Ever since I mastered trading the forex market I have committed myself to teaching others how to tackle this difficult challenge as well. I have authored my own free price action trading course that I encourage all beginner traders to take advantage of and use to shape their trading style and strategy. I am going to use this lesson to summarise the key areas you need to master whilst learning how to trade forex. The world of forex is an intimidating place, there is so much information available on different types of strategies it can be hard to determine which you should pay attention to if you’re a beginner. But it doesn’t need to be, trading should be simple and straightforward and with the methods I teach in my forex trading course I hope you will come to realise it can be simple and easy for you too. Below is my beginners essentials ‘checklist’ of everything you need to master when you start to learn how to trade forex – if you’re a beginner and eager to learn how to conquer the markets then please read on.
Find A Good Trading Coach
You may not think you need a trading coach to teach you how to trade at this stage in your career. You are probably under the impression that learning to trade forex is just like learning anything else in life. Well I have news for you; it’s absolutely not! As far as the technical aspects of trading go, yes, it’s as easy to learn as anything else in life – in fact it’s probably easier. The big difference between trading and learning to ride a bicycle, for example, is that we are not at risk of becoming emotionally attached to our bike-riding decisions because there is no money involved. Learning to trade is a completely different game, every time you make a bad decision as a beginner trader you will find yourself questioning the quality of your trading plan and ability to make decent decisions in the financial markets. A good trading coach should be able to support you through these difficult times. You need to find a coach that is willing to offer ongoing mentoring and guidance and give you the confidence you need to stick to your trading plan. Financial markets aren’t like anything else in life, there is no ‘black-box’ system, the same inputs never lead to the same outputs. As such, you will see strange things occur in the markets that make you question your decision-making when you start learning how to trade forex. A good trading coach will be there to guide you through these difficult times, provide support and reassurance and answer any questions you have about the markets and your trading decisions. I provide a first-class coaching service for my members and if you’ve been struggling to find a good coach I would encourage you to check out what I have on offer via my forex trading member’s area.
Decide Which Indicators To Use
You should use as little indicators as possible on your charts so that you are able to read pure price action trading setups without blurring your judgment or becoming distracted by useless patterns on your chart. If you’re a regular follower of my trading lessons you will know that I advocate using only two exponential moving averages for trend identification. The point here is that all indicators are lagging in their nature and they can only tell us what price has been doing in the past. The only tool at our disposal for determining current price movements is the price action patterns that occur on our candlestick charts. If you’re a beginner trader you will undoubtedly be faced with a host of decisions to make regarding which indicators to use on your forex charts, you’ll see mechanical system after mechanical system and wonder which will serve you best in the markets. The truth is that none of them will. You need to learn how to trade price action setups off of clean charts to give yourself the best chance of succeeding in the forex market. This is the style of trading I teach in my forex trading course and I encourage you to study all 10 chapters if you’re serious about learning how to trade.
Create A Good Trading Journal
You should create and maintain a good trading journal. Your trading journal should be everything you need to prove to others how well you are performing in the markets. You must record every trade you make along with the entry rationale and post-trade analysis, this will offer the opportunity to praise yourself for the good decisions you make and to devise a strategy for reducing the bad ones. I recommend recording all of your trades in an Excel Spreadsheet but there are also very useful tools you can use online for tracking your trades as well. If you trade with the MetaTrader platform then you will probably be able to setup an account over at myfxbook.com, these portfolios hook straight into your live trading account and show you a record over time of how well you have been performing – it’s a very powerful tool to use and well worth setting one up if you’re a beginner.
Choose A Timeframe That Fits Your Lifestyle
All too often beginners traders try to pick a low timeframe for trading because they think it will offer them lots of profitable trading setups in a short period of time. This is so far form the truth it’s unbelievable. You can pick a low timeframe, maybe the 5-minute chart or even the 15-minute chart, and you’ll find lots of trading setups that’s for sure, but guess what? Over 90% of the setups you see will be losing setups. The chart pattens that occur on these timeframes are nothing but noise, noise in the market produced by feeble traders that haven’t a clue how to trade like a professional. The first thing you want to do when you start trading forex is stay away from these charts, they will only bleed your account dry and create no-end of stress and upset for you in the process. If you’re just starting to learn how to trade forex then I would imagine there is a high probability you have a day job, in which case you need to pick a trading strategy that fits around your existing lifestyle and often the only timeframe that will do that is the daily. The daily timeframe closes at 22:00 GMT after the end of the New York trading session and requires you to only check your charts once a day. This is the timeframe all serious traders use, it keeps you away from the market noise, prevents you from becoming distracted and emotionally attached to the market and gives you plenty of time to focus on the finer things in life. What’s more, this timeframe provides the highest probability trading setups and hence it is the timeframe I predominantly trade with and recommend all of beginners use to learn how to trade the forex market as well.
