Truth About FX

In this episode of Truth About FX, Walter gives points on taking down barriers that hinders you from becoming a successful trader. He suggests some handy tools on how to take down these psychological walls, the importance of identifying your beliefs, and how your perception of others can affect your decisions.

Download (Duration: 07:05 / 8.11 MB)

In This Episode:

00:55 -a “male thing”

01:32 – the best advice

02:34 – barriers to overcome

03:09 – the gold standard

04:43 – what drives our actions

05:44 – biggest help for trading

06:41 – bubbling up

Tweetables:

What are the barriers that are stopping you? [Click To Tweet].

Watch other people and pay attention to what you say.  [Click To Tweet].

The drivers for our actions are our subconscious beliefs. [Click To Tweet].

Announcer: Sometimes, forex trading is a wild and wooly place to be. That’s why Hugh is here, to post your questions to Walter, the naked forex guy. Hugh’s got questions and Walter’s got the answers. Here at the Truth About FX Podcast.

Hugh: Hi, Walter! Here is another question for you. I’ve come to realize that I need to work on my mindset more than my trading method. Where do you recommend I start?

Walter: This is a tough one. First of all, most traders have something along this line. Most traders are dealing with something like this and so, there’s two ways to approach it. One is to just say “I need to find out what is going on and I need to fix it” which is like typically a male thing.

Something is wrong with the car, I will figure it out, fix it. Something is wrong with the clock, I will fix it. That sort of thing.

The other way is to say “You know what? Does not really matter what’s wrong, I am just going to replace the underlying beliefs that are restricting me from, that are holding me back. These barriers to success, I am just going to overwrite those subconscious thoughts with something more profitable and more positive”.

So, there is really two ways to approach it. If you are one of those people that feels like you just have to know what is going on, then there’s a lot of things that you can do. The best advice I ever received going through school — and I went three degrees in psychology all the way up to PhD.

The best advice I had was this professor who said “You want to know, you want to do some free therapy. You want to do something that’s like it’s going to tell you sort of what is going on in your head? This is what you do: you sit down on a bench in a public spot — you can do this at the mall — sit down in a mall and you just watch the people walking by and listen to what you say to yourself. ‘He’s an idiot’, ‘she’s too fat’,  or  ‘what a jerk’”.

You know what I mean? And so, what was happening is you are projecting the things that you do not like about yourself onto other people. Pay particular attention to what you say when you see someone who is clearly wealthy. What’s happening is you are going to project what you think about wealthy people onto those people walking by.

That helps you to see what are your barriers to overcome.

In this episode of Truth About FX, Walter delves into the topic of using fundamental analysis versus technical analysis in terms of analyzing market movements. Walter also taps into one of the most common errors newbie traders make when it comes to using fundamentals in trading.

He also touches the several advantages of using technical analysis in contrast to using fundamentals when it comes to perception of news events, support and resistance, and market expectations

Download (Duration: 04:49/ 5.52 MB)

In This Episode:

00:40 – surprise news

01:02 – was it jusrt luck?

02:11 – personality of the market

02:54 – best trade ever

03:57 – what to pay attention to

Tweetables:

Decide whether or not there is a trade based on patterns. [Click To Tweet].

Pay attention to the chart, not on people.  [Click To Tweet].

What does this news mean? [Click To Tweet].

Announcer: Sometimes, forex trading is a wild and wooly place to be. That’s why Hugh is here, to post your questions to Walter, the naked forex guy. Hugh’s got questions and Walter’s got the answers. Here at the Truth About FX Podcast.

Hugh: Hi, Walter! What percentage of fundamentals versus technical analysis do you use?

Walter: This is interesting. For me, I am close as you are going to find to a technical trade. In fact, today as we are recording this, there is this surprise news event that came out. It is funny because I’ve been talking the last couple of days about — in my trade, in videos — talking about this formation on the chart on the AUD/NZD. I’ve been saying that the AUD/NZD is getting ready to make a giant move up.

Today, it did that and it had nothing to do… I mean, one way to look at is saying, “Walter, you’re just lucky because you’re saying that it was a bullish formation”. And it was lucky. The other way to look at it is that the technical chart, pattern on the chart, foreshadows the fundamental news that came out today that’s fight the AUD up so much.

