Forex Trading The Mindset to Win

90% or more FOREX traders lose and only 10% or less achieve FOREX trading success.

Everything about trading however can be specifically learned.

The reason so many traders fail, is not they can't be successful (anyone can), they simply cannot adopt the right mindset needed for trading. If you can adopt the right mindset and have desire to learn, you can enter the minority of traders who achieve FOREX trading success - Let's look at this in more detail.

1. Your On Your Own

If you want to make it in FOREX Trading you are responsible for your success. Today, more than ever before people don't like taking responsibility for their actions - they want to consult an "expert". Many people think that they can buy success in FX trading, but you can't. If you think buying an e-book for $100.00 or so will make you rich think again. The only way you will be successful is to do it on your own. With this attitude you will now be able to learn the right knowledge for FOREX trading success.

2. Learning the RIGHT knowledge

This means leaving your ego behind and being humble. This may seem a strange trait for trading success, but it's true. Many traders think that learning lots of knowledge, developing complicated trading systems and being clever means success. They think the fact they are smart, means they have "a right" to be successful. This is of course is not true you make money not for being clever or working hard, but for getting market direction right. The really successful traders know this, they learn what they need to know, have essentially simple FOREX trading systems and are humble, in terms of their attitude to the market.

Many traders who make millions have no formal qualifications, yet they make money, that's because they learn the RIGHT knowledge and work smart rather than hard.

3. Confidence and discipline

If you develop your own trading methodology, you will know how and why it works - this means you will be confident in it and apply it with discipline in the market. Discipline is a hard trait to acquire and it's hard to put into words actually how hard it is. Staying for example with a trading system through a string of losses can be frustrating and this is where you need mental discipline to stick with your system. More traders fail due to lack of discipline than any other character trait, but it's essential for FOREX Trading success. It comes from learning your own trading methodology and having confidence in it.

4. Trade In Isolation

If you want to be successful in currency trading, then you need to trade in isolation. The real pro traders understand this. They don't discuss their trades with others, give or seek opinions, they focus on what their doing in the currency markets and ignore everyone else. If you don't trade in isolation, you will find that your emotions get involved and discipline suffers.

5. Patience.

You can't hurry the currency markets, or profits so don't try. Trading requires immense patience to ride out losing periods and wait for good risk to reward opportunities to present themselves.

6. Love what your doing

Trading should be fun and you should love what you do. If you constantly are feeling nervous, don't like risk, constantly checking quotes and willing the market to go your way, then trading is not for you.

If you can approach online FOREX trading with the character traits above, you have the opportunity to achieve FOREX Trading success and make some great long term capital gains.

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Jump in Nonresidential Construction Spending not Expected to Stick

Total construction spending fell 0.9 percent in February with downward revisions to December and January. Residential construction spending fell 4.1 percent. Nonresidential construction spending increased 0.5 percent, but we do not expect the gain to stick. Public construction spending rose 0.8 percent.

Residential Construction Spending Continued to Fall

Total construction spending was down 0.9 percent and is now down 10 percent year-over-year. Much of the decline continued to be in residential construction spending which fell 4.1 percent and was down 29.2 percent year-over-year. Single family residential spending fell 10.9 percent on the month and multifamily was down 2.1 percent. Home improvements increased 1.9 percent on the month, but are down 14.3 percent from a year ago.

Nonresidential Surprise Gain is not Expected to Stick

Nonresidential construction spending rose 0.5 percent with gains in both private and public construction spending. Private nonresidential construction spending rose 0.3 percent on the month with lodging and manufacturing increasing. Public nonresidential construction spending rose 0.8 percent with gains in power and conservation and development. With continued weak economic growth, nonresidential spending should decline in coming months.

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Tell 'em the Way it is Aso San!!

Having revealed his own economy to be in "a state of crisis," Japanese Prime Minister Taro Aso today told the Financial Times in London that the German government should get off its Teutonic high-horse and get to grips with the essence of fiscal stimulus. Mr. Aso told the FT, "There are countries that understand the importance of fiscal mobilization and some that do not, which is why, I believe, Germany has come up with their views."

