The internet has seen a massive growth in both the quantity of news and speed of delivery and many novice traders think this will help them win, however in most cases it simply helps them lose and lose quickly.

If you are looking at economic reports and news you need to consider one important fact first:

50 Years ago, 90% of FX traders lost and today the figure still remains the same – despite the advances in news forecasting and speed of delivery.

Most novices who watch news reports or trade off economic reports and fail miserably in their FOREX trading.

Why?

Firstly, they don’t realize that news is discounted by the market immediately and this is more true than ever today with any news available in any corner of the globe in a split second.

Secondly, if they see a so called expert talking about why a currency should fall it may sound convincing but that doesn’t mean the market will go the way they say.

Sure, it’s a convincing argument but these guys are giving opinions and are NOT traders.

An economist can always tell you why something has happened in hindsight, but is not so clever about telling you why something will happen.

Investors Determine Price Direction!

The fact is the news is not important in itself – it’s how investors perceive the news that’s important.

Humans make subjective judgements and all their opinions combined move the market price.

A Better Way To Trade

For most novice traders a better way of trading is to simply follow charts and use technical analysis.

As the marketing is a discounting mechanism you can simply assume all fundamentals will show up in the price instantly.

You can then simply follow the reality, rather than trying to second guess where currencies will go.

You will trade on the reality of price rather than predicting it.

Keeping Emotions Out of Trading

When you hear a convincing argument it’s easy to let your emotions get involved and trade with the losing majority.

Technical analysis allows you to set back from the market and see things without emotions and get a clearer perspective.

The fact that the news is bullish or bearish for a currency makes no difference on where it will go.

If you take major currency changes the fact is:

They tend to fall heavily when the fundamentals are most bullish and rally when they are at their most bearish.

Will Rodgers famously said:

“I only believe what I read in the papers”

He was joking of course but many FOREX traders do exactly this – believe what they read and hear and then lose.

Trying to trade off news stories for most traders is a complete waste of time and energy and sees them lose – don’t make the same mistake.

Individuals who learn Forex day trading may have a particular bias toward scalping, or trading breakouts, or trading swings, or one of a number of other strategies.

There is a particular market characteristic however than must be faced up to and which happens every day in the Forex day trading world.

A Key Market Characteristic

What is price doing about 70% of the time?

Answer: Not much!

Price spends most of its time, by a rough estimate perhaps as much as 70% of the time, in consolidation!

Can you hear someone saying: "That's it? That's hardly an earth shattering piece of information!" Maybe, but many traders fail to recognize this characteristic and suffer as a result.

What Makes This Information So Important

Why is it so important?

Because it will greatly affect how you trade! Trading when price is in consolidation requires a different mindset and very different profit objectives than when price is trending or making a breakout.

So when Forex day trading, you need to regularly ask yourself, what is price doing right now?

Is it trending or in consolidation?

Is trading when price is in consolidation part of my Forex day trading style or do I prefer to only trade breakouts or price swings?

If you prefer to trade breakouts and price swings then realize that probably three quarters of your time is going to be spent merely watching price action move up and down in a channel.

Trading The Channels

On the other hand, if you are a scalper, you can develop your skills to take small profits regularly during this major slice of the trading day when price is in consolidation.

Of course, scalping is a high risk Forex day trading strategy. As it involves a number of trades during the day, there is a higher risk one or more will not be successful.

However, with careful analysis and skills developed from experience and perhaps months spent honing the skills in a demo account, it is possible to regularly take 5, 10, or 15 pips from the market when price is in a consolidation channel.

If you choose to take profits from consolidation channels then mark your charts carefully. You will want to always keep an eye on the 1 hour chart to see where key levels of support and resistance are found.

Then you need to examine the 15 minute chart to get a closer view of current price action and take note of the direction of the immediate short term trend. MACD can help here by examining where MACD is in relation to its trigger line.

Then zero in on the 5 minute chart and draw horizontal lines above and below the top and bottom of the current channel. Is there a movement of 20 pips or more? Then you have a reasonable chance of extracting 10 or so from the market.

Remember to not only take into account the candle wicks but also the candle bodies. Sometimes it makes more sense to draw the horizontal lines marking the consolidation channel across the bodies of the candles rather than the wicks.

