Wednesday, May 20, 2009

Forex - the RIGHT way - Must use EA

I just realize this is one of the draft articles that has been sitting in my to-publish-list for more than 3 months but didn't get out in time to help people earlier. In short, I do NOT promote Forex investment because you really need to learn enough to do it but the fact is that you WILL NOT learn enough on it and you WILL invest in it before you learn enough. But such plain statement did not stop anyone to get into Forex and troubles. So I thought I may as well share the right way to do it, although carrying the risk of pushing more people to the dangerous world of leveraging - which already proven failed in this current financial break down in western world. Anyway, this post is stressing on EA - if you don't know what this is, don't forex !

1. download FREE forex trading software from MetaTrader4

MetaTrader4 is the foundation software for all the other forex brokers. If you don't want to download from MetaTrader you may try get a demo account from Interbank or Forex.com, they all use MetaTrader4 software anyway. Forex.com is known to have the smallest price gap which is very important especially when you have limited capital.

2. Get the demo account for FREE and then learn to buy, sell, long, short using the trading platform. Make as many buy sell transactions as you can and observe why the result is different than you would expect.

3. Understand price gap which is Different in each currency pair. You should eventually find out that there are only 3-6 currency pairs that you should trade in because they have the smallest price gap. This price gap is dynamic and it is possible that the gap changes right at the moment you execute a transaction, although not often.

4. Understand Expert Advisor feature in the software, you should learn (a) how to use it and how to (b)implement your own trading strategy.

5. Use real money ONLY after you have found an investment strategy that is proven can bring you return more than 60% of the time.

6. Apply money management, risk reward ratio, win lost ratio etc.

More on EA (step 4)
EA or short for Expert Advisor is one of single top most powerful feature why dump general public can earn money from Forex scientifically and systematically.

EA is a script that you can write yourself to get any data out from your trading platform, do anything you want with the data and then make decision on what transaction to take.

In short, if you have any investment ideas, you can TEST the idea and SEE if it works right in front of your own eyes! From the test result itself, you may further fine tune your investment ideas until you think you have gotten the right methodology, then you can invest with your real money in confident.

The most attractive elements in Forex is its liquidity and its HIGH leverage. It is the same liquidity and leverage that kill multi billionaires. So these 2 factors apply the same to everyone who trade Forex, sometimes it helps you, some other times it kills you. Its all up to your luck which way it turns.

However, EA is the ONLY quantifiable element in Forex (for FREE) that differentiates one investor than another. Because every investor has his own idea. And the ability to test, verify and 'PROVE' this idea for FREE is upmost powerful.

It is also the one last compulsory step but NOT many people have enough persistency to walk through the whole process. Which explains why 90% of the poor ALWAYS contribute to the 10% rich even in Forex.


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8 comments:

AutoForexGroup said...

Well enough said :) the .mql4 language is a true gift for traders so we can program our own trading strategy and do both backtest and forward testing. Some EAs may work well in the past but not in the future so it's best to run live forward testing too.

Michael Tsen said...

well said, thanks for commenting ...

travis said...

any website recommend for EA or robot
nice forex forum for traders?

Michael Tsen said...

the link in the article to meta4 already contain all the info one ever needed.

travis said...

meta4
cant find the link:
can post it here?
thanks

Michael Tsen said...

its in the first link in the article right at the top ...

http://www.metatrader4.com/

Angel Stone said...

One question which i think is very important.

It is about withdrawal. Any good and fine forex brokers who can give smooth withdrawal (on profit or capital) every times?

Michael Tsen said...

1st of all, you shouldn't need to use broker at all. If you still do, you may as well consider NOT to invest in forex.

some so call brokers are scam, those you will withdraw easily in the beginning. When the scam burst, you will not be able to find them anymore.

Real broker will have no problem letting you withdraw. But the withdrawal cost or minimum withdrawal limit alone may affect you if your amount is not big.