How a Temporary Visa Works Under the United States-Jordan Free Trade Agreement

The United States (U.S.) and Jordan launched negotiations for a free trade agreement in 2000. Several reasons explain the U.S. desire to negotiate a free trade agreement with Jordan. The failed WTO Ministerial Conference in 1999 led U.S. trade officials to analyze the possibilities for a free trade agreement that would include certain provisions that are resisted at the multilateral trading level. Moreover, the U.S. and Jordan had already signed a trade and investment framework in 1999, which is usually a precursor for a FTA.

The US-JO FTA includes a preamble, nineteen articles, three annexes, joint statements, memorandums of understanding, and side letters. In addition to the interesting articles on labor and environment, the US-JO FTA provides the opportunity for Jordanian nationals to come to the U.S. to make investments and participate in trade. Under certain conditions, Jordanian nationals can enter the U.S. to render professional services.

The US-JO FTA permits entry of nationals of one party in the territory of the other. From the outset, it is necessary to distinguish between migration and the ability of Jordanians to enter into the U.S. to make investments and participate in trade. Jordanian nationals are not allowed permanent resident status, but are only given the opportunity to acquire a visa on a temporary basis or “non-immigrant” status. This status requires that the visa beneficiary return to Jordan after his temporary stay expires.

The US-JO FTA allows nationals of Jordan to enter into the U.S. to carry solely “substantial trade”, including trade in services and technology. The yardstick in the FTA is “substantial trade”. Article 8 does not specify what constitutes “substantial trade”. For example, should a Jordanian trader be major exporter to the U.S to be eligible for entry? Or the U.S is obliged, subject to its laws on entry, to allow Jordan’s traders entry into its territory for attending a trade fair or partnering with U.S firms.

In effect, the language of article 8 of the US-JO FTA is drawn from the Immigration and Naturalization Service (INS), now known as Bureau of Citizenship and Immigration Service within the Department of Homeland Security, and the U.S Department of State regulations. The Department of State regulations define a treaty trader as an alien, classifiable as a nonimmigrant treaty trader (E-1), who will be in the U.S solely to carry on trade of a “substantial nature” either on the alien’s behalf or as an employee of a foreign person or organization engaged in trade, “principally” between the U.S and the foreign state of which the alien is a national. This language is identical to the language of article 8.1 of the US-JO FTA. The regulations of the Department of State reads that consideration being given to any conditions in the country of which the alien is a national which may affect the alien’s ability to carry on such substantial trade. Moreover, the alien must prove that he intends to depart the U.S after the termination of E-1 status.

Although US-JO FTA does not define the term “substantial trade”, the Department of State regulations define it as the quantum of trade “sufficient” to ensure a continuous flow of trade items between the U.S and the treaty country. Continuous flow contemplates numerous exchanges over time rather than a single transaction, regardless of the monetary value. The U.S regulation considers monetary value as an important factor. However, greater weight is given to more numerous exchanges of larger value. Therefore, Department of State regulations do not specify an exact monetary value of substantial trade, for example $100,000, as a benchmark that would qualify a Jordanian trader as eligible for E-1 visa.

Rather, Department of State regulations leave it to the U.S Consular Office in Jordan the flexibility of determining “substantial trade” that would qualify Jordanian nationals of for E-1 visa. This conclusion is supported by the fact that the regulations of the Department of State itself read that consideration being given to any conditions in the country of which the alien is a national which may affect the alien’s ability to carry on such substantial trade. In other words, the U.S Consular Office will have to take into account the conditions prevalent in Jordan when evaluating a petition for E-1 visa. Thus, the term “substantial trade will be evaluated on a case-by-case basis.

Additionally, the term “trade” is not defined in the US-JO FTA. The negotiators of the US-JO FTA perhaps wanted to give a non-exhaustive list of trade activities that could be conducted in the territory of the other party such as trade in services and technology. Other items of trade may include trade in monies, international banking, insurance, transportation, tourism, communications, and some news gathering activities.