It is sort of a “chicken or the egg: which comes first?” For me, I really focus on watching force on support and resistance on the chart. When the market gets the support and resistance levels, I decide based on the pattern whether or not there is a trade.

Usually, the answer is no, but occasionally it’s a yes. I am probably like ninety-five percent technical analysis. The reason why I don’t give fundamentals, I find them to be really difficult to interpret.

I found that when the news comes out, and you think that the market should go this way, but it doesn’t. It’s not related to the news, it is related to you have to interpret what the market thinks about what is going to happen.

It is almost like what is the expectations of the market and where is the market sitting to right now relative to what happens in the market when the news comes out. It is really tricky because you are basically trying to determine what the personality of the market is before the news comes out.

When the news comes out, you have to say “Okay, now that means this” or whatever. So, to me, it is just not my style. I do not want to get down that rat hole.

In this episode of Truth About FX, Walter talks about a common trap most traders fall into while sitting in front of the computer. He indulge into trading addiction, its consequences, and how it can lead into serious trading mistakes.

Walter delve into his knowledge of trading psychology and how this can be solved by just simply taking a time-off and re-aligning your beliefs.

Download (Duration: 05:44 / 6.56 MB)

In This Episode:

00:37 – killing a trading account

01:15 – an addiction

01:54 – self-sabotage

02:30 – take a 72-hour break

03:08 – overwriting subconscious desires

04:04 – hypnosis download

05:12 – good but still losing

Tweetables:

You have to treat trading like an addiction. [Click To Tweet].

Start working on your beliefs.  [Click To Tweet].

Overwrite negative thoughts with more successful ones.  [Click To Tweet].

Announcer: Sometimes, forex trading is a wild and wooly place to be. That’s why Hugh is here, to post your questions to Walter, the naked forex guy. Hugh’s got questions and Walter’s got the answers. Here at the Truth About FX Podcast.

Hugh: Hi, Walter! This is a question that I hear quite a  bit and I’ve definitely done this myself. I have a trading plan and a trade checklist but I can’t help from taking trades when I sit down on my computer even if it doesn’t follow my trading plan. This is killing my account. What do I do?

Walter: This is a really good question. This might sound like a funny answer but I can actually post a video in the shownotes for this episode for everyone listening to this and if this is an issue for you.

A video that goes into the neuroscience behind this. Basically, here’s what’s happening. You have to treat this like an addiction just as you would if you’re an alcoholic or you’re a heroine addict or a sex addict or whatever your chosen thing.

For me, it’s ice cream. So I’ve got this ice cream problem, everyone has got something. What you have to do is you have to treat it like an addiction. What happens in your brain is you’re building this neuro pathways and you literally have to stop doing it for seventy-two hours before you can make some head wave.

What that means is it’s doesn’t matter what your addiction is: if it’s trading, buying the CD or pants, if it’s drinking too much alcohol or whatever it is. You’ve got to stop doing that for seventy-two hours.

After you do that, what you want to do is you want to start working on your beliefs. What’s happening is there’s something subconsciously inside of you that’s allowing this to bubble out.

It could be as simple as self-sabotage. A lot of us don’t believe that we are worthy of money or we don’t believe that we should be wealthy because we think wealthy people are assholes or whatever.

We don’t want to be one of those so by extension we do not want to join that group of wealthy people because we feel like, “If I make all these money then I am going to become an asshole an...

In this episode of Truth About FX, Walter takes you to the core of leverage: what it is and how it really works. He talks about the difference between stock trading and forex trading and the use of leverage on both types of tradings.

You will also learn here how you can “fire up” an account using leverage.

Download (Duration: 03:38 / 4.17 MB)

In This Episode:

00:36 – forex versus stocks

01:06 – margin trading

01:34 – is leverage a bad thing?

03:27 – a high leverage instrument

Tweetables:

Small movements might mean huge things in forex. [Click To Tweet].

Look at leverage like a fire.  [Click To Tweet].

Fact: stocks move a lot faster than forex.  [Click To Tweet].

Hugh: Hi, Walter! What is leverage and how do I know if I’m using too much?

