Whether or not to use indicators, and which to use, can be a very emotive subject. Some traders swear by them, others swear at them.
Before choosing which indicators to use, or not use, study this subject at the school so you understand what purpose each has and what its limitations are.
What I would STRONGLY recommend is that, particularly for new traders, you start with the bare minimum number, perhaps only 1 or 2. Putting loads of indicators in your charts may look good and might impress friends who have zero forex knowledge, but they are only likely to complicate your analysis and make decision-making harder. You can always change them or add more as you gain experience and fine tune your trading plan.
Emotions and Greed will destroy your account. No doubt about it, if you can’t get both of these under control then your days as a forex trader are numbered.
Greed, excitement, euphoria, panic or fear are all perfectly natural emotions but we need to separate these from our trading lives. So how do we fo this?
Begin with small amounts.
By reducing our risk, we can be calm enough to realize our long term goals, reducing the impact of emotions on our trading choices. Think about it, compare how you would feel if you risked and lost a few dollars you found in an old jacket you were about to throw away, with losing next months rent? It makes sense to start small until you’ve built up some experience.
Have a plan
Create a simple trading plan, something along the lines of “If Xyz/Abc does this, then go long (buy)”, “If Xyz/Abc does that, then go short (sell). If Xyz/Abc does neither of the above, do not trade”. Then stick to the plan. Sometimes you may miss out on a potential profit, other times the trade may reverse just after you enter, and you lose money. But because you stick to a plan, this is easier to accept because you know that even the best plans will have bad days. The key is, you partly automate your trading, removing a lot of the emotions. If the plan consistently fails you, you can always revisit it to see how it can be improved.
Don’t revenge trade
It’s very tempting to enter a new trade simply to try and make up losses from earlier trades. Please don’t do this, your judgement is likely clouded by the loss you’ve just had. Better to turn off your pc and do something relaxing for a few hours, returning only when you feel refreshed and clear headed
Starting a journal to log your trades is one of the best things a trader can do. A journal can be just a note/notebook or an excel document. An excel document is particularly useful as you can add screenshots of the trades you open.
Note your trading plan at the start of the journal, that way you can refer to it before, during, and after each trade if you need to.
In the journal, note the date and time, reasons for opening the trade, expectations, Stop Loss and Take Profit positions, and how you felt when you entered the trade.
You can add progress notes about how the trade behaves, if that’s in line or contradictory to your thoughts, anything you feel relevant.
Finally, when you close the trade, note the outcome, how you felt during and after the trade, and how you feel you could have improved it.
This may seem like a lot but, particularly when you are just starting out, it will help you develop and fine tune your trading. As you become more experienced you will likely reduce your notes as your trading plan settles and your emotions become detached from your trading.
Keep It Simple, Stupid! At the risk of offending anyone, this should be one of the golden rules for new traders.
[U]Keep you charts simple. [/U]
Don’t overcomplicate them with indicators that you barely understand.
[U]Keep your pairs simple. [/U]
Trade a currency pair you understand a bit about. Exotic pairs may seem tempting to you, but do you understand what moves the Klingon currency? Likewise, it’s probably a good idea as a beginner to trade pairs where you are available to trade during their busiest times, that way you have more chance of catching a big move or closing a trade ahead of news events.
[U]Keep your trading simple[/U]
In general, try not to overcomplicate any aspect of your trading. Try not to over analysis the charts or news events, this can lead to trade paralysis where traders can neither enter new trades nor close existing trades because they are confused by information overload.
Not everyone will agree with this, but I recommend you start with either 1 or 2 demo accounts.
My reasoning is that you can use this to find your way around different brokers trading platforms before you commit any money- you may be less inclined to leave if you’ve already transferred money to them. Also, its quite likely that you will make mistakes when you start, I clicked “buy” instead of “sell” on my very first trade! You can also practice different trading strategies without risking real money.
As soon as you feel confident and ready to trade, open a live account. Only deposit the minimum amount the broker allows, and trade micro lots (you probably traded full lots on demo with the $100k play money you had).
You will find live trading very different to demo trading, purely because every penny you lose is coming out of your pocket! Try not to let this affect you, just as you shouldn’t get over excited when you gain. Stick to your trading plan and money management rules regardless.
Most forex brokers will offer provides different kinds of orders for trading. Below Ive listed some of the most common types of orders that you are likely to come across.
[U]Market orders[/U]
A market order is a buy or sell order in which the broker is to execute the order at the [B]best available current price[/B]. Note, the price you see when you click is NOT guaranteed.
[U]Entry orders[/U]
A request from you for your broker to buy or sell a specified amount of a particular currency pair at a specific price. The order will be filled if/when the requested price is hit.
[U]Stop Loss orders[/U]
An instruction from you to close a position when it reaches a specified price. It is designed to limit a trader’s loss on a position, however in most cases [B]the broker cannot 100% guarantee being able to achieve this[/B], so will close at the best possible price obtainable. Traders are strongly recommended to use stop loss orders to limit their losses.
[U]Take Profit Orders[/U]
An instruction from you to close a position when it reaches a predetermined profit exit price. It is designed to lock in a position’s profit (not to be confused with Trailing Stops). Once the price surpasses the predefined profit-taking price, the take profit order becomes market order and closes the position.
[U]Good Until Cancelled (GTC)[/U]
In forex, most of the orders default as GTC, meaning an order will be valid until it is cancelled, regardless of the trading session. The trader must specify that if they wish a GTC order to be cancelled before it expires, usually by entering a closing date/time or by manually closing the order. Generally, the entry orders, stop loss orders and take profit orders in online forex trading are all GTC orders.
The above are the basic orders types available in most of them trading systems. Some trading systems may offer more sophisticated orders.
No, nothing else, just don’t trade the news. Sit back, watch the screens by all means to see those wonderful whipsaws that would have wiped out your trade (if you’d been daft enough to open one), and see how 9 times out of 10 price eventually settles down roughly where it started pre-news.
This chart, from the “Trading the News” section of the Babypips school, shows the average pip movements for some of the major news releases. Obviously there figures can vary, so be careful. If you’re trading EurUsd and risking $10 a pip, a 150 pip move against you is going to cost you $1500.
You may also find that during news brokers widen their spreads, so you cost of entering trades is more. Also, due to high volatility your broker may not be able to close your trade at your desired price. This is a surprisingly common occurrence called slippage.
Just in case you’ve forgotten, DON’T TRADE THE NEWS
Nice thread. I am newbie. I just don’t understand what do you mean by don’t trading the news. does it means just ignore all the news or maybe some of the news or some news that might give big impact?
Hi Ray.
Good question. By don’t trade the news, I mean avoid entering new trades when we know there is a scheduled news event coming up. Personally, I avoid High and Medium events that are relevant to pairs I trade or pairs that are closely correlated.
For example, if we know that this months decision on whether or not the Fed will raise rates is due at 1.30pm today, avoid entering new Usd trades in the 30 minutes either side of the announcement.
Most experienced retail traders avoid these events. Although the decision/announcement is often predictable, the reaction of the market is not. It’s simply far too risky for most traders, better to let things settle down.
hi eddieb, just another question about the news. if we have an open trade and a high or medium event that relevant to the pairs will release in 30 minutes, what is the wise thing to do? close the trade?
i am a newbie but I will try to answer your question. this is what I know n what I believe it is true, before the result release many big traders and bank already know the result and make some trade hence the price already move before the result release.
If you trade the news you need a very good strategy because you can get whipsaws that trigger both buy and sell orders , so what news tradera do is they trade the fade, e g. they wait for two to four 5m candles after the news and then go in… Trying to jump in on the very moment a news item of importance comes out is like playing Russian roulette with your money.
If the trade ia losing money but you think it may reverse in your favour then watch the trade during the news and close it manually if thinga appear to be worsening …or, hedge the trade by opening one in the opposite direction…or, put in a stop loss. Or, close part of your trade…