You need to use your judgment and skills to determine which makes more sense in the particular session you are in.

Acceptance Leads To Realistic Expectations

Once you accept the fact that price spends most of its time consolidating, you can approach Forex day trading with a healthy mind set.

You will accept there will be long periods of inactivity requiring patience. You will need to decide on your personal trading style and whether you want to add scalping skills to your overall trading experience.

If not, if you just want to concentrate on breakouts and swings, then fix your profit levels accordingly. Don't be too ambitious and be ready to take some profits early.

Look ahead, see where price is going and where it is likely to stop and enter into another period of consolidation.

Do you have the mental stamina and emotional strength to endure a few hours of consolidation not really knowing whether price is going to move out and on or pull back further?

If this is difficult for you then take most of your profits early and give yourself peace of mind. Leave one or two lots to run after bringing up your stop to break even point and at least you will get additional profits, sometimes quite substantial, if price decides to continue.

Giving careful consideration to this key market behavior pattern will certainly help your Forex day trading sessions.

At least you will approach the market with a realistic frame of mind.

It can be said that successful trading is the sum of two parts:

1. A solid and reliable Forex day trading strategy

2. A strict, disciplined mental attitude

Often the first part is undone by a failure in the second area. You may have a great Forex day trading strategy but time and again it can be neutralized by one major flaw in part two. What is it?

COMPULSION TO TRADE

Any trader who is enveloped with a compulsion to trade will soon undo any profits a reliable Forex day trading strategy can produce.

Exactly what does it mean?

Here is a typical scenario:

The day trader approaches the trading session with enthusiasm and optimism and goes through habitual preparation steps which may include:

* Consulting the daily calendar for upcoming economic reports

* Reviewing major news items from the financial markets

* Preparing charts by inserting pivot points, drawing trendlines, marking key support and resistance levels, using the Fibonacci tool

* Doing a multiple time frame analysis starting with the daily chart, then moving down to the 4 hour, 1 hour, and perhaps 15 minute charts

Now, as the new session opens and progresses market conditions are flat. Price is for the most part in consolidation.

A Typical Scenario

The trader starts getting bored, or a little frustrated. Hours pass, nothing happens. The desire to trade starts getting stronger and stronger until it reaches compulsion level.

Now the trader starts looking at the charts through different eyes. His reliable Forex day trading strategy now takes a secondary position in his mind and number one is the need to find a trade!

Result?

The trader enters a low probability trade, the market then picks up steam and goes in a direction the trader did not expect and takes out the stop. The first trade of the day has been a loser.

What happens next can have more serious repercussions. Unless the trader employs strict mental discipline, there is now an even greater feeling of compulsion to trade in order to get back what was just lost.

As the mind is now in free fall, the stable, reliable Forex day trading strategy that works well when employed in a calm, analytical manner, now is cast aside and the trader is in the grip of powerful emotions.

What has just been described is a major flaw in many aspiring traders.

The question is: Do you have the honesty to recognize it in yourself? Or are you in a state of denial reasoning that this doesn't happen to you.

You may be an exception! On the other hand, many traders will relate to the scenario just described.

What is the solution?

During the trading session there is a need to constantly monitor not only candlestick movements on the computer screen in front of you, but also your own mental state and emotional level.

Discipline yourself to recognize when COMPULSION TO TRADE is beginning to build up. Stop. Walk away from the computer. Read a good motivational article on Forex trading disciplines, and return with a fresh viewpoint to the trading station.

Employing this mental/emotional self-check whenever COMPULSION TO TRADE rears its ugly head will help ensure your stable, reliable Forex day trading strategy has chance to succeed!

The Non-Farm Payroll report presents quite a dilemma for the new Forex trader. On the one hand it is a predictable market mover which happens on the first Friday of every month at 8:30 am Easter Standard Time.

On the other hand, it has the following major disadvantages for the Forex trader:

* The large price swings can create whip saw reaction which can easily take out stops.

* Trading at this time is very volatile and many online brokers cannot guarantee positions. Slippage is a major factor at this time so the Forex trader may not get the profits they think they should or they may get stopped out when they think they shouldn't.

