal situation would be the possibility of using MT4 while you are on your computer, and at the same time, the option to open or close orders through your browser, in situations where aren’t using your computer.

Finally MetaTrader 4 is, doubtlessly, a tool that every Forex trader should at least download and be familiar with, in most of the cases, you will make it part of your trading experience, considering its features, for the moment, MT4 has a wide superiority against other trading software.

Forex Chart Patterns

Trading with the chart patterns can be easy if you know how to distinguish them and how to place the entry and exit orders correctly. There are many different chart patterns recognized by the expert financial traders. But in my opinion, in Forex trading there are five most important and rather frequently appearing patterns: ascending, descending and symmetrical triangles and rising and falling wedges. Here you will find the models of these patterns and their descriptions:

Ascending Triangle
Generally, it’s a bullish continuation pattern but the breakout in each direction is possible. If you like taking risk you can go long immediately after you spot this pattern. But if you want to be careful it’s recommended to wait until breakout appears in either side. The most important parts of the ascending triangle are the horizontal line and the upwardly sloping line. It’s also important for the price rate to touch each of those lines at least twice before breakout. This rule is vital for all of the 5 Forex chart patterns presented in this article. As you can see on the image, the price has touched the sloping line three times and the horizontal line two times and then broke out through the latter. Stop-lossshould be placed slightly below the horizontal line. As the moderate pull-back is possible, consider placing stop loss near 70% level on the way from the sloping line to the horizontal one in place of the breakout. Take-profit should be placed according to the auxiliary sloping line, which runs from triangle’s top-left angle parallel to the main sloping line. Consider placing your target at the auxiliary line’s level in place of the breakout.



Descending Triangle
Generally, it’s a bearish continuation pattern but the breakout in each direction is possible. As with the previous pattern you can go short immediately after you spot it. Wait for breakout in either side to enter a high-probability position. The most important parts of the descending triangle are the horizontal line and the downwardly sloping line. The price rate should touch each of those lines at least twice before breakout. As the image shows, the price has touched the sloping line three times and the horizontal line two times and then broke out down.Stop-loss and take-profit levels are placed using the same principles as with the ascending triangle.



Symmetrical Triangle
Generally, it’s a continuation pattern that breaks out in the direction of the previous trend, but in practice breakout in every direction is possible. As always, you may decide to open a position in the direction of the previous trend immediately as you spot this triangle. If you wait for breakout then you have better chances of success. The most important parts of the symmetrical triangle are the downwardly and upwardly sloping lines and the horizontal line that bisects the angle created by the first two lines. The last line should be really horizontal (several degrees of error are allowable) or otherwise it’s some kind of a wedge but not a symmetrical triangle. As always, the price should touch each of the main sloping lines at least twice before breakout. Symmetrical triangle, which is shown on the image, breaks out downwardly after touching the bottom line three times and the top line multiple times. Stop-loss should be placed near 70% level on the way from the opposite sloping line to the horizontal line in the basement of the triangle (not the breakout point like before). Take-profit can be set near the auxiliary horizontal line, which runs from the top or bottom base angle (depends on the breakout direction) of the triangle and is parallel to the main horizontal line.



Rising Wedge
Usually, this chart pattern signals a reversal from the previous trend, but both upward and downward breakouts are possible. You can enter a risky trade immediately when you see this pattern. Wait for a clear breakout to enter a more probable trade. The crucial parts of the rising wedge are the two upwardly sloped lines that form a wedge. The price should touch each of them at least twice before breakout. On the image below you can see that the price touched top line two times and the bottom line multiple times. The downward breakout is shown. Stop-loss can be set at the auxiliary line that bisects the angle of wedge; set it near the level of the auxiliary line at the breakout. Take-profit is set near the auxiliary line (not shown on the image) that runs from the top or bottom base angle (depending on the breakout direction) of the wedge and is parallel to the opposite sloping line. E.g. in the picture’s example wedge the line should start at the bottom angle of the wedge and be parallel to the top sloping line. Take-profit should be placed near the level of that auxiliary line at breakout.



