In this article you will find more great information and advice on trading. This article helps a lot when dealing with success and failure in markets that are challenging. Trading is planning in advance how things can be if you plan and how things can be if you do not plan. Trading is not a race it should be a well thought out money making activity.

What to do in Times Like These: A Financial World in Panic

The GotForex Weekly Newsletter

by Rob Booker

The financial world is panicking again.

Today I scrapped this week’s idea for a newsletter when I woke up and saw that just since midnight, the GBP/JPY had fallen 1,400 pips. The Dow Jones Industrial Average futures contract fell overnight by 550 points, until further selling was frozen by the exchange because the maximum allowable drop had occurred.

There are some of you who, in times like these, panic along with everyone else and now you’re holding onto some really bad trades. Perhaps you’re getting close to a margin call. Perhaps you’re wondering if it is even safe to trade at all.

Here are some thoughts about what is happening, and what to do, to do in times like these. 1. The world financial indexes are dropping precipitously. The US dollar has, so far, been the major beneficiary. Money is flowing out of emerging market economies which attracted huge amounts of investment during the past 8+ years. Money is still flying out of real estate, technology stocks, and financial stocks, and just about anything else you can invest in. The US report on Treasury International Capital Flows has shown the following over the past 5 months:

Source: U.S. Department of Treasury Historical information is not indicative of future results.

The US dollar is gaining on all of this as investors are pouring money into US treasurys. The data above shows that purchases of perceived "safe" investments like T-Bonds and Notes have been strong, but money has been flying out of US equities.

It might seem paradoxical, but so far, the US currency has been the major beneficiary of what started as a US financial crisis. The cold economic front has now moved off the east coast of the United States and is spreading to Europe and beyond, and as that happens, money has been going into what investors believe to be the safest investments possible: bonds backed by the US government.

None of this means that the pattern we’re seeing above will last forever. The US dollar could reverse course if the market becomes more calm over the course of the next few weeks and months. The greenback could lose ground if the world begins to perceive that the US government has taken on too much toxic debt and now looks like an irresponsible financial corporation. Or if the US job market implodes (see newsletter from a few weeks ago). There are plenty of scenarios I can imagine where the US dollar turns the other way again. None of those scenarios are playing out right now.

2. With the financial markets still in turmoil despite the efforts of global financial leaders, investors across the planet are panicking. This generally means that traders are making decisions based on their emotions — sudden decisions without a lot of planning or thought. It also means that they are holding onto bad trades and then praying at night that the trades correct themselves. Rational thinking can be clouded by overpowering fear. Fear does not produce good trading results.

3. Are you taking enough time to be patient? In times like this, are you taking a bit of extra time before you trade, to think about how your decision could play out both positively and negatively? Before you enter an order, consider what the worst case scenario is. What is the worst that can go wrong? What do you stand to lose if your stop loss is hit? What percentage of your account will you lose if that happens? Is that an acceptable amount? It can happen, no matter how "safely" we believe that we put our stop loss. Realizing that it can happen is a big part of realizing that maybe you should just walk away from some trades.

4. What will you do if your trade goes right? What’s your game plan for a trade that does move in your favor? What is your plan for managing the trade, for taking profit, for moving the stop along the way? What is the basis of your decision to do that? These are the types of questions you want to answer (and not quickly) before you enter the trade. Once the trade is on, our emotions can start to cloud our judgment.

5. Never trade alone. Do you have someone else you can trust with whom you can talk about your trading? This doesn’t mean you’re weak, or that someone else is going to make your decisions for you. It means that you have someone to talk with if things go really wrong. Someone that will listen to your ideas about how to get out of a trade (good or bad) and who will help you stay on track with that plan. Perhaps many of you need no such person, and you are independently able to stay on track, avoid bad decisions, and see the world objectively on a regular basis, even in the face of massive financial loss.

The most important thing in times like this is to realize that there are times when not trading is just as smart as trading. That the market is so volatile and unpredictable that it makes more sense to back away from the currencies, the stocks, the everything — and just watch.

At the same time, these could be — but we don’t know for sure, of course — a time of great opportunity, where currencies or other investments represent a bargain.

