Are you considering trading the Forex market has a second source of income?
Please take heed.
Based on your expectations, it might not be all you think.
By now you have probably seen commercials or read stories on the Internet about Forex trading.
A couple of years ago television commercials made it seem so simple that even an 11-year-old child could do it.
These simple automated trading systems are usually based on moving average crossovers whether they be simple indicators or moving averages. The problem with these automated trading programs is they eventually break down when the markets change.
I have been trading the Forex market for over seven years. While I do not claim to have the best trading method available, I can honestly say I have seen just about everything the Forex industry has dished out.
I’ll start from the beginning. This is my personal story, making it simplified as possible of course.
What I want you to get out of this information is first of all, be very careful and secondly, keep your expectations in check with reality.
I had always wanted to be a trader , since I was in junior high school. Watching movies and hearing stories from family members and friends who had made money in the markets I was hooked.
Of course the money was extremely attractive but it was the personalities, that’s what really intrigued me.
Most of the successful traders I had met prior to starting my own trading career were somewhat reserved and seemed very in control of themselves.
This self control I was witnessing came from their ability to overcome personal obstacles and keep themselves in control of their actions.
As a Forex trading mentor, I have seen many people make the same mistakes I did and many different ones as well. What never ceases to surprise me is the unrealistic expectations new traders have right from the beginning. And it isn’t their fault, most of the time it is due to all of the advertisements they have seen making Forex trading appear to be easy and the simple road to riches.
The truth is, Forex trading is just like any other business. There is constant research and development. You must be aware of what the competition is doing. You must understand all of the technical and fundamental issues regarding the markets you are trading. If you do not understand anything I have just written, then this should give you a clue as to where to set your starting expectations.
It is not always possible to meet a new Forex trader and determine whether or not they will succeed. Sometimes you will be surprised at who actually finds their way.
I will start with having your home and personal lifestyle in check.
If you think Forex is the answer to your money problems and if there are additional relationship issues in your home due to money, then please do not try to trade Forex at this time.
As a Forex trader you will encounter some of the most challenging experiences on a personal level. It is very important that you have the support of everyone in your family. You must trust them completely and they must have a certain degree of faith in you.
It is also important for a Forex trader to be patient, extremely disciplined and have the desire to succeed regardless of what challenges lay ahead and how much time it may take.
This is where many new traders fail. They have unrealistic expectations in regards to how much time it may take for them to become successful and consistently producing an income that will replace a full-time job.
For me, it took me approximately 1 1/2 to two years. There were successful months during this learning process but for me to consistently understand why trades worked and why trades did not, was approximately 1 1/2 to two years. This included trying different trading methods without the help of a forex mentor or educator.
Keep in mind I did nothing else but trade during this 1 1/2 to two years so this can give you an idea if you are considering a part-time Forex trading endeavor. I do not mean to seem negative only to express the truth according to my experience and the reality I have had to deal with as a trader.
Discipline and focus cannot be overstated in this line of work.
To summarize personal characteristics, at least from my experience, a Forex trader needs:
the ability to stay sharp and focused for more than several hours at a time
a high level of personal discipline
a proper diet that will support physical comfort and mental focus
exercise rigorously at least three times per week, this honestly helps deal with the stress
a supportive and caring family
Realistic expectations in regards to the length of time you think it will take to succeed and how much money you think you’ll make
There are obviously many more little details and characteristics but for the most part this will suffice in the beginning of your trading career. If I seem to repeat some of the same lines over, it is because it stands out as I reflect on my trading career as one of the most important topics to contend with.
Realistic educational expectations.
If trading is completely new to you , you must be prepared for a great deal of research and study.
This also cannot be overstated. From my experience as a Forex mentor watching people with different levels of experience prior to learning how to trade, I have seen that people who have certain skills do better than others who do not. Qualities such as the ability to research a subject and formulate opinions after extensive analysis. Competitiveness. Of course discipline.
Your biggest challenge as a new trader is to find the proper education and guidance. Unfortunately most of the information that is sold on the Internet is repackaged textbook knowledge that does not usually work in a live market situation. There are simply too many variables that change when looking for a trade. You must have the ability to incorporate the results of economic data when it is released and apply it to technical analysis. This is important because this is the correct way to identify a specific entry point for a trade.
If economics is not your strength, do not fear, it is possible you can learn the information required to formulate a trade decision. This is possible because you are focusing your education to very specific economic reports and with time you will begin to learn the impact these economic reports have on price.