Falling Wedge
As its rising cousin, this chart pattern often signals a reversal from the previous trend, but both upward and downward breakouts are still possible. To enter a risky trade, open it immediately as you see this chart pattern. Wait for a clear breakout to enter a more probable trade. The main parts of the falling wedge are two downwardly sloped lines that form a wedge. The price should touch each of them at least twice before breakout. On the image you can see that the price touched the bottom line two times and the top line multiple times. Upward breakout is shown. Stop-loss and take-profit levels are set using the same principles as with the rising wedge.



If you have your own opinion or questions about Forex chart patterns, feel free to leave it in a comment to this post.

Recommended Forex Brokers

Here is the list of the Forex trading brokers with the favorable trading conditions and a decent reputation among the currency market participants. If you prefer flexible Forex trading conditions with little bureaucratic procedures, then these brokers are recommended for you:


FXOpen — one of the most popular MetaTrader Forex brokers with an easy entry limit and a really fast execution (they constantly invest into new trading servers):

• Welcome bonus system
• $1 to start trading
• WebMoney, LibertyReserve, CashU, E-Bullion and other payment options
• Traders’ contests with real bonuses
• 1-2 pips spreads on majors

InstaForex — known for their aggressive bonus and competition promotions, this broker offers extremely flexible leverage and has a very dedicated support:

• MetaTrader trading platform
• Flexible leverage — from 1:1 to 1:1000
• WebMoney, Moneybookers, e-Bullion and other payment methods
• Starter’s bonus — from $30
• Open account with only $1

AvaFX — original Forex broker with almost 4-year history of satisfied customers. Except traditional Forex trading provides also CFD, gold and oil trading:

• 1:200 leverage
• Custom trading platform
• Trade oil, gold and other commodities
• WebMoney, PayPal and many other ways to fund your account
• MetaTrader platform for Forex and commodities trading

Forex4you — ultimate decision for small-scale traders. With Forex4you you can trade even with cents:

• Deposit with WebMoney, LibertyReserve and other ways
• Ultra-micro lots — 0.0001 of a standard lot
• MetaTrader platform for trading
• Get paid an interest on your account balance

Point-and-Figure Charting Explained

Point-and-figure charts (P&F) is another way to represent the price charts that can be used in Forex trading. Conventional charts display the price as the linear function of time, which results in a demonstrative picture of how the market behaved during certain periods of time. But the problem is that the trader often doesn’t need to know how price depended on time, all he needs is to know what the prevailing force on the market is at the moment — bulls or bears, demand or supply. That’s where P&F charts come handy. They show the price changes graphically, independently on the time during which the changes have occurred.

For example, the simple point-and-figure chart could look like this:



The green X’s are the price increases (by some certain value) and the red O’s are the price decreases. A column of X’s represent an uptrend, while the column of O’s represents a downtrend. In each given column there can be only X’s or O’s. When one trend ends a new column starts. As you see, there is no time scale in this chart. Each column can last an indefinite period of time.

So, how are these point-and-figure charts drawn? To start drawing a point-and-figure chart you should first set two important parameter values of the chart — the box size and the reversal distance.

The box size is the height of each of the O’s and X’s in pips. For example, if you set a box size to 10 pips, each X will mean an upward movement by 10 pips, so a column of 6 X’s is an upward movement by 60 pips. The same would be correct for the O’s.

The reversal distance is the amount of boxes that should be passed by a price in a reverse direction for a trend to reverse (to start a new column). The most common reversal distance is 3. That means that on a rising trend (a column of X’s) a price has to go down by the amount of pips in three boxes for a new column (this time — of O’s) to start. For example, if you use a box size of 10 and a reversal distance of 3: the price goes up by 60 pips, you draw 6 X’s, then the prices goes down by 30 pips (that’s more than 3 × 10), you draw 3 O’s down starting a new column from the level below the last X. If the price would go down by less than 30 pips you wouldn’t have to draw anything new. Basically, after drawing an X or O you just wait for the price to continue going in the direction for a box size of pips or in a reverse direction for a reversal distance * box size of pips.

