Forex broker choice - criteria

Another thing you can't trade without - your forex broker

broker key words

How to choose the right forex broker? What criteria to consider? 
Why is this choice is important? 
Can this make a difference between being long term profitable or not? 

All your forex trades are executed through a forex broker. There are plenty of forex brokers out there and their marketing activities are very visible.

How to choose the right broker for you? Please note that I did not say the "right" broker, but the "right for you". The choice will depend on your circumstances.

I am not going to recommend any specific forex broker. I am not affiliated with any broker, i.e. I am not making money by recommending a broker and have no intent to do so.

OK, with disclaimers done, let's get into the criteria...

Trading journal

Another thing which you will fail at trading if you do not do it

trading journal key words

Your Trading Journal

Why do I think so? "You need to run a trading journal" is clearly among top pieces of advise, consistent accross good books on trading and in forum posts and stories of sucessfull traders.

Read on to see what it is, how I maintain it and what you get out of it.

End-of-Day trading

Why I choose to trade the markets after hours  End-of-Day

Do you want to allocate to trading no more than 1-2 hours per day?
Do you have a full-time job or a non-trading business?
Do you want to have life outside of trading?

If you said YES to any question above, the End-of-Day trading is likely right for you. 
And you should probably say NO to day-trading.

Why blogging

Benefits of running a blog in this 2-minute video 

My SDH1 trading system - part 2

This is a part 2 of my Supply & Demand trading system on H1 charts traded End Of Day

In part 1 I covered foundation: way of chart analysis, approach to markets, what markets I trade, risk management rules.

In this part I share specifics to offer a complete trading system: entry setup (what exactly needs to be printed on chart for me to enter my orders), entry method (order type and placement), initial stop loss, way to manage the trade, and other considerations such as news, higher timeframes, confluence with other factors, etc.)

My SDH1 trading system - part 1

Supply & Demand trading system based on hourly timeframe

I call this SDH1 system

SD stands for Supply & Demand and H1 for hourly timeframe. This is one of the two systems I trade.

Resources page added

I added a page with a list of useful forex trading resources such as education sites, news sites, etc.
I plan to add more also based on your comments.

Top Trading Rules

This is my list of Top Trading Rules

There is no innovation in this list. These are time-tested rules. 

The rules here come primarily from trading books, repeated in many books, stated by successful traders, trading instructors, experienced forum members (usually ones who joined years ago).  

• Trade with High Quality (this is a creed of this blog and my insight) 
• take high quality setups only 
• trade only if the trade is in line with your trading system (strategy, rules, method; I am not talking a mechanical algo here, but flexible trading rules, yet they must be met) 
• trade with the right mindset, i.e. the "quality" of your thinking, state of mind, emotional control, etc. 
• manage the risk (more on this below)
• Have a trading system and follow it
• have your own trading system
• find the system that is right for you (consider timeframes, markets, psychological implications of different systems, your skill level)
• follow the rules of your system
• "discover" your system in process of learning, backtesting, experimenting
• your trading system is your edge, a reason for being able to win in the market
• the trading system tells you when to open the trade (criteria), how to enter it (market, limit, stop, where to place), how much to trade (position size), where the initial stop loss is (e.g. last bar high/low, ATR), how to manage the trade (e.g. close half at first resistance/support and trail stop on the rest, or take profit at 2 times the stop distance, set & forget)
• with a well-defined trading system, you should have no doubt if the entry setup is present or not. You discretionarily decide whether to trade it or not, and how, but existence of the setup should ideally be clear with no doubt
• always have a plan on how you will close the trade, before you opened the trade. follow it. 

Digital Life

As I am creating a "digital life":-) of this blog...

...I created facebook and google+ pages for it

http://facebook.com/hqforextrading
https://plus.google.com/+Hqforextradingcom/

so now you can also Like me or Plus me.

I wonder if it helps bring in readers... or quality content will. 

I also created a trade journal on forex factory forum

http://www.forexfactory.com/showthread.php?t=464979
This is where I plan to post some trade setups.

12-FEB-2014 EDIT:

I also created a Twitter account for High Quality Forex Trading. 

https://twitter.com/HQForexTrading

I encourage you to follow me.

22 FEB 2014 EDIT:

I added a pinterest account
http://www.pinterest.com/hqforextrading/


I created a prezi about High Quality forex trading
View presentation

Your trading system

What is it  that you absolutely need  to become a profitable trader?

