babypips

Getting down and dirty with the exchange rate system
Exchange rate systems can be classified under the two broad categories of fixed and floating rates. In real life, exchange rate mechanisms are a mix of these, with some countries having abandoned exchange rates completely due to macro economic crisis. This phenomenon occurs when a nation loses faith in its own currency and adopts another currency as a medium of exchange. The usual choice for such currencies is the US dollar and the phenomenon is often termed as the Dollarization of the economy.

Fixed rate system
Broadly, there are three types of fixed rate systems in existence. The first is a currency board, which is a rigidly fixed system. The second is a traditional fixed rate system, which has some inbuilt flexibility. The third is a currency peg, which allows minor fluctuations in the currency value.

Currency board
The currency board is an arrangement by which, the value of a currency is fixed by the government and the nation undertakes to exchange the designated foreign currency for the local currency at the fixed rate. This implies that the quantum of domestic currency is based on the amount of designated foreign currency held by the nation. Intuitively, this also means that the nation does not issue its currency by fiat and thus does not follow an independent monetary policy. The currency board is well suited to nations that wish to instill confidence in their currency or may have been through a macroeconomic crisis. The Hong Kong dollar and the Argentinean Peso are prime examples of a currency board.

Fixed rate system or the currency peg
The currency peg traditionally is not as rigid as the currency board. Under this system, the government or the central bank undertakes to buy and sell foreign exchange at the fixed rate. The key difference between the currency board and the fixed rate system is that the latter allows periodic adjustments in the exchange rate.

The crawling peg
The crawling peg is another form of fixed exchange rate system that allows a narrow fluctuation of about 1% to 2% in the currency value. Under the crawling peg, the domestic currency can be pegged to a single foreign currency or a basket of foreign currencies. The narrow fluctuation band permitted under this system reduces the need for frequent interventions by the central bank to keep the value stubbornly fixed. The Bahamas and Marshall Islands have pegged their currencies to the U.S. dollar; Niger and Senegal to the French franc; and Bangladesh, Czech Republic and Thailand to a basket of several select currencies.

The currency peg systems allow some autonomy to central banks in following independent monetary policies. At the same time, the fixed rates also put a restrain on the central banks from following too loose a monetary policy.

The fixed exchange rate systems are attractive to foreign investors they cover their exchange rate risk. The system also helps keep inflation low, which in turn leads to low interest rates. This helps establish a virtuous cycle of investment and economic growth.

The floating exchange rate system
This kind of exchange rate system is a market friendly system, where the value of the currency is determined by market forces. Supply of the currency and demand for it help determine the value of the currency. Such systems are usually found in mature economies like the US, Europe and Japan. Under this system, it is usually unlikely for the central bank to intervene in the forex markets. The central banks intervene only if any wide and unexpected fluctuations occur in the currency value.

In theory the floating rate system is best equipped to correct any imbalances in an economy. Let’s understand this via a case study:

• Let’s assume that an economy has been hit by a slowdown.
• Slowdown implies reduction in employment and contraction of demand
• Contraction in demand will imply a lower demand for the local currency for buying goods and services
• This will lead to depreciation in the local currency
• Depreciation of the local currency will make imports more expensive
• This will stimulate demand for local goods and services and help generate employment in the local economy; (a self correction mechanism of imbalances in the case of floating rates)

Adoption of the floating exchange rate system requires great prudence in both the monetary and fiscal policies and such systems are best suited to mature economies.

Managed float
The managed float is a system, which allows the currency to float, but currency stability is managed by the central bank. Under this system the currency is allowed to move in response to macroeconomic parameters, but the central bank frequently uses open market operations to cushion sudden and wide fluctuations. Nations that have adopted a managed float are usually transitioning economies, which plan to achieve the full float as their economies mature further. Nations following a managed float, usually have sufficient autonomy to follow their own independent monetary policies. Prime examples include India, Taiwan and Venezuela.

Dollarization and the dual exchange rate system
Certain nations adopt the dollar as the medium of exchange officially or unofficially, once their own currencies become worthless. Zimbabwe is a nation, where the economy stands dollarized, and a majority of transactions are dollar denominated, with its own currency having lost its value due to hyperinflation. Inflation in Zimbabwe is running at over 350,000% and prices in the local currency double once every week or even faster rendering the local currency worthless.

