You can draw some useful parallels between running a business and Forex trading. For instance, most successful businesses keep statistics on everything from their conversion rate, to their average dollar sale, to the number of people that come in the door. Businesses do this to keep on top of how they are doing on a day-to-day basis and businesses must first take score before begining to improve on that score. Using a Forex back testing plan in your trading works exactly the same way.
Now that you`re looking at Forex trading as a business, you need to learn some valuable statistics about your system so you can improve it`s performance. You would use a Forex back testing method. You can`t improve your system unless you have something to measure it against. How could you expect to improve your trading unless you knew what it was you were looking to improve? You can discover these measurements and other valuable information about your trading system, by using a Forex back testing plan.
There are two ways that you can use a Forex back testing plan to back test a system. You can do it manually, which can be a drawn-out and labour-intensive process, or you can do it with the aid of some software packages. Unfortunately, I recommend you do it by hand when you first start out. You`ll get a much better feel for your system, and you`ll understand exactly how using a Forex back testing plan works in all its intricacies. Once you have the Forex back testing plan and the in-depth knowledge, you could look at finding a software package that does it for you.
There are a few major statistics on your Forex back testing plan that you need that you will uncover through back testing. The first statistic you need to become familiar with is the R multiple principal. R stands for risk, the risk you take on any trade when you enter the market. The R multiple of a trade is the ratio of the profit or loss compared to the amount of money risked to make the profit or loss.
Therefore, if you risk $200 dollars in your initial purchase, and you make a profit of $1,000, you have made five times the amount you risked in the trade. You have an R multiple of five. This statistic gives you a good idea of the relative size of your profits to your losses. You can compare the average size of your winning trades with the average size of your losing trades.
The next statistic you`ll find useful is your win to loss ratio. This is how many times you get a winning trade in proportion to how many times you get a losing trade. For example, if you had ten trades, four of those trades were winners, and six were losers, your win to loss ratio is simply four to six. This is your hit rate; you`ll get 40% of your trades correct.
With these two simple statistics, you can calculate the average size of your profits and of your losses, multiply these figures with your win to loss ratio, and calculate on average how much money you make with every dollar you risk.
For those of you who think this sounds like a too much work, particularly using a Forex back testing plan that you need to do to uncover these statistics, consider this scenario: Imagine yourself trading a system that you knew had a win to loss ratio of 60/40. You made profit on every six trades and lost one out of every four. How do you think you would feel, where would your confidence level be, after you traded the system for a little while and you received a string of 11 losses in a row?
Now, you know that this system has a win to loss ratio of six to four. Would you have the confidence to open another trade if your system brought up another buy signal after getting 11 trades wrong?
Unless you use Forex back testing plan to back tested your system, I doubt that your confidence level will remain high. That trading system may be a fantastic profitable system. However, since you didn`t use your Forex back testing plan to back test it, you don`t know that historically this system received up to 13 losses in a row, but was still profitable.
Here`s another point you may not have picked up unless you used your Forex back testing plan. Once you`ve set your money management rules and you begin to trade, you will likely experience a string of losses. Countless times, I`ve had clients who get disheartened by this fact because they don`t understand the nature of setting good management. If you`re adhering to the rules of cutting your losses short and letting your profits run, because you`re cutting your losses short, those trades are going to last for a shorter amount of time.
This means once you begin trading the odds of getting losses early in the game are much higher than getting a winning trade. This is particularly true when you consider that many successful trading systems run on a 40/60 win to loss ratio. However, you will never know the intricacies of your system unless you use a Forex back testing plan and back test it.
Using a Forex back testing plan, will help you to understand what works and what doesn`t. It will give you the statistics to gauge the effectiveness of your trades. It fills in your scorecard, and allows you to make improvements. But, you shouldn`t simply believe everything I`ve told you. Instead, you need to prove it to yourself by using some Forex back testing plans and back test your system.-=-=-==-=-=-=-==-=-=-=-=-=-=-=-=-=-=-=- David Jenyns is recognized as the leading expert when it comes to designing profitable forex trading systems.Discover the "secret formula" of trading that anyone can useto consistently generate BIG profits from the market by downloading your FREE copy of David's new UltimateForex Trading Systems course.Click Here To Download ==> Forex Trading Systemshttp://www.ultimate-trading-systems.com/forex.htm
November 09, 2007
How To Be a Successful Internet Marketer
The savvy internet marketer knows what is hot from month to month. They know what is selling at the time and what they should be concentrating on. You, on the other hand, might not have your nose as close to the trough as the rest so might not know what is going on. If you do then you have a head start.
If you are new to internet marketing you will have a lot to learn before you can call yourself an internet marketer. There is a great deal to learn, and if you are looking to learn then you either need a few empty credit cards, a very deep wallet or follow the advice you are about to get here.
Many start off full of hope but end up full of despair, simply because they are unfamiliar with the way the internet works, and how those that are completely at ease with it can use it to their own advantage. Most people who purchase information books online never use them to any effect. That is a proven fact. There are more people with their computer directories full of unused and now useless information for which they have paid a great deal of money than there are that have made anything from them.
Sometimes the only people who actually make money from online software and ebooks are the writers and the copywriters they employed to write their adverts and sales pages. The purchasers often have no idea what they are reading about, and having read the books are still as clueless as when they started. That is no way to enter the very cut-throat arena that is the internet. Here you take no prisoners, and have to know your subject from start to finish in order to be successful.