The US-JO FTA also allows nationals of one party to enter into the territory of the other party to establish, develop, administer, or advise on the operation of an “investment”. However, investment is qualified by the requirement that the nationals or the company that employs them “have committed” or “in the process of committing” a substantial amount of capital or other resources. In other words, the language of “have committed” or “in the process of committing” seems to require a significant amount of upfront investment such as transferring money before a national of Jordan can obtain the visa. The purpose such language could be interpreted so as to prevent maneuvering and fraud. Again, in the investment provision of the FTA, the yardstick is commitment to a “substantial amount of capital or other resources”. The Department of State regulations define a treaty investor as an alien, classifiable as a nonimmigrant treaty investor (E-2), that has invested or is actively in the process of investing a substantial amount of capital, as distinct from a relatively small amount of capital solely for the purpose of earning a living, and he seeks entry solely to develop and direct the enterprise. Moreover, the treaty investor must intend to depart from the U.S upon the termination of E-2 status. Thus, subparagraph 8.2 of the US-JO FTA is drawn directly from the U.S regulations.

The US-JO FTA is silent as to the definition of “investment” and “substantial amount of capital”. However, the Department of State regulation defines investment as the treaty investor’s placing of capital, including funds and other assets, at risk in the commercial sense with the objective of generating a profit. The treaty investor must be “in possession” of and “have control” over the capital invested or being invested. Furthermore, the U.S regulations require that capital in the process of being invested must be “irrevocably” committed to the enterprise. In other words, the treaty investor must commit capital in an unalterable way or commit beyond recall.

The treaty investor must have the burden of establishing such irrevocable commitment given to the particular circumstances of each case. Moreover, according to the U.S regulations, the treaty investor may use any legal mechanism available that would not only irrevocably commit funds to the enterprise but also extend some personal liability protection to the treaty investor. Even if all other conditions are met, the investment must not be passive or virtual but rather a “real” and “active” commercial or entrepreneurial undertaking, producing some service or commodity for profit and must meet applicable legal requirements for doing business in the particular jurisdiction in the U.S. This language intends to prevent visa fraud.

As to the definition of “substantial amount of capital”, article 8 of the US-JO FTA is silent on this matter. However, the U.S Department of State regulations define “substantial capital” as the amount that is 1) substantial in the proportional sense for example in relationship to the total cost of either purchasing an established enterprise or creating the type of enterprise under consideration; 2) sufficient to ensure the treaty investor’s financial commitment to the successful operation of the enterprise; and 3) of a magnitude to support the likelihood that the treaty investor will successfully develop and direct the enterprise. The U.S regulations define whether an amount of capital is substantial in the proportionality sense in terms of an inverted sliding scale. For example, the lower the total cost of the enterprise, the higher, proportionately, the investment must be to meet the criteria. Moreover, the Department of State regulations require that projected future capacity of the enterprise should generally be realizable within five years from the date the alien commences normal business activity of the enterprise. In summation, U.S regulations do not specify an exact amount of capital that would serve as a yardstick to evaluate whether an investment could qualify its holder for E-2 visa. Rather, the regulations leave “substantial amount of capital” test to be evaluated on a case-by-case basis.

Article 8.2 of the US-JO FTA allows nationals of either party to enter the territory of the other party to “establish”, “develop”, “administer”, or “advise” of an investment. These four terms are not defined in article 8 of the US-JO FTA. Again, U.S Department of State regulations define some of these terms. For example, the regulations define “develop and direct” as what the business or individual treaty investor does or will develop and direct the enterprise by controlling the enterprise through ownership of at least 50% of the business, by possessing operational control through a managerial position or other corporate device, or by other means. Therefore, an investor under the US-JO FTA must play a key role in the investment whether through establishment, development, administration, or advice in order to be eligible for E-2 visa.

For the purpose of article 8, the U.S rendered nationals of Jordan as eligible for treaty trader (E-1) and treaty investor (E-2) visas. This article seems to imply as if the U.S gave Jordanian nationals special or privileged visa treatment. However, Jordanian national individuals will not be exempt from acquiring a visa for entry into the U.S. Rather, Jordanian national must appear at the U.S. embassy or consulate in Jordan and be inspected by a consular officer and acquire a visa stamp before entering the U.S. for inspection by an immigration officer.

Two-way trade between the U.S. and Jordan is up substantially since the free trade agreement between the two countries took effect, but a provision enabling temporary entry of Jordanian nationals into the U.S. has seen little use. For the period 2002-2010, there were no trader or investor visas issued to Jordanian nationals under the visa provisions of the FTA. This state of affair could be attributed to lack of awareness or understanding on the part of Jordan’s nationals as to E category of visas, the difficulty traders or investors face in meeting the thresholds of “substantial trade” or “substantial amount of capital” for investment, or difficulty of proving intent to return back to Jordan. Not any trader or investor can meet these thresholds. The onerous of article 8 of the FTA might explain the nonexistent of visas under the FTA so far even though U.S regulations allow for consideration being given to any conditions in the country of which the alien is a national which may affect the alien’s ability to carry on such substantial trade.