While, the Zimbabwe government chose to maintain an official exchange rate pegged to the dollar, in reality, the black market determines the true value of the local currency and this is usually the reference rate for business transactions. This implies that there exists a dual exchange rate system, the official exchange rate and the unofficial exchange rate. This in itself leads to further black market activities due to the arbitrage opportunity presented by the two exchange rates and leads to further erosion of faith in the local currency.

by Forex Gump - babypips.com

Dr. Pipslow - babypips

It's Not the Size of the Fish But... Oh, Wait
During my very early days of currency trading my mind was running wild with the ideas and dreams of what I was going to do with my soon-to-arrive riches. Sound familiar? But I wasn't dreaming of a dollar here or a dollar there, but some serious cash money. I knew that I only needed a few monster winning trades to help me realize my then fantasies, and then the world was for my taking! Muuu-haha, muu-haha, muu-haha (imagine Dr.Evil/Austin Powers laughing).

Big trades weren't going to be easy or commonplace, I knew this. If they were, then everybody and their mothers would be here trading right along side me. And they weren't. So, I'd have to wait and be patient, and watch for the right signals and listen for that one hot tip. And then BAM! I'd get in low, wait for price to skyrocket, and then get out just before the masses new what hit them. SO EASY...

But did it happen that way? No.

And does it usually happen that way. Well, for a few, yes. But for the rest us (and the more common), of course not.

But who doesn't dream of being in the right place at the right time? Who doesn't dream of that rare elephant-sized gain? Again, it's normal and wishful, but not always realistic. Sure, yearning for that winning opportunity will motivate a trader to build his skill in hopes of becoming a trading master. But it's not going to be that rare trade that he waits forever for that transforms him into a profitable trader. For the most part, a trader's success will be defined by the many smaller, almost "boring", winning trades that are made and hopefully become regular. Although small profits, they are just as significant as the larger and more thrilling trades.

It's often times never realized that the many smaller trades provide just as much if not more to a new trader than a big win that hits only once every third full moon. Many novice traders make the small trades one after another with no real gains to show.

One pip here, six pips there... and so on.

They feel they've hit a level of experience that just can't be surpassed by making these small moves. But no matter how petite the trade, each trade provides another examination of the market and another test of the strategy and trader's skill. These trades all provide a new insight that ultimately aids in gaining more market experience and adding to that bag of knowledge.

Whether it's finally learning to identity a particular candlestick pattern and then better forecasting a price move to being risk-conscious by always placing a stop, the small experiences we have and learn along the way matter a great deal.

We all know that currency trading can be difficult, requiring various levels of commitment, whether financial, physical or mental. Many novice traders give up earlier after being smacked in face (figuratively), but there are those who make it. The surviving traders are still there because they have their systems in place; they're cool, calm and collect when dealing with the market and its uncertainties. They stay focused on their plan or strategy and they stay away from the risky and unrealistic trades and profit goals. They understand the risks involved with each position they take, and that losses are inevitable, but they look for the high profitability trades with minimized risk. It's always a calculated move, not driven my emotion. Now, it may not be World Cup type action, but the small profits are there. In the end, the many smalls add up to a very big.

Don't get disheartened if you feel you aren't progressing as you should be. Stay focused on making profits, no matter how small they are. You want to keep the capital on the positive side and continue to be able to make trades. That's the important part. You add more to your bag of knowledge when you're actually acting, and making a real trade. In the beginning, profits may not exist or may be small, but remember that a single pip gain is still a gain. And not a loss!

babypips

4 Reasons Why Traders Lose
Why do certain traders win consistently lose? Here are four reasons:

1. Not having a proven trading methodology

Those who consistently lose don’t know key numbers. They have no understanding of support and resistance. Chart patterns are foreign to them. Their definition of risk management is getting margin called. With no proven trading method or strategy, you are doomed to fail. You will end up quitting the game after a string of losses. But there is hope. With the right education, a workable method, psychological balance and persistence, it can be done.

2. Not understanding how the market works, key indicators, key numbers, and ideal times to trade.

When you place a trade, you literally go toe-to-toe against some of the biggest nerds in the world. Many professional traders are not only super smart and Ivy League educated, they’re also rich. That doesn’t mean that you, the small guy or gal, can’t win.

It just means that you simply must educate yourself and be prepared to do battle. David can beat Goliath, but only if he’s prepared. Some people might think the cost of a trading education is too high. But the cost of ignorance is way more expensive.