Learn How To Control Your Emotions
If you’re still only learning how to trade forex you probably have no idea what I mean here. If you’ve tried to trade a little on a demo account account you probably still have no idea what I’m talking about. For those out there that have risked their own money though, you’ll know exactly what I mean. The feeling you experience when you have placed your own money on the line is like no other – it’s actually so hard to explain. Suddenly perfectly calm, reasonable and rational human beings become erratic in their behavior, stressed, agitated and constantly distracted. Learning how to switch off from the markets after you’ve entered a position is so hard – it took me over 3 years to learn how to do it properly and even now I still get those feelings when the market doesn’t go my way. The point here is you need to learn how to control those emotions, you need to learn how to control the surges of fear and greed you feel in relation to trading, because if you don’t you will never be able to make technically sound trading decisions. Whenever I get undesirable feelings I tell myself this:
“We do not trade emotions or feelings, we trade price action and nothing else!”
It’s such a simple yet so powerful sentence; you should remind yourself of this before every trading decision you make. If the decision is motivated by anything other than the price action you see on your charts then it’s probably the wrong decision to be making. If you want to learn more about keeping your emotions under control you can check out my forex trading course where I give you a series of useful tips – many of which have helped me succeed over the years.
Build A Diverse Portfolio
You should seek to build a diverse trading portfolio; your portfolio should include different markets from all around the world. Don’t just trade forex, you should also consider trading major stock market indices and commodities as well. The idea here is to spread your bets across many markets, if there are tough trading conditions in Europe you should still be able to find profitable trading opportunities in Asia or America. If the currency market is quiet, the stock market on the other hand might be highly volatile and you can look for trading opportunities there. You don’t want to be sitting on your hands forever waiting for the perfect trading opportunity whilst there is lots of opportunity occurring in a market you don’t analyse. I recommend monitoring up-to 20 instruments in your portfolio and checking these charts at the end of every day. This should be more than manageable and large enough to present ample trading opportunities, yet not too large that your portfolio seems intimidating and a chore to manage. I have published by forex trading portfolio in my free trading course so feel free to check it out for inspiration.
Write The Perfect Trading Plan
There is absolutely no way you will ever be successful in the forex market if you don’t have a trading plan. You should study how to trade price action until you are blue in the face, follow my market commentary every single day and don’t let a day go by where you don’t check the forex charts for trading opportunities, this should become your life, what you live for (well, maybe that’s a step too far), but you should be so interested in it you can’t wait for the New York close each day so you can analyse the markets. Once you’ve done this for long enough and think you understand how I implement my strategy you should create one of your own. To be successful you need to be able to make your own trading decisions. I am here to teach you and guide you along the way, but ultimately one day you want to be an independent profitable forex trader too, right? Well, you need a plan for that, a set of rules that will guide you every day in the forex market. You should write it down, too. Sure it’s possible to keep it all in your head, but what’s the point, a pen and paper is easy to come by these days, just write it down and you will remember it much better – this way you can always show it to people if they enquire about your strategy or technique at a later date. It’s good practice and without a written plan you will find you become easily tempted to deviate from your rules as soon as the going gets tough. This should become your bible, what you live your trading life by, without one you are destined to fail.
Learning to trade forex isn’t easy; it’s rumored that up to 90% of beginner traders fail and lose all of their money within the first 12-18 months. I hope with the advise you’ve received in this trading lesson and the strategies I teach in my forex trading course you are able to become one of the 10% of successful forex traders. If you write a decent trading plan, keep a trading journal and constantly refine your technique you will have a far better chance of succeeding than most. You need to have consistency with respect to your trading, you need to find a strategy that works for you and repeat it over and over again – this is the only road to success in financial markets. I want to encourage you to go out there and find a good trading coach, a coach that will teach you how to trade forex through their own experiences and real-time market analysis. Indeed, this is something I do for my students and if you’re not already aware I would encourage you to review the benefits of my forex trading community. I wish you every success in the forex market, it’s a hard place to succeed but I believe you (just like everyone else) have all the talent and skill required to make it. Good luck and good trading – and thank you for taking the time to read my trading lesson!