Trading is simple, but for sure that is not an easy thing.
I’m giving you here a set of rules that any new forex trader should follow when he wants to start trading forex.
When you miss applying any of them, your chances of success decrease a lot.
But you are a winner, so here are the steps for you.
1 – Learn how trading Forex works
Most people just dive into trading without knowing how the Forex market works.
They just think that they are going to be rich quick and that it will be easy.
That’s completely far from the truth.
Being a trader is probably the hardest job in the world.
As a beginner trader, you need to learn the most possible and keep learning every day.
A good broker will have a small spread to trade meaning that you enter into profit territory much faster.
Beginners are always attracted to forex because brokers provide big leverage to trade, but there are other markets that tend to be easier to trade depending on your trading style.
Knowing the difference between forex vs indices vs stocks may help you to choose the right market for you when you start trading.
2 – Learn a trading strategy and stick to it
When traders start to trade Forex, they act like kangaroos.
They jump from strategy to strategy without really mastering any, never.
Because they think that trading forex is easy.
And if a strategy doesn’t work after a couple of weeks, they just jump to the next one.
Like a kangaroo.
And then you start from scratch again.
Don’t be a kangaroo trader.
You want to be a hard-working trader.
A trader that never gives up.
A trader that keeps practicing every day.
A trader that gets better after every single trade that he takes.
When starting to trade forex, you want to:
- Look superficially at different strategies
- Reject the ones that you don’t like
- Learn deeper the ones that you identify with
- Pick the one that is simpler
- Practice the strategy over and over
And how do you practice?
That’s why the next step is to create a trading plan.
3 – Plan your trades and trade your plan
Every trading strategy needs a trading plan.
When you start trading, you’ll follow rules.
You’ll need to know how to act on every occasion.
What rules do you need to start trading forex?
- When to open trades.
- When to close trades when you’re wrong.
- Should you use a stop loss or close the trades manually?
- When to close trades when you’re right.
- What time frame are you going to trade?
- How much are you going to risk on a particular trade.
- How are you going to manage your trade when it’s moving.
- Are you going to use targets? How?
- Are you going to use trailing stops? How?
- At what time are you going to trade.
- How many trades are you going to take every day, week, or month.
And the list may keep going.
The more details you have on your list, the fewer chances you have of not knowing what to do at some point.
The rule is, if you don’t have a rule, you have nothing to do.
Just sit on your hands and wait.
Yes, sit on your hands!
Because what’s the point of having a plan if you don’t follow it?
Get used to this as soon as you start trading forex and your chances of success will increase a lot.
4 – Runaway from miraculous indicators
Here’s a hard truth that beginners don’t like to read.
There are no magic indicators that will give you accurate signals to trade.
Is someone trying to sell you an indicator that draws buy and sell arrows on your screen?
Forget it, it’s useless.
You are being scammed most probably.
“Oh, but I saw a guy selling an indicator that has a 99% of success.”
Forget it, it’s a scam.
“Oh, but I saw a backtest of the indicator and he turned $1000 into 1 million in just 3 months.”
So why is that guy selling that Forex money machine?
“Oh, but I saw prints of the charts, and the arrows really appear before the markets start going up or down very accurately.”
Sure, have you ever heard about repainting?
Well, those miraculous indicators that never fail, repaint.
It means that a lot of arrows disappear after they appear.
If a trade doesn’t go in the right direction, the indicator just deletes the arrow.
If you want to start trading Forex and have chances of success, you need to stay away from these get-rich-quick schemes.
Otherwise, you’ll just lose all your hard-earned money and give up without even beginning.
5 – Keep a track of your progress
This one is key, and most traders just ignore it.
Every successful trader has what it’s called a trading journal.
As soon as you start trading forex, one of your tasks will be to keep a registry of your trades.
What to put on your trading journal:
- What forex pairs did you trade
- At what time
- What was the setup that you traded
- How much profit or loss did you have
- Did you follow the trading plan or not
Feel free to add any other parameters as you like.
Now you’re asking…
What do I do with the trading journal?
You use it to find your demons.
You use it to know what is working well for you and focus on that.
Let’s say that you are trading two setups, pinbars and engulfing candles.
And you notice that you have success trading pinbars.
While trading engulfing candles you are just losing money.
Or the opposite, it doesn’t matter.
What matters is your results.
Focus on what’s giving you the best results and be a master trading that.
This is what you learned today:
- To start trading forex you must first understand how the forex market work.
- To master a trading strategy you need to spend a lot of time, getting better every day, rather than jumping from strategy to strategy.
- Having a trading plan is vital either for someone that is starting to trade forex as well as for experienced traders.
- Miraculous indicators don’t exist, huge accuracy usually means that it’s a scam.
- Keep a trading journal updated to understand how are you performing and tweak your rules.
Now I want to know from you.
How is/was your experience when you started trading forex?