3. Risking too much per trade.

The wannabe trader risks 10% or more of her trading account on a single trade. Real deal traders understand risk and manage it FIRST before thinking about profit. They don’t take trades if it forces them to risk too much. Pros keep their risk below 2% of their account balance. This gives them the staying power to survive multiple losing trades in a row without turning into a worry wart.

4. Not being mentally prepared.

Psychology is a huge part of trading and most people are not mentally prepared. When money is on the line, fear, greed, and other emotions make trading very hard. Make sure you understand the emotional aspects of trading and be prepared to deal with them before you put your money on the line.

babypips

You can't handle the truth!

For novice Forex traders there always exists the desire to be right. What better to help justify their progress as traders than their decisions being correct, resulting in a successful trade? Yet this yearning to be right can get them into trouble.

To keep from having to deal with the consequences of bad trading decisions (or indecision), some traders will put off placing the trade all together. Others will go as far as holding a losing position, hoping the market will turn in their favor to prove their judgments right.

In these events, the need to be right is smothering any chances of success and doing nothing to help the trader grow. When there's hesitation at that critical moment of a trade, fear takes over, and the trader can't make a move. And when a trader is scared, he stays clear of making trades at all. You have to trade and trade and trade to learn the markets and sharpen your skills. Accepting criticism is an important trait that may help you get over those fears of trading by providing insight about your trading shortcomings.

Why do we have such a hard time accepting criticism? For one, criticism has negative connotations, usually associated with poor performance, doing something wrong, or not being sufficient enough in the task at hand. Most people, traders included, don't take well with negative feedback or comments. Some of the psychological aspects of the way we now deal with criticism are deeply rooted in our past, from experiences with our parents and school teachers. They were in the position to correct us and tell us when we were wrong, and some were more extreme than we liked with their criticism. They definitely had a psychological impact on us was there, with many of us now transferring those experiences to our trading.

Here is where we can make a change. Don't let criticism take an emotional toll on you. Don't take it as a personal attack, but as an opportunity to possibly make some changes. View criticism only as information you can use to better your skills. Removing the emotional ties to your performance is vital to using criticism constructively.

We also have a tough time accepting criticism because, deep down, we all want to be perfect. This position has been ingrained in us since our early days in school. You are taught to be. And if you're always right, you'll undoubtedly be successful. You usually didn't get a second chance at correctly answering a question or fixing your mistakes on a test you bombed. You weren't allowed the option of trying again and sharpening your skills.

Many traders take this position with their Forex trading. But this is where trading is different. You have the power to (demo) trade over and over again. Start with a small trade, learn from your errors, and try again. It's that simple. This process will give you experience with the Forex market and allow you to sharpen your trading skills, all while managing you risk effectively.

Don't be afraid of criticism... look for it! Keep an open mind and don't take everything so personal. Learn to view criticism as only information, and take it as free advice and training. It's not enough just making a trade and living with the outcome. To be a successful trader, you want to understand why you lost or won, and sometimes the best way of determining this is from someone else (through their experiences, views and comments). The better you get at staring criticism in the face AND learning from it, the more you help to develop your own trading skills. TRADE ON!

babypips

Oooh Look At That Stagflation!
by Forex Gump

The US economy seems to have reached a critical point where recession may be accompanied by inflation, a situation that is extremely difficult for the Fed to manage. Such a condition is termed as stagflation. And just what the hell is stagflation - Is it some special kind of stag released by the economy? It is actually a term coined by economists and is loosely defined as a period of slow economic growth and relatively high unemployment accompanied by a rise in prices, or inflation.

The signs for such a recipe seem to be in the making for the US economy. The US Labor Department recently announced that consumer prices in the nation had jumped 0.4% in January, which was nearly 4.3% higher than the prices a year ago. Unemployment has also started to raise its ugly head and latest numbers indicate that it has risen to about 4.9%.

Any central banker faces a dilemma under these conditions. Under ordinary circumstances, a central bank could lower interest rates to spur the economy and fight unemployment. Alternatively, the central bank has the option to raise interest rates to fight inflation and rising prices. Oops! Right now the Fed may need to fight both together – sounds like a dilemma indeed!

