Monthly Archives: November 2015

Understanding the Basics of Fundamental Analysis in Forex

Forex traders in Kenya, and elsewhere in the world, approach the forex market from two broad perspectives: either through technical analysis or through fundamental analysis. As a beginner, you may spend a lot of time trying to figure out which is the best approach to trading. The truth of the matter is that none is better than the other.

History is full of traders who have made bank by employing any of the above approaches.

In his book, Market Wizards, Jack Schwarger interviews two prominent traders, Ed Seykota and Jim Rogers. Rogers is a diehard fundamental trader who believes that no one can make a living trading forex using technical analysis. He goes ahead to say that he has, in fact, never met a rich technical trader.

Seykota shares the opposite view. According to Seykota, he had always been a poor trader when he relied in fundamental analysis. He insists that his fortune changed when he switched to technical trading.

As stated earlier, none is better than the other. You only need an approach that suits you, stick to it and make bank.

In this article, I am going to disect the basics of fundamental trading, just in case you decide that you decide you want to be a fundamental trader.

What is Fundamental Analysis?

Fundamental analysis is a way of studying a security in order to deternine its intrinsic value by analyzing a host of financial data.

In the forex exchange market, a security would be a currency. Fundamental analysts are always analyzing emerging financial data from a country in order to determine the value of the country’s currency.

There are several important economic indicators that every fundamental forex trader should understand. Fluctuations and variatons in these data will make the currecy value of a country to fall or rise.

Interest Rates

Interest rates are the most important driving force of the value of a country’s currency. Most central banks announce the interests rates every single month. Fundamental traders keenly watch these announcements to decide how a currency will be affected.

In general, Central Banks will manipulate the interest rates in order to control the amount of money in circulation. If the Central Bank wants to increase the amount of money in circulation, it lowers the interests, and conversely increases the interest rates when it wants to decrease the supply of its currency in the economy.

Gross Domestic Product (GDP)

GDP is the indicator of how fast a country’s economy is growing. Every country’s Central Bank has expectations of how much the economy is expected to grow every year. When the Gross Domestic Product falls below this expectation, currency values tend to sink while a growth that hits the expected growth rates or goes above raises the value of the currency.


Inflation destroys the purchasing power of a country’s currency, and therefore tends to devalue the currency. It is generally expected that a currency will suffer inflation of 2-3% annually. However, if the inflation rises beyond the Central Bank’s expectations, the Central Bank will increase the interest rates on the currency.


Without people, we wouldn’t have any economic growth. Employment and unemployment are the backbone of every country’s economic growth. When the level of unemployment in a country rises, it tends to have a devastating effects on the economy. To minimize the effects of unemployment on the economy, the Central Banks will reduce the interest rates in an attempt to increase the supply of money in the economy and stimulate economic growth.

Consumer Demand

As we have already stated, people are the ones that drive economic growth. Healthy consumer demand lies at the center of economic growth. When consumers are able to demand goods and services, the economy tends to grow. When the consumers’ demanding power is decreased, the economy tends to stagnate.

1 Hey, I am a Beginner. How Do I Invest in Online Forex Trading in Kenya?

Have you ever come across a person who asks this question? Maybe you haven’t because you are also new to online forex trading. You are probably also looking for a person to guide you.

But if you were in my position, this type of questions has everything skewed up. I normally do not answer such questions, but if I could, I would have only one answer for such people: “What…? You mean you are a newbie? Well, go and invest your money elsewhere. You will never become a profitable forex trader!”

Asking questions like this one is utter nonsense.

You may call me rude, pessimistic or arrogant, but such a trader will lose. Yes, you will lose, if you are the kind of person who asks such questions.

It is obvious that such a person has not bothered him/herself to even push a single keyboard key to find out about online forex trading.

Such a person does not want to tire their brain doing research for themselves and gathering information about online forex trading.

Such a person does not consider other people’s time to be valuable. How can s/he expects other people to be the ones to answer these basic questions about forex trading?

