- Learn the Basics
learn the basics in ForexYes this is a simple one but it has to be said. A man in my position has the pleasure of talking to scores of newbie traders on a daily basis. If there is one thing I have learned it’s that most newbies forego the basic training and jump straight into the warzone. This is of course a fatal error, on their part, so if you’re a newbie LEARN THE DAMN BASICS!
How do you learn the basics?
Check out the Forex education section.
- You Won’t Get Rich Quick, Experience Makes You Rich
the road to trading Forex is longIf you’re here to get rich quick you’re just a clueless tourist. Don’t be naive. Trading is all about experience. As is the case with any career, the longer you do it the more efficient you become. I am often asked “Nick, how did you make ninety pips when I only made seventy pips on the same trade?” It is all about experience. I have been trading for eight years so I am an efficient trader. I see things that newbie’s don’t because I have the experience.
The journey to becoming a trader is a long one so be prepared to stick it out for one to three years before you’re consistently profitable. Forex is a long road but it is well worth the journey.
Always remember, Forex is a career not a get rich quick scheme.
- Experts Are a Joke
Forex experts are a jokeListening to expert opinions is great right? Of course it is!
The problem with financial markets is that every newbie who’s had a good week thinks they are an expert. The other, more pathetic, type of expert is the 30-60 year old guy/girl, in a suit, who claims to be a professional trader yet begs you to buy their book. These people are usually failed traders who make money teaching other traders how to fail. Self-proclaimed experts tend to:
Regurgitate generic old information that just doesn’t work.
Say they’re rich full time traders yet try to sell you books.
Make outrageous claims like they turned $1k into $1mil in a month or some such rubbish.
Try to prove they are profitable traders by posting pics of photoshopped account statements.
Cleverly use maths to make themselves appear more successful than they are e.g. double counting wins and single counting losses.
So most ‘trading experts’ are a joke. Take what they say with a pinch of salt.
- Do Your Own Analysis
don’t be a brainless zombie do your own Forex analysisContinuing from the last tip, blindly following others will make you blind. Your goal should be to become a successful trader, not a pigeon following others around for scraps of information.
As a trader you need to pick a method and learn to analyse the market. Being able to do your own analysis will bring you closer to being a pro trader. Doing your own analysis allows you to:
Be self reliant.
Actually learn to trade.
If you choose to blindly follow some self-proclaimed guru all you are is a pigeon. How will you make the money when the guru stops giving tips or the tips stop working? Will you even understand why they worked in the first place and why they no longer work?
- The Demo Myth
If I wanted to be a professional boxer then I would go out and buy a boxing game for my PlayStation 3 and start my boxing training. Would that make any sense?? Well it makes just as much sense as trading demos in the hopes of becoming a successful Forex trader.
Demo trading for 3 months does not work for 2 reasons:-
Demos give new traders false confidence and cause them to learn bad habits.
Demo account performance is often superior to a brokers live account performance. This includes execution speed, stop hunting, and several other factors.
The best solution is to use a demo to learn the basics and test out, or find, a trading method. When it comes to actually trading you should only trade a live account. These days you can open an account with pocket change ($10) so there are no reasons not to trade live.
Oh and if you cannot afford to lose $10 you should not be trading anyway….
- Kill Losing Streaks Early
the impact of a losing streak in ForexThis is by far the most important rule I have ever put to action in my own trading. Had I not stringently stuck to this rule I truly believe I would not be a successful trader today.
If you lose 3 trades in a row STEP AWAY from your charts. Take a few days off trading and come back with a clear head. Losing streaks are very dangerous and falling into one can lead to very big losses.
I cannot stress this tip enough.
- Following the Pack
do not follow the pack in ForexHave you heard that 90% of new traders fail? Like most statistics that one is probably bull. However it is fair to say that the majority of newbie’s coming into this market fail.
I believe the secret is to break away from the pack and do your own thing. That doesn’t mean you should segregate yourself from the trading community. It just means you should rely on yourself. Get enough knowledge/experience to be independent and not simply a follower.
Think about this one logically:
The vast majority of new traders fail.
If I follow the majority I become part of the majority.
If I am part of the majority I am likely to fail with them.
Become independent DO NOT remain a follower.
- Stick to Your Method
Every trading method has its ups and downs. No trading system, method or style will be 100% profitable, all year round. My method, for example, has on average an 80% success rate. Some periods of the year I will win only 6 in 10 trades (60%). Other periods in the year I win 100% of trades for a month or two.
I know each year, I will have some bad periods in which case I lose more trades than normal. I do not lose faith though. I stick it out and keep on trading. The problem with most newbie’s is they will give up on a method after its first bad week.
Don’t abandon your method when times are tough.
- Keep It Simple
This is an easy one. Keep it simple!
There is no reason to complicate trading. For example, my trading method is extremely simple yet extremely effective. I spend 2-5 hours per week trading and the rest of the week enjoying life.
Your method does not have to be incredibly complex to work. Keeping it simple will allows you to:
Work much more efficiently
Speed up your learning (KISS)
If you remember nothing else from this article, remember this…..
Keep it simple!
- Trade Only One Pair
The key to making that transition from newbie to pro is keeping your trading simple.
One of the easiest ways to keep trading simple is to trade only a single currency pair at a time. This is so damn obvious I am surprised more people do not do it. Trading one pair helps because it allows you to concentrate all your efforts on learning that pair, therefore allowing you to understand how it moves.
If you try and trade 5 pairs at the same time, learning to trade becomes much harder. You will have to learn the unique characteristics of all those different pairs and each pair is unique. Each currency pair:
Reacts differently to news.
Moves at different rates, some fast some slow.
Moves more rapidly at different times of the day.
Has to be managed differently when holding an open position.
As a newbie, jumping into the deep end with multiple pairs adds a lot more stress and slows the learning process.
So start off with a single pair. Once you’re profitable you can add as many pairs as you think you can handle.
- Trade Only One Time frame
As above, picking a single time frame keeps things simple.
Looking at a single time frame has several benefits:
Allows you to concentrate on learning one time frame, therefore removing a lot of the confusion that comes with learning multiple time frames.
Gives you less charts to look at and allows you to concentrate more energy on analysing a single chart, therefore improving efficiency and the quality of your analysis.
Stops you from overanalysing your pair. Looking at too many time frames can give you conflicting signals.
It just makes your life easier.
Remember it’s all about keeping it simple. If you have a single timeframe and a single pair it means you’re looking at a single chart. As a newbie you do not want to juggle multiple charts. Stick with one chart, until you become consistently profitable.
- Clean Charts
Most newbies pile as many indicators as possible onto a chart, when they first start trading. Indicators help with your trading (apparently) so the more the better, right? Wrong!
As traders gain more experience they start figuring out that less is more. The more indicators you have on your chart the more confusion you will have. Every extra indicator:-
Adds to the clutter making your charts harder to read.
Gives you more to think about therefore clouding your judgment.
Increases the possibility of giving you conflicting signals.
Looks pretty damn ugly…
Indicators are not essential. I personally trade with no indicators and have an 80% success rate. I am not saying you need to remove all indicators but limit it to a max of 2 at a time on your chart.
I trade with no indicators, simply a few support and resistance lines and candlestick patterns.