Only you can know for yourself how should best approach trading in a time like this. What’s right for you may not be right for others. What matters is that you have an understanding of risk, of how to manage a bad situation, a plan to deal with a trade that goes right or wrong, and a person in whom you can confide about your trading.

Let me know how you’re doing in times like these. I’d love to hear from you.

Happy trading!

Rob

Enjoy the post!

They are as follows:

1. We accumulate information – buying books, going to seminars and researching.
2. We begin to trade with our ‘new’ knowledge.
3. We consistently ‘donate’ and then realize we may need more knowledge or information.
4. We accumulate more information.
5. We switch the commodities we are currently following.
6. We go back into the market and trade with our ‘updated’ knowledge.
7. We get ‘beat up’ again and begin to lose some of our confidence. Fear starts setting in.
8. We start to listen to ‘outside news’ and to other traders.
9. We go back into the market and continue to ‘donate’.
10. We switch commodities again.
11. We search for more information.
12. We go back into the market and start to see a little progress.
13. We get ‘over-confident’ and the market humbles us.
14. We start to understand that trading successfully is going to take more time and more knowledge than we anticipated.

MOST PEOPLE WILL GIVE UP AT THIS POINT, AS THEY REALISE WORK IS INVOLVED.

15. We get serious and start concentrating on learning a ‘real’ methodology.
16. We trade our methodology with some success, but realize that something is missing.
17. We begin to understand the need for having rules to apply our methodology.
18. We take a sabbatical from trading to develop and research our trading rules.
19. We start trading again, this time with rules and find some success, but over all we still hesitate when we execute.
20. We add, subtract and modify rules as we see a need to be more proficient with our rules.
21. We feel we are very close to crossing that threshold of successful trading.
22. We start to take responsibility for our trading results as we understand that our success is in us, not the methodology.
23. We continue to trade and become more proficient with our methodology and our rules.
24. As we trade we still have a tendency to violate our rules and our results are still erratic.
25. We know we are close.
26. We go back and research our rules.
27. We build the confidence in our rules and go back into the market and trade.
28. Our trading results are getting better, but we are still hesitating in executing our rules.
29. We now see the importance of following our rules as we see the results of our trades when we don’t follow the rules.
30. We begin to see that our lack of success is within us (a lack of discipline in following the rules because of some kind of fear) and we begin to work on knowing ourselves better.
31. We continue to trade and the market teaches us more and more about ourselves.
32. We master our methodology and our trading rules.
33. We begin to consistently make money.
34. We get a little over-confident and the market humbles us.
35. We continue to learn our lessons.
36. We stop thinking and allow our rules to trade for us (trading becomes boring, but successful) and our trading account
continues to grow as we increase our contract size.
37. We are making more money than we ever dreamed possible.
38. We go on with our lives and accomplish many of the goals we had always dreamed of.

Most traders will identify with this list and should be able to place themselves within these steps. Keep in mind that very few people progress through these steps in an orderly fashion. Developing your trading skills is an iterative process. For example, you may reach Step 13., find that although you were making money, your basic premise for trading was flawed (you might have been benefiting from the bull market, rather than your own trading prowess and then have been rudely awakened when the market entered a bear phase) and you may drop back to Step 4. and start ‘climbing’ the steps again. Having the proper mindset, attitude and psychological makeup becomes increasingly important as you progress through the steps. The focus
of the earlier steps is on external issues, i.e. developing proficiency in the mechanics of trading while the focus of the latter steps (particularly from Step 30, on) is on internal issues, i.e. improving ourselves mentally and psychologically, maturing as
traders.

Which of the 38 steps are you on? Are you stuck or feeling frustrated on any particular phase? Let us know in a comment below and we’ll see if we can help give you some new ideas to try.

Jed,

Yes, I have sustained losses on this particular demo account, and in many other accounts as well.  Not sure what you meant by the question.  The losses are few, but they still come.  As I briefly look over this demo, I am seeing roughly 15 wins for every 18 to 19 trades.  So, about 75%, which could be better, but we’ll work on that.

