10 Classic Quotes All Forex Traders Should Know About
Having a profitable strategy is only a part of what makes forex trades profitable. The other part? Execution. If you find that you’re having trouble with your trading mindset today, then this list is for you.
I have picked the brains of my fellow FX-Men and asked for the top trading quotes that have inspired them or have helped step up their trading game. Let’s take a look at the top 10!
1. “Every battle is won or lost before it’s ever fought” – Sun Tzu
Every trade is a battle and winning battles requires preparation. Since uncertainty is the only thing that’s certain about the markets, you should learn to identify the possible scenarios and prepare contingencies for them. Having plans for every likely scenario increases your chances of closing your trades without losses.
2. “The game taught me the game. And it didn’t spare me the rod while teaching.” – Jesse Livermore
The best way to learn about the trading game is to play it. You can read bajillions of books, sign up for classes, and talk to a mentor for hours and hours and you still won’t be as skilled as someone who went ahead and made his first trade.
You have to jump in the pool and make your own mistakes if you want to learn about the market that you’re trading. Your experiences will not only ensure that you don’t repeat your mistakes, but it will also make you trust your own judgement over the others’.
3. “The goal of a successful trader is to make the best trades. Money is secondary.” – Alexander Elder
Trading, like any high-performance endeavor, requires skill, focus, and discipline. Those who are in it for the money alone aren’t likely to focus on the process of being a good trader. Concentrate on being a good trader and the money will follow.
4. “Yesterday’s home runs don’t win today’s games” –Babe Ruth
Every day is a new day for forex traders. Just because you’ve been winning trades for the past few days doesn’t mean that your next trades will also be winners. The result of your past trades, whether they were winning or losing ones, shouldn’t affect how you handle your next positions.
5. “Losers average losers.” – Paul Tudor Jones
Paul Tudor Jones, one of the greatest traders in history, has this quote above his desk. This is to warn himself not to add to a losing position, especially since you can always get back in. If you’re uncomfortable with your losing position, avoid throwing more good money into it.
6. “Risk comes from not knowing what you’re doing.” – Warren Buffett
Risk management is what separates a trader from a gambler. If you have weighed the pros and cons of a trade idea and you have a trading plan in place, then you’re simply trading what you believe are favourable odds.
7. “Where you want to be is always in control, never wishing, always trading, and always, first and foremost protecting your butt.” – Paul Tudor Jones
You know you’ve managed your risks well if you’ve lived to trade for another day. Focusing on making money exposes you greed. Focus instead on keeping what you have while developing your trading skills.
8. “Luck is preparation meeting opportunity.” – Oprah
Ever noticed how “lucky” consistently profitable traders seem to be? While I don’t discount the possibility of having “lucky” trades, it’s more likely that the consistently profitable ones became profitable because they’ve learned how to prepare for when opportunity knocks on their doors.
9. “The biggest risk is not taking a risk. In a world that’s changing really quickly, the only strategy that is guaranteed to fail is not taking risks.” – Mark Zuckerberg
Losing is as much part of trading as winning. Simply put, making money in forex trading involves taking risks. The best you can do is to control your risk by placing strict risk management tools and by being flexible in your execution.
10. “It is not the strongest or the most intelligent who will survive but those who can best manage change.” – Charles Darwin
Like uncertainty, change is also constant in the forex markets. The profitable trading methods and correlations today may not be what gets you pips next week. Profitable traders know how to adapt to any trading environment.
That’s it for this batch of inspirational trading quotes! Did you see one in particular that speaks to your current trading progress the most? What inspirational quotes/messages are motivating you these days? Don’t hesitate to share!
Forex Tutorial: Reading a Forex Quote and Understanding the Jargon
One of the biggest sources of confusion for those new to the currency market is the standard for quoting currencies. In this section, we'll go over currency quotations and how they work in currency pair trades.
Reading a Quote
When a currency is quoted, it is done in relation to another currency, so that the value of one is reflected through the value of another. Therefore, if you are trying to determine the exchange rate between the U.S. dollar (USD) and the Japanese yen (JPY), the forex quote would look like this:
This is referred to as a currency pair. The currency to the left of the slash is the base currency, while the currency on the right is called the quote or counter currency. The base currency (in this case, the U.S. dollar) is always equal to one unit (in this case, US$1), and the quoted currency (in this case, the Japanese yen) is what that one base unit is equivalent to in the other currency. The quote means that US$1 = 119.50 Japanese yen. In other words, US$1 can buy 119.50 Japanese yen. The forex quote includes the currency abbreviations for the currencies in question.