Your own trading system

According to various sources, almost all top trading books and blog of top traders agree that having a trading system is a critical thing to become a pro trader (there are other things as well, such as right mindset, discipline, risk management rules, treating this like a business, which I all plan to cover later)

OK, so what is a trading system?

Among many definitions, the most useful for me is this: as a minimum, the trading system tells you when to open a trade, when to close a trade and how big position to trade.

So we have

• trade open criteria - i.e. when and how do you open a position. By "when" I mean the entry filters such as "trend is up" as defined by the slope of EMA 20 on daily for long position, the entry criteria such as bullish pinbar or price touched the demand level on H1. By "how" I mean the entry method: at market, with a limit order, with a stop order (e.g. buy on the break of last bar high) and criteria where to place the order. 
• trade close criteria - i.e. how an when you will close your position, either at loss (stop loss order hit or manually before the stop was hit) or at profit (take profit limit order hit, or trailed stop hit or manually). There are many ways and I plan to cover it. 
• position size - i.e. how many lots (mini lots, micro lots) , in other words, currency units, or stocks or future contracts you will trade. Obviously bigger position size means larger win or loss. And it has to be set correctly to manage your risk. Never risk more than you are comfortable with losing per trade. Always, first decide where is a logical place to place a stop loss, then calculate your position size in a way that, if your stop is hit, your loss will be manageable. One of the great advantages of forex is that you can do exactly this. 

For a complete trading plan, which I will cover later, but to state upfront, you need a few more things clarified in your head and ideally on paper, and follow it. This includes:

• which markets you trade - forex majors, exotics, stocks, indexes, commodities; spot, future or CFD or ETF
• which broker you use - Market Maker or ECN/STP, reliable, in your home country or offshore, how about taxes
• how you are organized - logistics, time of the day when you open orders, monitor positions
• how to maintain your trading journal - list of each trade, criteria, learnings, results
• backup plan in case of emergencies - computer down, broker bankruptcy, fraud, etc. 
• how to assess quality of your trades - checklist
• your trading system description - your own trading rules, written down, with all criteria, decision tree, and examples, lots of examples! You need to have at least tens of trades examples of your system, to master it. 

Feel free to follow this blog via e-mail or news feed, there are links at the bottom of the page.

In the future posts I plan to cover trading systems types and their characteristics, and how to find the one right for you.

Links I felt like sharing

This might be a bit off-topic, but that's fine.

Here is a couple of places I felt like sharing, because I see huge value in them, so in case you were not aware... like I was not until some time ago.

Coursera.org Free high quality courses, by professors from top universities.

Offers high quality education, at your own pace, of the topics of your choice.

Great thing. There is a few courses relevant for forex trading, too. Just try and search for "finance" or "psychology" or "markets".

zenhabits.net gives some good inspiration. Check it out for yourself.

This blog design and existence is somewhat influenced by Zenhabits. And lots of things the author talks there are applicable and relevant for having the right mindset to trade forex with high quality, so that we can be consistently profitable.


ted.com for good ideas. I have watching at least one video on my weekly checklist, just to keep learning new ideas, hacks, insights.

Coming soon

Here is my plan for future posts on this blog

• Top trading books - incl. "market wizards", van Tharp, Dr Elder, Nisson, "Reminiscences of a Stock Operator", and more. 
• forex broker criteria choice
• treat trading like a business not a hobby (this costs money) and business makes money (and I believe forex trading is one of the best businesses in the world, although not easy of course, but what other business you can easily do after hours with a full time job, with as little as a $1k capital, with complete control of the risk, total flexibility of approach and full accountability where the results are totally a reflection of your decisions and your decisions only)
• trading systems - what are they, how important, what kind of systems are out there
• how to choose the right trading system for you - this is key to be profitable
• risk management - stop loss and position size. Gaps and multiple positions on correlated pairs. Avoid a margin call. 
• action plan to become a trader - needed steps, a learning path, from reading, learning, via demo, then micro if profitable on demo, etc. 
• mechanical systems vs. discretionary trading
• intuitive trading, i.e. discretionary and how important this is (as per Curtis Faith book) 
• key elements of the trading system - setup, entry, close, position size, etc. 
• ways to enter the trade - at market, limit order, on the break
• ways to place your stop loss - candle pattern high/low, or plus "a few" pips, or ATR based
• types of stop loss - hard stop at a broker, soft/mental, emergency
• ways of managing the trade - set & forget, trailing stop, half take profit, half to break even and trailing stop, etc. 
• time frame choice and implications - time needed, number of opportunities per month
• over-trading vs. high quality trading, i.e. best setups only
• top trading rules, common ones from reading 50+ trading books
• trading capital - never trade borrowed money or money you cannot lose
• news trading - and why I do not trade the news (you need to have an edge)
• back testing - forex simulator tools and how to get a year of experience in a few hours
• beware of scams - esp. if too good to be true and magic trading systems
• realistic expectations - think expected return vs. max draw down you can handle - they go hand in hand
• risk vs. reward and percent of winning trades and number of trading opportunities as factors of your net result for a year
• my own trading system / method / approach / strategy / plan
• my trading performance - to be added via myfxbook.com 
• my trades - examples with charts from my trade journal - good trades and mistakes to learn from  