If we consider 10 pips box size and reversal distance of 3 for the image above then we can say that first the price goes up by 50 pips during the first uptrend, then it goes down by about 50 pips, then goes an uptrend for 70 pips, then go two equal bearish and bullish trends for 30 pips (exactly the reversal distance). Then a price declines by 50 pips, then goes up by 30 pips and finally falls by 40 pips. It ends at +10 pips (if you sum up all the values) and, as you see on the picture, the ceiling of the final O is 10 pips above the bottom of the first X. That’s exactly +10 pips. The «effective price» is located at the bottoms of the X’s and at the tops of the O’s.

Using the point-and-figure charts is simple. Almost all chart patterns and analysis techniques that work with the classic time-based charts work with the point-and-figure charts too. The trends are very easy to visualize in the P&F charts because the square dimensions of the boxes (X’s and O’s) form nice 45-degree angle trendlines. Look at the example:



Apart from the chart pattern analysis, P&F charts offer a sort of trading signals. When the trend direction changes, a new position can be opened in this new direction with a stop-loss equal to the reversal distance. But such trading technique requires some thorough optimization of the box size and the reversal distance for the given currency pair and the market conditions.

If you have any questions or comments regarding point-and-figure charting, feel free to reply in the commentaries to this post.

Price Action Forex Trading

Price action is a type of technical Forex trading that is based on the bare prices and charts instead of the usual indicators. Traders that employ various price action trading techniques believe that bare prices and charts can tell us everything we need and that indicators, while being helpful for calculating some statistical dependencies, create a time lag that can be critical in Forex. In fact, all indicators and any other methods are based on the data that is a part of a price action. So, price action is just a broad definition for the rather raw technical market data. The four techniques that are presented here aren’t the full set of price action trading instruments; they are just the most popular and interesting ones.

Tape Reading. The term refers to the times when the stock quotes came to the trading houses (more like the modern betting firms) in a form of a tape telegram. Traders analyzed the changes in the quotes, their speed and volume and, basing on this analysis, issued their trade orders. Modern tape reading in Forex is somewhat different — you just analyze the quote as it’s displayed in your broker’s terminal and then trade using your analysis of the data. It’s the most basic way of trading and some new traders start from it without knowing how is it called. Tape reading is mostly suitable for scalping and can’t be used for the long-term entries.

Japanese Candlestick Patterns. Many different patterns, formed by theJapanese candles, are recognized by the Forex traders. Such patterns are usually quite small (they consist of 1 to 4 candles) and can be spotted on all timeframes. Japanese candlestick patterns aren’t too reliable but the abundance of symbols compensates the low winning rate. This type of trading is a part of price action but it requires some basic chart analysis.

Chart Patterns. Patterns formed by the price fluctuations of the chart are numerous — triangles, wedges, double-tops, double-bottoms, head-and-shoulders and many others are all part of this trading technique. Opposite to the Japanese candlestick patterns these patterns are usually formed by many chart bars and often serve only for the long-term market evaluation. Chart patterns sometimes have a strong fundamental basement and are thus valued by the professional traders and the Forex market tends to «follow» them simply due to their popularity.

Point-and-Figure Charts. This type is a bit more difficult than everything else in the price action domain. It’s also arguable that point-and-figure can be considered a price action technique at all. P&F charts are built based on the price changes, independently on time. The columns of X’s are formed when the price is rising, while the columns of O’s are formed during falling trends. The columns of X’s and O’s follow each after another. A price should pass a certain amount to form an O or X or reverse in an opposite direction for a significantly higher amount to start forming a new column. Trends can be easily read in such charts and many Forex traders use the strategy to buy and sell exactly at the new column’s start to catch the new trend.

