Dirk du Toit's book, Bird Watching in Lion Country is a masterpiece. Here is a fellow mentor who sees the market much in the same light as I do. As I have experienced, many would-be forex traders find the truth hard to swallow; namely that it takes hard work and dedication to become a successful forex trader. The 236-page tome is underpriced for the home truths you will find within. Dirk goes systematically through the basics of what constitutes a trading system and goes on to talk about that vital factor 'The Edge'. I use this term too, albeit lifted from Mark Douglas, but there is no better word to describe it. Interestingly, we are given the facts about the forex market after this and finally we come back to using the 'Edge' in forex trading, where Dirk describes his 4 x 1 Strategy.

Abe Cofnas is founder of Learn4X. The firm is one of the first in the world to provide on-line training on how to trade forex. Mr. Cofnas has provided a worldwide audience with analysis and insight on what moves the forex market. He was selected as the first Forex Trader columnist for FUTURES MAGAZINE, writing a monthly column covering forex for the last 4 years. He has also provided unique content for their website.

Based on years of training, Abe finished and has published a book called "Understanding Forex: Trading to Win", which provides a getting started workbook on forex trading. It is now also available in PDF format. A unique approach of Mr. Cofnas is integrating fundamental and technical analysis.

Learn4x also provides around the world one-to-one mentoring in a Virtual classroom where students can see and draw on charts.

Mr. Cofnas holds a Masters Degree in Political Science, and a second Masters Degree in Public Policy Analysis from the University of California at Berkeley.

Says Abe on participation in this unique forum as resident expert:

The difference between an experienced trader and a new trader is that an experienced trader knows what he doesn't know, and a new trader doesn't know what he needs to know. The path to success in forex trading is to develop an ability to identify winning trading patterns. That's my goal.

Duane Archer has been involved in commodity and currency trading for over 30 years as a private trader, registered commodity trading advisor, branch manager, writer, lecturer, researcher and software publisher. In the early 1970’s he researched hundreds of technical trading indicators and systems using a then ‘state-of-the-art Data General Nova computer at the University of Colorado’s Department of Physics. “Today,” he notes, “That computer, valued at over $70,000, would be no match for a bare-bones PC costing less than $500!” He owns an extensive collection of books and ‘system’ manuals; including many rare items dating from the 1940s and 1950s.

Duane is CEO of FxPraxis and also owns a web conferencing company, PresentPlus. His primary interest is in non-linear trading systems where, he believes, a trader’s philosophers stone waits to be found. But he also does extensive research on linear methods and has co-authored a series of eight technical analysis treatises for currency traders. His "Getting Started in Currency Trading" book was published earlier this year by John Wiley and Sons. Currently he is working on The Goodman Codex and, his opus, The Trend Machine a system based on cellular automata.

Says Duane on participation in this unique forum as resident expert:

I’m excited about the idea of exploring technical analysis with the followers of Go Forex. Just when I think I’ve ‘seen it all’ someone comes up with a new idea begging for further study. Typically, I divide technical analysis into Linear and Non-Linear approaches and further divide Linear into Charting methods and Indicators. When looking at a new method or indicator I always ask myself, ‘What does this really do; what does it really measure - and how does it relate to the ‘true’ composition and nature of the markets?

Now, you may question my sanity here; why am I promoting my competitors? It is because I firmly believe that anyone who takes up forex trading should only do so with the right training and mentoring. Mentoring comes in different guises: Dirk, for instance is more 'hands on' than I am, giving traders daily pointers to the market. My philosophy on the other hand, is giving traders the best preparation by among other things, concentrating on money management. Therefore it is a matter of preference and to a degree, chemistry.

In addition, I endorse a product or a service until something better comes along. Bird Watching in Lion Country is certainly the best book on forex trading I have seen to date.

On the Go Forex forum, you have free access to industry experts, so please visit the forum, today!

New tools are being added to the functionality of TradeCraft and one such tool is the Calmar Ratio. As you have read in previous newsletters, TradeCraft is a money management tool that has two purposes: One is to provide the trader with a suite of tools that gives him or her vital performance information. The other is to provide me, the Mentor information as to how you, as a trader, are getting on; are you sticking to your plan? Are you following your rules? Are you performing to your risk/reward strategy? Are you getting those consistent profits?

TradeCraft provides the link between the individual trader and the professional money manager. These money managers are obliged to provide investors with detailed performance records, if they are ever going to attract funds. They also have to convince their investors that they can handle risk.