Sounds like interesting topics? Certainly to me :-) and I believe I have valuable insights to share! 

Please consider adding this blog to your reading list and sharing with your friends. While I do not aspire to come up with a lot of innovation here (likely all of this is in books or forums), the value I intend to create for you is from compressed, actionable and relevant knowledge. 

I decided against big aggressive social media buttons and ads everywhere, as I prefer minimalistic design and focus on high quality content, but I do encourage you to please share this blog with your circles or friends. 

Thank you! 

Top Trading books

My list of top trading books

After reading 50+ trading books, some of them a few times, here is the list of ones I found the most helpful and impactful, with a short review

• "Reminiscences of a Stock Operator" by Edwin Lefèvre. This is a classic. Must read. Ideally get a 2009 edition with new commentary.  Amazon link here for your convenience. This book is about trading psychology (mindset, way of thinking) and "nothing" has changed in the markets for the past 100 years with regards to human emotions and trading mistakes.
• "Market Wizards" series by Jack D. Schwager. There are a few books, "Stock Market Wizadrs", "New Market Wizadrs", "Hedge fund Market Wizadrs". I strongly recommend. While they do not offer a specific trading system to follow, they include great insights, and the biggest one: you must find your own trading system that is right for you. amazon search.
• "High probability trading strategies" by Robert Miner. This one, unlike previous ones offer a complete, well described trading system! It also contains lots of universal trading rules (on risk management, position sizing, having a plan, a journal, etc.) And the trading system it describes is very complete, logical and with many examples.   (disclaimer: I was unable to make money using this system, but it is not this book's fault ;-) Unless you are allergic to Eliot Waves , I recommend. I am sure you will find some good take-aways there, even if you do not trading this system, it is a great example of how a trading system should be described. amazon.
• "Trading for a living" by Dr Alexander Elder. Very good one, especially for beginners. Even though he focuses on stocks not forex, the trading psychology rules are universal. So are indicators descriptions. In there you will also find universal rules of risk management, having a plan, journal, etc. See his newer books and how he trades divergences. amazon. Visit http://elder.com/
• "Trade your way to financial freedom" by Van Tharp is another must read, focusing on trading system development (elements, rules), position sizing (how many units/lots to trade and what it means to risk and potential profits), and also on psychology. Excellent explanation of how risk to reward vs. percentage of winning trades and frequency of trading opportunities, and costs, determine your net outcome. amazon. Check out also some newer books by Van Tharp and sign up for his newsletter at http://www.iitm.com/
• "Diary of a Professional Commodity Trader" by Peter L. Brandt is another one I enjoyed reading and found helpful. He is a chart patterns trader. And it is great if you read on multiple way to approach markets by different people. amazon
• "Trading in the Zone" by Mark Douglas. This one is a must read focusing primarily on psychology, mindset, "how to think" kind of things. Important stuff.  Please make sure you do the exercise he offers at the end of the book, i.e. take 20 trades using some mechanical trading system, to show yourself you can do it in a disciplined way.  amazon.
• "Currency Trading For Dummies" by Brian Dolan... I probably should have started with this one... if you are a beginner and prefer to learn from a book vs. from educational sites, get it.  amazon.

Note, these are not affiliate links. I recommend these books honestly and unbiased vs. trying to get a few percent commission from amazon affiliate program ;-) 

OK, there are many many others highly valuable books. But the list above probably gets you 80 for 20 knowledge vs. time.  I encourage you to read more, I read new books all the time, but I enjoy it a lot. 

At some point, you get from the books as much as you can and then you need to move on to other learning venues: demo trading, using forums to find and follow and learn from good traders who often help others, try to find a coach or mentor, attend some trainings, maybe some trading conferences, etc.  (topic for another post) 

Anyway, reading good trading books I believe is critical to become a profitable trader and here I offer my top list. Enjoy!