And this is the sole reason why they will lose. A person with such an attitude and ‘exceptional’ research knowledge may never become a profitable forex trader.

An investor is a die-hard researcher at heart. An investor keeps an open mind and has the ability to find all the answers by him/herself.

Before you ask such dumb questions, remember that Google is your best friend. Type your question on the search engines, and 10/10 times, the answer will be right there in the search engine results.

5 Incredible Tips That You Must Master to Be Successful in Forex Trading in Kenya

There are two type of investors in the forex market. Those who learn all there is to learn about the market, and those who approach forex trading as if it was a gamble. They do not take their time to learn. To them, investing in forex is not so much unlike spinning the roulette. They click blindly on the charts and wait for Lady Luck to bless them with profits.

Wrong approach. Traders who do not learn end up making massive losses.

If you want to separate yourself from this sad group of ‘trader’s, you should take your time to learn how the forex market operates.

Here are 12 most important things that you should take time to learn:

1. Develop Your Trading Plan

By failing to plan, you are planning to fail- Benjamin Franklin

I’ll illustrate the importance of having a trading plan with situations that I encounter almost on a daily basis.

When new traders discover an uptrend in the market, they usually ask something like, “ The EUR/USD is on an uptrend, where should I enter the market?” My reply is usually, “What amount of risk/reward ratio are you willing to place on a trade?”

This reply catches them by surprise. Most forex traders in Kenya concentrate so much on being right and forget that they could be wrong. The market could go against you or it could hit a top and turn right back.

Without a trading plan, it means that you do not know what to do not only if a trade goes against you, but also when a trade goes your way. Big profits on paper could turn into massive loses when you do not have a trading plan.

Here are a few important points that I use when developing a trading plan. Feel free to borrow from the list when you are developing your own trading plan:

  • I always make sure that I know where and how to enter the market.
  • I always know what amount of money I can put to risk on any particular trade
  • I know when to leave if the market does not go my way
  • I know how much profit I am expecting from every trade if I am right
  • I always protect my profits by placing a trailing stop loss on my orders

These are just but a few of the things that go into developing a trading plan.

2. Have an Aggressive Money Management Strategy

Money management is one of the most important aspects of online forex trading. It is the one thing that will make or break your career as a forex trader. Unfortunately, a lot of traders enter into trades without taking money management into consideration.

If you are serious about trading, you have to learn how to manage your money.

Good money management starts way before you open a live trading account. It should start even before you are trading on a demo account. Good money management should start when you decide that you want to invest in online forex trading.

How, you ask?

Suppose that you had $20,000 that you have decided is a good starting capital for your online forex portfolio, would you put all the money on your forex trading account? You’d be putting yourself at an aggravated risk by doing so. What happens next if you lose all the money in the account for whichever reason? What if your forex broker goes broke bankrupt, closes the company and never pays back your money?

Or what happens if you accidentally take a 20 lots position and forget to set a stop loss?

If $20,000 is all you have to start trading, you should consider opening an account with a maximum of $1000. You can always inject more money into the account as you see necessary or when you have gained substantial trading experience.

The second most important factor to consider when managing your money is leverage. While it is possible to get accounts with leverage as high as 1:500, a huge leverage is a double-edge sword and usually a reserve of seasoned and aggressive forex traders in Kenya.

As a general rule of thumb, you should never risk more than 2% of your account in any one single trade.

Learning the art and science of money management will determine how you prosper in forex.

3. Make use of stop loss orders

With so much activity going in the forex market and so many a facets of setting up a trade, it is sometimes possible to forget the small things like setting protective stop loss orders on your trades. Apart from mitigating your losses, a stop loss order also lifts the burden of monitoring your trades from you. With proper stop loss orders, you can set up your trades and move on to other things, leaving your trade to play.

What is a stop loss order?

Trading online forex with your real hard earned cash is a serious business, and it should be taken seriously. As such, you should take time to familiarize yourself with the different trade management tools that you have at your disposal.

