Am I right? You have lost money, and you need a way to make it back.

Am I close?

So you are looking for a way to take small bites out of the forex market to make back what you lost, and eventually get you back to profitability. The thing is, you may be approaching this all wrong.

When you say you want to take a small slice out of the forex market, what does that mean to you? In other words, what is a small slice?

Are you talking about 100 pips per trade? Are you talking about 50 pips? 10 pips? 5 pips? If you are talking about an extremely small number (like less than 10 pips), you need to know that you are going down a dangerous road.

Did you know that it’s easier to trade off of a daily chart than just about any other chart? Also, when you trade a daily chart, you are usually going for much larger numbers of pips.

So what’s the deal?

When you target really small amounts of profit, you are trading actual market movement. Rather you are actually trading just plan market noise. That market noise is purely random.

Of course, if it’s random it can’t be predicted and that’s where the issue is. So, when you are looking to take your small slice out of the forex market, be sure that the slice isn’t so small that you end up “shooting yourself in the foot”, so to speak.

There really isn’t a definite answer on this one. You could say that this one is, and I would say that that one is better. However, just because two or more people can’t agree on what is best doesn’t mean you cannot tell what is best for you.

You certainly can tell. First, you must decide what is your strengths and what you are trying to achieve in the forex market.

Also if you are only available at certain times, you need to work within those constraints too. Let’s say that you have a “day job”. Now, that means that you won’t be day trading the forex market.

In fact, let’s say that you hours aren’t fixed. Sometimes you are on first shift. Other times, you are on second shift and working overtime. This can be difficult for your trading.

You would need to trade a simple end of day trading system or a weekly system in this instance. An end-of-day trading system simply means that you look at the charts once per day and you are looking at daily bars (or candles).

You are just taking trades based on what you see developing each day. That could even be too much for you. So, you could take trades based on weekly bars or candles. Do realize that with this kind of a method, you would only be trading several times per year.

Also, your profit target would be much, much larger. Another benefit is that those longer time frames are much easier to profit from.

On the flip side, if you are impatient, then waiting weeks for a trade to set up simply isn’t going to work for you. You need action and you need it now.

And that’s why you can see there isn’t one best forex trding system.

Well, let me get you started . . .

• Use Bollinger bands and have the price between them (counter trend)
• Use Bollinger bands and have the price break out (try just 1 standard deviation)
• Don’t use any indicators. Just use price action (inside bars, outside bars, percent gains, etc,)
• Use fractals. Something like the highest high of the last 5 bars for breakouts.
• Don’t limit yourself to the customary use of an indicator. Don’t think you have to use moving averages as support or resistance.
• Use pivot points . . . they offer great support and resistance areas.
• Only trade during certain times of day.
• Use moon phases in your trading
• Use Fibonacci, but use it for time and not price

There are just a few ideas to get you cookin’.

The idea is to brainstorm and really let your mind go. You want to think of something that’s “new”. Granted, you probably won’t be able to come up with something that no one has ever thought of before. However, you may just think of something that no one has implemented before.

That is very possible.

The other thing to keep in mind is that you will need to be a good coder. As the trading idea you want to test out gets further and further removed from what is commonly done, the more creative you will have to be when programming it.

Here are the straight answers. The only time that the forex market is closed is Friday afternoon to Sunday afternoon New York City Time (EST). That’s when you get a real open and close on forex.

However, still using New York City time, the forex market closes and instantly reopens at 5pm each day. That’s your open hour in the forex markets.

You do need to realize, however, that you can’t trade traditional open and close strategies with the forex market. What I mean is, if something worked on futures or stocks on the open, there is a very good chance it will not work in forex.

The reason is that there is too much continuity between the open and close. It’s a 24 hour market, after all.

Seriously. It’s supposed to be a non-directional trade. You are trying to make the difference in interest between the currencies.

Here’s how it’s done. You find a currency that has a low interest rate and a currency that has a high interest rate. You sell the one that has the low interest rate and buy the one paying the high interest rate.

Of course, you need to watch the price action. If the price on the one you sold rises, you could lose money. You need to figure how much you can lose before you need to get out of the trade.

Now the carry trade is magnified by leverage. Let’s say that there is a currency paying 2% interest and another paying 4% interest. You sell the first and buy the second.

You are now going to make 2% annually if you are invested at 1:1 leverage. But, if you have does this at 100:1 leverage, you are now going to make 200% annually, if the price doesn’t move.

Of course, the price will move, and so you can’t stay in the trade for a whole year. You may just be in for a week or two.

So before even considering this trade, you need to find currencies that have favorable interest rates, but you also need to look at the direction the prices are heading. If it’s against you (the one you would have to sell is rising), you may not want to enter that trade.

The carry trade is . . .

“A method where a trader sells a specific currency with a relatively low interest rate and uses the funds to purchase a different currency giving a higher interest rate. A trader using this strategy is working to get the difference between the rates. This can be substantial obviously depending on the amount of leverage used.”

Okay, that tells you broadly what the carry trade is. Let’s dig in a bit deeper. Let’s go over an example here. Let’s say that a trader borrows 1000 yen. Now, the borrower has the money changed into US dollars and buys a bond.

