There's many of you out there who want to trade the forex market. You've read some of the topics about Forex and what it's all about, but you don't know how to get started on a trading career.
This is the topic of this post: what do you really need before you start trading the forex market? To make this very clear, I've highlighted five key bullet points that you need to get to grips with to start a career in trading.
Point #1: Join a trading community
I think you heard the expression “Surround yourself with people you want to be like.” With that in mind, I would suggest you get some education, consider taking an online course, or read a decently good book, but perhaps the most important is to join a trading community. That may offer education and besides, it is allowing you to interact with other members of that community so you can ask general questions.
Point #2: Build a good trading strategy
Let's assume that you've got some education behind and you develop a basic understanding of how charts look and why markets are moving in the first place. The next thing for you is a good strategy (not one of these), this will give you the idea of when to sell when to buy and how are you going to manage the trade.
At this juncture, I want to talk about KISS: “Keep it simple, stupid”. When you get going in this business for the first time a very uncomplicated strategy is essential, you don't need all the technical analysis. You also have to appreciate that every strategy will have a losing streak, and you need to understand how to deal with it.
How do you achieve that? I suggest backtesting your strategy either on demo accounts that a lot of brokers are offering or you can buy some online backtesting software, like Forex Tester 3.
Point #3: Find a trading broker
So that leads us nicely to the bullet point number three: you need to have a broker, which is the middleman that's going to execute the trades on your behalf in the market.
Be careful, there are a lot of brokers that are offering you extreme leverage. And they give you this huge leverage because they know it's highly unlikely that you're going to make it and you'll lose the initial deposit.
The other things you need to consider when choosing a broker is the actual commissions that he charges. A good broker will have a tight spread, which means trading costs are going to be lower, and the actual cost of business is going to be cheaper. You also need to look if the broker is actually regulated and following the rules of the jurisdiction in which it is located.
Once you've got yourself a broker, I suggest you start by trading a demo account, spending time at the screens, looking at how prices move, respect certain levels and studying your strategy to see how it performs.
To make things interesting I'm going to throw out a challenge, called the 25-trade challenge. You write down your rules of engagement and trade that strategy for 25 times without fail. The purpose of the 25-trade challenge is not necessary to test the strategy, but it's to test your psychic.
Point #4: Start on low leverage
This is where the fun starts. At this point, you're going into the markets with your hard-earned cash.
Whatever your expectations are, you should be scaling them back. You've often seen the leverage of 100 to 1, 200 to 1, 500 to 1, but you don't need it when you're starting in trading. You can make money on 5-to-1 or even 0 leverage, and only then you should scale up.
Point #5: Write down a trading plan
Lastly, everything that you need to do has to be around a written down plan. Part of that plan is keeping a journal of all your trades because the losing trades, which happens to all of us, is not money wasted and you should be using that for education purposes. Make sure you journal all the trades using an Excel spreadsheet or manually on a piece of paper.
Those are the five basic points that I hope you will find valuable and that will give you more of a direction in which to embark on. If you'd like to learn more, why not try out our Trading Room? We offer 7-day free trial so what do you have to lose? Hope to see you there!