Not all traders can use price action techniques successfully, the same as not everyone can trade with the indicators profitably. Price action can be used alone but it also can be interesting for other methods’ confirmation. With price action techniques you can always scale in and out and flexibly change your strategies as well.

3 Most Important Forex Fundamental Indicators

There are many fundamental indicators available to the Forex traders today. If you count all of them only for the major currency pairs you’ll get more than a hundred distinct indicators — macroeconomic, monetary, economical, financial, weather-based, etc. For many traders it’s difficult to follow all of them, as it requires time and efforts in addition to the necessity to learn about the effect of all these fundamental indicators on various currency pairs. This article lists 3 most important (in my humble opinion) fundamental indicators that have the highest impact on the currency rates and are quite easy to follow as they are reported not so often.

• GDP or Gross Domestic Product is the main indicator of the macroeconomic strength of the country. The growth of GDP signals a stronger economy and a more competitive currency because the global investors will have to buy this currency in order to invest in this country, and they will want to invest in it because its economy is growing. GDP reports are usually published quarterly but they have three states of revision (advance, preliminary and final) published with the monthly intervals. GDP strongly affects currency pairs both in short-term and long-term. You’ll have a trading opportunity during the time of the release, as the volatility spikes up, and you’ll be able to adapt your long-term positions to the new data after the release.
• Interest Rates are set by the world’s central banks and are the main tools of the monetary regulation. Higher interest rates provide more value to the affected currency, while the lower interest rates decrease the value of the currency. Interest rates are usually revised every month or two during the special monetary policy meetings of the central banks. Interest rate decisions greatly depend on the growth of GDP and other macroeconomic indicators. Currency pairs react with the high volatility to the unexpected interest rate changes. It’s important to monitor the trends in the interest rates to forecast the long-term trends of the traded currencies.
• Unemployment Rates are influential indicators both for currency traders and for the monetary authorities when they set the interest rates. Non-farm payrolls are considered to be the most important of the unemployment indicators in USA and they are released monthly. Major currencies usually react with the short-term tendencies to such releases. Weekly reports on jobless claims can also be considered but they aren’t as influential.

In many cases it’s enough to be up to date with these fundamental indicators to understand the possible market trends in Forex. But, of course, if you wish to get a more detailed picture you shouldn’t limit yourself only with these indicators, especially if you pose yourself as a pure fundamental currency trader.

5 Reasons to Use Forex VPS

Installing your trading system on a dedicated server with a full-time connection to the trading server and no need to reboot, restart or be turned off is a great advantage that can seriously enhance your profit results. If you trade withMetaTrader expert advisors there is a great selection of VPS services available for you — starting from as little as $9/month they can guarantee you a 99.9% uptime of your trading robot. This is a list of 5 main reasons to use Forex VPS:

1. Uninterrupted 24/7 run-time of your expert advisor ensures that it uses all the trading signals. You won’t miss any opportunities. Your EA will be also able to close other positions on time and won’t need to store its internal variables in a file to load them after restart — there’s simply no need for it to restart during trading sessions.
2. No need to run the expert advisor from your home or office PC. Now that your expert advisor is trading on a real account from a VPS, you can stop running your MetaTrader platform all the time. You can also safely reboot your PC and turn it off when you don’t use it. And there is no more stress when suddenly you get some critical software error.
3. Because VPS is a dedicated server that runs only your trading platform and EA, it can have a much better performance, processing the incoming data and sending orders much faster than your own PC could do. That can really help to get better quotes, deal with the requotes and use scalping systems.
4. You can choose a VPS, which is located physically close to your Forex broker’s trading server, ensuring even faster connection and order execution. For example, if you trade from New Zealand and your broker is located in United States you’ll always have some network latency due to the distance. But installing your EA on a VPS, which is hosted in U.S., will remove this latency.
5. Usually, VPS can be accessed anywhere from any computer. So, if you travel a lot you won’t need to move your expert advisor from your PC to your notebook or some mobile device. Your EA will always remain on VPS and you will be able to control and monitor it by logging into your VPS control panel from any place with a connection to internet.