For this example, let’s say that the bond is paying at 4.5% annually. Again, for this example, let’s say that the interest rate on the Yen is at 0.

As long as the exchange rate between the two currency pairs doesn’t move, the trader is going to profit at 4.5% return on investment.

The risk here is that the exchange rate won’t hold still. If the US dollar loses value, then the trader could lose money. Of course, if the US dollar were to gain value, then the trader would make money on the currency move as well as the carry trade.

So, the carry trade doesn’t make you independent of price action. It’s not a truly non-directional trading method.

However, that said, professional traders are drawn to this trade because you use leverage in forex. And leverage magnifies what you can do with this trade.

If you were trading with just 10:1, then in the example above, you would stand to make out at 45% annually (assuming the rates don’t change). Given this ability to profit, you can see why forex and the carry trade do grab ones attention.

Yes, that’s stupid.

In this business, most traders never make anything. They blow up account after account. Yet they cling to the idea that they will be successful, raking in big money, and not answering to anyone.

The idea that you can take your $1000 and just go set yourself up as a king and be independent of everyone is foolishness. You cannot succeed on your own. Don’t be stupid like that.

You need some help. You need some real training. Forex is a super-competitive business. I believe somewhere around 97% of all traders end up as losers. Sure, the 3% who make it long term do very well.

It’s just that most completely under-estimate how hard it is to get to that point. They think that just because they have the determination that somehow that grants them a pass. They get access then.

No you don’t. It doesn’t matter how much you want it. It doesn’t matter how hard you work towards it. Forex trading success will elude you most likely. It’s just statistics, right?

Even if you get the right training from someone who knows what they are doing, you are still very likely to fail. I’m sorry, but that’s just the reality of it.

You don’t like to hear that?

I’m sorry; I’m not here to slink up next to you and tell you what you want to hear. That’s not what I’m going to do. I’m not some slippery snake oil salesman.

You definitely need to get the proper training in order to have a chance, but it goes way beyond that. You will need a bit of luck too . . .

• IBFX.com
• ForexMicroLot.com
• Alpari-US.com
• InstaForex.com
• There are many more . . .

The thing is that a micro account can be the key to your success in forex. Really it can be that huge. Now you may be wondering how that can be?

It’s simple like this. Trading is a stressful activity. You are risking your money to get more money. Or at least that what you hope happens. Often what happens is that you lose your money. That’s emotionally painful.

You had money, and now you don’t. It hurts, and it hurts so much that we modify our trading to try to take less losses. The problem is this has a counter-intuitive effect. Now we actually start losing more. It’s a very bad spiral.

So, how do you break the spiral? How do you get out of this negative cycle? You can’t learn to trade just using a demo account. There isn’t any real money involved, and you can’t learn to trade risking normal amounts of money as we just discussed.

There is the problem.

And using MT4 micro accounts is the answer. It allows you to risk a small amount of money and still be trading. In fact, it lets you risk an amount so small that you don’t care if you lose.

That’s the key right there. The amount you risk is so small that win or lose you are okay with either one. You can learn to trade with real money on the line and still have full emotional control.

And that is the key to long term trading success in forex.

The problem is that they offer you this solution for thousands of dollars. Usually, there is a hidden monthly fee as well, and the monthly fee is huge. It’s something like $100 per month. If you stop paying, then the software stops working.

That’s because the monthly fee will usually cover the data feed. The funny thing is just about any broker will give you free data. So why do these scams make you pay?

Let me be upfront with you. I’m not going to name names here. That’s a good way for me to get sued or to get this website taken down.

However, any forex software system scam is easy to spot. Here are the keys to watch for:

• They will make it sound very easy. Most of the time it will be just color coded or push button easy. (Trading forex is never that easy.)
• It will cost over $1000. These packages never sell for $97. Nope. You can expect to see a huge price tag.
• Aggressive marketing. These companies that push these things are always using “free seminars” and telemarketing follow up.

If you spot any of these, you will be doing yourself a favor if you just go the other way. Success in any endeavor doesn’t come to those that want the easy way out. It comes to those who are smart and work hard.

Forex trading isn’t any different, and anyone who tells you otherwise is lying to you (most likely to sell you something).

Some even offer smaller than mini accounts. For example IBFX.com offers micro accounts too. But here’s some brokers to get you started . . .

• www.alpari-us.com
• FXDD.com
• MBtrading.com (not a traditional MetaTrader broker)

There are hundreds more brokers that offer MT4, but those are the only ones I’m comfortable recommending. You really can’t go wrong with them. I understand that it’s a small list, but how many mini accounts do you really need?

Anyway, a mini account will let you trade at 1/10 the size of a standard account. A standard lot denominated in US dollars is worth $100,000. So the mini lot is worth $10,000. At the relatively standard 100:1 leverage, that means that you can control one mini lot with $100.

Of course, at 400:1 leverage, you would control 1 lot with just $25. Keep in mind that using more leverage isn’t bad by itself. What can be bad about using too much leverage is that you overbuy. It’s like having too much credit.

You can get yourself into more positions than you should be in. Then when (not if) the price moves against you, you can get hurt financially. For example, getting a margin call because your account is gone.