Traders get a bad rap. Many people, who know as much about trading as I know about pillow farming, blame crashes on traders, or hedge funds, or computerized trading. When the markets crumble, the media is quick to blame those greedy traders.

Trading is about being free. That is what most traders want. Isn't that why you are attracted to trading?

But are traders really greedy people intent on making it tough for the rest of the world?

I would say no – in fact, we traders do an excellent job at making it easy for the rest of the world to buy and sell stuff. We traders take on risk by buying (or selling) in the markets. We expect to be paid for taking on this risk, for sure, but we provide a valuable service to those people who are also buying and selling in the same market. We traders provide liquidity and this is extremely valuable for many people around the world, despite what you may read about in your local newspaper or see on the local nightly news.

Here is one example – and it is a good example because I actually know someone in this business (hi Craig!) – coffee trading. Futures traders who trade in coffee futures make it easier for coffee farmers to ship their coffee around the world. How so? Well, because there are so many futures traders around the world, buying and selling coffee futures at any given time, trying to make a profit, it is possible for people who are interested in buying coffee today (for a delivery at a later date), at a known price. Because there are so many people buying these coffee contracts, the price is well known around the world, and today anyone can buy or sell coffee futures with a few clicks of the mouse.

Coffee is a very liquid market, and this is due in large part to the futures traders out there who are providing willing buyers and sellers for this market. If you don’t think this is a big deal, consider what it might be like for coffee farmers (and coffee resellers like Starbucks, Peet’s Coffee and Gloria Jeans) if buying coffee were like buying a house. Can you imagine if it took 6 months to buy a few bags of coffee? It would be a nightmare. But it is not a nightmare, and this is because traders like you and I happily step in to buy and sell coffee in exchange for a profit. But coffee is not the only market that is very liquid because of the number of traders participating in the market. The largest market in the world is the money market, the forex market.

If you are reading this, then you are probably much like me, you are a currency trader. I would also guess that you understand that money is probably the easiest thing on the planet to buy and sell. You can do it nearly anywhere. In fact, you could probably walk outside your home and find someone willing to exchange money in a few minutes. The currency market is very liquid, there is a huge market for money. And one of the reasons for this is because so many people, so many businesses and so many traders are interested in buying and selling money. You and I both add to the liquidity of this market, although admittedly what we add to the market is very small.

So if you hear someone lament that traders do not do anything, or worse, that traders are causing crashes, and traders are greedy people, make sure that you mention what traders are right now doing for others around the world. Traders are right now taking on risk so that other people can enter the market for a small cost. Traders are doing this, and it helps banks, farmers, retail businesses and many many others.

But you are probably not a trader because you want to make it easier on Starbucks and cattle ranchers. You are probably not even a trader because you want to make a boatload of money…. right? Sure, making money is nice, but you are probably a trader because you want one thing – FREEDOM.

Does this sound like you? You probably just want to be able to wake up and do what you want to do that day. You probably want the freedom to work from any location in the world. You probably just want to trade and be free, don’t you? In the next post I will examine what traders and freedom have in common. Until next time, Happy Trading!

I will be at the FXstreet.com conference in Barcelona. We had a nice chat about the conference, and you can watch this video here:

If you are interested in joining us at the FXstreet.com conference, use this coupon code sp_peters to save €150 – that’s 150 Euros!

Click here to join the conference.

Forex scalpers have a tough road to profits.

Many forex traders love the idea of quick profits. Scalping seems like a wonderful idea. Who wants to make some money in a few minutes? Well, unfortunately, scalping is a bit difficult for many traders. There are three reasons why scalping is often a bad idea for traders.

1. Scalping is expensive: Traders pay more in transaction costs when scalping. A successful trade on the EUR/JPY daily chart may net 150 pips. If the spread on the EUR/JPY is 3 pips, the transaction cost for this daily trade is 2% of the profits. A successful scalp on the EUR/JPY 5 minute chart may net 15 pips. Since the spread is 3 pips, the transaction cost for this trade is 20%, a big difference. Simply put, scalping costs forex traders more. Scalpers pay a huge fee on each trade, and over the long run scalpers must be better traders than those traders who trade the longer term charts.
2. Scalping encourages over trading: A scalper can take a trade over the course of a few minutes. A scalper can take many trades over the course of an hour. If a few trades do not work out well, a scalper might be tempted to take revenge trades. Revenge trades are emotional trades meant to recapture lost profits and these trades do not fit within the rules of the trading system. Revenge trades can lead to even more losses for many traders.
3. Scalping is psychologically difficult: Scalpers often have a difficult time watching their account balance bounce up and down. Hundreds, even thousands of dollars can be made and lost over a few seconds. Many scalpers end up taking profits too quickly, and then have a difficult time watching the market move hundreds of pips without them.

So, the next time you consider scalping, remember that you will have to pay more money to scalp, you must be extremely disciplined to stick to your trading system, and you will have to be psychologically strong to withstand the difficulties of scalping.

Over-thinking can lead to poor trading results. Thinking about achieving excellent trading results may help your trading immensely.

Many traders wish they could find consistent profits. Sometimes traders are constantly playing a frustrating game of reaction, and it goes something like this.

