Forex Spread Trade

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Thank you for visiting this site. This site has been created to help you get immediate answers to many of your questions and concerns. Obviously there will be times when your questions will not be addressed here, and that is when you should email me at support@forexspreadtrade.com and I will help you. I am flooded with emails everyday, so it may take me some time to get back with you (I answer every email personally). I don't want you to have to wait any longer than you have to, so I am providing this site to help you get your questions answered as quickly as possible. ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------Below are some of the more common questions I receive, and my response to them. I do hope you find them useful. This will be a dynamic site in the sense that I will continuously add-to and refine the content here. Therefore, it would be useful for you to come back to this site from time to time to deepen your understanding of the Forex Spread Trade...

What time of day should I open the two trades? - It truly does not matter, in the big picture, when you open these spreads. You are not timing the market, nor are you trying to follow trends. You are simply taking advantage of the inherent volatility in the FX markets. What time of day should I close profitable trades? -Again, there is no "timing" going on here, so any time is fine. I explained that I like to take my profits when I get up each morning. This works for me and suits my lifestyle. Many people using this system take profits over and over again during a single trading session (sort of like "scalping") and this works for them. Find what works for you. This is why I recommend using demo accounts for at least one week or more - to get a feel for this method of trading, and to learn how you want to take profits. Once I close a spread that is profitable, what do I do next?

-This is one of my biggest questions...perhaps an example would be useful here: Say you have a spread that is profitable...you want to close it and take your pips. Let us say that your spread in this case is Long the GBP/USD and Short the EUR/USD - simply close each leg, take your profits, and then reopen the spread. By reopen I mean go Long the GBP/USD and Short the EUR/USD, whatever the prices may be. The idea is to always be in the market, and to always have spreads in seperate accounts that are the complete opposite of one another. I want to "peel-off" one leg of one of my spreads, and replace it with a new position because I believe prices are going to go...how do I do this? -NEVER, EVER would I do this...this is just a veiled attempt to try and predict the market, and you know by now that I don't believe that anyone can do that consistently. People always try to modify my spread method with all kind of little tricks and so forth. If that is what you want to do, well that is your choice. However, if you do make all of these cute little changes to the basic system and it doesn't work out for you, please don't come crying to me about it! I trade the basic, simple system that I have shared with you, and I never try to make it something it is not. It has served me well. If you find a way to make it better than I am very happy for you and wish you all the best... What is the biggest drawdown you have had, and what did you do about it? -I have had a drawdown of -287 pips max in one of my spreads. I didn't do anything about it...I just let it work itself out and eventually it turned a modest profit of 43 pips. Is it possible to have a spread with a loss in it for several days or weeks? -Yes it is. This happens from time to time and is just the price of doing business. As long as you can control your emotions for a little while you will be okay. It is only a paper-loss until you panic and close it out for a real-loss. Relax and let the volatility for you... Is it possible for both legs of the spreads to be negative at the same time? -Yes, but it seldom lasts for more than a day or two. When this happens just keeps checking on it and you will see that one of the legs turns positive (sometimes both will be positive at the same time...!!!). Are you starting to understand what is happening here? One of my clients put it this way - he calls it "the rubberband effect" - as prices go up and down, back and forth, each leg of the spread widens and narrows, stretching negative then positive and then back again...he saw this right away and is very astute to understand this. This is why this method of trading works... ------------------------------------------------------------------------------------------------------------------------A SNAPSHOT OF A TRADING PERIOD USING THE FOREX SPREAD TRADE: To address questions I have been receiving regarding the mechanics of spread trading the forex, I thought it would be a good idea to show an actual series of trading days and how things worked out. I think you will find this helpful.

Below I will show the actual day-to-day for a spread that I initiated on July 16, 2007:

July 16th, 2007

GBP/USD at 2.0370 EUR/USD at 1.3779

Account 1 Long the GBP/USD and Short the EUR/USD

Account 2 Short the GBP/USD and Long the EUR/USD

I opened the spreads the evening of July 16, and began taking profits the next morning (the 17th). Please see how it plays out below:

July Acct 1 Acct 2

17 +79 -79

18 +51 -130

19 -51 -79

23 +92 -171

24 +40 -211

25 -11 -200

26 -76 -134

27/30 31 (sessions) -230 +19 -194 (pips) -36 (pips)

Okay, here is what happened:

Every morning between 9am and 10am Central Time (US) I checked my positions. If a position was positive, I closed the spread, took the profits, and then reopened it right away, regardless of what prices were. So I took profits of +79, +51, +92, +40, and +19. Total profits for this string of days was +281 pips.

I never closed out a negative spread (I call them "paper-loss" spreads), so I kept all of the 281 pips.

Notice that Acct 2 started negative and remained negative until the 27/30 session where it turned positive and I closed it out for a profit. All I had to do was remain patient.

I averaged over 31 pips per trading day (281/9), so using full-lots I earned an average of $310 per trading day, for a total of $2810.

Yes, at some times both spreads were negative, but as you see it never stays that way. Furthermore, you will have times when both spreads are positive on the same day! (I love those days.you will too).

Bottom line: STOP TRYING TO OVER-ANALYZE THIS!!! It is a very simple strategy that takes advantage of all of the ups and downs and volatility in the forex markets. DON'T TRY TO READ ANYMORE INTO IT THAN THIS!!! All you have to do is be willing to take the spreads and WAITit will work out for you if you are patient. It is truly that simple.

I get emails from people that want to do all kind of little tricks with thisit is like they can't leave well enough alone. They want to optimize it, they want to play it against other things, they want to remove one part and add another, etcMe, I just want to make money, pure and simple. I let my spreads work for me day and night, and I don't try to make them do anything I SIMPLY LET THEM DO WHAT THEY HAVE TO DO AND LEAVE THEM ALONE.

