Forex | Forex Trading | Forex Broker | Online Forex Currency

Every once in a while, my status as a blogger gives me access to resources that otherwise might not be available to me. One such “perk” of the job is that I get to meet experts in the forex field and have an opportunity to pick their brain.

One such opportunity just came about with Abe Cofnas, one of the original pioneers of retail forex trading and author of three books on the subject. I first had occasion to run across Abe’s work when I started my own journey into forex. At the time I was trading futures and stocks, and came across Abe’s column in Futures magazine.

I was impressed by his straight-forward approach and ability to explain the intricacies of the forex market. I was hooked. So I went out and bought Abe’s book and dove right in and it was instrumental in my development as a forex trader.

In addition to his books, Abe is the president and founder of Learn4x.com and has been teaching students the forex market since 1999. I had a chance to catch up with Abe, and here are the highlights of the interview:

(FTB): You’ve seen a lot of traders come and go in the forex market. What is the one common trait all successful forex traders must have?

(AC): When all is said and done it comes down to psychology-the trader’s mindset. Successful traders may have different technical analysis tools, and fundamental views, but they have a mind-set that permits them to survive. The best of us lose money, and maybe even 40% of the time. The mindset is to recognize the opportunity and not dwell on the loss. Also, of critical importance is recognizing just what is driving the currency prices. There is a lot of noise, and you have to filter out the noise as well. The most successful traders “listen” to the market.

(FTB): In your opinion, why is the forex market the fastest growing financial market to trade and what are the advantages over other markets?

(AC): The key reason is that the world is interconnected as never before and forex allows a person to ride what I call, “the light-beam” of the world economy. By trading currency pairs you participate globally immediately and that is exciting.
Also, an average person no matter what their background can trade and win! I see it all the time, the “best and the brightest” often can’t trade better than Mr. Joe Six-pack!

(FTB): How has the industry changed since you began as one of the pioneers in forex trading?

(AC): There is greater awareness of forex. Today forex is considered a legitimate alternative investment and trading medium. The industry was the “wild west” years ago. Spreads were 5 pips and more and today, retail trading offers institutional spreads. The industry has acquired legitimacy and the players are required to be more capitalized.

(FTB): Which is more important, fundamental or technical analysis?

(AC): There is a common notion that it’s a battle between fundamental thinking and technical analysis. I don’t think that is true. Let’s define the terms. Technical analysis is deriving insight into the price action by ONLY looking at charts. Fundamental analysis is detecting the forces that move the prices. So price action is both fundamental and technical. You need to know what moved the price and not just that it moved a certain distance with momentum. The movement of the EURUSD in the next 5 minutes may be a reaction to the words of a central banker, or the release of a budget policy. If the trader doesn’t see what is going on outside the chart, there is exposure to misinterpretation.

(FTB): What is the biggest mistake novice traders make time and time again?

(AC): One word: Anticipation. “Newbies” or novice traders think they can anticipate the price direction. So they assume the currency pair will move to “their” script. The more experienced trader reacts and confirms what the price is doing, and THEN decides to join a direction instead of anticipating one.

(FTB): What advice would you give to new traders looking to enter the forex market?

(AC): Get into the action as soon as possible with real capital. I have found the best traders in the world in virtual trading-until they go live and face the psychodynamics of real trading. Set aside some risk capital and join the action. Put on trades, learn from errors, etc.

(FTB): Do you have a favored style of trading that you use?

(AC): I do have many different styles that fit different goals. But to answer the question, I like what I call “sniper” trading. I focus on entry conditions, and get into the action and ride the predominant wave. A good entry can result in a short grab of 5-10 pips or even more. But you have to catch the momentum and then-get out of the way and protect your profit. I have pioneered Price Break charting and Renko charting for detecting trend variations and what I call the “micro-detection of sentiment”. We can go down to the pip level of granularity in detecting if it’s time to get out!

(FTB): What is the “secret” to making profits in the forex market?

(AC): Hmmm…. ”Pip Accumulation”. What I mean by that is that one can spend an entire day waiting for a big move opportunity or scan about 12 currency pairs for 5 good moves per pair for short term gains. It’s easier to get 50 pips with several trades than with one.

(FTB): What was the best trade call you ever made?

(AC): Long the Aussie at .63 in March 09 and it went to .94 in November 09. I didn’t hold it that long but it was a beautiful move I caught several times in and out on the way.

(FTB): How has becoming a best-selling author impacted your trading?

(AC): My books: The Forex Trading Course (Wiley), The Forex Options Trading Course (Wiley), and my new book Sentiment Indicators (Bloomberg Press) were probably the best source of improving my trading than any other. The reason is that it forced me to be clear in my thinking about how to trade. I learned that if you can teach and tell someone exactly how to do something, the process of doing so forces you to detect your own weaknesses. It was a therapeutic experience.