On the other hand, one year after NAFTA came into force, 220 accountants from the U.S, but none from Mexico, entered Canada independently, and 62 U.S accountants entered as intra-company employees, 965 engineers from the U.S and 7 from Mexico, and 224 American intra-company engineers and 3 Mexicans were issued entry documents, 34 lawyers independently and 9 as intra-company employees came from the U.S.

Although national security, outsourcing, and immigration concerns are issues that need to be addressed, the U.S. must rationally weigh the costs and benefits of limiting movement of individuals. Increasing temporary worker mobility, and for that matter trade in general, has greater potential to benefit trade development, mutual understanding, peace, and tolerance. Failure to consider movement for individuals as a vital component of economic infrastructure and foreign policy will seriously affect economic growth and stability.

US-Jordan FTA Cross-Border Provision of Services

Historically, most trade agreements focused on reducing tariffs and non-tariff barriers on goods as they cross international borders. However, the services sector now accounts for about seventy five percent of employment activity in industrialized countries like the U.S. Therefore, current trade agreements deal with trade in services.

While WTO achieved major progress in liberalizing the trade in goods, it later has begun to liberalize trade in services. The WTO’s General Agreement on Trade in Services (GATS) recognizes several modes of supplying services with “Mode 4” addressing the temporary cross-border movement of business and professional workers. The US-JO FTA goes beyond the primary focus on goods and it deals with a new frontier, liberalization of trade in services. Such liberalization is important for freer flow of labor over national borders.

The US-JO FTA sets out several service obligations. The FTA requires each party to accord to service providers of another party treatment no less favorable than that it accords, in like circumstances, to its own service providers. The idea of this provision is nondiscrimination whereby Jordan must treat service provider from the U.S. the same way that Jordan treats service provider from Jordan. The other key US-JO FTA obligation is the most-favored nation obligation whereby each party is to accord to service providers of another party treatment no less favorable than that it accords, in like circumstances, to service providers of any other Party or of a non-Party. For example, if Jordan treats a service provider from Iraq more favorably than it treats a service provider from the U.S., the treatment provided to the Iraqi must be accorded to an American service provider.

The US-JO FTA created obligations specifically targeting professional services. Professional services, unlike most service providers who wish to provide their services in the U.S., they need permission to enter the jurisdiction from the U.S. immigration authorities. Movement of natural persons, professionals, is of particular importance to Jordan. However, temporary entry into the U.S. is limited to executives, managers, or specialists of a Jordanian company that has a physical presence in the U.S. in the form of branch, subsidiary, or affiliate. Such entry is limited to three years with a one-time two years extension.

The U.S. commitment, while covering the intra-corporate movement of senior personnel, does not extend to other categories of workers. Low-skilled workers seeking entry into the U.S. will not be admitted under the US-JO FTA. Both the U.S. and Jordan would benefit more from relaxed restrictions on unskilled labor rather than on skilled labor. Jordan has primarily unskilled labor to supply while the U.S. has primarily unskilled jobs to offer.

Under the US-JO FTA, a corporate employee cannot move to the U.S. unless his company already maintains commercial presence in the U.S. In other words, the FTA requires a Jordanian service providers to establish or maintain a representative office or any form of enterprise in the U.S. as a condition for the cross-border provision of a service. The “commercial presence” requirement prohibited if not stopped stop temporary movement of workers between the U.S. and Jordan. The US-JO FTA should have prohibited the parties from imposing local presence requirements on cross-border service providers.

The U.S. opted for skilled workers and commercial presence in the FTA perhaps out of concerns over education, certification, professional accreditation, and licensing in Jordan. For example, an engineer who wants to build a bridge in the U.S. is going to need two pieces of paper; in addition to a temporary visa permit, they also need to be licensed by the U.S. professional regulatory body. In order to increase worker mobility, the U.S. and Jordan could have concluded mutual recognition agreements and harmonized professional standards in certain sectors. Additionally, the U.S. and Jordan could have placed more emphasis on education and experience rather on passing exams or interviews. For example, a Jordanian engineer can obtain a temporary license to practice in the U.S. if he has a minimum of twelve years of acceptable engineering experience.