Of course, your EA should be a profitable one and your monthly profit should be high enough to cover the cost of the VPS or otherwise there is no point in using it. You can also use VPS hosting for demo testing your EAs but that’s quite an expensive endeavor. If you have any questions or opinions please, use the commentary form below.

Good Forex Trades Need Great Context

On your path to becoming a profitable trader, you will test many different methods for entering and exiting trades. At some point you may find a method which works pretty well for you and which you feel comfortable using. You may take a lot of great trades using this method, only to find that one day your method just stops working. What happened? Did your system break? Will you have to start all over? 

Sometimes the answer to questions like this is simpler than you might expect. A lot of traders pay attention to entry triggers like moving average crossovers,price action patterns, and other indicators lining up on their charts, but don’t pay as much attention to what the market is doing on a given day. The market does slowly transform, and like any other living system it will evolve with time. Some things about Forex will never likely change, but others are sure to do so. The “mood” of the market can change considerably as the years go by, and a system which worked great in one context may fail in another—or simply need an adjustment to keep working.

If you are in a situation like this and your system has abruptly “failed,” you may want to ask yourself if this is what has happened to you. Has the economic climate changed substantially since you were last profitable? If so, then perhaps the context around your trades has stopped being quite as optimal as it once was. You may have been placing trades in an excellent context before without even knowing it or attempting it by complete coincidence. And now that the context isn’t as great, your trades aren’t working out.

Here are some questions to consider. Ask yourself, “Am I trading against the trend?” This can often work against you. “Am I trading in a choppy market?”Choppiness kills a lot of traders. If there are a lot of fake outs, sometimes you need to take a break and wait for the market to even out a bit before you come back in. “But I’ll have to wait forever,” you might say. If this is the case, then look at more currency pairs. If you only trade a couple of pairs, and great setups are coming half as often in the current market climate, then think about looking at twice as many pairs each day. This phase of the market, like all others, will pass. It doesn’t mean your system is broken, it just means that right now it’s a little harder to make it work than usual. All traders face this sometimes. Once in a while you may indeed find you need to go back to the drawing board, but more often than not it’s a waste of time to start all over. If what you have makes sense and it works often enough, than you probably should just adapt to the market conditions and stick with what you’ve got. 

Develop a technique to find the best setups in the best locations. Great Forex traders point out that finding excellent setups is like using a rifle, not a shotgun.They’re right—good trades don’t take good setups, they take great setups.

Trading in Real Life: Why You Need to Demo Test

Have you backtested a fantastic system over hundreds or even thousands of trades, and achieved a high win percentage and otherwise excellent statistics?If so, you may be tempted to go live. Some traders struggle to bring themselves to actually take their Forex systems live, but for others it is impatience and not trepidation which is the enemy. If you are thinking of taking this great system which you’ve backtested live without demo testing, think again. Backtesting and trading in real life are completely different, and you may have quite a bit of work ahead of you to achieve the same kind of results in real time as you did backtesting.

The first thing a lot of us discover while demo testing is that we completely forgot that in real life we do stuff like work, eat, and sleep. Something which worked fine in backtesting may be impossible to fit into our real life schedules, or take some very serious workarounds. You may need to learn to trade using a cell phone if you are at work during trading hours for example. Or what if your Forex trades tend to fall in the dead of night? You’ll need to trade in your sleep, and that means setting a lot of price alerts. Those alerts will have to wake you up at useful times though, and even figuring that out can be like designing an entirely new system. The wrong system of alerts can cause you to lose the same trades you’d have won while demo testing!

