Forex: How to start Forex and learn Forex the right way?Answer: Foundation.
Posted on Mar 27 2012 at 11:20:18 PM in Finance & Investment
1.1 Forex: How to start Forex and learn Forex the right way?Answer: Foundation.
I believe that in everything we do, that we want to do well or succeed, Foundation is the key factor or element for this result. This is a similar factor across all board of life. A strong foundation of understanding Forex starts from the beginning, alike why children have to undergo the various stages of education before attaining their own highest qualification.
Foundation is not just dominant, but the positive side of it is what matters. Adult learning and self-mastery of this Forex subject starts from every trader himself/herself in his experience with Forex and his thoughts about it; which also compromises of emotions and experience level up on the trader himself/herself.
An excellent and proper methodology must be given to a trader, for trader to learn the more positive route of learning Forex; so that trader may avoid committing common mistakes and lesser re occurrences of his own mistakes.
You are not qualified to be called a trader
1. Myth in believing to multiply your money by enter trade at leverage of more than 100:1. To professional, even 100:1 is already considered a high risk. Nothing is guaranteed or highly predictable.
2. Failed to analyze your own risk and reward plan, fail to management money management. Risking your equities of more than 2% per trade.
3. Buying Expert Advisor to trade for you, rely on other's comments/opinions. Copying other people's trades.
4. Spending too much time focusing on smaller time frames or Entering too many trades per time risking your equities at stake. Unless you are a top scalpers. [ Many scalpers are their own devil of losses, winning more than few hundred % in a short period and losing everything once a breakout or sell off occurs for failing to place Stop Loss.
5. Failed to respect your trading plan/system, failed to respect your SL. Failed to set and forget your trade.
6. Using Binary option instead of margin trades, using binary such as eToro. Binary are locked in margin trades, and if you are on the wrong side of trade; you are losing a gambling trade. Usually, binary options are too high risk; 400:1 or 500:1. Locking your funds into one simple trade without a risk/reward plan and not risking more than 2% of your equities is no difference from gambling.
7. Not having balanced life style, spending too much time on the screen trading/gambling. Not having sufficient rest or time for other important areas in your personal's life.
8. Too emotional when seeing your trade in red and too receptive to accept losses early and understood that you placed a wrong trade. Admitting your own mistakes. Always hoping that things may turn around soon to be on your side. Too irrational to enter multiple hedge trade on the same account and failure to target your direction of trade.
9. Believing that you can win back your losses by multiplying your capital per trade over your initial losses to gain back what you have lost and even greedy to win more. Experience trader watch risks, and novice chase gains.
10. Do not have a system or always changing system, and too easily influenced by comments/opinions, and trading on major hours/releases of important data/fundamental news. Top traders always avoid high volatility and uncertainty period; this cause irrational spikes/sell off even without logical sense to either positive/negative data release.
Avoid starting Forex trading if you belong to any of the above category
If you belong to any of the above category, and just started Forex or have the intention to go Live. Simply just quit and get a life outside! Forex is not the only path to financial freedom/success, it will only be detrimental and disastrous to your well-being and personal life which have a high possibility of hurting your loved ones; as this is no differences from gambling and addiction.
Forex is not just trading, but its more of Forex Education that requires more understanding, experience and hard work compared to education in school. It involved high level of thinking and decision making in one of the most intense and stress environment to act.
Forex requires not just study, but also ample practices and time to hone your skill/experience in executing a good trading plan. And the study may not make any sense at times due to uncertainty/ fundamental issues, which can drives your technical analysis to be all wrong! Forex is about minimizing the risk you can take, and maximizing the growth and gains you can achieve.
Do not start a DEMO account or be drawn to Bonuses from Broker
Starting a Demo account could be the worst nightmare to novice in the end, and receiving bonus from Brokers could be attractive to join Forex, but could also lead to a very disastrous outcome. Because for more bonuses, you placed in more deposits; and you are likely and very likely to lose 90% of your initial investment or even subsequent investment. Don't be tempted to deposit too much money, if you are earning about $2000 per month as a normal worker, $100 is already considered high for Forex investment; you definitely don't want it to end up like a gambling spree.
Demo account are unrealistic and almost impossible to be compared with Live accounts that have substantial equities that is a considerable amount to you. If you are trading a micro account $5. That is peanut compared to thousands of dollars. And of course it is peanut for those high net worth individuals whom are earning more than $100,000 per month to trade thousands. Its sizing of your money that you have that matters to yourself.
Demo account can be restarted and repeated, money are virtual and can be lost, but real account are the opposite, its lost its lost forever, you will be forever chasing to regain or recoup it by placing more money to BET instead of trading. And you are going to start being irrational and emotional in your trades.
Here is a methodology that you can and should try;
Sticking to a minimum of 1:1 or 2:1 risk plan. And money management of not more than 2% risk per trade.
Lets say you start with a $1000.00 Demo account. If there isn't one, then lose all money until you reach $1000.00; this is to be realistic instead of those $10000.00 to $100,000.00 demo account which is simply FAKE.
- 2% = $20.00 you can afford to lose.
- 1:1 = $20.00 you must gain or lose
- 2:1 = $40.00 you must gain, and $20.00 you can lose.
You are going to take a 2%-4% gain per trade and lose only 2% per trade, until you reached $1000.00 which is 100% gain. Which is also equivalent to.
- 25-50 consecutive trades won.
- Estimated 50-100 trades before you achieve 100% growth if all your trades are carefully followed and Stop loss and gains are respected.
$20.00 by using 0.1 is $1 per pip which is about 20 pips you can last before hitting your stop loss, or 40 pip you can hold at 0.05 lot at $0.50 per pip value. Anything more than 0.1 for a $20.00 Stop loss is too HIGH and unrealistic.
Trading is about holding it at low and let it go at high, or selling it at high, buying it at low. [Sticking to this will ensure your trading plan to at least be workable and your risk and reward plans is likely to work, there is lesser chances of selling more at low and buy more at low] - This is an easy method to work for novice only, and does not prove correct all the time. But with a risk and reward plus money management plan, its likely to success within 50-200 trades.
For more possible growth trades, professionals uses more stop loss pips to protect their growth, meaning lesser leverage, lesser gain, but more constructive and protective risk management. For instance; $10000.00 account
$200.00 for 200 pips stop loss at 0.1 lot or even $200.00 for 400 pips stop loss for 0.05 lot. And strictly sticking and respecting your target and losses.
Next lesson. We will talk about more about Forex Foundation, and how to start Forex..