Getting started in Forex can be a little daunting. One beginning trader recently described it to me as a “minefield.”
He had lost several thousand dollars on an “education” program that told him to deposit real money into his account and just follow their signals.
In case you were wondering, that usually works about…never.
You need to figure out what works for you.
No matter what anyone tells you, there's no trading strategy that will work for everyone.
So in this post, I'll give you the complete beginner's guide on how to get started in Forex trading.
1. Figure Out Your Trading Personality
The first step might seem a little odd…especially given all of the trading-related marketing on the internet.
But the key to trading success is not found in a magic trading strategy, indicator or robot.
Especially not the robots.
It depends on matching a trading strategy to your unique personality.
Yeah, it's certainly not quite as simple as it sounds. You will have to do some experimentation, but here are the blog posts that can help you speed up the process.
- How to Find a Trading Strategy That Matches Your Personality
- Figure Out Your Trading Risk Tolerance Personality (and why it matters)
- How to Find the Trading Timeframe That Matches Your Personality
- Figure Out Your Trader Personality Profile
The important thing is not to obsess over which personality type is exactly right for you. Just get close enough and follow the next steps in the process.
As you go through the process, you will start to learn more about yourself and what type of trading works for you.
Just get started.
2. Only Learn Strategies That Match Your Personality
Once you have figured out your Trader Personality Profile, only learn trading strategies that match your personality.
This one tip alone will save you hours (and possibly years) of frustration.
It's going to be tempting to learn other trading strategies.
However, if you really care about learning to trade as quickly as possible, then don't deviate from your personality profile.
Let's say that you figure out that your personality aligns with technical swing trading and breakout chart patterns.
Then only seek out trading strategies that match that mold.
You would be surprised at how many strategies you can eliminate after you do this.
This will help you focus and stay off the Trading Silodrome. Choose a strategy that makes sense to you and move on to step 3.
3. Create a Trading Plan For One Strategy on One Timeframe and One Currency Pair
Once you have a strategy, don't trade real money yet.
Now create a written, detailed trading plan. You can get a free worksheet here.
Be sure to make your plan as specific as possible. There shouldn't be any doubt as to when you should enter, exit and modify trades.
4. Test Your Trading Plan Without Risking Real Money
Now it's time to put your plan into action.
But not with real money.
If you have a technical strategy, then backtest it. Once you find something that works in backtesting, it's time to beta test it.
A fundamental trading strategy might not be able to be backtested, so you will have to jump directly into beta testing.
There are many reasons why your backtesting might not have the same results as your beta testing. Likewise, there are reasons why your beta testing results might not match your live trading results.
That's why it's important to go through every step in the process so you figure out if a strategy has has an edge, before you risk real money.
If it does have an edge, then you will also get a lot of practice and gain confidence in the strategy.
After you find an edge in testing, then you can decide if you want to start risking real money or not.
5. Optional: Learn a Complimentary Trading Strategy
Some traders only need one trading strategy to make a living.
But others need more than one. If you need more trades, then adding another strategy is one way to do it.
However, you shouldn't add a strategy that is similar to your first strategy. That usually creates too much correlation and leads to big drawdowns.
Find a complementary strategy to fill in the gaps in your first trading strategy.
For example, if your current strategy is a trend following strategy, then look for a countertrend strategy. If you have a fundamental strategy, then maybe consider a technical strategy.
Keep adding strategies until you get the results you are looking for.
Even though I told you to pick a strategy that matches your personality at the beginning of this post, that was to give you the best chance of getting to consistently profitable. Once you learn how to do it, you can apply concept again and again.
But if you get bogged down trying to learn too many conflicting strategies, it will take a lot longer to get to profitable.
…and that's why so many traders blow out their accounts and give up.
So that's how to get started in Forex trading.
I wish that there really was a magic trading strategy, indicator or EA that worked for everyone.
But the reality is that you need to invest the time to figure out what works for you.
What do you think? Is there a strategy that could work for everyone?
How did you find your trading strategy or what are you struggling with right now?
Leave a comment below and share your experience.