That is why those inexperienced in internet marketing should start off with the type of income sources that were not available to those of us who started our internet careers some years ago. It is strange that concepts such as MLM marketing took so long to go online to the extent that it now has, although perhaps that is largely due to the fact that the way it worked was not fully understood, other than by those involved in the high profile offline network marketing organizations.
MLM marketing is ideally suited to the internet, and works far better online that it ever could offline, although some companies such as Amway did OK with it. That should be one of your initial income streams if you are a new internet marketer. You can run with the MLM company of your choice for a while and then switch if it doesn't work. However, network marketing takes time to get going so don't give up too early. It is the major online earner of a very large number of people, and many run three or four MLM projects at one time to bring them five figure incomes each and every month.
Another aspect of internet marketing suitable for a beginner is affiliate marketing. This is where most newbies to online marketing start. It takes away the need for a product and a sales page, cart and payment system and dealing with queries, complaints and refunds. You will likely need a website, but there are affiliate programs available that provide you with a website and with a wide choice of affiliate products to offer on it.
Basically what you are doing with affiliate marketing is drumming up prospects for others. You send the prospects to the merchant's sales page, and it is taken out of your hands from there. If somebody makes a purchase you get an average of 50% of the sales price for electronically deliverable goods such as ebooks and software. If you are selling hard goods, that could drop to as low as 2%. So don't specialize in selling hard goods!
There are many other ways in which you can make money online using internet marketing, but those detailed above are probably the best for a beginner to start with. Try one at a time and don't attempt to go too far too fast. What that means in practical terms is to try one MLM program and see how you get on with it. In the meantime find an affiliate program that provides you with a website and try that.
If you can get your own website and are comfortable with that, then that is even better. It is ultimately what you will need in any case, so it's the way to go. Every successful online marketer has at least one website, but usually several, and the sooner you can get yours the better.
If you are nervous about becoming an internet marketer, don't be. Get yourself together, open your eyes and go for it - with your eyes wide open and looking forward to the adventure that is facing you. You won't regret it.
------
Mike Littles is an expert internet marketer who specializes in running a successful home business. You can view his personal website at http://www.whoismikelittles.com
If you are new to internet marketing you will have a lot to learn before you can call yourself an internet marketer. There is a great deal to learn, and if you are looking to learn then you either need a few empty credit cards, a very deep wallet or follow the advice you are about to get here.
Many start off full of hope but end up full of despair, simply because they are unfamiliar with the way the internet works, and how those that are completely at ease with it can use it to their own advantage. Most people who purchase information books online never use them to any effect. That is a proven fact. There are more people with their computer directories full of unused and now useless information for which they have paid a great deal of money than there are that have made anything from them.
Sometimes the only people who actually make money from online software and ebooks are the writers and the copywriters they employed to write their adverts and sales pages. The purchasers often have no idea what they are reading about, and having read the books are still as clueless as when they started. That is no way to enter the very cut-throat arena that is the internet. Here you take no prisoners, and have to know your subject from start to finish in order to be successful.
That is why those inexperienced in internet marketing should start off with the type of income sources that were not available to those of us who started our internet careers some years ago. It is strange that concepts such as MLM marketing took so long to go online to the extent that it now has, although perhaps that is largely due to the fact that the way it worked was not fully understood, other than by those involved in the high profile offline network marketing organizations.
MLM marketing is ideally suited to the internet, and works far better online that it ever could offline, although some companies such as Amway did OK with it. That should be one of your initial income streams if you are a new internet marketer. You can run with the MLM company of your choice for a while and then switch if it doesn't work. However, network marketing takes time to get going so don't give up too early. It is the major online earner of a very large number of people, and many run three or four MLM projects at one time to bring them five figure incomes each and every month.
Another aspect of internet marketing suitable for a beginner is affiliate marketing. This is where most newbies to online marketing start. It takes away the need for a product and a sales page, cart and payment system and dealing with queries, complaints and refunds. You will likely need a website, but there are affiliate programs available that provide you with a website and with a wide choice of affiliate products to offer on it.
Basically what you are doing with affiliate marketing is drumming up prospects for others. You send the prospects to the merchant's sales page, and it is taken out of your hands from there. If somebody makes a purchase you get an average of 50% of the sales price for electronically deliverable goods such as ebooks and software. If you are selling hard goods, that could drop to as low as 2%. So don't specialize in selling hard goods!
There are many other ways in which you can make money online using internet marketing, but those detailed above are probably the best for a beginner to start with. Try one at a time and don't attempt to go too far too fast. What that means in practical terms is to try one MLM program and see how you get on with it. In the meantime find an affiliate program that provides you with a website and try that.
If you can get your own website and are comfortable with that, then that is even better. It is ultimately what you will need in any case, so it's the way to go. Every successful online marketer has at least one website, but usually several, and the sooner you can get yours the better.
If you are nervous about becoming an internet marketer, don't be. Get yourself together, open your eyes and go for it - with your eyes wide open and looking forward to the adventure that is facing you. You won't regret it.
------
Mike Littles is an expert internet marketer who specializes in running a successful home business. You can view his personal website at http://www.whoismikelittles.com
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