Walter: What a great question. This is essentially how it works: forex trading is really different to trading stocks because it’s highly leveraged. The reason why it’s highly leveraged is that the market only moves a fraction of a cent. Maybe at the most is a cent or two everyday.

Obviously, when you’re talking about stocks, stocks move a lot faster than that. You can buy stocks with leverage which is what they’re calling “margin trading”. Maybe like if you put up a fifty thousand USD, your broker might allow you to trade a hundred thousand USD from the stocks.

They might double your account size, you didn’t have to pay interest on that loan and all that but that’s sort of margin trading in the stock world.

In forex, it’s a little bit different because the small movements mean that if you’re really going to make money out of this, you need to have a huge leverage. Most of your brokers are going to be giving you — what is it in the States now? Is it fifty to one?

Hugh: Yes. Fifty to one max.

Walter: Okay, fifty to one max in the States. In other countries, you can get as much as four hundred to one, or five hundred to one probably. I’ve seen four hundred to one, I’ve heard of a five hundred to one.

People say that leverage is a bad thing because they say you’re going to blow up your account if you have high leverage. It’s not really the leverage that gets you. I mean, the way I look at leverage is like fire.

Fire can be used to cook your food so it does something good. It could be used to boil some water and kill the baddies or some bacteria or whatever and all. It can also burn your house down.

That’s really what leverage is like. It’s sort of those things were if you know how to use it, and you’re a risk averse and you’re not going gangbusters trying to really make as much as you can, then you’ll probably survive.

When people get into trouble is they just max their… They rush up their trades as high up as they can. Even if they do well for a while, start making money and start doubling their account, occasionally, they’ll run into some loser. That will knock them back down.

Psychologically, they’re in big trouble because they lost so much of their account. Even if they didn’t blow up their account, they’re at a place — psychologically — where it’s difficult to continue.

In this episode of Truth About FX, Walter talks about free forex educational resources. He suggests a book good book for those who have only started trading and wants to learn the psychology behind it. He also named a website that new traders can visit for instructional trading, especially those who are interested in price action.

Download (Duration: 01:58 / 2.26 MB)

In This Episode:

00:41 – The Naked Forex Book

01:05 – Baby Pips

01:35 – first step into forex

Tweetables:

Talk with other traders and learn from them. [Click To Tweet].

Best Forex Trading book? “Naked Forex”.  [Click To Tweet].

It’s better to get a background in trading itself.  [Click To Tweet].

Announcer: Sometimes, forex trading is a wild and wooly place to be. That’s why Hugh is here, to post your questions to Walter, the naked forex guy. Hugh’s got questions and Walter’s got the answers. Here at the Truth About FX Podcast.

Hugh: Hi, Walter! This might be a tricky question: if you can only recommend one free forex education resource to someone who knows nothing about forex, what would that be?

Walter: It’s hard to be unbiased. I’ve heard from a lot of beginner traders, they liked the book “Naked Forex” that I wrote, which you can find really in just any bookstore that has trading books.

If you’re not into books, you really want to go to a website, which makes sense, because you can interact with people and things like that. My book comes with a free membership site but it’s not really interactive with other traders.

If I had to choose one and you didn’t really want to read a book, I would probably say to go with Baby Pips. I think Baby Pips is a great place to get into an instructional trading. It’s not really necessarily a — the last time I checked, which is a while ago — it’s really a place to go for naked trading or price action trading which is sort of where I reside.

It’s good to get a background in trading itself. That’s a really good resource if that’s your sort of thing, to go to babypips.com. I would certainly recommend that one. What about you, Hugh, anything that you think of in terms of first step into forex?

Hugh: I totally agree with those two things. Baby Pips, of course, and your book. You sent me a copy a while back. I really appreciate it and it’s definitely one of the best books I’ve ever read about forex trading. I totally agree.

Walter: That’s great! I didn’t realized it was so good. Thanks, Hugh. See you next time.

Hugh: See you.

 

In this episode of Truth About FX, Walter discuss about Sharia Laws. He talks about the tricky things that you could get using this system and how some brokers have taken this to their advantage.

Download (Duration: 02:41 / 3.08 MB)

In This Episode:

00:33 – Sharia Laws

01:42 – holding fee

02:12 – interest rate difference

Tweetables:

According to religion, Muslims are not allowed to pay interest. [Click To Tweet].