The US experienced the symptoms of stagflation during the decade starting 1970, when inflation peaked to almost 15% and unemployment touched a high of 9%. Though, the present rates of inflation and unemployment are much more moderate compared to the rates in the 70s, the dilemma appears to be the same. The moderation in the rates indicates that the economy has matured substantially. An economy may be termed as mature when it is marked by low unemployment and low inflation rates, which are manageable cyclically. The combination of the present inflationary trend and increasing unemployment rate lead to a situation that is more difficult for the Fed to manage. The combination of these two movements also challenges the key assumption that the US economy can grow without generating inflation.
US Fed

So what are the options that the US Fed is left with to fight stagflation? Will it raise interest rates to fight inflationary expectations or will it lower interest rates to spur the economy and generate employment. Alternatively, the Fed might adopt a wait and watch stance and keep the interest rates unchanged for some time.
Fed’s Options

OPTION 1
Raise interest rates
If the Fed raises interest rates, it may squeeze out liquidity from the economy and manage to dampen price increase. However, raising interest rates is likely to make money more expensive for industry and will squeeze economic growth further. Unless inflation shows signs of shooting up, the Fed is unlikely to adopt this option.
UNLIKELY

OPTION 2
Lower interest rates
Given the existing macroeconomic scenario of weak growth, the real estate market being stumped by high interest rates and rising unemployment, the Fed’s choice may be to lower interest rates. This will be based on the projections for inflation and if the projection is moderate, the Fed may resort to slicing interest rates just one more time.
LIKELY

OPTION 3
Keep interest rates unchanged
The Fed having lowered interest rates twice in a row in January 2008, could possibly adopt a wait and watch situation and leave interest rates unchanged.
This move will imply that the Fed is not addressing either the issue of fighting inflation or inducing industry to invest more, which could have led to enhancement of employment
UNLIKELY

Happy New Year 2008

Well.. I think isn't too late to say.... HAPPY NEW YEAR 2008
Wish All of you have wonderful year and success for all you work.

My Own Signals

Lately, I have been researching more about Technical and Fundamental and Start next week, I will publish my own research as simple signals.

The signals only open signals which mean you have to decide how much you will put as money management as exit target. For safety, i will add the stop lose level.

Thanks for being my reader. I hope my post will do a little help to your own analysis.

Market Maker Vs. An ECN

Trading Through A Market Maker Vs. An ECN

The foreign exchange market (forex or FX) is an unregulated global market in which trading does not occur on an exchange and does not have a physical address of doing business. Unlike equities, which are traded through exchanges worldwide, such as the New York Stock Exchange or the London Stock Exchange, foreign exchange transactions take place over-the-counter (OTC) between agreeable buyers and sellers from all over the world. Because this network of market participants is not centralized, the exchange rate of any currency pair at any one time can vary from one broker to another.

The main market players are the largest banks in the world, and they form the exclusive club in which most trading activities take place.This club is known as the interbank market. Retail traders are unable to access the interbank market because they do not have credit connections with these large players. This does not mean that retail traders are barred from trading forex; they are able to do so mainly through two types of brokers: markets makers and electronic communications networks (ECNs). In this article, we'll cover the differences between these two brokers and provide insight into how these differences can affect forex traders.

How Market Makers Work
Market makers "make" or set both the bid and the ask prices on their systems and display them publicly on their quote screens. They stand prepared to make transactions at these prices with their customers, who range from banks to retail forex traders. In doing this, market makers provide some liquidity to the market. As counterparties to each forex transaction in terms of pricing, market makers must take the opposite side of your trade. In other words, whenever you sell, they must buy from you, and vice versa.

The exchange rates that market makers set are based on their own best interests. On paper, the way they generate profits for the company through their market-making activities is with the spread that is charged to their customers. Spread the difference between the bid and the ask price, and is often fixed by each market maker. Usually, spreads are kept fairly reasonable as a result of the stiff competition between numerous market makers. As counterparties, many of them will then try to hedge, or cover, your order by passing it on to someone else. But there are also times in which market makers may decide to hold your order and trade against you.

There are two main types of market makers: retail and institutional. Institutional market makers can be banks or other large corporations who usually offer a bid/ask quote to other banks, institutions, ECNs, or even retail market makers. Retail market makers are usually companies dedicated to offering retail forex trading services to individual traders.

Pros:

• The trading platform usually comes with free charting software and news feeds.
• Some of them have more user-friendly trading platforms.
• Currency price movements can be less volatile compared to currency prices quoted on ECNs, although this can be a disadvantage to scalpers.

Cons:

• Because they may trade against you, market makers can present a clear conflict of interest in order execution.
• They may display worse bid/ask prices than what you could get from another market maker or ECN.
• It is possible for market makers to manipulate currency prices to run their customers' stops or not let customers' trades reach profit objectives. Market makers may also move their currency quotes 10-15 pips away from other market rates.
• A huge amount of slippage can occur when news is released. Market makers' quote display and order placing systems may also "freeze" during times of high market volatility.
• Many market makers frown on scalping practices and have a tendency to put scalpers on "manual execution", which means their orders may not get filled at the prices they want.