A stop loss order is an order that you place on your active trades to prevent further losses. The stop loss closes your position in case the market moves against you and reaches your specified level of acceptable loss.

As an example, if you decide to go long on the USD/JPY at 109.58, you could set a stop loss at 106.58. If the market goes against you and reaches this level, your trade would automatically be closed, preventing further losses.

Most importantly, a stop loss order eliminates one of the hugest barriers to trading: emotions. Many traders tend to fall in love with their trades, believing that the trades will turn around. They hold on losing positions for far too long, and pay dearly for it.

To become a successful forex trader, you have to learn not only how to place stop loss orders on your open positions, but also where to place the stop loss orders. To tight of a stop loss means that your stop loss will be hit by the slightest drawdowns or noise in the market, while spaced out stop loss orders could lead to insufferable losses on your account. The art of the stop loss is one of the main lessons we teach traders during our paid training sessions.

4. Close your profit-making trades at the right time

Closely related to the art of putting stop losses on your trades is the art of taking your profits at the right time. One of the biggest blunders among new forex traders is that they take tiny profits too soon but allow their losing trades run.

When is the right time to take your profits?

The right time to take your profits will be dictated by your trading plan. Before you enter your trade, you should have a predetermined entry and exit points. This reduces the impact of emotions on your trades.

Your trading style also determines when you should take your profits. For scalpers, taking profits as soon as possible is an excellent strategy, but if you are a swing trader, you might want to let your trades run for longer.

5. Exercise Proper Trading Discipline

A lot of forex traders in Kenya end up burning their accounts not because they were not trained properly in the forex course, but because they lack the proper trading discipline. It is hard to become a successful forex trader unless you learn how to be disciplined, how to stick you your trading plan and how to substract emotions from trading.

One of the best exercises to help you develop stellar discipline is to watch the markets the whole day without taking a trade, even when you have an excellent entry set up. Repeat this several times every month and you should be on your way to becoming the next successful forex trader in Kenya.

1 Master your Mind, Develop the Perfect Trading Discipline

Every successful forex trader needs a set of skills and characteristics. Some of these skills we can acquire through training while others we can only develop from constant practice, which is why a demo account comes handy.

The ability to understand the fundamentals of a currency and the ability to point the direction of the trend, for instance, are some of the key skills that online forex trading demands, but none of them is as important as developing the proper trading psychology and discipline.

What’s it About Trading Discipline That is so Important?

If you ask me, or any other sober forex trader in Kenya, they will tell you that the psychological aspect of trading is the most important and defining part of trading. Forget about a fancy trading system or a million-dollar forex trading course, if your psychological game is not intact, you are headed for doom.

A s a forex trader you will always be entering and exiting trades, sometimes on very short notice. The market will constantly force you to make snap decisions. To operate profitably in such circumstances, you will need an incredible mental game, and by extension, discipline, so that you are able to stick to your plan.

This is what we call self-discipline.

According to Mark Douglas, the author of Trading in the Zone, self-discipline is “a mental technique to redirect our focus of attention to the object of our goal or desire, when that goal or desire conflicts with some other component of our mental environment.”

In short, self-discipline is the ability to develop a mental framework that lets you stay focused and motivated in spite of challenges, losses, mistakes, and conflicts of interest. Particularly, you will need to teach yourself how to get rid of the negative feeling that is associated with losses and setbacks.

Unfortunately, this is easier said than done. When faced by the real market risk, many traders abandon their trading plans and succumb to emotional trading. Greed, fear and euphoria can get the best of you and ruin your plans.

Things would have been different if self-discipline was a trait that you were born with. Unfortunately, it is not.

Many traders find it difficult to develop steady forex trading discipline, which is why automated forex trading software has become so common. But trust me, it is possible to develop the right trading discipline. Being disciplined will help you become a more profitable trader in the long run, even if you decide to use automated trading software in the future.

Here is how you can build your trading discipline:

Developing Clear Trading Goals

Setting clear trading goals and understanding the motivation behind your trading is a good place to begin. Ask yourself, “Why do I want to trade forex? What do I want to gain and achieve from investing in the forex market?”