Labor Mobility in the North American Free Trade Agreement

Compared with the modest language of article 8 of the US-JO FTA, NAFTA dedicates a whole chapter-chapter 16- dedicated to temporary entry for business persons. The purpose of chapter 16 of NAFTA is to facilitate temporary entry of business persons. NAFTA parties endeavor to develop and adopt common criteria and definitions for the implementation of chapter 16. Moreover, each NAFTA party is committed to furnish the other parties with materials that enable them to be acquainted with chapter 16. To facilitate the movement of persons across the borders, each NAFTA party is committed to provide explanatory material regarding the requirements for temporary entry under chapter 16 in such a manner as will enable business persons of the other parties to become acquainted with them. On the other hand, the US-JO FTA is absent of such a commitment. Hence, Jordanian nationals might not be able to determine the meanings of critical terms such as “substantial trade” or “investment”.

According to NAFTA, any dispute regarding refusal to grant temporary entry of business persons is subject to the dispute settlement mechanism. Chapter 16 of NAFTA created four categories of business persons who are citizens of a member country to be granted temporary entry. These four basic categories are: business visitors, traders and investors, intra-company transferees, and professionals. Business visitors who are engaged in international business activities may enter a NAFTA member country in B-1 status for the purposes of conducting research and design (technical, scientific, and statistical researchers), growth, manufacture and production (harvester owner supervising a harvesting crew, purchasing and production management personnel), marketing (marketing researchers and analysts, trade fair and promotional personnel).

NAFTA also provides E-1 and E-2 visas for traders and investors. The conditions for granting visa under this category are the same as visas granted under article 8 of the US-JO FTA. However, NAFTA mandates that no NAFTA party may impose or maintain any numerical restriction relating to temporary entry for traders or investors. In contrast, the U.S may impose numerical limits on the number of visa traders or investors under the US-JO FTA.

Another distinction between NAFTA and the US-JO FTA under the treaty trader and investor provisions is that a Canadian or Mexican business person may be denied E visa if there is a labor dispute in the Canadian or Mexican’s occupational classification in progress where the Canadian or Mexican will be employed and their entry may adversely affect the settlement of the labor dispute or the employment of any person involved in the dispute. In other words, the requirements for E-1 and E-2 visas under NAFTA are the same as they in the US-JO FTA, with the exception that entry may be denied when it would adversely affect the settlement of a labor dispute in the US. This provision is only triggered when the Department of Labor certifies the existence of a strike or work stoppage, and does not apply to E visa holders already in the US. This language is absent from the US-JO FTA which means in effect that even if there is a labor dispute in the Jordanian’s occupational classification, still a Jordanian national can enter the U.S as trader or investor.

The third category of NAFTA visas is L-1 visa for a business person employed by an enterprise who seeks to render services to that enterprise or a subsidiary or affiliate thereof, in a capacity that is managerial, executive or involves specialized knowledge. In this category, no NAFTA party may impose numerical restrictions on temporary entry.

The last category of visas under NAFTA is professional visa, TN category. This kind of visa is unique for NAFTA nationals and is not available for other nationals. The US-JO FTA does not contain such kind of visa system for professionals. Under NAFTA, certain categories of professionals who meet minimum educational requirements, or posses designated credentials or licenses and experience, and who seek to engage in professional occupations in a NAFTA member country, may be admitted for example into the U.S for up to one year. Appendix 1603.D.1 of NAFTA lists 63 professions whom its holder may be eligible for TN visa after meeting the minimum requirements. For example, an economist has to posses baccalaureate or Licenciatura degree, a lawyer has to posses LL.B (for example Canadian common law degree), J.D., LL.L., B.C.L. (for example Canadian civil law degree) or Licenciatura degree (Mexican law degree consists of studying for five years) or membership in a state/provincial bar, and a university teacher has to posses baccalaureate or Licenciatura degree.

The U.S could have incorporated a provision similar to the TN category of NAFTA in the US-JO FTA regarding professional visas. Professional visa system could have given the opportunity for Jordanian professionals to acquire contacts and experience that would be translated into increase of trade between the U.S and Jordan. However, issues of immigration and recognition of credentials could have prevented the incorporation of such a provision in the US-JO FTA. Probably, the U.S was concerned that Jordan may dump its citizens in the U.S. and they would not return to their native Jordan. Although, placing a cap on the number of TN visas issued annually could have minimized this concern on the part of the U.S.