The words of warning underscore the likely lack of action that many expect from the conclusion of the London G20 meeting. Japan's own problems took roots throughout the 1980's due to excessive bank balance sheet lending and asset appreciation, which drove the Nikkei close to 40,000 at the end of the decade. Failure to deal with problem loans in the aftermath ensured the Japanese system lay pinned to the seabed for more than a decade after the bubble burst, and today the benchmark Nikkei carries a similar index value to the S&P some 20 years later. The Japanese nation has been through a period of sincere chest-beating throughout its decade of torpor and hardly needed the world's largest economy to go belly up, just when they were enjoying the recovery.

So the veiled assault on Germany's fiscal fear is one spoken from the gut and one that deserves a page one headline of, "Aso lays bare G20 split." Yesterday's Eurozone inflation data halved in February to 0.6% from 1.2% and reveals a real chance that at as early as the summer, the ECB will be faced with the prospect of deflation. Arguably, in a declining economy, falling prices are harder to eradicate than rising prices. Just ask Mr. Aso if you have any doubts about that.

The euro accordingly has felt a little pressure overnight as dealers prepare for a potential interest rate cut on Thursday. But speculation is growing that the ECB might yet launch some element of quantitative easing, not just to stay in line with other central banks, but because monetary policy has proven to be just one minor part of the solution in spurring lending. We'd argue that failure to join the club will ultimately be a bad move for the Eurozone and there will be additional pressure on its currency going forward for failing to prevent a deepening recession turning worse. We're not sure what the Japanese for, "See! We told you so!" is, but we're pretty sure that as and when Europe's prices turn negative, the rear-view crowd will be telling the ECB that rates should have been cut faster and the governments that fiscal spending should have been sooner.

At $1.3267 the euro is unchanged overnight, while it has lost a little ground to the Japanese yen at ¥130.80. The Japanese Tankan index of manufacturers revealed the most pessimistic conditions since 1974. Investors' angst continues to center on the yen in response to the ongoing release of dire data. Arguably, a far better target would be the euro where deflation is a threat and a raft of fresh data released today highlights the worsening situation.

Unemployment in the region rose to 8.5% - a three-year high. Germany's retail sales numbers showed shoppers stayed clear creating a drop of 0.2% instead of the consensus rise of 0.3%. A survey of manufacturers confirmed an ongoing sign of Eurozone decay as further industrial contraction was indicated. When you stop to think that the dollar took it in the neck because of the Fed's announced quantitative easing and compare the prospects for each economic area, the U.S. wins hands down. The failure to implement quantitative easing in the Eurozone for fear of a collapse of the common budget boundaries that created the single euro currency might just turn out to be the reason why the euro collapses.

A rebound in British manufacturing helped rally the troops around the pound today, which rose against both the dollar to $1.4350 and the euro, where one euro buys 92.30 pennies.

Weakness in commodity markets is weighing on the commodity dollars today. Crude oil for May delivery is off almost $2.00 at $47.60 in early trade, which is substantially below the rally peak at $54.50 last week. That move was inspired by expectations that growth was set to return inspired by U.S. quantitative easing. As we know, that impacted the dollar negatively yet at the same time provided a double-whammy of enthusiasm for commodities, which typically trade inversely to the performance of the dollar.

Today's ADP payroll data bodes badly for Friday's key non-farm payroll report for the U.S. in which the current expectation will see a fifteenth consecutive month of job losses in which five million jobs will have been lost. That would send the unemployment rate careening towards double-digits at 8.5% from 8.2% as more companies see sales slump in the face of weakening consumer spending and tightening credit conditions.

The Aussie and the Canadian dollars look increasingly vulnerable here without firm evidence of a turnaround in economic data. Overnight, Aussie retail sales took a turn for the worse and it appears a matter of time before bears assault its currency.

Andrew Wilkinson
Senior Market Analyst

Interactive Brokers

Note: The material presented in this commentary is provided for informational purposes only and is based upon information that is considered to be reliable. However, neither Interactive Brokers LLC nor its affiliates warrant its completeness, accuracy or adequacy and it should not be relied upon as such. Neither IB nor its affiliates are responsible for any errors or omissions or for results obtained from the use of this information. Past performance is not necessarily indicative of future results.

