The first step every forex beginner needs to do is to stop looking for an easy way out – forget about automated robots that supposedly trade for you while you sleep, say no to all the scam artists that offer the Holy Grail, run away from suspicious “account managers” that promise 100% profits.
You are responsible for your money and your knowledge of trading. In order to become a successful trader, you have to learn the basics. By basics I don’t mean reading some online e-book once, open live account and deposit thousands of dollars right away. NO! You have to learn all there is to forex trading, open a demo account, practice for several months, make notes of your trades and your emotions, work on a good strategy and, last but not least, figure out the money management.
Avoiding troubles in trading is the biggest challenge of all. You need to be very organized and disciplined – after all, one little slip and your account can get wiped out. Don’t be too surprised when it happens though. Even with an awesome plan and great strategy, every beginner in forex makes bad decisions from time to time.
One of the important factors to consider is choosing the right forex broker. It is important to find a broker that is trustworthy and regulated. What do I mean by regulated? A broker that is under a supervision of an governmental authority is called regulated and therefore tends to follow the rules and not trick customers into something they don’t want to be doing.
Each broker offers different kind of trading conditions and terms. It is vital to go over those terms before you sign any kind of agreement (and by signing an agreement, I mean pressing a button or a check box “I agree” during the registration process).
Pay attention to the spreads and leverage offered – these two things significantly affect your trading experience. How do you know that a broker is fair? The rates shouldn’t jump too much while the market is volatile.
Another thing that shouldn’t skip your attention is slippage. Slippage is the cost that a trader pays when he tries to enter to leave the market. Bad brokers make it nearly impossible to make any kind of money. Your job is to find a broker that is fair, trusted and supportive.
Why do beginners in forex do so poorly while traders with experience make significant chunks of money? The answer is quite simple – with experience comes success. Forex trading is not all about skills. A professional forex trader has a clear understanding of psychological factors involved in gaining or loosing considerable amount of money within short periods of time.
While a beginner in trading might be overwhelmed by unrealistic expectations and objectives for each trade, an experienced trader learns to look at a wider picture by skipping the unfortunate losses and examining the overall profits within several months or longer.
Do you really think that every single trade will bring profits? Do you really believe that there is such a thing as 100% profits without loses? If you do, go back and read about currency market concepts again, because you are clearly still delusional!
The truth is that not every trade will be the right trade, not every day will be the perfect day for trading… Greed is your worst enemy, so learn to control it now, before it is too late.
Last, but not least, spend time figuring out money management. Forex trading is not only about making profits but also about keeping them! Never risk more than you can afford to lose. Trading with a risk of more than 2% of your total margin will eventually result in losing all of your money very, very quickly.
Erase your gambler mind set. This is not a poker game. Understand the risks, follow the trading plan, stay away from real money account before you create a solid trading system that has been tested with demo account for several months, work on your emotions and expect losses along the road. If you take forex trading seriously, you will be surprised how much money you can actually make!