Update: March 16, 2014

This is to add two more books to my list

• "One Good Trade" by Mike Bellafiore and  "The PlayBook: An Inside Look at How to Think Like a Professional Trader" by Mike Bellafiore. 
• Both books by the author are very good. While he talks about prop trading desk, trading U.S. stocks and ETFs on a 1 minute charts and "tape reading", while I trade forex End-of-Day, so a very different approach, but everything about trading mindset, psychology, how to think, how to develop, how to learn - I am finding all of this very relevant and helpful for high quality end of day forex trading, which I do. 

I recommend. 

Update: April 22, 2014

This is a great book I am adding to my list:

• "Enhancing Trader Performance Proven Strategies From the Cutting Edge of Trading Psychology" by Brett N. Steenbarger 

Getting organized and productivity tips

Tools and tricks to help you save time and get organized

Your trading platform

Obvious one. You need to master it, using a demo account first. What tool use use depends on your broker, which is an important and your own choice.

GadWin Printscreen

GadWin is a freeware tool for screen capture (for Windows). Choose PNG as file type. You can capture full screen or a rectangle area, and you can capture to clipboard or directly to file.  I use it to capture a chart for my trading journal, before and after the trade.

Trading journal spreadsheet

You can use Libreoffice, google docs or any other spreadsheet tool. Whatever you choose, you need a spreadsheet to record all your trades, the trading journal. In there you put each trade, market, chart, reasons why you entered, how you closed the trade, learnings, result. (Trading journal itself is worth another post)

My fx book

myfxbook.com is a great tool to analyze your trading results! You can also, optionally, share your performance with others to get feedback and inputs.

Box.com or dropbox or alike

Use cloud based on-line drive to backup your key files, such as trading journal, and synchronize them and use from any location any PC or even mobile device (e.g. from home, from office, on the go).

Freemind

I use Freemind mind mapping tool for many purposes. I recommend. I have my trading plan there, my all kinds of notes, reminders, passwords (encrypted note), to do lists and more.

TrueCrypt

I use TrueCrypt file encrypted volume to store the most sensitive files.

Google keep

I use Google keep to capture quick notes, on any PC or mobile, accessible everywhere, quick and easy. Even off-line with Android app.

Ad Block plus

I use Ad Block plus for Chrome to block annoying ads. Fantastic tool. I wish I discovered it earlier.  Usually blog owners do not talk about ad blockers becasue they make money with ads on the blog. This blog is different ;-) 

Ghostery

Another nice Chrome extension, called Ghostery, tells you (and optionally blocks) what trackers, etc. are fired on a site you visit (e.g. on this one you'd see google analytics, compare to other sites to see how many ghost scripts are running)

All tools mentioned above are free, according to what I know, at a time of writing this. 

Where to start learning about forex trading?

Where to start your learning journey? 

If you are new to forex, here is a few resources to start with, which I used and can honestly recommend.  (I am not making money recommending then, there are no affiliate links here.) 

Education sites

Baby pips
http://www.babypips.com/

FX Street education
http://www.fxstreet.com/education/


I assume my blog readers know the forex basics such as what is a pip, lot, broker, broker types, order types, how to use a trading platform (such as cTrader or Meta Trader 4).  If you need to, please visit the sites above to learn.

Your broker will also likely offer free training courses on how to use the platform. (I am not recommending any broker, I plan to write a post with broker selection criteria)

Books

Here is my post about top trading books list.

Trading journals and blogs of good traders

You can find many journals on forex factory forum at http://www.forexfactory.com/
Blogs, you are reading one of them ;-)  OK, for more, do a search for top trading blogs.

I believe materials above are a good starting point for beginners. Move on if you have seen all that already.

Open on-line courses

Here is a link to my FF post where I mention a vew free open on-line courses with knowledge relevant to trading the markets.

Why trade forex?

Why would you trade forex?