Why do you want an interest free account?  [Click To Tweet].

Wait for the interest rate difference to go up.  [Click To Tweet].

Announcer: Sometimes, forex trading is a wild and wooly place to be. That’s why Hugh is here, to post your questions to Walter, the naked forex guy. Hugh’s got questions and Walter’s got the answers. Here at the Truth About FX Podcast.

Hugh: Hi, Walter! This is an odd question maybe but what is “Islamic forex trading”?

Walter: I believe the question is referring to Sharia Laws. Really strict Muslims are not allowed to pay interest. What happens is, according to their religion, they’re not allowed to pay interest.

What that means is you’re used to be be able to get — if this is your religion — you’re used to get an account that was interest free. Obviously, in forex, we are either paying interest or gaining interest everyday of the week.

On Wednesdays, we actually get the three days. We get the Wednesday interest plus Saturday and Sunday with most brokers. You’re literally making or paying interest every day of the week which is called the “swap”.

There are a lot of tricky things that you could do by essentially gaining the system and opening up an interest free or Sharia account or Muslim account where you’re not paying interest in one account and then you could have and trade in another account, where you’re actually gaining interest.

It’s like you’re collecting all these interests, sort of thing. That game is really starting to shut down because the brokers understand it. Even if you’re trying to get an interest free account, they’ll often charge you with things like a holding fee or something like that.

They’re not calling it “interest”, they call it something else. Maybe possible but I think it’s really difficult to find a broker who’ll literally give you an interest free account now. I think a part of the question here is why do you want an interest free account? Or, why would you want to do that?

That’s been my experience. It’s actually a pretty cool system if you know what you’re doing. In other words, you’re just collecting interests. You do when you can get a lot of interest. You wait for the interest rate difference to go up and you can collect a lot of interest over time but I think that game is kind of shut down.

Do you know anymore about that?

Hugh: No, I don’t. I just heard about it a few years ago because I have a Muslim friend. That’s pretty much all I know. It’s seems interesting though but I can see where people would take advantage of it and why they will shut that down.

Walter: Exactly.

Hugh: Okay, great. Thanks, Walter. See you next time.

Walter:   See you.

 

Sometimes, we easily get lured into believing something out of rumors. Or, you have too much money and you just trade based on what others believe to be a good trend.

In this episode of Truth About FX, Walter discusses the fundamental analysis and the rationale behind the decision on whether you should or should not buy a currency. He outlines the biggest influence that might lead you to making wrong decisions: rumors. Should you go with what others say a profitable trade or should you stick with a system that you’ve already tested and proven to be effective for you?

Download (Duration: 03:14 / 3.71 MB)

In This Episode:

00:25 – an old question

01:06 – rumors behind it

02:18 – who is making the real money?

03:05 – a word of caution

Tweetables:

It’s better to stick to a system that you’ve already tested.[Click To Tweet].

You have to decide for yourself.  [Click To Tweet].

Demand can be created and manipulated too.  [Click To Tweet].

Announcer: Sometimes, forex trading is a wild and wooly place to be. That’s why Hugh is here, to post your questions to Walter, the naked forex guy. Hugh’s got questions and Walter’s got the answers. Here at the Truth About FX Podcast.

Hugh: Hi, Walter! This is an old question but I know it comes up once in a while. Is it worth buying Iraqi Dinars/IQD?

Walter: This is an interesting one. The other one that I hear a lot of is the Vietnamese Dong/VND. I don’t know if you’ve heard about it.

Hugh: Yeah.

Walter: The idea is that there’s going to be some sort of shocks in the market. Basically, they’re sort of differ and what will happen is the IQD or the VND is going to skyrocket up in value so you should go ahead and grab them while you can.

That’s the idea here so I stay away. To me, that’s more of a fundamental analysis sort of thing and I understand the thinking behind this. There’s also a lot of like just rumors and stuff.

I know a guy who bought a bunch of stock and we all know probably people who bought stock out of rumor — you know, the penny stock is going to triple or ten times or twenty times — that didn’t work out well for him.