Sitting in front of your computer, taking trades and hoping for the best is not enough. You must have a target in mind. What are you aiming to achieve by taking that particular trade? How many pips do you hope to gain?

Many beginner forex traders get into trading because they feel it is a get-rich channel. They set unrealistic goals and pay a hefty price for that. Don’t just set a bunch of crappy goals because I told you to do so. Your goals need to be realistic. It is important that you set challenging but achievable goals to avoid frustrations that may result from not hitting your target.

Without a goal in mind, it is possible to let the discouragement of being new to trading defeat your desire to learn.

Here is something that you must keep in mind as you venture into forex trading; every endeavor that you set to undertake will always be difficult in the beginning. This hold true more in online forex trading. Chances are that you will suffer many losses. This part will be disheartening, and if you are not disciplined, chances are that you will give up trading.

Maintaining Focus on What Needs to Be Done

Setting clear and realistic goals puts you one step closer to becoming a successful and disciplined forex trader. It is easier to stay focused on your goals, but that assumes that you actually get off your ass and do what needs to be done i.e. trading. For instance, if your goal is to let profits run and cutting your losses short, you must start putting trailing stops to your trades.

On the contrary, if you did not set clear trading goals, you’ll probably waste a lot of time trying to figure out what needs to be done. In return, this makes you more susceptible to your emotions.

Keeping a Trading Journal

Keeping a trading journal is an easy way to track your past trades. It can also help you identify areas that you need to work on. I also find that a trading journal helps me avoid making impromptu trades since I hold myself accountable for every trade that I take.

After a streak of losses, many traders, I included, start to take trades that are not in their plan. By recording your trades in a journal, you will identify this behavior and work to correct it.

A trading journal is also a great way to keep yourself motivated. It is unavoidable that you will face a lot of obstacles along the way. There will be a lot of times when you will feel discouraged and ready to give up. This is where your self-discipline will be put to the test. In order to succeed, your resolve to push on must be greater than the temptation to give up.

When you have reached your trading goals, take some time to refer back to your trading journal. What were the trades that you took that led to your target. What kind of analysis led you to hit your target? Can you replicate it on your future trades?

5 The Ultimate No Bullshit Guide to Choosing a Forex Broker in Kenya

I am a member of several online forums where members discuss all matters forex. One of the hottest/recurrent topics that I see in these forums concerns problems with online forex brokers. In fact, I would go ahead and say that not a day passes without someone posting about a ‘problematic’ broker.

The problems discussed range from forex brokers not processing withdrawal requests on time; forex brokers who are so aggressive in stop loss hunting or forex brokers who close all your open positions and liquidate your account for no evident reason.

Almost every beginner to online forex trading passes through a phase where they mistrust their forex broker. I understand this skepticism. It is actually an excellent survival mechanism. Online forex brokers range from highly reputable and strictly regulated firms handling a lot of client accounts honorably, to those that are highly questionable in price quotation and order execution, to the outright frauds that sprout overnight and are gone by morning, depriving you of your money even without giving you the chance to set up your MT4 trading software.

It is therefore recommended that you do thorough research when you are choosing a forex broker to trust with your money. Carrying out due diligence when choosing a broker is the number one rule that will help you avoid future problems with your broker.

Who/What are Online Forex Brokers?

Online forex brokers are financial institutions that act as intermediaries between you and the major liquidity providers or the interbanks. The brokers execute orders on your behalf or, in the case of ECN brokerage firms, provide a platform for the retail traders to place buy and sell orders.

Forex brokers operate through websites which allow you to make trades via proprietary software or through an independent trading software such as the MetaTrader4.

Forex brokers usually make their money via the spread, which is the difference between the bid and the ask price. For instance, a forex broker may buy Euros at 1.5475 U.S dollars and at the same time sell the Euros at 1.5478. In this case, the spread is 0.0003 USD or 3 pips.