It is however important that you like the research and study of economic data. In most cases it’s really all about the numbers and how the markets as a whole interpret those numbers.
Technical analysis on the other hand is usually easier for most to understand. The key here is getting the correct education in regards to technical analysis. Most of the information can be obtained from a good library or bookstore. This will at the very least give you working knowledge and again, more research and experience is the key to success here.
Realistic financial expectations
This is where most people lose it.
So many people enter this business expecting to make$10-$20000 per month right away.
I am not going to say it’s impossible but realistically, if you have no prior experience it most likely won’t happen. Expect good week’s and bad weeks, good months and bad months but what you are looking for is consistency. Consistency will come from having a good trading strategy that incorporates both fundamental and technical analysis.
Consistency will also come from some of the topics I described above, specifically discipline, family support and the time necessary to study your business. Keep accurate journal information in regards to all of your trading activities. Not just the trade details but how you felt personally about the trade. Journaling is often overlooked but a very important part of your research and development.
In regards to consistency, you are looking to make a decent number of pips per day or week, market providing the opportunity. What I mean by this is there are times when the markets simply move in an erratic sideways consolidation range and it is difficult at best to find the proper trade entry. Simply put, there will be days when you will not find a trade according to your Forex trading strategies.
Please do not put unnecessary pressure on yourself to make a set number of pips per day. This is a sure way to fail in the beginning. I have seen many new traders lose self-control because of goals like this.
Now the question you are probably wondering about, how much can you actually make per day or week?
There are two basic trading accounts. The first is called a standard which nets $10 per pip and the second is a mini account which nets one dollar per pip. Please note these are approximations and there are also variations of these two types of accounts, it all depends on the broker you use.
A simple example is to net approximately 20 to 40 pips per day. Since we realize this isn’t always possible everyday lets just try three times per week. This will result in 60 to 120 pips per week. If you are using a standard account trading one lot this will result in $600-$1200 per week. Of course you could do better and you could do worse, the results are all up to you and your ability to control your behavior based on a solid trading system.
A small tip in regards to money-management. I do not risk more than two or 3% maximum on any open trades at one time. In most cases it is considerably less. I do not suggest using high leverage accounts either. If you do not have a consistent trading system it is the fastest way to lose the money in your account.
You are looking for consistency. You want to be a full time trader perhaps for the rest of your life earning a consistent living from your trading efforts. I have often said that as traders, our capital in our accounts is like merchandise to a storekeeper. Capital is our inventory and we must do all we can to grow our capital and all we can to preserve it.
Trading education
This is a tough one. It’s easy for me to say, find someone with experience you can trust however it is not always that easy. It is also possible you may find someone who has the experience however you may simply not like them or their techniques. Whatever the case, my suggestion is try and hook up either with people in a blog or forum and start asking questions. Always keep in mind that they will probably try to sell you something if they are some kind of forex mentor, what you’re looking for is people with real experiences trying to learn just like you.
It may take some time but this again is also part of your research strategy. After some time you’ll start to see similarities in trading systems. Because the truth is things that work, will always work and there is no point trying to reinvent the wheel as they say. I am of the belief that there are no real trading secrets, it is simply information you may not have yet.
Finding a good forex mentor will also help you pick the right brokers. I could write another book on all of my experiences both positive and negative due to broker manipulation and the tactics they apply to unsuspecting traders.
What you are specifically looking for and will most likely have to pay for is the real world experiences on a day-to-day basis from your forex mentor. This is experience and information that cannot be obtained any other way unless you have a very large trading account. If you are going to try and do it on your own, expect a great deal of time and money spent on your trading business.
I remember joining a chat room in the first few months of my trading career. I was only in this chat room for a day or two but the most experienced members were obvious and one In particular typed in at the end of the day, “well guys that’s it for me, I’m done here. I have lost all of my family’s money and I will not be back”. It was an eye opening statement. At first the other members thought It was a joke and began to question him. He finished off by telling he had lost over $500,000 and had no way of replacing it.
I finished the rest of that week as it was a free trial but I never saw him and I never went back to that chat room.
In closing please remember it isn’t as easy as television commercials and internet ads make it seem but it is possible to succeed in this business. Always treat your trading business as you would any other business.
Good luck,
LC
L.C. is the head trading coach and mentor at www.udaytrading.com with over 7 years Forex trading experience. He has mentored hundreds of students with his Forex trading strategies.