I have played with several demo accounts, and one live account.  Currently, my live account is now a 1:100 leveraged account while my demos are 1:100, 1:200, and 1:400.  My numbers are fairly consistent on all accounts, and I am following the rules of the technique.

(My Advice)

Dear Trader

Good, I just want to make sure that you are having a real experience.  This just helps to solidify the fact that this is a realistic strategy and not pie in the sky.

To further add to your question about the natural laws of economics.  I have found an example from nature that I think will shed some light on my philosophy about investing and returns on said investments.

I would say that when the natural laws of economics are adhered to (which I believe that today’s big business and financial institutions are not following like they should) then there is such thing as ten folding, and even hundred folding.  Let me demonstrate this with how Mother Nature does this consistently.  I will use wheat as an example but there are many other examples found in nature that prove my point.  Of which I put more trust in than the scruples of the financial institutions and their crones.

A single wheat kernel on average is able to produce on one stem between 30 to 35 grains with an average of 5 stems per plant.  This is a 175 percent return.  If you take the kernels from this single plant and next year plant them you would get a total of 30,625 increase.  This is naturally found in Mother Nature.  I believe that if true principles are exercised in economics that one could see these types of results in there trading.  But again capital has a set of rules that are not always followed by her audience.

A wise teacher once shared this parable with his followers.  “A farmer went into his field to plant his crop.  As he sowed the seeds some fell by the path and birds came and devoured them.  Some of the seeds fell upon rocky ground; and sprouted and withered away because it lacked moisture.  Some fell among thorns; and the thorns grow and choked the tender shoots.  And other seeds fell upon good ground sprang up and did yield an increase some thirty, sixty and even hundred fold.

This parable applies to us as traders.  Here is my interpretation in this context.  The seed that fell by the path and were devoured by birds were traders who never quite grasp on to any one concept and are coaxed away by misleading, discouraging and false statements of others.  Because they do not apply proper learning, practice and patience.  The seeds choked out by the thorns represent those that allow discouragement and or greed to overcome them and blind them from proper methods.  Those that find good soil grow because they have applied themselves, though constant study, practice, sticking to a system, following a plan and trading by the rules in the plan.

-Jed

1.    You should have done your preparation before you enter the trade.

a.    Check for any news announcements.
b.    Check the direction of the trend; know which way the market is moving.
c.    Always use a stop.

Complete preparation puts you in control.  This gives you the advantage and will allow you to trade without the emotion and not let greed get in the way.

2.    You should be in a state of impartiality.

It is important to let the market tell you what it is going to do then move with the markets movements.  When you have your stops set and you profits targets set or in mind then don’t panic if the market goes against you.  And don’t get greedy when the market goes in your direction just get in and out based on a mechanical processes.

3.    At any given time we only have limited control.

We as traders can only control a few things, by controlling what we can we have the advantage.  We know we will lose and we will win that is part of trading.  What we need to do is make good decisions based on our trading rules and trading system.
I am pretty confident that if you stick to the above rules you’ll trade with calm confidence.  We all need to learn our limitations.  In the beginning we need to get a feel for how the market works.  Be patient and make wise decisions which in turn will make your trading a positive experience.

If you entered a trade because there was a strong trend and it no longer seems strong, exit the trade.  If you got into a trade because the indicator gave you a signal and it fails to do what is should do, don’t wait to get stopped out, just get out.  There is the stop to prevent massive losses but if you can save 5, 10, or even 15 to 20 pips then just get out.  As soon as you know you are wrong, just close the trade.  A pip saved is a pip earned.

If the indicator doesn’t continue as hoped for, hoping even harder will not make the market turn for you.  It is best to accept the fact that the trade is not going to work out and your best bet is to just get out.  It doesn’t matter if you are positive or negative on the trade once the reason you made the trade is no longer there, start thinking about closing the trade.

There are always more trades.  Each trade is one of many trades so treat it as only one trade.  Do not get emotionally attached to any one-trade look at it as part of your mechanical way of trading.  When one trade ends you know the next trade will be right around the bend.

Everyone needs to find the time of day that is best for them be it emotionally, time restraints, or alertness (when you are not tired of fatigued). Once you find that magic time for you then build your trading around your schedule not what works for others.

