Start forex trading successfully by following the seven steps which will ensure your long-term survival in trading financial markets.
The following Learn to Trade article will give you the essential ingredients so that you don’t fall into the obvious pitfalls that so many rookies fall victim to as they try and conquer the markets by not knowing what they don’t know!
How to Start Forex Trading Step #1:
A Reliable Internet Connection
This is essential for our charting software and broker accounts to function properly so we can keep up to date with the latest market movements and profit from opportunities. It’s also necessary so that we can quickly and easily place or edit our orders with our brokers.
However, it’s still possible to trade end-of-day if your internet connection is intermittent or unreliable. You can update your charts with your software package when you are in an area of coverage and place your orders with your broker on the telephone. However, this is far from convenient or practical.
How to Start Forex Trading Step #2: Charting Software
This will give us the means to independently analyse the markets and seek opportunities based on your strategy’s rules for entry when you start forex trading, and beyond! There is completely no point in trading without this. If you find yourself placing trades without even looking at the charts, then you are not a technically trading – you are punting! Furthermore, regularly looking at the charts helps to develop our analytical skills in the market to the point where, over time, the movement in price action becomes intuitively predictable.
How to Start Forex Trading Step #3: A Trading Account
You need a broker account to start forex trading. It is impossible to make money from trading without one of these! These are offered by your chosen brokerage; the people who you place and amend your trade’s orders with and, yes, ultimately the people you should be making your money from.
You can start off with a demo account (with pretend money) if you wish before you graduate onto a live account with real money when you feel confident enough to do so. Or, cut straight to the chase by starting off with a real money account from the outset. It’s your call. I discuss how to choose the best broker in the article: How to Choose a Broker.
Some of you may have noticed that the broker also offers charts to help you analyse the markets in addition to your trading account. Many do. However, it does make sense to keep broker and charting packages as separate entities by having a different charting package to the one the broker offers. This is because the functionality of dedicated charting software is usually superior to that of the broker and far more objective.
How to Start Forex Trading Step #4: A Strategy
A forex trading strategy is a set of rules which tells you what to do and, most importantly, when to do it. Unless you have a trade set-up based on your strategy’s rules for entry, then you should be doing what? You should be sitting on your hands and staying out of the market!
The simpler the strategy is, the better. When you start forex trading, don’t fall into the easy trap of going for the over-complex option because, from personal experience, they are by no means any more profitable ones than the strategies that are as old as the hills.
If you’re trading without one of these, then it’s highly likely you’re gambling and run the risk of blowing up your account.
How to Start Forex Trading Step #5: Effective Risk Management
You may have all of the above, but it won’t mean much without applying risk management. You could be trading a profitable strategy with the best charting software package on the planet and have your trading account with the most reputable broker in town. However, trading without applying risk management is like loading a gun without knowing how to shoot it!
As I explain in the article: What is Risk Management, the golden rule is that you should never risk more than 1% of your trading account’s value for every trade you place...no matter how good it looks!
How to Start Forex Trading Step #6: An Open Mind
Remember that market will simply do what it wants to, regardless.
When you start forex trading, be flexible and adapt to what the market’s telling you. Even though you may have the winning strategy, the right gadgetry and effective risk management, it does not mean to say that there will be any more opportunities in the market than there were before. The market can do anything at any time. It doesn’t care about who you are or how you trade. This is why it’s important to accept the probabilities (if you’re trading a profitable strategy, then they’re relatively high!) and not have an emotional attachment to the outcome of any trade.
How to Start Forex Trading Step #7: Patience and Discipline
Knowing what to trade and when to trade it, in theory, can be challenging questions in their own right. However one of the biggest challenges faced by any trader in their formative months is making the executive decision to stay out until their strategy’s rules for entry are met...and waiting, without expectation for when a legitimate opportunity does set-up.
Unfortunately the market won’t simply give you opportunities because you’re free to trade at a certain time (yes, even my prayers went unanswered back in the day!)
Granted, this may seem ridiculously obvious but it’s amazing how many people who I talk to are simply of the belief that just because they happen to be free to trade on one random Thursday morning, that they are automatically entitled to a string of winning trades!
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