Conclusion

Freer trade applies not only for trade in goods but also extends to include other factors of production such as labor and capital. Production is not just a function of capital and natural resources, but also of labor. Little attention has been paid to liberalizing the movement of persons who trade in these goods and services. In the formulation of trade agreement, the flow of goods between the member countries should be discussed in connection with the flow of people.

The US-JO FTA is designed to permit temporary entry, without intent to establish permanent residence, of traders and key business personnel. Despite that, the FTA does not provide “truly temporary entry”. As of this date, Jordanian nationals are not able to benefit from the visa commitments of the US-JO FTA. The US-JO FTA permits entry for narrowly defined investment-related and trade-related purposes. The U.S made the entry of traders and investors from Jordan difficult. Jordanian businesspeople face difficulties in meeting the threshold of “substantial trade”, “investment”, and “substantial amount of capital”. Moreover, the U.S. couples the movement of key business personnel with local presence requirements. Only Jordanian nationals with money and extensive professional skills can gain entry to the U.S. The US-JO FTA prioritized workers with advanced educational training and capital to invest. The US-JO FTA prioritizes the cross-border movement of corporate executives, researchers, and professionals with advanced degrees.

The US-JO FTA, among other US-Arab free trade agreement, is a trade agreement concerned with the movement of goods and services but not with the movement of persons. The U.S. has chosen to actively pursue a free trade agenda in the Middle East while simultaneously restricting inbound temporary labor mobility. Jordanian nationals are human beings and they have a baccalaureate degree. They are part of the free trade agreement. There can be no free trade without people to facilitate it. The current temporary visa provisions significantly increase the cost of doing business and prevent the effective use of a company’s human resources. The issue of trade and temporary visas should be of immediate relevance to negotiators when crafting the broader US-Middle East FTA. Unless the inter-relationship between trade and temporary visas is properly understood, trade liberalization may be easily undone.

Increase Your Earning Potential Using A Trade Copier Software

Foreign currency trading is a very lucrative investment option, but the inexperience and lack of knowledge in foreign currency trading makes beginners a little apprehensive about the whole affair. They fumble when it comes to opening and closing trades in the market. Also, they are unable to tell the high-earning positions from the unprofitable ones.

Using a trade copier might be the best option for most beginners until they get a deeper insight into the working of the Forex market and are able to trade independently. In fact, trade copier softwares have become so popular that they are being considered a necessity for successful trading rather than an optional tool to be taken only by those who need help.

To understand how a trade copier works, it will help to first understand how copy trading works.

What is Copy Trading?

Forex stands for Foreign Exchange. Forex enables investors to earn by speculating on the value of currency. Copy trading is an investment strategy used in Forex trading. It involves copying trades or trade decisions made by other investors. This other investor is generally a seasoned investor or one who has a reputation of generating consistent profits in the marketplace. The system is based on a kind of social trading network and the person whose trades you copy is a mentor.

The process of Forex trading starts with setting up an account with a broker. If you choose to copy a trade, a fixed amount of your funds get automatically linked to the account of the investor whose trades you intend to copy. Each time the investor trades including opening or closing an option or issuing a stop loss order, your account will copy the movements in proportion to the amount of money linked to the account. Every time the trader profits, you will profit and every time he loses you will lose. The system allows you to profit significantly by not restricting you to a single account; you can link it to different traders’ accounts.

Copy trading differs from mirror trading in the fact that the latter allows you to copy on specific trade strategies and not all. In copy trading, you can copy an entire strategy or mirror individual trades only; the choice is yours. The option of copying several accounts is a better option as it helps mitigate risks. The trade copier software allows you to stop copying other’s trades and starting trading independently whenever you want. You can close the copy relationship altogether.

Copy trading can be done manually or mechanically. There are specially designed trade copier software programs to enable it to be done mechanically. Its ability to copy an indefinite number of accounts gives you all the information you need to take sound trade decisions. Also, it has integrated several other tools to maximize profit and minimize risk.

