7 Steps to Getting Started In Forex Trading

You must have a solid grasp on Forex basics before you learn advanced trading strategies or open your account with any broker.

We have tried to cover most of the important basics topics here in Forex trading basics course for beginners. Going through it thoroughly will help to create a solid base.

Having a professional trader as a mentor or being part of any forex traders community can really help you move faster than learning just your own.

You must have a solid grasp on Forex basics before you learn advanced trading strategies or open your account with any broker.

We have tried to cover most of the important basics topics here in Forex trading basics course for beginners. Going through it thoroughly will help to create a solid base.

Having a professional trader as a mentor or being part of any forex traders community can really help you move faster than learning just your own.

Like most other things in life, the best way to learn is by practicing and getting stuck in!

Fortunately with forex trading, you don't need to risk your hard earned real money for that.

Start with demo trading with a good reliable Forex broker.

Purposes of Forex Demo Account:

There are several purposes of opening a demo account.

These are,

Most of the forex brokers offer a free demo account, but some of these demo accounts are usable for a limited time. There are some forex brokers who offer an unlimited demo account.

First, just learnmechanical execution aspects of trading (don't think about if you winning or losing at this time). Just try executing trades without making errors. Understand trading platform environment.

You can demo trade for 1 or 2 weeks but if you do it for too long then it can kill your mood. Better move trade with a micro account as soon as you feel comfortable.

It'll help you to learn about psychological effects of winning and losing as you are trading with your real money. But as same time if you blow your micro account and it's not as damaging as blowing a real account with big money in it.

Once having a solid grasp on basics, it's time to get more advanced with getting ideas about various forex trading strategies and concepts like fundamental analysis and technical analysis.

You can also read books and articles written by expert traders and try to learn from their trading style.

Now it's time to fine trading style. It can be based on various things like your behavioral, emotional and personality traits.

It also depends upon your lifestyle!

So for example, if you are doingfull-time job than it doesn't make sense to be a day trader.

You must have tested various strategies on demo or micro account by now. So look into what appeals to you so far and what fits in with your trading personality as well as current lifestyle.

If you still not sure then read a very this very good book Market Wizards. This book has many interviews with successful professional traders with various trading style.

Once you decided your trading style, find everything you could on it through books, Google, Youtube etc. You can also follow try to find and follow other successful traders on twitter who are trading with your style.

Trading Styles:

Different trading styles are as follows,

• Scalping
• Day Trading
• Swing Trading
• Position Trading or Long Term Trading

Scalping:

If you like excitement and want quick profits then, this trading style will be suitable for you. This is a profitable trading style for those who are impatient, and can think and react faster than many other traders. Scalpers aim to make small profits (1 to 2%) every day.

In this way, they gather reasonable profit in few days or a week.

Advantages :

• Higher accuracy or winning rate.
• Capable of generating faster profits than any other trading styles.

Disadvantages :

• Require a high level of experience and understanding about Forex market.
• A trader should be active and focused for several hours.
• Any mechanical error such as internet interruption, slow execution might lead the investment to a large drawdown.

Day Trading:

Day traders do not hold any position to the next day. If you are afraid of holding an overnight position and not a scalper then you should try this trading style.

In this trading style a trader open and close positions anytime before the end of the trading day.

Advantages :

• Lower trades per day
• Less trading commissions
• No overnight position
• Less trading stress
• Neither very short term, nor long term

Disadvantages :

• A trader should have sound knowledge and wide understanding about technical analysis.
• A trader needs to monitor the market whole day.

Swing Trading:

Swing trading is a longer term trading style than day trading. Swing trading is suitable for those who do not have time to trade or monitor the market whole day but can spend some time every day to analyze the market.

The holding period in this style may vary from a couple of hours to a couple of days. This trading style requires patience and larger stop loss level.

Advantages:

• Easy to understand and easy to follow for beginners.
• Profits are larger so the lower winning ratio is not a problem.
• Flexible trading style and a trader get some time to think before entering into a trade.
• The lower number of trades so lower trading commissions.

Disadvantages:

• Required larger stop loss.
• Chance of overnight positions.
• Profitability is lower than scalping and day trading.

Position Trading/Long Term Trading:

Position trading or long term trading is suitable for those traders, who have the patience to hold the positions for a long term. A position trader might hold a position for a couple weeks to months.

Position traders use long term charts such as daily, weekly or monthly charts. Position trading requires patience and calmness. Position traders often focus on fundamentals as long-term trends are a reflection of fundamental impacts.

Advantages:

• Very low transaction cost as only a few trades per week or month.
• Profits are large enough to cover up many small losses.
• Highly flexible and carries less trading stress.

Disadvantages:

• Require a high level of patience.
• Low profitability in the short term.
• Stop losses are larger.

Every trading style has both advantages and disadvantages. A trader should know advantages and disadvantages of these trading styles before choosing one.

Now it's time to make a plan and follow it. Plan your trade, trade your plan.

As human beings, we are prone to emotions. We trade on hope and fear.

Having a trading plan helps to eliminate at least some of the emotions that are inherent in a risky activity like trading. Logical traders who plan their trades are successful traders.

So, how to develop a good trading plan? It can be based on following factors

1. You must know time frame (lower time frames like 5 mins. or higher time frames like 4hr or daily) & markets you'll be trading
   
2. You must know what % of your account you are putting on risk for each trade
   
3. You must know exact market condition requires to put a trade and how exactly you will enter a trade
   
4. You must know how exactly you'll exit a trade in case of either you are right or wrong. At which point on a chart you exit if you are losing? If you winning, would you trail your stops or set a profit target ahead of time? Are you going to book partial profit or full ?

Each trading plan should include 3 main parts: A way to enter the market, a way to Limit your risk and a way to take profits once you’re in a winning trade.

Part 1 of any trading plan is the entry

The first part of any trading plan involves the entry. You should know exactly when you should get in a trade. Have you entry criteria written on a post-it note and slap that note on your monitor so that you can always keep an eye on it.

In addition to this, you should know your reasons for the entry, why you enter a particular trade.

Once your trading plan is ready it's good to forward test it in the live markets. Back testing generally doesn't provide you a very clear picture.

You can forward test on either demo or small live account.

I suggest you trading withmicro account as it help can you understand how psychology of winning or losing affects your trading behavior.

This is where your discipline will be tested to stick with your training setups.

This helps you make an objective conclusion on performance of your trading plan.

After collecting sample size of 100 trades, it's time to review statistics to see how your trading plan performing.

Sadly, there is no one size fits all as different trades faces different issues. It's your duty to find out issues with your trading plan and fix it.

Once you come up with solution, just repeat entire process over again

Develop >> Execute >> Record >> Review

As a novice trader, some of the facts you must know are : "over trading" and "over leveraging" are two fastest ways to lose all your funds.

Simple forex trading strategies are the best to follow and removing of emotional trading is necessary to succeed in currency trading.

You should have a clear idea about proper ways to deal with your losses as you can't be winning 100% of your trades.

It's better to take a break from trading for a while if you feeling too stressed from series of loses.