Or what is forex? Foreign exchange, i.e. currency markets, you may read more on wikipedia (new window will open)

Benefits and opportunities of forex trading

• You can make money independently from what is happening in a stock market (with forex you go for absolute returns, not vs. the stock market, you are like a hedge fund manager)
• You can always close your position without impacting the market (whatever position size you trade as long as you are a retail trader; the market is so big that your order has no impact). This is important. It means that your stop loss or take profit orders will usually be executed at the price you set (there are exceptions, but this is nothing compared to less liquid stocks)
• You can manage your risk very well. Yes, although you may have heard "forex is risky", the truth is that if you know what you are doing and follow some simple rules, you can manage your risk very well. You can upfront and exactly decide how much you are willing to lose on a given trade by using the stop loss orders and right position sizing strategy (e.g. adjust lot size in a way that you loss per trade will be just $50 - this is easily possible with brokers with microlots)
• It is a simple market. Note I did not say "easy"... making money trading forex is very hard, but it is simple in a way that you have just a currency pair and exchange rate. No dividends, no earnings reports, no splits, no daily opening gaps. You just have economic news, rollover and price. Forex is simpler than stocks.
• You have 100+ currency pairs to choose from, to look for trading opportunities. You can also focus on just top 5 majors.
• You can use any timeframe, from 1-minute/5-minute combo to daily/weekly. I strongly recommend hourly and above.
• You do not need a lot of capital to get started, unlike with stocks, thanks to leverage. $1000 is enough to start with, and use microlots account and loose no more than $20 per trade (i.e. 2%).
• You can find your own way of trading. Your "system" or method, approach, strategy. Whatever we call it, it is your own approach. In fact, is is said in many books that this is the only way to become consistently profitable.
• Your results totally depend on your decisions! This might be the best of all. You do not depend on your customers, employees, management, not even your broker or FEB chairman or the market. Your results are always a reflection of your own trading decisions! This is a business where you have the full accountability, very clearly. 

Risks

• You can lose all your account deposit or even more. This is likely to going to happen if you violate the risk management rules, such as always use a stop loss (at a broker) and correct position size (number of lots traded).  But isn't it the same with any market? Just that, with non-leveraged markets, if you do something irresponsible, it will take longer to loose all the money. In forex you can blow the account in hours... but again... only if you do irresponsible things such as using full leverage and trade huge position without a stop.

Let me make this question ever broader: why would you trade any financial market? (such as forex, stocks, bonds, commodities)

I will not say here, like in many other places, that you can soon become a pro trader, say bye-bye to your job and become a full time pro trader and trade for living. No. This is extremely hard.

What I am going to say is this: with right dedication, putting some hours of work every day or week, for a couple of months or years, you should be able to achieve a double digit returns every year, regardless of market type, with drawdowns no larger than 15-20%, on a trading capital that you put aside.

If this is not compelling enough, it may be that forex trading is not for you.
But if you have passion for the markets, by all means go ahead and work to learn to become a profitable forex trader.

Good luck!

What is High Quality forex trading?

What do I mean by "high quality" forex trading? i.e. this blog title and the HQForexTrading.com domain that I registered for this blog.

This is a big topic, and this whole blog will be about this, but here let me start with a high level list, each point deserves an article or more...

What is a High Quality trading?  it is.. 

• following your trading plan
• trading the high quality setups only (I will explain later what exactly I mean by that)
• managing the risk - always use stop loss orders and trade the right position size
• document your trades in a trading journal
• approach trading with the right mindset (much more on this) 

That's it for now, but this list is far from complete. 

About me

My nick is michal9.

That's all I choose to share at this time. Knowing more about me is not needed to benefit from reading my posts, which, you will assess if are valuable for you.

Feel free to send me any question or comment. I moderate comments and I can answer privately and hide your question if you prefer.

You can also e-mail me directly at michal9 followed by the @ sign and the hqforextrading.com domain name.

What is the purpose of this blog?

Purpose of this blog

This is my first blog and an experiment, to be perfectly honest. 

For you, the readers, my intent is to provide high quality and relevant content to help you achieve consistent profits trading forex, i.e. foreign exchange, currencies. 

For me, this is an opportunity to hopefully help others, and to learn!  I expect running the blog and sharing a trading journal to help me trade with high quality, i.e. "walk the talk".

My plan is to periodically write about my insights and learnings on a journey to become a consistently profitable forex trader. I am not there yet. I am confident that I have a good plan to get there and, already today, I have lots of valuable insights to share.

Over time, I plan to share my forex trading strategy, trading plan, trades examples, and the trading journal.  By sharing this I want to achieve two things. 1. help others to learn from my trades (good and mistakes), 2. feel good about helping others ;-) and discipline myself to take high quality trades only.

Time will tell how active this blog will be and if it will last. It is certainly my aspiration, that it will be showcase of a learning path to become a consistently profitable trader.

I invite you to join me on a path to becoming a consistently profitable forex part time trader.