How Electronic Communication Networks or ECNs Work
ECNs pass on prices from multiple market participants, such as banks and market makers, as well as other traders connected to the ECN, and display the best bid/ask quotes on their trading platforms based on these prices. ECN-type brokers also serve as counterparties to forex transactions, but they operate on a settlement rather than pricing basis. Unlike fixed spreads, which are offered by some market makers, spreads of currency pairs vary on ECNs depending on the pair's trading activities. During very active trading periods, you can sometimes get no ECN spread at all, particularly in very liquid currency pairs such as the majors (EUR/USD, USD/JPY, GBP/USD and USD/CHF) and some currency crosses.

Electronic networks make money by charging customers a fixed commission for each transaction. Authentic ECNs do not play any role in making or setting prices; therefore, the risks of price manipulation are reduced for retail traders.

Just like with market makers, there are also two main types of ECNs: retail and institutional. Institutional ECNs relay the best bid/ask from many institutional market makers such as banks, to other banks and institutions such as hedge funds or large corporations. Retail ECNs, on the other hand, offer quotes from a few banks and other traders on the ECN to the retail trader.

Pros:

• You can usually get better bid/ask prices because they are derived from several sources.
• It is possible to trade on prices that have very little or no spread at certain times.
• Genuine ECN brokers will not trade against you as they will pass on your orders to a bank or another customer on the opposite side of the transaction.
• Prices may be more volatile, which will be better for scalping purposes.
• Since you are able to offer a price between the bid and ask, you can take on the role as a market maker to other traders on the ECN.

Cons:

• Many of them do not offer integrated charting and news feeds.
• Their trading platforms tend to be less user-friendly.
• Because of variable spreads between the bid and the ask prices, it may be more difficult to calculate stop-loss and breakeven points in pips in advance.
• Traders have to pay commissions for each transaction.

Which Type of Broker Should I Use?
The type of broker that you use can significantly impact your trading performance. If a broker does not execute your trades in a timely fashion at the price you want, what could have been a good trading opportunity can quickly turn into an unexpected loss; therefore, it is important that you carefully weigh the pros and cons of each broker before deciding which one to trade through.

By Grace Cheng, See Grace's Forex blog at www.gracecheng.com

How Speculators Exploit Market Fears

How Speculators Exploit Market Fears
by Ben Stein

Here's a fact: The speculators and hedge fund managers who run today's stock market need market volatility in order to make money.

They can't make enough money if the market stays flat or moves only a bit, so they like extreme and unexpected price movements. They especially like sudden, surprise movements down, when they can make money off stocks they borrow and sell -- or, as they say, "sell short."

Money Lust Satisfied
That's what's been happening the past couple of weeks. But it's not interesting to say that the speculators are whipping the market around to satisfy their money lust. So the speculators themselves make up reasons for why the market is fluctuating, flog those reasons to the media, and then profit if some other speculators believe the jive reasons and jump in the way the manipulators want them to.

Supposedly, the market is "correcting" because of worries about the housing slowdown, and also because of fears that the debt markets that support mergers and acquisitions is drying up.

These are interesting theories, and people who don't know a lot about the stock market or the economy might find them beguiling. What follows are a few truths that show how shallow these "reasons" for the stock market moves are.

Housing a Theory
Yes, the housing market has slowed from a spectacular bubble level to a simply pretty good level. Housing sales and starts are now about what they were in 2002, and no one thought we were in a housing depression then.

In any event, housing is only about 5 percent of the economy. If it falls by 15 percent, that would represent a fall-off of about .75 percent. That's not trivial, but it's also not the stuff of which recessions are made.

The fact is that there is no recession. The economy is suffering from a labor shortage, not a surplus of unemployment. The Fed is worried about excess demand, not slack demand.

Corporate profits set new records every day. Whatever's happening in residential sales and building is simply not slowing down the economy. Why should a Boeing or a Merck or a Pfizer have any reaction to housing at all? Because the speculators sell everything they can when nervousness sets in -- and for no other reason.

A Minor Major Mess
Subprime is a mess. But it's a small mess. Subprime mortgages account for roughly 20 percent of mortgages even in the most heavily exposed states. About 20 percent of them are delinquent in some way. That's 4 percent of mortgages.