Before you start investing, it is important that you do background research to establish whether the broker you are thinking of investing with is reputable and whether he has the features that you are looking for.

Here are 9 questions to ask yourself when you are shopping for a forex broker:

  1. Is the broker regulated, if so, which bodies/organization regulate the broker?
  2. How efficient is the brokers trading platform?
  3. Capitalization
  4. Is the company a broker or a dealer
  5. How supportive is the broker’s customer support department?
  6. What is the cost of trading with the broker?
  7. What account types does the forex broker offer?
  8. Does the broker offer any value added services?
  9. What are the broker’s requirements concerning margin and leverage?

Is the Broker Regulated? In Which Country?

Regulation for forex brokers differ from country to country. I have heard people argue that since we are trading forex in Kenya, it does not matter where the forex broker you choose is regulated. This is a big no. I’d rather choose a broker in a country where there are strict regulations (the US of A) than choose a broker where the regulatory framework is a sham (Russia or Cyprus?).

Some of the countries where the regulations are intact include:

  • The USA
  • UK
  • Eurozone
  • Japan
  • Australia
  • Switzerland

Choosing a broker that is regulated in one of these countries brings you one step closer to avoiding future problems with your broker or to avoiding an outright scam.

However, you shoudn’t take a broker’s word for it. It is easier for a forex broker to write that they are regulated by so-and-so on their website. Anyone can do that. Take it a step further. Visit the regulatory authorities website and seek whether the broker is really regulated by the said authority.

How Reliable is the Brokers Trading Platform?

Depending on your hardware and software limitations, you may either choose to trade forex on a web-based application or on a software that you install on your computer. You need to decide which platform suits you best before you choose a broker.

The broker you choose must be able to offer the trading application that suits you. More importantly, however, the trading platform needs to be perfectly stable. You do not want the agony of a platform that hangs whenever the market activity increases. Nothing else is as important as the stability of the trading platform; forget the look and feel. Stability is king.

User-friendliness is another unique characteristic that you need to watch out for when vetting a broker’s trading platform. In the forex trading circles, user-friendliness refers to the ease with which you can place your orders, including limit and stop-loss orders. Most brokers offer one-click order platforms.

How Capitalized is the Forex Broker?

The more capitalized a forex broker is, the better their credit connections with liquidity providers are.

Since forex is traded over the counter (OTC), it becomes exceedingly difficult for a forex broker to get competitive currency pricing without depositing a considerable margin with a lending institution or bank.

In addition, many forex brokers are required to comply with a minimum capitalization level. This capitalization level is directly related to the broker’s ability to stay solvent. If a forex brokerage company does not publicly declare its minimum capitalization level, this could be a warning sign about the company’s solvency.

Is the Brokerage Firm a Broker or a Dealer?

Understanding the nature of a forex brokerage company is an important step as there are several types of brokers in the OTC forex market.

Dealing with a broker

Brokers act as intermediaries between you and the market makers/dealers. Brokers make use of computer systems to process your orders. The orders do not typically go through a dealing desk, hence the term ‘non dealing desk’.

The technology through which a broker sends your orders to the market makers/dealers is called Straight Through Processing or STP. The spreads that you get on your orders are dependent on the market maker that your broker routes your order through.

Brokers can either charge you a fee for this service or are compensated by the market maker for the transactions that are routed to the market makers desk.

Dealing With a Market Maker aka Dealer

All market makers make use of a dealing desk, which is the traditional method used by conventional financial institutions and banks to process customer orders. As the name suggests, market makers ‘make’ their own bid and ask price and display them on their trading platforms.

The market makers are always ready to take your order. However, in doing this, they become counterparts to each transaction you make. If you happen to sell 10 lots of USD, the market maker must be prepared to buy the 10 lots from you. In others words, whenever you sell a currency, the market makers must buy. The vice versa is also true.

As counterparties to your trades, the forex market makers may try to hedge or cover your order by passing it on to someone else. There are also times when the market maker will decide to hold your order, and trade against you.

