On Sep 29, 2011 | In Forex Tips | by Forex
If you hop on to any of the popular forums right now, you might get the impression that everyone is making money in Forex except you. There’s never a shortage of “wise old traders” sharing their cryptic trading advice with you, but how many people actually go beyond the cliches and share something substantial? In my experience, there’s precious little useful information being shared by genuinely successful traders. So the beginner traders of this world continue jump from trading course to trading course, and from automated system to automated system.
As a trader myself, I’ve been exactly where you are. I wish I could say that there’s a “paint by numbers” blueprint that I could just give you, or a tried and tested automated trading system that you could just plug in and profit, but in reality it’s not that simple at all. You are going to make mistakes along the way, lose some money and feel like quitting. It’s a completely normal part of the process that every trader has to go through before they start making progress towards their goals. That said, there are a few things that I’ve learned over the years about trading that I’d like to share with you, to help you to start making money in Forex a lot quicker than you otherwise would.
Before You Start Making Money In Forex…
Before you commit any real money to trading a Forex account, you should learn the basics of technical analysis (TA). A lot of so called experts go around saying that technical analysis is dead, but at the end of the day TA is a study of historical prices and how they change over time, and if you don’t consider price then what else do you have to base your decision on? To me, technical analysis can be as simple or as complicated as you want it to be. You can just have pure price on your charts, you can plot support, resistance and trendlines if you want to get a bit more advanced, and obviously there are hundreds of different indicators ranging from the moving averages to Fibonacci levels that you can apply as well.
You might be wondering, “What has all this got to do with making money in Forex?” Well, how else are you going to decide what position to take, when to take it and what are the potential scenarios that will eventuate? There’s got to be more to trading than just following a broker’s recommendation or trading off a signal’s service. Even if you’re just going to follow someone’s recommendation, normally they will have done their own technical analysis, so you’ll be able to understand their reasoning behind calling a trade and know when things aren’t going as predicted so that you can get out with your capital intact.
Not Losing Money Is More Important Than Making Money In Forex
Once you’ve decided that you’re ready to start trading real money (as opposed to trading a demo account), then obviously you choose a reliable broker and deposit some funds into your trading account. A word of caution here, make sure that you don’t overleverage your account. That means that you should keep your leverage between 1:50 and 1:100, otherwise you may get frequent margin calls or have your account wiped out prematurely. Most beginners make the mistake of focusing on the big returns in their hurry to start making money in Forex, and not realizing that big risks come with those returns as well.
The fundamental attitude that you should adopt in your trading is that not losing money is more important than making money in Forex. That means that you keep your risks low at the start, and you apply correct money management to protect yourself from bad trading streaks. After all, you are only going to lose money at the start of your trading career, so it makes sense to keep those losses as small as possible while you learn.
As time goes by, and as you improve yourself in your trading, you will notice that your losses start getting smaller and less frequent, and your wins start getting bigger and more frequent. Once you have achieved consistency in your trading, then you are finally ready to start making money in Forex. Until then, keep working at the basics, which are technical analysis, money management and most importantly, your mindset.