Another difference you’ll discover quickly is the role which time plays in your trading psychology. When you move the Forex charts forward a candle at a time and make trading decisions in a few seconds or minutes while backtesting, you don’t have a lot of time to second guess yourself. The same trades though, spread out over a time period of hours, days, or even weeks, can cause a lot of traders to experience a wide range of conflicting emotions. Many times we ask ourselves “What decision would I have made backtesting?” only to discover that we don’t know anymore! It takes a lot of practice to find out how timing is impacting your trading. You may find you need to trade on a different timeframe, or just get a grip on your emotions.

While all this may again sound simple in theory, most traders discover Forex demo testing presents a lot of unexpected situations which need resolution before they can go live. We highly recommend that you demo test until you are profitable for at least 2-4 consecutive months before you go live with your system. There is no reason for you to lose a dime in this business unnecessarily since you can demo test for as long as it takes for you to master your trading, completely free! Your drawdown live should reflect your backtesting figures, but it won’t unless you invest some time and effort demo testing and finding out how to integrate trading into your real life first.

Tips for Trading Forex at Night

For a lot of us (especially in the US), the best times to trade Forex fall at the worst times of day—either during work hours or while we’re asleep at night. Fortunately for those who trade the dailies in the US, the start of the new candle tends to happen in the afternoon, but that often means that trades will span overnight on this and other timeframes. What do you do if your trading schedule is this inconvenient? Suggestions online usually range from “quit your job” to “move to Europe.” This is hardly feasible for most of us. Most of us are going to be faced with examining an option which is more viable but still challenging: trading Forex at night.

For many people, trading overnight is just a given since position traders who trade longer term charts like weeklies are going to be in trades for many days on end. These timeframes move slowly though and are easier to keep an eye on during the daytime than other trades on faster timeframes. What if you trade the dailies or hourly charts? You could be stuck making critical trading decisions in the dead of night. 

Unfortunately many FX traders arrive at the solution, “I’ll just not sleep.” This is the road to disaster though. You cannot function without sleep. You need sleep to be healthy and also to keep your mind sharp and fresh. Trading on a sleep deficit is like trading inebriated. It’s just a really bad idea; it’ll destroy your health and your finances. So you have to sleep. How do you balance sleep with currency trading at night?

The trick is to set up alerts in such a manner that you can maximize your rest, minimize the complexity of your decision-making process, and maximize your returns. You want to only have your alerts wake you up at critical junctures, and you want those junctures to be clear cut. Making difficult, complex decisions in the dead of night will rob you of sleep and also harm your judgment, resulting in losses. The alerts should wake you up in order to make simple, straightforward decisions. 

One technique you can use to trade during the night is to set alerts at pivot zones. Different techniques will be appropriate for different Forex systems, but if for example you exit trades partially based on support and resistance, then you will want to identify important pivot areas and set alerts in those areas. Choose a sound to signal when a trade is moving toward profit and another sound to signal when it is moving away. That way if you hear the “good” sound in your sleep you can roll over and go back to sleep (or get up and trail your stop). If you hear the “bad” sound you can get up and choose whether to exit. By letting the sound itself give you information, you can optimize your sleep. Also make sure to have the alert beep at you more than once so you don’t miss it in your sleep the first time.

Trading the foreign exchange market at night is one of the most challenging real life integrations you can do, but with some tweaking you should be able to make it work for you. You don’t have to move to another country or quit your job to trade during the day if you can learn how to trade at night and get adequate sleep!

What to Include in a Forex Backtest Spreadsheet

One critical step on your Forex journey is going to be backtesting. Once you find a system or method which you like, you are going to need to run throughhistorical data and see how your method would have performed on real trades over the past few weeks, months or years (depending on the timeframe you’re planning to trade). It is recommended you do at least a couple hundred of backtest trades for any given system to establish a really good idea of how theForex system will perform in those market conditions. Market conditions do change, so a backtest still doesn’t give you all the information you need, but it can sure give you a good lead in to your demo testing. If you record a lot of important information you can also learn specific things that work and don’t work and how you can refine your system to statistically improve your profits.