Most market makers provide you with a fixed currency price throughout the day. The exchange rates that they set is based on their best interests. However, they try to keep the prices fair due to the stiff competition that characterizes the market maker industry.

On paper, market makers are supposed to make profits through the spread that their charge you. However, this is always not the case and some forex market makers have been known to utilize unscrupulous means to get an edge over you.

ECN Brokerage Model

The ECN brokerage model is the new kid on the block. An ECN broker will pass you prices from various market participants including banks, market makers and other financial institutions. ECN brokers display the best bid/ask price on their trading platforms.

Unlike the market makers who offer fixed spreads, the spreads offered by ECN brokers vary depending on a currency pair’s activity in the market. During periods of intense market activity, ECN brokers will not charge any spread.

Unlike the other brokerage models that charge spreads on your trades, ECNs charge a commission on every trade that you place. Really authentic ECN brokers do not play a part in price determination, therefore, your risk of losing trades due to price manipulation is non-existent.

Customer Support

Customer support is one of the core pillars of online forex trading. Since the forex market is a 24-hour market, the forex broker you choose should be able to provide support around the clock.

Most importantly, what medium of communication does the forex broker offer? Email, toll-free phone numbers and online chat applications are some of the most important communication tools offered by forex brokers.

You also need to deal with a forex broker whose customer support staff are knowledgeable. There is nothing as agonizing as having to deal with customer reps who do not have a clue to what you are talking about. It wastes time, which is one of the most precious resources you have as a forex trader. You can tell how knowledgeable the customer support staff is by the way they answer your questions.

It is not uncommon to run into technical issues when trading. Try to simulate a technical glitch, formulate the questions that you would have, and see how the support staff answers them.

Cost: Spreads and Commissions

The forex market prides itself on being a cost-free market to invest. Many market markers try to entice retail traders to trade more and more from this unique feature of the forex market; they promise no commissions, no regulatory fees and no data fees.

Something that the market makers fail to tell you is that your trading costs depend on you trading. Your frequency of trading, ratio and size have an impact on the cost of your trading.

Depending on the forex broker you choose, you will either pay:

  • a fixed spread
  • variable spread, or
  • commission on your trades.

As a quick reminder, spread is the difference between ask price and the bid price.

Which is the best choice?

Depending on how you look at it, you may take the fixed spread as the best choice since you always know what your trades will cost you. On the other hand, a variable spread means that you may sometimes pay a very low transaction cost, especially if you time your trades to coincide with the periods of heightened market activity.

Most forex brokers do not charge commission on trades, so the spread is the way that they make money. In such a case, the lower the spread, the higher the hypothetical profit that you will make.

In the case of forex brokers who offer variable spreads, you can expect the spread to be as low as 1 pip or as high as 7 times during periods of low market activity.

The best deal lays in choosing the right forex broker. If you choose a broker who is well regulated and capitalized, you have less to worry about. Secondly, you need to factor in your trading model and choose a cost model that is favorable to your trading model.


Reduced liquidity or high volatility may cause your forex broker to apply ‘slippage’ (or requotes) on your orders. Slippage occurs when your order is executed at a price that is different from the one that was quoted. If you trade the news or you are a small timer, this is a cost that you cannot bear to bear. You should therefore choose a broker who does not offer requotes.

Account Types

Many online forex brokers offer different account types ranging from standard accounts, to mini accounts, to micro accounts. The size of the account depends on the lots that you wish to trade.

If you have forgotten about lots, here is a quick overview of lot sizes:

  1. A standard lot is a lot that consists of 100,000 units of the base currency
  2. A mini lot consists of 10,000 units of the base currency
  3. A micro lot consists of 1000 units of the base currency.

The mini and micro forex accounts require low initial capital while the standard account may demand that you invest a lot of money.

As you can see, the account type is depended on the amount of capital you have to start trading. Choosing a forex broker that offers an account type of your size will save you a lot of headaches when you are managing your money and risks.

Does the Broker Provide any Value added Services?

