If you are wanting to learn how to trade Forex there are some items of business to go over before you begin. A lot of people get involved in the currency markets without realizing quite what they are getting into; however, learning to trade Forex doesn’t need to be scary or overwhelming. Just follow these tips and you will already be starting down the path to successful money management on the right foot.
Don’t Look for "The One”
There is no one-size-fits-all in the currencies market. There is no magic strategy, nor a secret recipe. So stop looking for one. The more time you waste looking for someone to hand you the keys to the markets on a platter, the more experience and learning opportunities you are missing out on. Work hard and develop your own strategy; one that works with your schedule, goals, and personality.
Don’t Hide From Losing Trades
Look, the plain vanilla here is that some trades will result in a profit and some will result in a loss. Don’t freak out if you have a losing trade, that’s just part of the trade. However, there is a big difference between having a losing trade and losing. Losing means you’ve lost control - maybe you didn’t follow the rules or gave into your emotions. On the other hand, a losing trade is managed, might even be expected and accounted for. Additionally, a losing trade can be a sign for growth; we’ve heard that failure is not fatal, but failure to learn might be. So, while it might dampen your pride a titch, take some time to sit down and learn from your losing trades.
Don’t Give Up on a Strategy Too Soon
First of all, let’s just take a look at your strategy and see how in depth you can answer these basic questions. Why did you choose this strategy? Do you understand the concept behind the strategy, or is it one that was just handed to you? Have you taken the time to sit down and calculate how this strategy will become profitable? A common mistake new traders make is that they lose confidence in their strategy the minute the trade enters negative. A lot of the time a strategy takes a while to develop (possibly a little longer than you would like to spend in the growing stage), and no strategy is going to be profitable all of the time. When you’re learning how to trade it will take time before you’re able to feel like you’re gaining consistent profitability.
Don’t Paint Your Charts
We’ve seen traders who have so many indicators pasted onto their charts that they can’t even see the candles. Candles are a primary source of information for quotes and price action. If all you can see are your indicators, then you’re only viewing secondary information - which will not be as accurate.
Start Small and Consistent
A lot of new traders kind of get thrown into the markets and it’s either sink or swim. Hopefully, you’re starting on a paper, or simulated, account (we start our traders off with a $10,000 demo account) so that you have room to gain a little experience in the markets. Some traders start off trading with 1 or 2 lots, which translates into $100,00-200,000. In reality, it’s the number of pips--not the profit/loss--that matters. So why go risking most, if not all, of your account in a couple trades when you could be gaining the same experience using a mini or a micro lot. (For more info about lots and pips, click here).
Set Some Simple rules
Let us let you in on a little known fact in the Forex world; anyone can interpret the market anyway they want and say that anything could happen. There are so many indicators and signals that could tell you, “do this,” or, “do that,” that they might serve more to confuse you rather than inform you. It has been said that Leonardo Da Vinci stated that “Simplicity is the ultimate sophistication.” You don’t need a lot of complicated systems to be a good trader; simply choosing a few basic trading rules to start developing your strategy can be a lot more useful than trying to keep up with a plethora of magazine subscriptions or attempting to keep tabs on 12 twelve daily maintenance.
A lot of times we get new traders who call us and have a lot of questions that we are happy to answer. Some questions, though, don’t have an answer yet. Questions like, “which indicators do I want to put on my chart,” or, “what’s the best strategy to trade,” don’t have a “one-size-fits-all” sort of answer. It’s through understanding your trader psychology and developing your trader strengths and weaknesses that you’ll gain these answers. So don't stress about finding the perfect solution right away; just follow these tips and you'll find your ability to understand trading will grow with the more honest effort you put into it.