On a Forex backtest spreadsheet you will want about six columns. The first will state whether each trade was a buy or a sell. The second column should list the date, and the third column the reason for the trade. The fourth and fifth columns should be the entry and exit prices respectively. The last column will be the sum of pips you gained or lost from each trade. The column where you list the reason you entered the trade can be a good place to take specific notes along with the triggers which caused you to enter. Those notes will come in handy later, so be detailed, especially on trades you lose. Later you can look back and find patterns which will help you to refine and eliminate losses.

Write your Forex trading rules at the top of your spreadsheet. They will help you focus and also remind you of what your rules were on this backtest when you look back on it later. If you make changes as you go to your system, note those changes and the historical dates on which you implemented them.

Some statistics to calculate from your data, which will be useful to you, include net pips from your entire Forex backtest, along with the values of your average win and average loss. You’ll want to tally how many wins and losses you have, and what your win percentage and win to loss ratio is. Remember that the spread will cost you some profit on every trade, and breakeven trades are technically at a very small loss as a result. You can calculate an adjusted net which takes these losses into account. Take note of your biggest losing streak, and how many losses in a row you endured. Also find out your average net winning trades per month, week, day, or whatever is an appropriate unit of time for you to overview your trading. Another good quotient to add up is your net profit divided by your maximum loss. This will tell you how many of your largest losses you could endure before blowing all your profits. 

Forex backtesting can be pretty overwhelming at first, but eventually you’ll get used to it and get into a rhythm. And it can be incredibly rewarding—it can make the difference between whether you blow your account in real life or become a profitable trader.

Avoiding Slippage in Forex

My Forex broker cheated me. I put in an order at one price and it got filled at another, and now I’m in a losing trade. That’s why I’m losing.»

How often have you heard that story, or been tempted to tell it yourself? One of the many risks of trading Forex is something called slippage. No, it’s not your broker cheating you (well, that’s up for debate, but seriously, don’t make excuses for your lost trades). It’s something you need to be aware of and compensate for during your trades.

What is slippage in Forex? Slippage is when you place an order at a quoted price, and your order gets filled at a different (worse) price than the one you were quoted. Slippage can be minor enough not to impact your trade outcome at all, or it can be major enough to stop you out the moment you’ve entered the trade! You can lose a lot of money through slippage, so it’s something to be wary of and to avoid if at all possible.

Why is there slippage in Forex? Slippage tends to result during times of great volatility, and also in response to fundamental events like reports being filed, etc. Slippage almost always happens when the market opens each weekend on Sunday nights! If you stay in a trade over a weekend, be very wary. Sunday nights are unpredictable—in general this is not a good day to trade. 

If you do place a Forex trade which you’re going to hold over the weekend, or set up for a trade on the weekend which might get triggered when the market opens again, compensate for that potential slippage. Place entries a little farther out than you usually would (testing will help you choose a good amount of buffer to leave). You may also want to move your stops out a little farther than usual too if you are already in a trade.

Do some Forex brokers deliberately make money through slippage? Probably, but slippage is a fact of life, even with good Forex brokers. It’s best to learn to deal with it than to complain and blame someone else for your failure. There are bad brokers out there though, so if you’re concerned you might have one, look up their ratings and find out about other traders’ experiences.

On a related note, you can set up most broker platforms to show you the spread. This should help you to understand spread and slippage better and thus make better trading decisions. Spread widens and shrinks in different market conditions—during volatile ones it tends to widen (which is how slippage usually occurs). By setting your charts to show this spread, you’ll be able to visually see the days of the week and the times at which the spreads widen the most. Then you can compensate in the future by following the previous suggestions to avoid slippage in Forex outright or work around it.