Before considering how a Forex trader should approach the market at the time of this report, let's get behind the scenes and get some background information on this fundamental announcement:

The U.S. Bureau of Labor Statistics releases this statistic which represents around 80% of the workers responsible for the gross domestic product of the USA. In other words, the figures released show the total number of paid employees in the USA in any sector with the exception of those in:

* general government service

* private household category

* certain non-profit organizations

* farm and agricultural sector

This comprehensive report gives details of:

* how many people are looking for employment

* how many people are in employment

* salary levels of those in employment

* number of hours worked

Why is this of interest to the Forex trader and why does this information have such an impact on the foreign exchange market?

A successful Forex trader needs to have some understanding of economic factors in order to perceive what candlestick charts are representing.

The employment data contained in the Non-Farm Payroll report is a major indication of how well the economy of the USA is doing. Additionally, the data provides a guide for investors as to where to put their money.

Another major factor is the insight the employment data gives on inflation, especially the figures relating to salaries and wage trends. Any signs that inflation may be increasing or decreasing are monitored closely by the Federal Reserve which responds accordingly.

As a result, the money markets react in a big way.

How should the Forex trader deal with the Non-Farm Payroll report?

In view of the wild price swings which are characteristic at the time of the release of this report, and as many online brokers cannot guarantee positions at this time, many professional traders choose to stay out of the market at 8:30 am EST on the first Friday of each month, and for perhaps 30 to 40 minutes after.

Additionally, price action is often very muted during the first Friday of every month as the market awaits the Non-Farm Payroll report. Modest price action may even be noted one or two days before the first Friday in some instances.

The Forex trader needs to be aware of this and recognize the market conditions leading up to this report. Price will often be in consolidation working its way up and down narrow channels. Trading opportunities still exist but of course, such price behavior will require a different set of strategies.

As for the time after the report, there can often be good trading opportunities. After waiting for the market to settle, which may take anywhere between 30 to 60 minutes after the report, it is possible to start making sense of what is happening.

By observing key support and resistance levels, candle patterns, Fibonacci levels, and other indicators, it is possible for the Forex trader to profit from the second leg of price action, after the first dramatic swing has taken place.

Many beginner forex traders start out making a common mistake. They will begin trading one currency but within a month and sometimes much less, will have traded almost all the major currencies. If you take a peek at some of the forex chat forums on the Internet, you will see enthusiastic newbie traders making the same mistake. They will ask questions, discuss and trade the yen, the pound, the euro, the Swiss franc and go back and forth between them all.

Why do they do this and why is it foolish?

Let’s see. If you ask them why they do this, they will probably reply that either they saw an opportunity for a profitable trade on their charts that was too good to pass up or that they were just increasing their chances of success by spreading their bets. Fair enough, that seems like a perfectly fine answer.

Imagine this however: You are a pretty strong guy and you think you can handle yourself in a street fight. Then you are thrown into a ring with a guy who’s been training boxing for years. The outcome of this fight? Well, there really is no fight – you will get slaughtered.

Forex trading is the same. To be a success, you must always be looking at ways to swing the odds in your favour. The fundamentals that influence the yen are totally different to that of the Swiss franc or that of the Australian dollar. If you are trading them all, while it may appear the same, its not. Just like the fight against the boxer, you are up against highly paid institutional traders and currency analysts - experts in a particular currency.

When a news announcement breaks, without thinking they know and incorporate its effect on a particular currency and its relationship to other currencies, the interest rates, bonds and gold market. The Australian dollar is a commodity price driven currency; the Swiss franc will do well when global security is a problem; the yen is a currency reflecting a nation with a huge export surplus and so on. All these currencies have different characters, moods and personas. They are influenced by different and conflicting information that you need to be aware of.

To increase your chances of success in trading, it is much better to master one chosen currency. This will help you build focus and trading discipline. Sticking to trading one currency will eliminate the need to have to focus on numerous sets of information. However, the most important thing: with time, as you understand your chosen currency and its character traits inside out, you will gain conscious confidence in your trading – something invaluable in this game.

If you are switching back and forth from trading one currency to another, understand that no one currency is easier or better to trade than another. There are no guarantees that you will make more money trading one particular currency over another. If you were doing poorly trading one currency and decided to switch to another thinking this might improve your chances, think why should it?

It is much smarter to stay focused, learn the particularities of your currency inside out and in the process develop trading discipline. Over the long run, you will have swung the odds of success in your favour.