Local vs. Remote Trade Copier Software

Trade copier software is of two basic types. The first one is remote while the second is local. The two differ on various grounds. A local version is used primarily to trade between many different accounts, between account managers and also by retail managers trading with multiple brokers. This exposes one to a greater number of trades thereby increasing the earning potential. This software generally operates on a local network.

The remote trade copier permits trades between multiple accounts. It is a fully-automated solution and the trading is conducted from a remote server or machine. In today’s times, the remote version has become more popular because it is more sophisticated and highly reliable. It also allows for high speed trading. Being fully automated, it reduces the workload for managers and traders who can then rely on automated signals.

How does Forex Trade Copier Software help?

When the concept of copy trading was introduced, it was believed that it offered the most benefits to account managers and not much to retail Forex traders. This is not what it actually is. The software program can be used by account managers and retail Forex traders.

There are several benefits of using the trade copier software. The software converts vital trade data into an easier format and copies it to different accounts simultaneously. Since the process is handled by computers, it eliminates the need for human effort. Imagine the amount of work that would have gone into it if the same process was done manually. It also saves a good amount of time. Even if you are a full-time trader and are quick at replicating trades, you might not be able to do it as efficiently as the program because after all manual processes are prone to mistakes.

When you copy trades, as an investor you can capitalize on another investor’s ability to predict market movements. It enables an investor to manage his or her money more effectively by distributing it profitably. Trade reversal is another advantage of using the trade copier. If you think you are going to lose on a particular trade you can reverse it that is you sell when the trade is buy and vice versa. It is called the stop loss order in trading jargon.

Making the Right Choice

There are plenty of trade copier software packages available for use in the market. The choice of software is what makes the difference between success and failure. Hence, you should pay careful attention to the features the program has to offer.

The first most obvious feature and of course a standard feature on most packages is automation. Trading software opens and executes trades on the basis of pre-programmed algorithms. The Forex market is a highly volatile one. The real earnings come from responding quickly to the sudden movements in the market. And, if you’ve done a bit of reading on Forex trading, you must know that when these movements might occur is totally unpredictable. The copier software you choose should ask for minimum human intervention. A high level of automation allows one to copy trades to and from master accounts instantly.

The trade copier program must run the MetaTrader 4 trading platform. MetaTrader or MT4 as it is also referred to, is an electronic trading platform used in retail foreign exchange. It comprises a client and server component. The server component is managed by the broker while the client component is provided to his customers. If the program you have does not have MetaTrader 4, it is a better option not to invest in it. It is preferable to go for the older versions of the MT4 platform. Also, it should allow for regular updates as and when the newer versions are released. It should also be compatible with future versions.

When choosing trade copier software, the ease of use is another feature you might want to consider. Ease of use allows even the least tech-savvy traders to benefit from the program. The program should be easy to install. Detailed instructions provided by the manufacturer can be of great help in this regard. It makes it less stressful as it eases the learning curve.

Versatility is another feature that defines an efficient program. When we say versatility, we mean that the software has the capability to mirror trades to multiple accounts thus putting you in a better position to open and close trades. If you can get trade copier software that allows for reverse trading, there is nothing like it.

Additionally, one must be able to customize the copier program to one’s individual needs. This includes the ability to adjust profit and stop loss levels, multiplier levels, the choice of currency pairs and the likes. The software should be complete in itself and should not require any additional programs to support it.

Your budget also goes a long way in influencing your choice. Don’t hesitate to pay a little extra for tried, tested and proven software programs.

As we end, there is a small tip I would like to give. The trade copier system is an automated system and will take vital trading decisions on your behalf based on the market trends. However, if you want to be in better control of your investments, you should evaluate the collected data and decide to what degree you want to follow or copy the trade decisions of another investor. Also, don’t get into Forex trading a blank slate. You should go out and learn the best you can about Forex trading to give you a head start on the rest. There are very good resources out there to help you learn the market. This way you will compliment the software program and make it work better.

Forex trade copiers have changed the way investors can invest their money. Work with one starting today and turn currency trading into a potentially profitable investment option.

The 3 Keys to Successful Forex Trading

The first key element is one we have mentioned already, it is also the one element of trading that seems to get the most attention – The Trading Strategy.

1. The Trading Strategy

Your Trading Strategy is basically how you trade, what must happen in order for you to pull the trade trigger? Most trading strategies are based upon indicators such as RSI, Moving Average or a combination of a few different indicators, personally I prefer not to trade based upon indicators. Being able to simply read the Price Action off the charts will provide you with a much stronger base in determining your trades.