Direct Currency Quote vs. Indirect Currency Quote
There are two ways to quote a currency pair, either directly or indirectly. A direct currency quote is simply a currency pair in which the domestic currency is the quoted currency; while an indirect quote, is a currency pair where the domestic currency is the base currency. So if you were looking at the Canadian dollar as the domestic currency and U.S. dollar as the foreign currency, a direct quote would be USD/CAD, while an indirect quote would be CAD/USD. The direct quote varies the domestic currency, and the base, or foreign currency, remains fixed at one unit. In the indirect quote, on the other hand, the foreign currency is variable and the domestic currency is fixed at one unit.
For example, if Canada is the domestic currency, a direct quote would be 1.18 USD/CAD and means that USD$1 will purchase C$1.18 . The indirect quote for this would be the inverse (1/1.18), 0.85 CAD/USD, which means with C$1, you can purchase US$0.85.
In the forex spot market, most currencies are traded against the U.S. dollar, and the U.S. dollar is frequently the base currency in the currency pair. In these cases, it is called a direct quote. This would apply to the above USD/JPY currency pair, which indicates that US$1 is equal to 119.50 Japanese yen.
However, not all currencies have the U.S. dollar as the base. The Queen's currencies - those currencies that historically have had a tie with Britain, such as the British pound, Australian Dollar and New Zealand dollar - are all quoted as the base currency against the U.S. dollar. The euro, which is relatively new, is quoted the same way as well. In these cases, the U.S. dollar is the counter currency, and the exchange rate is referred to as an indirect quote. This is why the EUR/USD quote is given as 1.25, for example, because it means that one euro is the equivalent of 1.25 U.S. dollars.
Most currency exchange rates are quoted out to four digits after the decimal place, with the exception of the Japanese yen (JPY), which is quoted out to two decimal places.
When a currency quote is given without the U.S. dollar as one of its components, this is called a cross currency. The most common cross currency pairs are the EUR/GBP, EUR/CHF and EUR/JPY. These currency pairs expand the trading possibilities in the forex market, but it is important to note that they do not have as much of a following (for example, not as actively traded) as pairs that include the U.S. dollar, which also are called the majors. (For more on cross currency, see Make The Currency Cross Your Boss.)
Bid and Ask
As with most trading in the financial markets, when you are trading a currency pair there is a bid price (buy) and an ask price (sell). Again, these are in relation to the base currency. When buying a currency pair (going long), the ask price refers to the amount of quoted currency that has to be paid in order to buy one unit of the base currency, or how much the market will sell one unit of the base currency for in relation to the quoted currency.
The bid price is used when selling a currency pair (going short) and reflects how much of the quoted currency will be obtained when selling one unit of the base currency, or how much the market will pay for the quoted currency in relation to the base currency.
The quote before the slash is the bid price, and the two digits after the slash represent the ask price (only the last two digits of the full price are typically quoted). Note that the bid price is always smaller than the ask price. Let's look at an example:
If you want to buy this currency pair, this means that you intend to buy the base currency and are therefore looking at the ask price to see how much (in Canadian dollars) the market will charge for U.S. dollars. According to the ask price, you can buy one U.S. dollar with 1.2005 Canadian dollars.
However, in order to sell this currency pair, or sell the base currency in exchange for the quoted currency, you would look at the bid price. It tells you that the market will buy US$1 base currency (you will be selling the market the base currency) for a price equivalent to 1.2000 Canadian dollars, which is the quoted currency.
Whichever currency is quoted first (the base currency) is always the one in which the transaction is being conducted. You either buy or sell the base currency. Depending on what currency you want to use to buy or sell the base with, you refer to the corresponding currency pair spot exchange rate to determine the price.
Spreads and Pips
The difference between the bid price and the ask price is called a spread. If we were to look at the following quote: EUR/USD = 1.2500/03, the spread would be 0.0003 or 3 pips, also known as points. Although these movements may seem insignificant, even the smallest point change can result in thousands of dollars being made or lost due to leverage. Again, this is one of the reasons that speculators are so attracted to the forex market; even the tiniest price movement can result in huge profit.