Once you have the time to trade, decide which style you will use. Day trading, swing trading, position trading. This will take some looking into, your emotions and personality, for sure. Once you have figured this out the time frames you will trade will be obvious. For day trading use small time frames, (5 minute and 15 minute) for the longer time trades (swing or position) use the larger time frames (1hr or 4hr or larger).

Now only take trades in the direction of the trend. These trades have to have good confirming signals. If you do this you will only be taking a few trades a day or even a few trades every couple of days.

By being very selective on the trades you take you will trade less and have more successful trades. Tomorrow is always another trading day. Do not think you have to trade 40 hours a week just the good hours for you. If you do this you will probably make more by doing less.

Where, you ask?  On the Jump Start Discussion Page

What to do:

1. Go the Forex Trading Contest Page to read about any updates and to see all the rules
2. Then go to the Jump Start Discussion Page and read the post
3. Scroll down to the bottom of the page and insert your comment
4. Click the button “Add Comment” and then you’re done
5. Then wait.  We will randomly pick 3 of the comments on May 1st to receive the coupons.

Note to yourself:

If you haven’t signed up for the forex trading Jump Start Strategy videos yet, do so now.  It is free to do so and it is required to be eligible for the contest.  And besides, how can you make a legitimate comment about the strategy unless you’ve watched the videos?

I thank those of you who have already submitted your feedback to help us answer the important question: What are the top two questions about forex trading that we absolutely MUST answer in this course?

The questions and a little more detail on the much anticipated trading system can be found at this link:

http://www.forexstrategysecrets.com/surveys/index.php?sid=34286&lang=en

Thanks!!

Jed Norwood

Fun Announcements:

We’re really looking forward to kicking off our contest this week for some great forex related prizes, so be sure to check out the blog on Wednesday! We’ll also be getting on the phones with some of you to get a better idea of who you are and what needs you have in your forex trading. If you are willing to do a more in depth survey on your trading habits and experience, please email us at phonecall(at)forexstrategysecrets.com (replace (at) with @). We will make it worth your while!

Lastly, we’ll be doing several webinars between now and our early May launch date and I have a feeling a couple lucky participants…well, just make sure to join us!

First, the feedback from users of the free Jump Start trading strategy has been so wonderful and positive. We feel very blessed to have hit such a need in the forex market. One user said, “Thanks for such a great help. I [have been] busy for 1-2 years reading, learning and testing strategies on Forex, I have used anything between 8-12 thousand dollars on books, strategies and systems on the internet, but honestly, what you offer for free is worth more than most things I have bought on the internet.”

We’re really close to finishing our long awaited Forex trading system. Now, here’s the favor! We want to make sure that this system addresses all your concerns. Will you help us out by answering a few questions?

The questions along with more detail on the much anticipated trading system can be found at this link:

http://www.forexstrategysecrets.com/surveys/index.php?sid=34286〈=en

Thanks!!

Jed

PS If you help us out by answering these questions you can also sign up to get a special “pre-launch” invitation. This group will have the first shot at some great bonuses we’re going to bundle with the system.

Again, the videos that will be removed are:

• Patterns
• Find the Trend Part 1
• Find the Trend Part 2
• Find the Trend Part 3
• Setting the Stop Loss

We’re removing them because they are not necessary to the successful implementation of the Jump Start Strategy and they will make much more sense as part of the new trading system we’re working hard to put together for you.

Please, if you know of anyone that would like to sign up for free and take advantage of these videos until 12PM MST tomorrow, please click “ShareThis” button down below and to the left and then click on “Send” and write a quick message to your friend.

Remember that you will continue to be able to access all the other videos. We are taking down only five of the videos. The rest of the videos, including the trading platform videos, will still be available to you and to anyone who becomes a member.

Current Members login to the forex trading videos here.

All others can register for free to see the forex videos here.

If you’re interested in learning more about our upcoming trading system make sure to subscribe to our RSS feed. Also join us on our Facebook page or on Twitter.

This will keep you on top of all that will be happening over the next month before we launch the new system. We’ll be releasing some great free bonuses over the next month to get you excited for our new trading system. So, hold on tight!