This material is not intended as an offer or solicitation for the purchase or sale of any security or other financial instrument. Securities or other financial instruments mentioned in this material are not suitable for all investors. Any opinions expressed herein are given in good faith, are subject to change without notice, and are only correct as of the stated date of their issue. The information contained herein does not constitute advice on the tax consequences of making any particular investment decision. This material does not take into account your particular investment objectives, financial situations or needs and is not intended as a recommendation to you of any particular securities, financial instruments or strategies. Before investing, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.

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Private Employers Shed A Staggering 742,000 Job in March According to the ADP!

The U.S. labor market continues to suffer deeply from the worst financial crisis since the Great Depression, as the ongoing recession which indeed dampened economic activity severely forced companies to increase the pace of layoffs according to the ADP employment report today.

The ADP employment report signaled that the private sectors shed 742,000 jobs in March well above median estimates of 663.000 jobs and above the prior revised estimate of 706,000 jobs shed back in February.

The report comes ahead of Friday's Non-farm payrolls, which is expected to signal an ongoing deterioration in the labor market, as companies continue to reduce their costs through firing more workers to withstand the most difficult economic conditions since early 1930s.

The unemployment rate is also expected to rise from a 25-year high of 8.1 percent to 8.5 percent, which indeed signals that there's still along way to go before the economy starts to recover, meanwhile conditions are still rather challenging and accordingly economic contraction is extending further.

Meanwhile the saga concerning the U.S. automakers continue to spread pessimism around the market, as President Obama is signaling that should General Motors or Chrysler fail to restructure and prove their financial viability, both will be forced to go bankrupt, as that would be the logical solution.

The auto industry continues to suffer the worst conditions since the 1980s, as tightened credit conditions, rising unemployment, and falling households wealth continue to suppress consumer spending.

The last thing the U.S. government needs right now is one of automakers going bankrupt, especially if we consider the aftermath on global financial markets, especially as the level of uncertainty remains rather high, and that will only cause more volatility and more risk aversion among investors.

Meanwhile President Obama joined U.K. Prime Minister Brown in calling for more actions from the G20 in order to be able to help global growth recover the aftermath of the worst financial crisis since the Great Depression, yet on the other hand Germany, France and Japan all were skeptical over the worthiness of the G20 meeting.

The Institute for Supply management released today its manufacturing index for the month of March, the index rose to 36.3 from the prior estimate of 35.8 and slightly above median estimates of 36.0.

The prices paid index rose to 31.0 from 29.0, while the production index was almost unchanged at 36.4, new orders rose to 41.2 from 33.1, while inventories declined to 32.2 from 37.0, meanwhile the employment index rose to 28.1 from 26.1, new exports orders rose to 39.0 from 37.5, and imports rose to 33.0 from 32.0.

Despite the slight rise but the index continues to signal a severe contraction in the manufacturing sector inline with the ongoing contraction in other major sectors around the economy including the services and construction sectors. Construction spending declined in declined in February by 0.9 percent better than the estimate drop of 1.9 percent and up from the prior revised drop of 3.5 percent.

Meanwhile pending home sales rose 2.1 percent in February up from the prior reported drop of 7.7 percent in January and well above the expected flat estimate. The housing market continued to show signs of stabilization in February, which indeed encouraged investors that the long lived slump might be coming to an end.

Stocks barely moved in today's early trading session, as the data provided mixed signals for investors, especially the ADP hefty drop which left investors uncertain over what to expect on Friday.

The DJIA was up by 21.50 points or 0.28% only as it was last trading at 7630.42, while the S&P 500 index was up 2.12 points only or 0.27% and was last trading at 799.99, and the NASDAQ Composite index was almost unchanged at 1528.80, data as of 10:24 New York time.

Equity markets are still expected to drop over the upcoming period, as the incoming data continues to signal that the economy is still contracting, and accordingly the Dow might drop back towards the 7000 levels, meanwhile our projections are signaling the S&P 500 will also drop back to the 750 levels at least, yet I should also note that volatility should persist over the next two days.

