Trading the Forex market can be a very rich and rewarding experience for those who start from a solid foundation. For those that jump in head-first with no previous training and no pre-defined trading plan, disaster is only a trade a way. I mean that in the most literal sense because if you have no trading plan and no real idea of what being a successful Forex trader entails, then you will quickly develop and reinforce all the wrong habits that eventually will destroy your trading account much faster than you think. This article is written out of personal experience and knowledge and will give you some idea of how to get started trading the forex market with the goal of consistent profits.
Building a solid trading foundation
In my experience, many, if not most traders, tend to skip over learning the basics of Forex trading. They don’t understand what the Forex market is or why it exists and how it works. While it may seem like you can ignore learning about the basics of Forex, doing so is a very big mistake that many beginning traders make, and many don’t even realize they are making it.
You need to take some time to learn about the Forex market and get familiar with the ‘lingo’ and terminology used by traders. You would not expect to take a university physics class and skip ahead to the most advanced chapters; instead, you start at the beginning and work your way up, and everything builds off the previous information you learned. It is the same thing in trading, but for some reason many traders don’t seem to behave as if it is. Thus, if you want to properly prepare yourself for a career as a trader, you need to ‘pay your dues’ and start at the beginning, learn the basics and build a foundation to work from, you can get this introductory Forex trading education by taking my free beginners forex trading course.
I will save you months or even years of frustration, time, and money by telling you this; all you need to make your entry and exit decisions is a naked price chart. That’s right, you don’t need a bunch of fancy indicators and you certainly do not need to buy some two thousand dollar black box system. Trading is mostly psychological and most people over emphasize the technical analysis side of it. A good foundation in price action analysis is all you need as far as the technical side of trading goes. Once you know the basics of price action in the Forex market you can then develop risk reward strategies and concentrate on maintaining your self control and discipline.
How do you know when you’re ready to trade live?
The first and arguably most important factor in determining wither or not you are ready to trade a live Forex account is to sit down and take a look at your entire personal financial picture. If you are planning on funding your trading account with money that you might possibly need for any living expense than you are not ready to trade. You need to have disposable risk capital that you are totally OK with losing; this is the first step in developing the proper habits of a successful forex trader. If you are trading with money that you need for bills or anything else in your life, you are doomed to fail because you will be overly emotional from the very beginning while trading, a sure-fire recipe for disaster.
I suggest you demo-trade for a month or two or three before trading your real money in the markets (or however many months it takes for you to see consistent demo trading success). Develop a good method for entries and exits so that you already know what to look for and what to do when you trade with real money. You need to know what you are going to do before you get into the trade because if you try to decide while the trade is happening you will inevitably make the wrong decision due to emotion. You need to have all scenarios planned out before they happen, so if x happens you will do y, if a happens you will do b, there should be no deciding while the trade is open, or at least very little.
Finally, learning from people who are already consistently successful in the Forex market is probably the best route to go. The problem is that many people claim to be successful traders but few actually are for long periods of time. Forex trading is full of people trying to make a quick buck by selling some bogus trading systems that are overly complicated and simply don’t work. Simplicity is your friend when it comes to trading the Forex markets. Remember that, it’s important.
So, do your research before jumping into the Forex market. Only trade money you can afford to lose, study price action and naked price charts and learn from a good mentor, demo-trade until you get your trading plan tweaked just right, then and only then should you think about diving in with real money. To get started learning a simple yet effective trading method, checkout my forex trading course for more information.