When you first start trading forex, it might seem like a bit of information overload. There is so much opportunity, you get to play with forex leverage, and opening a forex trading account is such a simple process.
Usually after things settle in a bit, new traders start to realize that they don't really have a clue how anything really works. They start searching the internet and looking for a simple forex trading system. Unfortunately, there really are no easy answers when it comes to that. It feels instinctual to start searching forex forums looking for an answer, looking for someone that is on to something.
The truth is that it's much better to get out there and learn on your own. If you don't know what you're doing, or you feel you're losing too much money, get on a demo account. Even better yet, open a micro forex trading account, and trade for nickels and dimes until you feel like you've got a handle on it.
Forex feels like a monster when you first start trading. You might be tempted to stay awake around the clock, scrub forex forums in search of answers to something that seems like it should be so simple, but feels difficult. The unfortunate answer is that getting some real time experience in live forex trading will do more for you than 100 hours of reading forum posts. In fact, the people that you end up following on the forums are usually just as desperate as you are to find an answer. This is not to say that forums aren't useful, they can be, but they aren't the answer to learning how to trade.
Forex comes down to only a few concepts that you need to master in order to be successful.
Start Reading
The first thing I always recommend is to start reading about trading forex online. Take some time to learn the lingo, check out a forex glossary, hang around a forex forum. In the beginning, just lurk around a bit and get acquainted, don't try to do any trading yet.
The first thing I always recommend is to start reading about trading forex online. Take some time to learn the lingo, check out a forex glossary, hang around a forex forum. In the beginning, just lurk around a bit and get acquainted, don't try to do any trading yet.
Open a Demo Account
Open a forex demo account with a broker and do some playing around in the market. A demo account will let you get familiar with the forex trading platform and learn a bit about how the market flows. Experiment with some different methods, try some real time forex trading, and consider trying other methods like position trading.
Learn Risk Management
Forex risk management is one of the biggest key skills to learn for forex trading. If you don't plan on learning to manage your risk, you can just flush your money down the toilet instead of putting it into a trading account, the result will be the same. The best time to learn risk management is when you don't have any real money at stake. Study up on risk reward ratio and other money management methods and work out your trading plan. It can help to keep a forex trading journal during your demo days to learn where your trading weaknesses are before you put your hard earned money on the line.
Forex risk management is one of the biggest key skills to learn for forex trading. If you don't plan on learning to manage your risk, you can just flush your money down the toilet instead of putting it into a trading account, the result will be the same. The best time to learn risk management is when you don't have any real money at stake. Study up on risk reward ratio and other money management methods and work out your trading plan. It can help to keep a forex trading journal during your demo days to learn where your trading weaknesses are before you put your hard earned money on the line.
Open a Real Account
This is the part that is the most exciting. Open a real account with your chosen broker. For a first time account, I'd recommend opening a micro forex trading account. A micro account will allow you to trade very small to get the hang of live trading. Demo trading will teach you what you need to know about the mechanics of trading, how you can manage risk, how to use the trading platform, etc. Once you go live, a new factor is introduced, fear.
Trading fear creeps it's way in once you put on a trade with your real money and watch it fluctuate. Usually you feel excited and unsure, and ready to close or change your trade at any minute. This is where the trading mistakes begin. Keeping your trades small will help you to stay afloat while learning to maneuver this new issue.
So at this point, you just need to rinse and repeat. Learning forex trading is as simple as gaining some experience without blowing your account to pieces. Getting a margin call is not pretty, and it can make you want to quit if you started out with a large amount of capital. In the early days, keep it small, and do your learning on the cheap. If you feel like you should be trading larger, increase your trade size gradually and put down some success with a larger trading size before you increase again. If you start to feel nervous about your potential losses, you are trading too large, drop back to a lower lot size.
Unfortunately, you won't get rich in forex trading overnight. It's a type of investing similar to many others. It takes time to get acclimated and you have to follow some guidelines in order to make money at it and it isn't risk free.
Keep your head clear and go slow with your trading and you'll survive long enough to get things figured out and make some money.
Trading fear creeps it's way in once you put on a trade with your real money and watch it fluctuate. Usually you feel excited and unsure, and ready to close or change your trade at any minute. This is where the trading mistakes begin. Keeping your trades small will help you to stay afloat while learning to maneuver this new issue.
So at this point, you just need to rinse and repeat. Learning forex trading is as simple as gaining some experience without blowing your account to pieces. Getting a margin call is not pretty, and it can make you want to quit if you started out with a large amount of capital. In the early days, keep it small, and do your learning on the cheap. If you feel like you should be trading larger, increase your trade size gradually and put down some success with a larger trading size before you increase again. If you start to feel nervous about your potential losses, you are trading too large, drop back to a lower lot size.
Unfortunately, you won't get rich in forex trading overnight. It's a type of investing similar to many others. It takes time to get acclimated and you have to follow some guidelines in order to make money at it and it isn't risk free.
Keep your head clear and go slow with your trading and you'll survive long enough to get things figured out and make some money.
Money Management
First of all, you have to be able to manage your money. This is sometimes referred to as risk management. Don't take on more than you can handle. Trade in smaller amounts. Just because a forex brokerage is offering 50:1 leverage does not mean you have to use it. It's preferable to use 5:1 at the most, 1:1 (no leverage) recommended for beginners. Think of it this way, there are stock traders that have 2:1 leverage and it common for them to blow up their accounts. What do you think would happen if you start trading at even 10:1 as a beginner? Potentially disaster, so keep the leverage down when starting out.
Emotional Control
Making or losing your hard earned money is an emotional experience. It either sparks off fear, or it sparks off greed. Either way, it will cause you to do things that you don't really intend to do, like keep trades on too long, or cut them too short. It even causes some strange side effects like revenge trading. You just have to learn to keep it together. Emotions are your enemy when trading. You need to keep a clear head and be honest with yourself about whether things are good or bad. If you can master those two main concepts, the rest will come much easier. Anyone can learn to follow a plan, and keep a forex trading journal to learn along the way. Until that point, it's just a matter of surviving the rest. The first months of trading forex are not easy for anyone, in fact, even professionals can make bad trades and have a rough time. Many times new traders quit, because they assume that there is some technical trick that they just haven't been clued in on. If you can master the main concepts, and survive for awhile, you'll find that you'll learn a lot. You might end up being someone that is on a forum teaching other beginners about trading forex online in time.
Making or losing your hard earned money is an emotional experience. It either sparks off fear, or it sparks off greed. Either way, it will cause you to do things that you don't really intend to do, like keep trades on too long, or cut them too short. It even causes some strange side effects like revenge trading. You just have to learn to keep it together. Emotions are your enemy when trading. You need to keep a clear head and be honest with yourself about whether things are good or bad. If you can master those two main concepts, the rest will come much easier. Anyone can learn to follow a plan, and keep a forex trading journal to learn along the way. Until that point, it's just a matter of surviving the rest. The first months of trading forex are not easy for anyone, in fact, even professionals can make bad trades and have a rough time. Many times new traders quit, because they assume that there is some technical trick that they just haven't been clued in on. If you can master the main concepts, and survive for awhile, you'll find that you'll learn a lot. You might end up being someone that is on a forum teaching other beginners about trading forex online in time.
To summarize, keep your head together, learn from your mistakes, and keep your trades small until you feel like you know what you're doing. Learning to trade forex is as much about mastering yourself as it is about mastering the trades.
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