Easy access to charting tools, real time data, news analysis and economic data are the bread and butter of all professional traders. If your forex brokers offers all these tools, you have landed on a winner.

Leverage and Margin Call Policies

A lot of forex traders in Kenya gravitate towards forex brokers who offer high leverage. However, you should remember that leverage is a double-edged sword. It can make you freaking rich or agonizingly poor. Do not base your decision of a forex broker in Kenya only on this feauture.

Some brokers offer a fixed leverage rate while others will vary the leverage rate depending on the currency that you are trading.

You also need to understand your broker’s margin call policy.

Are these 3 Demons Haunting Your Forex Trading Strategies?

You want to be a successful forex trader. You want to retire from your 9-5 job and enjoy working from anywhere in the world. You want to spend more time with your family, and you want to provide your loved ones with the kind of lifestyle that they deserve.

Trust me. All this is possible when you invest in the forex market.

However, success in online forex trading, like all other good things, does not come on a silver platter. You have to work for it. You have to condition yourself for success. You have to change some habits, and adopt other habits of successful forex traders, and you have to open your eyes to what is really happening in the market.

What Limits Your Success as a Forex Trader?

A lot of forex traders in Kenya believe that they need an exceptional trading strategy or advanced education in finance and related fields to be successful in forex trading. Nothing could be further from the truth.

Good academicians do not always make good forex traders and people who develop incredible trading systems do not always end up profitable. Long-Term Capital Management (LTCM), a hedge fund management firm that was based in Greenwich, is a good example of how good academicians do not make the best forex traders.

LTCM’s board of directors included Rober C. Merton and Myron Scholes, two Nobel Prize winners whose contributions to the economic theory are among the most valuable in our century. Nonetheless, their articulate analytical skills and spectacular knowledge of the markets did not prevent the collapse of the firm in 1998.

It is clear that lack of trading knowledge was not the cause of collapse for the most reputed hedge fund firm in Wall Street. Instead, it was the 3 demons that finally got up with them and razed their firm to the ground.

These 3 demons, if not tamed, will also be the cause of your losses.

What am I Talking About?


If you trace the source of failure for every trader, beginner, intermediate and pro alike, you will realize that their failure is not caused by lack of understanding of the market. Majority of the failure in forex trading is rooted in emotions.

There are particularly 3 strong emotions, which is not tamed and handle cause the fall of many a trader.


The greed demon has to be the most tempting among traders. The demon has a long and luscious tongue that constantly whispers to you that unless you do act now, you will miss the most profitable trading opportunities in the market.

The greed demon is always on its feet. Like it is high on something. It is always urging you to enter into trades faster. It will cause you to lose focus as you rush to make trades that have not been carefully analyzed. You have to recognize this demon for what it is. It is an emancipated and empty-bellied demon since none of its exhortations for speed and greed lead to profits.

Every trader has a natural inclination to want to make money. Every trader attaches great importance to financial success. I wouldn’t be trading if I was not profit-oriented. In fact, no trader would withstand the pressure of the market if they were not driven by the desire to make money. The drive to make money, in moderate proportions, is healthy and a requisite driving force for traders.

The drive to make money, however, becomes unhealthy when it becomes the main driving force of your trading decisions; when it starts interfering with your trading decisions and trading strategies. Only logic should dictate your decisions in the market.

So, how do you strangle the Greed Demon and ensure you are making the right trading decisions?

The first step to strangling the greed demon is to ensure that you have developed a disciplined approach to trading. This will reduce the impact of impulse decision in your trading.

By developing a trading system and strictly following it from the very start, we can ensure that greed has no play in our trading decisions. You will be able to make your decisions based on a tested and proven trading setup.

Emotions can only thrive where fear and uncertainty are in plenty. To prevent fear and uncertainty, you need to make sure that you have developed, backtested and taken your trading system on a roller-coaster ride on a demo trading account.

Also, keep in mind that your desire, motivation and quench for profits will not actually make you achieve profits. There is nothing to be achieved by bowing down to the demon of greed.