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U.S. Market Update

Dow +48 S&P +4 NASDAQ +6.5

US indices opened not far above Monday's lows on this the first day of the second quarter, while the G20 gather in London and protesters riot in the streets. But equities are rallying with enthusiasm in early trading this morning after February pending home sales rebounded strongly from January's record low and the March ISM reading showed manufacturing activity contracted by a bit less than anticipated. Note that the ISM new orders component was much better than prior, with inventories seen falling. Various commentators have offered doom and gloom this morning, including Fed Governor Fisher, who warned the Q1 contraction in GDP may be worse than Q4's decline, and Harvard Economist Feldstein, who said the economy is getting worse. The FDIC's Bair is not among them, boosting financial names after saying she was cautiously optimistic about the US banking sector.

With the G20 summit about to get underway in London, recent economic data from around the globe confirms that the politicians in attendance are under great pressure to do something about the world economy. China's March manufacturing PMI declined again, casting further doubt on whether the country can power any kind of economic recovery. In Japan the quarterly Tankan was dismal, showing that economic conditions remain severe. German retail sales were worse than expected. European PMI reading remained at or near all-time lows and Euro Zone unemployment climbed to its highest level since May 2006, at 8.5%. The US ADP employment change data registered its largest decline since the inception of the series back in 2001. One European currency dealer commented that the current G20 conference could be among the three most important summits of all time, just behind the Plaza and Louvre Accords in the 1980. However it's worth keeping in mind that the latter left their marks with substantive agreements while this conference is likely to be marred by discord and naked self interest.

Both the Fed and BOE purchased government notes as part of their quantitative easing schemes. GILT prices moved sharply higher after a relatively low bid-to-cover ratio in the reverse auction of £3.5B 2014-2019 paper. Treasury prices have also climbed higher after the NY Fed bought $6B with a bid-to-cover ratio of 2.82, also below the average of the first three reverse auctions. The US benchmark yield is trading around 2.6% while the long bond offers closer to 3.5%. The yield on the Bund has also moved lower, below 3% after sources indicated the ECB is considering unconventional quantitative measures in the coming weeks. Reminder the ECB is expected to cut by another 50 basis points at tomorrow's meeting.

Energy prices remain to the downside following weekly inventory data from the DOE. Distillate stockpiles grew when a decline was expected, and demand dropped off in the latest week indicating the economic weakness continues to weigh on the complex. May crude remains near a 1-week low below $50.

Today's early rebound in the Indices has been led by the financials. Trades seem to be buying these names ahead of tomorrow's FASB meeting and official vote on possible changes to the way mark-to-market accounting is implemented. The XLF is up more than 2% after opening down closer to 3%.

In other equity news, consumer-oriented names Sealy and Borders Group both offered surprising positive quarterly reports yesterday after the close. Sealy reported a modest Q1 profit, while analysts had expected a small loss, earning the company an upgrade at Raymond James. Borders beat Q4 estimates by a healthy margin, although sales remain very depressed on a y/y basis. Shares of ZZ are up 54% early on, while BGP is up 20% and headed higher. Education company Apollo Group managed to beat earnings and revenue estimates, but negative comments on debt from the CEO and a Baird downgrade are weighing on the name, with shares of APOL-12%. Shares of Sonic Automotive are hurting, down more than 45% after reporting a big Q4 loss and refraining from offering any guidance for 2009. Biopharma firm Celgene warned that it would barely achieve its 2009 guidance; shares of CELG-14% are down sharply in early trading.

In currencies, dealers were eyeing key EUR/USD hourly support at the 1.3130 level, where the pair was trading prior to the Fed's quantitative easing announcement on March 18. This level also corresponds to the 100-day moving average. The pair was seen consolidating in a 1.3130 top 1.3330 ahead of the ECB rate decision and G20 summit. Chatter has been circulating that the ECB is planning an additional rate cut of up to 50bps and considering some unconventional quantitative measures in the coming weeks.

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Sponsor Forex Brokers $ Index, Upside Still Not Complete....

$ index is down from the Oct 28th high at 87.85 but with no signs that a more important top is in place pattern-wise, is seen as a correction and with eventual new highs above 87.85 after. Also, yesterday’s bullish "false break" of the bull trendline since late Sept (see daily chart below), adds weight to the view of further upside ahead. However, there remains some risk for another week or 2 of wide consolidating before the new highs are seen. Reached the buy target from the Oct 22nd email at 84.75 and for now, would stop on a close below the bullish trendline from late Sept (not including yesterday’s spike, currently at 84.75/85). Note that a break below there would not abort the view of new highs, and would be looking to rebuy at lower levels if taken out. Nearby resistance before the 87.85 high is seen at 86.20.