Do yourself a favor and just do this in demo accounts for a week or twoit will soon be easy for you to understand, and you will know what to expect and you can then use real accounts.

I hope this is helpful for you ------------------------------------------------------------------------------------------------------------------------>What Margin (leverage) do you use?

Never more than 100:1. You can use lower than that and be even more conservative. With the extreme volatility we are experiencing right now, I would recommend either lowering your leverage to 50:1, or raising your capital per account by 50% (i.e. $7500 instead of $5000). Until the US Dollar starts to gain strength, and the US Economy stops shivering, we are going to have this heavy volatility. Be warned.the method is working fine, but you must be ready to ride out some wild swings. The upside is that we are having some strong profitable spreads.

>Pip spreads charged by brokershow does this affect the Forex Spread Trade method?

Obviously you have to overcome whatever spread you are paying. When you close a profitable spread, forget about it from then on, and open a new spread. You pay for your spread when you close out profitable positions.

Try to find the lowest spreads possible. Never pay more than 4 pips per spread. Try to pay 3 pips, or even 2.every little bit helps.

I have come to discover that some people are paying as much as 9 pips per spread(!!!!) This is unacceptable these days. I am going to research this question of access to low pip spread brokers and let you all know what I discover.

>Recommended brokers:

This is a personal thing as much as a technical issue. First and foremost you want to make sure you are dealing with someone that is reputable. Make sure they are overseen and have filed with the CFTC. The CFTC has a very good record of keeping the commodity industry in line, and I suspect they will do the same with the FX industry. Secondly, as mentioned above, you want to pay as little as possible for your trades. Competition between brokers is so strong now that I have seen some brokers offering 1 pip spreads! For those of you that have expressed to me than some brokers are not available to you because of where you liveI am going to look in to this to see if we can find a solution.

>What kind of funds are within the CFP portfolio?

These are all closed-end funds, which as far as buying and selling them goes, trade just like a single company stock. They are very liquid, and have good tax treatment features, unlike standard mutual funds.

>What are the mechanics of closing and reopening the spreads?

I am sorry so many people are having trouble seeing this. For some of you that are new to this it probably seems very strange and counterintuitiveI will attempt to explain this a little differently so that everyone understands what we are doing hereHere goes:

Step 1 Open two accounts. These accounts must be separate. If you try to use a single account to do this it will not work, because all of the positions will cancel each other out.

Step 2 In acct#1 Buy the GBP/USD pair and simultaneously Sell the EUR/USD pair. In acct#2 Sell the GBP/USD pair and simultaneously Buy the EUR/USD pair. Step 3 Go away for a few hours or overnight. Come back and check both accounts. One of the accounts will be negative and one will be positive. Okay, you now have a NET PROFIT in one account, and a NET LOSS in the other account. You want to take the NET PROFIT and leave the NET LOSS ALONEDO NOTHING WITH IT.

Step 4 (here is where there is so much confusion) The account with the NET PROFIT in it, let's say acct#1 from above, is showing a increase in equity, and no positions (you just closed them for a profit). What do you do now??? Buy the GBP/USD and Sell the EUR/USD JUST LIKE YOU DID IN ACCT#1 WHEN THIS ALL STARTED. Please understand that you must stay in the market at all timesso both accounts will always have the above positions in them (see Step 2 above). The only time you want to have no positions is if you cannot access your accounts for an extended period of time for some reason. These days that is hard to do.

It is quite simple once you get the hang of it. You are playing ALL SIDES of the market at once. You are profiting from the volatility in the marketsby taking advantage of the interrelationships between the GBP/USD and EUR/USD. By default you will have net lossesbut these are only temporaryride them out until they are net profitable.

Step 5 Relax and be patient. Here is a major problem for many of us. It is hard to wait around when you see increasing paper losses. You want to do something. You feel the need to take control of the markets (impossible). This is where most people fail. Also, don't do anything to the spreads to try and "optimize them"again, don't mess with this thingunless you are just doing all of this for the fun of it, and don't care about being profitable.

Make sure that you take profits when you get them. Also, instead of doing what everybody else does, don't set a certain pip goal to takes profits. In other words, don't say to yourself, " when I see 48 pips profit in spread #1, I am going to close it

then, but not a minute sooner" this is very similar to thinking you can predict the market. Instead of setting pip limits or minimums, trade on a time basis. I check my trades every morning between 9am and 10am CST, because that is after the very active "overnight" session. I take action at that time, and that time only. If I have profits, I take them, If I don't have profits I simply wait until tomorrow.

>Isn't this just a zero-sum game? How do we overcome it?

All trading is a zero-sum game, no matter what or how you are trading. It always has been a zero-sum game and it always will be.

You overcome it by riding what I call "the waves" of the market. I tried to ride these waves with other methods, but half the time I fell off of the waveboard (stopped-out, etc). This is why I use spreadsthey buy me the most valuable of commodities TIME. TIME to wait for things to turn around, rather than be stopped out. TIME to let volatility work for me rather than against me. TIME to do other things, instead of staring at a screen and worrying whether things will go my way.

Yes, one account will offset the other and vice versajust trade it as outlined and you will see that it all works out. The problem that most people have with this is that they have never seen anything like this in their life. This goes against everything they have seen before, so it is therefore intimidating and seems like it won't work out. Just do it with a demo account for a few weeks and you will see how this works, and you will begin to get the "rhythm" of "the waves".

>How many days per week do you trade?

I trade every day. I am always in the market. The only time I don't trade is when I cannot check-in on my trades each morning for an extended period of time, which is very, very rare with the technology today.

>How many contracts do you trade daily?

I am currently trading 60 contracts, total, per day.

***More to come.thank you for your patience.

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