Whatever your choice, having a good trading strategy is very important when trying to become a profitable Forex trader. The question is what do I mean by ‘good’? What constitutes a ‘good’ trading strategy? Most traders define a ‘good’ trading strategy as one that has a high rate of success. The truth is you need to ask, how has this ‘success rate’ been established? Over how many trades was it determined, 10 trades? 100 trades? And what about asking the question were all trades taken following the precise steps of the trading strategy?

It is not as simple as finding a trading strategy that claims to have a 70% success rate and then just running with it, chances are if you’ve been in the trading game for some time you will know that it is never that straightforward.

For e.g.

A Trading Strategy claims to have a success rate of 70%

However when you trade it, your success rate is only 40%

Why is this?

Of course it could be that perhaps Trading Strategy A does not have a 70% success rate to begin with, but let’s say for this example that is does. So, what else could be the problem? The answer is you are lacking the other two key elements of a successful Forex Trader, let’s take a look at the second one.

2. Trading Psychology

There is one key component that affects every single trade you take… you. Your Trading Psychology very often is the difference between a successful trade and an unsuccessful one.You can be the strongest minded human being on the planet, but you are still human and as a human you have emotions.

Trading is a very highly charged emotional game, especially when you are trading large amounts of money, naturally your emotions can overtake and influence your thinking/behavior as a trader. Sometimes you will subconsciously take a trade based upon your emotions, whether you are ‘Revenge Trading’ or just being plain greedy, it is all down to how strong your Trading Psychology.

You could have the best Trading Strategy in the World, but if you have a weak Trading Psychology then it counts for nothing. Let’s take a look at some of the ways in which your emotions may affect your trading decisions.

  • Emotions that hold you back from taking the trade
  • Emotions that entice you to take a trade
  • Emotions that cloud your judgement

Your Trading Psychology will improve as your exposure to the markets improve, of course I am referring to LIVE Trading with real money. Trading a DEMO account is fine to start off with, but you do not want to get too comfortable trading DEMO funds, when you are able to start trading LIVE. Please of course ensure you understand the risks involved, and NEVER trade with money that you can not afford to risk.

The final key is a game changer, most newbies don’t understand the power that it yields, the next key is Money Management.

3. Money Management

We are all different, some of us have £5,000 set aside that we can put into trading, some have only £500 and for some those kinds of figures they can only dream of. In other words we are all different, we all have different finances, different aims/goals, different reasons for trading the Forex Market.

Money Management or Risk Management, is that very important part of trading that determines how much money you will risk on a single trade. This amount will be determined by what your individual goal/s are and also how much money you have to actually invest in the market.

As a general rule of thumb, when you are ready to start trading seriously it is best to keep your risk down to 1%, and base your Money Management around that. Unfortunately, there are plenty of ‘Forex Gurus’ out there on the Internet who don’t even mention the importance of Managing your risk (steer far away from these types of people), or say that it’s okay to risk more; say 3% or even 5% (unthinkable!)

The fact is it does not matter how great a Trader you feel you are, it is simply mathematically proven that during your trading activities you will have losses and not just one here and there, but runs of losses. The question you really want to ask yourself is, will I survive during this bout of losses? Or will it wipe my account out?

Let’s say for e.g. you take a hit of 9 losing trades consecutively, you risk 5% of your account balance on each trade:

Opening Account Balance: £5,000

5% Risk per Trade: £250 Risk Per Trade

9 Losses x 5% = 45% LOSS

Remaining Account Balance: £2,750

You will lose just under half of your entire Account Balance! The time taken and the difficulty in trying to make that deficit up will be extremely difficult, and factoring in the fact that you will still have losing trades, makes the whole thing even more messy.

Let’s now take a look at what happens if we risk only 1%:

Opening Account Balance: £5,000

1% Risk per Trade: £50 Risk Per Trade

9 Losses x 1% = 9% LOSS

Remaining Account Balance: £4,550

Here we lose just under 10% of our Trading Account Balance, a very reasonable amount for a 9 trade losing streak. Be SMART, Trading is about capital preservation first, and looking at making a profit only once you have taken your Money Management into consideration.

So, there you have it. A quick look at the 3 Keys to Successful Forex Trading. Learn them, please share them via Social Media with others who are also interested in the field, spread the love!

Happy Trading.