Learning to Trade Forex in Seven Steps
If you are interested in learning to trade forex successfully, then the most common path for an aspiring trader these days is to search the Internet for information to apply immediately to their live forex trading account. The problem is that their search often leads them to destinations where there are plenty of false promises, bad ideas, negativity and an obsession with indicators. Many of the EBooks on sale today are filled with recycled concepts or incomplete strategies which the authors themselves do not use. Many authors do not earn money from forex trading but they earn their living by selling these EBooks to the novice forex trader.
This easy access to forex guru's who fuel the idea that forex trading is the holy grail of easy money, then financially feed off those same people they have sold this idea to. https://www.goldsniper.io/ At the end of the day what many of these forex guru's sell is a gross misrepresentation of what it takes to trade forex for a living.
Forex Trading is not easy. You can become a good forex trader though dedication and by treating forex trading as you would any other skill. The reality is that it is hard work and must be treated with the same amount of seriousness as you would any other career.
The effect of all these gurus is that many forex traders start off overly optimistic with unrealistic goals. Whilst there is nothing wrong with a positive mental attitude but this positivity must be built on strong foundations and realistic expectations.
New forex traders normally start their career by purchasing some secret set of indicators and they are quickly punished for their naivety. Many of these forex traders then purchase a different set of secret indicators until they become disillusioned and then quit trading.
In fact, many forex traders that are now successful went through this learning process, including myself. This is only a problem if you refuse to learn from your mistakes. You need to break from this cycle of reliance on secret indicators and guru methods to be successful.
You help yourself in the beginning; by learning to think for yourself and understanding that whilst anyone can trade forex, to be successful, you must learn to BE a forex trader.
To BE A Forex Trader
To trade forex is easy, all you need is a forex trading account with money in it and then you enter the foreign exchange market and start trading.
To be a forex trader is more work. You need to grow from the starting point of having very little knowledge to the stage where you have a trading plan, understand the concepts and behaviour of the forex market and be able to trade with a cool head and understand that wins and losses are all part of being a Forex Trader.
Learning How to Trade Forex by thinking like a Forex Trader in Seven Steps.
1. Understand your place in the Forex Market
This is very important you must understand that you are very small fish in a big ocean.
In the Foreign Exchange Market the majority of the liquidity is coming from big banks and experienced institutional traders. These are the big fish. The big fish will happily enjoy you as a little snack.
You are only fooling yourself if you think it will be easy to take money off these big forex traders.
You have to learn to swim alongside these big fish and catch the same currents they do. Swimming against them just marks you as prey and sooner or later you will be eaten.
2. Learn to read the Forex Charts and Understand the Foreign Exchange Market.
Many novice forex traders believe that these big forex traders have access to some secret forex trading strategy or use a secret set of indicators, but the truth is this is just not the case.
These major forex players are using simple, but proven technical analysis techniques - most commonly horizontal support/resistance, identification of trading ranges, Fibonacci these are then coupled with fundamental themes.
Begin by accepting that the other major participants are highly experienced in the market and they make money because of experience and by a complete understanding of the core skills and not because they hold a holy grail of secret indicators.
3. Money Management
It is crucial that you understand as a novice forex trader the emphasis is not on how much you can make from forex trading but on how you manage what you have.
This is the most common downfall of all novice traders. It is common place to see a starting trader risk the majority of their account on one or two positions.
This style of trading is not sustainable and professional traders do not trade in this manner. Everyone sometime in their career will have a string of bad trades. A typical number might be 10 losing trades in a row. The question is do you have a money management plan in place that enables you to survive this?
4. Focus on the Market
Many novice forex traders open their forex charting software and activate their latest hot indicator or tool and proceed to place their trades as per the tools recommendations. This style of forex trading is unlikely to have much long term success.
When these indicators fail to generate the required profits then these traders then move rapidly on to another set of indicators.
You must focus on the forex market and understand what the indicators are telling you so that you can pick the forex trades which have the best probability of being winners.
Successful forex traders use indicators and tools as Fibonacci, Pivot points, price channels, MACD, RSI etc. These tools by themselves do not make a successful trader. There are many successful traders and unsuccessful traders who use the exact same indicators.
The key is that successful traders understands how the market behaves around the indicators and understands what the signals actually mean.
The best way to achieve this is to stop swapping between tools and select those that compliment your trading plan, understand how they work, and then spend time in the market experiencing them.
5. Plan your trade and trade your plan.
This is a common saying that seems to get lost on novice traders. It should be every trader's goal to make pips on each forex trade as per their trading plan. Forex Traders must treat each trade as a business decision by calculating their risk and defining their entries and exits points, those that do not open themselves to big losses when a trade goes bad.
Many novice traders seem to lack the discipline to follow a plan for each trade. So what happens is typically the following; a novice trader will see a potential set-up, they decide on some arbitrary sum to buy or sell with a quick guesstimate, then place the trade without analyzing any risk and having an exit strategy.
Of course this way of trading can be profitable over the short term, more down to luck than skill. But eventually the luck runs out and the trader is caught napping and a common result is a wiped out account.
The first question novice traders tend to ask themselves how much will I make on this forex trade?
The first question experience traders tend to ask themselves is how much is my potential loss / risk?
6. Your mind is your strongest asset and weakest link.
Entire books have been dedicated to the subject of psychology and its role in trading. That doesn't mean they are all going to help you, but you should take this as a sign that the subject is not to be ignored.
First you must understand the role psychology plays in trading. You must learn to understand your personality traits and how they might affect your trading style.
A trader I know is a bad loser and when he has a bad trade, he had a habit of going straight back and trying to win those pips back with even worse results. But he understands this as a weakness and when he has a bad trade, he takes a break of 20 minutes before he goes back to trading so that his emotions do not affect his trading decisions.
Second you must make it your aim to never stop learning. You cannot get yourself to a certain level and then become complacent. Every day is a learning experience in some way or other and you must be prepared to learn lessons and invest time in improving your skills and experience. The day you stop learning is the day you should stop trading.
7. Understand The Forex Market is always right or Expect the Unexpected.
The forex market is an interesting place, but there is one thing every trader needs to learn. Always expect the unexpected and do not get wrapped up in past successes. No matter what your charts or indicators tell you; sometimes the forex market will just do the opposite.
Whatever happens in the market you must maintain an objective outlook on your strategy and the forex market and ensure that bubbles and crashes do not derail you in the long term.
By following these steps and learning to become a forex trader rather than just trading the forex market, you will put you on the path to ultimate success as a profitable forex trader. This is something that 90% of all novice traders fail to achieve.