As a trader that took a long time to achieve any sort of profits, and I mean years not months, I would like to help you newbie traders by explaining where I think I went wrong and why it took so long.
First of all, don’t whatever you do try trading forex with any decent amount of money, you are guaranteed to lose it, I did. I opened an account a few weeks into a really poor forex course I had taken, it was around £2,000, not a major amount of money in my perception at the time. I had bought and sold shares before, won some money and lost some money, so I thought I wouldn’t lose the £2,000, I’d stop if I got to the point where I had lost a few hundred pounds. It didn’t work out like that, although I didn’t lose it that quickly over the course of a few months just like most other traders my account dwindled to virtually nothing. I think this had a detrimental effect on my long term forex career, I’m sure it had a major psychological impact on me in the way that it was always in the back of my mind that it was money I had to make up sooner rather than later. It certainly didn’t serve me as a learning experience except never to to the same thing again. So now not only was I £2,000 worse off my trading psychology was shot and it took a long while to recover. Looking back I think the best course of action is to stick to trading forex on demo, or stick to a nominal amount of money, but even using a token amount can lead you to expect to make higher percentage profits than you really need to since the amounts are smaller. But the most important thing you need to get used to is to execute your trades according to your plan, you cannot let the results have an impact on you. You may not be able to trade a system profitably at the start but if you learn to execute the system according to the set of rules that you have set down, then you can start looking to trade a profit. Trading isn’t that hard, it’s the psychology of it all that will get you, after all the market can only go up or down.
Learning To Execute Your Forex Strategy.
After literally years of getting virtually nowhere in my forex trading, I mean I couldn’t stick to a system even if my life depended on it, it’s okay for other forex traders to say ‘all you need is discipline’ but how do you learn discipline? That was the big question for me, over the years I became more disciplined, but that was only from the stage of placing 30 trades on per day to ten a week maybe. The problem wasn’t patience, I had got to the point where I would wait for a setup, but it was executing the right decision at the right time in a disciplined manner, there were just always too many variables, when to take profit, when to move your stop loss, when to cut my losses, and so on. The exercise I used to help me overcome this was to use the simplest strategy I could think of, and that was to either make a profit of 30 PIPS or a loss of 30 PIPS, this given everything being equalish should keep at break even over the long term. And so I started to execute my strategy, and I soon realised that I couldn’t even execute this, my rules were to place a trade and leave the take profit and stop loss in place, I wasn’t going to worry too much about the entries since it was generally a 50/50 outcome, or so I thought. I couldn’t believe my initial run of losses though, it was ridiculous, it was about 13 losses in a row, so I had to take more notice of my entries, but this kind of proved to me that trading was 90% psychological. So then I decided to only enter on pin bars and trade with the trend, I would gauge the trend from the higher time frames i.e. the daily chart to start off with, and trade off the 1hr and keeping an eye on the 4 hr. So now my forex system is much more complex, still very simple, but compared to just putting a 50/50 trade on there were quite a few more variables. Now by taking more care of my entries, my losses were limited, but I still found it hard to follow a few basic rules, namely to wait for a pin bar at support or resistance and keep an eye on the daily chart. I would still move my stop loss, sometimes it would work out, sometimes it didn’t, I may well have been making the right choices. But that wasn’t the point, the point was to train myself to follow a system, and my system stated that I don’t move my stop loss, and this I eventually did, and it was then I added to the system that I would move my stop loss under certain circumstances. It doesn’t matter at the start whether you are making a profit or not, learn to follow a forex trading system and then when you know you can follow that system, then you can tweak it, but still, never make any major changes, you will lose track of where you are.