You will recognize this demon by its sharp and shrieking voice that is always shouting to us of imminent dangers ahead. The demon injects second-thoughts and doubts on whatever trades you want to take.

The Fear Demon has the opposite role to that of greed. Instead of pushing us to trade like automation weapons, opening and closing positions with the speed of lightning, fear does the complete opposite. It tries to convince us that we cannot trade profitably, regardless of the meticulousness of our trading systems and the thoroughness of our analyses.

If they overcome fear long enough to get into trades, fearful traders will not wait for their positions to realize profits. They close positions prematurely, and end up making massive losses from drawdowns, commissions and broker spreads.

Apart from not taking trades and closing positions prematurely, fear also leads to more irrational decisions.

When dealing with fear, it is important that you realize the distinction between fear and conservative trading. A conservative approach to forex trading is usually a recipe for success. A conservative forex trader will be skeptical of all information he gets, but that does not stop him or her from taking action when his/her trading system shows that a profitable trade setup in in play. A fearful trader on the other hand is not only incredulous about the opinions of others but also about everything that his trading system tells him. He is always confused of what to do, where to look, and which trade to setup to take and which one to avoid.

A fearful trader does not trust anyone, not even himself or his trading system. He cannot evaluate the markets effectively as he has a gnawing mistrust of all trade analysis tools. The trader always ends up trading in a style akin to casino gambling; the outcome is always disastrous long term losses.

How can you strangle the demon of fear?

To avoid the calamitous results of fear, you must train yourself to realize that no trader ever became successful through randomness. You must be convinced that you are in full control of your choices. You must have a clear trading system that you adhere to until it proves that it is no longer profitable. All this is possible when you have a logical and sober approach to trading, something that can only be achieved through patient and persistent study of the forex market.

Another way to strangle the demon of fear is to avoid overleveraging your account and having a tight risk management strategy, such that a losing trade would not wipe out your whole account.


Euphoria is the queen of all forex trading demons. It promises infinite wealth in a limited amount of time.

Don’t be fooled.

Euphoria can only deliver destruction, disappointments, and destitution.

Euphoria works hard to ensure that you only see the rosy side of investing in online forex trading. It makes you think that you have somehow been blessed with the Midas Touch. It makes you think that everything you touch will turn into gold.

Most traders will least be affected by euphoria because many are aware that being successful in forex trading is no child play. While it is possible to make huge profits in a short time, such results are usually the result of many hours poured in studying forex and practicing trading on a demo account.

In case of many forex beginners who do not have background study or practice, euphoria usually results in despicable results. Beginners usually develop euphoria after a string of profitable trade setups that make the trader believe that all is rosy in the markets. As the trader gets comfortable, his analysis slackens, he takes larger unmitigated loses, and this is when the demon decides to strike.

The key to vanquishing this demon is to realize that no analysis or trading system is error-proof. A successful forex trader is always skeptical of his systems, although this does not stop him from taking trades as he bases all his decisions on logic alone. The successful trader realizes that the success of previous trades is not an indicator of profiting in future trades.

A successful forex trader does not get excited about his past performance. The next trades may or may not be successful depending on how diligently he has studied the market. Thus, the best way of killing euphoria is realizing that the success or failure of previous trades does not impact the outcome of the next trades. The success of every trade is only Dependant on how carefully you have studied and analyzed the market prior to opening a position.


The problems I have analyzed above are associated with trading psychology. In order to perfect your trading psychology, you must work to reduce the role of emotions in your trading decisions. You must understand that your success or failure is not a matter of luck, but a consequence of the choices that you make.

I have always pointed out that it is hard to get an unleveraged account wiped out from a single trade. If you lose all your money from a series of trades, then it is clear that luck has no role to play in that.

The best way to deal with the emotions that are associated with online forex trading is to develop a logical approach to trading. Study the market and understand its mechanisms. Understand the forces that drive price. In this website, I strive to equip you with the basic understanding of these factors and some more. To never miss any of the informative news, consider signing up for my newsletter.