Perhaps the first trade takes off in the expected direction rather quickly, so the trader decides to take quick profit as the nice fat profit is very tempting. But the trade continues on in the expected direction for a week and the trader says “I left a lot of profit on the table on that one, that was a mistake.”

Perhaps the next trade is managed differently. The trader decides to instead “let this trade run” – and instead of running in the expected direction, the trade starts off in profit and then slowly backtracks until it … gets …… stopped ….. out.

So the third trade will be different, the trader decides. This time the trader will stick to the trading plan and only exit the trade according to the trading system. But… this time the trade is a losing trade, and the trader is frustrated. The trader thinks – “this is just my luck – of course this trade is a loser, it is the one trade that I wanted to follow my system rules precisely. What am I doing wrong here?”

Many traders end up thinking about what they do not want, traders often ponder losing trades, losing streaks, difficult situations and poor trade management. Magically, these traders often find losing trades in their account statement.

Is it possible for you to think your way to profits? Perhaps it is. Perhaps you will be surprised at the results if you decide that for the next 30 trades you will think about how exciting it will be if your trades find big profits. Try this experiment, for the next 30 trades decide that you will take trades that make big money, and see this happening when you enter the trades. See if this makes a difference in your trading… you may be surprised by the results.

At the ITC, we will trade in 3D. Click on the picture above and use the coupon code sp_peters to get the special discount.

The FXstreet.com International Traders Conference is June 20-22 in Barcelona, Spain. I am looking forward to meeting the forex traders at the event. We will eat, we will talk and we will trade. I am so excited for this conference, it will be truly unique.

FXstreet.com has given me a special coupon code for my friends (that’s you). So if you would like to join us at the FXstreet.com conference, click on this link and use the special coupon code sp_peters for a discount of €150 Euros.

One of the first danger signs for a nation’s economy is the housing market. Once the housing market starts to slip up, the currency will soon follow.

But have you ever wondered why housing markets go through boom and bust phases? If you have wondered why, perhaps this movie may be interesting to you.

Click this picture to watch the video.

Forex traders at banks must answer to a risk manager.

You probably know that banks trade forex, in fact most banks have a team of forex traders. But do you know what banks look for in a forex trader? The answer may surprise you.

Banks are not searching for traders with:

• a stunning track record
• the ability to make money quickly
• a high win rate

Banks are searching for traders who do not take large risks. In fact, these are the only traders banks want on the forex desk. Banks want traders who will stay within the rules of the game. And the number one rule of the forex game for banks is this keep the risk at an acceptable level at all times.

Every bank trader has a number. This is the amount of money they are allowed to risk on behalf of the bank. With time and experience this number will creep upward, and every forex trader at the bank understands this. When a forex trader at the bank has too much risk on, when the risk exceeds their number, a risk manager will pull the trader aside and ask that the positions be lightened up to reduce the risk. The trader is also given one warning from the risk manager.

What happens if the bank trader again exceeds the number? The risk manager will again pull aside the trader and explain to the trader that it is time to leave. The bank trader has no job because his number was exceeded. The trader will lose his job even if he made millions for the bank on the risky trades. Banks understand that the most important aspect of forex trading is keeping risk under control. The risk manager ensures that all forex traders do not risk too much. Each forex trader is given one warning for taking too much risk, there is no second warning, the second time a trader takes on too much risk he loses his job.

This is a great system. All forex traders at the bank know the consequences of taking on too much risk. The problem is this – many bank forex traders end up leaving their job, as many of them end up trading for themselves, as independent traders. However, on their own these former bank traders are missing one key ingredient for their success… the risk manager.

Without a risk manager many former bank traders end up losing huge amounts of money, and end up being unsuccessful in the long run.

Trading is a game of risk, and any trader who does not understand this will have a difficult time as a professional trader. If you trade at home, who is your risk manager? Who is going to tell you when you are risking too much? Who are you accountable to for your trading? If the answer is “no one” perhaps it is time for you to emulate the banks and find someone to report to each week.

I have created a new DVD for my good friends at FXstreet.com – I am very happy with this DVD, and I think that traders who no nothing about naked trading will find this DVD very interesting. I make the case for indicator-free trading, after watching this DVD you should be able to look at a chart, with no indicators, and decide whether or not the market is ripe for a high probability trade. I hope that this DVD helps many traders, and I do believe it will.

Simple trading (Naked Trading) can be very profitable.

The AUD/NZD Daily chart has a nice Kangaroo Tail. I took a close look at this trade in this video.

Click this TV to watch the video.

Everyone interested in trading wants to become a professional trader. But only a few traders want to put in the work it will take to become a professional trader.

Click on this picture to watch the video

Do you think he loves getting better at what he does?

Do you think he has spent some time perfecting his craft? Do you think he loves doing what he does? Of course he does, that is why he spends so much time doing it.

I love looking at new trading systems on ForexTester. This is how I spend my days, testing trading systems. Why? Because I want to become very good at my craft…. trading.

It may be fun to make money, but for many traders we must put in the hard work (testing) before we reap the benefits. It is understandable if it takes time for you to become consistently profitable. So long as you love what you do, and you spend time getting better at it, you will get better, no matter what your passion.

Happy Trading!