What are some of the first things you need to learn to be successful in forex trading?… I know there is so much info out there and you dont want waste your time learning a strategy that is not right.
First Steps You need To Learn To Trade Any Market
Forex is fundamentally similar to any market be it that of lemons or that of Stocks. If you have ever done hunting in the jungle you would know that despite having a rifle or bullets you may not kill anything and the jungle is home of all species of wild life. In frustration you may kill a lizard or some other low hanging rodent.
Well, most traders do exactly that, they spend their days killing lizards rather than training to be a hunter. The experienced hunter understands the jungle he has respect for the creatures. This is because he has taken the time to understand the market.
If I asked 9 out of 10 traders what asset correlated strongly with the Brazilian Real, they wouldn’t have the foggiest idea. Yet they will tell you they have traded for years, it is lack of market knowledge and awareness.
So the first step is gain market awareness and knowledge especially in your chosen asset. A Cocoa trader knows everything about Cocoa, all the players, if the Cocoa market took a shit, they would know. This is the first thing every trader needs.
Being A Successful Trader
To be successful at forex trading you must be
1) Realistic – This is going to take you a few years minimum of hard work to get competent
2) Process driven – You must approach building trading skill like becoming a concert pianist or a professional golfer. Measure everything, engage in structured and focused practice.
3) Aware that 99.99999% of the people selling courses, ebooks, and systems are themselves failed traders. Imagine you didn’t play golf, and one of your friends was a serious weekend golfer. If you didn’t know any better, he would appear to be incredibly good, but the reality is that he’s not good enough to make a living from it (insert any hobby/sport analogy you like)
Let’s break it down into the component parts:
a) An system for trading the markets
b) That system must have an objective edge. Most successful traders I know trade edges which are uncontroversial and uncomplicated. Some examples:
- Buying pullbacks in an uptrend is an edge
- Buying support in a range bound market is an edge
- Buying breakouts is an edge, even though it only works around 30–35% of the time, since the wins are large
- Opening gaps are an edge
- Seasonality is an edge
- Inter market correlations are an edge
c) The system must suit your investment goals, lifestyle, market beliefs and personality. It is unlikely you will be able to trade another persons system without modifying it to your taste.
d) You must keep accurate records and screen captures and set aside a lot of time for regular reviews of your system performance and your own performance as executor of that system
e) You must have a business plan to go with your trading system, telling you when to increase position size, when to reduce, when to stop trading, and how to deal with anything that could potentially go wrong.
Once you have all this together, you do a lot of backtesting, and out of sample backtesting so you know what to expect. Then when you start trading live you start VERY SMALL. Literally risking $50 on each trade.
The way I do it is to start with very small trade size, and when I trade 20 trades with 1 mistake or less, I raise size a little. I stay focused on trading perfectly with no mistakes (as opposed to making money) and increase the size as I get better at execution.
You don’t need to do lots of courses to do this. It is honestly just time, and grunt work. Most people are unwilling to put in the work.
I think you should start by contructing a trading plan. First you need to find out what type of trader you are, look into things like your behavioral, emotional, and personality traits. Are you a patient person, risk averse, discipline etc..
You can determine, what types of time frames fit your personaility. If your not a paitent person tehn longer tf’s might not be for you and vice versa. Also look at different strategies and what appeals to you and fits in with your trading personality.
Do not fight it , flow with it…
Then demo trade the heck out of it to see if you were right in deciding what type of trder you are. The most important thing is to know there is no holy grail, work hard, make a plan and follow it. Plan your trade, trade your plan. We do not plan to fail , we fail to plan.