By Michael Sankowski, Editor, Currency Profits Trader, taipanpublishinggroup.com
For today’s Smart Investing Daily, I’ve dug into the annals of Currency Profits Trader and found Editor Michael Sankowski’s report on mastering the Forex currency market.
In it he discloses 10 secrets to mastering the Forex currency market. You know we like to get expert opinions from people who’ve actually been there, to reveal the inside details of how lucrative investment sectors work and how you can gain an edge.
With that in mind, here is Michael Sankowski’s article…
Guide to Mastering the Forex Currency Markets
The first step in mastering the Forex currency market is knowing which currencies to trade.
The Best Currencies to Trade
The G-7 or “major” currencies are the best currencies to trade. These countries are the largest and most economically advanced in the world — and their currency markets are the most liquid on the planet. A vast majority of currency trading happens in the majors, so I recommend trading these currencies first:
- U.S. Dollar
- Euro
- Japanese Yen
- British Pound
- Swiss Franc
- Canadian Dollar
- Australian Dollar
Which Currencies to Avoid
In the beginning, avoid trading any currencies outside of the major currencies. They are known as exotics — and they have a tendency to crash without notice. To avoid losing a ton of money, avoid the exotics.
I still focus on the majors after years of trading — there is plenty of opportunity to make truckloads of money in the major currencies.
How to Get Your First Winning Forex Currency Trade Under Your Belt in a Single Day!
Some of the trades I’ve recommended as the editor of Currency Profits Trader have been winners from the very first day. Follow the trade recommendations carefully — I put an enormous amount of research and thought into every recommendation.
How to Evaluate How Much to Put in Each Currency Trade
This is among the most important topics in trading. Most people risk far too much in each trade. Many professional traders risk 1% of their equity per trade — it is the way to insure that you can always have capital on hand to make another trade. I recommend putting less than 5% of your trading equity in each trade. Even with this level of risk, be careful.
How to Enter a Position for Maximum Gains
The best way to enter a trade is when it meets several criteria for being a successful trade — not only one or two criteria. When a trade has fundamental and technical support, short- and long-term sentiment, and momentum going for it, then the odds of a successful trade go up dramatically. Situations like this happen frequently in the currency markets, and when they do, large gains can be made.
How to Track Your Trades in Just Five Minutes a Day
Many people fall into the habit of “checking” the markets constantly. They will pull up prices on their computers, pull up short-term five-minute charts, and watch the market move trade by trade. Please don’t do this. It doesn’t help trading at all — it may even be counterproductive.
You can’t make the market go your way any faster by watching it closely, and obsessing over the markets does not help you make objective decisions about making trades. Of course, you’ll want to be watching your trades, but watching them too closely doesn’t help.
I recommend checking the markets every morning for just a few minutes, getting on with your life during the day, and then checking them again in the evening. When you get a trade recommendation from me, act on it immediately. If you are in a place where you cannot act on the trade recommendations immediately, get a broker who can execute them for you.
Beyond that, you don’t need to do anything more with the markets. I spend my days researching, thinking through scenarios, and analyzing the markets so you don’t have to. When you get a recommendation from me, know it has the full weight of my best thinking behind it, and 15 years of market experience.
The WORST Day of the Week to Enter a Forex Trade
Saturday is the worst day to enter a trade. The Forex currency markets are always open, but at different times of the week there are different levels of liquidity. During the workweek — that is, from Sunday night (Asian Week Open) to Friday at 5 p.m. ET — the markets are liquid. As a result, the prices you get on trades are reasonable.
But on Saturday and Sunday morning, the markets are not liquid. But on many Forex platforms, you can still place a trade. You’ll get a terrible price — and make some bank trader overjoyed as he rakes in the bucks — but you can place a trade.
This is why I avoid trading on the weekends, and Saturday in particular.
(By the way, Investing doesn’t have to be complicated. Sign up for Smart Investing Daily and let me and editors Sara Nunnally and Jared Levy simplify the stock market for you with their easy-to-understand investment articles.)
How to Exit a Position for Maximum Gains
I put profit targets on nearly every recommendation. The secret to exiting correctly is in sticking to a system. When you have clear profit targets backed up by research, exiting becomes easy.
Trading is as much about the exits as the entries. Having a great trading idea or a great entry to a trade is exciting, so many traders do not focus on the exit when they do have an open profit. But the exit is how you put money into your account.
I put profit targets on my trades, but I also have fundamental reasons for trades. If the fundamentals of the trade change in a negative way, I’ll get out before it reaches the profit target.
It is important to know that traders have been making money for centuries. There will always be another opportunity to make money in the markets, so take your profits, stick to the system, and wait for the next good opportunity.
Three Industry-Leading Investment Websites That — as a Currency Trader — You Must Know About!
The three websites I look to every day for currency trading are all related to data. I’ve found that most commentary about the currency markets is based on wildly inaccurate assumptions.
1. Bloomberg and economic calendars:
There are lots of economic calendars out there, but Econoday.com has the best ones. Bloomberg is a must-read, and the more technical articles tend to be filled with links to interesting data.
2. Chicago Mercantile Exchange website with currency prices:
Here are the current market prices for both Futures and Cash FX, options price information including volatility, and prices on almost every commodity traded in the United States — including gold. The CME runs an incredible site.
3. The St. Louis Federal Reserve Economic Data (FRED) — it has almost everything:
This is a gold mine of economic information, and you can create excellent charts with it.
The Ultimate Currency Risk-Control Formula and How It Can Protect Your Money!
I use something I call Dollar Volatility to determine how much the markets are moving. Dollar Volatility is a quick and easy way to tell how your account is going to move if you trade a specific currency market. I explain how to calculate Dollar Volatility in my report “The Leverage Loophole”*.
P.S. Learn how a $600 billion government-backed “currency cartel” could crush your retirement dreams… read on to learn how to protect and build your wealth with one of the most powerful financial weapons.
*Editor’s Note: “The Leverage Loophole” is another in-depth report by Michael Sankowski, available to all Currency Profits Trader subscribers. You can learn more about Michael and his service here.
About the Author
Michael Sankowski is the Editor of Taipan Publishing Group’s Currency Profits Trader. He has worked as a financial trader and analyst for the past 13 years in over 60 financial markets, beginning as runner on the floor of the Chicago Board of Trade in 1994 and working his way up to become a trader. Michael has traded for a $250 million hedge fund, which required him to trade all over the world, including the United States, Europe and Asia. He has also worked as a product designer for U.S. Futures Exchange, where he focused on trading in Forex, futures, options and fixed-income cash markets.
Michael holds the prestigious CFA Charterholder and Chartered Alternative Investment Analyst (CAIA) designations. The CFA charter is a certification for finance and investment professionals, particularly in the fields of investment management and financial analysis of stocks. The CAIA designation establishes a standard for those who specialize in the area of alternative investments, such as hedge funds, venture capital, private equity and real estate investment. Michael’s solid background and certifications in financial trading make him the best man to share his expertise and Forex recommendations with the readers of Taipan Publishing Group’s Currency Profits Trader.