Longer term, the market is nearing overbought after the sharp gains since the March low at 70.70 (see weekly chart/2nd chart below). However, there are no signs of even a near term top and suggests further gains above, but there is some risk that further upside may be limited. Note too that longer term resistance is above there at 90.00 (38% retracement from the July 2001 high at 121.00) and a number on bigger picture cycles in the financial markets reverse in the mid Dec timeframe. So for now, would have a bullish bias but will be looking for signs of a potentially important top (for at least 3-6 months) on a move above 75.90, and especially on an approach of the mid December timeframe.

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Day Trading or Swing Trading?

here are countless ways to invest and trade. One question that immediately needs to be answered is "In what timeframe do you plan to focus your investing?" There are major differences between the active day trader and the long-term buy and hold investor. Let's break down the different stock trading strategies based upon timeframe and look at the advantages and disadvantages for each.
Day Trading

The stock or futures day trader is someone who is buying and selling intraday. They tend to do this with frequency throughout the day. A day trader may trade a few times per day or dozens of times per day.

* Advantages: No overnight hold exposure. Can profit both long and short and take advantage of quick swings in both directions. Can focus on a higher winning percentage of trades by taking quicker profits and smaller risk.
* Disadvantages: Work. Simply put, day trading requires the most effort. Your attention on the markets has to be consistent - not always constant but certainly quite active, at least during portions of the trading day. Trading costs are another consideration. You tend to run up a large commission bill when investing frequently.

Swing Trading

The swing trader could be a stock, option or futures investor. This person is looking to take larger bites out of the stock market that can stretch over a day or multiple days and weeks.

* Advantages: Slower cycle of trades, meaning fewer trades to make, fewer commissions, less chance of error and the ability to catch the more significant multi-day profitable swing trades. Technical analysis is used primarily to identify these opportunities. Average profit target percentage is much higher typically than day trading.
* Disadvantages: With those higher profit targets comes higher risk per trade. If you are looking to trade over a longer timeframe, you have to expect your average risk per trade will need to be higher simply to account for the retracements that are common in all stock and futures markets trading. There is also overnight exposure and you would be exposed to any major developments.

Long Term Swing Trading

The long term swing trader is someone who trades much like the swing trader discussed above, but he typically focuses on several weeks to months in average trading timeframe. Many times this type of investor is trading the indexes, timing mutual funds, or focusing on both technical and fundamental analysis.

* Advantages: This trading strategy certainly filters out the 'noise' that is common in virtually all trading markets. What do we mean by this? It is easy to get faked out by small moves against the trend or your trade when day trading or even swing trading. The longer-term swing trader is less likely to get caught in these normal market wiggles. The profit objectives can be quite large. It is not uncommon to target 20%, 30%, 50% or more when trading out over a few weeks and months.
* Disadvantages: Once again, the larger the timeframe usually the larger your initial risk, especially with stocks that are volatile. You must give those markets enough 'breathing room' to do their usual retracements but still stay with the trades. You'll also miss out on the numerous shorter-term swings that any market will make - even in a long sustained uptrend there tend to be quite a few solid shorting opportunities.

Buy and Hold Investing

Usually someone who has built a portfolio of stocks, bonds and mutual funds who looks to hold for the longest term.

* Advantages: If you pick right using plenty of fundamental analysis and market sentiment analysis, the gains can be quite large with very few trading costs.
* Disadvantages: Most buy and hold investors wouldn't know a protective stop if it slapped them in the face. What does that mean? It means that 98% of the buy and hold investors we've ever talked to have absolutely no plan for their investment. No idea of a profit objective and certainly no idea when to give up and move on. Why do you think so many lost 90% or more in the bear market? The buy and hold investors just couldn't bring themselves to sell. This is why we feel the buy and hold investor should re-classify himself as a long-term swing trader. You go from no strategy to a specific strategy where you always know when you enter a trade, what your objectives are, and how you'll exit should the markets go against you.

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