These sort of things, his stocks went from eleven cents to one. You know what I mean? These things are like that. To me, if you have an extra, some money, and you want to throw in the IQD and hope that something happens, I guess go for it.

To me, it makes more sense to trade a system that you’ve verified, that you know works. You’ve back tested it and you have confidence in it because you know that’s a known quality.

Whereas, try to anticipate shocks to the market or changes, those sort of things are really difficult to do even if under the best of circumstances. So, I would say it’s not worth it but I guess every trader would have to decide for himself.

Hugh: Well, at least when I first heard about them, the theory was that they’re going to get new IQD and one dinar is going to be worth one USD and is going to parody. If you bought a million, you’re going to be a millionaire or whatever.

I agree with that. It’s just too much of a risk and I think the only people really making money with that are...

Sometimes, you want to catch a trade badly that you stay up even late at night. It’s a really good trade and you don’t want to miss it, but is it good for you?

In this episode of Truth About FX, Walter talks about the importance of having a sound mind and healthy body, especially when making important decisions. Is it really worth it to sacrifice a good night’s sleep for an extra trade that may or may not be profitable? Walter shares a good advice if you want to keep up with certain charts depending on your timezone.

Hugh also shares his experience on late night trends and the lesson he learned from them.

Download (Duration: 03:28 / 3.98 MB)

In This Episode:

00:27 – missed one candle

00:57 – what affects your decision making?

02:26 – sleep versus waking up in the middle of the night

Tweetables:

Rest is more valuable than any extra trade.[Click To Tweet].

Sleep early at night and catch the early morning trade.  [Click To Tweet].

A well-rested mind makes better decisions.  [Click To Tweet].

Announcer: Sometimes, forex trading is a wild and wooly place to be. That’s why Hugh is here, to post your questions to Walter, the naked forex guy. Hugh’s got questions and Walter’s got the answers. Here at the Truth About FX Podcast.

Hugh: Hi, Walter! Today’s question is: I like the four-hour chart and I want to trade them but I missed one candle in the middle of the night, the European session. Should I wake up to watch this candle close? What should I do?

Walter: This is a big one and I know when you first start trading you feel like you have to get into every single trade, you don’t want to miss out. My advice would be to actually sleep. Your sleep is more valuable than getting that one dose extra trade.

Just think about it, if you keep waking up in the middle of the night, that’s going to affect your decision making. That’s going to affect your brain because that’s when your brain is really repairing and that’s when your body is repairing. That’s really a valuable time.

For those of you who have small children, you know exactly what I mean. Basically, what you want to do is you want to let that go, forget about it. Even if you’re doing testing in forex tester, you might even identify where that candle prints on your charts and make sure that you don’t take those trades as well.

That way, you know about what your results will be. When I say that, I mean about how many trades you’ll get per month, per week and so forth. It really is a good idea to go to bed early then wake up maybe a little bit early so you can catch that early morning candle than it is to try and stay up late to get that late night candle.

In other words, let’s say you live in Seattle. If you’ve lived in Seattle, you’re at the Pacific time zone. What that means is you will have the daily candles — say you use the five pm New York time close — if you’re looking at four-hour candle charts, you’re going to have, the candle will close. That’ll be the one that closes at four, right?… I’m sorry, one that’ll close at two. Then four hours later, one that closes at six pm.

In this episode of Truth About FX, Walter talks about choosing the right time frame to trade and the factors that you should consider. According to Walter, you should always consider your lifestyle when choosing a time frame and ask yourself “does it fit my daily schedule?”, “am I comfortable trading on this time frame?” or “is my current time frame giving me the results I want from the charts?”

Hugh also shares how and why he chose his current time frame and the importance of acknowledging your strengths and weaknesses.

Download (Duration: 06:17 / 7.19 MB)

In This Episode:

00:35 – wrong approach

01:12 – a set block

02:05 – the way it works

03:09 – what fits your lifestyle?

03:41 – really tempting

04:52 – a little crazy

05:57 – great habits to build on

Tweetables:

What do you want to get out of trading?[Click To Tweet].

Your trading should fit in with your lifestyle.  [Click To Tweet].

Trade with the timeframe you’re most comfortable with.  [Click To Tweet].