You, as an individual trader, do not have this possibility to be your own risk manager, trader and investor at the same time. Even with the pro traders, it is recommended that risk management is separated from trading. Therefore, my role is one of the risk and money manager, and the auditor of the performance records - to you.

There are many measures of performance which do not seem at all relevant to your average trader. However, the average trader is also the one who is losing money! The smart traders know how to monitor and interpret the numbers and use them to keep tem 'in the zone'.

Maybe you have heard, or read about some of these performance indicators, such as Sharpe Ratios, Sterling ratios, and haven't a clue what they are or how to use them. I can tell you that most Interbank forex traders don't know either!

Let us take just one, the 'Calmar ratio' that has been incorporated into TradeCraft. What is it.

It is a return/reward measurement that divides the Average Annual Compounded Rate of Return by the Maximum Drawdown. Got it? No? Well, it calculates the historical dollar return for each dollar risked over a given period of time. The normal period is 3 years, but TradeCraft recalculates on a daily basis, so you can really see the effect. Your maximum drawdown (which is also calculated in TradeCraft), is the biggest consecutive series of losses that you have suffered in your trading. This is a key statistic of interest to investors, because the attitude is ' I don't care how much you earn for me, just don't put my capital at risk'. Why else do you think investors are happy with a small positive return in a year such as this one? They don't want to see large drawdowns.

As an individual trader, you don't want to see a big drawdown either. We assume that you have tested your system and it does not go 10 losing trades in a row. If it does, your Risk Reward ratio is wrong, the system is rubbish, or your risk per trade is too large. The average annual compounded rate is also calculated on a daily basis in TradeCraft, so the final number shows you how much you are risking for every dollar you earn.

The higher the Calmar Ratio, the better your trading risk-adjusted performance is. The number, in real-time, or better still plotted over a period of times speaks volumes about your trading. You will learn this, when you have been using TradeCraft for a time and you will be able to use it yourself to forewarn you of any deterioration in your trading performance before you start bleeding cash.

You may have noticed brokers offering yet tighter spreads. This is because the market makers that stand behind the brokers are turning up the competition. Citibank has been particularly aggressive and is quoting 1 pip on almost any currency pair, so I have heard. They say they have quadrupled turnover. The name of the game it seems, is to try and corner a chunk of the market.

I understand the strategy: I worked intensively with a simulation model that made massive profits from random trades on a 2-point spread based on live market rates. Yes, the models was very 'long' or 'short' at times, but no matter where the market went, if you got enough turnover, you would make money. So, Citibank have realised this and they are going for the turnover.

What might happen as a result, and this is significant, is market players will tend to do their business around a central 'average' price. Much like the old currency 'fixings', which was the normal way to conduct forex business until 40 years ago. This means that markets will be held in a tight range during the 'normal' business hours, only to get volatile when the bulk of the business has been done. Maybe this is already apparent.

In any case, you have to realise that the forex market is constantly evolving and that needs to be taken into account, especially when implementing a system that worked perfectly in back testing.

Refco freezes debt-scandal unit

Refco's problems have come two months after its stock market listing

Refco, the brokerage whose former boss has been charged with fraud, has frozen accounts at a scandal-hit subsidiary at the heart of the allegations.

Shares in the firm were suspended in New York after they plunged 27%.

Refco - which only listed on the stock exchange in August - has lost three quarters of its market value this week.

Former chief executive Phillip Bennett is accused of padding Refco's finances by hiding millions of dollars of debts it was owed by the troubled subsidiary.

On Wednesday, Mr Bennett was accused of hiding the fact that Refco Capital Markets - an unregulated subsidiary he controlled - owed more than $550m (£285m) to its parent, Refco.

US Attorney Michael Garcia alleges that Mr Bennett wanted to make Refco look stronger ahead of August's $583m stock market listing.

Safety measures

On Thursday, the firm said that Refco Capital Markets did not have enough capital to keep operating and explained it would freeze accounts and block withdrawals for 15 days to prevent the subsidiary from collapsing.

Refco Capital Markets is a bond, share and currency broker, which also lends securities and acts as a prime broker.

"This company is in serious jeopardy," said Kevin Starke, an analyst at Weeden & Co.

Refco is one of the world's largest commodities and futures brokerages.

Mr Bennett first joined the group in 1991 and was appointed chief executive in 1998. He also was chairman.

The US Attorney's Office for the Southern District of New York charged Mr Bennett with securities fraud on Wednesday. If found guilty, he could face up to 20 years in jail.

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