Of these, maybe half, or 2 percent, will go into foreclosure. There will be roughly 50 percent recovery on sale of these. This is a loss of 1 percent in the mortgage market -- a sum the lenders have already made many times over because of the hefty fees on those deals. In the context of the size of the U.S. financial sector, it's nothing.

And why should a crisis in subprime drive down stocks in Mexico and Thailand? Again, because the speculators seek to create panic to make money by selling short, and they sell short everything.

There's simply no connection between subprime and developed or developing nations' stocks. This by itself shows the thin context of the selling wave late last month.

Money's Still Cheap
What about the supposed drying up of loans for mergers and acquisitions by private equity firms? Well, here's a good, simple test of just how valid that explanation is for stock market moves: The majority of private equity takeovers are financed with junk debt.

If there really were a major shortage of funds for these deals, the interest rate on the junk would skyrocket. Instead, while the rate has risen by about 150 basis points in the past month, the spread between junk and investment grade is now about 290 basis points, according to leading junk analyst Martin Fridson.

This is a lot lower than the year-end average of the spread from 2002 to 2006, and far below the almost 800 basis point spread during a true interest-rate crunch like the one after the tech meltdown in 2000-2002.

So that's phony, too. Interest rates have risen, but not anything like what they've done in real crises. And besides, the Dow fell by about 550 points the week before last, yet not one of the Dow stocks is involved as either acquiror or acquiree in a private equity deal.

In short, money is no longer virtually free the way it was for private equity deals in the past year. But it's not expensive by historical standards, either.

Spreading the Fear
In other words, it's all the speculators trying to panic us so their sell programs will make money. And they'll make money as long as they can spread their panic. When they can't do that any longer, they'll work the long side -- and make up reasons for that, too.

In the meantime, the economy is strong. Profits are great, and interest rates are low and will stay that way. Don't sell. With all the shrieking about the market, it only fell to what it was about five weeks ago -- and we didn't think we were poor then.

So let the speculators shout "fire." As of right now, they're not blowing anything but smoke.

Dr. Pipslow - babypips

Forget that Perfect Trade

When you're risking your own money, do you feel the need to find that secret information that nobody yet knows or find the perfect trade setup?

Some traders are so obsessed with trying to find the perfect trade that they end up not trading enough to come out profitable. Trading is not the line of work you want to be if you're a perfectionist. You can plan a trade systematically only to end up losing money because an unforeseen event invalidates the trade setup you so thought was sooo perfect and your trade slaps you in the face and goes against you.

While you don't want to become a careless and impulsive trader, you don't want to be an extreme perfectionist either. Remember there's no such thing as a guaranteed profit.

Instead of being perfect, try being average. For all the "A" students out there, I know this almost sounds blasphemous since I'm basically suggesting you strive for a "C" grade. But give it a try.

Rather than look for the "perfect" setup, just find a profitable setup. Yes, you might make less profit per trade, but you'll feel better. Compare how it feels to strive for perfect standards versus average standards. You may find that you prefer average standards since you're more relaxed. Since you'll be putting on more trades, your profits will improve.

Trading is all about probabilities. You must make many trades to get the law of averages to work in your favor. As long as the setups are solid, and you're using sound money management and risk control, you'll make enough trades to come out ahead. You'll be able to get the losing trades "off your back" and focus on winning trades.

If you're an uptight perfectionist, you'll always be on edge and will hardly be able to execute any trades. This will be your downfall because you won't be able to pull the trigger on traders that were "less than perfect" but were profitable.

Dare to be average and see what happens. A student who makes straight "A's" may be smarter but the "C" student sitting behind him may be richer.

Babypips

Be Picky

In the foreign exchange market, there are times to trade but there are more times to not trade.
In order to achieve success as a trader, you must be alert, selective, and not chase every single pip.

Don't chase price. Be patient.

When you go to the grocery store, you usually don't buy the first apple you pick up. Instead you look at several apples, comparing their shape, color, smell, etc. In other words, you're picky.

You should apply the same approach to trading. Be picky with your trades. Take only the ones with high probability setups.

Only trade when there is a good setup which means it meets all the rules in your trading system.
Stay out of the market when if it doesn't.
You do have a system right?

If you don't see any good trade setups or the current market conditions don't fit with your trading system, stay out!
Trade only when you see something. Don't trade when you don't see anything.

Simple.
Never trade just to be in the market.