I’ve been asked on several occasions how to go about learning how to trade Forex. The first answer that usually comes to mind is to get a good grasp of the basics, without necessarily getting too technical at first. The basics includes learning topics such as, what is a pip; the different types of orders and how to use them; market conditions, and what affects price movement, etc.
I also always stress the importance of discipline, and being fully prepared before venturing into live trading by risking money on the market. These are the most critical stages in a trader’s career, and often the habits that are developed during these beginning stages will determine whether you will succeed in not only learning how to trade the forex, but to be able to eventually make consistent profits from the market in later stages.
After having covered the theoretical aspects and covering the basics, the next step in the process would be to gain some actual experiences trading on a broker platform using practice funds. Many do not agree about the benefits to demo trading, but it does, in my opinion, offer significant benefits. It not only allows you to get familiarized with the platform, but it allows you to also apply what you learned in theory. It is at this stage that you should delve deeper into different trading strategies and techniques in order to determine what type of trader you will want to become, and what techniques will suit you best. If done for a sufficient duration, the results gleaned from a system/strategy testing at this point can become a good standard for comparisons after you begin live trading. This is so because demo trading allows you to truly test a strategy the way it is meant to be tested without the interference that emotions often present during live trading. Another important facet of practice trading is mental preparation it affords as a pre-curser to live trading.
This next step is as important as the previous ones in your preparation for becoming a forex trader. At this point, you will have definite ideas as to what type of a trader you want to be, whether you will be swing trading, or scalping the market. Hopefully you will have tested a strategy to find out useful information such as what the expected returns will be; how much drawdown to expect, and what the ideal market conditions are for the specified strategy. Now is the time to go live with a small account. I recommend that new traders begin trading micro or nano lots at first. I specify this for a reason. Up to this point you would have been shielded from the potential emotions that live trading involves. Now that you are actually risking your own money, the emotions, such as fear of loss can dominate if you are not fully prepared. It creates less of a shock after just switching from practice trading, and allows you to execute your trades in the way your strategy demands. If you instead jump in with significant risk and you sustain losses, you could be setting up yourself for impending psychological issues which can be difficult for you to get past.
The aim is to build your self-confidence at this stage, thereby giving yourself a huge advantage in the trading game. After having achieved consistent profits for at least three months (may vary for each individual), you may start to consider increasing your account size. I would caution that whatever amount you will be adding, it should not cause you to feel discomfort at the thought of potential losses.
The reality of trading is that less than 10% of persons who attempt to trade the forex actually succeed to the point of consistent profits. Even so, it is not an impossible endeavour. If you approach the process in a responsible manner, you can become a part of the successful 10%. In learning how to trade the forex, respect the process, and you will have a fighting chance.
Latest posts by admin (see all)
- The Secret of Taking Profit and Why it is Important - September 20, 2017
- Fading the Momentum in Forex Trading - September 14, 2017
- Trend Line Drawing With Fractals - September 8, 2017
Winner’s Edge Trading, as seen on: