I get emails asking me how to get started in Foreign Exchange trading. Essentially, these people are looking for a guide on how to trade Forex, for beginners.
There is a lot of great trading education out there, but there is also a lot of noise. Many times, well intentioned education sites try to teach you everything under the sun and end up confusing you instead. Forums can be even worse, since anyone is free to give their opinion, regardless if they are qualified to do so or not.
This post will show you the simple four step process for getting started in Forex trading. It is the result of my personal experience and observing many aspiring and professional traders alike, since I started this blog in 2007.
So if you are just getting started in Forex trading and don’t know where to begin, this post will give you the shortest path that I know of to overcome confusion and head down the right path. I will also tell you which trading courses I have taken and recommend, to help you on your journey.
Step 1 – The Most Important Forex Trading Principle
The first thing that you need to learn about Forex trading is not a system or fancy indicator. It’s not an economic report or trader sentiment either. The most important principle is…
You need to trade strategies that fit your personality.
Let me say that again because it really is the most important concept in all of trading. Even if the best trader in the world uses a system, it may not work for your personality and schedule.
A day trading system probably will not fit people who work a day job or get nervous when they have to concentrate on a perfect entry and exit. Likewise, some people may not have the patience to sit on a longer term trade.
So instead of trying to find the perfect trading method, start by figuring out your personality and what trading method would work best for you. That will help you seek out the right kinds of traders and education.
Some things to ask yourself are:
- Do you get nervous day trading?
- Do you prefer to only take a few trades a month?
- What kind of work schedule do you have?
- Do you feel more comfortable specializing in one currency pair or trading many pairs?
- Do you like using indicators, or do you prefer trading naked?
Those are just some of the things to consider. Remember, the key to winning in the trading game is to trade a method that plays to your strengths.
Don’t let anyone tell you otherwise.
Step 2 – Place Some Demo Trades…Now
One thing that never ceases to amaze me it how people “study” Forex trading for months, but never place a demo trade. I have written about this before, but I think it certainly needs to be mentioned again.
If you have not placed a demo trade yet, stop everything and place one right now. There is really no excuse.
Almost every legitimate broker provides demo trading accounts. Demo accounts allow you to trade with play money, in market conditions that are very similar to the real thing.
Demo trading has the following benefits:
- No money at risk
- Opening a demo account only takes a couple of minutes and is free
- Allows you to learn the mechanics of taking a trade, setting a stop loss and exiting a trade
- Almost identical to real trading
- You get the same charts and trading platform
- Lets you figure out a strategy before putting any real money at risk
- And more!
It’s not real money, so go ahead and take some trades. Who cares if you make a mistake?
Once you place a few demo trades, it will lead to more questions that can help guide your education. Until then, you are just spinning your wheels with a lot of theory.
Keep learning and practicing with a demo account.
The only thing a demo account does not do is allow you to feel the psychology of having real money on the line. But it will help you with everything else.
It can also be tempting to trade real money from the beginning. But don’t do it until you are confident in your skills and method.
Step 3 – Build A Track Record
Now that you have placed some demo trades, start to establish your track record in that demo account. This will do two things.
First, you will get numerical feedback on how your trading is going every month. If you do not keep track of your trading, it can be easy to under or overestimate how well you are doing. You can only improve if you have a way to measure your improvement.
Second, it will give you deeper insight into your trading. There are certain metrics that cannot be uncovered with a simple spreadsheet. Some services also plot your trade results on a chart, making it easier to review your trade.
Luckily it is easy to start building your track record. Websites like MyFxBook automatically log your trades for you and provide graphs and metrics on your trading, so you know exactly how well you are doing. You can also setup MyFxBook to automatically tweet your trades and keep yourself accountable.
Step 4 – Never Stop Learning
If you are serious about learning to trade profitably, then you need to get educated. This usually means paying for mentoring or a course at some point.
But if you are not sure if you want to commit to trading yet, then you should utilize some of the free resources out there. They will get your education off on the right foot.
A word of warning however. Free education does come at a price.
Lack of clarity.
If you don’t believe me, then spend an hour looking at all the free resources out there. Then come back and tell me the one strategy that you are going to test and how you are going to test it. Go ahead, leave a comment below.
Then come back two weeks after you leave a comment and tell me how it went. Some people will be able to choose a system and test it.
But the majority of new traders will just end up dazed and confused by the information overload. That was certainly the case for me. My head was spinning so fast that I didn’t know where to begin.
Once you get some basic education from the free resources out there and you find out that you want to truly commit to learning Forex trading, then start looking for a paid course or mentor. Here is a very short list of Forex courses that I have personally taken and recommend.
I have also partnered with a professional trader to create a course that we feel solves many of the issues of beginner’s overload. He only teaches what is absolutely necessary to trade his method, nothing more…nothing less.
You can find out more here.
So those are the four simple steps for getting started in Forex trading. Although I sincerely believe that almost anyone can become a successful trader, if they put their mind to it, trading is not going to be for everyone.
Trading is a tough skill to manage. There are many reasons why a vast majority of traders who start trading lose money and give up.
This process outlined above will help you get started as efficiently as possible. You may find that trading is not your thing and that is perfectly fine. But if you do discover that you have a passion for trading, then this process will prevent you from spinning your wheels for years, before you find a process that works.