Announcer: Sometimes, forex trading is a wild and wooly place to be. That’s why Hugh is here, to post your questions to Walter, the naked forex guy. Hugh’s got questions and Walter’s got the answers. Here at the Truth About FX Podcast.

Hugh: Hi, Walter! I want to find the right time frame to trade. How do I decide on this?

Walter: This is really an interesting question, Hugh. I think a lot of traders, they approach it the wrong way. They think of it in terms of “Hey, Joe trader makes a lot of money. He trades the one-hour chart so I’ve got to trade the one-hour chart.”

It’s not really that. What you want to do is you want to fit it into your life. I’ll give you a couple of examples. I have a good friend and he lives in England and he, basically, sits down in the morning and does his trading in the morning.

He looks at the lower time frames. He has a business but almost runs itself so he doesn’t have to do a whole lot in terms of his business and, instead, what he does is he concentrates on his trading in the morning.

He has that set block of four, five hours a week. He’ll sit down and watch the one-hour chart and try to lock into some trades.

Now, there are other traders who, like for example: I know another student, she’s in France and she will actually trade the four-hour candles.

The reason she does that, she can check the candle that prints before she takes her child to school. When she comes back, she has few hours and then she can check the next candle.

If you have that kind of life where you can check your charts two or three times a day, and you’re okay with trading the four-hour candles, and you’ve back tested it and it worked for you, that’ll be another opportunity.

Or, if you’re like me, you really just want to do this once a day where you sit down and you look at what’s going on. To be fair, I do it twice a day. Here in Australia, the way it works is my daily candles will close in the morning.

In the morning, I’ll see the daily candle close and it changes a little bit depending on  what time of the year it is. Basically, in the morning,

In this episode of Truth About FX, Walter talks about some of the most common mistakes forex traders make — and even the brokers agree on this. You’ll also know the importance of leverage, risk management, and how to deal with drawdowns.

Hugh also shares his own mistakes and how, sometimes, you’ve got to deal with human nature.

Download (Duration: 04:02 / 4.62 MB)

In This Episode:

00:35 – couple of mistakes

01:06 – a slippery slope

02:12 – human nature

02:42 – fruitful approach

03:25 – better problem to have

Tweetables:

It’s human nature to want to try to make it back.[Click To Tweet].

You want to get out of a bad trade as quickly as possible.  [Click To Tweet].

Most traders start off trading with too much leverage.  [Click To Tweet].

Announcer: Sometimes, forex trading is a wild and wooly place to be. That’s why Hugh is here, to post your questions to Walter, the naked forex guy. Hugh’s got questions and Walter’s got the answers. Here at the Truth About FX Podcast.

Hugh: Hi, Walter! Today’s question is: I’m a new forex trader and I want to do this the right way. What is the biggest mistake new traders make?

Walter: I don’t know if you can relate to this, Hugh, but I recall a couple of mistakes. Number one was trading with too much leverage so I’m having too much risk per trade.

The second thing is when you get into a drawdown, you want to get out of that as quickly as possible. I’ve actually spoken to brokers about this and they’ve highlighted this also.

When I say brokers I’m talking about forex brokers. They’ve also highlighted that this is one of the real challenges that forex traders have. When they get into this — or any trader, really, doesn’t matter what the instrument — but when they get into this drawdown, you want to get out of it as quickly as possible.

That’s a really slippery slope because if you look at the numbers — will post the numbers below this podcast episode — you can see where when you lose x percentage of your account, you actually have to gain more than that to get back up to where you were.

This is the sort of thing that really gets traders into a bit of a trap because they feel like they’re behind the eight ball and they want to take on more risk. Of course, when they have another loser, that just sends them deeper down the hole.

That’s probably the number one problem, how to deal with drawdowns and using improper money management. Of course, that is closely followed by the fact that most traders start off trading with too much leverage to begin with.

Those are the things that I would say. What about you, Hugh? Have you run into these things when you first started trading? What was your experience?

Hugh: For me, actually, I was taking too little risks. I think that was the problem — the biggest problem — but, on the second point where you’re saying that you just go down that rat in hole and you just end up chasing bad drink, good money after bad. I can totally relate to that.

I’ve got that under control but I think, sometimes,