What are some of the first things you need to learn to be successful in forex trading?
I have dabbled around with forex for about two years. I have been on babypip and many more websites. I know there is so much info out there and I don’t want waste my time learning a strategy that is not right. If someone could please point me in the right direction I will forever be grateful. Thanks!
To be successful at forex trading you must be -:
1) Realistic – This is going to take you a few years minimum of hard work to get competent
2) Process driven – You must approach building trading skill like becoming a concert pianist or a professional golfer. Measure everything, engage in structured and focused practice.
3) Aware that 99.99999% of the people selling courses, ebooks, and systems are themselves failed traders. Imagine you didn’t play golf, and one of your friends was a serious weekend golfer. If you didn’t know any better, he would appear to be incredibly good, but the reality is that he’s not good enough to make a living from it (insert any hobby/sport analogy you like)
Let’s break it down into the component parts:
- An system for trading the markets
- That system must have an objective edge. Most successful traders I know trade edges which are uncontroversial and uncomplicated. Some examples:
- Buying pullbacks in an uptrend is an edge
- Buying support in a range bound market is an edge
- Buying breakouts is an edge, even though it only works around 30–35% of the time, since the wins are large
- Opening gaps are an edge
- Seasonality is an edge
- Inter market correlations are an edge
- The system must suit your investment goals, lifestyle, market beliefs and personality. It is unlikely you will be able to trade another persons system without modifying it to your taste.
- You must keep accurate records and screen captures and set aside a lot of time for regular reviews of your system performance and your own performance as executor of that system
- You must have a business plan to go with your trading system, telling you when to increase position size, when to reduce, when to stop trading, and how to deal with anything that could potentially go wrong.
Once you have all this together, you do a lot of backtesting, and out of sample backtesting so you know what to expect. Then when you start trading live you start VERY SMALL. Literally risking $50 on each trade.
The way I do it is to start with very small trade size, and when I trade 20 trades with 1 mistake or less, I raise size a little. I stay focused on trading perfectly with no mistakes (as opposed to making money) and increase the size as I get better at execution.
You don’t need to do lots of courses to do this. It is honestly just time, and grunt work. Most people are unwilling to put in the work.